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Exhibit 10.1

PURCHASE AND SALE AGREEMENT

 

THIS
PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of October 10,
2018 (the "Effective Date"),
by and among GrowLife, Inc., a Delaware corporation ("Buyer") on the one hand, and
EZ Clone Enterprises, Inc..,
a California corporation (the "Company"), Brad Mickelsen, individually
and in his capacity as a shareholder ("Mr. Mickelsen") and William Blackburn,
individually and in his capacity as a shareholder ("Mr. Blackburn") Mr. Mickelsen and Mr.
Blackburn sometimes individually referred to as a "Seller" and collectively as the
"Sellers." The Buyer and
Sellers may hereinafter be referred independently as "Party" or collectively as the
"Parties". Capitalized terms
used herein are defined in the text.

 

RECITALS

 

WHEREAS, Sellers
own all right, title, and interest in the issued and outstanding
shares of capital stock of the Company (the "Shares").

 

WHEREAS
Sellers desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the Shares all upon the terms and subject to the
conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained in
this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties hereto, intending to be legally bound hereby, agree as
follows:

 

AGREEMENT

 

ARTICLE
I

PURCHASE AND SALE OF SHARES; CONSIDERATION

 

 

1.01.                      

Purchase and Sale of Shares on the
Effective Date and at the First Closing.

 

(a)           On
the terms and subject to the conditions set forth in this
Agreement, at the First Closing (as defined herein), Sellers will
sell, transfer and deliver to Buyer, and Buyer will purchase and
accept from Sellers, all of Seller's rights, title and interest in
and to Twenty Five Thousand and Five Hundred (25,500) Shares held
by Sellers’ (the "Initial Shares") which represents
fifty–one percent (51%) of the total issued and outstanding
stock of the Company, free and clear of any liens, claims, charges,
restrictions, obligations, and encumbrances.

 

(b)           

In consideration
for the sale and delivery to Buyer of the Initial Shares, Buyer
agrees to pay an aggregate Two Million Forty Thousand Even Dollars
($2,040,000), payable as follows: (i) a cash payment equal to Six
Hundred Forty–Five Thousand Even Dollars ($645,000) by wire
transfer of immediately available funds which shall be allocated
in the form and amounts as set forth
on Schedule 1.02,
and (ii) One Hundred Seven Million Three Hundred Seven Thousand Six
Hundred Ninety–Two (107,307,692) restricted shares of
Buyer’s common stock, at a price of $0.013 per share, which
equates to an aggregate value of One Million Three Hundred
Ninety–FiveThousand Even Dollars ($1,395,000) (collectively,
the "First Closing Purchase
Price").

 

1

 

 

1.02.                      

Purchase and Sale of Shares at Second
Closing. Subject to completion of the First Closing, Buyer
shall have the obligation to acquire the remaining forty–nine
percent (49%) ownership interest in Seller for a period of twelve
(12) months after First Closing Date, within which to acquire the
remaining forty-nine (49%) percent, as follows:

 

(a)           

On the terms and
subject to the conditions set forth in this Agreement, at the
Second Closing, the Sellers will sell, transfer and deliver to
Buyer, and Buyer will purchase and accept from the Sellers, all of
the Sellers' rights, title and interest in and to the remaining
Shares held by the Sellers as identified on Schedule 1.02 attached hereto
(the "Second Closing
Shares"), free and clear of any any liens, claims, charges,
restrictions, obligations, and encumbrances.

 

(b)           

In consideration for the sale and delivery to
Buyer of the Second Closing Shares at the Second Closing, Buyer
agrees to pay to the Sellers an aggregate purchase price of One
Million Nine Hundred Sixty Thousand Even Dollars ($1,960,000)
payable as follows: (i) a cash payment equal to Eight Hundred
Fifty–Five Thousand Even Dollars ($855,000) to be allocated
in the form and amounts as set forth in Schedule 1.02 attached
hereto; and (ii) Eighty – Five Million (85,000,000) shares of
Buyer’s common stock, at a price of 0.013 per share, which
equates to an aggregate value of One Million One Hundred Five
Thousand Even Dollars ($1,105,000) (collectively, the
"Second
Closing Purchase Price"). in
the form and amounts as are set forth on Schedule
1.02.

 

1.03           Allocation
of Purchase Price. The Parties
agree the First Closing Purchase Price and Second Closing Purchase
Price shall be allocated consistent (across two (2) tax periods)
with the schedule set forth on Schedule 1.02. The Parties agree
that this allocation was arrived at by arm's length negotiation
between them and that no Party will take a position on any income
tax return, before any Governmental Authority, that is inconsistent
with such allocation without the prior written consent of the other
Parties.

 

(a)           Working
Capital Contribution. As part of and included in the
Purchase Price at the First Closing and Second Closing, as set out
in Schedule 1.02, Buyer will have made a capital contribution in
respect of the securities owned by the Buyer in the Company in an
amount equal to One Hundred Fifty Thousand Even Dollars ($150,000)
and One Hundred Thousand Even Dollars ($100,000), respectively,
payable by wire transfer of immediately available funds, on or
before each respective Closing Date. The capital contributions
shall be used by the Company solely for working capital
purposes.

 

ARTICLE
II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The
Company and each of the Sellers hereby represent and warrant to
Buyer as follows as of the Effective Date, as of the First Closing
Date and as of the Second Closing Date, except as specifically set
forth in the Disclosure Letter to be delivered separately by the
Company to the Buyer within ten (10) business days the Effective
Date, dated as of the Effective Date, and updated if necessary at
least two (2) business days before each of the First Closing and
Second Closing (referring to the appropriate section numbers) (the
"Disclosure
Letter"):

 

 

2

 

 

2.01.                      

Organization and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. The
Company is duly qualified to do business as a foreign corporation
and is in good standing in all jurisdictions in which the ownership
of its properties or the nature of its business makes such
qualification necessary, except to the extent that the failure to
be so qualified, individually or in the aggregate, has not resulted
in and is not reasonably likely to result in a Material Adverse
Effect, and all of such jurisdictions are listed in Section 2.01 of the
Disclosure Letter. As used in this Agreement, "Material Adverse Effect" means a
material adverse effect on (a) the business, assets,
operations, financial condition or prospects of the Company or
(b) the ability of any Seller to perform his obligations under
the Transaction Documents. Without limiting the generality of
the foregoing, a Material Adverse Effect will be deemed to have
occurred if any event occurs or condition exists which results in a
loss to or liability of the Company of $50,000 or
more.

 

2.02.                      

Power and Authority. The
Company has the corporate power and authority to own its assets and
to conduct its business as presently conducted and as presently
planned to be conducted and to execute, deliver and perform the
Transaction Documents to which it is a party.

 

2.03.                      

Execution and Enforceability.
This Agreement has been, and on the applicable Closing Date the
other Transaction Documents to which it is a party will be, duly
and validly authorized by all necessary action on the part of the
Company. This Agreement has been, and on the applicable Closing
Date the other Transaction Documents to which it is a party will
be, validly executed and delivered by the Company and constitute
(or upon such execution and delivery will constitute) legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms.

 

2.04.                      

No Breach, Default, Violation or
Consent. Except for the Consents identified on Section 2.04 of the Disclosure
Letter (the "Required
Consents"), the execution, delivery and performance by the
Company and the Sellers of the Transaction Documents to which it or
he is a party do not and will not:

 

(a)           

violate the
Company's articles of incorporation, as amended to date, or
bylaws;

 

(b)           

materially breach
or result in a material default (or an event which, with the giving
of notice or the passage of time, or both, would constitute a
default) under, require any Consent under, result in the creation
of any Lien on the assets of the Company or Sellers under or give
to others any rights of termination, acceleration, suspension,
revocation, cancellation or amendment of any contract, agreement,
lease, license, indenture, commitment, purchase order or other
legally binding business arrangement, whether written, oral or
implied, relating to the Company or any of its assets
(collectively, the "Business
Agreements") or any material agreement to which the Company
is a party or by which the Company or any of their respective
assets is bound;

 

3

 

 

(c)           

breach or otherwise
violate any order, writ, judgment, injunction or decree issued by
any Governmental Entity (each a "Governmental Order") which names the
Company or is directed to the Company or any of its respective
assets;

 

(d)           

violate any law,
rule, regulation, ordinance or code of any Governmental Entity
(each a "Governmental
Rule"); or

 

(e)           

require any
approval, consent, license, permit, order, ratification, waiver or
authorization ("Consent")
of, or exemption or other action by, any individual, firm,
corporation, partnership, company, limited liability company,
trust, joint venture, association or other entity, including any
Governmental Entity ("Person").

 

2.05.                      

Ownership and
Control.

 

(a)           

The authorized
capital stock of the Company consists of one hundred thousand
(100,000) shares of common stock, of which fifty thousand (50,000)
shares of common stock are issued and outstanding (the
"Shares"). All Shares have
been duly authorized and validly issued and are fully paid and
non-assessable, and were not issued in violation of or subject to
any preemptive right or other rights to subscribe for or purchase
shares created by statute, the articles of incorporation of the
Company or any other agreement to which the Company is a party or
by which it is bound. Schedule 1.02 sets forth the
names and the number of shares held by each of the Sellers of the
Company. No issued and outstanding shares of the capital stock of
the Company are owned by anyone other than the Sellers. Each of the
Sellers owns and has good and marketable title to all of the Shares
opposite his name. Except as set forth in Section 2.05(a) of the
Disclosure Letter, all Shares were issued in compliance with
applicable securities laws. Immediately following the First
Closing, the Buyer shall own the Initial Shares, free and clear of
all Liens. Second Closing, the Buyer shall own all of the Shares,
free and clear of all Liens.

 

(b)           

Except as set forth
in Section 2.05(b)
of the Disclosure Letter, the Company does not have any stock
option plans. Except as set forth in Section 2.05(b) of the
Disclosure Letter, there are no outstanding (i) options,
warrants, convertible securities, calls, preemptive rights, rights
of first refusal, agreements or other rights to which the Company
is bound obligating the Company to issue, deliver, purchase or
redeem, or cause to be issued, delivered, sold, repurchased or
redeemed any of the shares of the Company's capital stock
(collectively, "Rights"), or
(iii) options, warrants, sale agreements, shareholder
agreements, pledges, proxies, voting trusts, powers of attorney,
restrictions on transfer or other agreements or instruments which
are binding on the Company and which relate to the ownership,
voting or transfer of any of the Company's capital
stock.

 

(c)           

The Company does
not have and has never had any subsidiaries or affiliated companies
and does not otherwise own and has never otherwise owned any shares
in the capital or any interest in, or control (directly or
indirectly) of, any other corporation, partnership, association,
joint venture or other business entity.

 

4

 

 

2.06.                      

Financial Matters.

 

(a)           

The books of
account and other financial records of the Company, all of which
have been made available to Buyer, are correct and complete in all
material respects, represent actual, bona fide transactions and
have been maintained in accordance with sound business and
accounting practices. Each transaction is properly and accurately
recorded in the books and records of the Company, and each document
upon which entries in the Company's books and records are based is
correct and complete in all respects. The Company maintains an
adequate system of internal accounting controls and does not engage
in or maintain any off-the-books accounts or
transactions.

 

(b)           

Attached as
Section 2.06(b)(i)
of the Disclosure Letter are correct and complete copies of
(i) the Company's most recent unaudited balance sheets and
statements of income, retained earnings and cash flows as of and
for its fiscal years ended December 31, 2016 and December 31, 2017,
and (ii) the Company's unaudited interim consolidated balance
sheets and statements of income, retained earnings and cash flows
as of and for the eight months ended August 31, 2018 (the
"Current Financial
Statements" and, together with the items described in
clause (i) above, the "Financial Statements"). The Financial
Statements fairly present the financial condition of the Company as
at the end of the periods covered thereby and the results of its
operations and the changes in its financial position for the
periods covered thereby, and were prepared on a cash accrual
basis.

 

(c)           

Except as and to
the extent otherwise disclosed in the Current Financial Statements
or on Section 2.06(c) of the
Disclosure Letter, the Company has no material liabilities of any
kind, whether direct or indirect, fixed or contingent or otherwise,
other than (i) executory obligations under Business Agreements
which are not required to be set forth in the Current Financial
Statements in accordance with modified accrual principles
consistently applied and (ii) liabilities incurred in the
ordinary course of business since August 31, 2018 (the
"Financial Statement Date").
As used in this Agreement, an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" of such
Person only if that action (A) is consistent in nature, scope and
magnitude with the past practices of such Person and is taken in
the ordinary course of the normal, day-to-day operations of such
Person, (B) does not require authorization by the board of
directors or shareholders of such Person (or by any Person or group
of Persons exercising similar authority) and does not require any
other separate or special authorization of any nature and (C) is
similar in nature, scope and magnitude to actions customarily
taken, without any separate or special authorization, in the
ordinary course of the normal, day-to-day operations of other
Persons that are in the same line of business as such
Person.

 

(d)           

The Company is not
insolvent and will not be rendered insolvent by the consummation of
the transactions contemplated by the Transaction
Documents

 

5

 

 

2.07.                      

Tax Matters.

 

(a)           

The Company has,
duly and timely filed all federal, state and local (United States
and all foreign jurisdictions) tax returns required to be filed by
it ("Tax Returns") (unless a
valid extension therefore has been granted). Each such Tax Return
has been prepared in compliance with applicable law and
regulations, and, except as set forth on Section 2.07(a) of the
Disclosure Letter, all such Tax Returns are true, complete and
correct in all material respects. The Company has duly and timely
paid or made adequate provision for the payment of all taxes,
assessments and other governmental charges which have been incurred
by the Company as set forth in the Tax Returns or are otherwise due
and payable by the Company with respect to periods ending on or
prior to the Effective Date. The Company has withheld and paid all
taxes to the appropriate Governmental Entities required to have
been withheld and paid in connection with amounts paid or owing to
any employee, independent contract, creditor, stockholder or other
third party. All sales taxes required to be collected and remitted
by the Company with respect to periods ending on or prior to the
Effective Date have been (or will be) properly collected and
remitted. All necessary sales tax exemption certificates have been
obtained by the Company and all such certificates have been
properly completed and maintained. No Tax Return is under audit or
examination by any taxing authority and there are no applications
or agreements for the extension of the time for the filing of any
Tax Return or for the assessment of any amounts of tax nor any
consent to an extension of the period of limitations applicable to
such assessment or to the collection of any tax. No issue or issues
have been raised in connection with any prior inquiry into, or
audit of, any tax filings of the Company which may reasonably be
expected to be raised in the future by such taxing authorities and
to the Company's and the Sellers’ knowledge, no facts exist
or have existed which would constitute grounds for the assessment
of any further tax liabilities, which individually or in the
aggregate are material. The Company has made available to the Buyer
true and complete copies of all federal, state and local (United
States and foreign) income Tax Returns which it has filed for each
of the past three (3) fiscal years together with copies of all
schedules, work papers, elections, tax depreciation schedules and
other documents which were used in the preparation of each such Tax
Return. There are no liens for taxes upon the assets of the Company
except for liens for taxes not yet due.

 

 (b)           

There is no tax
sharing agreement, tax allocation agreement, tax indemnity
obligation or similar written or unwritten agreement, arrangement,
understanding or practice with respect to taxes (including any
advance pricing agreement, closing agreement or other arrangement
relating to taxes) that will require any payment by the Company.
The Company (A) has not been a member of an affiliated group within
the meaning of Code Section 1504(a) (or any similar group defined
under a similar provision of state, local or foreign law) and (B)
has no liability for taxes of any person other than the Company
under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor by contract or otherwise. The Company has disclosed on
its federal income tax returns all positions taken therein that
could give rise to a substantial understatement of federal income
tax within the meaning of Code Section 6662.

 

(c)           

As used herein,
"taxes" means (a) all net
income, gross income, gross receipts, sales, use, transfer,
franchise, profits, withholding, payroll, employment, excise,
severance, property or windfall profits taxes, or other taxes of
any kind whatsoever, together with any interest, penalties or
additional amounts imposed by any taxing authority (domestic or
foreign).

 

6

 

 

2.08.                      

Litigation. Except as otherwise
disclosed on Section 2.08(a) of the
Disclosure Letter, there is no pending or, to the Company's or the
Sellers’ knowledge, threatened, investigation, action, claim,
demand or proceeding against the Company or its assets by or before
any Governmental Entity, arbitrator, mediator or other tribunal,
and neither the Company nor the Sellers have any knowledge of a
reasonable basis for any such investigation, action, claim, demand
or proceeding. Section 2.08(b) of the
Disclosure Letter sets forth a correct and complete list of each
investigation, action and proceeding (a) described in the
preceding sentence or (b) in which the Company is the
plaintiff or initiating party, together with the parties thereto,
the alleged basis therefor, the relief sought therein and the
current status thereof.

 

2.09.                      

Absence of Certain Changes and
Events. Since August 31, 2018, there has not been any
Material Adverse Effect. Except as otherwise disclosed on
Section 2.09
of the Disclosure Letter, since the Financial Statement
Date:

 

(a)           

the Company has not
borrowed any amount or incurred or become subject to any material
liabilities, except liabilities incurred in the ordinary course of
business, liabilities under contracts entered into in the ordinary
course of business and borrowings from banks (or similar financial
institutions) necessary to meet ordinary course working capital
requirements;

 

(b)           

the Company has not
mortgaged, pledged or subjected to any Lien, any portion of its
assets, except Liens for current property taxes not yet due and
payable;

 

(c)           

the Company has not
sold, leased, licensed, assigned or transferred any portion of its
properties or assets, or any interest therein;

 

(d)           

the Company has not
written off as uncollectible any of the Receivables, or written
down the value of any of its assets or properties, except in each
case in the ordinary course of business and at a rate no greater
than during the 12-month period ending on the Financial Statement
Date;

 

(e)           

the Company has not
suffered any material losses, waived any rights of material value
or permitted any such rights to lapse;

 

(f)           

the Company has not
issued, sold or transferred any of its capital stock or other
equity securities, securities convertible into its capital stock or
other equity securities or warrants, options or other rights to
acquire its capital stock or other equity securities or any other
Rights, or any bonds or debt securities;

 

(g)           

Except for the
Dividends or any distributions identified on Section 2.09 of the Disclosure
Letter, the Company has not declared or paid any dividends or made
any distributions on the Company's capital stock or other equity
securities or redeemed or purchased any shares of the Company's
capital stock or other equity securities;

 

(h)           

the Company has not
made any capital expenditures or commitments exceeding $50,000 per
expenditure or commitment except in the ordinary course of
business;

 

7

 

 

(i)           

the Company has not
entered into any material agreement, contract, lease, or license
outside the ordinary course of business;

 

(j)           

the Company has not
had accelerated, terminated, made modifications to, or cancelled
any material agreement, contract, lease, or license involving more
than $50,000 individually to which the Company is a party or by
which any of them is bound;

 

(k)           

the Company has not
made any capital investment in or any loan to any
Person;

 

(l)           

the Company has not
granted any license or material sublicense of any rights under or
with respect to any Intellectual Property except in the ordinary
course of business;

 

(m)           

the Company has not
made or authorized any change in the charter or bylaws of any of
the Company;

 

(n)           

the Company has not
made any loan to, or entered into any other transaction with, any
of its directors, officers, and employees outside the ordinary
course of business;

 

(o)           

the Company has not
entered into any employment contract or collective bargaining
agreement, written or oral, or made any modification to the terms
of any existing such contract or agreement except in the ordinary
course of business;

 

(p)           

the Company has not
granted any bonus to or increase in the base compensation of any of
its directors, officers, and employees outside the ordinary course
of business;

 

(q)           

the Company has not
adopted, amended, made any modification to, or terminated any
bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to
any other employee benefit plan) except as required under
applicable law or in the ordinary course of business;

 

(r)           

the Company has not
made any other material change in employment terms for any of its
directors, officers, and employees outside the ordinary course of
business;

 

(s)           

the Company has not
cancelled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than
$50,000 individually or outside the ordinary course of
business;

 

(t)           

the Company has not
entered into any other material transaction, except in the ordinary
course of business;

 

8

 

 

(u)           

the Company has not
experienced or incurred any casualty, loss or damage with respect
to any of the Company's assets, whether or not covered by
insurance;

 

(v)           

no executive
officer or key employee of the Company has left his or her
employment or service with the Company;

 

(w)           

the Company has not
introduced any material change with respect to its business,
including without limitation with respect to the products or
services it sells, the areas in which such products or services are
sold, its methods of providing such products or services, its
marketing techniques or its accounting methods;

 

(x)           

the Company has not
changed any of its accounting methods or practices (including any
change in depreciation or amortization policies or rates) nor
revalued any of its properties or assets other than depreciation or
amortization in accordance with modfied accrual principles
consistently applied and reflected in the Financial Statements;
and

 

(y)           

neither the Company
nor the Sellers has entered into any agreement (in writing or
otherwise) to take any actions referred to in subsections (a)
through (x) above.

 

2.10.                      

[Reserved].

 

2.11.                      

Constituent Documents and Governmental
Rules. The Company is in compliance with (a) its
charter and bylaws (correct and complete copies of which have been
delivered to Buyer) and (b) all Governmental Rules applicable
to the Company or its business or assets.

 

2.12.                      

Governmental Orders.
Section 2.12
of the Disclosure Letter sets forth a correct and complete list of
all Governmental Orders which name the Company or are directed to
the Company or any of its assets, together with the governmental,
quasi-governmental, judicial, public or statutory instrumentality,
authority, agency, bureau, body or entity of the United States of
America or any state, country, municipality or other public
subdivision located therein (each, a "Governmental Entity") who issued the
same and the subject matter thereof. The Company is in compliance
with all such Governmental Orders.

 

2.13.                      

Business Permits. Section 2.13 of the
Disclosure Letter sets forth a correct and complete list of all
governmental permits, licenses, franchises, certificates,
authorizations, Consents and approvals which have been obtained by
the Company and are currently in effect (collectively, the
"Business Permits") and
indicates for each whether any Consent or other action is required
in order for the same to remain in full force and effect following
the Closing. Such Business Permits have been validly acquired, are
in full force and effect and represent all governmental permits,
licenses, franchises, certificates, authorizations, Consents and
approvals necessary under applicable Governmental Rules for the
Company to conduct its business as currently conducted and to own,
occupy or use its assets. No violations have been recorded against
any such Business Permit, no citation, notice or warning has been
issued by any Governmental Entity with respect to any such Business
Permit, no investigation or hearing has been held by or before any
Governmental Entity with respect to any such Business Permit, the
Company has not received any notice from any Governmental Entity
that it intends to cancel, revoke, terminate, suspend or not renew
any such Business Permit and neither the Company nor the Sellers
have any knowledge of any basis for any of the foregoing. The
Company is in compliance with all such Business Permits, except for
such non-compliance as, individually or in the aggregate, is not
likely to have a Material Adverse Effect.

 

 

9

 

 

2.14.                      

[Reserved].

 

2.15.                      

Real Property.

 

(a)           

Section 2.15(a)(i) of the
Disclosure Letter sets forth a correct and complete list of all
real property owned by the Company (collectively, the "Owned Real Property"). Section 2.15(a)(ii) of the
Disclosure Letter sets forth a correct and complete list of all
leases, subleases and other material agreements or rights pursuant
to which any Person has the right to occupy or use any Owned Real
Property.

 

(b)           

Section 2.15(b) of the
Disclosure Letter sets forth a correct and complete list of (i) all
real property leased or licensed by the Company (collectively,
"Leased Real Property" and,
together with Owned Real Property, the "Real Property") and (ii) all
leases, subleases and other material agreements or rights pursuant
to which the Company has the right to occupy or use any Leased Real
Property, together with the names of the lessors or other grantors
thereunder, the location of the property covered thereby, the
annual rental or other consideration payable thereunder and the
duration thereof, including any renewal options. All such leases
are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not under any such
leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).
The Company has a valid leasehold interest in the Leased Real
Property, free and clear of any Liens, any enjoys peaceful and
undisturbed possession thereof.

 

(c)           

Except as otherwise
disclosed on Section 2.15(c) of the
Disclosure Letter, all buildings and other improvements located on
the Real Property (including without limitation all water, sewer,
gas, electrical, information technology, communications and HVAC
systems servicing the same) are in good repair and operating
condition and are suitable for the purposes for which they are
used.

 

(d)           

All buildings and
other improvements located on the Real Property, and the use of the
Real Property by the Company and all Persons claiming under the
Company, comply in all material respects with all Governmental
Rules relating to zoning and land use and with all easements,
covenants and other restrictions applicable to the Real
Property.

 

(e)           

The Real Property:
(i) is adequately serviced by all utilities necessary for the
Company to conduct its business as currently conducted thereon;
(ii) has adequate means of ingress and egress, either directly
or by means of perpetual easements or rights-of-way which run with
the Real Property; (iii) has adequate parking that is
sufficient to meet the needs of the Company’s employees and
business invitees and to comply with applicable Governmental Rules;
and (iv) is not located in whole or in part within an area
identified as a flood hazard area by any Governmental
Entity.

 

10

 

 

2.16.                      

Personal Property;
Receivables.

 

(a)           

Section 2.16(a)(i) of the
Disclosure Letter sets forth a correct and complete list of all
equipment, machinery, fixtures, vehicles, computer hardware,
furniture and other personal property owned, leased or used by the
Company (collectively, the "Equipment"). Section 2.16(a)(ii) of the
Disclosure Letter sets forth a correct and complete list of (i) all
Equipment leased or licensed by the Company (collectively,
"Leased Equipment") and
(ii) all leases, subleases and other material agreements or
rights pursuant to the Company has the right to use such Leased
Equipment, together with the names of the lessors thereunder, the
annual rental or other consideration payable thereunder and the
duration thereof, including any renewal options. All such leases
are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not under any such lease,
any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a
default).

 

(b)           

Except as otherwise
disclosed on Section 2.16(b) of the
Disclosure Letter, the Equipment is in good repair and operating
condition and is suitable for the purposes for which it is used.
The Equipment constitutes all equipment, machinery, fixtures,
vehicles, computer hardware and furniture necessary for the Company
to conduct its business as currently conducted.

 

(c)           

Except as otherwise
disclosed on Section 2.16(c)(i) of the
Disclosure Letter, all accounts receivable of the Company
(i) represent amounts receivable for services actually
provided (or, in the case of non-trade receivables, represent
amounts receivable in respect of other bona fide business
transactions), (ii) are valid and binding obligations due and
owing to the Company in the amounts invoiced by the Company and
stated in its books and records, subject to collection,
(iii) are not subject to any material defenses, counterclaims
or rights of setoff, (iv) have been billed and are generally
due and payable within 30 days after billing, and (v) are fully
collectible in the ordinary course of business except, in the case
of receivables arising prior to the Financial Statement Date, to
the extent of the reserves set forth in the Current Financial
Statements and, in the case of receivables arising after such date,
to the extent of a reasonable allowance for bad debts. Section 2.16(c)(ii) of the
Disclosure Letter sets forth the total amount of accounts
receivable of the Company outstanding as of the Financial Statement
Date, together with the aging of such accounts receivable, from the
due date thereof, based on the following schedule: 0-30 days; 61-90
days; and over 90 days. The reserves against the accounts
receivable of the Company have been established in accordance with
principles consistently applied and based upon a review of such
accounts receivable, the Sellers reasonably believe such reserves
to be adequate.

 

(d)           

Section 2.16(d) of the
Disclosure Letter sets forth a correct and complete list of the
names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which the Company
maintains accounts of any nature, the type and number of all such
accounts and the names of all persons authorized to make
withdrawals therefrom.

 

 

11

 

 

2.17.                      Intellectual
Property.

 

(a)           Set
forth in Section
2.17(a) of the Disclosure Letter is a true and complete list
and a brief description of all trade secrets (including recipes),
trademarks, trade names, copyrights, including any registrations,
applications, filings or the like relating thereto (collectively,
"Intellectual Property") to which the Company owns any right, title
or interest ("Owned Intellectual Property"). The Company does not
license or possess any Intellectual Property of any third party
except for standard off-the-shelf software licensed pursuant to
shrinkwrap licenses, and the Company is not in default of any such
license and does not owe any license or maintenance fees with
respect to its current usage of such software except as set forth
on Section 2.17(a)
of the Disclosure Letter. Except as disclosed in Section 2.17(a) of the
Disclosure Letter, no rights of the Company in or to the Owned
Intellectual Property conflict with or infringe upon the rights of
any Person and the Company nor has not received any claim or
written notice from any Person to such effect, nor does any Seller
believe there is any reasonable basis for any Person to make such a
claim.

 

(b)           There
are no royalties, honoraria, fees or other payments payable by the
Company or its subsidiaries to any person by reason of the
ownership, use, license, sale or disposition of the Owned
Intellectual Property except as set forth on Section 2.17(b) of the
Disclosure Letter.

 

(c)           The
Owned Intellectual Property and the Licensed Intellectual Property
constitutes all the Intellectual Property used or held or intended
to be used in the conduct of the businesses of the Company and its
subsidiaries.

 

(d)           All
personnel, including, but not limited to officers, employees,
agents, consultants and contractors, who have contributed to or
participated in the conception and development of the Owned
Intellectual Property on behalf of the Company either: (i) are or
have been party to a "work-for-hire" arrangement or agreement with
the Company, in accordance with applicable federal and state law,
that has afforded the Company full, effective, exclusive and
original ownership of all tangible and intangible property thereby
arising; or (ii) have executed enforceable instruments of
assignment in favor of the Company as assignee that have conveyed
to the Company full, effective and exclusive ownership of all
tangible and intangible property thereby arising.

 

2.18.                      

Title Matters. The Company has
(a) good and marketable (and, in the case of any owned Real
Property, fee simple) title to all assets purported to be owned by
it and (b) good leasehold title to all assets purported to be
leased by it, in each case free and clear of all liens, claims,
security interests, pledges, charges, options, rights of first
refusal, preemptive rights, mortgages, hypothecations, prior
assignments, use restrictions, imperfections in title or other
encumbrances of any nature whatsoever (collectively, "Liens").

 

On the
First Closing Date, the Company's assets and the Company Shares
will be free and clear of all Liens, specifically:

 

12

 

 

(a) The
Liens filed by Plumas Bank, Filing Number 16-7521545884, filed on
April 25, 2016 (the "Financing Statement"), shall be cured or
resolved concurrently with the First Closing by and through Payment
of the First Closing Purchase Price as allocated in Schedule 1.2,
payment of which shall be evidenced by a UCC-3 Termination
Statement or equivalent filing filed by Plumas Bank or its
Affiliate, within 15 days of the First Closing. If the Financing
Statement is not cured or resolved prior to 15 days from the First
Closing, Buyer shall have the right, in its sole discretion, to
waive this requirement and deduct the additional cost required to
cure or resolve the Financing Statement from the Second Closing
Purchase Price.

 

 

2.19.                      

Pension and Welfare
Plans.

 

(a)           Section
2.19(a) of the
Disclosure Letter sets forth a correct and complete list of all
employee benefit plans (collectively, "Plans"). The Company does not have any
plan or commitment to establish any new Plans or to modify any
existing Plans.

 

(b)           

There are no
actions, suits, claims, investigations or other proceedings pending
or, to the Company's or the Sellers’ knowledge, threatened
against any Plan or related trust or any fiduciary thereof (other
than routine claims for benefits). There are no outstanding
Governmental Orders which name any Plan or related trust or any
fiduciary thereof or are directed to any Plan or related trust, any
fiduciary thereof or any assets thereof.

 

(c)           

Neither the
execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, will (either alone or upon
the occurrence of any additional or subsequent events) constitute
an event under any Plan, trust, employment agreement or other
agreement to which the Company is a party or by which the Assets
are bound that will result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any Person.

 

2.20.                      

Personnel Matters.

 

(a)           

Section 2.20(a) of the
Disclosure Letter sets forth a correct and complete list of
(i) all directors and executive officers of the Company,
(ii) all other employees of or consultants or independent
contractors to the Company including "outside employees" (i.e.
those employees who provide services directly at the customers'
site), (iii) the current job title or relationship to the
Company of each such Person described in clauses (i) and (ii)
above, (iv) the amount of compensation (including bonuses and
commissions) paid to each such Person during the Company's fiscal
year ended December 31, 2017 and which each of them is expected to
receive in the Company's current fiscal year and (v) any
employee benefits or perquisites available to any such Person that
are not generally available to employees of the Company. To the
knowledge of the Company, no Persons identified pursuant to the
previous sentence have threatened to terminate his or her
employment with the Company.

 

13

 

 

(b)           

Except as otherwise
disclosed on Section 2.20(b) of the
Disclosure Letter, the Company is not a party to any employment,
consulting or similar agreement, written or oral, with any
Person.

 

(c)           

Except as otherwise
disclosed on Section 2.20(c) of the
Disclosure Letter, (i) no employees of the Company are
represented by any labor union or similar organization,
(ii) the Company is not party to any collective bargaining or
similar agreement covering any of its employees and (iii) no
labor union or similar organization or group of employees has made
a demand for recognition, filed a petition seeking a representation
proceeding, given the Company notice of any intention to hold an
election of a collective bargaining representative or engaged in
any organizing activities at any time during the past three
years.

 

(d)           

Except as otherwise
disclosed on Section 2.20(d) of the
Disclosure Letter, (i) no strike, work stoppage, contract
dispute or other labor disturbance involving any employees of the
Company currently exists or, to the Company's and the
Sellers’ knowledge, is threatened and (ii) no
investigation, action or proceeding by or before any Governmental
Entity which relates to allegedly unfair or discriminatory
employment or labor practices by the Company or the violation by
the Company of any Governmental Rule relating to employment or
labor practices is pending or, to Company's or the Sellers’
knowledge, threatened.

 

(e)           

Except as otherwise
disclosed on Section 2.20(e) of the
Disclosure Letter, the Company: (i) has complied with, and is
currently in compliance with, all Governmental Rules regarding
employment, including without limitation, the Equal Pay Act, Title
VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Civil Rights Act of 1866, Executive Order 11246, the Age
Discrimination in Employment Act of 1967, the Americans with
Disabilities Act of 1991, the Employee Retirement Income Security
Act of 1974, the Family Medical Leave Act, the Fair Labor Standards
Act and the Uniformed Services Employment and Reemployment Rights
Act of 1994, including all amendments to any of the aforementioned
acts and any other federal, state, or municipal fair employment and
wage payment and collection statutes or laws, including but not
limited to any other Governmental Rule, (ii) has withheld and
reported all amounts required by law or by agreement to be withheld
and reported with respect to 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 the forgoing and
(iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental
authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for its employees.
To Company's and Sellers’ knowledge, there are no unresolved
claims alleging violations of such laws, regulations, rules or
ordinance or for wrongful, constructive, or unlawful discharge,
unlawful harassment, any claim for back pay, front pay, overtime
pay, benefits, attorneys’ fees, emotional distress,
intentional infliction of emotional distress, assault, battery,
pain and suffering, punitive or exemplary.

 

2.21.                      

Insurance. Section 2.21 of the
Disclosure Letter sets forth a correct and complete list of all
insurance policies of which the Company is the owner, insured, loss
payee or beneficiary and indicates for each such policy any pending
claims thereunder. Except as otherwise disclosed on Section 2.21 of the
Disclosure Letter: (a) there has been no failure to give any
notice or present any material claim under any such policy in a
timely fashion or as otherwise required by such policy;
(b) all premiums under such policies which are due and payable
have been paid in full; (c) no such policy provides for
retrospective or retroactive premium adjustments; (d) the
Company has not received notice of any material increase in the
premium under, cancellation or non-renewal of or disallowance of
any claim under any such policy; (e) the Company has not been
refused any insurance, nor has its coverage been limited by any
carrier; and (f) since 2015, the Company has maintained, or
been the beneficiary of, general liability and product liability
policies reasonable, in both scope and amount, in light of the
risks attendant to its business and which provide coverage
comparable to coverage customarily maintained by others in similar
lines of business, and such policies have been "occurrence"
policies and not "claims made" policies.

 

14

 

 

2.22.                      

Business Agreements.
Section 2.22 of the
Disclosure Letter sets forth a correct and complete list of all
Business Agreements that involve annual payments to or from the
Company in an amount greater than $25,000. The Company has
delivered to Buyer accurate and complete copies of each Business
Agreement listed on any Schedule hereto, and each such Business
Agreement (i) is in full force and effect, (ii) constitutes a
legal, valid and binding obligation of the Company and (iii) is
enforceable against the Company and, to the best of the Company's
and Sellers’ knowledge, the other parties thereto, in
accordance with its terms. The Company is in compliance with each
such Business Agreement in all material respects. To the Company's
and Sellers’ knowledge, all other parties to such Business
Agreements are in compliance with the terms thereof in all material
respects. Except as otherwise disclosed on Section 2.22(b) of the
Disclosure Letter: (i) neither the Company nor, to the Company's or
Sellers' knowledge, any other Person thereto, has materially
violated or materially breached, or declared any default or
committed any material default under, any Business Agreement; (ii)
no event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time), and the
execution and delivery of this Agreement and the consummation of
the Transactions contemplated herein will not, (A) result in a
violation or breach of any of the provisions of any Business
Agreement by the Company nor, to the knowledge of the Company or
Sellers, any other Person thereto, (B) give to the Company, nor to
the knowledge of the Company or Sellers, any other Person thereto
the right to declare or exercise any remedy under any Business
Agreement, (C) give to the Company, nor to the knowledge of the
Company or Sellers, any other Person thereto the right to
accelerate the maturity of performance of any Business Agreement,
or (D) give to the Company, nor to the knowledge of the Company or
Sellers, any other Person thereto the right to cancel, terminate or
modify any Business Agreement; (iv) neither the Company nor Sellers
have received any notice or other communication (in writing or
otherwise) regarding any actual, alleged, possible or potential
violation or breach of, or default under, any Business Agreement;
and (v) the Company has not waived any material right under any
Business Agreement. There is no agreement (non-compete or
otherwise) or Governmental Order to which either the Company or
Sellers or, as applicable, their respective officers, directors or
employees, is a party or otherwise binding upon the Company or
Sellers or, as applicable, their respective officers, directors or
employees, that has or reasonably could be expected to have an
effect of prohibiting or impairing (i) the acquisition of the
Shares by Buyer, (ii) the performance of the Company or any of the
Sellers of their respective obligations under the Transaction
Agreements or (iii) the conduct of the Company's business following
the Closing.

 

2.23.                      

Transactions with Related
Parties. Except as otherwise disclosed on Section 2.23 of the
Disclosure Letter: (a) none of the customers, suppliers,
distributors or sales representatives of the Company are Related
Parties; (b) none of the Company's assets are owned or used by
or leased to any Related Parties; (c) no Related Party is a
party to any Business Agreement or informal arrangement with the
Company, including without limitation, any loan arrangements; and
(d) no Related Party provides any administrative, human
resources, information technology, legal, accounting or other
services to the Company.

 

As used
in this Agreement the following terms have the following
meanings:

 

 

15

 

 

"Affiliate" of a Person means any other
Person who controls, is controlled by or is under common control
with such Person, and "control" means, with respect to any
Person, the direct or indirect ability to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise.

 

"Related Party" means (i) any
Seller, (ii) any Affiliate of the Company or any Seller,
(iii) any director, officer, equity holder or immediate family
member of the Company or any Seller or of any Affiliate of the
Company or any Seller and (iv) any Affiliate of any Person
described in clause (iii) above.

 

2.24.                      

Brokers. Except for the brokers
identified on Section
2.24 of the Disclosure Letter, neither the Company nor any
Seller has not employed or retained, and has no liability to, any
broker, agent or finder on account of this Agreement or any of the
other Transaction Documents or the transactions contemplated hereby
or thereby.

 

2.25.                      

Delivery of Documents; Accurate
Disclosure. The Sellers or the Company have previously
delivered to Buyer correct and complete copies of each Business
Permit, each Business Agreement listed on Section 2.15 through
Section 2.22
of the Disclosure Letter and each additional agreement, document
and instrument which Buyer or any of its representatives has
requested in writing. None of the information furnished by the
Sellers or the Company to Buyer or any of its representatives in
connection with this Agreement and the other Transaction Documents,
and none of the representations and warranties of the Company or
the Sellers set forth herein, in any other Transaction Document or
in any certificate delivered in connection herewith or therewith,
(a) is false or misleading in any material respect,
(b) contains any untrue statement of a material fact or
(c) omits any statement of material fact necessary to make the
same not misleading. The Sellers acknowledge and agree that the
results of any due diligence investigation or examination conducted
by the Buyer or its representatives shall not relieve the Sellers
of their obligations with respect to the representations and
warranties made by them in this Agreement or any of the other
Transaction Documents, or reduce the rights of the Buyer to pursue
such remedies at law or hereunder as it would otherwise have in the
absence of having conducted such investigation or
examination.

 

2.26           

Updating Disclosure Letter. The
Company and the Sellers may update the Disclosure Letter prior to
the First Closing and prior to the Second Closing to reflect
actions taken by Sellers or events occurring after the date of this
Agreement or to make any non-material corrections to items already
appearing on the Disclosure Letter, provided that (a) such updates
shall relate only to actions taken by Sellers that are permitted
pursuant to this Agreement, and (b) no such update shall be deemed
to cure any breach which exists as of the date of this
Agreement.

 

 

16

 

 

ARTICLE
II.B

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

Each
Seller hereby represents and warrants on behalf of himself to Buyer
as follows as of the date of this Agreement and, as of the First
Closing Date, and as of the Second Closing Date:

 

2B.01.
Execution and
Enforceability. This Agreement has been, and on the
applicable Closing Date the other Transaction Documents to which he
or she is a party will be, duly and validly authorized by all
necessary action on the part of Seller. This Agreement has been,
and on the applicable Closing Date the other Transaction Documents
to which he or she is a party will be, validly executed and
delivered by such Seller and constitute (or upon such execution and
delivery will constitute) legal, valid and binding obligations of
such Seller, enforceable against such Seller in accordance with
their respective terms.

 

2B.02.
Ownership and
Control. Seller owns and has good and marketable title to
all the Shares opposite his name in Schedule 1.02, free and clear
of any Liens, unless otherwise set forth in Section 2B.02 of the
Disclosure Letter

 

2B.03.                      

No Breach, Default, Violation or
Consent. The execution, delivery and performance by the
Seller of the Transaction Documents to which he is a party do not
and will not:

 

(a)           

materially breach
or result in a material default (or an event which, with the giving
of notice or the passage of time, or both, would constitute a
default) under, require any Consent under, result in the creation
of any Lien on the assets of the Company or such Seller under or
give to others any rights of termination, acceleration, suspension,
revocation, cancellation or amendment of any contract, agreement,
lease, license, indenture, commitment, purchase order or other
legally binding business arrangement, whether written, oral or
implied, relating to the Company or such Seller or any of their
respective assets (collectively, the "Seller Business Agreements") or any
material agreement to which the Company or such Seller is a party
or by which the Company or such Seller or any of their respective
assets is bound;

 

(b)           

breach or otherwise
violate any Governmental Order which names the Company or such
Seller or is directed to the Company, such Seller or any of their
respective assets;

 

(d)           

violate any
Governmental Rule; or

 

(c)           

require any Consent
of, or exemption or other action by, any Person.

 

 

17

 

 

ARTICLE
III

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer
hereby represents and warrants to Sellers and the Company as
follows as of the Effective Date, as of the First Closing Date and
as of the Second Closing Date:

 

3.01.                      

Organization. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware. Buyer is duly qualified to do business
as a foreign corporation and is in good standing in all
jurisdictions in which the ownership of its properties or the
nature of its business makes such qualification necessary, except
to the extent that the failure to be so qualified, individually or
in the aggregate, has not resulted in and is not reasonably likely
to result in a Buyer Material Adverse Effect. For purposes of this
Agreement, a "Buyer Material
Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, financial condition or prospects of
the Buyer or (b) the ability of the Buyer to perform its
obligations under the Transaction Documents; provided, however, that none of the
following shall be deemed, in themselves, either alone or in
combination, to constitute a Buyer Material Adverse Effect, and
none of the following shall be taken into account in determining
whether there has been or shall be a Buyer Material Adverse Effect:
(i) any change in the market price or trading volume of the
Buyer's Common Stock after the date hereof; or (ii) any
adverse circumstance, change or effect resulting directly from
conditions affecting the industries in which the Buyer participates
in their entirety, the U.S. economy as a whole, or foreign
economies as a whole in any countries where the Company or any of
its subsidiaries has material operations.

 

3.02.                      

Power and Authority. Buyer has
the corporate power and authority to own its properties and assets,
to conduct its business as presently conducted and to execute,
deliver and perform the Transaction Documents to which it is a
party.

 

3.03.                      

Execution and Enforceability.
This Agreement has been, and on the applicable Closing Date the
other Transaction Documents to which Buyer is a party will be, duly
and validly authorized, executed and delivered by Buyer and
constitute (or upon such execution and delivery will constitute)
legal, valid and binding obligations of Buyer enforceable against
Buyer in accordance with their respective terms.

 

3.04.                      

No Breach, Default, Violation or
Consent. The execution, delivery and performance by Buyer of
the Transaction Documents to which it is a party do not and will
not:

 

(a)           

violate Buyer's
charter or bylaws;

 

(b)           

breach or result in
a default (or an event which, with the giving of notice or the
passage of time, or both, would constitute a default) under,
require any Consent under, result in the creation of any Lien on
any assets of Buyer under or give to others any rights of
termination, acceleration, suspension, revocation, cancellation or
amendment of any material agreement to which Buyer is a party or by
which Buyer or any of its assets is bound;

 

18

 

 

(c)           

breach or otherwise
violate any Governmental Order which names Buyer or is directed to
Buyer or any of its assets;

 

(d)           

violate any
Governmental Rule; or

 

(e)           

require any
Consent, authorization, approval, exemption or other action by any
Person;

 

except
in the case of clauses (b) through (e) above, for such matters as
would not, individually or in the aggregate, be likely to have a
material adverse effect on Buyer's ability to perform its
obligations under the Transaction Documents.

 

3.05.                      

Brokers. Except for the brokers
identified on Section
3.05 of the Disclosure Letter, Buyer has not employed or
retained, and has no liability to, any broker, agent or finder on
account of this Agreement or any of the other Transaction Documents
or the transactions contemplated hereby or thereby.

 

3.06           

Stock Consideration. The all
common stock to be issued as consideration ("Stock Consideration")
at the First Closing and Second Closing will, when issued and
delivered in accordance with this Agreement, be duly authorized,
validly issued, fully paid and non-assessable and issued in
compliance with applicable securities laws; provided, however, that
the Stock Consideration to be issued hereunder will be subject to
restrictions on transfer (and restrictive legends) under applicable
federal and state securities laws. The Stock Consideration shall
bear a restrictive legend substantially in the following
form:

 

The
securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the “Securities
Act”), and are “restricted securities” within the
meaning of Rule 144 promulgated under the Securities Act. The
securities have been acquired for investment and may not be sold or
transferred without complying with Rule 144 in the absence of an
effective registration or other compliance under the Securities
Act.

 

3.07           

Sufficiency of Funds. At First Closing,
Buyer shall have sufficient cash on hand or other sources of
immediately available funds to enable it to make payment of the
First Closing Purchase Price and consummate the transactions
contemplated by this Agreement

 

3.08           

Litigation. Other than as set
forth in the Buyers public filings as filed with the Securities
Exchange Commission, there is no action, suit or proceeding of any
nature pending or to the Buyer's knowledge threatened against the
Buyer, its properties or any of its officers, director or
employees, nor, to the knowledge of the Buyer, is there any
reasonable basis therefor the adverse result of which would have a
Buyer Material Adverse Effect.

 

3.9           

Disclosure Letter. Buyer may
provide a Buyer Disclosure Letter prior to the Closing to reflect
actions taken by Buyer or events occurring after the date of this
Agreement or to make any non-material corrections to items already
appearing on the Disclosure Letter provided that (a) such updates
shall relate only to actions taken by Buyer that are permitted
pursuant to this Agreement, and (b) no such update shall be deemed
to cure any breach which exists as of the date of this
Agreement.

 

 

19

 

 

ARTICLE
IV

Removed
and Reserved.

 

 

ARTICLE
V

COVENANTS; TRANSACTIONS PRIOR TO CLOSING

 

5.01.                      

Conduct of Business Prior to
Closing. Except otherwise contemplated by this Agreement, or
approved in writing by Buyer, between the date hereof and the First
Closing Date and then between the First Closing Date and the Second
Closing Date, Company will, and Sellers will cause the Company,
to:

 

(a)           operate
its business only in the ordinary course and consistent with past
practice;

 

(b)           use
its best efforts to preserve its business intact, to keep available
the services of its present officers and employees and to preserve
the good will of customers, suppliers and others having business
relations with the Company;

 

(c)           maintain
the Equipment in good repair and operating condition, ordinary wear
and tear excepted;

 

(d)           maintain
in full force and effect all Business Permits and insurance
policies;

 

(e)           not
enter into any contract or commitment except those made in the
ordinary course of business the terms of which are consistent with
past practice and reasonable in light of current
conditions;

 

(f)           not
terminate, cause the termination of, amend, renew or extend any
Business Agreement unless in each case such action is in the best
interest of the Company;

 

(g)           not
waive or release any of its rights permit any of such rights to
lapse;

 

(h)           not
sell, transfer or otherwise dispose of any of its assets or any
interest therein, or solicit offers in respect of or agree to do
any of the foregoing, except for sales of inventory in the ordinary
course of business;

 

(i)           not
(1) incur any indebtedness for borrowed money or (2) incur, make,
assume or suffer to exist any Lien, tenancy or other matter
affecting title to any of its assets;

 

(j)           comply
with applicable Governmental Rules in all material
respects;

 

(k)           not
merge or consolidate with or into, or otherwise combine with, any
other Person;

 

20

 

 

(l)           take
no action, and use its best efforts to prevent the occurrence of
any event or the existence of any condition, which would result in
any of Sellers' representations and warranties herein not being
true and correct;

 

(m)           not
(1) issue, sell, exchange or deliver any shares of its capital
stock or issue or sell any securities convertible into, or options
with respect to, or warrants to purchase or rights to subscribe
for, any shares of its capital stock, (2) effect any
recapitalization, reclassification, stock dividend, stock split or
like change in its capitalization, (3) amend its articles of
incorporation (or other charter documents) or bylaws,
(4) declare or pay any dividends or make any distributions
with respect to the Company's capital stock, or (5) make any
redemption or purchase of any shares of the Company's capital
stock;

 

(n)           promptly
inform Buyer of the occurrence of any event or the existence of any
condition which has had or is likely to have a Material Adverse
Effect;

 

(o)           not
make, change or revoke any tax election or make any agreement or
settlement with any taxing authority; and

 

(p)           take
no action, and use its best efforts to prevent the occurrence of
any event or the existence of any condition, which would result in
any of the representations and warranties of the Company or the
Sellers herein not being true and correct.

 

5.02.                      

No Negotiation. Neither the
Company nor any of the Sellers, nor any officer, director,
Affiliate or agent on behalf of any of the foregoing, will, at any
time on and after the date hereof and prior to one year from
closing, directly or indirectly, (a) enter into, or participate in,
any discussions or negotiations, or solicit, entertain or encourage
any inquiries or proposals, which relate to the acquisition of the
Shares or the Company, or the assets, properties, business or
securities of the Company (or any material portion thereof), by way
of merger, reorganization, sale of assets, stock sale or exchange
or otherwise by any Person (other than the Buyer) or (b) provide
any non-public information to, any Person (other than the Buyer)
relating to any such acquisition transaction. Promptly upon
receiving any offer or inquiry from a Person (other than the Buyer)
to acquire the Shares or the Company or any of its assets,
properties or securities, the Sellers will notify Buyer of such
offer or inquiry, and, if requested, will provide the Buyer with
all details requested by the Buyer. The parties acknowledge and
agree that there would be irreparable damage in the event that any
of the provisions of this Section 5.02 are not performed in
accordance with their specific terms or are otherwise breached.
Accordingly, it is agreed that the non-breaching party shall be
entitled to an injunction or injunctions (or other appropriate
equitable relief) to prevent breaches of this Section, and each of
the parties shall have the right to specifically enforce this
Section and the terms and provisions hereof against the other party
in addition to any other remedy to which they may be entitled at
law or in equity. Notwithstanding any of the foregoing, the Company
and the Sellers may take any of the actions otherwise prohibited by
clauses (a) and (b) above so long as they are limited to the
transfer of Shares not being sold to Buyer, in a manner that does
not prevent or interfere with the sale of the Shares to Buyer or
the obligations of the Company or Sellers under this
Agreement.

 

21

 

 

5.03.                      

Access to Information. At all
times prior to the applicable Closing Date Sellers will furnish, or
will cause the Company to furnish, to Buyer and its representatives
(a) full access during normal business hours to the
properties, books and records and personnel of the Company and
(b) all such information concerning the Company as any of them
may reasonably request.

 

5.04.                      

Notification of Changes. If, at
any time prior to the Closing, the Company, any Seller or Buyer
becomes aware that any of its or his representations or warranties
set forth herein is false or misleading in any material respect, it
or he will promptly notify the other party of the same. Unless
otherwise specifically agreed to by the parties in writing, no such
disclosure will be considered to be an amendment to this Agreement
or the Schedules hereto or will release such party from any
liability arising out of such false or misleading representation or
warranty.

 

5.05.                      

Commercially Reasonable
Efforts. The parties agree to use their commercially
reasonable efforts to take or cause to be taken and to do or cause
to be done all such actions and things as are necessary or
advisable, or as may be reasonably requested by the other party, in
order to consummate the transactions contemplated hereby and by the
other Transaction Documents. Without limiting the generality of the
foregoing, the parties agree to take all commercially reasonable
actions necessary in order to obtain any Consent or approval of any
third party, including without limitation any Governmental Entity,
which is required in connection with this Agreement or the other
Transaction Documents or any of the transactions contemplated
hereby or thereby.

 

5.06.                      Employee
Matters; Employment Agreements.

 

 Concurrent with the First Closing Date, the Company
will have executed and delivered an employment contract for William
“Billy” Blackburn that shall respectively provide for:
(i) a one (1) year employment term, renewable on a monthly basis
thereafter, (ii) a base gross salary of not less than Ten Thousand
Dollars ($10,000) per month, with such salaries payable in
accordance with the Company’s normal payroll practices. A
form of such employment agreement is attached hereto as
Exhibit "A" and
incorporated by reference herein (the “Employment
Agreement”).

 

5.07           
Consultants; Consulting
Agreement. Concurrent with the First Closing Date, Company
will have executed and delivered to Brad Mickelsen a consulting
agreement that shall respectively provide a base monthly consulting
fee of $10,000 per month, payable on a monthly basis in arrears,
for(i) a minimum term of six (6) months from the First Closing Date
("Minimum Term") , and
thereafter for (ii) such term beyond the Minimum Term through the
Second Closing Date ("Extended
Term") if the Second Closing Date occurs more than six (6)
months from the First Closing Date. A form of such consulting
agreement is attached hereto as Exhibit "B" and incorporated by
reference herein (the
"Consulting Agreements" and,
together with the Agreement and Employment Agreement, the
"Transaction
Documents").

 

 

22

 

ARTICLE
VI

CLOSING AND CLOSING CONDITIONS

 

6.01.                      

First and Second Closing. The
initial closing of the transactions contemplated hereby (the
"First Closing") will take
place as soon as practicable after the satisfaction (or waiver) of
all of the conditions set forth in Sections 6.02 and 6.03. The
parties anticipate that the First Closing shall take place on or
before October 15, 2018. The date on which the First Closing occurs
is referred to herein as the "First
Closing Date". The second closing of the transactions
contemplated hereby (the "Second
Closing") will take place on or before the date which is one
year after the First Closing Date following the satisfaction (or
waiver) of all the conditions set forth in Sections 6.04 and 6.05.
The date on which the Second Closing occurs is referred to herein
as the "Second Closing
Date". Both the First Closing Date and Second Closing Date
may be extended by the mutual written consent of the
Parties.

 

6.02.                      

First Closing Conditions Precedent to
Obligations of Buyer. Buyer's obligation to proceed with the
First Closing and consummate the transactions contemplated by the
Transaction Documents is subject to the satisfaction by the Company
and/or the Sellers and/or Sellers, as applicable, or the written
waiver of Buyer on or prior to the First Closing Date of each of
the following conditions precedent:

 

(a)           Accuracy
of Representations and Warranties. The representations and
warranties of the Company and the Sellers, as applicable, set forth
herein will be true and correct on and as of the First Closing Date
with the same force and effect as though made on and as of such
date (other than representations and warranties made specifically
with reference to a particular date, which shall have been true and
correct in all respects as of such date);

 

(b)           Performance
and Compliance. The Company and Sellers will have performed
or complied with each covenant and agreement required to be
performed or complied with by it or them hereunder on or prior to
the First Closing Date;

 

(c)           Consents
and Approvals. Sellers or the Company, as applicable, will
have obtained or made each Consent, authorization, approval,
exemption, filing, registration or qualification, if any, listed on
any Schedule hereto or which are otherwise necessary (under
applicable Governmental Rules or otherwise) for Sellers to execute,
deliver and perform the Transaction Documents;

 

(d)           Material
Adverse Effect. No event will have occurred and no condition
will exist which has had, or is likely to have, a Material Adverse
Effect;

 

(e)           Consulting
/ Employment Agreements. Mr. Blackburn and Mr. Mickelsen
shall have executed and delivered to the Buyer the Employment
Agreement and Consulting Agreement, containing the terms set forth
therein;

 

(f)           Buyer
Financing. Buyer shall have secured the financing that it
deems reasonably necessary to effect the transactions contemplated
herein; and

 

 

23

 

 

(g)           

Share Certificates. Mr.
Mickelsen and Mr. Blackburn will have delivered to Buyer the
certificates evidencing the Initial Shares, together with stock
powers duly endorsed in blank.

 

6.03.                      

First Closing Conditions Precedent to
Obligations of Sellers. Sellers' obligation to proceed with
the First Closing is subject to the satisfaction by Buyer, or the
written waiver, on or prior to the First Closing Date of each of
the following conditions precedent:

 

(a)           Accuracy
of Representations and Warranties. The representations and
warranties of Buyer set forth herein will be true and correct on
and as of the First Closing Date with the same force and effect as
though made on and as of such date (other than representations and
warranties made specifically with reference to a particular date,
which shall have been true and correct in all respects as of such
date);

 

(b)           Performance
and Compliance. Buyer will have performed or complied with
each covenant and agreement to be performed or complied with by it
hereunder on or prior to the First Closing Date;

 

(c)           Consents
and Approvals. Buyer will have obtained or made each
Consent, authorization, approval, exemption, filing, registration
or qualification, if any, necessary (under applicable Governmental
Rules or otherwise) for Buyer to execute, deliver and perform the
Transaction Documents;

 

(d)           Transaction
Documents. Buyer and any other parties thereto (other than
Sellers) will have executed and delivered to the Sellers each of
the Transaction Documents to which Buyer is a party.

 

(e)           

Payment of First Closing Purchase
Price. Buyer will have delivered the First Closing Purchase
Price in the manner set forth in Sections 1.01 and
1.03.

 

(f)           

Delivery of Consulting and Employment
Agreements. Buyer will have approved the execution and
delivery by the Company of the Consulting Agreement of Mr.
Mickelsen and Employment Agreement of Mr. Blackburn.

 

6.04.                      

Second Closing Conditions Precedent to
Obligations of Buyer. Buyer's obligation to proceed with the
Second Closing and consummate the transactions contemplated by the
Transaction Documents is subject to the satisfaction by the Company
and/or the Sellers and/or Sellers, as applicable, or the written
waiver of Buyer on or prior to the Second Closing Date of each of
the following conditions precedent:

 

(a)           Accuracy
of Representations and Warranties. The representations and
warranties of the Company, the Sellers and/or the Sellers, as
applicable, set forth herein will be true and correct on and as of
the Second Closing Date with the same force and effect as though
made on and as of such date (other than representations and
warranties made specifically with reference to a particular date,
which shall have been true and correct in all respects as of such
date);

 

24

 

 

(b)           Performance
and Compliance. The Company and Sellers will have performed
or complied with each covenant and agreement required to be
performed or complied with by it or them hereunder on or prior to
the Second Closing Date;

 

(c)           Consents
and Approvals. Sellers or the Company, as applicable, will
have obtained or made each Consent, authorization, approval,
exemption, filing, registration or qualification, if any, listed on
any Schedule hereto or which are otherwise necessary (under
applicable Governmental Rules or otherwise) for Sellers to execute,
deliver and perform the Transaction Documents;

 

(d)           Material
Adverse Effect. No event will have occurred and no condition
will exist which has had, or is likely to have, a Material Adverse
Effect;

 

(e)           

Share Certificates. Sellers
will have delivered to Buyer the certificates evidencing the Second
Closing Shares, together with stock powers duly endorsed in
blank.

 

 

6.05.                      

Second Closing Conditions Precedent to
Obligations of Sellers. Sellers' obligation to proceed with
the Second Closing is subject to the satisfaction by Buyer, or the
written waiver by the Seller, on or prior to the Second Closing
Date of each of the following conditions precedent:

 

(a)           Accuracy
of Representations and Warranties. The representations and
warranties of Buyer set forth herein will be true and correct on
and as of the Second Closing Date with the same force and effect as
though made on and as of such date (other than representations and
warranties made specifically with reference to a particular date,
which shall have been true and correct in all respects as of such
date);

 

(b)           Performance
and Compliance. Buyer will have performed or complied with
each covenant and agreement to be performed or complied with by it
hereunder on or prior to the Second Closing Date;

 

(c)           Consents
and Approvals. Buyer will have obtained or made each
Consent, authorization, approval, exemption, filing, registration
or qualification, if any, necessary (under applicable Governmental
Rules or otherwise) for Buyer to execute, deliver and perform the
Transaction Documents;

 

(d)
Payment of Second Closing
Purchase Price. Buyer shall have delivered the Second
Closing Purchase Price in the manner set forth in Sections 1.02 and
1.03, and Schedule 1.02.

 

 

25

 

 

ARTICLE
VII

CERTAIN POST-CLOSING MATTERS

 

7.01.                      

Access to Information. After
the Effective Date, the Company agrees to make available to Buyer,
for any proper purpose, any and all books and records of the
Company existing on the applicable Closing Date; provided, that
such access will be deemed the Company’s Confidential
Information subject to Section 9.02, and will be available upon
reasonable prior notice, during normal business hours, at Buyer's
expense and conducted in a manner so as not to unreasonably
interfere with the Company's business.

 

7.02           

Further Assurances. From time
to time, as and when requested by any party hereto and at such
party's expense, any other party shall execute and deliver, or
cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further
or other actions as such other party may reasonably deem necessary
or desirable to evidence and effectuate the transactions
contemplated by this Agreement.

 

7.03.                      

Conduct of Business.
Notwithstanding anything contained herein to the contrary, after
the First Closing and until the Second Closing, that Buyer (or its
affiliate) owns all of the issued and outstanding equity of the
Company, the Company shall operate the business consistent with the
Company’s standard operating procedures as of the date of the
Agreement, unless otherwise agreed between the Sellers and Buyer.
Without limiting the generality of the foregoing, each Seller with
an Employment Agreement, (in each case until his death, retirement,
resignation or termination for Cause), shall continue to manage all
aspects of the business including, without limitation, (i)
determining the fees and prices charged by the Company, (ii)
determining the compensation paid to employees or independent
contractors of the Company, (iii) determining whether to
discontinue or modify the Company’s business or any program
related thereto, (iv) making any decisions concerning the
production, marketing, sales, capital expenditures, expenses and
related matters respecting the Company and (v) making any decisions
pertaining to the personnel, staffing and other resources of the
Company. Notwithstanding anything to the contrary, any material
changes to the Company’s business operations outside the
standard operating procedures as of the date of the Agreement shall
be subject to Buyer’s approval, which approval shall not be
unreachably withheld. As used herein, Cause” means (i) an
intentional tort (excluding any tort relating to a motor vehicle)
which causes substantial loss, damage, or injury to the property or
reputation of the Company or its subsidiaries; (ii) any serious
crime or intentional, material act of fraud or dishonesty against
the Company, (iii) the commission of a felony that results in other
than immaterial harm to the Company’s business or the
reputation of the Company, (iv) habitual neglect of one’s
reasonable duties (for reason other than illness or incapacity)
which is not cured within ten days after written notice thereof by
the Board, (v) the disregard of written, material policies of the
Company which causes other than immaterial loss, damage, or injury
to the property or reputation of the Company which is not cured
within ten days after written notice thereof by the Board, and (vi)
any material breach of ongoing obligation not to disclose
confidential information.

 

26

 

 

7.04.                      

Specific Accounting Election.
This election is referred to as
the "specific accounting
election" which is made in conjunction
with the sale of more that fifty percent (50%) of the sahres of the
Company to Buyer. (It
is
also known as the
"election to use normal
accounting rules"
and the "election to treat the tax year as if it consisted
of two (2) tax years.") All shareholders affected by the stock
disposition must consent. The shareholders affected by the
disposition include all shareholders who disposed of shares and all
shareholders who acquired shares during the tax
year. Where the shares were transferred to the
corporation, all shareholders who owned stock during the year are
affected shareholders [ IRC §1377(a)(2) ]. The parties do not
intend to protect the S Election in conjunction with this
Agreement.

 

7.05           

Installment Sale Cooperation.
The parties hereby acknowledge that Seller may elect to effect a
tax-deferred installment sale under Section 453 of the Internal
Revenue Code, but in such event Seller shall not on that account
delay the closing or cause additional expense to Buyer. Seller's
rights under this agreement, but not Seller's duties or
obligations, may be assigned to a qualified intermediary under
Section 453, for the purposes of completing such an installment
sale. Buyer consents thereto and agrees to cooperate with Seller
and the intermediary to permit the installment sale to be
completed. In the event of such an installment sale and assignment,
Seller shall nonetheless transfer
the shares directly to Buyer as provided in this agreement.
In the event of such an installment sale and assignment, Seller's
duties and obligations, if any, under this Agreement for
performance after closing and Seller's representations and
warranties herein shall remain with Seller and not pass to, or be
undertaken or assumed by, the intermediary.

 

ARTICLE
VIII

RESERVED

 

ARTICLE
IX

GENERAL PROVISIONS

 

9.01.                      

Assignment. Neither this
Agreement nor any right, interest or obligation hereunder may be
assigned, pledged or otherwise transferred by any party, whether by
operation of law or otherwise, without the prior consent of the
other party or parties; provided, that (a) Buyer may assign
its rights hereunder to an Affiliate so long as Buyer remains
liable hereunder, and may collaterally assign its rights hereunder
to any lender.

 

27

 

 

9.02.                      

Confidentiality.

 

(a)           

As used in this
Section the "Confidential
Information" of a party means all information concerning or
related to the business, operations, financial condition or
prospects of such party or any of its Affiliates, regardless of the
form in which such information appears and whether or not such
information has been reduced to a tangible form, and specifically
includes (i) all information regarding the officers,
directors, employees, equity holders, customers, suppliers,
distributors, sales representatives and licensees of such party and
its Affiliates, in each case whether present or prospective,
(ii) all inventions, discoveries, trade secrets, processes,
techniques, methods, formulae, ideas and know-how of such party and
its Affiliates, and (iii) all financial statements, audit
reports, budgets and business plans or forecasts of such party and
its Affiliates; provided, that the Confidential Information of a
party does not include (A) information which is or becomes
generally known to the public through no act or omission of the
other party and (B) information which has been or hereafter is
lawfully obtained by the other party from a source other than the
party to whom such Confidential Information belongs (or any of its
Affiliates or their respective officers, directors, employees,
equity holders or agents) so long as, in the case of information
obtained from a third party, such third party was or is not,
directly or indirectly, subject to an obligation of confidentiality
owed to the party to whom such Confidential Information belongs or
any of its Affiliates at the time such Confidential Information was
or is disclosed to the other party.

 

(b)           

Except as otherwise
permitted by subsection (c) below, each party agrees that it will
not, without the prior written consent of the other party, disclose
or use for its own benefit any Confidential Information of the
other party.

 

(c)           

Notwithstanding
subsection (b) above, each of the parties is permitted
to:

 

(i)           

disclose
Confidential Information of the other party to its officers,
directors, employees, equity holders, lenders, agents and
Affiliates, but only to the extent reasonably necessary in order
for such party to perform its obligations and exercise its rights
and remedies under this Agreement, and such party will take all
such actions as are necessary or desirable in order to ensure that
each of such Persons maintains the confidentiality of any
Confidential Information that is so disclosed;

 

(ii)           

make additional
disclosures of or use for its own benefit Confidential Information
of the other party, but only if and to the extent that such
disclosures or use are specifically contemplated by this
Agreement;

 

(iii)           

disclose
Confidential Information of the other party to the extent, but only
to the extent, required by Governmental Rules; provided, that prior
to making any disclosure pursuant to this subsection, the
disclosing party will notify the affected party of the same, and
the affected party will have the right to participate with the
disclosing party in determining the amount and type of Confidential
Information of the affected party, if any, which must be disclosed
in order to comply with Governmental Rules; and

 

28

 

 

(iv)           

disclose to any and
all Persons, without limitation of any kind, the tax treatment and
tax structure of the transactions contemplated by the Transaction
Documents and all materials of any kind (including opinions or
other tax analyses) that are provided to it relating to such tax
treatment and tax structure; provided, that such disclosure may not
be made (A) until the date of the public announcement of such
transactions or (B) to the extent of restrictions on disclosure
which are reasonably necessary to comply to any applicable U.S.
federal or state securities laws. For purposes of this Agreement,
the "tax treatment" of a transaction means the purported or claimed
U.S. federal income tax treatment of such transaction and the "tax
structure" of a transaction means any fact that may be relevant to
understanding the purported or claimed U.S. federal income tax
treatment of such transaction.

 

9.03.                      

Expenses. Except as otherwise
specifically provided herein or in any other Transaction Document,
each party is responsible for such expenses as it may incur in
connection with the negotiation, preparation, execution, delivery,
performance and enforcement of the Transaction Documents
("Transaction Expenses");
provided, however, that Buyer shall be responsible for $20,000 for
the audit.

 

9.04.                      

Further Assurances. The parties
will from time to time do and perform such additional acts and
execute and deliver such additional documents and instruments as
may be required by applicable Governmental Rules or reasonably
requested by any party to establish, maintain or protect its rights
and remedies or to effect the intents and purposes of this
Agreement and the other Transaction Documents. Without limiting the
generality of the foregoing, each party agrees to endorse (if
necessary) and deliver to the other, promptly after its receipt
thereof, any payment or document which it receives after the
Effective Date and which is the property of the other.

 

9.05.                      

Notices. Unless otherwise
specifically provided herein, all notices, consents, requests,
demands and other communications required or permitted hereunder:
(a) will be in writing; (b) will be sent by messenger,
certified or registered mail, a reliable express delivery service
or telecopier (with a copy sent by one of the foregoing means),
charges prepaid as applicable, to the appropriate address(es) or
number(s) set forth below; and (c) will be deemed to have been
given on the date of receipt by the addressee (or, if the date of
receipt is not a business day, on the first business day after the
date of receipt), as evidenced by (i) a receipt executed by the
addressee (or a responsible person in his or her office), the
records of the Person delivering such communication or a notice to
the effect that such addressee refused to claim or accept such
communication, if sent by messenger, mail or express delivery
service, or (ii) a receipt generated by the sender's telecopier
showing that such communication was sent to the appropriate number
on a specified date, if sent by telecopier. All such communications
will be sent to the following addresses or numbers, or to such
other addresses or numbers as any party may inform the others by
giving five business days' prior notice:

 

29

 

 

If to the Company:

EZ
Clone Enterprises, Inc.,

10170
Croydon Way, Suite G & B

Sacramento,
CA 95827

 

If to Sellers:

 

Brad
Mickelsen

_________________

_________________

Email:
Brad Mickelsen <brad@ezclone.com>

 

William
Blackburn

_________________

_________________

Email:
Billy Blackburn <billy@ezclone.com>

 

If to Buyer:

GrowLife,
Inc.

5400
Carillon Point

Kirkland,
WA 98033

 

 

9.06.                      

Publicity. Neither party will
make any press release or other public announcement regarding this
Agreement or the other Transaction Documents or any transaction
contemplated hereby or thereby until the text of such release or
announcement has been submitted to the other party and the other
party has approved the same; provided that either party may write a
public announcement or disclosure to the extent such party is
advised by counsel advisable to comply with applicable law or the
rules, regulations or interpretations of the applicable electronic
quotation system.

 

9.07.                      

Termination.

 

(a)           This
Agreement may be terminated at any time prior to the First Closing
or the Second Closing, as applicable:

 

(i)           by
mutual written agreement of Buyer and the Sellers;

 

(ii)           by
Buyer if there has been a material misrepresentation by the Company
or Sellers hereunder, a material breach by Sellers of any of their
warranties or covenants set forth herein or if any of the
conditions specified in Section 6.02 and 6.04, as applicable, have
not been fulfilled within the time required and have not been
waived in writing by Buyer;

 

30

 

 

(iii)           by
the Company if there has been a material misrepresentation by Buyer
hereunder, a material breach by Buyer of any of its warranties or
covenants set forth herein or if any of the conditions specified in
Section 6.03 and 6.05, as applicable, have not been fulfilled
within the time required and have not been waived in writing by the
Company; or

 

(iv)           by
Buyer or the Company if the First Closing has not occurred prior to
November 1, 2018.

 

9.08.                      Miscellaneous.
This Agreement: (a) may be amended only by a writing signed by
Buyer, each Seller and the Company; (b) may be executed in
several counterparts, each of which is deemed an original but all
of which constitute one and the same instrument; (c) together
with the other Transaction Documents, contains the entire agreement
of the parties with respect to the transactions contemplated hereby
and thereby and supersedes all prior written and oral agreements,
and all contemporaneous oral agreements, relating to such
transactions; (d) is governed by, and will be construed and
enforced in accordance with, the laws of the state of Delaware,
(and in keeping with the internal laws of California) without
giving effect to any conflict of laws rules of that or any other
jurisdiction; and (f) is binding upon, and will inure to the
benefit of, the parties and their respective heirs, successors and permitted assigns. The
due performance or observance by a party of any of its obligations
under this Agreement may be waived only by a writing signed by the
party against whom enforcement of such waiver is sought, and any
such waiver will be effective only to the extent specifically set
forth in such writing. The waiver by a party of any breach or
violation of any provision of this Agreement will not operate as,
or be construed to be, a waiver of any subsequent breach or
violation hereof. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof
or affecting the validity or enforceability of such provision in
any other jurisdiction. All references to dollar amounts herein
shall mean United States dollars.

 

[Remainder of page intentionally left blank; signatures appear on
following page]

 

 

31

 

 

SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT

 

 

IN
WITNESS WHEREOF, each of the parties hereto has executed this Stock
Purchase Agreement as of the date first set forth
above.

 

 

BUYER

 

GROWLIFE
INC.

 

/s/
Marco Hegyi

By:
Marco Hegyi

Title:
President & CEO

 

COMPANY

 

EZ
CLONE ENTERPRISES, INC.

 

 /s/ Billy
Blackburn

By:
William Blackburn

Title:
President

 

SELLERS

 

/s/
Brad Michelsen

Brad
Mickelsen

 

 

/s/
Billy Blackburn

William
Blackburn

 

 

 

32

 

 

SCHEDULE 1.02

 

Allocation of Purchase Price

 

	
  Cash

	
 $1,500,000 

	
     

	
     

	
  Stock

	
  2,500,000 

	
    

	
    

	
Sale
Price

	
 $4,000,000 

	
     

	
     

	
 

	
    

	
    

	
    

	
Stock
Price

	
 $0.01300 

	
    

	
    

	
Total
Shares

	
  192,307,692 

	
    

	
    

	
 

	
    

	
    

	
    

 

	
Tranches

	
 
Tranche-I

 

	
 
Tranche-II

 

	
 
Total

 

	
Cash

	
 $645,000 

	
 $855,000 

	
 $1,500,000 

	
Stock

	
  1,395,000 

	
  1,105,000 

	
  2,500,000 

	
Sale
Price

	
 $2,040,000 

	
 $1,960,000 

	
 $4,000,000 

	
 

	
  51.0%

	
  49.0%

	
  100.0%

	
Stock
Price

	
 $0.01300 

	
 $0.01300 

	
    

	
Total
Shares = Stock divided by Stock Price

	
  107,307,692 

	
  85,000,000 

	
  192,307,692 

 

 

33

 

Exhibit
A

CONSULTING AGREEMENT

 

 

This
CONSULTING AGREEMENT (the
“Agreement”) is
entered into as of October 10, 2018, (the “Effective Date”) by and between
William Blackburn (hereinafter be referred to as
“Consultant”),
and EZ CLONE ENTERPRISES,
INC., an California corporation (the “Company”). Consultant and Company
are occasionally referred to herein individually as a
“Party” and collectively as the
“Parties.”

 

RECITALS

 

WHEREAS, the Company is in the business
of hydroponic and indoor gardening, including, but not limited to,
the design, creation and manufacturing of a commercial product line
for commercial growers and large-scale agriculture producers (the
“Business”).

 

WHEREAS, concurrent with entry into this
Agreement, the Consultant and Company closed on the sale of a
majority of the Company’s common stock to GrowLife, Inc.,
pursuant to that certain Purchase and Sale Agreement, dated October
10, 2018, incorporated herein by reference (the “Purchase Agreement”).

 

WHEREAS, the Consultant has been an
owner and operator of the Company since inception and has extensive
experience in providing services necessary for the operation of the
Business, as set forth in Schedule A attached hereto and
incorporated herein by reference (hereinafter collectively referred
to as the “Services”), and is willing and
able to provide such Services to the Company;

 

WHEREAS, pursuant to the Purchase
Agreement and this Agreement, the Company desires to have
Consultant furnish such Services to the Company on the terms and
conditions hereinafter set forth.

 

WHEREAS, the Parties mutually agree that
this Agreement supersedes and replaces any prior agreements,
whether written or verbal, entered into by and between the
Consultant and the Company.

 

WHEREAS, any terms not herein defined
shall have the same meaning as set forth in the Purchase
Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the
mutual promises hereinafter set forth, the sufficiency of which are
hereby acknowledged, Consultant and Company agree as
follows:

 

SECTION 1

SERVICES

 

Section 1.1

Scope of
Services. Consultant agrees to provide the Services to the
Company and is free to enter into this Agreement. Consultant
represents that the Services to be provided pursuant to this
Agreement are not in conflict with any other contractual or other
obligation to which Consultant is bound. The Company acknowledges
that the Consultant is in the business of providing Services of the
type contemplated by this Agreement. Consultant agrees that it will
manage its time accordingly so as to not limit or restrict the
Company in the development of its projects as a result of any other
business Consultant may have ongoing. Consultant agrees to provide
the Services to the Company subject to the highest professional
standards of one skilled in the Consultant’s industry.
Consultant shall:

 

34

 

 

a.

Use best efforts to
promote the interests of the Company;

 

b.

Perform duties that
are commensurate and consistent with Consultant’s
expertise;

 

c.

Provide timely
reports of the nature and performance of the Services upon demand
by the Company; and

 

d.

Perform all such
other duties as may be assigned from time to time by the Company,
which relate to the business of the Company and are reasonably
consistent with Consultant’s position and
expertise.

 

 

Section 1.2

Independent
Contractor Relationship
Between the Parties. The Company and Consultant agree and
acknowledge that neither is an agent for the other and this
Agreement does not create any relationship of Partnership, Joint
Venture, or Tenancy in Common. Consultant is an independent contractor in the
performance of services under this Agreement and shall not be
considered to be or permitted to be an agent, employee, personnel,
joint ventured or partner of the Company for any purpose. All
persons hired by or on behalf of the Consultant, are and shall be
considered the employees or agents of Consultant. Consultant
assumes sole and full responsibility for their acts. Consultant
shall at all times during the term of this Agreement maintain such
supervision. In consideration of the independent contractor
relationship, the Parties warrant as follows:

 

a.

The Consultant is
not required to perform work exclusively for the
Company;

 

b.

The Company shall not provide the
Consultant with any business
registrations or licenses required to perform the Services
contemplated by this Agreement.

 

c.

The Company shall not pay the Consultant
a salary or hourly rate, the
Consulting Fee shall be for a fixed amount.

 

d.

The Company shall not terminate the
Consultant before the expiration of
the Term, unless the Consultant breaches this Agreement or violates the laws of
the State of California.

 

e.

The Company shall not provide tools to the
Consultant.

 

f.

The Company shall not dictate the time of
performance to the Consultant.

 

g.

The Company shall pay the Consultant
in the name appearing
above.

 

h.

The Company shall not combine business operations
with the Consultant and shall
maintain these operations separately.

 

i.

Consultant
expressly acknowledges and agrees that (i) Consultant will not be
entitled to or eligible for benefits or programs offered by Company
to its employees, (ii) Company will not withhold or pay any kind of
employment and/or payroll taxes on behalf of Consultant, and (iii)
Consultant is solely responsible for the payment of Consultant's
own taxes. Consultant represents and covenants that it shall pay
all federal, state and/or local income or any other taxes payable
by Consultant by reason of the consideration given to Consultant by
Company in accordance with this Agreement.

 

Consultant
agrees to indemnify Company and defend, protect, save and keep
Company harmless from and against any and all losses, actions,
liabilities, claims, damages, assessments, costs and/or expenses
relating to and/or arising from or in connection with the breach of
the foregoing representations and covenants, including any and all
legal, accounting, and other professional fees.

 

35

 

 

Section 1.3

Approval and
Changes in Scope of Services. Changes may be made from time
to time by the Company, in its sole discretion, to the duties and
reporting relationships of Consultant under this Agreement.
Consultant shall obtain the approval
of the Company prior to the commencement of any new project
undertaken on behalf of the Company.

 

Section
1.4   

Ownership
of Intellectual Property Arising from the
Services. In rendering
the Services, Consultant may develop creative works for the
Company, including but not limited to business and financial
models, inventions, discoveries, improvements, developments,
processes, drawings, computer software or other intellectual
property and other work which may be protectable by copyright,
patent or trade secrecy law. Consultant agrees that all such work
shall be considered to be "work for hire" and that all ownership
and rights of copyright, patent, or trade secrecy pertaining to such
work shall become the property of the Company. Consultant agrees to
assign and does hereby assign all its rights in and to the
foregoing, whether or not patentable or copyrightable, to the
Company. Consultant agrees that all information disclosed to it
about the Company's products, processes and services are the sole
property of the Company and Consultant will not assert any rights
to any confidential or proprietary information or material, nor
will Consultant directly or indirectly, except as required in the
conduct of its duties under this Agreement, disseminate or disclose
any such confidential information. Further, any social media
content and contacts, including “followers” or
“friends,” that are acquired through accounts used or
created on behalf of the Company by Consultant, including but not
limited to email addresses, blogs, Twitter, Facebook, YouTube or
other social media networks, shall be the property of the
Company.

 

SECTION 2

COMPENSATION AND OTHER CONSIDERATION

 

Section 2.1

Consulting
Fee. As full
consideration for the performance of the Services described above,
the Company shall pay Consultant $10,000 per month payable on a
monthly basis in arrears during the Term, as defined in Section
3.1.

 

Section 2.2

Consultant’s
Expenses. Consultant
shall be responsible for all expenses incurred by Consultant in
connection with this Agreement, except for pre-approved travel or
any other such reasonable out-of-pocket expenses as may be
pre-authorized in writing by the Company to be incurred (the
“Expenses”).

 

SECTION 3

TERM

 

Section 3.1

Term and
Expiration. This Agreement shall commence on the Effective
Date and terminate on the Second Closing Date, as defined in the
Purchase Agreement (the “Term”), unless extended by
mutual written consent of the Parties. Notwithstanding anything to
the contrary in this Agreement, Consultant may be terminated by the
Company on account of Cause (as defined below). Upon a termination
of this Agreement for Cause only the accrued but unpaid Consulting
Fee shall be paid to Consultant through the date of termination.
“Cause” means (i) an intentional tort (excluding any
tort relating to a motor vehicle) which causes substantial loss,
damage, or injury to the property or reputation of the Company or
its subsidiaries; (ii) any serious crime or intentional, material
act of fraud or dishonesty against the Company, (iii) the
commission of a felony that results in other than immaterial harm
to the Company’s business or the reputation of the Company or
Consultant, (iv) habitual neglect of Consultant’s reasonable
duties (for reason other than illness or incapacity) which is not
cured within ten days after written notice thereof by the Company
to Consultant, (v) the disregard of written, material policies of
the Company which causes other than immaterial loss, damage, or
injury to the property or reputation of the Company which is not
cured within ten days after written notice thereof by the Company
to Consultant, and (vi) any material breach of Consultant’s
ongoing obligation not to disclose confidential
information.

 

 

36

 

 

SECTION 4

CONFIDENTIALITY, PROPRIETARY RIGHTS, NON-CIRCUMVENTION AND
NON-DISPARAGEMENT

 

Section 4.1

Confidential
Information. As used in this
Agreement, “Confidential
Information” shall mean
and include all information provided by Company to
Consultant, including but not limited to business and
financial models, inventions, discoveries, improvements,
developments, processes, drawings, computer software or other
intellectual property and other work which may be protectable by
copyright, patent or trade secrecy law. All Confidential Information disclosed by
Company to Consultant shall be maintained by the Consultant, its
employees and agents, with the same degree of care as the
Consultant safeguards from disclosure its own confidential or
proprietary information, but in any event at least reasonable care.
The Consultant, its employees and agents, shall not divulge, in
whole or in part, any such Confidential Information to any third
party without the prior consent (written or verbal) of the Company,
except such Confidential Information as Consultant becomes legally
compelled to disclose (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand
or similar process, including regulatory inquiries or otherwise).
Under such circumstances, Consultant shall provide Company with
prompt written notice of such request and an opportunity to defend
and/or attempt to limit such production.

 

Section 4.2

Return
of Confidential Information.
Upon Company’s request, and in any event upon cancellation of
this Agreement, Consultant shall return the original and any copies
of the Confidential Information which it, or any of its employees
or agents, is holding under its possession or control in tangible
form, written or otherwise, to Company or shall certify in writing
to Company that such Confidential Information has been destroyed
and/or purged from its own system and files.

 

Section 4.3

Non-Disclosure.
Except as may be required by law, the Consultant shall not disclose
any Confidential Information to persons not involved in the
operation of the Company without the express written consent of the
Company.

 

Section 4.4

Proprietary
Rights. The Parties stipulate that any information or work
product provided by Consultant to Company, whether on paper,
communicated electronically, orally, or in any other form, is
“Confidential” and/or “Proprietary”, and
have independent economic value, and, as such, shall constitute the
“Confidential Property” of Company subject to the terms
and limitations set forth in this Agreement.

 

Section 4.5

Non-Circumvention.
Consultant shall not: (i) utilize any Confidential Information to
circumvent or compete with the Company or to cause any detriment,
harm or injury to the Company or the business of the Company; or
(ii) utilize any and all information lawfully furnished or
disclosed to Consultant by any party to circumvent or compete with
the Company or to cause any detriment, harm or injury to the
Company, to the business of the Company, or any affiliates of the
Company. Further, Consultant shall not engage in any activity which
shall cause any detriment, harm or injury to the Company, to the
business of the Company, or to the reputation of the Company or to
permit any circumvention of or competition with the Company or the
business of the Company.

 

Section 4.6

Non-Disparagement.
Consultant shall not, in any written or oral communications with
any party or through any medium, whether tangible, electronic, or
otherwise, criticize, ridicule or make any statement which,
directly or indirectly, disparages, causes harm to, or is
derogatory of the Company or its affiliates or any of their
respective directors or senior officers. Consultant shall not
express any negative opinions of the Company, the Company’s
business or products, or any affiliates of the Company or their
businesses or products. The provision shall be construed broadly
and shall govern any statement, express or implied, made concerning
the Company, the Company’s business and products, or
affiliates of the Company.

 

37

 

 

SECTION 5

MISCELLANEOUS

 

Section 5.1

Authority to Be
Bound. The Parties to this Agreement represent they have the
authority to enter into this Agreement. The promises made herein
shall be binding upon all undersigned Parties, and are the joint
and several obligations of each of the undersigned. Each party will
take responsible steps to insure that their associates, affiliates,
employees, agents, representatives and officers abide by the
provisions of this Agreement. The Parties hereto, and each of them,
further represent and declare that they have carefully read this
Agreement and know the contents thereof and sign the same freely
and voluntarily, and each of the Parties hereto have been given the
opportunity to confer with counsel.

 

Section 5.2

Delegation.
Consultant shall not, without
Company’s prior consent (which consent Company may withhold
in its sole discretion) subcontract or delegate, or enter into,
amend or modify any subcontract for the delegation or performance
of, any part of its obligations under this Agreement. Without
limitation on the foregoing, and notwithstanding any Company
consent thereto, Consultant shall remain fully responsible to
Company for the performance of any services rendered by any
subcontractor personnel, as if such subcontractor or subcontractor
personnel were Consultant or Consultant personnel
hereunder.

 

Section 5.3

Force
Majeure. Both Parties shall be
excused from performance under this Agreement for any period to the
extent that a party is prevented from performing any obligation, in
whole or in part, as a result of causes beyond its reasonable
control and without its negligent or willful misconduct, including
without limitation, acts of God, natural disasters, war or other
hostilities, labor disputes, civil disturbances, governmental acts,
orders or regulations, third party nonperformance, or failures or
fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment.

 

Section
5.4  

Waiver.
No delay in exercising, no course of dealing with respect to, or no
partial exercise of any right or remedy hereunder shall constitute
a waiver of any other right or remedy, or future exercise
thereof.

 

Section 5.5

Severability.
If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, all
terms, provisions, covenants, and conditions and all applications
not held invalid, void, or unenforceable will continue in full
force and will in no way be affected, impaired, or
invalidated.

 

Section 5.6

Mediation;
Governing Law; Venue. In the event of any dispute between
the Company and Consultant, including any Third Party, arising
under or pursuant to the terms of this Agreement, or any matter
relating to the subject matter of the Agreement, such dispute shall
be settled only by mediation in Orange County, California. The
Parties agree that Orange County, California is the appropriate
venue for all disputes. This Agreement shall be construed and
governed under the laws of the State of California, without regard
to its conflicts of law or choice of law provisions.

 

Section 5.7

Entire Agreement;
Amendment. This
Agreement constitutes the entire Agreement among the Parties with
respect to the subject matter hereof and supersedes in all respects
all prior proposals, negotiations, conversations, discussions and
agreements between the Parties. This Agreement may not be modified
or amended except by express written amendment signed by authorized
representatives of all Parties.

 

Section 5.8 

Successors &
Assigns. This
Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, personal representatives
and successors and assigns.

 

 

38

 

 

Section 5.9

Headings.
The headings and any table of contents contained in this Agreement
are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.

 

Section
5.10    

Rights
Cumulative. The
rights and remedies provided by this Agreement are cumulative, and
the exercise of any right or remedy by either Party hereto (or by
its successors), whether pursuant to this Agreement, to any other
agreement, or to law, shall not preclude or waive its right to
exercise any or all other rights and remedies.

 

Section 5.11

Facsimile
Certification. A
facsimile copy of this Agreement signed by any and/or all Parties
shall have the same binding and legal effect as an original of the
same.

 

Section 5.12

Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one in the same instrument. Regardless of whether this
Agreement is executed in one or more counterparts, each such
counterpart may be executed by actual or facsimile
signature(s).

 

Section 5.13 

Notices: Any
notice, request, demand, instruction or other document to be given
hereunder to any party shall be in writing and shall either be
delivered personally or by U.S. Mail, or by electronic means, to
the persons and entities listed at the addresses set forth below.
Notice shall be deemed given when: (i) personally served; or (ii)
three (3) business days following deposit with the United States
Postal Service; or (iii) one (1) business day following
transmission by facsimile or electronic mail if such facsimile
transmission or electronic mail service provides a mechanism for
recording the date and time of transmission in the ordinary
course.

 

 

 

39

 

 

SIGNATURE PAGE FOLLOWS

 

IN WITNESS WHEREOF, the Parties hereto, through their duly
authorized officers, have executed this Agreement, which shall be
binding as of the Effective Date.

 

 

 

	

EZ CLONE ENTERPRISES, INC.

(“COMPANY”)

 

/s/
William Blackburn

 

By:
William Blackburn

Title:
Chief Executive Officer

 

	

CONSULTANT

WILLIAM
BLACKBURN

 

/s/
William Blackburn

 

By:
William Blackburn

 

	
 

	

Consultant Address for Notice:

________________________

________________________

 

 

 

 

 

40

 

SCHEDULE
A

 

DESCRIPTION OF SERVICES

 

Consultant shall
perform the following services as pursuant to the terms of this
Agreement and at all times in accordance with the guidance and
direction of the Company’s Board of Directors and
Consultant’s direct report and other such services as may be
reasonably requested by the board of directors of the Company from
time to time.

 

Consultant
shall:

1.

_________________;

2.

_________________;
and,

3.

_________________.

 

Consultant’s
Direct Report: Marco
Hegyi

 

 

41

 

 

Exhibit
B

 

EZ-CLONE CONSULTING AGREEMENT

 

THIS EZ–CLONE CONSULTING AGREEMENT (the "Agreement") is entered into as of October 10, 2018,
(the "Effective Date") by and between Brad Mickelsen (hereinafter be referred
to as "Consultant"), and EZ
CLONE ENTERPRISES, INC., a California corporation (the
"Company"). Consultant and Company are occasionally
referred to herein individually as a "Party"
and collectively as the "Parties."

 

RECITALS

 

WHEREAS, the Company is in the business of hydroponic and
indoor gardening, including, but not limited to, the design,
creation and manufacturing of a commercial product line for
commercial growers and large-scale agriculture producers (the
"Business").

 

WHEREAS, concurrent herewith, the Consultant and Company
close the sale of a majority of the Company's common stock to
GrowLife, Inc., pursuant to that certain Purchase and Sale
Agreement, dated October 15, 2018, incorporated herein by reference
(the "Purchase Agreement").

 

WHEREAS, the Consultant, having been an owner and operator
of the Company since inception and having extensive experience
conducting the operations of the Business, as set forth in the
attached Schedule A, incorporated herein by reference (collectively
referred to as the "Services"),
is willing and able to perform such Services for the
Company;

 

WHEREAS, in accordance with the Purchase Agreement and this
Agreement, the Company desires to have Consultant provide Services
to the Company on the terms and conditions set forth
herein.

 

WHEREAS, the Parties mutually agree that this Agreement
supersedes and replaces any prior agreements, whether written or
verbal, entered into by and between the Consultant and the
Company.

 

NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth, the sufficiency of which are hereby
acknowledged, Consultant and Company agree as follows:

 

SECTION 1

SERVICES

 

1.1            

Scope of
Services. Consultant agrees to Perform Services for the
Company. Consultant shall perform Services pursuant to this
Agreement, which does not conflict with any other contract or other
obligation by which Consultant is bound. The Company acknowledges
that the Consultant is in the business of providing Services
contemplated by this Agreement. Consultant agrees to perform
Services for the Company subject to the highest professional
standards of one skilled (with like education, credentials, and
experience) in the Consultant's industry. Consultant
shall:

 

e.

Use best efforts to
promote the interests of the Company; and

 

f.

Answer operational
questions from time-to-time drawing from Consultant's operational
experience and reasonably consistent with Consultant’s
previous position and expertise;

 

 

42

 

1.2            

Independent
Contractor Relationship
Between the Parties. The Parties acknowledge and agree that
this Agreement does not create any agency relationship nor any
Partnership, Joint Venture, or Tenancy in Common. Consultant is an independent contractor with
respect to the performance of Services and shall not be deemed to
be an agent, employee, personnel, joint ventured or partner of the
Company for any purpose. All persons hired by or on behalf of the
Consultant, are and shall be considered the employees or agents of
Consultant. Consultant assumes sole and full responsibility for
their acts. Consultant shall at all times during this Agreement
maintain such supervision. In consideration of the independent
contractor relationship, the Parties warrant as
follows:

 

j.

The Consultant is
not required to perform work exclusively for the
Company;

 

k.

The Company shall pay Consultant
in the name appearing above;
and

 

l.

The
Company shall not

 

a.

provide Consultant with any business registrations or licenses
required to perform the Services contemplated by this
Agreement.

 

b.

pay
Consultant a salary or hourly rate, the Consulting Fee shall be for
a fixed amount.

 

c.

terminate
Consultant before the expiration of the Term, unless the Consultant
breaches this Agreement or violates the laws of the State of
California.

 

d.

provide
tools to Consultant.

 

e.

dictate
the time of performance to Consultant.

 

f.

combine
business operations with Consultant and shall maintain these
operations separately.

 

Consultant
expressly acknowledges and agrees that (i) Consultant will not be
entitled to or eligible for any employee benefit programs offered
by Company, (ii) Company will not withhold and remit any employment
and/or payroll taxes on behalf of Consultant, and (iii) Consultant
is solely responsible for the payment of all of Consultant's
federal, state and/or local income or any other taxes ("Taxes"). Consultant represents and covenants
that it shall Taxes payable by Consultant in accordance with the
consideration provided to Consultant under this
Agreement.

 

The
Parties agree to indemnify defend, protect, save and keep each
other harmless from and against any and all losses, actions,
liabilities, claims, damages, assessments, costs and/or expenses
relating to and/or arising from or in connection with the breach of
the representations and covenants of this Agreement.

 

1.3            

Ownership
of Intellectual Property Arising from the
Services. The Parties
acknowledge and agree that all creative work (including but
not limited to business and financial models, inventions,
discoveries, improvements, developments, processes, drawings,
computer software or other intellectual property and other work
which may be protectable by copyright, patent or trade secrecy
law)Consultant performs for the Company shall be considered to be
"work for hire" and that all ownership and rights to such "work for
hire" shall become the property of the Company. Consultant does
hereby assign all its rights in and to such "work for hire" to the
Company. Consultant will not assert any rights to any confidential
or proprietary information or material, nor will Consultant
directly or indirectly, except as required in the performance of
Services to the Company, disseminate or disclose any such
confidential or proprietary information. Further, any social media
content and contacts, including "followers" or "friends, " acquired through accounts used or created
on behalf of the Company by Consultant, including but not limited
to email addresses, blogs, Twitter, Facebook, YouTube or other
social media networks (collectively "Digital Assets"), shall be the property of the
Company.

 

 

 

43

 

SECTION 2

COMPENSATION AND OTHER CONSIDERATION

 

2.1            

Consulting
Fee. As full
consideration for the performance of the Services, Company shall
pay Consultant ten thousand even dollars ($10,000) per month
payable on a monthly basis in arrears during the Term of this
Agreement.

 

2.2            

Consultant’s
Expenses. Consultant
shall be responsible for all expenses incurred by Consultant in
connection with this Agreement, except for reasonable travel and
other reasonable out-of-pocket expenses pre-approved in writing by
the Company to be incurred (the "Expenses").

 

SECTION 3

TERM

 

3.1            

Term and
Expiration. This Agreement shall commence on the Effective
Date for six (6) months from the First Closing Date and shall
terminate on the Second Closing Date when delayed beyond six (6)
months from the First Closing Date, as defined in the Purchase
Agreement (the "Term").

 

SECTION 4

CONFIDENTIALITY, PROPRIETARY RIGHTS, NON-CIRCUMVENTION AND
NON-DISPARAGEMENT

 

4.1            

Non-Disclosure.
Except as may be required by law, the Consultant shall not disclose
any Confidential Information to persons not involved in the
operation of the Company without the express written consent of the
Company.

 

4.2            

Confidential
Property. The Parties stipulate that any information or work
product provided by Consultant to Company or by Company to
Consultant, whether written, communicated electronically, orally,
or in any other form, is "Confidential" and/or "Proprietary", having independent economic value, and,
as such, shall constitute the "Confidential Property" of Company subject to the terms and
limitations set forth in this Agreement.

 

4.3            

Return
of Confidential Property. Upon
Company’s request at the expiration of this Agreement,
Consultant shall return all original and copies of Confidential
Property whether in tangible form, written or otherwise, to Company
or shall certify in writing to Company that such Confidential
Property has been destroyed and/or purged from Consultant’s
system and files.

 

4.4            

Non-Circumvention.
Consultant shall not: utilize any Confidential Information and all
other information lawfully furnished or disclosed to Consultant by
any Party to circumvent or compete with the Company or to cause any
detriment, harm or injury to the Company, to the business of the
Company, or any affiliates of the Company. Further, Consultant
shall not engage in any activity which shall cause any detriment,
harm or injury to the Company, to the business of the Company, or
to the reputation of the Company or to permit any circumvention of
or competition with the Company or the business of the
Company.

 

4.5            

Non-Disparagement.
The Parties shall not, in any written or oral communications with
any party or through any medium, whether tangible, electronic, or
otherwise, criticize, ridicule or make any statement which,
directly or indirectly, disparages, causes harm to, or is
derogatory of the other Party, its affiliates or any of their
respective directors or senior officers. Consultant shall not
express any negative opinions of the Company, the Company’s
business or products, or any affiliates of the Company or their
businesses or products. The provision shall be construed broadly
and shall govern any statement, express or implied, made concerning
the Company, the Company’s business and products, or
affiliates of the Company.

 

 

44

 

SECTION 5

MISCELLANEOUS

 

5.1            

Authority to Be
Bound. The Parties to this Agreement represent they have the
authority to enter into this Agreement. The promises made herein
shall be binding upon all undersigned Parties, and are the joint
and several obligations of the undersigned Parties. The Parties
insure that their associates, affiliates, employees, agents,
representatives and officers will abide by the provisions of this
Agreement. Each of the Parties further represent and declare that
they have carefully read this Agreement, understand the contents
hereof, sign the same freely and voluntarily, and have been given
the opportunity to confer with counsel of their
choice.

 

5.2            

Delegation.
Consultant shall not, without
Company's prior consent (which
consent Company may withhold in its sole discretion) subcontract,
delegate, enter into, amend, modify or subcontract for the
delegation or performance of, any part of its obligations under
this Agreement. Without limiting the foregoing, and notwithstanding
Company's consent hereto,
Consultant shall remain fully responsible to Company for the
performance of any Services rendered by any subcontractor or
subcontractor personnel, as if such subcontractor or subcontractor
personnel were Consultant or Consultant personnel
hereunder.

 

5.3            

Force
Majeure. The Performance of both Parties shall be excused to the extent that
any Party is prevented from performing any obligation, in whole or
in part, for any period by causes beyond its reasonable control and
without its negligent or willful misconduct, including without
limitation, acts of God, natural disasters, war or other
hostilities, labor disputes, civil disturbances, governmental acts,
orders or regulations, third party nonperformance, or failures or
fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment.

 

5.4            

Waiver.
No delay in exercising, no course of dealing with respect to, or no
partial exercise of any right or remedy hereunder shall constitute
a waiver of any other right or remedy, or future exercise
thereof.

 

5.5            

Severability.
If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, all
terms, provisions, covenants, and conditions and all applications
not held invalid, void, or unenforceable will continue in full
force and will in no way be affected, impaired, or
invalidated.

 

5.6            

Mediation;
Governing Law; Venue. In the event of any dispute between
the Company and Consultant, including any Third Party, arising
under or pursuant to the terms of this Agreement, or any matter
relating to the subject matter of the Agreement, such dispute shall
be settled only by mediation in Orange County, California. The
Parties agree that Orange County, California is the appropriate
venue for all disputes. This Agreement shall be construed and
governed under the laws of the State of California, without regard
to its conflicts of law or choice of law provisions.

 

5.7            

Entire Agreement;
Amendment. This
constitutes the entire Agreement among the Parties with respect to
the subject matter hereof and supersedes in all respects all prior
proposals, negotiations, conversations, discussions and agreements
between the Parties. This Agreement may not be modified or amended
except by express written amendment signed by authorized
representatives of all Parties.

 

5.8            

Successors &
Assigns. This
Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective heirs, personal representatives
and successors and assigns.

 

5.9            

Headings.
The headings and any table of contents contained in this Agreement
are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.

 

 

45

 

 

5.10            

Rights
Cumulative. The
rights and remedies provided by this Agreement are cumulative, and
the exercise of any right or remedy by either Party hereto (or by
its successors), whether pursuant to this Agreement, to any other
agreement, or to law, shall not preclude or waive its right to
exercise any or all other rights and remedies.

 

5.11            

Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one in the same instrument. Regardless of whether this
Agreement is executed in one or more counterparts, each such
counterpart may be executed by actual or facsimile signature(s). A
facsimile copy of this Agreement signed by any and/or all Parties
shall have the same binding and legal effect as an original of the
same.

 

5.12            

Notices: Any
notice, request, demand, instruction or other document to be given
hereunder to any party shall be in writing and shall either be
delivered personally or by U.S. Mail, or by electronic means, to
the persons and entities listed at the addresses set forth below.
Notice shall be deemed given when: (i) personally served; or (ii)
three (3) business days following deposit with the United States
Postal Service; or (iii) one (1) business day following
transmission by facsimile or electronic mail if such facsimile
transmission or electronic mail service provides a mechanism for
recording the date and time of transmission in the ordinary
course.

 

5.13            

Definitions.
Any terms not herein defined shall have the same meaning as set
forth in the Purchase Agreement.

 

SIGNATURE PAGE FOLLOWS

 

 

46

 

 

IN WITNESS WHEREOF, the Parties hereto, through their duly
authorized officers, have executed this Agreement, which shall be
binding as of the Effective Date.

 

 

 

	

EZ CLONE ENTERPRISES, INC.

(“COMPANY”)

 

/s/
Billy Blackburn

 

By:
William Blackburn

 

Title:
Chief Executive Officer

 

	

CONSULTANT

BRAD
MICKELSEN

 

/s/
Brad Michelsen 

 

By:
Brad Mickelsen

 

	
 

	

Consultant Address for Notice:

 

________________________

 

________________________

 

 

 

 

 

47

 

SCHEDULE
A

DESCRIPTION OF SERVICES

 

Consultant shall
perform the following services pursuant to the terms of this
Agreement and at all times in accordance with the guidance and
direction of the Company’s Board of Directors and
Consultant’s direct report and other such services as may be
reasonably requested by the board of directors of the Company from
time to time:

 

Consultant is not
expected to participate in the day-to-day operations of the Company
during the term of this agreement. Consultant’s specific
duties under this Agreement shall be limited to assisting the
Company from time-to-time by answering operational questions where
Consultant’s knowledge and experience would benefit the
Company.

 

 

 

48Exhibit 10.1

SEPARATION AGREEMENT AND GENERAL RELEASE

 

This confirms the following
understandings and agreements between Omnicom Capital Inc. (the “Company”) and Dennis Hewitt (hereinafter referred
to as “you” or “your”).

 

1.(a)You have notified
the Company that you are retiring effective December 31, 2018 (the “Retirement Date”). You shall be paid your salary
through the Retirement Date and for any accrued but unused vacation days in accordance with Company policy. Until the Retirement
Date, you agree to assist the Company in the orderly transition of your responsibilities.

 

(b)Your health
coverage under the Company’s group health plan will terminate on December 31, 2018. Thereafter, you will be provided an opportunity
to continue health coverage for yourself and qualifying dependents under the Company’s group health plan in accordance with
the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).

 

(c)Except as otherwise
specifically set forth in this Separation Agreement and General Release (hereinafter also referred to as the “Agreement”),
after the Retirement Date you shall no longer be entitled to any further compensation or any monies from the Company or any of
its affiliates or to receive any of the benefits made available to you during your employment at the Company.

 

2.Provided you sign
this Agreement and do not revoke it pursuant to paragraph 11 below, the Company agrees to pay you $1,250,000, less all applicable
withholdings, payroll taxes and deductions. This amount shall be paid to you in a lump sum within 5 business days of July 1, 2019.

3.(a)As
used in this Agreement, the term “claims” shall include all claims, covenants, warranties, promises, undertakings,
actions, suits, causes of action, obligations, debts, attorneys' fees, accounts, judgments, losses and liabilities, of whatsoever
kind or nature, in law, equity or otherwise.

            (b)For and in consideration
of the payments described in paragraph 2 above, and other good and valuable consideration, you, for and on behalf of yourself and
your heirs, administrators, executors, and assigns, effective the Effective Date, do fully and forever release, remise and discharge
the Company, its direct and indirect parents, subsidiaries and affiliates, together with their respective officers, directors,
partners, shareholders, employees and agents (collectively, the “Group”) from any and all claims which you had, may
have had, or now have against the Company and the Group, for or by reason of any matter, cause or thing whatsoever, including any
claim arising out of or attributable to your employment or the termination of your employment with the Company, including but not
limited to claims of breach of contract, wrongful termination, unjust dismissal, defamation, libel or slander, or under any federal,
state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual
preference. This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family and Medical
Leave Act, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act, the Connecticut Fair Employment

    

    

    

Practices Act, the Connecticut Family and Medical Leave Act, and all other federal, state and local labor
and anti-discrimination laws, the common law and any other purported restriction on an employer’s right to terminate the
employment of employees. Notwithstanding anything above to the contrary, this release does not include any and all claims, defenses
and/or actions (i) to enforce the terms and conditions of this Agreement; and/or (ii) relative to or in connection with indemnification
of you as an officer and/or employee of the Company.

(c)You specifically
release all claims under the Age Discrimination in Employment Act (the “ADEA”) relating to your employment and its
termination.

(d)You represent
that you have not filed or permitted to be filed against the Group, individually or collectively, any lawsuits and you covenant
and agree that you will not do so at any time hereafter with respect to the subject matter of this Agreement and claims released
pursuant to this Agreement (including, without limitation, any claims relating to the termination of your employment), except as
may be necessary to enforce this Agreement, to obtain benefits described in or granted under this Agreement, or to seek a determination
of the validity of the waiver of your rights under the ADEA. Nothing in this Agreement shall be construed to prohibit you from
filing a charge with or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission
(“EEOC”), the Securities and Exchange Commission, or a comparable federal, state or local agency. Notwithstanding the
foregoing, you agree to waive your right to recover monetary damages in any charge, complaint, or lawsuit filed by you or by anyone
else on your behalf. Except as otherwise provided in this paragraph, you will not voluntarily participate in any judicial proceeding
of any nature or description against any member of the Group that in any way involves the allegations and facts that you could
have raised against any member of the Group as of the date hereof.

4.You are specifically
agreeing to the terms of this release because the Company has agreed to pay you money and other benefits to which you were not
otherwise entitled under the Company’s policies, and has provided such other good and valuable consideration as specified
herein. The Company has agreed to provide this money and other benefits because of your agreement to accept it in full settlement
of all possible claims you might have or ever had, and because of your execution of this Agreement.

5.Notwithstanding
any other provision of this Agreement, you will retain any rights that you have (i) to vested benefits under the Omnicom Group
Retirement Savings Plan and the Flex-Spending Plan; (ii) under the Executive Salary Continuation Agreement with Omnicom Group Inc.;
and/or (iii) to be indemnified as an officer/employee of the Company. Moreover, the Company agrees that it shall maintain Directors
and Officer insurance coverage in your favor in the same manner as the Company provides for all other similarly situated Officers
of the Company that have retired.

6.Upon termination
of your employment, or at any other date requested by the Company, you agree to return to the Company all Company property, including
without limitation, mailing lists, reports, files, memoranda, records, computer hardware, software, credit cards, door and file
keys, computer access codes or disks and instructional manuals, and other physical or personal property which you received or prepared
or helped prepare in connection with your employment with the Company, and that you will not retain any copies, duplicates,

    2

    

    

reproductions or excerpts thereof. Notwithstanding
anything above to the contrary, you shall be entitled to keep your cellphone and laptop computer at no expense to you; provided,
however, the Company reserves the right to remove any Company data from same by the Termination Date.

7.You agree
that in the course of your employment with the Company you have had access to and acquired Confidential Information. The term “Confidential
Information” as used in this Agreement means (a) confidential information of the Company, including without limitation, information
received from third parties under confidential conditions, and (b) other technical, business or financial information or trade
secrets or proprietary information (including, but not limited to, account records, confidential plans for the creation or disposition
of products, product development plans, marketing strategies and financial data and plans), the use or disclosure of which would
be contrary to the interests of the Company, its affiliates or related companies, or the Group. You understand and agree that such
Confidential Information has been disclosed to you in confidence and for the use of only the Company. You understand and agree
that (i) you will keep such Confidential Information confidential at all times after your employment with the Company, and (ii)
you will not make use of Confidential Information on your own behalf, or on behalf of any third party, unless required to do so
under compulsion of law.

8.You agree
that you will not encourage or cooperate or otherwise participate or confer with any current or former employee of the Company
or any member of the Group, individually or collectively, or any potential plaintiff, to commence any legal action or make any
claim against the Company or any member of the Group with respect to such person’s employment with the Company or its affiliates;
provided, however, that nothing in this Agreement shall prohibit you from cooperating with a current or former employee who has
filed a charge of discrimination with the EEOC. You will reasonably cooperate with the Company and its counsel in connection with
any investigation, administrative proceeding or litigation relating to any matter in which you were involved or of which you have
knowledge as a result of your employment with the Company; provided, however, that the Company shall pay for any and all costs
and expenses relating to your cooperation, including without limitation your reasonable attorneys fees and travel expenses.

9.(a)You
agree that you shall not make, or cause to be made, any statement or communicate any information (whether oral or written) that
disparages or reflects negatively on the Company or any member of the Group.

(b)The Company
agrees that it’s executive officers shall not make, or cause to be made, any statement or communicate any information (whether
oral or written) that disparages or reflects negatively on you.

10.The Company
shall be entitled to have the provisions of paragraphs 6, 7, and 9(a) specifically enforced through injunctive relief, without
having to prove the adequacy of the available remedies at law, it being acknowledged and agreed that such breach will cause irreparable
injury to the Company and that money damages will not provide an adequate remedy to the Company. Moreover, you understand and agree
that if you breach, or have previously breached, any material provision of this Agreement, including but not limited to commencing,
joining in or in any other manner attempting to assert any claim released herein, in addition to

    3

    

    

any other legal or equitable remedy
the Company may have, the Company shall be entitled to cease making any payments to you or on your behalf under paragraph 2 hereof,
recover any payments made to you or on your behalf under paragraph 2 hereof, and you shall reimburse the Company for all its reasonable
attorneys’ fees and costs incurred by it arising out of any such breach. Similarly, if the Company breaches any material
provision of this Agreement, the Company shall reimburse you for all your reasonable attorneys’ fees and costs arising out
of any such breach. The remedies set forth in this paragraph 10 shall not apply to any challenge to the validity of the waiver
and release of your rights under the ADEA. In the event you challenge the validity of the waiver and release of your rights under
the ADEA, then the Company’s right to attorneys’ fees and costs shall be governed by the provisions of the ADEA, so
that the Company may recover such fees and costs if the lawsuit is brought by you in bad faith. Any such action permitted to the
Company by this paragraph, however, shall not affect or impair any of your obligations under this Agreement, including without
limitation, the release of claims in paragraph 3 hereof. Each party further agrees that nothing herein shall preclude either party
from recovering attorneys’ fees, costs or any other remedies specifically authorized under applicable law.

11.You acknowledge
that you have read this Agreement in its entirety, fully understand its meaning and are executing this Agreement voluntarily and
of your own free will with full knowledge of its significance. You acknowledge and warrant that you have had the opportunity to
consider for twenty-one (21) days the terms and provisions of this Agreement and that you have been advised by the Company to consult
with an attorney prior to executing this Agreement. You shall have the right to revoke this Agreement for a period of seven (7)
days following your execution of this Agreement, by giving written notice of such revocation to the Company. This Agreement shall
not become effective until the eighth day following your execution of it (the “Effective Date”).

12.In the event
that any one or more of the provisions of this Agreement, except paragraph 2 above, is held to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Moreover,
if any one or more of the provisions contained in this Agreement, except paragraph 2 above, is held to be excessively broad as
to duration, scope, activity or subject, such provisions will be construed by limiting and reducing them so as to be enforceable
to the maximum extent compatible with applicable law.

13.Nothing herein
shall be deemed to constitute an admission of wrongdoing by either party or any member of the Group. Neither this Agreement nor
any of its terms shall be used as an admission or introduced as evidence as to any issue of law or fact in any proceeding, suit
or action, other than an action to enforce this Agreement.

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

15.The terms
of this Agreement and all rights and obligations of the parties thereto, including its enforcement, shall be interpreted and governed
by the laws of the State of Connecticut.

    4

    

    

16.All payments
made to you under this Agreement will be subject to applicable withholding taxes.

17.The terms
contained in this Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede
all prior negotiations, representations or agreements relating thereto whether written or oral with the exception of any agreements
concerning confidentiality, trade secrets, or any nonsolicitation, nonservicing or noncompetition agreements, all of which agreements
shall remain in full force and effect, and are hereby confirmed and ratified. You represent that in executing this Agreement, you
have not relied upon any representation or statement not set forth herein. No amendment or modification of this Agreement shall
be valid or binding upon the parties unless in writing and signed by both parties.

 

	 	Omnicom Capital Inc.
	 	By:	/s/ Michael J. O’Brien
	 	Date:	October 12, 2018

 

	Agreed to and Accepted By:
	    /s/ Dennis Hewitt
	Dennis Hewitt
	 	 
	Date:	 October 12, 2018

 

    5

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