Document:

f8k032514ex10i_hoteloutsourc.htm

Exhibit 10.1

AGREEMENT

This Agreement (the “Agreement”) is made and entered into as of  March 25, 2014 by and between Hotel Outsource Management International, Inc., a Delaware corporation (“HOMI”) having a registered address at 80 Wall Street, Suite 815, New York, NY 10005, HOMI Industries Ltd, having its principal place of business at Galgalei HaPladah 20, 2nd Floor, Herzliya Pituach 4672220, Israel (“Industries”), Moise Laurent Elkrief, 8C Chemin Edouard Tavan, 1206 Genève, Switzerland (“Elkrief”) and Daniel Cohen, 10 Iris Street, PO Box 4591, Caesarea 3088900, Israel (“Cohen”), (Elkrief and Cohen, or a company owned by them via which they will perform the transactions set forth herein, hereinafter jointly referred to as “PURCHASERS”), who hereby agree as follows.

WHEREAS, HOMI is a holding company for Industries, HOMI USA, Inc. and HOMI Israel Ltd. and an indirect holding company for HOMI UK Limited (hereinafter each of the foregoing companies a “Subsidiary” and jointly referred to as the “Subsidiaries”); and

 

WHEREAS, HOMI owns registered trademarks for “HOMI” in various countries around the world, all as set forth in Exhibit “A”, together with all associated goodwill (collectively, the “IP Rights”), for which an exclusive worldwide license was issued to Industries in 2009; and

WHEREAS, Cohen is currently an officer and director and shareholder of HOMI and an officer and director of the Subsidiaries; and

WHEREAS, Tomwood Limited, a BVI corporation (“Tomwood”), is the majority shareholder of HOMI, and Elkrief is the beneficial owner of the HOMI shares which are held in Tomwood’s name; and

WHEREAS, Purchasers beneficially own an aggregate of 2,088,697 shares of HOMI’s common stock, out of the total of 2,949,484 issued and outstanding shares of common stock in HOMI, thereby representing approximately 71% of HOMI’s issued and outstanding common stock; and

WHEREAS, Purchasers are willing to purchase the Transaction Assets (as defined below) and HOMI is willing to sell the same upon the terms and conditions provided hereinbelow; and

WHEREAS, because of the potential conflict of interest arising from the transactions described herein and to provide assurances that the proposed terms and conditions of the transactions proposed herein are fair and reasonable to the Parties, including the shareholders of HOMI, HOMI contracted to obtain an independent valuation from A. Heifetz & Co. Investment Banking, who is not affiliated in any manner to any of the parties hereto and who placed a negative value on the Transaction Assets.  A copy of such valuation is attached hereto and incorporated herein as Exhibit “B”.

  

  

  

 

NOW, THEREFORE, in consideration of the premises, the respective covenants and commitments of HOMI and PURCHASERS set forth herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

I.           HOMI RESTRUCTURING

1.1         Internal Transfer of Restructuring Assets by HOMI.  Immediately prior to the actions contemplated in Section 2.1 below herein, HOMI shall take all action necessary to sell, assign and transfer the IP Rights, all of the issued and outstanding stock of all the Subsidiaries except Industries and all of the rights of HOMI and HOMI Europe S.A.R.L. in the intra-company balance between HOMI and those Subsidiaries, including loans which they made to those Subsidiaries at various times and which remain outstanding as listed in Exhibit “C” (all the foregoing, collectively, the “Restructuring Assets”), to Industries, and Industries hereby agrees to purchase and acquire the same from HOMI.  Prior to Closing (as defined below herein), HOMI shall deliver to Industries (i) all such documents as may be required to vest in Industries good and marketable title to the Restructuring Assets free and clear of any and all liens, and (ii) all necessary stock transfer and any other required documentary stamps. For avoidance of any doubt, even after the sale and assignment of the Restructuring Assets, the Subsidiaries will continue to carry the liabilities they have at that time, as listed on Exhibit “D”. To the Parties’ best knowledge, Exhibit “D” includes all of the Subsidiaries’ liabilities, as of December 31, 2013, and may be further adjusted, as necessary, at Closing, in order to reflect their liabilities at that time, but it is the Parties’ intention that all of the Subsidiaries’ liabilities will continue to be carried by the Subsidiaries as of Closing.

 

1.2         Internal Transfer of Debt to Industries.  In consideration for the sale, assignment and transfer of the Restructuring Assets to Industries, Industries shall assume from HOMI the liabilities listed on Exhibit “E” (the “Assumed Liabilities”). The Parties hereto shall undertake their best efforts to obtaining a release of HOMI by the creditors under the Assumed Liabilities, and for those Assumed Liabilities for which no release is obtained, Industries and Purchasers shall indemnify HOMI therefrom as described hereinbelow in Article VI. To the Parties’ best knowledge, Exhibit “E” includes all of HOMI’s debts, as of December 31, 2013, and may be further adjusted, as necessary, at Closing, in order to reflect HOMI’s debt at that time, but it is the Parties’ intention that no debt will remain in HOMI as of Closing, with the exception of a currently outstanding IRS demand for payment of c. $200k in fines by HOMI, relating to alleged failure by HOMI to make certain filings in a timely manner (the “IRS Claim”), for which Industries and Purchasers shall indemnify HOMI in part as described in Article VI below.

 

II.           PURCHASE AND SALE OF THE TRANSACTION ASSETS

2.1         Purchase and Sale.  Upon the terms and subject to the conditions set forth in this Agreement, HOMI hereby agrees to sell, assign and transfer to PURCHASERS all of the issued and outstanding stock of Industries (the “Subsidiary Shares”) and all of the rights of HOMI in the intra-company balance between HOMI and Industries, including in respect of loans which it made to Industries at various times and which remain outstanding, all as listed in Exhibit “F” (collectively with the Subsidiary Shares: the “Transaction Assets”), and PURCHASERS hereby agree to purchase and acquire all of the Transaction Assets from HOMI, following completion of the HOMI restructuring pursuant to Article I above.

  

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2.2         Closing; Effective Time.  The closing (the "Closing") of all of the transactions contemplated herein (collectively, the "Transaction") shall take place at the offices of HOMI, or such other location as the parties may so agree on or before ____________________, 2014, after the satisfaction or waiver of the conditions set forth in Article VII, or at such other time, date and location as the parties hereto agree in writing (the "Closing Date").  The Transaction shall become effective twenty (20) days after HOMI files its Definitive Information Statement with the US Securities and Exchange Commission and the same has been disseminated to all of the shareholders of HOMI (the “Effective Time”) Prior to that time, the Transaction shall not be effective, such that none of HOMI’s assets shall have been deemed assigned to any party pursuant to this Agreement unless and until the Transaction becomes effective as set forth above, and such matters shall in all respects be deemed a condition precedent to the effectiveness of this Agreement.

2.3         Delivery of the Transaction Assets.  At Closing, HOMI shall deliver to PURCHASERS (i) all such documents as may be required to vest in PURCHASERS good and marketable title to the Transaction Assets free and clear of any and all liens, and (ii) all necessary stock transfer and any other required documentary stamps.

2.4         Taking of Necessary Action; Further Action.  If, at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Purchasers with full right, title and possession to the Transaction Assets, the other parties will take all such lawful and necessary action.

III.           PURCHASE PRICE

Purchase Price.  In consideration for the sale, assignment and transfer of the Transaction Assets to PURCHASERS, it being understood that the Subsidiaries shall continue to carry existing liabilities as set forth in Exhibit “D”, in addition to the Assumed Liabilities that will have been assigned by HOMI to Industries as set forth in Section 1.2 above and pursuant to Exhibit “E”, PURCHASERS shall pay the sum of $1 (one Dollar) to HOMI.

IV.           REPRESENTATIONS AND WARRANTIES OF PURCHASERS

PURCHASERS, as the same applies to each of them individually and not jointly and severally, hereby represent and warrant to their respective knowledge, and covenant with the other parties with respect to those matters set forth in this Article IV.  For purposes of this Agreement, the disclosure of any matter in a schedule to this Agreement (the “Disclosure Schedule”) shall serve as a sufficient disclosure for purposes of any and all representations and warranties in this Agreement to which such matter logically relates and where such deemed inclusion can be reasonably inferred from the matter and shall be deemed to modify such representation and warranty to the full extent of the disclosure. It is understood that the listing (or inclusion of a copy) of a document or other item on the Disclosure Schedule shall be deemed adequate disclosure of the document or item and its contents.

 

  

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4.1         Authority.  The PURCHASERS have full power and authority and are competent to (i) execute, deliver and perform this Agreement, and each ancillary document which PURCHASERS have executed or delivered or are to execute or deliver pursuant to this Agreement, and (ii) carry out PURCHASERS obligations hereunder and thereunder, without the need for any Governmental Action/Filing (as defined herein).  The execution, delivery and performance by the PURCHASERS to this Agreement and each ancillary document does not and will not conflict with, result in a breach of, or constitute a default or require a consent or action under, any agreement or other instrument to or by which such PURCHASERS are a party or are bound or to which any of the properties or assets of the PURCHASERS are subject, or any Legal Requirement (as defined herein) to which such PURCHASERS are subject.  This Agreement, and any ancillary document to be executed and delivered by PURCHASERS at the Closing, have been duly executed and delivered by PURCHASERS (and each ancillary document to be executed and delivered by PURCHASERS at or after the Closing will be duly executed and delivered by PURCHASERS), and this Agreement constitutes, and each ancillary document, when executed and delivered by PURCHASERS will constitute such PURCHASER’s legal, valid and binding obligation, enforceable against PURCHASERS in accordance with its terms.  For purposes of this Agreement, (x) the term "Governmental Action/Filing" shall mean any franchise, license, certificate of compliance, authorization, consent, order, permit, approval, consent or other action of, or any filing, registration or qualification with, any federal, state, municipal, foreign or other governmental, administrative or judicial body, agency or authority, and (y) the term "Legal Requirements" means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.

4.2         Governmental Approvals and Filings.  No consent, approval or action of, filing with or notice to any party on the part of PURCHASERS is required in connection with the execution, delivery and performance of this Agreement or the consummation of the Transaction.

4.3         No Brokers or Finders.  No person, firm or corporation has or will have, as a result of any act or omission of PURCHASERS, any right, interest or valid claim against PURCHASERS for any commission, fee or other compensation as a finder or broker in connection with the Transaction.

4.4         Familiarity with Business.  As a result of their respective positions held for a lengthy period of time in HOMI and the Subsidiaries, PURCHASERS are fully and completely familiar with and aware of all of the business dealings and the financial situation of the Subsidiaries, without there being any need for HOMI to make any representations as to same herein, and they neither have nor shall have any claim, demand and/or action whatsoever against HOMI howsoever in connection with the business and/or financial situation of the Subsidiaries, which they are acquiring pursuant to this Agreement, on an “as is” basis, and/or in connection with the contents of the Exhibits hereto and/or the records and/or financial statements of the Subsidiaries. Purchasers likewise are aware of the agreements made between HOMI Israel and Industries and various third parties who provided financing for the purchase of minibars, and such agreements are valid and effective as between said third parties and said Subsidiaries. Industries confirms its intention to honor all agreements to which it is party, including the foregoing agreements.

  

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V.           REPRESENTATIONS AND WARRANTIES OF HOMI

HOMI hereby represents and warrants to PURCHASERS, except as otherwise disclosed to PURCHASERS in a schedule attached hereto and except as otherwise disclosed to PURCHASERS in writing, to the best knowledge after due inquiry of HOMI, as follows:

 

5.1         Ownership of Restructuring Assets and Transaction Assets.  HOMI is the record or beneficial owner of the Transaction Assets and was at the signing hereof the record or beneficial owner, directly or indirectly, of the Restructuring Assets.

5.2         Organization and Good Standing.  HOMI is a corporation duly organized, validly existing and is in good standing under the laws of Delaware and has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement.

5.3         Authority to Execute and Perform Agreement.  HOMI has the requisite power and all authority required to enter into, execute and deliver this Agreement and the Transaction documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the Transaction.  The execution, delivery and performance of this Agreement and the consummation of the have been duly authorized by all necessary corporate action.

5.4         Authorization.  The execution, delivery and performance of this Agreement by HOMI have been duly authorized by proper corporate action of HOMI and is within its corporate powers. This Agreement constitutes the legal, valid and binding obligation of HOMI and is enforceable against HOMI in accordance with its terms.

5.5         Board and Shareholder Approval.  The Board of Directors of HOMI, by resolutions duly adopted at a meeting duly called and held at which a quorum was present or by the unanimous written consent in lieu of such a meeting, has approved this Agreement and the Transaction in accordance with the requirements of the State of Delaware.  The holders of a majority of HOMI’s issued and outstanding voting securities, including those owned by Purchasers, and a majority of HOMI’s issued and outstanding voting securities not including those owned by PURCHASERS, have approved this Agreement and the Transaction in accordance with the requirements of the State of Delaware.

5.6         Binding Effect.  This Agreement has been validly executed and delivered by HOMI and, assuming the due execution and delivery hereof by PURCHASERS and Industries, constitutes a valid and binding obligation of HOMI, enforceable against HOMI in accordance with its terms, except to the extent such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws of general applicability affecting or relating to enforcement of creditors’ rights generally, and (ii) general equitable principles (regardless of whether such enforceability is considered in equity or at law).

5.7         Governmental Approvals and Filings.  No consent, approval or action of, filing with or notice to any party on the part of HOMI is required in connection with the execution, delivery and performance of this Agreement or the consummation of the Transaction.

5.8         No Brokers or Finders.  No person, firm or corporation has or will have, as a result of any act or omission of HOMI, any right, interest or valid claim against HOMI for any commission, fee or other compensation as a finder or broker in connection with the Transaction.

  

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VI.        INDEMNIFICATION OF HOMI

6.1         Industries and PURCHASERS’ Indemnification Obligation with Respect to the Assumed Liabilities and Representations and IRS Claim.  Industries and PURCHASERS, jointly and severally,  each acknowledge that some or all of the creditors under the Assumed Liabilities may chose not to release HOMI from such obligations. Industries and the PURCHASERS hereby indemnify and hold harmless, and agree to indemnify and hold harmless (from and after the Closing) HOMI and its respective directors, officers, shareholders, employees and agents (collectively, the "HOMI Indemnified Parties") against any and all liabilities, obligations, losses, damages, claims, actions, liens and deficiencies which exist, or which may be imposed on, incurred by or asserted against any one or more of the HOMI Indemnified Parties as arising out of (i) any and all Assumed Liabilities as of the Closing Date, (ii) any and all other liabilities of HOMI which Purchasers knew and/or should have known existed at the date hereof or at the date of Closing but did not disclose to HOMI’s Board of Directors in writing, and/or which was known to HOMI at said times, and (iii) any cost or expense (including reasonable attorneys' fees and court costs) incurred by the HOMI Indemnified Parties or any of them in connection with the foregoing (including, without limitation, any cost or expense incurred by the HOMI Indemnified Parties in enforcing their rights pursuant to this Section 6.1) (collectively, the "Damages" for purposes of this Section 6.1). In respect of the IRS Claim, the Parties will fully cooperate in order to reduce the IRS Claim as much as possible and preferably to cancel it altogether, bearing in mind that HOMI’s auditors have advised that it is IRS’ stated policy to reduce or cancel such fines in similar circumstances. If, following all such efforts to reduce or cancel the IRS Claim, any part of the IRS Claim remains outstanding, then one half of the IRS Claim shall be included in the liabilities being indemnified by Industries and Purchasers as set forth in this Section 6.1 above, and the other half will remain a liability of HOMI.

  A HOMI Indemnified Party may apply all demands or claims for indemnification under this Article against any payment to be made by or on behalf of such HOMI Indemnified Party or any of its Affiliates to or for the account of Industries and the PURCHASERS by means of set-off, reduction or otherwise.  No HOMI Indemnified Party shall be required to make any claim or demand against any other Person prior to the making of any claim or demand for indemnification or at any other time.  The rights of the HOMI Indemnified Parties under this Section 6.1 are in addition to such other rights and remedies which they may have under this Agreement or otherwise.  The amount of any and all Damages suffered by HOMI Indemnified Parties under this Section 6.1 shall be recovered, and all claims of HOMI Indemnified Parties pursuant to this Section 6.1 shall be brought by HOMI on behalf of such HOMI Indemnified Parties.

  

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6.2           Procedure for Indemnification Claims.

(a)       If at any time a HOMI Indemnified Party determines to assert a right to indemnification hereunder, the HOMI Indemnified Party shall give to Industries and the PURCHASERS written notice describing the matter for which indemnification is sought in reasonable detail.  In the event that a demand or claim for indemnification is made hereunder with respect to a matter the amount or extent of which is not yet known or certain, the notice of demand for indemnification shall so state, and, where practicable, shall include an estimate of the amount of the matter.

(b)      Within 15 days after receipt of the notice referred to in clause (b) above, Industries and the PURCHASERS shall (i) if true, acknowledge in writing their respective responsibility for all or part of such matter, and shall pay or otherwise satisfy the portion of such matter as to which responsibility is acknowledged or take such other action as is reasonably satisfactory to the HOMI Indemnified Party to resolve any such matter that involves anyone not a party hereto, or (ii) give written notice to the HOMI Indemnified Party of his intention to dispute or contest all or part of such responsibility.  Upon delivery of such notice of intention to contest, the parties shall negotiate in good faith to resolve as promptly as possible any dispute as to responsibility for, or the amount of, any such matter.  Failure to respond to a notice claiming indemnification shall be deemed a denial of responsibility therefore.

(c)       In the event that the HOMI Indemnified Party is required to expend any amount in enforcing his, her or its rights of indemnification hereunder, Industries and the PURCHASERS will, jointly and severally, promptly upon request, pay such amounts to the HOMI Indemnified Party if indemnification is required to be made hereunder.

(e)       Industries and each PURCHASER shall have the right to employ separate counsel in any action or claim which is brought against any HOMI Indemnified Party in respect of which indemnity may be sought from it, and to participate in the defense of such action or claim, if Industries or such PURCHASER confirms in writing their responsibility for such action or claim; provided, however, that (i) PURCHASERS and Industries, or the HOMI Indemnified Party or Parties, as per their mutual agreement, shall retain control of such action or claim and (ii) the fees and expenses of such separate counsel shall be at the expense of Industries and the PURCHASERS, as applicable; and (iii) PURCHASERS and Industries may in no event settle such claim without the prior written consent of the relevant HOMI Indemnified Party unless such settlement provides for a full release of the relevant HOMI Indemnified Party in respect of such claim.

VII.       CLOSING

7.1          General Procedure.  Upon the execution of this Agreement (the “Closing”), each party shall deliver to the other party such documents, instruments and materials in their possession as may be reasonably required in order to effectuate the intent and provisions of this Agreement, and all such documents, instruments and materials shall be reasonably satisfactory in form and substance to counsel for the other parties.

  

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7.2           Conditions to Obligation of HOMI.  The obligation of HOMI to assign the Assets, sell the Transaction Assets and other transactions contemplated herein on the Closing in accordance with the terms set forth in this Agreement is, at the option of HOMI, subject to the satisfaction (or waiver by HOMI) of each of the following conditions:

(a)       Accuracy of Representations and Warranties.  The representations and warranties made by PURCHASERS in this Agreement shall be correct in all material respects on and as of the Closing with the same force and effect as though such representations and warranties had been made on the Closing.

(b)       No Injunction.  There shall not be in effect, as of the Closing, any non-appealable injunction or other binding order of any court or other tribunal having jurisdiction that prohibits the sale of the Transaction Assets to the PURCHASERS or the sale of the Restructuring Assets to Industries.

(c)       Delivery of Closing Documents. PURCHASERS shall have delivered or be prepared to deliver to HOMI the closing items identified in Section 7.4 (a).

7.3            Conditions to Obligation of PURCHASERS.  The obligation of PURCHASERS hereunder to complete the purchase of the Transaction Assets on the Closing on the terms set forth in this Agreement is, at the option of PURCHASERS, subject to the satisfaction (or waiver by PURCHASERS) of each of the following conditions:

(a)       Accuracy of Representations and Warranties. The representations and warranties made by HOMI in this Agreement shall be correct in all material respects on and as of the Closing with the same force and effect as though such representations and warranties had been made on the Closing.

(b)       No Injunction.  There shall not be in effect, as of the Closing, any non-appealable injunction or other binding order of any court or other tribunal having jurisdiction that prohibits the purchase of the Transaction Assets by PURCHASERS.

(c)       Delivery of Closing Documents.  HOMI shall have delivered to PURCHASERS the closing items identified in Section 7.4(b) in form satisfactory to PURCHASERS.

7.4           Specific Items to be Delivered at the Closing.  The parties shall deliver or shall cause to be delivered the following items to the appropriate party at the closing of the transactions contemplated by this Agreement:

(a)       To be delivered by PURCHASERS to HOMI:

(i)       Executed releases of HOMI by those creditors under the Assumed Liabilities who have executed the same, including releases of all notes owed by HOMI and held by Purchasers.

(b)       To be delivered by HOMI to Purchasers:

(i)        All necessary documents conveying the Transaction Assets to Purchasers.

(ii)       copies of all documents evidencing that all Restructuring Assets have been conveyed to Industries.

  

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VIII.           POST-CLOSING COVENANTS

8.1            Access to Records After Closing.  From and after the Closing, each of HOMI and Industries shall have reasonable access to inspect and copy all books and records that the other retains after the Closing with regard to business activities preceding the Closing for reasonable purposes (e.g., audits, etc.) and for the periods stipulated by applicable law. Such access shall be afforded by the party maintaining such books and records upon receipt of reasonable advance notice and during normal business hours. Purchasers shall also provide reasonable assistance, including general consultation (while Industries’ controller, Bella Kivilis, remains in her position currently estimated as May 2014) and consultation with Cohen, data storage and such like, without incurring any out of pocket expense, until such time as HOMI enters into an acquisition or merger or similar transaction with a third party, to the extent reasonably required in order to enable HOMI to continue to make such filings and reports as may be necessary during that period. Purchasers will procure that HOMI’s Board of Directors will at Closing receive two electronic copies of all of the signed agreements, balance sheets (including data files) and all other accounting files and legal documents relating to HOMI and its subsidiaries and currently and as of Closing electronically stored by HOMI or Industries, and Purchasers and Industries likewise consent to Industries’ accountants and lawyers providing such documents to HOMI’s Board of Directors.

8.2           Survival.  The post-closing covenants set forth herein shall survive in accordance with their respective terms. Each of the parties acknowledges that, except as expressly provided herein, none of the parties hereto, and none of the representatives of either party hereto, has made or is making any representations or warranties whatsoever, implied or otherwise.

IX.          MISCELLANEOUS

9.1           Binding Effect: No Third Party Beneficiaries.  This Agreement shall be binding upon and inure to the benefit of and be enforceable against the parties hereto and their respective heirs, successors and permitted assigns, as applicable. This Agreement is not intended to confer on any party not a signatory hereto any rights and remedies hereunder.

9.2           Governing Law.  This Agreement shall in all respects be governed by, and enforced and interpreted in accordance with, the laws of the State of New York, without regard to conflict of law provisions, as if all performance under this Agreement were to occur within the State of New York, subject to the provisions of Section 9.3(b) below.

9.3           Arbitration: Venue.  Any disputes arising under, or related to, this Agreement shall be resolved in accordance with the following provisions:

(a)      In the event that a dispute should arise among the parties with respect to the interpretation and implementation of this Agreement or if the parties fail to come to mutual agreement with respect to any decision that is to be mutually agreed hereunder, each party agrees to use all reasonable efforts to solve such dispute in negotiations, including, subject to the parties’ agreement at such time, non-binding mediation.

  

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(b)      In the event that a dispute resolution according to the foregoing is not successful within thirty (30) days of institution of such negotiations, any dispute, controversy or claim arising out of or relating to this Agreement or breach hereof shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with said Rules. The arbitrators shall be citizens or residents of the United States. The place of arbitration shall be New York, New York and the language of the arbitration shall be English, unless HOMI elects in writing, in its discretion, that the place of arbitration shall be Israel, governing law shall be Israeli Law and the language of arbitration shall be Hebrew. The award shall be final and binding on the parties, and each party hereby waives to the fullest extent permitted by law any right it may otherwise have under the laws of any jurisdiction to any form of appeal. The award may include an award of costs, including reasonable attorneys’ fees and disbursements. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof, and with respect thereto, each party (i) irrevocably submits to the jurisdiction of any court of competent jurisdiction located in the designated place of arbitration as above; (ii) waives any argument that venue in such forum is not convenient; and (iii) consents to the jurisdiction of such courts regardless of their state or country of residence.

9.4           Notices.  All notices, consents, requests, instructions or other communications provided for herein shall be in writing and shall be deemed validly given, made and served when (a) delivered personally, (b) sent by certified or registered mail, postage prepaid, (c) sent by reputable overnight delivery service, pending the designation of another address, or (d) sent by facsimile transmission, addressed to the receiving party at the address indicated hereinabove, or such other address as a party may designate in the future, in writing, with receipt confirmed in writing by the receiving party.

9.5           Entire Agreement and Amendments.  This Agreement (together with the Exhibits and Schedules attached hereto, each of which are hereby incorporated herein) sets forth the entire agreement between the parties relating to the subject matter hereof, superseding in all respects any and all prior oral or written agreements or understandings between them pertaining to the transactions contemplated by this Agreement. This Agreement shall be amended or modified only by written instrument signed by each of the parties hereto.

9.6           Interpretation.  Each party hereto acknowledges that it has participated in the drafting of this Agreement, and any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in connection with the construction or interpretation of this Agreement. Each party has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice. Section and article headings used in this Agreement have no legal significance and are used solely for convenience of reference.

9.7           Assignment.  No party shall assign its rights or delegate its responsibilities without the prior written consent of the other parties hereto, which consent will not be unreasonably withheld.

9.8           Expenses.  Cohen confirms that HOMI’s consultants in connection with this Agreement have already been paid by HOMI through the date hereof.

  

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9.9           Force Majeure.  Neither party shall be in default under this Agreement or liable for any nonperformance that is caused by fire, flood, explosion, war, strike, embargo, or any act, order or requirement of a regulatory body, court or legislature, civil or military authority, act of God, act or omission of any third party, or other cause beyond such party’s reasonable control during the period and to the extent that such extraordinary condition delays, impairs or prevents such party’s performance.

9.10         Attorneys’ Fees.  In any action or proceeding brought to enforce any provision of this Agreement or other related document, or where any provision hereof or thereof is validly asserted as a defense, the successful party shall be entitled to recover, and the court or arbitrator shall award, reasonable attorneys’ fees in addition to any other available remedy. Purchasers confirm that in the event of any issue arising after Closing in which there shall be a conflict of interests between HOMI and Purchasers, Purchasers shall have no objection to any service provider who previously provided services to HOMI, such as lawyers and accounts, acting for HOMI in such matter.

9.11         Counterparts Facsimile Execution. For purposes of this Agreement, a document (or signature page thereto) signed and transmitted by facsimile machine or telecopier or email is to be treated as an original document.  The signature of any party thereon, for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same binding effect as an original signature on an original document.  At the request of any party, a facsimile or telecopy or email document is to be re-executed in original form by the parties who executed the facsimile or telecopy or email document.  No party may raise the use of a facsimile machine or telecopier machine or email system as a defense to the enforcement of the Agreement or any amendment or other document executed in compliance with this Section.

9.12         Governing Language.  This Agreement shall be executed in the English language. Any translation of this Agreement into a language other than English shall be for the convenience of the parties only, it being understood that the English version shall control. In the event of any dispute with regard to this Agreement and its interpretation, the English language version of this Agreement shall prevail.

(Balance of Page Intentionally Left Blank – Signature Page Follows)

  

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IN WITNESS WHEREOF, THE PARTIES have executed this Agreement as of the date set forth in the first paragraph.

PURCHASERS:

_________________________________

Daniel Cohen

_________________________________

Moise Laurent Elkrief

 

__________________________________

[Newco]

HOTEL OUTSOURCE MANAGEMENT INTERNATIONAL, INC.

a Delaware corporation

By: _________________________________

Its: _________________________________

 

 

HOMI Industries Ltd

an Israeli company

 

By: _________________________________

Its: _________________________________SECURED
LOAN AGREEMENT

 

This
Secured Loan Agreement (“Agreement”) made and entered into this March 25, 2014, by and between CANNABIS-RX, INC.,
a corporation duly organized and existing under and by virtue of the laws of the State of Nevada (hereinafter referred to as the
“Borrower”) and FALCON INVESTMENTS HOLDINGS S.A., a corporation duly organized and existing under and by virtue of
the laws of Belize (hereinafter referred to as “Lender”).

 

WITNESSETH:

 

WHEREAS,
the Borrower has requested a two (2)-year term loan of up to FOURTEEN MILLION US DOLLARS (US$14,000,000.00) from the Lender, to
finance its business operations and for other general corporate uses;

 

WHEREAS,
the Lender has agreed to extend a term loan to the Borrower subject to the terms and conditions set forth herein;

 

NOW,
THEREFORE, for and in consideration of the foregoing premises and of the mutual covenants and agreements hereinafter stated, the
Parties hereto agree as follows:

 

Section
1. Construction and Definitions

 

1.01
Principles of Construction

 

(a)
Capitalized terms used in this Agreement but not otherwise defined shall have the meanings set forth in Section 1.02 of this Agreement.

 

(b)
The headings in this Agreement are inserted for convenience of reference only and shall not limit or affect the construction of
the provisions hereof. Unless the context otherwise requires, words denoting the singular number shall include the plural and
vice versa, and references to any gender shall include the other genders. Unless otherwise provided herein, all terms of accounting
used herein shall be construed in accordance with generally accepted accounting principles in effect in the United States on the
date applied. References to “Sections” and “Exhibits” are to be construed as references to the Sections
and Exhibits of and to this Agreement. The Exhibits attached to this Agreement shall form integral parts hereof.

 

(c)
Reference to any Applicable Law shall be construed as a reference to such Applicable Law as re-enacted, amended or extended from
time to time, and any reference to any document or agreement, including this Agreement, shall be deemed to include (i) the schedules
and exhibits thereof and thereto which are attached and made integral parts thereof, and (ii) references to such document or agreement
as may be amended or modified from time to time in accordance with its terms, but only to the extent such amendments and other
modifications are not prohibited by the terms thereof or of this Agreement, unless otherwise indicated.

 

(d)
Reference to any party to this Agreement or any party to any other agreement shall include its successors, and in the case of
governmental persons, persons succeeding to their respective functions and capacities.

 

1.02
Definitions

 

When
used in this Agreement, the following terms, unless the context otherwise requires, shall have the following meanings:

 

(a)
“Agreement” shall mean this Secured Loan Agreement, the Note/s, and all annexes, schedules and all future amendments
or supplements thereto;

 

(b)
“Applicable Law” shall mean any statute, law, regulation, ordinance, rule, judgment, order, decree, governmental approval,
concession, grant, franchise, license, directive, guideline, policy, requirement or other governmental restriction or any similar
form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any governmental
authority;

 

(c)
“Banking Day” shall mean a day on which commercial banks are open for business in New York City. Provided, that all
other days not otherwise specified herein shall mean calendar days which shall be construed as successive periods of twenty-four
(24) hours each whether such periods are Banking Days or not;

 

    	 

    	 

    

(d)
“Base Rate” shall mean five (5) percent;

 

(e)
“Borrowing” shall mean the advance by the Lender to the Borrower, or as the context may require, the amount of such
advance from time to time outstanding;

 

(f)
“Commitment” shall mean the obligation of the Lender to grant a term loan facility in favor of the Borrower up to
the maximum aggregate principal amount of FOURTEEN MILLION US DOLLARS (US$14,000,000.00) subject to the terms and conditions of
this Agreement;

 

(g)
“Days” shall mean consecutive calendar days;

 

(h)
“Dollars” or “US Dollars” and the signs “$”, “US$” or “USD” shall
mean the legal currency of the United States of America;

 

(i)
“Drawdown” shall mean the act of availing of the Borrowing to be made by the Lender in favor of the Borrower, here
to be made in accordance with Sections 2.02 and 7 hereof;

 

(j)
“Event/s of Default” shall have the same meaning set forth in Section 8.01 hereof;

 

(k)
“Governmental Authority” shall mean any governmental, state or other political subdivision thereof, or any entity
exercising or entitled to exercise executive, legislative, judicial, regulatory or administrative functions of, or pertaining
to, government;

 

(l)
“Indebtedness” shall mean all obligations of the Borrower then outstanding for the payment or repayment of money,
including (i) all indebtedness of the Borrower for or in connection with borrowed money or for the deferred purchase price of
property or services or for leases and similar arrangements (including, but not limited to, reimbursement obligations under or
in respect of any letter of credit or bank acceptance and the obligation to repay deposits with or advances to the Borrower),
and (ii) all direct and indirect guarantees of the Borrower in respect of, and all obligations (contingent or otherwise) of the
Borrower to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, all indebtedness of another
Person; provided, however, that the term Indebtedness shall not include (a) payment obligations in the ordinary course of business
or in the day-to-day operations of the Borrower, or (b) agreements providing for indemnification, purchase price adjustments or
similar obligations incurred or assumed in connection with the acquisition or disposition of assets.

 

(m)
“Interest” on the Loan shall be as set out in Section 2.04 hereof.

 

(n)
“Lien” shall mean any pledge, mortgage, charge, encumbrance, title retention or other security arrangement on or with
respect to any asset or revenue of the Borrower;

 

(o)
“Loan” shall mean the aggregate principal amount of the Borrowing made by Borrower hereunder;

 

(p)
“Loan Documents” shall mean collectively this Agreement, the Note/s, and all other agreements, instruments and documents
executed or delivered pursuant to the terms of this Agreement, including any and all amendments or supplements thereto;

 

(q)
“Loan Repayment Date” shall mean the day on which the principal and all accrued interest is due on the Loan as set
out in Section 2.07 hereof.

 

(r)
“Note/s” shall mean each of the promissory notes executed on the date of Drawdown which by their respective terms
are incorporated into and form an integral part of this Agreement, evidencing the Loan pursuant to Section 2.03 hereof and more
specifically described in Exhibit “A” hereof or any promissory note/s delivered by the Borrower with the consent of
the Lender in extension, renewal or substitution thereof and evidencing all or part of the Lender’s advances;

 

    	2

    	 

    

Section
2. The Loan

 

2.01
Commitment of the Lender

 

The
Lender grants to the Borrower a two (2)-year term loan facility in the maximum aggregate principal amount of FOURTEEN MILLION
US DOLLARS (US$14,000,000.00) upon the terms and subject to the conditions hereof (“Commitment”). The Lender agrees,
upon the terms and subject to the conditions hereinafter set forth, to make advances in Dollars to the Borrower within three (3)
Banking days from the signing of this Agreement and, from then, from time to time, as the Borrower makes a demand on the Lender,
in an aggregate principal amount up to but not in excess of their above-stated Commitment

 

2.02
Procedure for Drawdown

 

On
any Drawdown date, provided all conditions set forth in Section 6 hereof have been fulfilled, the Lender shall make available
to the Borrower the amount of Commitment demanded, which amount shall be released by crediting the Borrower’s designated
deposit account/s (electronic fund transfer). The Lender shall, immediately upon crediting the Borrower’s account/s, notify
the Borrower by facsimile transmission of such fact.

 

2.03
The Notes

 

(a)
The Borrowing shall be evidenced by Note/s, substantially in the form of Exhibit “A” hereof, dated on the Drawdown
date.

 

(b)
On or before any Drawdown date, the Borrower shall deliver to the Lender the duly executed Note/s evidencing the Borrowing on
such date in accordance with the Agreement.

 

The
provisions of the Note/s, once executed, shall be complemented by the terms and conditions of this Agreement; provided, however,
that in case of conflict between the Notes and this Agreement, the latter shall prevail.

 

2.04
Interest

 

(a)
The Borrower shall pay Interest on the Loan equal to the Base Rate (the “Interest Rate”).

 

(b)
All payments for Interest pursuant to this Section shall be computed on the basis of a 360-day year for the actual days elapsed.

 

(c)
All accrued but unpaid interest shall be due and payable on the Loan Repayment Date.

 

2.05
Security

 

(a)
As security for the payment of the Borrowing, the Borrower obliges itself to mortgage in favor of the Lender such real property
as will be agreed upon by the Lender and the Borrower (the “Collateral”) to ensure the outstanding amount of the Borrowing.

 

It
is understood and agreed that all additions and accretions to, or replacements or substitutions of, said Collateral shall be made
and subject to the lien of this mortgage and shall be held for the security and payment of the outstanding amount of the Borrowing
including interest, expenses or any such other obligations owing to the Lender under this Agreement.

 

(b)
The Borrower states that it is the sole and beneficial owner of the Collateral and the one in possession thereof free from any
lien, encumbrance or other security interest of any other person, except as otherwise disclosed in writing, or as provided under
Section 6.02(d) hereof.

 

    	3

    	 

    

(c)
During the term and existence of this Agreement, the Borrower shall insure or cause to be insured at all times and at its own
expense the Collateral against loss, fire, theft, pilferage, or otherwise, for the full insurance value payable to the Lender
as its interest in the Collateral may appear, and it shall endorse and deliver the policy or policies of insurance to the Lender,
and in default thereof, the Lender may, at its option, insure the Collateral and any and all sums so paid by the Lender for such
insurance shall be repayable with interest thereon at the same interest rate as being imposed under this Agreement and shall be
considered covered by herein mortgage. It is clearly understood that the Lender has the right to see and inspect the Collateral
to find out their state or condition, upon a prior written notice of at least 24 hours submitted to the Borrower and only to be
conducted during regular business hours from 9:00 am to 5:00 pm.

 

(d)
The Borrower shall not, during the existence of the mortgage, encumber with a second mortgage the Collateral, or any part thereof,
without the written consent of the Lender.

 

(e)
The Borrower may sell or dispose of the Collateral, provided the Borrower shall have the consent of the Lender (which consent
shall not be unreasonably withheld) and immediately replace the Collateral with other real property such that at all times it
is maintained that the value of the mortgage is the outstanding amount of the Borrowing. In this case, the Borrower undertakes
to execute a new mortgage document to cover the substitute collateral. It is agreed that the Borrower shall furnish all documentary
stamps for the new Collateral and pay all fees for the notarization and registration (if required by the Lender) of the documents
connected therewith.

 

(f)
In the event the Borrower should fail to pay the Lender the sum of money or Borrowing secured by this mortgage, or any part thereof,
when due, or is in default within the meaning of this Agreement, the Lender shall have the right at their election, to foreclose
this mortgage in accordance with Applicable Law, and the proceeds of such sale of the mortgaged Collateral shall be applied in
accordance with Section 2.07(b).

 

(g)
The Borrower agrees and undertakes to execute and deliver to a Lender such other documents which said Lender may from time to
time reasonably request from the Borrower in connection with the mortgage.

 

(h)
Effective upon the breach of any condition of this mortgage and in addition to the remedies herein stipulated, the Lender are
hereby appointed attorneys-in-fact of the Borrower with full powers and authority, to take actual possession of the Collateral,
without the necessity of any judicial order or any other permission or power, to sell or dispose of the Collateral or take any
other legal action that may be deemed necessary, to lease any of the Collateral and collect rents therefor; to execute bills of
sale, leases or agreements that may be deemed convenient; to make repairs or improvements to the Collateral and pay the same and
perform any other act which the Lender may deem convenient for the proper administration of the Collateral.

 

2.06
Loan Repayment

 

The
Borrower shall fully pay and liquidate the Loan within two (2) years from and after the initial Drawdown date (the “Loan
Repayment Date”).

 

In
case of multiple loan drawdowns, the repayment schedule of any succeeding drawdown shall coincide with the repayment schedule
of the initial drawdown.

 

2.07
Payments

 

(a)
All payments to be made by the Borrower hereunder or under the Note/s or under any document contemplated hereby shall be paid
to each Lender not later than 12:00 noon of the due date of the payment in Dollars drawn on immediately available funds by debiting
the Borrower’s designated deposit account/s.

 

(b)
Any payment made to the Lender hereunder shall be applied first against reasonable costs, expenses and indemnities due hereunder;
then against penalties; then against interest due on the Loan; then against the principal amount of the Loan then due and payable.

 

    	4

    	 

    

2.08
Voluntary Prepayment

 

The
Borrower shall have the option to prepay the Loan in full or partially on the first day of each month without any penalty chargeable
against it, subject to the following terms and conditions:

 

(a)
The Borrower shall give the Lender written notice of such prepayment not less than ten (10) days prior to the proposed prepayment
date, which notice, once given, shall be irrevocable and binding on the Borrower;

 

(b)
The amount payable in respect of each prepayment shall be the full or partial outstanding principal amount of the Loan plus any
accrued but unpaid interest, penalties and other charges (where applicable);

 

(c)
Any amount prepaid may be re-borrowed hereunder.

 

2.09
Use of Proceeds

 

The
Borrower agrees that it will use the proceeds of the Loan exclusively to finance its business operations and for other general
corporate uses.

 

Section
3. Funding

 

3.01
Cost and Losses

 

The
Borrower shall pay the Lender for any actual and documented reasonable costs and losses, as certified by the Lender and upon submission
by Lender of proof of such costs and losses (without prejudice to Borrower’s right to dispute or request clarification of
the charges), in connection with the unwinding or liquidation of any deposit, funding or financing arrangement that the Lender
may in good faith incur as a result of (i) any Borrowing not being made due to the failure of the Borrower to satisfy the applicable
conditions specified in Section 6 of this Agreement on the proposed Drawdown date, or (ii) the default by the Borrower in the
payment of the interest accrued thereon after the occurrence of any Event of Default hereunder, or (iii) any prepayment of the
Loan.

 

Section
4. Fees and Charges

 

4.01
Costs and Expenses

 

(a)
The Borrower shall, for its own account, pay all reasonable costs, charges and expenses incurred in connection with the execution
of the Loan Documents and any other documentation required thereunder and/or any amendment of any of the Loan Documents, which
total reasonable costs, charges and expenses shall include documentary stamp tax and notarial fees.

 

(b)
The Borrower shall also reimburse the Lender on demand for all reasonable and documented expenses incurred by them, including
reasonable expenses and fees of external counsel, when applicable, (i) in connection with the enforcement and administration of
the Loan Documents from and after the occurrence of an Event of Default, or (ii) with respect to any action which may be instituted
by any person against the Lender in respect of any of the foregoing or as a result of any transaction, action or non-action arising
from the foregoing. Such expenses shall be reimbursed whether or not the Lender gives notice of such Event of Default or demand
acceleration of the Loan or take other action to enforce the provisions of this Agreement, unless the Lender waives the Event
of Default and in such waiver specifically waive reimbursement of administration and enforcement expenses resulting from such
waived Event of Default; provided that in every case the Borrower shall have the right to contest prior to or after the payment
thereof the correctness or reasonableness of the expenses incurred. It is understood that expenses shall not include representation
expenses of any kind.

 

    	5

    	 

    

4.02
Non-Reimbursable Nature

 

The
fees, expenses and other amounts payable by the Borrower under this Section shall be payable by the Borrower, and, if already
paid, shall not be reimbursable by the Lender, notwithstanding the failure by the Borrower to make any Borrowing under the Agreement
or any other failure of the transactions contemplated herein.

 

Section
5. Covenants

 

5.01
Affirmative Covenants

 

During
the term of the Loan and until payment in full of all amounts due to the Lender under this Agreement shall have been received
by the Lender, the Borrower covenants and agrees that, unless the Lender shall otherwise consent in writing, which consent shall
not be unreasonably withheld, it shall:

 

(a)
Maintenance and Continuity of Business/Insurance. Maintain and preserve its corporate existence, rights, privileges and franchises;
carry out and conduct its business in an orderly, diligent, efficient and customary manner and in accordance with sound financial
and business practices; keep all its properties in good working order and condition, ordinary wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements and improvements thereto and thereof so that business
carried on in connection therewith may be properly and advantageously conducted at all times; and, maintain insurance with reputable
insurers on all its properties and assets to such extent and against such operational and other risks and liabilities as are customary
for businesses of a like or similar nature;

 

(b)
Compliance with Laws/Taxes. At all times comply with or cause to be complied with, all laws, statutes, rules, regulations, orders
and directives, judgments, indentures, mortgages, deeds of trust, agreements and other instruments, arrangements, obligations
and duties to which it is subject or by which it is legally bound where non-compliance would materially and adversely affect the
Borrower’s ability to duly perform and observe its obligations and duties under the Agreement; and timely file tax returns
which to its knowledge are required to be filed and pay all taxes due in respect of the ownership of its properties and assets
or the conduct of its operations;

 

(c)
Indebtedness and Contractual and Other Obligations. Promptly as practicable, (i) duly pay and discharge all indebtedness and perform
all contractual obligations in accordance with their terms; (ii) duly pay and discharge all taxes, assessments and governmental
charges of whatever nature validly and legally levied upon or against it or against its properties and business prior to the date
on which penalties attach thereto; and, (iii) duly pay and discharge all lawful claims for labor, materials, supplies, services,
or otherwise which might or could, if unpaid, become a lien or charge upon the properties or assets of the Borrower, unless and
to the extent only that the same shall be contested in good faith and by appropriate proceedings diligently conducted by the Borrower,
and take such steps as may be necessary in order to prevent its properties or any part thereof from being subjected to the possibilities
of loss, forfeiture or sale;

 

(d)
Notice of Legal Proceedings/other Matters. Promptly, as practicable, give written notice to the Lender of (i) any litigation or
proceeding before any court, tribunal, arbitrator or governmental authority affecting it or any of its assets, including provisional
reliefs such as attachments and garnishments, that may materially and adversely affect the Borrower’s capacity to pay the
Loan; (ii) any dispute which may exist between it and any governmental authority or any proposal by any governmental authority
to acquire its business or any of its assets, which may materially and adversely affect its operations or financial condition;
(iii) any litigation or proceeding relating to environmental matters concerning the Borrower, that may materially and adversely
affect the Borrower’s capacity to pay the Loan; (iv) any notice of strike filed with the Department of Labor and Employment
against the Borrower which may disrupt the Borrower’s operations and materially and adversely affect its capacity to pay
the Loan; (v) any Event of Default to the best of the Borrower’s knowledge or any event which the Borrower is certain, upon
a lapse of time or giving of a notice or both, would become an Event of Default; (vi) any damage, destruction or loss which might
materially and adversely affect the assets, business prospects or financial condition of the Borrower; and, (vii) any other matter
which has resulted or might result in a material adverse change in the operations or financial condition of the Borrower;

 

    	6

    	 

    

(e)
Additional Agreements. Execute and deliver within a reasonable time to the Lender such additional reports, documents, and other
information respecting the business, properties, condition or operations, financial or otherwise of the Borrower, as the Lender
may reasonably require from time to time to perfect and confirm to the Lender all their rights, powers and remedies hereunder;

 

(f)
Continuing Approvals. At its own cost and expense, continue in full force and effect (and where appropriate, promptly renew) all
governmental approvals obtained in connection with or necessary for the carrying out of its business and its obligations under
the Loan Documents; perform and observe all the conditions and restrictions contained in, or imposed on the Borrower by, any and
all such governmental approvals; and, obtain any new or additional governmental approvals, effect any and all registrations or
filings, and take such additional actions as are, or which may become, necessary for its business and the performance or enforceability
of the aforementioned documents;

 

(g)
Environmental, Occupational and Health Safety Guidelines. Take all practical measures to ensure that the Borrower’s business
is carried out with due regard to ecological and environmental factors and in compliance with (i) environmental and occupational
and health safety guidelines relevant to the business of the Borrower and (ii) applicable Philippine and local environmental,
occupational and health safety laws and regulations;

 

(h)
Books of Accounts and Records. Maintain true, complete and adequate books, accounts and records and prepare all financial statements
required hereunder to reflect fairly its financial condition and results of operation in accordance with generally accepted accounting
principles and practices consistently applied, and in compliance with the regulations of any governmental regulatory body having
jurisdiction thereof; and, as soon as available, submit to the Lender copies of all reports, information and documents which the
Borrower may be required to file or submit to the Securities and Exchange Commission and other governmental authority having jurisdiction
over it, except only to the extent that such reports, information or documents are, by their nature or by express conditions,
subject to confidentiality requirements;

 

(i)
Use of Proceeds. Use the proceeds of the Loan for the specific purpose stated in Section 2.09 hereof;

 

(j)
Further Assurances. The Borrower shall: (i) comply with all the terms and conditions of this Agreement and the Loan Documents,
(ii) maintain satisfactory accounting, cost control and management information systems and (iii) ensure that all transactions
with its Subsidiaries or Affiliates in the ordinary course of business shall be executed on an arm’s length basis.

 

6.02
Negative Covenants

 

Until
payment in full of all amounts due to the Lender under the Loan Documents, the Borrower covenants and agrees that, unless the
Lender shall otherwise consent in writing, which consent shall not be unreasonably withheld, it shall not:

 

(a)
Lien. Permit any Indebtedness to be secured by or to benefit from any Lien, in favor of any creditor or class of creditors on,
or in respect of, any assets or revenues or chattels of the Borrower which are subject to the mortgage under this Agreement, provided
however, that this shall not prohibit the following:

 

(i)
liens or charges for taxes, assessment, or other governmental charges which are not delinquent or remain payable, without any
penalty, or the validity of which is contested in good faith by appropriate proceedings, and adequate reserves have been provided
for payment thereof;

 

(ii)
deposits or pledges to secure statutory obligations, surety, or appeal bonds, bonds for release of attachment, stay of execution
of injunction, or performance bonds for bids, tenders, contracts (other than for the repayment of borrowed money) or leases in
the normal course of business; liens, pledges, charges, and other encumbrances on the properties and assets of the Borrower (i)
imposed by law, such as carriers’ liens, warehousemen’s liens, mechanics’ liens, unpaid vendors’ liens,
and other similar liens arising in the ordinary course of business; (ii) arising out of pledges or deposits under workmen’s
compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits or similar legislation,
or retirement benefit plans of the Borrower; and (iii) arising out of the set-off provision on other agreements of the Borrower
relating to indebtedness;

 

    	7

    	 

    

Section
7. Conditions for Borrowing

 

The
obligation of the Lender to provide the Borrowing on Drawdown date hereunder shall be subject to the fulfillment of the following
terms and conditions:

 

(a)
The Lender shall have received the Note/s (in the form as per attached Exhibit “A”), duly executed by the Borrower
in favor of the Lender evidencing the Borrowing to be made on Drawdown date.

 

(b)
Each of the Loan Documents shall have been duly authorized by and executed by the parties thereto, and shall be legally binding
on each of them in accordance with their respective terms.

 

(c)
The Lender shall have received copies, certified by the Corporate Secretary of the Borrower, of the Securities and Exchange Commission
Certificate of Registration, Articles of Incorporation and By Laws or other constitutive documents, as appropriate, of the Borrower,
each as amended to date.

 

(d)
The Lender shall have received such other approvals, certificates or other document which the Lender may reasonably request from
the Borrower for the execution of the Loan documents.

 

Section
8. Default and Remedies

 

8.01
Events of Default

 

Upon
the determination of the Lender, each of the following events constitutes an Event of Default under this Agreement

 

(a)
Payment Default. The Borrower fails to pay any principal or interest on the Note/s, when due and payable in accordance with the
terms thereof; or with respect to failure to pay any amount other than the principal or interest, the Borrower fails to pay within
thirty (30) days from receipt of a payment notice for said amount;

 

(c)
Other Provisions Default. The Borrower fails to perform or comply with any term, obligation or covenant contained in any of the
Loan Documents or in any other document/instruments related or otherwise in connection therewith which would materially and adversely
affect the ability of the Borrower to meet its obligations under the Loan Documents and any such failure, violation, non-compliance
is not remediable or if remediable, continues unremedied for a period of thirty (30) Days from the date after written notice thereof
shall have been given by the Lender.

 

(d)
Cross-Default. Any other material obligation of the Borrower for borrowed money, deferred purchase price or monetary obligation
is not paid when due and after giving effect to any applicable grace period and, in general, any default in the performance or
observance of any instrument, contract or agreement pursuant to which any other obligation of the Borrower was created, unless
contested in good faith, which default shall result in the acceleration or declaration of the whole obligation thereunder to be
due and payable prior to the stated normal date of maturity.

 

(e)
Insolvency Default. The Borrower becomes insolvent or unable to pay its debts when due or commits or permits any act of bankruptcy,
which act shall include (i) the filing of a petition in any bankruptcy, reorganization, winding up or liquidation of the Borrower,
or any other proceeding analogous in purpose and effect: Provided, however, that in case the foregoing petition is filed by any
other party, other than the Borrower, such event shall be considered a Declared Event of Default if such petition is not dismissed
or decided in favor of the company within a period of sixty (60) Days, from the date of filing thereof, (ii) the making of an
assignment by the Borrower for the benefit of its creditors, (iii) the admission in writing by the Borrower of its inability to
pay its debts, or (iv) the entry of any order or judgment of any court, tribunal or administrative agency or body confirming the
bankruptcy or insolvency of the Borrower or approving any reorganization, winding up or liquidation of the Borrower, or (v) the
appointment of a receiver, liquidator, assignee, trustee, or sequestrator of the Borrower or a substantial part of its property
or assets or a substantial part of its capital stock or to assume custody or control of the Borrower or the ordering of its dissolution,
winding-up or liquidation of its affairs.

 

(f)
Event or Condition Affecting Loan Documents. Any event, condition, or circumstance (including, without limitation, any change
in the economic or financial condition of the Borrower) shall occur which, in the reasonable determination of the Lender, shall
have a material and adverse effect on the business, assets, prospects, condition or operations of the Borrower, or which shall
materially and adversely affect the Borrower’s ability to duly perform and observe, or to meet in the normal course, any
of its obligations and duties under the Loan Documents;

 

    	8

    	 

    

8.02
Consequences of Events of Default

 

If
an Event of Default shall have occurred, then at any time thereafter, if any such event shall then be continuing, and not remedied
during the curing period (where it is provided for), the Lender at its option, upon written notice to the Borrower, except in
case of a payment default where no notice is necessary, may:

 

(a)
Declare the Commitment to be terminated, whereupon, the obligation of the Lender to make or maintain the Loan hereunder shall
forthwith terminate;

 

(b)
Accelerate payment and declare the entire unpaid principal amount of the Loan then outstanding, all interest accrued and unpaid
thereon and all other amounts payable hereunder to be forthwith due and payable, whereupon all such amounts shall become and be
forthwith due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; and

 

(c)
Take such other judicial steps or actions against the Borrower as the Lender may deem necessary and proper for the full protection
and enforcement of its rights and interests. The foregoing provisions notwithstanding, the Lender shall likewise have the right
to exercise all other legal rights and remedies which may now or hereafter be available to them under Applicable Law.

 

Section
9. Additional Conditions

 

9.01
Attorney’s Fees and Expenses

 

The
Borrower shall reimburse the Lender on demand for all reasonable attorney’s fees and expenses, including without limitation,
filing fees and fees and expenses of counsel incurred in the enforcement of any of the Loan Documents from and after the occurrence
of an Event of Default. Such expenses shall be reimbursed whether or not they arise during the term of this Agreement, or the
Lender demand acceleration of the Loan or take other action (including judicial remedies) to enforce the provisions of the Agreement.
It is hereby agreed and understood that the amounts that may be reimbursable under this Section 9.01 are only those that were
actually incurred by the Lender and supported by proper documentation and/or receipts, provided that, in the case of attorney’s
fees, the reimbursable amount shall in no case exceed the equivalent of five percent (5%) of the outstanding principal balance
of the Borrowing.

 

9.02
Waiver and Cumulative Rights

 

No
failure or delay on the part of the Lender in exercising any right, power or remedy accruing to them upon any breach or default
of the Borrower under this Agreement shall impair any such right, power or remedy nor shall it be construed as a waiver of any
breach or default thereafter occurring, nor shall a waiver of any single breach or default be deemed a waiver of any other breach
or default theretofore or thereafter occurring, nor shall any single or partial exercise of any such right or power preclude any
other or further exercise thereof or the exercise of any other right or power hereunder. Any waiver, permit, consent or approval
of any kind or character on the part of the Lender of any breach of any provision or condition of this Agreement must be in writing
and shall be effective only to the extent such writing specifically sets forth. All remedies afforded the Lender under this Agreement
by law or otherwise shall be cumulative and not alternative. No notice to or demand on the Borrower in any case shall entitle
it to any other or further notice or demand in similar or other circumstances.

 

9.03
Venue of Suit

 

The
Borrower irrevocably agrees that any legal action, suit or proceeding arising out of or relating to this Agreement may be instituted
in any competent court in Las Vegas, Nevada, and by execution and delivery of this Agreement, the Borrower submits to and accepts
with regard to any such action or proceeding for itself and in respect of its properties or assets, generally and unconditionally,
the jurisdiction of any such court. Notwithstanding the foregoing, the right of the Borrower to bring suits, actions or proceedings
arising out of or relating to this Agreement in the courts of any other competent jurisdiction shall not be affected.

 

    	9

    	 

    

9.04
Governing Law

 

This
Agreement, the Note/s, the Loan Documents and all other instruments pertaining hereto shall be governed by and construed in accordance
with the laws of the State of Nevada.

 

9.05
Separability of Provisions

 

If
any provision or provisions contained in this Agreement or any document executed in connection herewith shall be declared by any
court of competent jurisdiction as invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein not otherwise so declared shall remain in full force and effect
and shall be enforceable in such manner as may be provided by law.

 

9.06
Assignment

 

This
Agreement shall be binding upon and shall be enforceable on the Borrower and the Lender and their respective successors and assigns,
provided that the Borrower shall have no right to assign or transfer its rights or obligations hereunder without the prior written
consent of the Lender, which approval shall not be unreasonably withheld.

 

9.07
Entire Agreement and Amendments

 

This
Agreement and the documents referred to herein constitute the entire agreement of the parties with respect to the subject matter
hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction. Any amendment to
this Agreement shall require the written consent of all of the Parties to this Agreement.

 

9.08
Notices

 

All
communications, notices, statements and requests required under this Agreement shall be made in writing and shall be deemed to
have been duly given and sufficient under the following conditions: (i) on the date of receipt if delivered personally, (ii) ten
(10) Banking Days after posting date or the date of receipt, whichever is earlier, if transmitted by mail, or (iii) two (2) Banking
Days from the date of transmittal with confirmed answer back or the date of confirmation of transmittal, if transmitted by facsimile
or telex or email, whichever shall first occur. All notices shall be sent to the addresses as any party hereto may designate by
written notice to the other party hereto.

 

9.09
Force Majeure

 

In
the event that as a result of fire, typhoon, earthquake, act of government or state, war, civil commotion, insurrection or any
other event which is beyond the control of the Borrower, the Borrower’s conduct of its business or operations is severely
curtailed in such manner as to materially and adversely affect its ability to meet its obligations under this Agreement, the Borrower
may notify the Lender of the said fact in writing within fifteen (15) Days from the occurrence of the event and request for a
meeting with the Lender to discuss the Borrower’s circumstances and situation. The Lender are obliged to attend the requested
meeting and other meetings scheduled in relation to this, discuss the circumstances and situation of the Borrower and exert all
efforts in good faith to assist the Borrower in minimizing the effects of the force majeure event.

 

9.10
Counterparts

 

This
Agreement may be signed in any number of counterparts. Any single counterpart or a set of counterparts signed, in either case,
by the parties hereto shall constitute a full and original agreement for all purposes.

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective duly authorized officers
on the date and at the place indicated below.

 

	Borrower

          

        \s\
        Llorn Kylo

        By:
        Llorn Kylo

         

        Its:
        CEO 
	Lender

          

        \s\
        Andrew Godfrey

        By:
        Andrew Godfrey

         

        Its:
        Director 

 

    	10

    	 

    

 

 Exhibit
A 

 

CANNABIS-RX
INC.

5%
PROMISSORY NOTE

Principal
Amount: $_______________Original Issuance Date: [___] 2014

FOR
VALUE RECEIVED Cannabis-Rx Inc., a Delaware corporation (the “Company”), promises to pay to [___] (“Holder”),
the principal amount of [___] ($___) together with all accrued but unpaid interest, or such lesser amount as shall equal the then
outstanding principal amount hereof together with all accrued but unpaid interest thereon, payable on the Loan Repayment Date.

The
following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which
the Holder, by the acceptance of this Note, agrees:

1.                 
Interest.

(a)
Interest shall accrue on the unpaid principal balance of this Note at the rate of five percent (5%) per annum. Interest shall
be calculated from and include the date hereof and shall be calculated on an actual/360-day basis. All accrued but unpaid interest
shall be due and payable on the Loan Repayment Date.

 

(b)
Notwithstanding anything to the contrary contained herein, in no event shall this or any other provision herein permit the
collection of any interest which would be usurious under applicable law. If under any circumstances, whether by reason of advancement
or acceleration of the maturity of the unpaid principal balance hereof or otherwise, the aggregate amounts paid under this Note
shall include amounts which by law are deemed interest and which would exceed the maximum rate permitted by law, the Company stipulates
that payment and collection of such excess amounts shall have been and will be deemed to have been the result of a mistake on
the part of both Holder and the Company or the holder of this Note, and the party receiving such excess payments shall promptly
credit such excess (only to the extent such payments are in excess of the maximum rate) against the unpaid principal balance hereof
and any portion of such excess payments not capable of being so credited shall be refunded to the Company.

 

2.                 
Event of Default.

(a)               
For purposes of this Note, an “Event of Default” means:

(i)                
the Company shall default in any payment of principal and/or accrued interest on this Note when due; or

(ii)              
the Company shall fail to materially perform any covenant, term, provision, condition, agreement or obligation of the Company
under this Note (other than for non-payment) and such failure shall continue uncured for a period of ten (10) business days after
notice from the Holder of such failure; or

(iii)            
the Company shall (a) become insolvent; (b) admit in writing its inability to pay its debts generally as they mature; (c) make
an assignment for the benefit of creditors or commence proceedings for its dissolution; or (d) apply for or consent to the appointment
of a trustee, liquidator, receiver or similar official for it or for a substantial part of its property or business; or

(iv)            
a trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or

(v)              
any governmental agency or any court of competent jurisdiction at the insistence of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within
thirty (30) days thereafter; or

(vi)            
bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings, or relief under any bankruptcy law or
any law for the relief of debt shall be instituted by or against the Company and, if instituted against the Company shall not
be dismissed within thirty (30) days after such institution, or the Company shall by any action or answer approve of, consent
to, or acquiesce in any such proceedings or admit to any material allegations of, or default in answering a petition filed in
any such proceeding; or

(vii)          
the Company shall fail to pay when due or otherwise be in material default of any of its indebtedness that gives the holder thereof
the right to accelerate such indebtedness.

    	11

    	 

    

(b)              
Upon the occurrence of an Event of Default, the entire unpaid and outstanding indebtedness due under this Note shall be immediately
due and payable without notice. 

(c)               
Upon the occurrence of an Event of Default, this Note shall bear interest at the rate of twelve percent (12%) per annum from the
date of the Event of Default. 

(d)              
As soon as possible and in any event within 2 days after the Company becomes aware that an Event of Default has occurred, the
Company shall notify the Holder in writing of the nature, extent and time of and the facts surrounding such Event of Default,
and the action, if any, that the Company proposes to take with respect to such Event of Default.

2.Prepayment.
The Company may prepay this Note at any time, in whole or in part, without penalty or premium.

3.Miscellaneous.

(a)Loss,
Theft, Destruction or Mutilation of Note. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note and delivery of an indemnity agreement reasonably satisfactory in form and substance to
the Company and , in the case of mutilation, on surrender and cancellation of this Note (or what remains thereof), the Company
shall execute and deliver, in lieu of this Note, a new note executed in the same manner as this Note, in the same principal amount
as the unpaid principal amount of this Note and dated the date of this Note.

(b)Payment.
All payments under this Note shall be made in lawful tender of the United States no later than 5:30 pm, Eastern Standard Time,
on the date on which such payment is due, by wire transfer of immediately available funds to the account identified by the Holder.

(c)Waivers.
The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and
all other notices or demands relative to this instrument.

(e)               
Waiver and Amendment. Any provision of this Note may be amended, waived or modified only by an instrument in writing signed
by the party against which enforcement of the same is sought.

(f)               
Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing sent by mail,
facsimile with printed confirmation, nationally recognized overnight carrier or personal delivery and shall be effective upon
actual receipt of such notice, to the following addresses until notice is received that any such address or contact information
has been changed:

To
the Company:

Cannabis-Rx
Inc.

7702
E Doubletree Ranch Rd – Ste 300

Scottsdale,
AZ 85258

		Facsimile:	____________

 

To
Holder:

 

		Facsimile:	____________

 

    	12

    	 

    

(g)              
Expenses; Attorneys’ Fees. If action is instituted to enforce or collect this Note, the Company promises to pay or
reimburse all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred
by the Holder in connection with such action.

(h)              
Successors and Assigns. This Note may be assigned or transferred by the Holder with the written consent of the Company.
Subject to the preceding sentence, the rights and obligations of the Company and the Holder of this Note shall be binding upon
and benefit the successors, permitted assigns, heirs, administrators and permitted transferees of the parties.

(i)                
No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising on the part of the Holder, any right,
option, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
right, option, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other
right, option, remedy, power or privilege. The rights, options, remedies, powers and privileges herein provided are cumulative
and not exclusive of any rights, options, remedies, powers and privileges provided by law.

(j)                
Governing Law; Jurisdiction. THE PARTIES HEREBY AGREE THAT THIS NOTE IS MADE AND ENTERED INTO IN THE STATE OF NEVDA AND
FURTHER AGREE THAT ALL ACTS REQUIRED BY THIS NOTE AND ALL PERFORMANCE HEREUNDER ARE INTENDED TO OCCUR IN THE STATE OF NEVADA.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAWS. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE PERSONAL AND SUBJECT MATTER JURISDICTION
OF THE STATE OR FEDERAL COURTS OF THE STATE OF NEVADA OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE.
EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, (A) ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT; AND (B) ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. FINAL JUDGMENT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT SHALL BE CONCLUSIVE AND BINDING UPON EACH PARTY DULY SERVED WITH PROCESS THEREIN AND MAY BE ENFORCED IN THE COURTS OF THE
JURISDICTION OF WHICH EITHER PARTY OR ANY OF THEIR PROPERTY IS SUBJECT, BY A SUIT UPON SUCH JUDGMENT. THE PARTIES HEREBY WAIVE
ANY AND ALL RIGHTS TO TRIAL BY JURY.

IN
WITNESS WHEREOF, the Company has caused this Note to be executed as of the date first above written by its duly authorized officer.

Cannabis-Rx
Inc.

By:

Name:

Title:

    	13

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