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AGREEMENT AND PLAN OF MERGER
by and among
NutraNomics, Inc.
and
NNRX Merger Sub I, Inc., NNRX Merger Sub II, Inc., and NNRX Merger Sub III, Inc.
(each a “Merger Sub” and collectively "Merger Subs")
and
DHS Development, Inc., d/b/a The Plant, RCW Investments, Inc., and DHS10, Inc.
(each a “Target” and collectively "Targets")
and
The Shareholders of Targets
dated as of
March 24, 2022
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This Agreement and Plan of Merger (this "Agreement"), dated as of March 23, 2022, is entered into among NUTRANOMICS, INC., a Wyoming corporation ("Parent"), NNRX Merger Sub I, Inc., a California corporation, NNRX Merger Sub II, Inc., a California corporation, and NNRX Merger Sub III, Inc., a California corporation (each a "Merger Sub" and collectively the “Merger Subs”), DHS Development, Inc., d/b/a The Plant, a California corporation, RCW Investments, LLC, a California limited liability company, and DHS10, Inc., a California corporation (each a “Target" and collectively the “Targets”), and the shareholders of the Targets identified on Exhibit A (collectively, "Target Shareholders").
RECITALS
WHEREAS, the Target Shareholders have (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of the Targets, (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger, and (c) resolved to recommend adoption of this Agreement by the Shareholders of the Targets in accordance with the applicable laws.
WHEREAS, prior to the execution of this Agreement, the Targets shall seek to obtain a written consent of Target Shareholders approving this Agreement, the Merger and the transactions contemplated hereby;
WHEREAS, the respective boards of directors of Parent and Merger Subs have unanimously (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of Parent, Merger Subs and their respective shareholders and members, and (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger.
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:
"Acquisition Proposal" has the meaning set forth in Section 5.06(a ).
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"Agreement" has the meaning set forth in the preamble.
“California Corporations Code” has the meaning set forth in Section 2.01.
"Certificate" has the meaning set forth in Section 2.11(a ).
"Certificate of Merger" has the meaning set forth in Section 2.06.
"Closing" has the meaning set forth in Section 2.04.
"Closing Date" has the meaning set forth in Section 2.04.
"Closing Merger Consideration" has the meaning set forth in Section 2.02.
"Code" means the Internal Revenue Code of 1986, as amended.
“Disclosed Information” means any documents, information, facts or circumstances: (i) disclosed to the Parent, its officers, representatives or advisors by the Target Shareholders as of the date of this Agreement or the Closing Date (as applicable) either verbally, in writing (including email) or via a shared Dropbox location or other file sharing system; or (ii) which the Parent and/or its officers had Knowledge of as of the date of this Agreement or the Closing Date (as applicable).
"Dollars or $" means the lawful currency of the United States.
"Effective Time" has the meaning set forth in Section 2.06.
“Employment Agreements” has the meaning set forth in Section 5.03.
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restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“FY” means a fiscal year.
“Fully Diluted Basis” mean after taking into account all outstanding shares of Common Stock of the Parent and assuming the exercise, conversion or exchange of all options, warrants, convertible or exchangeable debt or securities and similar rights and the issuance of all shares of Common Stock that the Parent is obligated to issue at the time in question.
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"GAAP" means United States generally accepted accounting principles in effect from time to time.
“Gross Revenue” means the aggregate revenues and income of any nature derived in the ordinary course of business, including revenue derived from acquisitions made by Parent.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
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applications for registration, and renewals of any of the foregoing ("Copyrights"); (d) internet domain names and social media account or user names (including "handles"), whether or not Trademarks, all associated web addresses, URLs, websites and web pages, social media sites and pages, and all content and data thereon or relating thereto, whether or not Copyrights; (e) trade secrets, know-how, inventions (whether or not patentable), discoveries, improvements, technology, business and technical information, databases, data compilations and collections, tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein ("Trade Secrets"); (f) computer programs, operating systems, applications, firmware, and other code, including all source code, object code, application programming interfaces, data files, databases, protocols, specifications, and other documentation thereof; and (g) all other intellectual or industrial property and proprietary rights.
"Liabilities" has the meaning set forth in Section 3.04.
"Material Contracts" has the meaning set forth in Section 3.07(a ).
"Merger" has the meaning set forth in the recitals.
"Merger Consideration" means the Closing Merger Consideration.
"Merger Sub" has the meaning set forth in the preamble.
“Net Earnings” means Gross Revenue minus costs and expenses calculated pursuant to the Code (as it exists on the date of this Agreement) and not including deductions for: (i) taxes; (ii) depreciation; (iii) interest; and/or (iv) amortization.
"Parent" has the meaning set forth in the preamble.
"Parent Periodic Reports" has the meaning set forth in Section 4.08.
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"Permits" means all permits, licenses (including cannabis licenses), franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.
"Permitted Encumbrances" has the meaning set forth in Section 3.08(a ).
"Pre-Closing Taxes" means Taxes of the Targets for any Pre-Closing Tax Period.
“Principal Target Shareholder” means Sherratt Reicher, Mattie Cooper and Clayton Wiedemann.
“Registration Rights Agreement” has the meaning set forth in Section 7.01(g).
“Requisite Target Vote” means a consenting majority vote of Target Shareholders representing each class of Target Stock.
"SEC" has the meaning set forth in Section 4.08.
"Shareholder Indemnitees" has the meaning set forth in Section 8.02.
"Straddle Period" has the meaning set forth in Section 6.05.
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or other persons performing similar functions or (b) representing equal to or more than 50 percent of such securities or ownership interests are at the time directly or indirectly owned by such Person.
"Surviving Corporations" has the meaning set forth in Section 2.01.
"Target" has the meaning set forth in the preamble.
"Target Stock" means all the outstanding equity, membership, voting, or other interests of the Targets.
"Target Shareholders" has the meaning set forth in the preamble.
"Union" has the meaning set forth in Section 3.14(b ).
“Voting Agreement” has the meaning set forth in Section 5.14(c).
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"Written Consent" has the meaning set forth in Section 5.07.
ARTICLE II
THE MERGER
(a)The aggregate purchase price for the transaction shall be (1) post-Closing cash bonuses to be paid to the Principal Target Shareholders pursuant to Section 2.02(b); and (2) Series B Preferred Stock of Parent convertible to a total of up to 30% of the total issued and outstanding common stock of Parent on a Fully Diluted Basis according to the following issuance schedule:
(i)Initial Tranche: Upon the execution of this Agreement, Parent shall deliver to the Target Shareholders 500,000 shares of Series B Preferred Stock convertible into 15% of the total issued and outstanding common stock of Parent on a Fully Diluted Basis, with anti-dilution rights for a period of 18 months following the Closing Date.
(ii)Achievement of First Milestone: Upon the achievement by the Surviving Corporations in aggregate of Eighteen Million Eight Hundred Thirty-Three Thousand Six Hundred Forty-Six Dollars ($18,833,646.00) in Gross Revenue and Two Million, Eight Hundred Twenty-Five Thousand Forty-Six Dollars ($2,825,046.00) in Net Earnings, calculated on a cumulative basis (the “First Milestone”), Parent shall deliver to the Target Shareholders shares of Series B Preferred Stock convertible into an additional 7.5% of the total issued and outstanding common stock of Parent on a Fully Diluted Basis as of the date of issuance. Parent shall deliver such shares no later than ten (10) days following the last day of the month in which the First Milestone is achieved.
(iii)Achievement of Second Milestone: Upon the achievement by the Surviving Corporations in aggregate of Thirty-Seven Million, Seven Hundred
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Sixty-Seven Thousand Two Hundred Ninety-Nine Dollars ($37,767,299.00) in Gross Revenue and Five Million Six Hundred Thirty-Four Thousand Thirty-One Dollars ($5,634,031.00) in Net Earnings, both calculated on a cumulative basis inclusive of the First Milestone (the “Second Milestone”), Parent shall deliver to the Target Shareholders shares of Series B Preferred Stock convertible into an additional 7.5% of the total issued and outstanding common stock of Parent on a Fully Diluted Basis as of the date of issuance. Parent shall deliver shares no later than ten (10) days following the last day of the month in which the Second Milestone is achieved.
(b)Subsequent to Closing, and for as long as a Principal Target Shareholder is a member of the Board of Directors of the Parent, the Parent shall pay a cash bonus to such Principal Target Shareholder on an annual basis pursuant to the following schedule, Section 2.02(b), provided that the cumulative amount of cash payable under this Section 2.02(b) by the Parent to the Principal Target Shareholders shall not exceed twenty percent (20%) of the total value of the consideration received by the Target Shareholders hereunder, in aggregate:
(i)in FY 2022, an amount equal to three percent (3%) of the cumulative Net Earnings of the Surviving Corporations shall be paid to each Principal Target Shareholder;
(ii)in FY 2023, an amount equal to four percent (4%) of the cumulative Net Earnings of the Surviving Corporations shall be paid to each Principal Target Shareholder; and
(iii)in FYs 2024 through 2037, an amount equal to five percent (5%) of the cumulative Net Earnings of the Surviving Corporations shall be paid to each Principal Target Shareholder.
Section 2.03Certain Terms Related to Cash Bonus.
(a)All amounts paid to the Principal Target Shareholders pursuant to Section 2.02(b) shall be deemed to be an increase of the purchase price paid pursuant to this Agreement.
(b)Each Principal Target Shareholder’s right to receive the cash bonus referred to in Section 2.02(b) in each applicable FY is contingent upon the Surviving Corporations realizing Net Earnings equal to or in excess of $1,000,000 in the relevant FY.
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(e)Each Principal Target Shareholder’s right to receive the payments required under Section 2.02(b) shall remain in full force and effect until FY 2037 unless such Principal Target Shareholder either: (1) resigns from, or refuses to serve on, the Board of Directors of the Parent; or (2) is convicted of a felony which makes it legally impermissible for such Principal Target Shareholder to serve on the Board of Directors of the Parent.
Section 2.05Closing Deliverables.
(a)At or prior to the Closing, the Targets shall deliver to Parent the following:
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(iv)a counterpart of the Registration Rights Agreement, duly executed by each of the Principal Target Shareholders;
(v)a counterpart of the Voting Agreement, duly executed by each of the Principal Target Shareholders;
(vi)a counterpart of each Employment Agreement, duly executed by the relevant Principal Target Shareholder; and
(iv)a counterpart of the Registration Rights Agreement, duly executed by the Parent (to be delivered to the Principal Target Shareholders);
(v)a counterpart of the Voting Agreement, duly executed by Jonathan Bishop and Geoff Bazegian;
(vi)a counterpart of each Employment Agreement, duly executed by the Parent and the relevant Surviving Corporation; and
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Section 2.09Directors and Officers.
(a)The directors and officers of Merger Subs, in each case, immediately prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporations, subject to Section 5.12; provided that (i) each of Sherratt Reicher, Mattie Cooper, and Clayton Wiedemann will be appointed as directors on the Board of Directors for each of the Surviving Corporations and (ii) Mattie Cooper will be appointed President and CEO of each of the Surviving Corporations.
(b)At the Effective Time, the Principal Target Shareholders will be appointed as directors on the Board of Directors of the Parent.
Section 2.10Effect of the Merger on Common Stock. At the Effective Time, as a result of the Merger and without any action on the part of Parent, Merger Subs, the Targets or any Target Shareholder, the Target Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Closing Merger Consideration.
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Section 2.11Surrender and Payment.
Section 2.13Dissenters’ Rights. Despite anything in this Agreement to the contrary, a “dissenting shareholder” who holds any of a Target’s “dissenting shares” (as those terms are defined in California Corporations Code §1300) outstanding immediately before the Effective Time and who has made and perfected a demand for payment of the value of the shares (“Payment”) in accordance with California Corporations Code §§1300–1313 (“Dissenters’ Rights Statute”) and who has not effectively withdrawn or lost the right to such Payment shall have, by virtue of the Merger and without further action on the dissenting shareholder’s part, the right to receive and be paid the Payment and no further rights other than those provided by the Dissenters’ Rights Statute. Targets shall give Parent prompt written notice of all written demands for Payment, withdrawals of demand, and other written communications received by Targets pursuant to the Dissenters’ Rights Statute. After the amount of the Payment has been agreed on or finally determined pursuant to the Dissenters’ Rights Statute, all dissenting shareholders entitled to the Payment pursuant to the Dissenters’ Rights Statute shall receive such payment from Targets, and the dissenting shares shall thereupon be canceled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET
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Section 3.02Authority. Having obtained the Requisite Target Vote, each Target has full power and authority to enter into and perform its obligations under this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by each Target of this Agreement and any Ancillary Document to which it is a party and the consummation by each Target of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of each Target and no other corporate proceedings on the part of each Target are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the Merger and the other transactions contemplated hereby and thereby, subject only, in the case of consummation of the Merger, to the receipt of the Target Shareholder consent, which is the only vote or consent of the Target Shareholders required to approve and adopt this Agreement and the Ancillary Documents, approve the Merger and consummate the Merger and the other transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by each Target, and (assuming due authorization, execution and delivery by each other party hereto) this Agreement constitutes a legal, valid and binding obligation of each Target enforceable against each Target in accordance with its terms. When each Ancillary Document to which each Target is or will be a party has been duly executed and delivered by each Target (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Document will constitute a legal and binding obligation of each Target enforceable against it in accordance with its terms.
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consummation of the transactions contemplated hereby and thereby, except for the filing of the Certificate of Merger with the Secretary of State of Wyoming and the Secretary of State of California and such filings as may be required.
(a)Liabilities disclosed or provided for in the Balance Sheet, including the notes to the Balance Sheet;
(b)Liabilities disclosed in the Disclosed Information; or
(c)Liabilities incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date, none of which has been adverse to the business of Targets, and none of which is attributable to any period before the Balance Sheet Date.
Section 3.05Financial Statements; Balance Sheet Date. The (a) unaudited balance sheet of Targets as of December 31, 2021 (the “Balance Sheet”), and as of December 31, 2021, the related Profits and Loss Statement of Targets for the years then ended (together with the Balance Sheet, the “Unaudited Financials”), copies of which have been delivered by Targets to Parent and included in the Disclosed Information, are accurate and complete in all material respects and fairly present in all material respects the financial position of Targets as of that date and the results of operations for the periods covered therein and have been prepared in accordance with sound accounting principles utilized by Targets and applied on a consistent basis. December 31, 2021, is referred to in this Agreement as the “Balance Sheet Date.”
(b)amendment of the charter, operating agreement or other organizational documents of the Target;
(c)pledge, transfer, or assignment of any Target Stock;
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(f)entry into any Contract that would constitute a Material Contract;
(g)incurrence, assumption or guarantee of any indebtedness for borrowed money;
(h)transfer, assignment, sale or other disposition of any Target’s assets;
(k)material damage, destruction or loss (whether or not covered by insurance) to its property;
(l)any capital investment in, or any loan to, any other Person;
(n)any material capital expenditures;
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(t)entry into a new line of business or abandonment or discontinuance of existing lines of business;
Section 3.07Material Contracts.
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(xi)any other Contract that is material to the Targets and not previously disclosed.
Section 3.08Title to Assets; Real Property.
(i)liens for Taxes not yet due and payable;
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Section 3.09Intellectual Property. Targets have disclosed a correct, current, and complete list of: (i) all Target IP Registrations (ii) all unregistered Trademarks included in the Target Intellectual Property; and (iii) all proprietary Software of the Targets; and (iv) all other Target Intellectual Property used or held for use in the Targets’ business as currently conducted and as proposed to be conducted.
Section 3.11Legal Proceedings; Governmental Orders.
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Section 3.12Compliance with Laws; Permits.
Section 3.13Environmental Matters.
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increase the costs associated with the ownership, lease, operation, performance or use of the business or assets of each Target as currently carried out.
Section 3.14Employment Matters.
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relating to unfair labor practices, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, employee classification, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers' compensation, leaves of absence, paid sick leave, unemployment insurance or any other employment-related matter arising under applicable Laws.
Section 3.15Taxes.
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(ii)an installment sale or open transaction occurring on or prior to the Closing Date;
(iii)a prepaid amount received on or before the Closing Date;
(v)any election under Section 108(i) of the Code.
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Section 3.19No Other Representations and Warranties. Except for the representations and warranties contained in this ARTICLE III, each Target (including its Shareholders and Affiliates) has not made and does not make any other express or implied representations or warranties to Parent or its Affiliates.
Section 3.20Disclosed Information. The Targets shall not be liable for any claim for breach of the representations, warranties or covenants made by them in this Agreement if and to the extent the fact, matter or circumstance which is the subject matter of such claim was disclosed in the Disclosed Information.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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Authority is required by or with respect to Parent or any Merger Sub in connection with the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby, except for the filing of the Certificate of Merger with the Secretary of State of Wyoming and the State of California and such filings as may be required under the HSR Act.
Section 4.07Capitalization. The authorized capital stock of Parent, as of the February 14, 2022, consists of (a) 60,000,000,000 shares of Parent Common Stock, par value $0.001 (“Parent Common Stock”), of which 9,790,759,045 are issued and outstanding; and (b) 1,000,000 shares of Parent Series A Preferred Stock, par value $0.001 (“Parent Class A Preferred Stock”), of which 1,000,000 are issued and outstanding. Two new classes of Preferred Stock, Parent Class B and Parent Class, shall be created in conjunction with the Merger. It is anticipated the Parent Series B and Parent Series C Preferred Stock will each have 1,000,000 shares authorized. All of the issued and outstanding shares of Parent’s capital stock have been duly authorized, validly issued and are fully paid and nonassessable and were not issued in violation of the preemptive, subscription or similar rights of any Person.
(a)Since February 8, 2022, Parent has filed with or furnished to OTC Markets all reports, schedules, forms, certifications, prospectuses, and registration, proxy and other statements required under OTC Markets’ alternative reporting standard applicable to Parent and has filed with or furnished to OTC Markets, on a timely basis, all reports required under the Pink Basic Disclosure Guidelines (“Parent Periodic Reports”).
(b)Parent has received all state securities and “Blue Sky” permits necessary to consummate the transactions contemplated herein.
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Section 4.09Financial Statements. Each of the consolidated financial statements (including, in each case, any notes and schedules thereto) contained in or incorporated by reference into the Parent Periodic Reports: (i) complied as to form in all material respects with the OTC Markets guidelines with respect thereto as of their respective dates; (ii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved; and (iii) fairly presented in all material respects the consolidated financial position and the results of operations, changes in stockholders' equity, and cash flows of Parent and its consolidated Subsidiaries as of the respective dates of and for the periods referred to in such financial statements.
Section 4.10Litigation. There is no Action pending, or to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries or any of their respective properties or assets or, to the Knowledge of Parent, any officer or director of Parent or any of its Subsidiaries in their capacities as such other than any such Action that: (a) does not involve an amount that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and (b) does not seek material injunctive or other material non-monetary relief. None of Parent or any of its Subsidiaries or any of their respective properties or assets is subject to any Governmental Order, whether temporary, preliminary, or permanent, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the Knowledge of Parent, there are no SEC inquiries or investigations, other governmental inquiries or investigations, or internal investigations pending or, to the Knowledge of Parent, threatened, in each case regarding any accounting practices of Parent or any of its Subsidiaries or any malfeasance by any officer or director of Parent.
Section 4.11Compliance; Permits.
(a)To the Parent’s Knowledge, the Parent and each of its Subsidiaries has complied, and is now complying, with all Laws applicable to it or its business, properties or assets.
(b)To the Parent’s Knowledge, all Permits required for the Parent and each of its Subsidiaries to conduct its business have been obtained by it and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date hereof have been paid in full. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Parent Permit.
Section 4.12Independent Investigation. Parent and Merger Subs have conducted their own independent investigation, review and analysis of the business, results of operations, prospects, condition (financial or otherwise) or assets of the Targets, and each acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of the Targets, consistent with ARTICLE III above, for such purpose.
Section 4.13Debt. The amount of debt obligations of the Parent’s balance sheet is no greater than Three Million Dollars ($3,000,000).
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Section 4.14Valid Issuance. Upon exchange of the Targets’ shares for the Merger Consideration, such Merger Consideration shall be duly authorized and validly issued by Parent free and clear of any liens, claims, charges, options, or encumbrances. Parent has and shall reserve a sufficient number of Merger Consideration to satisfy any of its obligations pursuant to this Agreement.
ARTICLE V
COVENANTS
(a)preserve and maintain all of its Permits;
(b)pay its debts, Taxes and other obligations when due;
(e)defend and protect its properties and assets from infringement or usurpation;
(g)maintain its books and records in accordance with past practice;
(h)comply in all material respects with all applicable Laws; and
Section 5.02Conduct of Parent Prior to Closing. From the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Targets (which consent shall not be unreasonably withheld, conditioned or delayed), the Parent shall (x) conduct the business of the Parent in the ordinary course of business consistent with past practice; and (y) use reasonable best efforts to maintain and preserve intact the current organization, business and franchise of the Parent and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having business
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relationships with the Parent. Without limiting the foregoing, from the date hereof until the Closing Date, the Parent shall:
(a)preserve and maintain all of its Permits;
(b)pay its debts, Taxes and other obligations when due;
(c)maintain the properties and assets owned, operated or used by it in the same condition as they were on the date of this Agreement, subject to reasonable wear and tear;
(d)continue in full force and effect without modification all Insurance Policies, except as required by applicable Law;
(e)defend and protect its properties and assets from infringement or usurpation;
(f)perform all of its obligations under all Contracts relating to or affecting its properties, assets or business;
(g)maintain its books and records in accordance with past practice;
(h)comply in all material respects with all applicable Laws; and
(i)not take or permit any action that would cause any of the changes, events or conditions described in Section 3.06 to occur;
(j)not issue, reissue or sell, or issue options or rights to subscribe to, or enter into any contract or commitment to issue, reissue or sell, any shares of its capital stock or acquire or agree to acquire any shares of its capital stock;
(k)amend its Articles of Incorporation or merge or consolidate with or into any other corporation or sell all or substantially all of its assets or change in any manner the rights of its capital stock or other securities
(l)not pay or incur any obligation or liability, direct or contingent, of more than $1,000, other than in the ordinary course of business
(m)not incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise become responsible for obligations of any other party, or make loans or advances to any other party.
Section 5.03Employment Agreements with Key Employees. At Closing, Parent and one of the Surviving Corporations shall enter into employment agreements with each of the Principal Target Shareholders, detailing positions, salary, and any other employment bonuses or benefits (the “Employment Agreements”).
Section 5.04Financing of Targets' Operations. As soon as reasonably practical after the Effective Time, Parent and Targets shall enter into certain financing documentation, in form and substance satisfactory to the Parent and the Principal Target Shareholders, for the purpose of
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fulfilling the Targets' financial requirements in accordance with the Financing Distribution Schedule attached to this Agreement as Exhibit B.
Section 5.05Access to Information. From the date hereof until the Closing, the Targets shall (a) afford Parent and its Representatives full and free access to and the right to inspect all of the Real Property, properties, assets, premises, books and records, Contracts and other documents and data related to the Targets; (b) furnish Parent and its Representatives with such financial, operating and other data and information related to the Targets as Parent or any of its Representatives may reasonably request; and (c) instruct the Representatives of the Targets to cooperate with Parent in its investigation of the Targets. Any investigation pursuant to this Section 5.05 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the Targets. No investigation by Parent or other information received by Parent shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Targets in this Agreement.
Section 5.06No Solicitation of Other Bids.
Section 5.07Shareholder Consent. The Targets shall obtain, promptly following the execution and delivery of this Agreement, the Target Shareholders' consent to the Merger pursuant to written consent (the "Written Consent").
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Section 5.08Notice of Certain Events.
Section 5.09Governmental Approvals and Consents.
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to vest, perfect or confirm of record or otherwise in the Surviving Corporations any and all right, title and interest in, to and under any of the rights, properties or assets of the Targets acquired or to be acquired by the Surviving Corporations as a result of, or in connection with, the Merger.
Section 5.13Public Announcement. Neither Parent nor any Target, without the consent of the other, shall make any public announcement or issue any press release with respect to this Agreement or the transactions contemplated by it, which consent shall not be unreasonably withheld, except as may be required by law or by any listing agreement with, or the policies of, a national securities exchange, in which case reasonable efforts shall be used to consult with the other party before such announcement or release.
Section 5.14Board Appointments.
(a)As of Closing, the Board of Directors of the Parent shall consist of six (6) directors. Subsequent to Closing, by virtue of their ownership of Series B Preferred Stock of the Parent (and for as long as they own any shares of Series B Preferred Stock), the Principal Target Shareholders shall have the right and power to elect three (3) directors to the Board of Directors of the Parent, and the other three (3) directors shall be elected by the holders of Common Stock and Series A Preferred Stock of the Parent. The parties agree that the initial Board of Directors of the Parent subsequent to Closing shall consist of the following directors: (i) Jonathan Bishop; (ii) Geoff Bazegian; (iii) Sherratt Reicher; (iv) Mattie Cooper; (v) Clayton Wiedemann; (vi) an individual nominated by Jonathan Bishop and Geoff Bazegian. Each Sherratt Reicher, Mattie Cooper and Clayton Wiedemann hereby undertake not to resign from, or refuse to serve on, the Board of Directors of the Parent for at least thirty-six (36) months after the Closing Date.
(b)The parties agree that subsequent to Closing, the number of directors on the Board of Directors of the Parent may be increased to seven (7), provided that the seventh (7th) director shall be an individual who is unanimously approved of by all of the other directors.
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ARTICLE VI
TAX MATTERS
Section 6.01Tax Covenants.
Section 6.04Tax Returns.
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ARTICLE VII
CONDITIONS TO CLOSING
(d)Filing. The Agreement and Plan of Merger shall have been filed in the office of the Secretary of State or other office of each jurisdiction in which such filings are required for the Merger to become effective, or Parent shall have satisfied itself that all such filings will be or are capable of being made effective as of the Closing Date.
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(e)Dissenting Shares. Not more than twenty percent (20%) percent of the outstanding shares of Targets common stock are, or are eligible to become, “dissenting shares” within the definition of California Corporations Code §1300.
(f)Employment Agreements. Each Principal Target Shareholder, the Parent and one of the Surviving Corporations shall have entered into the Employment Agreements on terms satisfactory to such Principal Target Shareholder and its counsel and to Parent and its counsel.
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(f)Each Target shall have delivered each of the closing deliverables set forth in Section 2.05(a ).
Section 7.03Conditions to Obligations of the Targets and Target Shareholders. The Obligations of the Targets and the Target Shareholders 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)The representations and warranties of the Parent and Merger Subs contained in this Agreement, the Ancillary Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and 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, the accuracy of which shall be determined as of that specified date in all respects).
(b)Parent and Merger Subs shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the Ancillary Documents to be performed or complied with by it prior to or on the Closing Date.
(c)Parent shall have delivered each of the closing deliverables set forth in Section 2.05(b).
(d)At least a majority of the outstanding common stock of Targets shall have been voted for the approval of the Merger.
(e)Jonathan Bishop and Geoff Bazegian shall have entered into the Voting Agreement.
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ARTICLE VIII
INDEMNIFICATION
Section 8.03Indemnification of Shareholder Indemnitees. From and after the Effective Time, the Parent agrees to cause the Surviving Corporations, and the Surviving Corporations immediately following the Closing agree, to indemnify, defend and hold harmless, as set forth as of the date hereof in the Target Charter Documents and to the fullest extent permitted under applicable Law, all Shareholder Indemnitees with respect to all acts and omissions arising out of such individuals’, if natural persons, services as officers or managers of Targets occurring prior to the Effective Time, including the execution of, and the transactions contemplated by, this Agreement. Without limitation of the foregoing, in the event any such Shareholder Indemnitee is or becomes involved, in any capacity, in any action, proceeding or investigation in connection with any matter, including the transactions contemplated by this Agreement, occurring prior to, on or after the Effective Time, the Surviving Corporations, from and after the Effective Time, shall pay, as incurred, such Shareholder Indemnitee’s legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Surviving Corporations shall
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pay, within thirty (30) days after any request for advancement, all expenses, including attorneys’ fees, which may be incurred by any Shareholder Indemnitee in enforcing this Section or any action involving a Shareholder Indemnitee resulting from the transactions contemplated by this Agreement.
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ARTICLE IX
TERMINATION
Section 9.01Termination. This Agreement may be terminated at any time prior to the Closing:
(a)by the mutual written consent of the Targets and Parent;
(b)by Parent by written notice to the Targets if:
(c)by the Targets by written notice to Parent if:
(d)any of the conditions set forth in Section 7.01 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by the Effective Time, unless such failure shall be due to the failure of a Target 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 by Parent or the Targets if:
(ii)the Effective Time has not occurred by March 18, 2022.
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(a)as set forth in this ARTICLE IX and ARTICLE X hereof;
Section 9.03Return of Targets’ Documents in Event of Termination. In the event of the termination of this Agreement for any reason, Parent shall return to Targets all documents, work papers, and other materials (including copies) relating to the transactions contemplated in this Agreement, whether obtained before or after execution of this Agreement. Parent shall not use any information so obtained for any purpose and shall take all practicable steps to have such information kept confidential.
ARTICLE X
MISCELLANEOUS
If to the Targets: | DHS Development, Inc., d/b/a The Plant 3200 Danville Blvd., Suite 100 Alamo, CA 94507Email: SReicher@hudsonco.com Attention: Sherratt Reicher
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with a copy to (which copy shall not constitute Notice): | Weintraub Law Group Email: rick@weintraublawgroup.com Attention: Richard A Weintraub, Esq.
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If to Parent: | NUTRANOMICS, INC. 605 Portland Ave., Unit 154 Gladstone, OR 97027 Email: jtbishop@nutranomics.com Attention: Jonathan Bishop, CEO
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with a copy to (which copy shall not constitute Notice): | JDT LEGAL, PLLC 897 Baxter Drive South Jordan, UT 84095 Email: jeff@jdt-legal.com Attention: Jeff Turner, Esq. |
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Section 10.10Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
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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.
[SIGNATURE PAGE FOLLOWS]
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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.
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TARGETS/ TARGET SHAREHOLDERS The Plant dba DHS Development, Inc.
By_____________________ Sherratt Reicher Ownership: 31%
By_____________________ Clayton Wiedemann Ownership: 24.5%
By_____________________ Mattie Cooper Ownership: 24.5%
By_____________________ Tiffany Miller Ownership: 12%
RCW Investments, Inc.
By_____________________ Sherratt Reicher Ownership: 30%
By_____________________ Mattie Cooper Ownership: 30%
By_____________________ Twin Creeks, by Clayton Wiedeman, Founder Ownership: 30%
By_____________________ Tiffany Miller Ownership: 10%
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DHS10, Inc.
By_____________________ Happy Hours, by Sherratt Reicher, founder Ownership: 51%
By_____________________ Twin Creeks, by Clayton Wiedeman, Founder Ownership: 49%
PARENT NutraNomics, Inc.
By____________________ Jonathan Bishop, CEO
MERGER SUBS NNRX Merger Sub I, Inc.
By____________________ Jonathan Bishop, CEO
MERGER SUB NNRX Merger Sub II, Inc.
By____________________ Jonathan Bishop, CEO
MERGER SUB NNRX Merger Sub III, Inc.
By____________________ Jonathan Bishop, CEO
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EXHIBIT A
DHS Development, Inc. C-Corp (Manufacturing, R&D, packaging, distribution)
•31% Sherratt Reicher
•24.5% Clayton Wiedemann
•24.5% Mattie Cooper
•12% Tiffany Miller
•8% Treasury Licenses:
Type 7 Manufacturing – CDPH-10003543
Distribution – Complete - C11-0001284-LIC
RCW Investments, Inc. (Brand/Formulation IP)
•30% Sherratt Reicher
•30% Mattie Cooper
•30% Twin Creeks
•10% Tiffany Miller
DHS10, Inc. (Cultivation)
•51% Happy Hours
•49% Twin Creeks License:
Cultivation license - CCL19-0005312
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EXHIBIT B
Financing Distribution Schedule
The Parent shall use best efforts, subject to the terms of this Agreement (including the Ancillary Documents), to raise necessary funding to fulfill Targets’ financial requirements in accordance with an established Use of Funds schedule (to be provided by Target), through the sale of shares of common stock, preferred stock, or debt (the “Financing”), according to the Financing Distribution Schedule below. It is anticipated that the Financing will be consummated in twelve (12) tranches following the completion of the merger transaction contemplated herein. To the extent not already converted or exchanged for Target Preferred by holders of any preferred equity position(s) in the Targets (“Target Preferred Equity Holders”), Target Preferred Equity Holders shall not be redeemed from proceeds of such Financing prior to Targets’ aggregate generation of (a) annual gross revenue from operations of greater than $15,000,000, and /or (b) annual EBITDA of greater than $3,000,000 (“Excess Cash”), at which time Target Preferred Equity Holders may be redeemed only from such Excess Cash of up to 10% of their position at the end of each fiscal quarter that Targets, in aggregate, generates such Excess Cash.
Financing Distribution Schedule
Pursuant to the Parent’s intended commitment to Financing this transaction, the following distribution schedule will commence upon closure of this Acquisition:
Disbursement 1: | $750,000 | Disbursement 7: | $600,000 |
Disbursement 2: | $750,000 | Disbursement 8: | $335,000 |
Disbursement 3: | $750,000 | Disbursement 9: | $335,000 |
Disbursement 4: | $750,000 | Disbursement 10: | $335,000 |
Disbursement 5: | $600,000 | Disbursement 11: | $335,000 |
Disbursement 6: | $600,000 | Disbursement 12: | $335,000 |
After the initial 4 monthly disbursements, issuance of the remaining financing to Targets shall be contingent upon and in cooperation with Target’s achievement of the following set of Performance Milestones for gross revenue, gross margins, and net income as detailed herein this section. The following milestones have been established in accordance with Target-provided Financial Projections:
Target Performance Milestones
Disbursement # | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
Gross Revenue | $1,797,832 | $2,351,515 | $3,025,539 | $3,758,565 | $4,518,765 | $5,336,808 | $6,220,010 | $6,718,884 |
Gross Profit | $322,830 | $450,965 | $660,745 | $860,148 | $1,064,477 | $1,282,240 | $1,516,840 | $1,651,118 |
Net earnings | $200,324 | $309,301 | $495,838 | $669,260 | $847,093 | $1,037,673 | $1,242,258 | $1,358,931 |
*Additional funding may be made available subject to justification review.
Timing and use of the provided Financing shall be applied according to the finalized detailed Use of Funds schedule which Targets shall provide at Closing.
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EXHIBIT C
Voting Agreement
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EXHIBIT D
Registration Rights Agreement
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