AMENDED AND RESTATED MEMBERSHIP INTERESTS PURCHASE AGREEMENT

Exhibit 2.1

 

Execution Version

 

 

AMENDED AND RESTATED

 

MEMBERSHIP INTERESTS PURCHASE AGREEMENT

 

between

 

KOZE INVESTMENTS, LLC

 

and

 

▇▇▇▇ ▇▇▇

 

(“Sellers”)

 

▇▇▇▇▇▇ ▇▇▇▇▇

 

As “Sellers’ Representative”

 

and

 

CANNAPHARMARX, INC.

 

(“Buyer”)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMENDED AND RESTATED MEMBERSHIP INTERESTS PURCHASE AGREEMENT

 

This Amended and Restated Membership Interests Purchase Agreement (this "Agreement"), dated November 22, 2023, to be deemed effective as of April 1, 2023 (the “Effective Date”), is entered into between Koze Investments, LLC, a California limited liability company and ▇▇▇▇ ▇▇▇ (each a "Seller", collectively the “Sellers”), ▇▇▇▇▇▇ ▇▇▇▇▇ as the “Sellers’ Representative” and Cannapharmarx Inc., a Delaware company ("Buyer").

 

Recitals

 

WHEREAS, Sellers own all of the issued and outstanding Class B Units (the "Units"), of LTB Management LLC, a Delaware limited liability company (the "Company");

 

WHEREAS, Sellers wish to sell to Buyer, and ▇▇▇▇▇ wishes to purchase from Sellers, the Units, subject to the terms and conditions set forth herein; and

 

WHEREAS, the parties erroneously executed prior draft versions of purchase agreements concerning the transactions contemplated by this Agreement and further certain dates and deadlines in the previous agreement needed to be extended or eliminated to allow the Buyer to meet certain of its obligations, the parties are thus entering into this Agreement to supersede and replace any executed drafts of any other purchase agreement pertaining to the transactions contemplated by this Agreement entered into or executed prior to the execution of this Agreement, including without limitation those dated May 31, 2022 and December 1, 2022.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

The following terms have the meanings specified or referred to in this ARTICLE I:

 

“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble.

 

“Balance Sheet” has the meaning set forth in Section 3.06.

 

“Balance Sheet Date” has the meaning set forth in Section 3.06.

 

“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in New York, New York are authorized or required by Law to be closed for business.

 

 

 

 

“Buyer” has the meaning set forth in the preamble.

 

“Closing” has the meaning set forth in Section 2.10.

 

“Closing Date” has the meaning set forth in Section 2.10.

 

“Company” has the meaning set forth in the recitals.

 

“Company Intellectual Property” has the meaning set forth in Section 3.09(b).

 

“Direct Claim" has the meaning set forth in Section 7.05(c).

 

“Dollars or $” means the lawful currency of the United States.

 

“Drop-Dead Date” has the meaning set forth in Section 8.01(b)(i).

 

“Encumbrance” means any lien, pledge, mortgage, deed of trust, security interest, charge, claim, easement, encroachment or other similar encumbrance.

 

“Financial Statements” has the meaning set forth in Section 3.06.

 

“Fraud” means, with respect to a party, an actual and intentional misrepresentation of a material existing fact with respect to the making of any representation or warranty in ARTICLE III or ARTICLE IV, made by such party, (a) with respect to Sellers, to Sellers actual Knowledge or (b) with respect to Buyer, to ▇▇▇▇▇'s actual knowledge, of its falsity and made for the purpose of inducing the other party to act, and upon which the other party justifiably relies with resulting Losses.

 

“GAAP” means United States generally accepted accounting principles in effect from time to time.

 

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“Indemnified Party” has the meaning set forth in Section 7.04.

 

“Indemnifying Party” has the meaning set forth in Section 7.04.

 

“Indemnity Cap” has the meaning set forth in Section 7.04(b)

 

 

 

 

“Intellectual Property” has the meaning set forth in Section 3.09(a).

 

“Interim Balance Sheet” has the meaning set forth in Section 3.06.

 

“Interim Balance Sheet Date” has the meaning set forth in Section 3.06.

 

“Interim Financial Statements” has the meaning set forth in Section 3.06.

 

“Knowledge of Company or Company’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of the Manager of the Company, solely in their capacity as the Manager of the Company, as of the date made.

 

“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

 

“Losses” means actual out-of-pocket losses, damages, liabilities, costs or expenses, including reasonable attorneys' fees.

 

“Material Adverse Effect” means any event, occurrence, fact, condition or change that is materially adverse to (a) the business, results of operations, financial condition or assets of the Company, or (b) the ability of Sellers to consummate the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which the Company operates; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any matter of which Buyer is aware on the date hereof; (vi) any changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (vii) the announcement, pendency or completion of the transactions contemplated by this Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with the Company; (viii) any natural or man-made disaster or acts of God; (ix) any epidemics, pandemics, disease outbreaks, or other public health emergencies; or (x) any failure by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded).

 

“Permits” means all permits, licenses, franchises, approvals, authorizations and consents required to be obtained from Governmental Authorities.

 

“Permitted Encumbrances” has the meaning set forth in Section 3.08.

 

“Person” means an individual, company, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

“Privileged Communications” has the meaning set forth in Section 9.13(b).

 

“Purchase Price” has the meaning set forth in Section 2.02.

 

 

 

 

“Real Property” means the real property owned, leased or subleased by the Company, together with all buildings, structures and facilities located thereon.

 

"Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

 

“Sellers” has the meaning set forth in the preamble.

 

“Seller Group” has the meaning set forth in Section 9.13(a)(i).

 

“Seller Group Law Firm” has the meaning set forth in Section 9.13(a)(i).

 

“Sellers’ Representative” shall mean ▇▇▇▇▇▇ ▇▇▇▇▇, on behalf of the Sellers.

 

“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

 

“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document required to be filed with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Third-Party Claim” has the meaning set forth in Section 7.05(a).

 

“Transaction Documents” shall mean this Agreement, the Warrant, the Joinder, the Notes, and any other document necessary to consummate the transactions contemplated herein

 

“Unaudited financial statements” has the meaning set forth in Section 3.06.

 

“Units” has the meaning set forth in the recitals.

 

“Warrant” has the meaning set for in Section 2.06 Section 2.06.

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.01   Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing, Sellers shall sell to Buyer, and Buyer shall purchase from Sellers, the Units for the consideration specified in Section 2.02.

 

Section 2.02   Purchase Price. The consideration for the Units (the "Purchase Price"), shall be paid in part by the Buyer issuing shares of Class C Preferred Stock of the Buyer (“Preferred Stock”).

 

 

 

 

Section 2.03   Determination of Purchase Price. The Buyer shall issue to Sellers, in proportionate amounts to their membership interest percentage in the Company, shares of Preferred Stock equal, on an as-converted basis, to thirty-three percent (33%) of the outstanding shares of the Buyer’s common stock on the date of such issuance of Preferred Stock, to be further adjusted by the Earn-Out provisions in Section 2.05 below, and other standard adjustments, including, among other things, adjustments based upon date of conversion and outstanding shares then outstanding.

 

Section 2.04   Quarterly True-Up. The Buyer shall issue to Sellers additional shares of Preferred Stock on a quarterly basis to account for any other issuances of common stock of the Buyer (each a “True-Up”), such that after each True-Up, the Preferred Stock held collectively by the Sellers shall equal, on an as-converted basis, thirty-three percent (33%) of the Buyer’s outstanding common stock. Such True-Ups shall continue until Sellers have converted any of the Preferred Stock, after which time there shall be no further True-Ups.

 

Section 2.05   Earn-Out. Notwithstanding the foregoing, the Purchase Price shall be adjusted as follows:

 

(a) If the annual revenue (pro-rated for partial years) of the Company is equal to or exceeds $2,500,000 at any time within twenty-four (24) months of the Effective Date hereof, the Purchase Price shall be adjusted and the Sellers issued additional shares of Preferred Stock, in proportionate amounts to their membership interest percentage in the Company, such that on an as-converted basis Sellers will collectively hold forty-five percent (45%) of the then-outstanding common stock of the Buyer; or

 

(b) If the annual revenue (pro-rated for partial years) of the Company is less than $2,500,000 on the date that is twenty-four (24) months from the Effective Date hereof, the Purchase Price shall be adjusted and the Sellers shall return to the Buyer, in proportionate amounts to their membership interest percentage in the Company, shares of Preferred Stock on an as-converted basis equal to five percent (5%) of the then- outstanding common stock of the Buyer.

 

(c) If the threshold in subsection (a) above is met, the provisions of Section 2.04 shall apply such that the Sellers shall receive additional shares of Preferred Stock, on a quarterly basis, equal to, on an as-converted basis, forty-five percent (45%) of the Buyer’s then-outstanding common stock, as opposed to thirty-three percent (33%).

 

(d) For purposes of this section “annual revenue” means the value of all sales of goods and services recognized by the Company on an annual basis.

 

Section 2.06   Promissory Note. As part of the Purchase Price, the Buyer shall pay to Sellers an aggregate amount of $3,000,000 in the form of secured promissory notes to each Seller (each a “Note”), secured by the Units, pursuant to the terms and substantially in the form attached hereto as Exhibit A. For avoidance of any doubt, there shall be two Notes issued to the Sellers and the aggregate amount of these two Notes issued shall be $3,000,000.

 

Section 2.07   Warrants. In addition to the Purchase Price, at Closing, the Buyer shall issue to each of the Sellers, in proportionate amounts to their membership interest percentage in the Company, a warrant (the “Warrants”) collectively exercisable into shares of common stock of the Buyer representing ten percent (10%) of the issued and outstanding common stock as of the Closing Date of the Buyer, with an exercise price of $0.02 per share, subject to adjustment as provided therein, substantially in the form attached hereto as Exhibit B.

 

 

 

 

Section 2.08   Transactions to be Effected at the Closing.

 

(a) At or prior to the Closing, Buyer shall deliver, or shall have delivered to Sellers’ Representative:

 

(i) evidence of the issuance to the Sellers of the Class C Preferred Stock pursuant to this Agreement;

 

(ii) an executed Warrant to each Seller;

 

(iii) an executed joinder to the Company’s operating agreement in the form attached hereto as Exhibit C;

 

(iv) evidence of a sufficient reserve of common stock of the Buyer for the benefit of each of the Sellers; and

 

(v) the Notes, Security Agreement, and all other Transaction Documents, agreements, documents, instruments or certificates required to be delivered by Buyer at or prior to the Closing pursuant to Section 6.03 of this Agreement.

 

(b) At or prior the Closing, Sellers’ Representative, on behalf of the Sellers individually shall deliver, or shall have previously delivered to Buyer:

 

(i) An updated Membership Interest Ledger and Operating Agreement reflecting the Units being transferred to the Buyer; and

 

(ii) all other agreements, documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to Section 6.02 of this Agreement.

 

Section 2.09   Investor Introductions. Sellers shall use their best efforts to introduce investors to the Buyer with the intent of the Buyer to raise up to $3,000,000 in additional capital for the Buyer. Notwithstanding the foregoing, the Purchase Price and any other consideration due to Sellers hereunder, shall not be enlarged or reduced by the success, or lack thereof, as it relates to these introductions. For avoidance of any doubt, no portion of the Purchase Price or any other consideration from the Buyer to any Seller shall be contingent upon, nor adjusted by, these introductory efforts. These efforts are not for any additional compensation, but merely as a potential benefit to the Sellers through the potential future appreciation of Sellers’ equity in the Buyer. Further, Seller shall only provide introductions to the Buyer and shall not be responsible for, nor participate in any negotiations, or preparation of investment materials on behalf of the Buyer and any potential investor.

 

Section 2.10   Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Units contemplated hereby shall take place at a closing (the "Closing") to be held at 9:00 a.m., Pacific Time, no later than two (2) Business Days after the last of the conditions to Closing set forth in ARTICLE VI have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), at the offices of the Sellers’ Representative or remotely by exchange of documents and signatures (or their electronic counterparts), or at such other time or on such other date or at such other place as Sellers and Buyer may mutually agree upon in writing (the day on which the Closing takes place being the "Closing Date").

 

 

 

 

Section 2.11   Board Representation. For so long as any of the Sellers shall own any Preferred Stock, the Buyer agrees that it shall, or shall cause, Sellers Representative to appoint one (1) seat on the Buyer’s Board of Directors.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY

 

With respect to Sections 3.01, 3.05, 3.13, and 3.14 only, each Seller severally and not jointly represents and warrants to Buyer, and likewise with respect to Sections 3.02, 3.03, 3.04, 3.05, 3.06, 3.07, 3.08, 3.09, 3.10, 3.11, 3.12, 3.13, and 3.14, the Company represents and warrants to Buyer, that the statements contained in this ARTICLE III are true and correct as of the date hereof.

 

Section 3.01   Organization and Authority of Seller. Each Seller has all necessary ability or corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Sellers of this Agreement, the performance by ▇▇▇▇▇▇▇ of their respective obligations hereunder and the consummation by ▇▇▇▇▇▇▇ of the transactions contemplated hereby have been duly authorized by all requisite authority or corporate action on the part of Sellers, as applicable. This Agreement has been duly executed and delivered by each Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

Section 3.02   Organization, Authority and Qualification of the Company. The Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it is currently conducted. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect. All corporate actions taken by the Company in connection with this Agreement will be duly authorized on or prior to the Closing.

 

Section 3.03   Capitalization.

 

(a) The authorized Membership Interests of the Company consists of 100 Class A Units and 100 Class B Units, all of which are issued and outstanding. All of the Units have been duly authorized, are validly issued, fully paid and non-assessable, and are owned of record and beneficially by Sellers, free and clear of all Encumbrances except those set forth in the Company’s Operating Agreement.

 

(b) There are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, except for the Company’s Operating Agreement, arrangements or commitments of any character relating to the capital stock of the Company or obligating Sellers or the Company to issue or sell any Membership Interests of any kind in the Company. The Company does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. There are no voting trusts, member voting agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Units.

 

Section 3.04   No Subsidiaries. The Company does not own, or have any interest in any Units.

 

 

 

 

Section 3.05   No Conflicts; Consents. The execution, delivery and performance by Sellers and the Company of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of formation or operating agreements of Sellers or the Company; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to Sellers or the Company; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any material contract, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a Material Adverse Effect. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Sellers or the Company in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for such filings as may be required under the HSR Act and such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which, in the aggregate, would not have a Material Adverse Effect.

 

Section 3.06   Financial Statements. Copies of the Company's unaudited financial statements consisting of the balance sheet of the Company as of December 31, 2022 (the "Unaudited Financial Statements"), and Unaudited Financial Statements consisting of the balance sheet of the Company as of June 30, 2023 (the "Interim Financial Statements" and together with the Unaudited financial statements, the "Financial Statements") are available for Buyer’s review. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments and the absence of notes. The Financial Statements fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations of the Company for the periods indicated. The balance sheet of the Company as of December 31, 2022 is referred to herein as the "Balance Sheet" and the date thereof as the "Balance Sheet Date" and the balance sheet of the Company as of June 30, 2023 is referred to herein as the "Interim Balance Sheet" and the date thereof as the "Interim Balance Sheet Date".

 

Section 3.07   Absence of Certain Changes, Events and Conditions. Except as expressly contemplated by the Agreement, from the Interim Balance Sheet Date until the date of this Agreement, the Company has operated in the ordinary course of business in all material respects and there has not been, with respect to the Company, any:

 

(a) event, occurrence or development that has had a Material Adverse Effect;

 

(b) material amendment of the charter, bylaws or other organizational documents of the Company;

 

(c) split, combination or reclassification of any Units of its capital stock;

 

(d) issuance, sale or other disposition of any of its capital stock, or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock;

 

(e) declaration or payment of any dividends or distributions on or in respect of any of its capital stock or redemption, purchase or acquisition of its capital stock;

 

(f) material change in any method of accounting or accounting practice of the Company, except as required by GAAP or applicable Law or as disclosed in any notes to the Financial Statements;

 

(g) incurrence, assumption or guarantee of any indebtedness for borrowed money in an aggregate amount exceeding $500,000, except unsecured current obligations and liabilities incurred in the ordinary course of business;

 

 

 

 

(h) sale or other disposition of any of the assets shown or reflected on the Balance Sheet, except in the ordinary course of business and except for any assets having an aggregate value of less than $500,000;

 

(i) acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any Person or any division thereof for consideration in excess of $1,000,000;

 

(j) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law; or

 

(k) any agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

Section 3.08   Title to Assets; Real Property. The Company has good and valid (and, in the case of owned Real Property, good and marketable fee simple) title to, or a valid leasehold interest in, all Real Property and tangible personal property and other assets reflected in the Unaudited financial statements or acquired after the Balance Sheet Date, other than properties and assets sold or otherwise disposed of in the ordinary course of business since the Balance Sheet Date. All such properties and assets (including leasehold interests) are free and clear of Encumbrances except for the following (collectively referred to as "Permitted Encumbrances"):

 

(a) liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures;

 

(b) mechanics, carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of business;

 

(c) easements, rights of way, zoning ordinances and other similar encumbrances affecting Real Property;

 

(d) other than with respect to owned Real Property, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; or

 

(e) other imperfections of title or Encumbrances, if any, that have not had, and would not have, a Material Adverse Effect.

 

Section 3.09   Intellectual Property.

 

(a) "Intellectual Property" means any and all of the following arising pursuant to the Laws of any jurisdiction throughout the world: (i) trademarks, service marks, trade names, and similar indicia of source or origin, all registrations and applications for registration thereof, and the goodwill connected with the use of and symbolized by the foregoing; (ii) copyrights and all registrations and applications for registration thereof; (iii) trade secrets and know-how; (iv) patents and patent applications; (v) internet domain name registrations; and (vi) other intellectual property and related proprietary rights.

 

(b) The Intellectual Property of the Company consists of the Intellectual Property set forth on Schedule A hereto (collectively, the "Company Intellectual Property").

 

 

 

 

(c) Except as would not have a Material Adverse Effect and to Company’s Knowledge: (i) the conduct of the Company's business as currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property of any Person; and (ii) no Person is infringing, misappropriating or otherwise violating any Company Intellectual Property. This Section 3.09(c) constitutes the sole representation and warranty of Sellers under this Agreement with respect to any actual or alleged infringement, misappropriation or other violation of Intellectual Property.

 

Section 3.10   Legal Proceedings; Governmental Orders.

 

(a) There are no actions, suits, claims, investigations or other legal proceedings pending or, to Company’s Knowledge, threatened against or by the Company affecting any of its properties or assets (or by or against any Seller or any Affiliate thereof and relating to the Company), which if determined adversely to the Company (or to any Seller or any Affiliate thereof) would result in a Material Adverse Effect.

 

(b) There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Company or any of its properties or assets which would have a Material Adverse Effect.

 

Section 3.11   Compliance With Laws; Permits.

 

(a) The Company is in compliance with all Laws applicable to it or its business, properties or assets, except where the failure to be in compliance would not have a Material Adverse Effect.

 

(b) All Permits required for the Company to conduct its business have been obtained by it and are valid and in full force and effect, except where the failure to obtain such Permits would not have a Material Adverse Effect.

 

Section 3.12   Taxes.

 

(a) The Company has filed (taking into account any valid extensions) all material Tax Returns required to be filed by the Company. Such Tax Returns are true, complete and correct in all material respects. The Company is not currently the beneficiary of any extension of time within which to file any material Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business. All material Taxes due and owing by the Company have been paid or accrued.

 

(b) There are no ongoing actions, suits, claims, investigations or other legal proceedings by any taxing authority against the Company.

 

(c) The Company is not a party to any Tax-sharing agreement.

 

(d) All material Taxes which the Company is obligated to withhold from amounts owing to any employee, creditor or third party have been paid or accrued.

 

(e) The representations and warranties set forth in this Section 3.12 are each Seller's sole and exclusive representations and warranties regarding Tax matters.

 

 

 

 

Section 3.13   Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Sellers.

 

Section 3.14   No Other Representations and Warranties. Except for the representations and warranties contained in this ARTICLE III, none of Sellers, the Company or any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Sellers or the Company, including any representation or warranty as to the accuracy or completeness of any information regarding the Company furnished or made available to Buyer and its Representatives any information, documents or material management presentations or in any other form in expectation of the transactions contemplated hereby) or as to the future revenue, profitability or success of the Company, or any representation or warranty arising from statute or otherwise in law.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Sellers that the statements contained in this ARTICLE IV are true and correct as of the date hereof.

 

Section 4.01   Organization and Authority of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware. Buyer has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by ▇▇▇▇▇ of this Agreement, the performance by ▇▇▇▇▇ of its obligations hereunder and the consummation by ▇▇▇▇▇ of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly executed and delivered by ▇▇▇▇▇, and (assuming due authorization, execution and delivery by Sellers) this Agreement constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

Section 4.02   No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of incorporation or bylaws of Buyer; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which Buyer is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a material adverse effect on Buyer's ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for such filings, consents, approvals, Permits, Governmental Orders, declarations, filings or notices which would not have a material adverse effect on Buyer's ability to consummate the transactions contemplated hereby, except that the Sellers acknowledge that the Buyer is pursuing stockholder approval via proxy solicitation to permit Buyer to engage in certain actions consistent with effecting the transactions contemplated by this Agreement. At Closing, that approval has not been obtained. Failure to obtain sufficient approval from the Buyer’s stockholders to consummate the transactions contemplated by this Agreement does not eliminate the Buyer’s performance of its obligations under this Agreement.

 

Section 4.03   Investment Purpose. Buyer is acquiring the Units solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Units are not registered under the Securities Act of 1933, as amended, or any state securities laws, and that the Units may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. Buyer is able to bear the economic risk of holding the Units for an indefinite period (including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment.

 

 

 

 

Section 4.04   Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.

 

Section 4.05   Sufficiency of Preferred and Common Stock. Buyer will have sufficient authorized and unissued common stock, and will at all times so long will maintain sufficient authorized and unissued common stock to satisfy the full conversion of the Preferred Stock and exercise of the Warrants issued hereunder. Buyer will likewise have sufficient reserve authorized, but unissued Preferred Stock to fulfill its obligations hereunder. Failure of the Buyer to obtain any stockholder consent and to maintain a sufficient reserve of authorized but unissued common stock or Preferred Stock will not eliminate Buyer’s obligations under this Agreement, to the Sellers.

 

Section 4.06   Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to ▇▇▇▇▇'s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

 

Section 4.07   Independent Investigation. Buyer has conducted its own independent investigation, review and analysis of the business, results of operations, prospects, condition (financial or otherwise) or assets of the Company, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of Sellers and the Company for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, ▇▇▇▇▇ has relied solely upon its own investigation and the express representations and warranties of Sellers set forth in ARTICLE III of this Agreement; and (b) none of the Sellers, the Company or any other Person has made any representation or warranty as to the Sellers, the Company or this Agreement, except as expressly set forth in ARTICLE III of this Agreement.

 

ARTICLE V

COVENANTS

 

Section 5.01   Conduct of Business Prior to the Closing. From the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), Sellers shall, and shall cause the Company to: (a) conduct the business of the Company in the ordinary course of business; and (b) use commercially reasonable efforts to maintain and preserve intact the current organization, business and franchise of the Company and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having business relationships with the Company. From the date hereof until the Closing Date, except as consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), Sellers shall not cause or permit the Company to take any action that would cause any of the changes, events or conditions described in Section 3.07 to occur.

 

Section 5.02   Access to Information. From the date hereof until the Closing, Sellers shall, and shall cause the Company to: (a) afford Buyer and its Representatives reasonable access to and the right to inspect all of the Real Property, properties, assets, premises, books and records, contracts, agreements and other documents and data related to the Company; (b) furnish Buyer and its Representatives with such financial, operating and other data and information related to the Company as Buyer or any of its Representatives may reasonably request; and (c) instruct the Representatives of Sellers and the Company to cooperate with Buyer in its investigation of the Company; provided, however, that any such investigation shall be conducted during normal business hours upon reasonable advance notice to Sellers, under the supervision of Seller's personnel and in such a manner as not to interfere with the normal operations of the Company. All requests by Buyer for access pursuant to this Section 5.02 shall be submitted or directed exclusively to the Sellers’ Representative or such other individuals as Sellers may designate in writing from time to time. Notwithstanding anything to the contrary in this Agreement, none of the Sellers nor the Company shall be required to disclose any information to Buyer if such disclosure would, in Sellers’ sole discretion: (x) cause significant competitive harm to any of the Sellers, the Company and their respective businesses if the transactions contemplated by this Agreement are not consummated; (y) jeopardize any attorney-client or other privilege; or (z) contravene any applicable Law, fiduciary duty or binding agreement entered into prior to the date of this Agreement. Prior to the Closing, without the prior written consent of Sellers’ Representative on behalf of the Sellers, which may be withheld for any reason, Buyer shall not contact any suppliers to, or customers of, the Company and Buyer shall have no right to perform invasive or subsurface investigations of the Real Property. Buyer shall, and shall cause its Representatives to, abide by the terms of the Confidentiality Agreement with respect to any access or information provided pursuant to this Section 5.02.

 

 

 

 

Section 5.03   [RESERVED]

 

Section 5.04   Governmental Approvals and Other Third-party Consents.

 

(a) Each party hereto shall, as promptly as possible, use its reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from their shareholders, boards of directors or managers, and all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

 

(b) All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Sellers or the Company with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments and proposals. Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.

 

(c) Sellers and Buyer shall use commercially reasonable efforts to give all notices to, and obtain all consents from, all third parties that may be necessary to consummate the transaction contemplated by this Agreement.

 

Section 5.05   Closing Conditions. From the date hereof until the Closing, each party hereto shall use commercially reasonable efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in ARTICLE VI hereof.

 

Section 5.06   Public Announcements. Unless otherwise required by applicable Law or stock exchange requirements (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.

 

Section 5.07   Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances, and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.

 

Section 5.08   Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Buyer when due. Company shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Sellers shall cooperate with respect thereto as necessary).

 

 

 

 

ARTICLE VI

CONDITIONS TO CLOSING

 

Section 6.01   Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

 

(a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

 

(b) Sellers shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 3.05, if any, and Buyer shall have received all consents, authorizations, orders and approvals from the its board of directors, shareholders (if required), Governmental Authorities referred to in Section 4.02, in each case, in form and substance reasonably satisfactory to Buyer and Sellers, and no such consent, authorization, order and approval shall have been revoked.

 

Section 6.02   Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or ▇▇▇▇▇'s waiver, at or prior to the Closing, of each of the following conditions:

 

(a) The representations and warranties of Sellers contained in ARTICLE III shall be true and correct in all respects as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and correct would not have a Material Adverse Effect.

 

(b) Each of the Sellers shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.

 

(c) ▇▇▇▇▇ shall have received a certificate, dated the Closing Date and signed by each Seller, or a duly authorized officer of each Seller, as the case may be, that each of the conditions set forth in Section 6.02(a) and Section 6.02(b) have been satisfied.

 

(▇) ▇▇▇▇▇ shall have received a certificate signed by a duly authorized officer of each corporate Seller, certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of such Seller authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby.

 

(e) ▇▇▇▇▇ shall have received a certificate signed by a duly authorized officer of each corporate Seller certifying the names and signatures of the officers of such Seller authorized to sign this Agreement and the other documents to be delivered hereunder.

 

(f) Sellers’ Representative shall have delivered, or caused to be delivered, to Buyer a copy of the Membership Interest Ledger of the Company reflecting the consummation of the transactions contemplated by this Agreement.

 

(g) Sellers’ Representative shall have delivered to ▇▇▇▇▇ executed copies of the Transaction Documents.

 

 

 

 

Section 6.03   Conditions to Obligations of Sellers. The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Sellers’ waiver, at or prior to the Closing, of each of the following conditions:

 

(a) The representations and warranties of Buyer contained in ARTICLE IV shall be true and correct in all respects as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such representations and warranties to be true and correct would not have a material adverse effect on Buyer's ability to consummate the transactions contemplated hereby.

 

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

 

(c) Sellers’ Representative shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in Section 6.03(a) and Section 6.03(b) have been satisfied.

 

(d) Sellers’ Representative shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby.

 

(e) Sellers’ Representative shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement and the other documents to be delivered hereunder.

 

(f) ▇▇▇▇▇ shall have delivered to Sellers’ Representative executed copies of each of the Transaction Documents.

 

ARTICLE VII

INDEMNIFICATION

 

Section 7.01   Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is six (6) months from the Closing Date. None of the covenants or other agreements contained in this Agreement shall survive the Closing Date other than those which by their terms contemplate performance after the Closing Date, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its terms. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved.

 

Section 7.02   Indemnification By Sellers and the Company. Subject to the other terms and conditions of this ARTICLE VII, with respect to the Sellers’ representations herein, Sellers shall severally, but not jointly; and the Company with respect to its representations herein shall, indemnify Buyer against, and shall hold Buyer harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Buyer based upon, arising out of, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of the Sellers contained in this Agreement; or

 

 

 

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Sellers pursuant to this Agreement.

 

(c) Notwithstanding anything else herein, if any breach in this Section 7.02 is solely the fault of any one Seller, that breaching Seller shall be fully responsible for any indemnification due to Buyer arising therefrom and under this Agreement.

 

Section 7.03   Indemnification By Buyer. Subject to the other terms and conditions of this ARTICLE VII, ▇▇▇▇▇ shall indemnify Sellers against, and shall hold Sellers harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Sellers based upon, arising out of, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement; or

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement.

 

Section 7.04   Certain Limitations. The party making a claim under this ARTICLE VII is referred to as the "Indemnified Party", and the party against whom such claims are asserted under this ARTICLE VII is referred to as the "Indemnifying Party". The indemnification provided for in Section 7.02 and Section 7.03 shall be subject to the following limitations:

 

(a) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 7.02(a) or Section 7.03(a), as the case may be, until the aggregate amount of all Losses in respect of indemnification under Section 7.02(a) or Section 7.03(a) exceeds $50,000 (the "Deductible"), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible. With respect to any claim as to which the Indemnified Party may be entitled to indemnification under Section 7.02(a) or Section 7.03(a), as the case may be, the Indemnifying Party shall not be liable for any individual or series of related Losses which do not exceed $50,000 (which Losses shall not be counted toward the Deductible).

 

(b) The aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to Section 7.02 or Section 7.03 as the case may be, shall not exceed $75,000 (the “Indemnity Cap”).

 

(c) Payments by an Indemnifying Party pursuant to Section 7.02 or Section 7.03 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment received or reasonably expected to be received by the Indemnified Party (or the Company) in respect of any such claim. The Indemnified Party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses prior to seeking indemnification under this Agreement.

 

(d) Payments by an Indemnifying Party pursuant to Section 7.02 or Section 7.03 in respect of any Loss shall be reduced by an amount equal to any Tax benefit realized or reasonably expected to be realized as a result of such Loss by the Indemnified Party.

 

(e) In no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, incidental, consequential, special or indirect damages, including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple.

 

 

 

 

(f) Each Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.

 

(g) No Seller shall be liable under this ARTICLE VII for any Losses based upon or arising out of any inaccuracy in or breach of any of the representations or warranties of any Seller contained in this Agreement if Buyer had knowledge of such inaccuracy or breach prior to the Closing.

 

Section 7.05   Indemnification Procedures.

 

(a) If any Indemnified Party receives notice of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a "Third-Party Claim") against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Third-Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third-Party Claim at the Indemnifying Party's expense and by the Indemnifying Party's own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 7.05(b), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party's right to control the defense thereof. If the Indemnifying Party elects not to compromise or defend such Third-Party Claim or fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, the Indemnified Party may, subject to Section 7.05(b), pay, compromise, defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party Claim. Sellers and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including making available records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.

 

(b) Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), except as provided in this Section 7.05(b). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third-Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten (10) days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnifying Party may settle the Third- Party Claim upon the terms set forth in such firm offer to settle such Third-Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 7.05(a), it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).

 

 

 

 

(c) Any claim by an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (a "Direct Claim") shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. During such thirty (30)-day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party's investigation by giving such information and assistance (including access to the Company's premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such thirty (30)-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

 

Section 7.06   Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

 

Section 7.07   Exclusive Remedies. Subject to Section 9.11, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from Fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this ARTICLE VII. In furtherance of the foregoing, except with respect to Section 9.11, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this ARTICLE VII. Nothing in this Section 7.07 shall limit any Person's right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 9.11 or to seek any remedy on account of Fraud by any party hereto.

 

ARTICLE VIII

TERMINATION

 

Section 8.01   Termination. This Agreement may be terminated at any time prior to the Closing:

 

(a) by the mutual written consent of ▇▇▇▇▇▇▇ and ▇▇▇▇▇;

 

(b) by Buyer by written notice to Sellers’ Representative if:

 

(i) Buyer is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in ARTICLE VI and such breach, inaccuracy or failure cannot be cured by Seller by November 225, 2023 (the "Drop-Dead Date"); or

 

 

 

 

(ii) any of the conditions set forth in Section 6.01 or Section 6.02 shall not have been fulfilled by the Drop-Dead Date, unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

 

(c) by Sellers’ Representative by written notice to Buyer if:

 

(i) Sellers are not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in ARTICLE VI and such breach, inaccuracy or failure cannot be cured by Buyer by the Drop-Dead Date; or

 

(ii) any of the conditions set forth in Section 6.01 or Section 6.03 shall not have been fulfilled by the Drop-Dead Date, unless such failure shall be due to the failure of Sellers to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

 

(d) by Buyer or Sellers in the event that:

 

(i) there shall be any Law or any process or requirement by any regulator, that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited, or unfeasible;

 

(ii) any of Buyer’s shareholders bring any action not block or enjoin the transactions contemplated by this Agreement; or

 

(iii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.

 

Section 8.02   Effect of Termination. In the event of the termination of this Agreement in accordance with this Article, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:

 

(a) as set forth in this ARTICLE VIII and ARTICLE IX hereof; and

 

(b) that nothing herein shall relieve any party hereto from liability for any intentional breach of any provision hereof.

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.01   Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.

 

 

 

 

Section 9.02   Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third (3^rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02):

 

If to Sellers’ Representative:	Koze Investments, LLC
	▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
	Los Angeles, California 90036
	E-mail: ▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
	Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
If to Buyer:	Cannapharmarx, Inc.
	▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇
	Calgary, AB, Canada T2P 5C5
	E-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
	Attention: ▇▇▇▇ ▇▇▇▇▇▇, CEO

 

Section 9.03   Interpretation. For purposes of this Agreement: (a) the words "include," "includes" and "including" shall be deemed to be followed by the words "without limitation"; (b) the word "or" is not exclusive; and (c) the words "herein," "hereof," "hereby," "hereto" and "hereunder" refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, and Exhibits mean the Articles and Sections of, and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

 

Section 9.04   Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

Section 9.05   Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 9.06   Entire Agreement. This Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and the Exhibits, the statements in the body of this Agreement (except as to the Warrants, which in case of inconsistency between this Agreement and the Warrants, the Warrants) will control.

 

 

 

 

Section 9.07   Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 9.08   No Third-Party Beneficiaries. Except as provided in ARTICLE VII or elsewhere herein, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 9.09   Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 9.10   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction).

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF CALIFORNIA IN EACH CASE LOCATED IN THE CITY OF LOS ANGELES AND COUNTY OF LOS ANGELES, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY'S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10 (c).

 

 

 

 

Section 9.11   Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

Section 9.12   Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

Section 9.13   Conflict Waiver; Attorney-Client Privilege.

 

(a) Each of the parties hereto acknowledges and agrees, on its own behalf and on behalf of its directors, members, shareholders, partners, officers, employees and Affiliates, that:

 

(i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.C. has acted as counsel to (A) the Company and (B) certain Sellers and their Affiliates (collectively, the "Seller Group"), in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. Buyer agrees, and shall cause the Company to agree, that, following consummation of the transactions contemplated hereby, such representation and any prior representation of the Company by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.C. (or any successor) ("Seller Group Law Firm") shall not preclude Seller Group Law Firm from serving as counsel to the Seller Group or any director, member, shareholder, partner, officer or employee of the Seller Group, in connection with any litigation, claim or obligation arising out of or relating to this Agreement or the transactions contemplated hereby.

 

(ii) Buyer shall not, and shall cause the Company not to, seek or have Seller Group Law Firm disqualified from any such representation based on the prior representation of the Company by Seller Group Law Firm. Each of the parties hereto hereby consents thereto and waives any conflict of interest arising from such prior representation, and each of such parties shall cause any of its Affiliates to consent to waive any conflict of interest arising from such representation. Each of the parties acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that the parties have consulted with counsel or have been advised they should do so in connection herewith. The covenants, consent and waiver contained in this Section 9.14(a) shall not be deemed exclusive of any other rights to which Seller Group Law Firm is entitled whether pursuant to law, contract or otherwise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) All communications between the Seller Group or the Company, on the one hand, and Seller Group Law Firm, on the other hand, relating to the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (the "Privileged Communications") shall be deemed to be attorney-client privileged and the expectation of client confidence relating thereto shall belong solely to the Seller Group and shall not pass to or be claimed by Buyer or the Company. Accordingly, Buyer and the Company shall not have access to any Privileged Communications or to the files of Seller Group Law Firm relating to such engagement from and after Closing and may not use or rely on any Privileged Communications in any claim, dispute, action, suit or proceeding against or involving any of the Seller Group. Without limiting the generality of the foregoing, from and after the Closing, (i) the Seller Group (and not Buyer or the Company) shall be the sole holders of the attorney-client privilege with respect to such engagement, and none of Buyer or the Company shall be a holder thereof, (ii) to the extent that files of Seller Group Law Firm in respect of such engagement constitute property of the client, only the Seller Group (and not Buyer nor the Company) shall hold such property rights and (iii) Seller Group Law Firm shall have no duty whatsoever to reveal or disclose any such attorney-client communications or files to Buyer or the Company by reason of any attorney-client relationship between Seller Group Law Firm and the Company or otherwise. Notwithstanding the foregoing, in the event that a dispute arises between Buyer or its Affiliates (including the Company), on the one hand, and a third party other than any of the Seller Group, on the other hand, Buyer and its Affiliates (including the Company) may assert the attorney-client privilege to prevent disclosure of confidential communications to such third party; provided, however, that neither Buyer nor any of its Affiliates (including the Company) may waive such privilege without the prior written consent of the Seller Group, which consent shall not be unreasonably withheld, conditioned or delayed. In the event that Buyer or any of its Affiliates (including the Company) is legally required by Governmental Order or otherwise legally required to access or obtain a copy of all or a portion of the Privileged Communications, to the extent (x) permitted by applicable Law, and (y) advisable in the opinion of Buyer's counsel, then Buyer shall immediately (and, in any event, within fifteen (15) Business Days notify Sellers’ Representative in writing so that Sellers can seek a protective order.

 

(c) This Section 9.13 is intended for the benefit of, and shall be enforceable by, Seller Group Law Firm. This Section shall be irrevocable, and no term of this Section may be amended, waived or modified, without the prior written consent of Seller Group Law Firm.

 

Section 9.14   Non-recourse. This Agreement may only be enforced against, and any claim, action, suit or other legal proceeding based upon, arising out of, or related to this Agreement, or the negotiation, execution or performance of this Agreement, may only be brought against the entities that are expressly named as parties hereto and then only with respect to the specific obligations set forth herein with respect to such party. No past, present or future director, officer, employee, incorporator, manager, member, partner, stockholder, Affiliate, agent, attorney or other Representative of any party hereto or of any Affiliate of any party hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any party hereto under this Agreement or for any claim or Action based on, in respect of or by reason of the transactions contemplated hereby.

 

[THIS SECTION INTENTIONALLY LEFT BLANK]

 

[SIGNATURE PAGES FOLLOW]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Execution Version

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

	SELLERS
	Koze Investments, LLC
	By	/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
	Name: ▇▇▇▇▇▇ ▇▇▇▇▇
	Title: Authorized Signer
	/s/ ▇▇▇▇ ▇▇▇
	▇▇▇▇ ▇▇▇
	COMPANY
	LTB MANAGEMENT, LLC
	By	/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
	Name: ▇▇▇▇▇▇ ▇▇▇▇▇
	Title: Authorized Signer
	BUYER
	Cannapharmarx, Inc.
	By	/s/ ▇▇▇▇ ▇▇▇▇▇▇
	Name: ▇▇▇▇ ▇▇▇▇▇▇
	Title: CEO

 

 

 

 

 

 

 

 

 

 

 

Signature Page

Amended and Restated Membership Interest Purchase Agreement

 

 

 

Execution Version

 

 

 

 

EXHIBIT A

 

[Note]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A

Amended and Restated Membership Interest Purchase Agreement

 

 

Execution Version

 

 

EXHIBIT B

 

[Warrant]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit B

Amended and Restated Membership Interest Purchase Agreement

 

 

 

 

Execution Version

 

 

EXHIBIT C

 

[Joinder]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit C

Amended and Restated Membership Interest Purchase Agreement

 

 

 

 

Execution Version

 

 

SCHEDULE A

 

“Lucky Tackle Box” trademark, Trademark Registration Number 4,862,435 and the

 

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SCHEDULE A

Amended and Restated Membership Interest Purchase Agreement