Exhibit 2.1
SECURITIES EXCHANGEAGREEMENT
byand among
RSQUARED TECHNOLOGIES, INC. (“R2”)
and
theSECURITYHOLDERSOF R2,
on theone hand; and
OMNISHRIMP,INC. (“Pubco”),
on theother hand January 11, 2019
SECURITIES EXCHANGEAGREEMENT
This Securities Exchange Agreement, dated asofJanuary 11,2019 (this “Agreement”), ismade andentered into by andamong RSQUARED TECHNOLOGIES INC., aDelaware corporation (“R2”), andthe shareholders, noteholders andwarrantholders ofR2 executing this Agreement (each a“Shareholder” andcollectively, “Shareholders”), onthe one hand; and OMNI SHRIMP, INC., aNevada corporation (“Pubco”), onthe other hand.
RECITALS
WHEREAS, onDecember 30,2018, theBoardofDirectorsofPubco adopted resolutions approving Pubco’s acquisition ofthe equity interestsofR2 held by theShareholders (the “Acquisition”) bymeans of a shareexchange with theShareholders, upon theterms andconditions hereinafter set forth inthis Agreement;
WHEREAS, theShareholders ownall ofthe outstanding equity interests ofR2, consisting of 17,850,000shares ofstock (the“R2 Shares”) andwarrants topurchase 1,500,000 sharesofstock (the “R2 Warrants”; together with the R2Shares,the“R2 Equity Interests”);
WHEREAS, certain of theShareholders (the “Noteholders”) own promissory notesofR2 inthe principal amount, together with accrued interest through thedate hereof, aggregating approximately
$964,000(the “R2 Notes”; together with the R2Equity Interests, the “R2Securities”);
WHEREAS, uponconsummation of thetransactions contemplated by thisAgreement andsubject totheterms hereof,R2will become a100% wholly-owned subsidiary ofPubco, theR2 Shares will beexchanged for Pubcopreferred Stock, theR2 Warrants will beexchanged for Pubco Warrants and theR2 Noteswill beexchanged for Pubconotes; and
WHEREAS, it isintended that theterms andconditions ofthis Agreement comply in allrespects with Section 368(a)(1)(B) and/or Section 351 of theInternal Revenue Codeof 1986, asamended (the “Code”) and theregulations corresponding thereto, sothat theAcquisition shall qualify as a taxfree reorganization under the Code, and it isintended that this share exchange transaction shall qualify as atransaction in securities exempt fromregistration orqualification under theSecuritiesAct of1933, asamended andin effectonthe date ofthis Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending tobelegally bound,agree asfollows:
ARTICLE1
THE ACQUISITION
1.1 The Acquisition. Upon theterms andsubject to theconditions hereof, at theClosing (ashereinafter defined) the parties shall do thefollowing:
(a) TheShareholders will sell, convey, assign, transfer to Pubcocertificates representing theR2 Shares held by theShareholders, which in theaggregate shall constitute 100% ofthe issued andoutstanding equity interests ofR2, accompanied byproperly executed andauthenticated stock powersorinstrumentof like tenor.
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(b) Inexchange forthe R2 Shares, Pubco shall issue tothe Shareholders on a prorata basis thefollowing shares of Pubcopreferred stock (collectively, the“Issuable Shares”): (i) anaggregate of TenMillion SixHundred Fifty Thousand (10,650,000) newand dulyissued, fully paidand non-assessable sharesofPubco Series FPreferred Stock, parvalue $0.001 (the “Series FPreferred Stock”) described in theSeries FCertificateofDesignation, annexed hereto asExhibitA, and (ii)an aggregate ofSeven Million Two Hundred Thousand (7,200,000) new andduly issued, fully paid andnon-assessable sharesofPubcoSeries GPreferred Stock, parvalue $0.001 (the “Series GPreferred Stock”) described in theSeries GCertificate ofDesignation, annexed hereto asExhibit B, eachsuch Series convertible into Pubcocommonstock, parvalue $.001(“Pubco Common Stock”). The Issuable Shares shall beconvertible inthe aggregate into anumber ofshares of PubcoCommon Stockrepresenting approximately 95% of thesharesofPubcoCommon Stock outstanding on afully diluted basis immediately after conversion, subject toadjustment asdescribed inthe Series F andSeries GCertificatesofDesignation. Simultaneously, certain convertible debt of Pubcoshall bemodified pursuant to theterms oftheNoteAmendment/TransferAgreementreferenced inSection 6.12.
(c) TheNoteholders and Shareholders owningR2 Warrants (the “Warrantholders”) will sell, convey, assign and transfer toPubco their respective R2Notes and R2 Warrants, accompanied byproperly executed andauthenticated transfer powersorinstrumentoflike tenor.Inexchange for theR2 Notes andR2 Warrants,Pubcoshall issue (i) to theNoteholders on apro rata basis convertible promissory notes, substantially in theform ofExhibit Cannexed hereto, in anaggregate principal amount equalto theprincipal amount of theR2 Notes plus accrued andunpaid interest thereon (the “Issuable Notes”) and(ii) tothe Warrantholderson a prorata basis warrants, substantially in the form ofExhibit Dannexed hereto (the“Issuable Warrants”), topurchase anaggregate number ofsharesof CommonStock ofPubco equal tothe numberofshares ofR2 stockunderlying the R2Warrants.
(d) In order toeffectuate the PutRight described inSection 6.14, the certificates representing theR2 Securities andaccompanying transfer instruments shall bedelivered by theholders thereof asprovided inSection 1.3(a) andshall not beimmediately cancelledbut instead shallbeheld by theExchange Agent (as defined inSection 1.3(a)) and released and transferred either to Pubcoor theShareholders inaccordance with Section 6.14 or asotherwise directed inwriting jointly executed by Pubco,R2 andthe Shareholders affected thereby.
1.2 Closing Date.The closing of theAcquisition (the “Closing”) shall take place onJanuary 9,2019 oras soon aspracticable after thesatisfaction orwaiver ofthe conditions toClosing set forth in Article 7,or on suchother date asmay bemutually agreed upon by theparties. Suchdate isreferred to herein as the “Closing Date.”
1.3 | Surrender andExchange ofCertificates. |
(a) At theClosing, (i) Pubcoshall deliver toR2’s counsel or suchother person asthe parties shall jointly designate inwriting, who shall act as exchange agent for thebenefitofthe Shareholders (the“Exchange Agent”), certificates representing theIssuable Shares, Issuable Warrants andIssuable Notes (collectively, “Issuable Securities”) registered in thenames ofthe Shareholders andfor thenumber andkind ofIssuable Securities set forth onSchedule 1.3(a)(i) hereto and(ii) each Shareholder shall deliver to theExchange Agent certificates representingtheR2 Shares,R2 Notes andR2 Warrants owned bysuch Shareholder asset forth onSchedule 1.3(a)(ii) (which Schedule shall also indicate accrued interest on theR2 Notes), accompanied byproperly executed and authenticated stock powersorinstrument oflike tenor.
(b) Unless earlier released upon exerciseofthe Put Right inaccordance with Section 6.14,promptly following thePut Expiration Date, the Exchange Agent shall deliver (i) the Issuable
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Securities tothe Shareholders (or their transferees, ifany) inaccordance with the allocations set forth onSchedule 1.3(a)(i) and(ii) theR2 Securities, together with all stock powers orinstruments ofliketenor deposited by theShareholders with theExchange Agent, to Pubco.
(c) Pendingrelease by theExchange Agent of theIssuable Securities and R2 Shares inaccordance with thetermsofthis Agreement, (i) the registered ownersof theIssuable Securities shall beentitled toexercise all voting and otherrights ofownership with respect tothe Issuable Securities and Pubco shall beentitled toexercise allvoting andother rights ofownership with respect to theR2 Shares and (ii) theregistered ownersof theR2 Notes andR2 Warrants shall notbepermitted exercise, convert or enforce thesame.
1.4 TakingofNecessary Action; Further Action. If, at anytime after the Closing, anyfurther action is necessary ordesirable tocarry outthe purposes ofthis Agreement, the Shareholders, R2, and/or Pubco(as applicable) shall take all such lawful andnecessary action.
1.5 Certain Definitions. Thefollowing capitalizedterms asused in thisAgreementshallhave therespective definitions:
“Affiliate” means anyPerson that, directly orindirectly through oneormore intermediaries, controlsor iscontrolled by oris under common controlwith aPerson, as suchterms are used in andconstrued under Rule 405under theSecurities Act.
“Best Knowledge” means the actual knowledge, after dueinvestigation andinquiry, of theofficers, directors oradvisors of the referencedparty.
“Charter Documents” shall have themeaning ascribed to suchterm inSection 4.1.
“Claim Notice” shallhavethe meaning ascribed tosuch term inSection 5.3(a).
“Closing” shall have themeaning ascribed tosuch term inSection 1.2.
“Common Stock Equivalents”means anysecurities of Pubco orof anysubsidiary of Pubcowhich would entitle theholder thereof toacquire at any time PubcoCommonStock, including, without limitation, anydebt, preferred stock, rights, options, warrants orother instrument that is at anytime convertible intoorexercisableorexchangeable for, orotherwise entitles theholder thereof toreceive PubcoCommonStock.
“Contract” means anycontract, lease, license, indenture, note, bond,agreement, permit, concession, franchiseorother instrument.
“Enforceability Exceptions” shallhave themeaning ascribed tosuch term inSection 4.3.
“ERISA” means theEmployeeRetirementIncomeSecurity Actof1974or anysuccessor law and theregulations andrules issued pursuant tothat act or anysuccessor law.
“Evaluation Date” shallhave themeaning ascribed to such term inSection 4.16.
“Exchange Act” means the Securities Exchange Actof1934, asamended.
“Exchange Agent” shallhave themeaning ascribed to such term inSection 1.3.
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“Exercise Notice” shall have themeaning ascribed tosuch term inSection 6.14.
“Financial Statements” shall have the meaning ascribed tosuch term inSection 4.7.
“FINRA” means the Financial Industry Regulatory Authority.
“GAAP” means generally accepted accounting principles in theUnited States.
“Governmental Authority” means: (a) thegovernmentof theUnitedStates: (b)the government of anyforeign country; (c) thegovernment of anystateorpolitical subdivision ofthe government oftheUnitedStatesorthe government of anyforeign country; or (d) anyentity, body orauthority exercising executive, legislative, judicial, regulatory oradministrative functionsof orpertaining togovernment which shall include, without limitation, the SEC andFINRA.
“IndemnifiedParty”shallhave themeaning ascribed to such term inSection 5.3.
“Indemnifying Party” shall have themeaning ascribed to suchterm inSection 5.3.
“Intellectual Property” shall have the meaning ascribed tosuch term inSection 2.8.
“Intellectual Property Rights” shallhavethe meaning ascribed tosuch term inSection 2.8.
“Issuable Notes” shall have themeaning ascribed tosuchterm inSection 1.1(c).
“Issuable Shares” shallhave themeaning ascribed tosuch term inSection 1.1(b).
“Issuable Warrants” shallhave themeaning ascribed to such term inSection 1.1(c).
“Knowledge” means theactual knowledge ofthe officers, directors oradvisors ofthe referenced party.
“Liabilities” means anydirect orindirect indebtedness, guaranty, endorsement,claim, loss,damage, deficiency, cost,expense, obligation orresponsibility, fixedorunfixed, known orunknown, asserted choate orinchoate, liquidated orunliquidated, secured or unsecured.
“Liens” means alien, charge, security interest, encumbrance, rightoffirst refusal, preemptive right orother restriction.
“Majority Shareholder” shall have themeaning ascribed to suchterm inSection 6.14.
“Material Adverse Effect” means anadverse effect oneither referenced party orthe combined entity resulting from theconsummation ofthe transaction contemplated by thisAgreement, or onthe financial condition, results ofoperations orbusiness, before orafter the consummation of thetransaction contemplated in this Agreement, which as awhole is orwould beconsidered material toan investor inthe securities of Pubco.
“Material Conflict” shallhave themeaning ascribed to such term inSection 5.3(a).
“MoneyLaundering Laws” shall have themeaning ascribed to suchterm inSection 2.25.
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“Note Amendment/Transfer Agreement” shallhavethe meaning ascribed tosuch term inSection 6.12.
“Notice Period” shallhave themeaning ascribed tosuchterm inSection 5.3(a).
“Person” means anyindividual, corporation, partnership, joint venture, trust, business association, organization, governmental authority orother entity.
“PubcoCommonStock” shallhave themeaning ascribed to suchterm inSection 1.1(b).
Section 4.14.
“PubcoIntellectual Property Rights” shall have the meaning ascribed to such term in
Stock.
“PubcoPreferred Stock” shallmean theSeries FPreferred Stock and theSeries GPreferred
“PubcoSEC Filings” shall mean alldocuments, statements, proxymaterials, information statements andcurrent andperiodic reports filedorrequired tohave beenfiled by Pubco at anytime onorafter January 1, 2016including, without limitation, all reports onForms10-K, 10-Q and Form 8-K, ineach case infull compliancewithapplicable requirements.
“PutExpiration Date” shall have themeaning ascribed tosuch term inSection 6.14.
“PutRight” shall have the meaning ascribed tosuch term inSection 6.14.
“R2 Accounting Date”shall have the meaning ascribed tosuch term inSection 2.7.
“R2 Financial Statements” shall have the meaning ascribed tosuch term inSection 2.7.
“R2 Securities” shallhavethe meaning ascribed tosuch term in theRecitals.
“Registration Expenses” shall have themeaning ascribed to suchterm inSection 6.15.
“Required Approvals” shall have themeaning ascribed tosuch term inSection 4.4.
“Securities Act” means the Securities Actof1933, asamended.
“SEC” means theUnited States Securities &Exchange Commission.
“SEC Reports” shall have the meaning ascribed tosuch term inSection 4.7.
“Selling Expenses” shallhave themeaning ascribed to such term inSection 6.15.
“Series FCertificate ofDesignation” shall mean Pubco’sCertificateofDesignation ofSeries FPreferred Stock, par value $0.001,annexed asExhibit Ahereto.
“Series GCertificate ofDesignation” shall mean Pubco’sCertificate ofDesignation ofSeries FPreferred Stock, par value $0.001,annexed asExhibit Bhereto.
“TaxReturns” means all federal, state, local andforeign returns, estimates, information statements and reports relating toTaxes.
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“Tax”or“Taxes” means any and allapplicable central, federal, provincial, state, local, municipal andforeigntaxes, including, without limitation, gross receipts,income,profits, sales, use, occupation, value added, ad valorem, transfer, franchise,withholding,payroll, recapture, employment, excise andproperty taxes, assessments, governmental charges and duties together with all interest, penalties andadditions imposedwithrespect to any suchamounts and anyobligations under any agreementsorarrangements with anyother person with respect to any suchamounts and including anyliability of apredecessor entity for anysuch amounts.
“Trading Day” means a day onwhich the principal Trading Market is open fortrading.
“Trading Market” means the following markets orexchanges onwhich PubcoCommon Stock islistedorquoted for trading on thedate inquestion: the NYSEMKTLLC, theNasdaq Capital Market, theNasdaq Global Market, theNasdaq Global Select Market, theNewYork StockExchange, the OTCQB,OTCQX orOTC PinkMarketplace operated ormaintained by theOTC Markets Group,Inc.or theOTC Bulletin Board.
Acquisition.
“Transaction” means the transactions contemplated by thisAgreement, including the
7.1(a)(v).
“Transaction Documents” shall have the meaning ascribed to such term inSection
“Triggering Event” shallhave themeaning ascribed to such term inSection 6.14.
“Underlying Shares” means thecommon stock orother securitiesof Pubcoissuable upon conversion ofthe Issuable Shares andIssuable Notes and exerciseofthe Issuable Warrants.
“United States” means andincludes theUnited States ofAmerica, its territories and possessions, anyState ofthe United States, and the District ofColumbia.
“Warrantholders” shallhave themeaning ascribed to such term inSection 1.1(c).
1.6 Tax Consequences.It isintended that theterms andconditions ofthisAgreementcomply inall respects with Section 368(a)(1)(B) and/or Section 351 ofthe Code andthe regulations corresponding thereto, sothat the Acquisition shall qualify as atax-free reorganization under theCode. Eachparty hereto isrequired toobtain his orits own taxadvice with respect to the taxnature of the Transaction.
ARTICLE2
REPRESENTATIONSAND WARRANTIES OFR2
Exceptas otherwise disclosed herein or in theR2 disclosure schedule attached hereto, R2 hereby represents andwarrants to Pubco as of thedate hereof and asof theClosing Date (unlessotherwiseindicated), asfollows:
2.1 Organization. R2 has been dulyincorporated, validly exists as acorporation, andis ingood standing under the laws of itsjurisdiction ofincorporation, andhas the requisite power tocarry onitsbusiness as nowconducted.
2.2 | Capitalization. Theauthorized capital stock ofR2 consistsof20,000,000 shares, parvalue |
$.0001 pershare, ofstock, undesignated asto classorseries, not more than17,850,000 ofwhich shares
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shall beissued andoutstanding immediately prior tothe Closing. Alloftheissued andoutstanding shares ofcapital stockofR2, as of theClosing, are dulyauthorized, validly issued, fully paid, non-assessable and were issued free ofpreemptive rights. There are novoting trustsor anyother agreements orunderstandings withrespect to thevoting ofR2’s capital stock. Except asset forth in the preceding sentence, noother class ofcapital stock ofR2 isauthorized, issued, reserved for issuance oroutstanding. Except forthe R2 Notes andR2 Warrants, there are noauthorized oroutstanding options, warrants, calls, rights, convertible securities, commitments oragreementsof anycharacter bywhich R2 isobligated toissue,deliver orsell, orcause to beissued, deliveredor sold,any sharesofcapital stock or othersecurities ofR2. There arenooutstanding contractual obligations (contingent orotherwise) ofR2 toretire, repurchase, redeem orotherwise acquire anyoutstanding shares ofcapital stock of, orother ownership interests in, R2.
2.3 | Subsidiaries. R2 has nodirect orindirect subsidiaries. |
2.4 Certain Corporate Matters. R2 isduly qualified to dobusiness in eachjurisdiction inwhich theownership ofits property or theconduct ofits business requires it to beso qualified, except where the failure to be soqualified would not have aMaterial Adverse Effect onR2’s financial condition, resultsofoperations orbusiness. R2 has fullcorporate power andauthority andall authorizations, licenses andpermits necessary tocarry on thebusiness inwhich it isengaged and toown and use theproperties owned andused by it.
2.5 Authority. R2 has therequisite power andauthority toenter into this Agreement andto carry outits obligations hereunder. The execution, delivery andperformance ofthis Agreement andthe consummation ofthe transactions contemplated hereby byR2 have been dulyauthorized byR2’s Board ofDirectors and noother actions on thepartofR2 arenecessary toauthorize this Agreement or thetransactions contemplated hereby. This Agreement has beenduly andvalidly executed and delivered byR2 andconstitutes avalid andbinding agreement, enforceable against R2 in accordance with its terms, except as suchenforcementmay belimited bybankruptcy, insolvency orother similar laws affecting theenforcement ofcreditors’ rights generally or bygeneral principlesofequity.
2.6 Consents andApprovals; No Violations. Except forapplicable requirements, ifany, offederal securities laws andstate securitiesorblue-sky laws, nofiling with, andnopermit, authorization, consent orapproval of, anythird party, public body orauthorityisnecessaryforthe consummation byR2 ofthe transactions contemplated bythis Agreement. Neither theexecution anddeliveryof thisAgreement byR2 nor theconsummation byR2 ofthe transactions contemplated hereby, norcompliance byR2 with any ofthe provisions hereof, will (a)conflict with orresult in anybreach ofany provisionsofthe charter orbylaws ofR2, (b) result in aviolation orbreach of, orconstitute (withorwithout duenotice orlapse oftime orboth) adefault (orgive rise to anyright oftermination, cancellationoracceleration) under, any of theterms, conditions orprovisions ofany note, bond,mortgage, indenture,license, Contract, agreement orother instrument orobligation towhich R2 is apartyor bywhich any ofR2’s properties orassetsmay be bound, or (c)violate anyorder, writ, injunction, decree, statute, rule orregulation applicable toR2 or any of itsproperties orassets, except in the case ofclauses (b) and(c) for violations, breachesordefaultswhich arenot inthe aggregate material toR2 taken as awhole.
2.7 Financial Statements. R2 hasdelivered toPubco (i) anunaudited balance sheet as ofJune 30, 2018(the “R2 Accounting Date”) and therelated unaudited statements ofincome oroperations and cashflows ofR2 forthe sixmonths then ended and(ii) anunaudited balance sheet asofDecember 31, 2017 andthe related unaudited statements ofincome oroperations and cashflows ofR2 forthe period fromJune 22, 2017(inception) through December 31, 2017(theitems inclauses “(i)” and“(ii)”, collectively, the “R2 Financial Statements”). Except asset forth onSchedule 2.7, the R2 Financial Statements fairly present inall material respects the financial condition and operating resultsofR2 as of thedates, and for theperiods, indicated therein, subject to normal year-end audit adjustments. Except as set forth inthe R2 Financial
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Statements or inSchedule 2.7,R2 has nomaterial liabilitiesorobligations, contingent orotherwise, other than(i) liabilities incurred in theordinary course ofbusiness subsequent to theR2 Accounting Date;(ii) obligations under contracts andcommitments incurred in the ordinary courseofbusiness; which, inall such cases, individually and in theaggregate wouldnot reasonably beexpected tohave aMaterial Adverse Effect.
2.8 Intellectual Property. R2 owns, islicensedorotherwise possesses legally enforceable rights to use,license andexploit all issued patents, copyrights, trademarks, service marks, trade names, trade secrets, and registered domain names and allapplications forregistration therefor(collectively, the“Intellectual Property Rights”) and all computerprograms andother computer software, databases, know- how, proprietary technology, formulae, anddevelopment tools, together with all goodwill related to any of theforegoing (collectively, the“Intellectual Property”), ineach case as isnecessary to conductits business aspresently conducted, the absence ofwhich would beconsidered reasonably likely toresult in aMaterial Adverse Effect.
2.9 Litigation. There are noactions, suits, arbitrations, regulatory proceedings orother litigation, proceedingsorgovernmental investigations pending or, tothe KnowledgeofR2, threatened against R2 or any ofits officersordirectors intheir capacity as such, or any of itsproperties orbusinesses, andR2 has noKnowledge ofany facts orcircumstances whichmayreasonablybelikely togiverise to any ofthe foregoing. R2 isnot subject to anyorder, judgment, decree, injunction, stipulationorconsent order of orwith any courtorother Governmental Authority. R2 has notentered into any agreement tosettle orcompromise anyproceedingpending orthreatened inwriting against it which hasinvolved anyobligation forwhich R2 has anycontinuing obligation. There are noclaims, actions, suits, proceedings, orinvestigations pending or, tothe Knowledge ofR2, threatened by oragainst R2 with respect tothisAgreement, or inconnection with thetransactions contemplated hereby, and R2 hasnoreason tobelieve there is avalid basis for any suchclaim, action, suit, proceeding orinvestigation.
2.10 Legal Compliance. To theBest Knowledge ofR2, noclaim hasbeen filed against R2 allegingaviolationof anyapplicable laws andregulations offoreign, federal,state andlocal governments andall agencies thereof.R2holds all ofthe material permits, licenses, certificates orother authorizations offoreign, federal, stateorlocal governmental agencies required for theconductofR2’s business as presently conducted.
2.11 Contracts. Except asdisclosed inSchedule 2.11 of thedisclosure schedules hereto, there are noContracts towhich R2 is aparty or bywhich it or any ofits properties orassets are bound that are material tothe business, properties, assets, condition (financialorotherwise), results ofoperationsorprospects ofR2. Except as disclosed inSchedule2.11,R2 isnot inviolationof or indefault under (nor doesthere exist anycondition which uponthe passage oftime or the giving ofnotice would cause such aviolationofordefault under) anyContract towhich R2 is aparty or bywhich R2orany ofR2’sproperties orassets are bound,except forviolations ordefaults that would not, individually orin theaggregate, reasonably beexpected toresult in aMaterial Adverse Effect.Except asdisclosedinSchedule 2.11, each of theContracts disclosed inSchedule 2.11is now, andwill beatClosing, infull force andeffect inaccordance with itsrespective terms.
2.12 | Material Changes. Except asdisclosed onSchedule 2.12,Since the R2 AccountingDate: |
(i)there has been noevent, occurrenceordevelopment that hashad orthat could reasonably beexpected toresult in aMaterial Adverse Effect, (ii) R2 has not incurred anyLiabilities (contingent orotherwise) other than(A)trade payables and accrued expenses incurred in theordinary courseofbusiness consistent with pastpractice, and(B)Liabilities notrequired to bereflected inthe R2 Financial Statements, (iii) R2 has notaltered its method ofaccounting, (iv) R2 hasnot declared ormade anydividend ordistributionof cashorother property toits stockholdersorpurchased, redeemed ormade anyagreements topurchaseorredeem
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anyshares ofits capital stock, and(v) R2 hasnot issued anyequity securities to anyofficer, directororAffiliate.
2.13 Labor Relations. No labor dispute exists or, to theKnowledge ofR2, is imminent with respect to any of theemployees ofR2 which could reasonablybeexpected toresult in aMaterial Adverse Effect.None ofR2’s employees is amember of aunion that relates to suchemployee’s relationship with R2, andR2 is not aparty to acollective bargaining agreement, andR2 believes that its relationshipswith itsemployees is good. No executive officer, to theKnowledge ofR2, is,or is nowexpected tobe, inviolation of anymaterial term of anyemployment contract, confidentiality, disclosure orproprietary information agreement ornon-competition agreement, or anyother contract oragreement or anyrestrictive covenant infavor of anythird party, and thecontinued employment ofeach such executive officer does notsubject R2 to anyliability with respect to any of theforegoing matters.R2 isin compliance with all U.S. federal, state, local andforeign laws andregulations relating toemployment andemployment practices, terms andconditions ofemployment andwages andhours, except where the failure to be incompliance could not,individually orin theaggregate, reasonably beexpected tohave aMaterial Adverse Effect.
2.14 Title toAssets.R2 hasgood and marketable title infee simple toall real property owned by them andgood andmarketable title inall personal property owned by themthat is material to thebusiness ofR2, in each case free and clearofall Liens, except forLiens thatdonot materially affect thevalueof suchpropertyand do notmaterially interfere with the usemade andproposed to bemadeofsuch property byR2 and Liensfor the payment ofTaxes, thepayment ofwhich isneither delinquent nor subject topenalties. Any real property andfacilities held under lease byR2 isheld byR2 undervalid, subsisting andenforceable leases with which R2 is incompliance.
2.15 Transactions with Affiliates andEmployees. None ofthe officersordirectorsofR2and, to theKnowledge ofR2, none ofthe employees ofR2 is presently a party to anytransaction with R2 (other thanfor services as employees, officers and directors), including anycontract, agreementorother arrangement providing for the furnishing ofservices to orby, providing for rentalofreal orpersonal propertyto orfrom, orotherwise requiring payments to orfrom anyofficer, directoror suchemployee or, to theknowledgeofR2, any entity inwhich any officer, director,orany suchemployee has asubstantial interestoris anofficer, director, trustee orpartner, in eachcase inexcessof $100,000,other than for: (i) payment ofsalary orconsulting fees for services rendered, (ii) reimbursement for expenses incurred onbehalfofR2 and(iii) other employee benefits.
2.16 Business Records andDueDiligence. R2 has received andreviewed all ofthe Pubco materials anditems set outinfra inparagraph 4.32.
2.17 Certain Fees. No brokerage orfinder’s feesorcommissions areorwillbepayable byR2 to anybroker, financial advisor orconsultant, finder, placement agent, investment banker, bank orother Personwith respect tothe transactions contemplated by thisAgreement.
2.18 Registration Rights. No Person has anyright tocause R2 (or anysuccessor) to effect the registration under the SecuritiesAct of anysecuritiesofR2 (or anysuccessor).
2.19 TaxStatus. Except for matters that would not, individually or in theaggregate, have orreasonably beexpected toresult in aMaterial Adverse Effect,R2 has timely filed all necessary TaxReturns andhas paid oraccrued all Taxes shown as duethereon, andR2 has noKnowledge of a taxdeficiency which has been asserted orthreatened against R2.
2.20 No General Solicitation. Neither R2 nor any person acting onbehalfofR2 hasoffered or soldsecurities inconnection herewith by any form ofgeneral solicitationorgeneral advertising.
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2.21 ForeignCorrupt Practices.NeitherR2, nor to theKnowledge ofR2, any agent orother person acting onbehalf ofR2, has:(i) directly orindirectly, used any funds forunlawful contributions, gifts, entertainment orother unlawful expenses related toforeignordomestic politicalactivity,(ii) made anyunlawful payment toforeign ordomestic government officials oremployeesor to anyforeign ordomestic political partiesorcampaigns fromcorporate funds,(iii) failed todisclose fullyanycontribution made byR2 (ormade by any personacting onits behalf ofwhich R2 isaware)whichisin violationoflaw or(iv)violated in anymaterial respect any provision of theForeign Corrupt PracticesAct of1977, asamended (“FCPA”).
2.22 Obligations ofManagement. None ofR2’s officersoremployees is currently devoting substantially all ofhis orher business time tothe conduct ofbusinessofR2. No officerorkey employee iscurrently working or, toR2’s Knowledge, plans towork for acompetitive enterprise, whetherornot such officer orkey employee is orwillbecompensated by suchenterprise.
2.23 Minute Books. Theminutebooks ofR2 have, to theextent andfor theperiods requested by Pubco, beenmade available to Pubco andcontain acomplete summary ofallmeetings andwritten consents inlieu ofmeetingsofdirectors and stockholdersofR2 for the periods requested.
2.24 Employee Benefits. R2 has no(and for thetwoyears precedingthedate hereof has had no)plans which are subject toERISA.
2.25 MoneyLaundering Laws. TheoperationsofR2 are andhave beenconducted at alltimes incompliance with applicable financial record-keeping andreporting requirements ofthe money laundering statutesofall U.S. and non-U.S. jurisdictions, the rules andregulations thereunder and anyrelatedorsimilar rules, regulations orguidelines, issued, administeredorenforced by anygovernmental body(collectively, the“Money Laundering Laws”) and noaction, suitorproceeding by orbeforeany court orgovernmental agency, authority or body or anyarbitrator involving R2 with respect to theMoney Laundering Laws is pending or, to theknowledge ofR2, threatened.
2.26 Disclosure. The representations andwarranties andstatementsoffact made byR2 inthis Agreement, andall statements setforth in the certificates delivered byR2 atthe Closing pursuant tothis Agreement, are, asapplicable, accurate, correct andcomplete and do notcontain any untruestatementof amaterial factoromit tostate anymaterial fact necessary inorder tomake thestatements andinformation contained herein notfalseormisleading. Thecopiesof alldocuments furnished byR2 pursuant to theterms ofthis Agreement are complete andaccurate copies of theoriginal documents. The schedules,certificates, and any andall other statements andinformation, whether furnished inwritten orelectronicform, to Pubco orits representatives by or onbehalf ofR2 inconnection with this Agreement and the transactions contemplated hereby do not contain anymaterial misstatement offactoromit tostate amaterial fact or anyfact necessary tomake thestatements contained therein notmisleading.
ARTICLE3
REPRESENTATIONSAND WARRANTIES OFTHESHAREHOLDERS
Exceptas otherwise disclosed herein or inthe Shareholder disclosure schedule attached hereto, eachShareholder severally represents and warrants to Pubco as of thedatehereofand as ofthe Closing Date (unless otherwise indicated), asfollows:
3.1 Ownership of theR2 Securities. The Shareholder owns, beneficially and ofrecord, good andmarketable title to theR2 Securities set forth opposite such Shareholder’sname inSchedule1.3(a)(ii) hereto, free andclearofall security interests, liens, adverseclaims,encumbrances, equities, proxies, options
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orvoting agreements. TheShareholder represents that, except forsuch R2 Securities, hehasnorightorclaim whatsoever to anyequity interests ofR2andownsnooptions, warrantsorother instruments entitling him toexercise orpurchase orconvert into equity interests ofR2. At theClosing, theShareholder will convey to Pubcogood andmarketable title to theR2 Securities, free and clear of any and allsecurity interests, liens, adverse claims, encumbrances, equities, proxies, options, shareholders’ agreementsorrestrictions.
3.2 Authority Relative tothis Agreement. ThisAgreement hasbeen duly andvalidly executed anddelivered by theShareholder andconstitute avalid andbinding agreement ofsuch person, enforceable against such Shareholder in accordance with its terms, except as suchenforcement may belimited bybankruptcy, insolvencyorother similar laws affecting theenforcement of creditors’rights generallyor bygeneral principlesofequity.
3.3 AcquisitionofRestricted Securities for Investment. TheShareholder acknowledges that theIssuable Securities andUnderlying Shareswillnot beregistered pursuant tothe SecuritiesAct or anyapplicable state securities laws, that the Issuable Securities andUnderlying Shares will becharacterized as“restricted securities” under federal securities laws, and that under such laws andapplicable regulations theIssuable Securities andUnderlying Shares cannot be soldorotherwise disposed ofwithout registration underthe Securities Act or anexemption therefrom. In this regard, the Shareholder isfamiliar with Rule 144promulgated under theSecurities Act, ascurrently ineffect,andunderstands theresale limitations imposed thereby and by theSecurities Act.Further, the Shareholder acknowledges andagrees that:
(a) The Shareholder will beacquiring theIssuable Securities andUnderlying Shares forinvestment, for such Shareholder’s own account and not as anominee oragent, and notwith aview to theresaleordistribution of any partthereof, andthe Shareholder hasnopresent intentionof selling,granting anyparticipation in,orotherwise distributing thesame. Theforegoing shallnot bedeemed topreclude an intention totransfer Issuable SecuritiesorUnderlying Shares tofamily members for noconsideration. TheShareholder further represents that he doesnothaveany Contract, undertaking, agreementorarrangement with anyperson to sell, transfer orgrant participation to suchperson or toany third person, with respect to any of theIssuable Securities orUnderlying Shares.
(b) TheShareholder understands that theIssuable Securities andUnderlying Shares arenot registered under the SecuritiesAct on theground that the sale andthe issuanceofsecurities hereunder isexempt fromregistration under the Securities Act pursuant toSection 4(a)(2)thereof andorRegulation Dpromulgated under theSecurities Act, andthat Pubco’s reliance on suchexemption is predicated onthe Shareholder’s representations set forth herein.
3.4 Status ofShareholder. TheShareholder is an“Accredited Investor” as that term isdefined inRule 501ofRegulation Dpromulgated underthe Securities Act, anexcerpt ofwhich isincluded in the attachedAnnexI, and suchShareholder isnot acquiring theIssuable SecuritiesorUnderlying Shares as aresultof anyadvertisement, article, noticeorother communication regarding theIssuable Securities andUnderlying Shares published inany newspaper, magazineorsimilar media orbroadcast over televisionorradio orpresented atany seminar or anyother general solicitation orgeneral advertisement.
3.5 InvestmentRisk. TheShareholder is ableto bearthe economic risk ofacquiring theIssuable Securities and Underlying Shares pursuant to theterms ofthis Agreement, including acomplete loss of theShareholder’s investment inthe Issuable SecuritiesandUnderlying Shares.
3.6 Restrictive Legends. TheShareholder acknowledges that the certificate(s) representing theIssuable Securities and Underlying Shares shall eachconspicuously set forth onthe face or backthereof alegend insubstantially thefollowing form:
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“[NEITHER]THISSECURITY [NOR THESECURITIESINTO WHICHTHISSECURITYIS[EXERCISABLE] [CONVERTIBLE]]HAS[NOT] BEEN REGISTERED WITH THE SECURITIESAND EXCHANGECOMMISSION ORTHE SECURITIES COMMISSION OFANYSTATEINRELIANCE UPON AN EXEMPTION FROM REGISTRATIONUNDERTHE SECURITIES ACT OF 1933, ASAMENDED(THE “SECURITIES ACT”),AND, ACCORDINGLY, MAYNOTBE OFFERED OR SOLD EXCEPTPURSUANT TOAN EFFECTIVEREGISTRATIONSTATEMENTUNDERTHE SECURITIES ACT ORPURSUANT TOANAVAILABLEEXEMPTION FROM, ORIN ATRANSACTION NOTSUBJECT TO, THEREGISTRATIONREQUIREMENTS OF THE SECURITIES ACTAND INACCORDANCE WITH APPLICABLE STATESECURITIESLAWS AS EVIDENCED BY ALEGALOPINION OFCOUNSEL TOTHETRANSFEROR TOSUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TOTHE COMPANY.THISSECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE][CONVERSION]OFTHISSECURITY] MAYBEPLEDGED INCONNECTION WITH ABONAFIDE MARGINACCOUNTWITH AREGISTERED BROKER-DEALER OR OTHER LOAN WITH AFINANCIALINSTITUTION THATISAN “ACCREDITED INVESTOR” ASDEFINEDIN RULE 501(a)UNDERTHESECURITIES ACTOR OTHER LOAN SECURED BY SUCH SECURITIES.”
3.7 Disclosure. The representations andwarranties andstatementsoffact made by theShareholder inthis Agreement, and all statements setforth in thecertificates delivered bythe Shareholder atthe Closing pursuant tothis Agreement, are, asapplicable, accurate, correct andcomplete and donot contain anyuntrue statementofamaterial factoromit tostate anymaterial fact necessary inorder tomake thestatements andinformation contained herein notfalseormisleading. The copiesofall documents,if any, furnished by theShareholder pursuant to theterms ofthis Agreement are complete andaccurate copies of theoriginaldocuments. Theschedules, certificates, and any andall other statements andinformation, whether furnished inwritten orelectronic form inconnection with this Agreement andthe transactions contemplated hereby do notcontain anymaterial misstatement offactoromit tostate amaterial fact or anyfact necessary tomake thestatements contained therein notmisleading.
3.8 No Disqualification Events. TheShareholder is not subject to any of the “BadActor” disqualifications described inRule 506(d)(1)(i) to (viii) under the SecuritiesAct (a“Disqualification Event”), except for aDisqualification Event covered byRule 506(d)(2)or(d)(3). R2 hasexercised reasonable care todetermine whether aShareholder is subject to aDisqualification Event.
ARTICLE 4
REPRESENTATIONSAND WARRANTIES OFPUBCO
Except asotherwise disclosed hereinorin the Pubco disclosure schedule attached hereto,Pubco herebyrepresents andwarrants toR2 and theShareholder asofthe date hereof and as of theClosing Date (unless otherwise indicated), asfollows:
4.1 Organization andQualification. Pubco is anentity dulyincorporated orotherwise organized, validly existing and ingood standing under thelaws ofState ofNevada, with the requisite power andauthority toown and use its properties andassets and tocarry onits business ascurrently conducted. Pubco isnot inviolation ordefaultof any ofthe provisions ofits articlesofincorporation,bylaws orother organizational orcharter documents (collectively the “CharterDocuments”). Pubcois dulyqualified to conduct business and is ingood standing as aforeign corporation orother entity ineach jurisdiction in which the nature of thebusiness conducted orproperty owned by itmakes suchqualification necessary,
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except where the failure to be soqualified or ingood standing, as thecasemay be,could not haveorreasonably beexpected toresult in aMaterial Adverse Effect, andnoproceeding has been instituted inany suchjurisdiction revoking, limiting orcurtailing orseeking torevoke, limitorcurtail suchpower andauthority orqualification.
4.2 Authorization; Enforcement. Pubco has therequisite corporate power andauthority toenter into andto consummate this Agreement andthe transactions contemplated hereby andotherwise to carry outits obligations hereunder. Theexecution and delivery ofthis Agreement andeach of the otherTransaction Documents by Pubco andthe consummation byit of thetransactions contemplated herebyandthereby have been dulyauthorized byall necessary action on the part of Pubcoand nofurther action is required by Pubco, theBoard ofDirectors orPubco’s stockholders inconnection therewith other than inconnection with the Required Approvals, asdefined inSection 4.4. TheTransaction Documents have been (orupon delivery will have been) dulyexecuted by Pubco and,when delivered inaccordance with the termsthereof, will constitute the valid andbindingobligation ofPubco enforceable against Pubco inaccordance with their respective terms, except: (i) aslimited bygeneral equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium andother laws ofgeneral application affecting enforcement ofcreditors’ rights generally, (ii) as limited by lawsrelating to theavailability ofspecific performance, injunctive relief orother equitable remedies and (iii) insofar asindemnification and contribution provisions may belimited byapplicable law(the exceptions referenced inthe preceding clauses “(i)” through “(iii)”, the“Enforceability Exceptions”).
4.3 No Conflicts. Theexecution, delivery andperformance by Pubco ofthe Transaction Documents andthe consummation by Pubcoof thetransactions contemplated thereby donot and will not:
(i)conflict withorviolate any provision ofPubco’s certificate orarticlesofincorporation,bylaws orother organizational orcharter documents, (ii) conflict with, orconstitute adefault (oran event that with notice orlapse oftime orboth would become adefault) under, result inthe creationofany Lien upon any oftheproperties orassets ofPubco, orgiveto others anyrights oftermination, amendment, acceleration orcancellation (withor withoutnotice, lapse oftime or both)of, anyagreement, credit facility, debtorother instrument (evidencing aPubco debt orotherwise) orother understanding towhichPubco is aparty or bywhich anyproperty orassetofPubco is bound oraffected, or(iii) subject tothe Required Approvals, as defined bySection 4.4,conflict with orresult in aviolationof any law,rule, regulation, order, judgment, injunction, decree orother restriction of anycourt orgovernmental authority towhich Pubco issubject (including federal and state securities laws andregulations), or bywhich anypropertyorasset ofPubco is boundoraffected; except in the case ofeachofclauses (ii) and (iii), such ascould nothaveorreasonably beexpected to result in aMaterial Adverse Effect.
4.4 Filings, Consents andApprovals. Pubco is notrequired toobtain anyconsent, waiver, authorization ororder of,give anynotice to, ormake anyfiling orregistration with, anycourt orother federal, state, local orothergovernmental authority orother Person inconnection with the execution, delivery andperformanceby Pubco of thisAgreement and theother Transaction Documents, other than the filing ofCurrent Report(s) on Form 8-Kwith the SEC andsuch filings asare required to bemade under applicable federal andstatesecurities lawsrelating to theoffer andsaleofsecurities (collectively, the“Required Approvals”).
4.5 TheIssuable Securities and Underlying Shares. TheIssuable Shares are dulyauthorized and,when issued andacquired inaccordance with this Agreement,will beduly andvalidly issued, fully paid andnon-assessable, free and clearofall Liens imposed on or by Pubcoother thanrestrictions ontransfer provided forin this Agreement. TheIssuable Notes and Issuable Warrants areduly authorized and, when issued andacquired inaccordance with this Agreement, will constitute the valid andbinding obligationsofPubco enforceable against Pubco inaccordance with their respectiveterms subject, inthe case ofenforceability, tothe Enforceability Exceptions. TheUnderlying Shares areduly authorized and
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reserved and,whenissued and acquired inaccordance with the termsof theIssuable Securities,will beduly andvalidly issued, fully paid andnon-assessable, free and clear ofall Liens imposed on or by Pubcoother thanrestrictions ontransfer provided for inthis Agreement or theIssuable Securities.
4.6 | Capitalization. The capitalization ofPubco isas set forth onSchedule 4.6,whichSchedule |
4.6 shall also include thenumber ofsharesofPubcoCommon Stockowned beneficially, and ofrecord, byAffiliates ofPubco as ofthe date hereof, if any. Other than as set forth inSchedule 4.6,Pubco has noauthorizedorissued shares of anyclass ofcapital stock. No Person has anyright offirst refusal, preemptive right, right ofparticipation, or anysimilar right toparticipate in thetransactions contemplated bythis Agreement. Except as setforthonSchedule 4.6,there are nooutstanding options, warrants, scrip rights to subscribe to,calls orcommitments of anycharacter whatsoever relating to, orsecurities, rightsorobligations convertible into orexercisable orexchangeable for, orgiving anyPerson anyright tosubscribe for oracquire anyshares of PubcoCommonStock, orContracts, commitments, understandings orarrangements bywhich Pubco or anysubsidiary ofPubco is ormaybecome boundto issue additional shares ofPubcoCommon Stockor Common StockEquivalents. The issuance ofthe Issuable Securities will not obligate Pubco toissue shares ofPubcoCommon Stock orother securities to any Person andwillnot result in aright of anyholderofPubco securities toadjust theexercise, conversion, exchange orreset price under any of suchsecurities. Except asset forthonSchedule 4.6,alloftheoutstanding shares of capital stock of Pubcoare validly issued, fully paid andnonassessable, have beenissued incompliance with all federalandstate securities laws, andnone of suchoutstanding shareswasissued inviolation of anypreemptive rights orsimilar rights tosubscribe fororpurchase securities. No further approval orauthorizationof anystockholder orPubco’s boardofdirectors isrequired for the issuance ofthe Issuable SecuritiesorUnderlying Shares. There arenostockholders agreements, voting agreementsorother similar agreements with respect toPubco’s capital stock to whichPubco is a party or, tothe Knowledge of Pubco,betweenoramong any ofPubco’s stockholders.
4.7 | SEC Reports; Financial Statements; No Shell. |
(a) Except as setforth onSchedule 4.7 hereto, Pubco has filed all reports, schedules, forms, statements andother documents required to befiled by Pubcounder theSecurities Act and theExchange Act, including pursuant toSection 13(a) or15(d) thereof, since June 23, 2016(the foregoing materials, including theexhibits thereto and documents incorporated byreference therein, being collectively referred toherein as the“SEC Reports”, and the SEC Reports setforth onSchedule 4.7hereto being collectively referred to herein as the“Delinquent SEC Reports”). As oftheir respective dates, the SEC Reports complied in all material respects with therequirements ofthe Securities Actand theExchange Act, asapplicable, and none of theSEC Reports,when filed, contained any untrue statement of amaterial fact oromitted to state amaterial fact required to bestated therein ornecessary inorder to make thestatements therein, inthe light of thecircumstances under which theywere made, notmisleading. The financialstatements ofPubco included in theSEC Reports(“SEC Financial Statements”) comply in allmaterial respects with applicable accounting requirements and therules andregulations ofthe SEC with respect thereto as ineffect atthe time offiling. Suchfinancial statements have beenprepared inaccordance with GAAP,except as may beotherwise specified in suchfinancial statements orthe notes thereto andexcept that unaudited financial statements may notcontain all footnotes required byGAAP, andfairly present in allmaterial respects the financial position ofPubco as ofand forthe dates thereof and theresults ofoperations and cash flows for the periods then ended, subject, inthe case ofunaudited statements, tonormal, immaterial, year-end audit adjustments.
(b) Setforth onSchedule 4.7(b) is(i) anunaudited balance sheet as of June 30,2018(the“Pubco Accounting Date”) andrelated unaudited statements ofincome oroperations and cash flowsof Pubcofor the six months then ended and(ii) anunaudited balance sheet as ofDecember 31, 2017and related unaudited statements ofincome oroperations and cashflows ofPubco for theyear then ended(the
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items inclauses “(i)” and“(ii)”, collectively, the“Pubco Financial Statements”). ThePubco Financial Statements fairly present inall material respects the financial condition and operating results of Pubco as ofthe dates, and forthe periods, indicated therein, subject tonormalyear-end audit adjustments.
(c) Pubcois not, and atalltimes sinceat least July 1, 2016 Pubco hasnot been, a“shell” company within themeaning ofapplicable SEC rules. Pubcomakes norepresentations as toits “shell company” status prior tosuch date.
4.8 Material Changes. Since thedate of thelatest audited financial statements included within theSEC Reports, except asspecifically disclosed in asubsequent SEC Reportfiledprior tothe date hereof or in thePubco Disclosure Schedule:(i) there has been noevent, occurrence ordevelopment that has had orthat could reasonably beexpected toresult in aMaterial Adverse Effect, (ii)Pubcohas not incurred anyLiabilities (contingentorotherwise) other than(A)trade payables and accrued expenses incurred in theordinary course ofbusiness consistent with past practice and(B)liabilities notrequired to bereflected inPubco’s financial statements pursuant toGAAP ordisclosed infilings made with the SEC, (iii) Pubco has notaltered its method ofaccounting, (iv) Pubco has not declared ormade any dividend ordistributionof cashorother property toitsstockholdersorpurchased, redeemed ormade anyagreements topurchaseorredeem anyshares ofits capital stock, and(v) Pubco has notissued any equity securities to anyofficer, director orAffiliate. Pubco does nothave pending before theSEC any request for confidential treatmentofinformation. Except forthe issuanceofthe Issuable Securities contemplated bythis Agreement or asset forth onSchedule 4.8, noevent, liability ordevelopment hasoccurred orexists with respect to Pubcoor anysubsidiaryofPubcoortheir respective business, properties, operationsorfinancial condition, that would berequired to bedisclosed by Pubcounder applicable securities lawsatthetime this representation ismade ordeemedmade thathas not beenpublicly disclosed at least one(1) Trading Day prior to thedate that this representation ismade.
4.9 Litigation. There are noactions, suits, arbitrations, regulatory proceedings orother litigation, proceedings orgovernmental investigations pending or,to theKnowledge of Pubco,threatened against Pubco or any ofits officersordirectors intheir capacity assuch, or any ofits propertiesorbusinesses, and Pubcohas noKnowledge ofany facts orcircumstances whichmayreasonably belikely togive rise toany ofthe foregoing. Pubco is notsubject to anyorder, judgment, decree, injunction, stipulation orconsent order of orwith anycourt orother Governmental Authority. Pubco has not entered into anyagreement tosettle orcompromise anyproceeding pending orthreatened inwriting against it which has involved anyobligation for which Pubco has anycontinuing obligation. There are noclaims, actions, suits, proceedings, orinvestigations pending or, tothe Knowledge of Pubco,threatenedby oragainst Pubcowith respect tothis Agreement, or inconnection with the transactions contemplated hereby, andPubco has noreason to believe there is avalid basis for any suchclaim, action,suit, proceeding orinvestigation.
4.10 Labor Relations. No labor dispute exists or, to theKnowledge ofPubco, isimminent with respect to any of theemployees ofPubco which could reasonably beexpected toresult in a MaterialAdverse Effect.NoneofPubco’s employees is amember of a unionthat relates to suchemployee’s relationship with Pubco, and Pubcois not aparty to acollective bargaining agreement, and Pubcobelieves that its relationships with their employees are good. No executive officer, tothe Knowledge of Pubco,is, or is nowexpected tobe, inviolation of anymaterial term of anyemployment contract, confidentiality, disclosureorproprietary information agreement ornon-competition agreement,or anyother Contract oragreementor anyrestrictive covenant infavor ofany third party, and thecontinued employment of each suchexecutive officer does notsubject Pubco to anyliability with respect to any of theforegoing matters. Pubcois incompliance with all U.S. federal, state,local andforeign laws andregulations relating toemployment andemployment practices, terms andconditions ofemployment andwages andhours, except where thefailure tobe incompliance couldnot,individually or inthe aggregate, reasonably beexpected tohave aMaterial Adverse Effect.
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4.11 Compliance. Tothe Knowledge ofPubco, Pubco: (i) isnot indefault under or inviolation of (and noevent hasoccurred that hasnot been waived that, with noticeorlapse oftime orboth,wouldresult in adefault byPubco under), nor has Pubco received notice of aclaim that itis indefault under orthat it is inviolation of,anyindenture, loan orcredit agreement or any otheragreement orinstrument towhich itis apartyor by which it or anyofits properties is bound (whether ornot such defaultor violation hasbeen waived), (ii) is not inviolationof anyorderofany court,arbitrator orgovernmental body, or(iii) except for the failure tofile theDelinquent SEC Reports,isnot andhas not been inviolationof anystatute, rule orregulation of anygovernmental authority, including without limitation all foreign, federal, state andlocal lawsapplicable toits business and all suchlaws that affect theenvironment, except ineach case as could nothave orreasonably beexpected toresult in aMaterial Adverse Effect.
4.12 Regulatory Permits. Pubco possesses all certificates, authorizations and permits issued by theappropriate federal, state, localorforeign regulatoryauthorities necessary toconduct its business, except where the failure topossess such permits could notreasonably beexpected to result in aMaterial Adverse Effect (“Material Permits”), andPubco has not received any notice ofproceedings relating tothe revocationormodification of anyMaterial Permit.
4.13 Title toAssets. Pubco has good andmarketable title inall personal property owned byit that is material to the businessofPubco, free and clear ofallLiens, except for Liens disclosed onSchedule
4.13 orthat donot materially affect the value of suchpropertyand donot materially interfere with theuse made andproposed to bemade ofsuch property by Pubco andLiens for the payment ofTaxes, the payment ofwhich isneither delinquent nor subject topenalties. Pubco doesnot own any real property.Any realproperty andfacilities held underlease by Pubcoare held by Pubcounder valid, subsisting andenforceable leases with which Pubco is incompliance.
4.14 Patents andTrademarks. Pubco has, orhas rights touse, all patents, patent applications, trademarks, trademark applications, service marks, tradenames,trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights described onSchedule 4.14(collectively, the“Pubco Intellectual Property Rights”). Other than thePubco Intellectual Property Rights, there are nointellectual property orsimilar rights necessary ormaterial for use inconnection with Pubco’s business andwhich thefailure to sohave couldhave aMaterial Adverse Effect. Pubco has notreceived anotice (writtenorotherwise) that any ofthe Pubco Intellectual Property Rights used by Pubcoviolatesorinfringes upon therights of anyPerson. Tothe Knowledge of Pubco, all suchPubco Intellectual Property Rights are enforceable andthere isnoexisting infringement byanother Person of any of theIntellectual Property Rights. Pubco has taken reasonable security measures toprotect thesecrecy, confidentiality andvalue of alloftheir intellectual properties, except where failure to do socould not, individually or in theaggregate, reasonably beexpected tohave aMaterial Adverse Effect.
4.15 Transactions with Affiliates andEmployees. Exceptas set forth onSchedule 4.15,none ofthe officers ordirectors of Pubco and,to the Knowledge ofPubco, none ofthe employees ofPubco is presently aparty to anytransaction with Pubco (other than for services asemployees, officers anddirectors), including anyContract, agreement orother arrangement providing forthe furnishing ofservices toorby, providing for rentalofreal orpersonal property to orfrom, orotherwise requiring payments toorfrom anyofficer, directororsuch employee or, to the Knowledge ofPubco, anyentity inwhich anyofficer, director, or anysuch employee has asubstantial interest or is anofficer, director, trusteeorpartner, ineach case inexcess of$10,000 individually or$25,000 in theaggregate, other thanfor: (i) payment ofsalary orconsulting fees forservices rendered, (ii) reimbursement for expenses incurred onbehalfofPubco and(iii) other employee benefits.
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4.16 Sarbanes-Oxley; Internal Accounting Controls. Pubco is inmaterial compliance withallprovisionsofthe Sarbanes-Oxley Act of2002 which areapplicable toit as ofthe Closing Date. Pubcomaintains asystem ofinternal accounting controls sufficient toprovide reasonable assurance that: (i) transactions areexecuted inaccordance withmanagement’s generalorspecific authorizations, (ii) transactions are recorded as necessary topermit preparation offinancial statements inconformity withGAAP and tomaintain asset accountability, (iii) access to assets ispermitted only in accordancewith management’s general orspecific authorization, and(iv) therecorded accountability forassets iscompared with theexisting assets at reasonable intervals andappropriate action istaken with respect to anydifferences. Pubcohas established disclosure controls andprocedures (as defined inExchange Act Rules 13a-15(e) and15d-15(e)) for Pubco anddesigned such disclosure controls andprocedures toensurethatinformation required tobedisclosed by Pubco inthe reports it files orsubmitsunder theExchangeAct isrecorded, processed, summarized andreported, within thetime periods specified in theSEC’s rules andforms. Pubco’s certifying officers have evaluated the effectiveness ofPubco’s disclosure controls andprocedures asof the endof theperiod covered byPubco’s most recently filed periodic report under theExchange Act (such date, the“Evaluation Date”). Pubcopresented inits most recently filed periodic report under theExchange Act theconclusionsof thecertifying officer about theeffectiveness ofthe disclosure controls andprocedures based ontheir evaluations as of theEvaluation Date. Since the Evaluation Date, there have beennochanges inPubco’s internal control over financial reporting (as such term isdefined in theExchange Act) that hasmaterially affected,oris reasonably likely tomaterially affect, Pubco’s internal controloverfinancial reporting.
4.17 Certain Fees.Nobrokerage orfinder’s fees orcommissions areorwill bepayable by Pubco to anybroker, financial advisororconsultant, finder, placement agent, investment banker, bank orother Person with respect to thetransactions contemplated bythis Agreement.
4.18 Issuance ofIssuable Securities andUnderlying Shares.Assuming theaccuracy ofthe Shareholders’ representations andwarranties set forth inSection 3, noregistration underthe Securities Act isrequired for theoffer and issuanceof theIssuable Securities andUnderlying Shares by Pubcoas contemplated hereby. Theissuanceof theIssuable Securities andUnderlying Shares hereunder does not contravene therules and regulations of the applicable Trading Market.
4.19 InvestmentCompany. Pubco isnot, and isnotanAffiliate of, an“investment company” within the meaning of theInvestmentCompany Act of 1940,as amended.
4.20 Listing andMaintenance Requirements. PubcoCommon Stock iscurrently quoted on theOTC Pink Marketplace underthe symbol “OMSH”. Except as setforth onSchedule 4.20, Pubco ispresently incompliance with all such quoting, listing andmaintenance requirements of theOTC Pink Marketplace.
4.21 ApplicationofTakeover Protections. Pubco hastaken all necessary action, ifany, in order torender inapplicable anycontrol share acquisition, business combination, poisonpill(including anydistribution under arights agreement)orothersimilaranti-takeover provision under Pubco’s articles ofincorporation orthe lawsofNevada that isorcouldbecomeapplicable to aShareholder as aresult of aShareholder and Pubco fulfilling their obligations orexercising their rights under this Agreement, including without limitation as aresult ofPubco’s issuance ofthe Issuable Securities andUnderlying Shares and theShareholders’ ownershipoftheIssuable SecuritiesandUnderlying Shares.
4.22 No Integrated Offering. Tothe Knowledge of Pubco,and assuming theaccuracy ofthe Shareholders’ representations andwarranties set forth inSection 3,neither Pubco, nor any ofits Affiliates, nor anyPerson acting onits ortheir behalf has,directlyorindirectly, made any offers orsales of anysecurity orsolicited anyoffers to buy anysecurity, under circumstances that would cause this offering of
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theIssuable SecuritiesorUnderlying Sharestobeintegrated with priorofferings by Pubcofor purposes of
(i) theSecuritiesActwhich would require theregistration of any suchsecurities underthe Securities Act, or(ii) anyapplicable shareholder approval provisionsof anyTrading Market onwhich any of thesecurities ofPubco are listed or designated.
4.23 TaxStatus. Except for matters that would not, individually or in theaggregate, have orreasonably beexpected toresult in aMaterial Adverse Effect,Pubco hasfiled all necessary TaxReturns and haspaid oraccrued all Taxes shownas duethereon, and Pubco has noknowledge of a taxdeficiency which has been asserted orthreatened against Pubco.
4.24 No General Solicitation. Neither Pubco nor anyperson acting onbehalf ofPubco has offered orsold any ofthe Issuable Securities by anyform ofgeneral solicitation orgeneral advertising.
4.25 ForeignCorrupt Practices. Neither Pubco, nor to theKnowledge ofPubco, anyagentorother person acting onbehalfof Pubco,has: (i) directly orindirectly, usedany funds forunlawful contributions, gifts, entertainment orother unlawful expenses related toforeign ordomestic political activity, (ii) made anyunlawful payment toforeign or domesticgovernment officialsoremployees or to anyforeign ordomestic political partiesorcampaigns from corporate funds,(iii) failed to disclose fully anycontribution made byPubco (or made by anyperson acting onits behalf ofwhich Pubco isaware) which isin violationof lawor (iv)violated in anymaterial respect anyprovisionoftheFCPA.
4.26 Transfer Agent. Pubco’s transfer agent is Continental Stock Transfer &Trust Company. Suchtransfer agent iseligible totransfer securities via Depository Trust Company (“DTC”) andDeposit Withdrawal Agent Commission (“DWAC”).
4.27 No Disagreements with Accountants andLawyers. To theKnowledge ofPubco, there are nodisagreementsofany kind, including but notlimited to any disagreementsregarding fees owed forservices rendered, presently existing, orreasonably anticipated by Pubco toarise, between Pubco andtheaccountants and lawyers formerly orpresently employed by Pubcowhich couldaffect Pubco’s ability toperform any ofits obligations under this Agreement, and Pubco iscurrent with respect to anyfees owed to itsaccountants andlawyers.
4.28 Regulation MCompliance. Pubco hasnot, and tothe Knowledge ofPubco, no oneacting onbehalfofPubco has, (i) taken, directlyor indirectly, anyaction designed tocause or toresult inthe stabilizationormanipulation ofthe price ofany security of Pubco tofacilitate the sale orresaleof any of theIssuable Shares, (ii) sold, bid for,purchased, orpaid any compensationfor soliciting purchases of, any of thesecurities ofPubco, or(iii) paid oragreed to pay to any Person anycompensation forsoliciting another topurchase anyother securities ofPubco.
4.29 MoneyLaundering Laws. The operationsof Pubcoare andhave been conducted atall times incompliance with the MoneyLaundering Laws and noaction, suit orproceeding by or before anycourt orgovernmental agency, authority or body or anyarbitrator involving Pubcowith respect to the MoneyLaundering Laws ispending or, to thebest Knowledge ofPubco, threatened.
4.30 Minute Books. Theminutebooks of Pubcohave, to theextent and for theperiodsrequested byR2or theShareholders, beenmade available toR2 and theShareholders contain acomplete summary of allmeetingsand written consents inlieu ofmeetings ofdirectors and stockholders forthe periods requested.
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4.31 Employee Benefits. Pubco has not (nor for the two years preceding the datehereofhas) had any planswhich are subject toERISA.All existingEmployment Agreements of Pubcowillbeterminated at theClosing Date.
4.32 Business Records andDue Diligence. Prior tothe Closing, Pubcoshall have delivered toR2 all records anddocuments relating to Pubco,which Pubcopossesses, including, without limitation, books, records, government filings, TaxReturns, Charter Documents, corporate records, stock records, consent decrees, orders, and correspondence, director andstockholder minutes, resolutions and writtenconsents, stock ownership records, financial information andrecords, andother documents used in orassociated with Pubco whichhave beenrequested inwriting byR2.
4.33 Contracts. Except asset forth inSchedule 4.33, there are noContracts (i) that are material tothe business, properties, assets, condition (financial orotherwise), results ofoperationsorprospects of Pubcotaken as awholeor(ii) thatinvolve thepayment to or by Pubco ofmoney in excess of$10,000 for anyindividual Contractor $25,000 in theaggregate. Exceptas set forth inSchedule 4.33,Pubco isnot inviolation ofor indefault under (nor does there exist any condition which upon the passage oftime orthe givingofnotice would cause such aviolationof ordefault under) anyContract towhich it is apartyor bywhich itor any ofits properties orassets isbound, except for violationsordefaults that would not, individually or inthe aggregate, reasonably beexpected toresult in aMaterial Adverse Effect.
4.34 No Undisclosed Liabilities. Except asdisclosed inSchedule 4.34orthe latest balance sheet included inthe Pubco Financial Statements, Pubco has noliabilities whatsoever, either direct orindirect, matured orunmatured, accrued, absolute, contingentorotherwise.Pubcorepresents that at the dateofClosing, Pubcoshall have noliabilities orobligations whatsoever, eitherdirectorindirect, matured orun-matured, accrued, absolute, contingentorotherwise.
4.35 No SEC orFINRAInquiries. To theKnowledge of Pubco,neitherPubco nor any ofits present officers ordirectorsis, or hasever been, the subjectof anyformal orinformalinquiry orinvestigation by the SECor FINRA.
4.36 Disclosure. Therepresentations andwarranties andstatementsoffact made by Pubcoin this Agreement, andall statements setforth inthe certificates delivered by Pubco atthe Closing pursuant tothis Agreement, are, asapplicable, accurate, correct and complete and do notcontain any untruestatement of amaterial fact oromit tostate anymaterial fact necessary inorder tomake thestatements and information contained herein not false ormisleading. Thecopies ofall documents furnished by Pubcopursuant to theterms ofthis Agreement arecomplete and accurate copies ofthe original documents. The schedules, certificates, and any andallother statements andinformation, whether furnished inwritten orelectronic form, toR2 orits representatives by or onbehalfof Pubcoin connection withthis Agreement andthe transactions contemplated hereby donot contain anymaterial misstatementoffactoromit tostate amaterial fact or anyfact necessary tomake thestatements contained therein notmisleading.
ARTICLE5
INDEMNIFICATION;SURVIVAL OFREPRESENTATIONS
5.1 Indemnification.
(a) Subject tothe provisions ofthisArticle 5,and irrespective of anyduediligenceinvestigation conducted byR2 or theShareholderswithregard to thetransactions contemplated hereby, Pubcoagrees toindemnify fully inrespect of, hold harmless anddefend R2 andthe Shareholders, andeach of theofficers, agents and directorsofR2 and/or theShareholders against anydamages, liabilities, costs, claims, proceedings, investigations, penalties, judgments, deficiencies, including taxes, expenses
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(including, but notlimited to, any and allinterest, penalties and expenseswhatsoeverreasonably incurred ininvestigating, preparing ordefending against any litigation, commenced or threatened, or anyclaim whatsoever) and losses (each, a“Claim” andcollectively “Claims”) towhich itortheymaybecome subject arising out oforbased on any breach oforinaccuracy in any of therepresentations andwarrantiesorcovenants orconditions made by Pubcoin this Agreement.
(b) Subject tothe provisionsofthisArticle 5,R2 and eachShareholder agrees toindemnify fully in respect of, hold harmless and defend Pubco andeachofits officers, agents anddirectors against any Claims towhich theymaybecome subject arising out of orbased on anybreach oforinaccuracy in anyofthe representations andwarrantiesorcovenantsorconditions made byR2 and/or anyShareholder inthis Agreement;providedthat R2 shall have noresponsibility hereunderexcept for representations, warranties, covenants orconditions made by it and noShareholderhave anyresponsibility hereunder except forrepresentations, warranties, covenants orconditions made by it;and further provided that theliability of anyShareholder shall not exceed thevalue onthe ClosingDate of theconsideration received by ithereunder.
(c) Notwithstanding anything tothe contrary contained herein, except forclaims involving fraudorintentional misrepresentation orclaims asserted bythird parties, neither R2 northeShareholders, on the onehand and inthe aggregate, nor Pubco, onthe other hand, shallhaveliability to theother pursuant tothis Section 5.1 inexcessof$50,000.
5.2 Survival ofRepresentations and Warranties. Notwithstanding anyprovision in this Agreement tothe contrary, therepresentations andwarrantiesgiven ormade by Pubco,R2 and theShareholders under thisAgreementshallsurvive the datehereof for aperiod offorty-eight (48)months from andafter the Closing Date (the last day ofsuch period isherein referred to as the“Expiration Date”), except that anywrittenclaim forbreach thereof made and deliveredprior tothe Expiration Date tothe party against whom suchindemnification issought shallsurvivethereafter and, asto any suchclaim, suchapplicable expiration will not effect therights toindemnification ofthe party making suchclaim;provided,however, that anyrepresentations andwarranties that were fraudulently made shallnot expire onthe Expiration Date andshall survive indefinitely andclaims with respect tofraud by Pubco,R2 or theShareholders must bemade at anytime, as long assuch claim ismade within areasonable periodof timeafter discovery by theclaiming party.
5.3 MethodofAsserting Claims, Etc. Thepartyclaiming indemnification ishereinafter referred to asthe “Indemnified Party” andthe party against whom suchclaims are asserted hereunder ishereinafter referred to asthe “Indemnifying Party.”All Claims forindemnification by anyIndemnified Partyunder thisArticle 5shall beasserted as follows:
(a) In theevent that any Claim ordemand forwhich anIndemnifying Partywouldbeliable to anIndemnified Party hereunder isasserted against orsought to becollected from suchIndemnified Party by athirdparty, saidIndemnified Party shall, within ten (10) business days from thedate upon which theIndemnified Party has Knowledge of suchClaim, notifythe Indemnifying Party ofsuch claim ordemand, specifying thenatureof andspecific basis forsuch claim ordemand and theamount orthe estimated amount thereof to theextent then feasible (which estimate shall notbeconclusive of thefinal amount of suchClaim ordemand) (the“Claim Notice”). TheIndemnified Party’s failure to sonotify theIndemnifying Party inaccordance with the provisions ofthis Agreement shall not relieve theIndemnifying Party ofliability hereunder unless such failure materially prejudices the Indemnifying Party’s ability todefend against theclaimordemand. TheIndemnifying Party shallhave 30days from thegiving of the ClaimNotice (the “Notice Period”) tonotify theIndemnifiedParty:(i) whether ornot theIndemnifying Partydisputes the liability of theIndemnifying Party to theIndemnified Party hereunder with respect to suchClaim ordemand, and(ii) whether ornot theIndemnifying Party desires,at the solecost and expense of theIndemnifying Party, todefend theIndemnified Partyagainst suchClaims or demand;provided,
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however, that anyIndemnified Partyishereby authorized prior to andduringtheNotice Period tofile anymotion, answerorother pleading which heshalldeem necessary orappropriate toprotect hisinterestsor thoseofthe Indemnifying Party and notprejudicial tothe Indemnifying Party.In theevent that theIndemnifying Partynotifies theIndemnified Partywithin theNotice Period that he, sheorit does not dispute liability forindemnification underthisArticle 5 andthat suchperson desires to defend theIndemnified Partyagainst suchclaim ordemand andexcept ashereinafter provided, the IndemnifyingPartyshallhave theright todefend by allappropriate proceedings, which proceedings shall bepromptly settledorprosecuted byhim to afinal conclusion. TheIndemnified Party shallhavethe right toemploy separate counsel in any suchaction andparticipate in the defense thereof, but thefees andexpensesofsuch counsel shallbeat theexpense ofsuch Indemnified Party except to the extent that theemployment thereof hasbeenspecifically authorized by theIndemnifying Party inwriting,theIndemnifying Party hasfailed after areasonable period oftime to assume suchdefense and toemploy counselor insuchaction there is, in thereasonable opinion ofsuch separate counsel, amaterial conflicton anymaterial issue between the position of theIndemnifying Party and thepositionofsuch Indemnified Party (a“Material Conflict”).Ifrequested by theIndemnifying Party andthere is noMaterial Conflict, the Indemnified Party agrees tocooperate with theIndemnifying Party andhis, her orits counsel incontesting any Claim ordemand which the Indemnifying Partyelects to contest or,if appropriate andrelated to theClaim inquestion, inmaking anyCounterclaim against the person asserting thethird party Claim ordemand, or any cross-complaint against any person.NoClaim forwhich indemnity issought hereunder and forwhich the Indemnifying Party hasacknowledged liability forindemnification under thisArticle 5may besettledwithout theconsentof theIndemnifying Party, which consent shall not beunreasonably withheld ordelayed.
(b) In theevent anyIndemnified Partyshouldhave aClaim against anyIndemnifying Partyhereunder which does notinvolvea Claim ordemand beingasserted against orsought to becollected from himby athirdparty,the Indemnified Party shall give aClaim Notice with respect tosuch Claim tothe Indemnifying Party.If, afterreceipt of aClaimNotice, theIndemnifying Party does notnotify theIndemnified Party within the Notice Period that he, she or itdisputes suchClaim, then theIndemnifying Partyshallbedeemed tohaveadmitted liability for such Claim inthe amount set forth inthe Claim Notice.
(c) | TheIndemnifying Partyshall begiven theopportunity todefend therespective Claim. |
ARTICLE6
COVENANTS OFTHEPARTIES
6.1 Corporate Examinations andInvestigations. Priorto theClosing, each partyshall beentitled, through itsemployees andrepresentatives, tomake suchinvestigations andexaminations of thebooks, records andfinancial condition ofR2 andPubco as eachparty may request.In order that eachparty may have thefull opportunity to do so, theShareholder shall furnish eachparty andits representatives during suchperiod with all suchinformation concerning theaffairsofR2 or Pubco aseach party orits representativesmayreasonably requestand cause R2 or Pubcoand their respective officers, employees, consultants, agents, accountants andattorneys tocooperate fully with eachparty’s representatives inconnection with such review andexamination and tomake fulldisclosure ofall information anddocuments requested byeach party and/or its representatives. Any suchinvestigations and examinations shall beconducted atreasonable times andunder reasonable circumstances, it being agreed that anyexaminationoforiginal documents will be at eachparty’s premises,withcopies thereof to beprovided to eachparty and/or itsrepresentatives uponrequest.
6.2 Cooperation; Consents. Prior to theClosing, eachparty shall cooperate with theother parties to theend that theparties shall(i) in atimely mannermake allnecessary filings with, andconduct negotiations with, all authorities andother persons theconsentorapproval ofwhich, orthe licenseorpermit fromwhich isrequired for theconsummation ofthe Acquisition and (ii) provide to eachother party such
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information as the other party may reasonably request inorder toenable it toprepare suchfilings andto conduct such negotiations.
6.3 ConductofBusiness. Subject totheprovisionshereof, from thedate hereof through the Closing, eachparty hereto shall (i) conduct its business inthe ordinary course andin such amanner sothat therepresentations and warranties contained herein shall continue to betrue and correct inall material respects as of theClosing as ifmade at and asofthe Closing and(ii) not enter intoany material transactions orincur any material liability notrequired orspecifically contemplated hereby, without first obtainingthewritten consent ofR2 andthe Shareholdersonthe one handand Pubco on theother hand. Without the prior written consent ofR2, theShareholders orPubco, except as required orspecifically contemplated hereby, eachparty shall notundertake orfail to undertake anyaction ifsuch actionorfailure would render any of saidwarranties andrepresentations untrue in anymaterial respect asoftheClosing.
6.4 Litigation. From thedate hereof through theClosing, each party hereto shall promptly notify therepresentativeof theother parties of anylawsuits,claims,proceedings orinvestigationswhichafter the date hereof arethreatened orcommenced against suchpartyor any of itsaffiliates or anyofficer, director, employee, consultant, agent orshareholder thereof, intheir capacities as such,which, if decidedadversely, couldreasonably beexpected tohave aMaterial Adverse Effect.
6.5 Noticeof Default. From thedate hereofthrough theClosing, each party hereto shallgive to therepresentative of theother parties prompt written notice oftheoccurrence or existenceof anyevent, condition orcircumstance occurring which would constitute aviolation orbreach ofthis Agreement by suchpartyorwhich would render inaccurate in anymaterial respect anyofsuch party’s representationsorwarranties herein.
6.6 | Officers andDirectors. |
(a) Effective onthe Closing, Pubcoshall cause (i) the Board ofDirectorsofPubco andthe officersof Pubco to bethe individuals identified onSchedule 6.6(a) hereto, each ofwhom is anexisting officer and/or director ofPubco prior to theClosing and (ii) theindividualnamed as aBoard Observer onSchedule 6.6(a) to beappointed as anobserver to thePubco BoardofDirectors. Until such time asPubco complies with the provisions ofSection 6.10 or, iflater, the PutExpiration Date, Pubcoshall ensure that theofficers anddirectors of Pubcoremain as set forth onSchedule 6.6, andthat the individual named as a BoardObserver onSchedule 6.6(a) (or such other individual asmay bedesignated bythe Majority Shareholder (defined inSection 6.14(c)), remains as an observer to thePubco BoardofDirectors, entitled toall of therights ofmembersof theBoard ofDirectorsincluding notice andattendance atboard meetings, copiesofall minutes, actions bywritten consent and board materials, compensation, ifany, other than voting rights.
(b) Effective onthe Closing, R2 shall cause the Board ofDirectorsofR2 and theofficersofR2 to be theindividuals identified onSchedule 6.6(b). Until the PutExpiration Date, Pubco shallmakenochange to theBoard ofDirectors of R2 except with the approval of theMajority Shareholder.
(c) As soon aspracticable after Closing, Pubcoshall obtain director andofficer insurancenot lessthan $1,000,000 in amount, onterms andconditions reasonably satisfactory to theMajority Shareholder.
6.7 | Confidentiality; Access toInformation. |
(a) Confidentiality. Anyconfidentiality agreement orletter ofintent previously executed bythe parties shall besuperseded inits entirety by theprovisionsofthis Agreement. Eachparty
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agrees tomaintain inconfidence anynon-public information received fromtheother party, and touse such non-public information only forpurposesofconsummating thetransactions contemplated bythis Agreement. Suchconfidentiality obligationswillnot applyto(i) information which was known to theone party ortheir respective agents prior toreceipt from theother party; (ii) information which is orbecomes generally known; (iii) information acquired by a party ortheir respective agents from a thirdparty who was not bound to anobligation ofconfidentiality; and(iv)disclosure required by law.In theevent this Agreement isterminated as provided inArticle 8hereof, eachparty will returnorcause tobereturned to theother all documents and othermaterial obtained from the other inconnection with the Transaction contemplated hereby.
(b) | Access toInformation. |
(i) R2willafford Pubco andits financial advisors, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, to theproperties, books, records andpersonnel ofR2 during theperiodpriorto the Closing toobtainallinformation concerning thebusiness, including thestatus ofproduct development efforts, properties, results ofoperations andpersonnelofR2, as Pubcomayreasonably request. No information orKnowledge obtained by Pubco in anyinvestigation pursuant to thisSection 6.7(b) will affect orbedeemed tomodify anyrepresentationorwarranty contained herein orthe conditions to theobligationsof theparties toconsummate theTransaction.
(ii) Pubco will afford R2 and itsfinancial advisors, underwriters, accountants, counsel and other representatives reasonable access during normal business hours, uponreasonable notice, tothe properties, books, records and personnelofPubco during theperiod prior to theClosing toobtainallinformation concerning thebusiness, including thestatus ofproduct development efforts, properties, results ofoperations and personnel of Pubco,as R2 may reasonablyrequest. No information orknowledge obtained byR2 in anyinvestigation pursuant tothisSection 6.7(b)willaffector bedeemed tomodify anyrepresentationorwarranty contained hereinorthe conditions to theobligationsofthe parties toconsummate theTransaction.
6.8 Public Disclosure. Except to the extent previously disclosed or to theextent the parties believe that they arerequired byapplicable laworregulation tomakedisclosure, prior toClosing, noparty shall issue anystatementorcommunication tothe public regardingthe transaction contemplated herein without the consent of theother party, which consent shall not beunreasonably withheld. Tothe extent a partyhereto believes it is required by law orregulation tomakedisclosure regarding theTransaction, it shall, ifpossible, immediately notify the other party prior to suchdisclosure. Notwithstanding theforegoing, theparties hereto agree that Pubcowill prepare and file aCurrent Report orReports on Form8-K pursuant tothe Exchange Act toreport theexecution and consummation ofthis Agreement, which shallbereviewed andsubject toreasonable input byR2 orits counsel prior to thefiling thereof.
6.9 R2 Audits. As soon as reasonably practicable after theClosing, R2 shall deliver to Pubco complete andaccurate audited financial statements prepared in accordance withGAAP foreach annual period since R2’s inception andany reviewed stubperiods as arerequired by theSEC toenable Pubco to beable to comply with its reporting obligations under allapplicable laws, rules and regulations including butnot limited to theExchange Act andspecifically Form 8-K.
6.10 PubcoSEC Reports. Assoon aspracticable after theClosing, Pubcoshallhavefiled with theSEC all DelinquentSECReports andany reportsorstatements required to befiled after thedateofthis Agreement including with respect tothis Agreement and thetransactions contemplated hereby.As oftheir respective dates, the Delinquent SEC Reports and anyother such reportsorstatements shall comply inall material respects with therequirements of theSecurities Act and theExchange Act, asapplicable, and none
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ofthe Delinquent SEC Reports or suchother reports orstatements, when filed, shall contain anyuntrue statement of amaterial fact oromit tostate amaterial fact required to bestated therein ornecessary inorder to make thestatements therein, in the light of thecircumstances under which theywere made, not misleading. The financial statements of Pubcoincluded in theDelinquent SEC Reports and anysuch other reports orstatements shall comply in allmaterial respects with applicable accounting requirements and therules andregulations ofthe SEC with respect thereto as ineffect at thetime offiling. Such financialstatements shall have been prepared inaccordance with GAAP,except that unaudited financial statements may notcontain all footnotes required by GAAP, and shallfairly present inall material respects the financial position ofPubco as of and for the datesthereof and theresults ofoperations and cash flows for theperiods thenended, subject, in thecase ofunaudited statements, tonormal, immaterial, year-end audit adjustments.
6.11 Post-Closing RestrictionsonControlof R2. From andafter theClosing andprior tothe PutExpiration Date, Pubco shall notsell, assign, encumber, pledge orotherwise transfer anyR2 Shares orinterest thereinorvote the R2 Sharesorotherwise take anystockholder action with respect toR2, except asmaybeapproved by theMajority Shareholder.
6.12 Note Amendment/Transfer Agreement. Priorto theClosing Date, Pubco shall have caused theholders ofits convertible promissory notes in theaggregate principal amount of $1,480,965to amend theterms ofthe convertible promissory notes pursuant to aNote Amendment/TransferAgreementannexed hereto asExhibit E(the “Note Amendment/Transfer Agreement”).In theevent thePut Right described inSection 6.14 isexercised, theNoteAmendment/Transfer Agreement shall berescinded and theparties thereto shall take any and allaction necessary toeffect thesame. Inaddition to theprincipal amount outstanding under the promissory notessubject tothe Note Amendment/Transfer Agreement, at theClosing, Pubcoshall have, in theaggregate, notmore than $821,500 inprincipal amount outstanding onall other then outstanding promissory notes.
6.13 Separate Divisions.Untilthe PutExpiration Date, thebusiness ofR2 and the business of Pubco constituted prior to the Closing willbeoperated asseparate divisionsorentities. Their assetswill not beco-mingled, norwill oneassume responsibility forthe liabilities of theother.
6.14 | Shareholder Put Right. |
(a) As usedherein, “Triggering Event” means the occurrence ofany of thefollowing:
(i)prior to June 30, 2019 (the“Trigger Date”), Pubco shall have failed tobecome current initsSECreporting requirements and tootherwise comply with its obligations under Section 6.10above, (ii) prior to theTrigger Date, Pubco shallhavefailed to become incompliance with all quoting, listing andmaintenance requirementsof theOTCPinkMarketplace forSEC current reporting issuers, (iii)prior to theTrigger Date, Pubco’sCommon Stock shall nothave beenmade DWAC eligible, (iv)prior to theTrigger Date, Pubco shall have failed toreflect inits SEC reports thewrite-off as of adateprior to theClosing of atleast
$1,000,000 inold payables andaccrued employee compensation that are presently reflected inthe Pubco Financial Statements asof thePubco Accounting Date,(v) Pubco’s common stockshallhavebeen deregisteredorsuspended from trading, (vi)Pubco shallhavebeen the subject of aninvestigation orother proceeding by aGovernmental Authority, or(vii) Pubco shall have breached in anymaterial respect arepresentation, warranty, covenant, agreement orcondition contained inthis Agreementor inany ofthe Transaction Documentsor Pubcoshall have incurred liabilities post-Closing inexcessof$25,000 individually or$150,000 in theaggregate, except as shall have been approved bythe Majority Shareholder.
(b) Upon theoccurrence of aTriggering Event, theShareholders shall have aright to put theIssuable Shares, Issuable Notes andIssuable Warrants to Pubco inexchange for100%of thethen outstanding sharesofcapital stock ofR2, as provided in this Section 6.14 (the “Put Right”).
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(c) The PutRight shall beexercisable bywritten notice toPubco andR2 and theExchange Agent (the “Exercise Notice”) specifying inreasonable detail thenature of theTriggering Event relied upon and signed byholdersofatleast amajority ofthe then outstanding shares ofSeries FPreferred Stock(the “Majority Shareholder”). The Exercise Noticemay begiven atany time following the occurrenceof aTriggering Event andprior toAugust 31, 2019(the “Put Expiration Date”). TheMajority Shareholder shall have the soleright toexercise andenforce thePut Right, andany suchexercise shall bebinding uponall Shareholders.
(d) Upon receiptofthe Put Notice, theExchange Agent shall (i) return eachcertificate forR2 Shares, R2 Notes and R2 Warrants, togetherwithaccompanyingstockpowers orother instruments oflike tenor, delivered to itpursuant toSection 1.3(a)(ii), to therespective holder asset forthonSchedule 1.3(a)(ii) andshall otherwise take all steps necessary totransfer the R2 Shares,R2 Notes and R2 Warrants to theholders or asotherwise directed by theholders (it beingunderstood that theR2Notes andR2 Warrants soreturned shall bepromptly exchanged by theholders for newnotes andwarrants ofR2 pursuant to separatewrittenagreement among R2 andsuch holders) and(ii)deliver toPubco the Issuable Securities delivered to theExchange Agent pursuant to Section 1.3(a)(i), together with accompanying stockpowers orinstruments ofliketenor, endorsed for transfer to Pubco and shall otherwisetake allsteps necessary to transfer the Issuable Shares to Pubco. Eachofthe Shareholders andPubco hereby grant tothe Exchange Agent anirrevocable power ofattorney coupled with aninterest totake any andallactions required toeffect suchtransfers.
(e) Notwithstanding anything inthis Agreement tothe contrary, all covenants and agreements of Pubco inSection 6that expire bytheirterms on the ClosingDate, shall instead expire onthe PutExpiration Date.
6.15 Piggy-Back Registrations.If at anytime after thePut Expiration Date there is not aneffective registration statement covering all of theIssuable Securities and Underlying Shares andPubco determines to prepare andfile with the SEC aregistration statement relating to anoffering foritsownaccount or theaccountof othersunder theSecuritiesAct of any of itsequity securities, butexcluding Forms S-4 orS-8 andsimilar forms which donot permit suchregistration, then Pubcoshall sendto each holder of any of theIssuable SecuritiesorUnderlying Shares written noticeofsuch determination and, ifwithinfifteen calendar days after receipt of suchnotice, any suchholder shall sorequest inwriting, Pubcoshall include insuch registration statement allor anypartoftheIssuable Securities andUnderlying Shares suchholder requests to beregistered andwhich inclusion of suchIssuable Securities and Underlying Shareswill besubject tocustomary underwriter cutbacks applicable toall holders ofregistration rights andminimum cutbacks inaccordancewithguidance provided by theSEC (including, but notlimited to,Rule 415). TheobligationsofPubco under this Sectionmay bewaived by anyholder of any ofthe securities entitled to registration rights underthisSection 6.15. Theholders whose Issuable Securities andUnderlying Shares areincludedorrequired to beincluded insuch registration statement are granted thesamerights, benefits, liquidatedorother damages andindemnification granted toother holdersofsecurities included insuch registration statement.In noevent shall the liabilityof anyholderofSecuritiesorpermitted successor inconnection with anyIssuable Securities and Underlying Securities included in any suchregistration statementbegreater inamount thanthe dollar amount ofthe net proceedsactually received bysuch purchaser uponthe sale ofthe Issuable Securities andUnderlying Shares soldpursuant to suchregistration or suchlesser amount inproportion toall other holders ofsecurities included insuch registration statement. All expenses incurred by Pubco incomplying with Section 6.15,including, without limitation, all registration andfiling fees, printing expenses (if required), fees anddisbursements ofcounsel and independent public accountants forPubco, fees andexpenses (including reasonable counsel fees) incurred inconnection with complying with state securities or“bluesky” laws,fees of theFINRA,transfer taxes, andfees oftransfer agents andregistrars, are called “Registration Expenses.”Allunderwriting discounts andselling commissions applicable tothe sale ofregistrable securities are called "Selling Expenses." The
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Company will pay allRegistration Expenses inconnection with the registration statement under Section
6.15.Selling Expenses inconnection with each registration statement under Section6.15shallbeborne by theholder andwill beapportioned among suchholders inproportion to thenumber ofshares included therein for aholder relative toall thesecurities included therein for all selling holders, or asall holdersmayagree.Itshall be acondition precedent to theobligationsofPubco tocomplete the registration pursuant tothis Agreement with respect to theIssuable Securities andUnderlying Shares of aparticular purchaser that suchpurchaser shall (i) furnish to Pubcoin writing such information and representation letters, including acompleted form of asecurityholder questionnaire, with respect toitself and the proposed distribution byit as Pubcomayreasonably request toassure compliance with federal andapplicable state securities laws, andshall enter into anindemnification agreement with Pubco oncustomary terms.No holder ofIssuable Securities orUnderlying Sharesshallhaveregistration rights under this Section with respect to anyIssuable Securities orUnderlying Shares from andafter thedate thesame are(i) sold tothe public pursuant to aregistration statementorRule 144or(ii) eligible to besold publicly without restriction under Rule144 and noSecuritiesActrestrictive legend orstop transfer instructions apply tosuch securities.
6.16 | Concerning theExchange Agent. |
(a) TheExchange Agent may act inreliance upon anysignature believedby it to begenuine, andmay assume thatany person who purports tohave been authorized onbehalf of a party togiveanywritten instructions, notice orreceipt, or make any statements inconnection with the provisionshereof hasbeendulyauthorized to do so. TheExchange Agentshall have noduty to make inquiryas to thegenuineness, accuracy or validityof anystatements orinstructions or anysignatures onstatements orinstructions.
(b) TheExchange Agent mayact relative hereto inreliance uponadvice of counsel inreference toany matterconnected herewith. TheExchange Agent shall not beliable for any mistake offact orerror ofjudgment orlaw, or for anyacts or omissions ofany kind, unlesscausedby its willfulmisconduct orgross negligence.
(c) Eachof the otherparties hereto, jointlyand severally,agree toindemnify, release, and hold theExchange Agent harmlessfrom and againstanyand all claims, losses, costs, liabilities, damages, suits,demands, judgments orexpenses, including, but not limited to,attorney's fees, costs and disbursements, (collectively “Claims”)claimed against orincurredbyExchange Agentarising out of orrelated, directly orindirectly, to thisAgreement and theExchange Agent’s performance hereunderor inconnection herewith,except to the extentsuch Claimsarise from Exchange Agent’s willfulmisconduct orgross negligence as adjudicated by acourt of competent jurisdiction.
(d) Inthe event of anydisagreement between or among the otherparties hereto, orbetweenany of themandany otherperson, resulting inadverseclaims or demands being made toExchange Agent inconnection with the instruments or propertyheldby theExchange Agenthereunder (the “DepositedProperty”), or in the event that theExchange Agent, ingood faith,be in doubtas to what action it should take hereunder, the Exchange Agentmay, at its option,refuse to comply withany claims ordemands on it, orrefuse to takeany other actionhereunder, so longas such disagreement continues orsuch doubtexists, and in anysuch event, theExchange Agent shall notbecome liable in anyway or toany person for itsfailureorrefusal toact, and theExchange Agent shallbeentitled tocontinue so torefrain from acting until (i) therights ofall parties shallhave been fullyand finallyadjudicatedby acourt ofcompetent jurisdiction, or (ii)all differences
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shall havebeenadjusted and all doubtresolvedbyagreement amongall of theinterested persons,and theExchange Agentshall have beennotified thereof inwriting signedbyall such persons. TheExchange Agentshall have the option,after thirty (30)days’ notice to theShareholders, R2and Pubco of itsintentionto do so, to filean action ininterpleader requiring theparties toanswer and litigateany claimsand rights amongthemselves. Therights of theExchange Agent under thissection are cumulativeofall otherrights which it may haveby laworotherwise.
(e) Inthe event that theExchange Agent shall beuncertain as to itsduties orrights hereunder, theExchange Agent shall beentitled to (i)refrain from takinganyaction other than tokeep safely theDeposited Property until itshall bedirected otherwiseby acourt ofcompetent jurisdiction, or (ii)deliver theDepositedProperty to acourt of competentjurisdiction.
(f) TheExchange Agent shallhave no duty, responsibility orobligation tointerpret orenforcetheterms ofanyagreement other than Exchange Agent's obligations hereunder.
(g) TheExchange Agent mayresign atany timebygiving thirty (30) days' priorwritten notice ofsuch resignation to the otherparties hereto. Upon providing suchnotice, theExchange Agent shallhavenofurther obligationhereunder except to hold theDeposited Property that ithas received as of thedate onwhich itprovided thenotice ofresignation. In suchevent, theExchange Agent shall nottakeanyaction until the MajorityShareholder, R2and Pubco jointlydesignate an attorneyor other personas successor escrow agent. Uponreceipt of suchwritten instructions signedby the MajorityShareholder, R2and Pubco, theExchange Agentshall promptly deliver theDeposited Property, to suchsuccessor escrow agentand shall thereafter have nofurther obligations hereunder. Ifsuch instructionsare notreceived within thirty (30)days following theeffective date ofsuch resignation, then theExchange Agent maydeposit theDeposited Property andany otheramounts heldby it pursuant to thisAgreement with aclerk of a courtof competentjurisdiction pending theappointment of asuccessor escrowagent. In either case provided for in thissection,theExchange Agentshall berelieved ofall further obligations and released from all liabilitythereafter arising with respectto theDeposited Property.
(h) Notwithstanding anything to the contrary containedherein, theExchange Agent shall beentitled tocompensation from the other partieshereto for itsservices hereunder at the rate of $475 per hour,and shall beentitled to retain counsel inconnection withany matter hereunder, thecost ofwhich shall beborneby theother partieshereto.
ARTICLE7
CONDITIONSTOCLOSING
7.1 Conditions toObligations ofR2 andthe Shareholders. Theobligations ofR2 and theShareholders under this Agreement shall besubject to eachof the following conditions:
(a) Closing Deliveries. At theClosing, Pubco shall have deliveredorcaused to bedelivered toR2 and the Shareholders (or, ifapplicable, theExchange Agent) thefollowing:
(i) this Agreementdulyexecutedby Pubcoand the Note Amendment/TransferAgreement dulyexecuted by theparties thereto;
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6.6;
(ii) | aletter agreement appointing theBoard Observer asprovided inSection |
(iii) acertificate ofgoodstanding forPubco from theStateofNevada, dated notearlier than five (5)daysprior to theClosing Date;
(iv) Atrue andcomplete list,prepared asof themost recent practicable date byPubco’s transfer agent andregistrar, Continental Stock Transfer &Trust Company, of thenamesand addresses ofthe record owners of all of theoutstanding shares ofPubco Common Stock, together with the number ofshares ofPubcoCommon Stock held byeach recordowner;
(v) acertificateofthe Secretary of Pubco,dated as ofthe Closing Date, certifying as to(i) theincumbency ofofficers ofPubco executing this Agreement and all exhibits and schedules hereto andall other documents, instruments andwritings required pursuant tothis Agreement (the“Transaction Documents”), (ii) a copy of theArticles ofIncorporationandBy-Laws ofPubco, asin effecton andas ofthe Closing Date, and(iii) a copy of theresolutionsofthe Board ofDirectorsofPubco authorizing andapproving Pubco’s execution, delivery andperformance of theTransaction Documents, all matters inconnection with the Transaction Documents, andthe transactions contemplated thereby;
(vi) ll corporate records, board minutes and resolutions, tax andfinancial records, agreements, seals and any otherinformation ordocuments reasonably requested byR2’s representatives with respect toPubco;
(vii) suchother documents asR2 and/or theShareholdersmayreasonably requestinconnection with the transactions contemplated hereby; and
(viii) acertificate, dated the Closing Date,of anofficer ofPubco, certifying as tothe compliance by Pubcowith theconditions ofSection 7.1(b) below.
(b) Representations and Warranties tobeTrue.The representations andwarrantiesof Pubcoherein contained shall betrue inall material respects at the Closing withthesame effect as though made at suchtime. Pubcoshall have performed in allmaterial respectsall obligations andcomplied inall material respects with all covenants andconditions required bythis Agreement to beperformed orcomplied with byit at orprior tothe Closing.
(c) No Liabilities. At theClosing, Pubcoshall have noliabilities (contingent orotherwise) other than as set forth onSchedule 7.1(c).
(d) Outstanding Capital Stock. At theClosing, Pubcoshall have nomore than 8,095,400shares ofcommon stockand nosharesofpreferred stock issued andoutstanding.
(e) Consummation ofNote Amendment/Transfer Agreement. TheNoteAmendment/TransferAgreementshallhave beenentered into and the transactions contemplated thereby shall have been consummated.
(f) No Adverse Effect. Thebusiness and operations of Pubco will nothavesuffered anyMaterial Adverse Effect.
7.2 Conditions toObligationsofPubco. TheobligationsofPubco under this Agreement shall besubject to each of the following conditions:
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(a) Closing Deliveries. On theClosing Date,R2 and/or the Shareholders shall have delivered toPubco (or the Exchange Agent, asapplicable) the following:
(i) this Agreement duly executed byR2 and theShareholder;
(ii) resolutions duly adopted bythe BoardofDirectorsof R2authorizing and approving theexecution, delivery andperformance of this Agreement;
(iii) certificates representing theR2 Securities to bedelivered pursuant tothisAgreement dulyendorsedoraccompanied by dulyexecuted stock powers orinstruments oflike tenor;
(iv) acertificate ofthe Secretaryorother dulyqualified officer ofR2, dated as ofthe Closing Date, certifying as to (i)the incumbency ofofficersofR2 theTransaction Documents, (ii) a copyof theArticlesofIncorporation and By-LawsofR2,as ineffect on and as of theClosing Date, and
(iii) a copy of theresolutions of theBoard ofDirectors ofR2 authorizing andapproving R2’s execution, delivery andperformance of theTransaction Documents towhich itis aparty, all matters inconnection with theTransaction Documents, andthe Transaction contemplated thereby;
(v) acertificate, dated theClosing Date, of anofficerofR2, certifying as to thecompliance byR2 with theconditions of Section 7.2(b) below applicable toit; and
(vi) ll corporate records, board minutes andresolutions, taxand financial records, agreements, seals and suchother documents as Pubcomayreasonably request inconnection with thetransactions contemplated hereby.
(b) Representations and Warranties True and Correct. Therepresentations andwarranties ofR2 andthe Shareholders herein contained shall betrue inall material respects at theClosing with thesameeffect asthoughmade atsuchtime.R2 andthe Shareholders shall have performed inall material respects all obligations andcomplied inall material respects with all covenants andconditions required bythis Agreement to beperformed orcomplied with by them at orprior tothe Closing.
(c) No Adverse Effect. The business andoperations ofR2will nothave suffered anyMaterial Adverse Effect.
ARTICLE8
TERMINATION; SEC FILING
8.1 This Agreementmaybeterminated atany time prior to theClosing:
(a) bymutual written agreement ofPubco, R2 and theMajority Shareholder;
(b) byeither Pubco,R2 orthe Majority Shareholder if the Transaction shall nothave beenconsummated for anyreason byDecember 31,2018; provided, however, that the right toterminate this Agreement underthisSection 8.1(b) shall not beavailable to any partywhose actionorfailure toact hasbeen aprincipal cause oforresulted inthe failure ofthe Transaction tooccur on orbefore suchdate andsuch action orfailure to actconstitutes abreach ofthis Agreement;
(c) byeither Pubco or theMajority Shareholder if aGovernmental Entity shall have issued anorder, decreeorruling ortaken anyother action, inany casehaving theeffect ofpermanently restraining, enjoining orotherwise prohibiting theTransaction, which order, decree, ruling orotheraction isfinal and non-appealable;or
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(d) bythe Majority Shareholder orR2, upon amaterial breach of anyrepresentation, warranty, covenant oragreement on thepart ofPubco setforth inthis Agreement,or if anyrepresentation orwarrantyofPubco shall have become materially untrue, ineither case such that the conditions set forth inSection 7.1would not besatisfied asof thetime ofsuch breachorasof thetime such representationorwarranty shall have become untrue, provided, that if such inaccuracy in therepresentations and warranties by Pubco orbreach by Pubcois curable byPubcoprior tothe Closing Date, thenthe Majority Shareholder or Pubocmay notterminate this Agreement under thisSection 8.1(d) for thirty (30) days after delivery ofwritten notice from theMajority ShareholderorR2 to Pubco ofsuch breach,providedPubco continue toexercise commercially reasonable efforts tocuresuchbreach (it being understood that the Majority Shareholder orR2may notterminate this Agreement pursuant tothisSection 8.1(d) if theyshallhavematerially breached this Agreementor ifsuch breachby Pubcois cured during such thirty (30) day period).
8.2 Notice ofTermination; Effect ofTermination. Any terminationofthisAgreement underSection 8.1above will beeffective immediately upon(or, if thetermination ispursuant toSection 8.1(d)orSection 8.1(e) and theproviso therein isapplicable, thirty(30)days after) thedelivery ofwritten noticeof theterminating party tothe other parties hereto.In theevent of thetermination ofthis Agreement asprovided inSection 8.1,this Agreement shall beof nofurther forceoreffect and theTransaction shallbeabandoned, except asset forth inSection 8.1,Section 8.2 andArticle 9(General Provisions), eachofwhich shallsurvive thetermination ofthis Agreement.
8.3 Filing of Form8-K. Pubcoshall, in atimely andexpeditious manner, but in noeventlater than fourBusiness Days following Closing,prepare, with the cooperationofR2, andfile with theSEC acurrent report on Form8-K(which shallbe in a formsatisfactory toR2, Pubco and theMajority Shareholder, acting reasonably), together with anyother documents required byapplicable Laws inaccordance with all applicable Laws onthe dateoffiling thereof, in the form andcontaining the information required byall applicable Laws and not containing any misrepresentation (as defined under applicable securities Laws andrequirements) with respect thereto, and Pubco shall, with thecooperation ofR2, promptly prepare and file with theSEC such amendmentsorsupplements to the Form8-K, ifany, asmay berequired bythe SEC orunder applicable Laws.
ARTICLE9
GENERALPROVISIONS
9.1 Notices.Allnotices, demands, requests, consents, approvals, andother communications requiredorpermitted hereunder shall be inwriting and,unless otherwise specified herein, shall be(i)personally served, (ii) deposited in themail, registered orcertified, return receipt requested,postage prepaid, (iii) delivered byreputable air courier service with charges prepaid,or (iv)transmitted byhand delivery, telegram, orfacsimile, addressed asset forth below or to suchother address as such party shall have specified most recently bywritten notice. Any noticeorother communication requiredorpermitted tobe givenhereunder shall bedeemed effective (a) uponhand delivery ordelivery byfacsimile, with accurate confirmation generated bythe transmitting facsimile machine, at the address ornumber designated below(if delivered on abusiness day duringnormal business hours where suchnotice is to bereceived), or thefirst business day following suchdelivery (ifdelivered other than on abusiness dayduring normal business hours where such notice isto bereceived) or (b) on thesecond business dayfollowing thedate ofmailing by expresscourier service, fully prepaid, addressed tosuch address, orupon actual receipt ofsuch mailing, whichever shall first occur. Theaddresses for suchcommunications shall be:
(i) | if toR2, to: RSquared Technologies, Inc. |
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517Dumaine, PH4 New Orleans, LA70116
With acopy by fax onlyto: Keith Moskowitz, Esq. Eilenberg &Krause LLP Facsimile (212) 986-2399
(ii) | if to Shareholders,to: | to theaddress set forth onthe respective Shareholder signature page |
(iii) | if toPubco, to: | Omni Shrimp, Inc. 13613Gulf Boulevard. Madeira Beach, Florida 33708 Fax:(787) 358–5695 Attn: President |
With acopy by fax onlyto: Samuel M.Krieger, Esq.
Krieger &Prager LLP
Fax:(212) 363-2999
9.2 Interpretation. The headings contained inthis Agreement arefor reference purposes only andshall not affect in anyway themeaning orinterpretation ofthis Agreement. References toSections andArticles refer tosections and articles ofthis Agreement unless otherwise stated.
9.3 Entire Agreement. TheTransaction Documents, together with the exhibits andschedules thereto, contain theentire understanding ofthe parties with respect tothe subject matter hereof andthereof andsupersede all prior agreements andunderstandings, oral orwritten, with respect to suchmatters, which theparties acknowledgehave beenmerged into suchdocuments, exhibits andschedules.
9.4 Amendments; Waivers. No provisionofthis Agreement may bewaived, modified, supplemented oramended except in awritten instrument signed, inthe caseof anamendment, byall parties. No waiver of anydefault with respect to anyprovision, conditionorrequirementofthis Agreement shall bedeemed to be acontinuing waiver inthe future or awaiverofany subsequent default or awaiverof anyother provision, condition orrequirement hereof, norshall anydelay or omission of any party toexercise anyright hereunder inany manner impair theexercise of any suchright.
9.5 Successors and Assigns. ThisAgreement shall bebinding upon andinure to thebenefit of theparties andtheir successors and permitted assigns. Thepartiesmay notassign thisAgreement or anyrights or obligations hereunder.
9.6 No Third-Party Beneficiaries. This Agreement isintended for thebenefitofthe parties hereto andtheir respective successors andpermitted assigns andis notfor the benefitof, normay anyprovision hereof beenforced by, any otherPerson.
9.7 Governing Law.All questions concerning theconstruction,validity,enforcement and interpretationof theTransaction Documents shall begoverned by andconstrued and enforced in accordance with the internal lawsofthe State ofNew York, without regard tothe principles ofconflictsof lawthereof. Eachparty agrees thatalllegal proceedings concerning the interpretations, enforcement anddefense of the
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transactions contemplated by thisAgreement andany otherTransaction Documents (whether brought against aparty hereto or itsrespective affiliates, directors, officers, shareholders, partners, members, employees oragents) shall becommenced exclusively in the state andfederal courtssitting inthe City ofNew York. Each partyhereby irrevocably submits to theexclusive jurisdiction of thestate andfederal courts sitting inthe City ofNew York, Borough ofManhattan for the adjudication of anydispute hereunder or inconnection herewith orwith anytransaction contemplated hereby ordiscussed herein (including with respect to theenforcement of any of theTransaction Documents), and hereby irrevocably waives, and agrees not toassert in anyaction, suit orproceeding, any claim that it is notpersonally subject tothe jurisdiction of any suchcourt, that suchsuit, action orproceedingisimproper or is aninconvenient venue for suchproceeding. Each party hereby irrevocably waives personal service ofprocess andconsents to process being served inany such suit,action orproceeding bymailing a copythereof via registered orcertified mail orovernight delivery (with evidence ofdelivery) tosuch party atthe address ineffect for notices toit under this Agreement andagrees thatsuch service shall constitute good andsufficient service ofprocess and notice thereof. Nothing contained herein shall bedeemed tolimit in anyway anyright toserve process in anyother manner permitted by law. If any partyshall commence anaction orproceeding toenforce anyprovisions ofthe Transaction Documents, the prevailing party insuch action, suit orproceeding shall bereimbursed bythe other party forits reasonable attorneys’ fees andother costs and expenses incurred with the investigation, preparation and prosecution of suchaction orproceeding.
9.8 Execution; MannerofDelivery. ThisAgreementmay beexecuted intwo ormore counterparts, allofwhich when taken together shallbeconsidered one and thesameagreement andshall become effective when counterparts have beensigned by eachparty anddelivered toeach other party, it beingunderstood that the parties need notsign thesame counterpart.In theevent that anysignature tothis Agreement or otherTransaction Document isdelivered byfacsimile transmissionor by e-maildeliveryof a“.pdf”formatdata file, such signature shall create avalid andbinding obligation ofthe party executing (or onwhose behalf such signature is executed) with the same forceand effect asif suchfacsimileor“.pdf” signature page werean original thereof.
9.9 Severability.If anyterm, provision, covenant orrestriction ofthis Agreement is held by acourt ofcompetent jurisdiction to beinvalid, illegal, void orunenforceable, the remainderofthe terms, provisions, covenants and restrictions set forth herein shall remain infull force and effect and shall in noway beaffected, impaired orinvalidated, and theparties hereto shall use their commercially reasonable efforts tofind and employ analternative means toachieve thesame orsubstantially thesame result asthat contemplated by suchterm, provision, covenant orrestriction.Itishereby stipulated anddeclared tobethe intentionofthe parties that they would have executed the remainingterms, provisions, covenants and restrictions without including any of suchthatmay behereafter declared invalid, illegal, void orunenforceable.
9.10 Saturdays, Sundays, Holidays, etc.Ifthelastorappointed day forthe taking ofany action or theexpirationof anyright required orgranted herein shall not be aBusinessDay, thensuch actionmay betaken or such rightmay beexercised onthe next succeeding BusinessDay.
9.11 Construction. Theparties agree that each ofthem and/ortheir respective counsel have reviewed and had anopportunity torevise theTransaction Documents and, therefore, thenormalruleofconstruction tothe effect that anyambiguities are to beresolved against thedrafting partyshall not beemployed in theinterpretation of theTransaction Documents or anyamendments thereto.
9.12 WAIVER OFJURY TRIAL. INANYACTION, SUIT, ORPROCEEDING INANYJURISDICTION BROUGHT BYANYPARTYAGAINST ANYOTHER PARTY, THE PARTIESEACH KNOWINGLY ANDINTENTIONALLY, TOTHE GREATEST EXTENTPERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,UNCONDITIONALLY,IRREVOCABLY
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ANDEXPRESSLYWAIVESFOREVER TRIAL BY JURY.
9.13 Further Assurances. Each partyshall do andperform, orcause tobedone andperformed, all suchfurther acts andthings, andshall execute and deliver all suchother agreements, certificates, instruments anddocuments, asthe other partymayreasonably request inorder tocarry outthe intent and accomplish thepurposes ofthis Agreement and theconsummation of thetransactions contemplated hereby.
9.14 Shareholders Representative.The provisionsofAnnex B,pursuant to which eachof theR2 Shareholders entitled toreceive Series FPreferred Stock in theAcquisition constitutes andappoints theShareholder Representative named thereinassuch R2 Shareholder’s agent and attorney-in-fact inconnection withthis Agreement and thetransactions contemplated hereby, onthe terms andprovisions set forththerein, areincorporated herein and made anintegral partof thisAgreement.
(Signature Pages Follow)
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ANNEX A
DefinitionofAccredited Investor
Thesecuritieswillonly besold toinvestors who represent inwriting inthe Securities Purchase Agreement thatthey areaccredited investors, asdefined inRegulation D, Rule501 underthe Act which definition isset forth below:
1. Anatural person whose networth, orjoint net worth with spouse, at the time ofpurchase exceeds
$1million (excluding principal residence); or
2. Anatural person whose individual gross income exceeded $200,000orwhose joint income with that person’s spouse exceeded $300,000 in eachofthe last two years, andwho reasonably expects to exceed suchincome level in thecurrentyear;or
3. Atrust with total assets in excessof $5million, not formed for thespecific purpose ofacquiring thesecurities offered,whosepurchase is directed by asophisticated person described inRegulationD; or
4. | Adirectororexecutive officerofthe Company; or |
5. | Theinvestor is anentity, all ofthe ownersofwhich are accredited investors;or |
6. (a)bank asdefined inSection 3(a)(2) of theAct,or anysavings and loanassociation orother institution asdefined inSection 3(a)(5)(A)ofthe Act, (b) anybroker ordealer registered pursuant toSection 15 of theSecurities Exchange Act of1934, (c) aninsurance Company asdefined inSection2(13) ofthe Act, (d) aninvestment Company registered undertheInvestment Company Act of1940 or abusiness development Company asdefined in Section 2(a)(48)ofsuch Act, (e) aSmall Business Investment Company licensed by the UnitedStates Small Business Administration under Section 301(c) or(d) ofthe Small Business Investment Act of1958, (f) an employee benefit plan established and maintained by astate, itspolitical subdivisions,or anyagency orinstrumentality of a state orits political subdivisions, ifsuch plan hastotal assets inexcessof $5million, (g) an employee benefit plan within the meaning ofTitle I of theEmployee RetirementIncomeSecurities Act of1974, andthe employee benefit plan hasassets inexcess of $5million, orthe investment decision ismade by aplan fiduciary, asdefined in Section3(21) ofsuch act,thatiseither abank, savings and loaninstitution, insurance Company, orregistered investment advisor, or,if aself-directed plan,with aninvestment decisions made solely bypersons that areaccredited investors,
(h) aprivate business development company asdefined inSection 202(a)(22)ofthe Investment Advisers Actof1940,or(i) anorganization described inSection 501(c)(3)of theInternal Revenue code,corporation, Massachusettsorsimilar business trust, orpartnership, notformed for thespecific purpose ofacquiring thesecurities offered, with assets in excess of$5million.
ANNEX B
Shareholders Representative
Capitalized terms usedbut notdefined herein shallhave themeaningsascribed thereto in theSecurities Exchange Agreement towhich thisAnnex B isattached (the “Agreement”).
Section1.01AppointmentofSeries FShareholders Representative; Power and Authority.
(a) By virtue ofthe executionoftheAgreement, eachShareholder whose R2 Shares are beingexchanged forSeries FPreferred Stock in the Acquisition (each, an“Appointing Shareholder”), hereby irrevocably agrees, constitutes andappoints Crescent Saints Holdings,LLC (the“Shareholders Representative”), and by itsexecutionof theAgreementCrescent Saints Holdings, LLC accepts such appointment, as thetrue, exclusive andlawful agent and attorney-in-fact ofeach Appointing Shareholder:
(i) tohave theright, power andauthority toperform allactions (or refrain from taking anyactions) the Shareholders Representative shall deem necessary, appropriateoradvisable inconnection with,orrelated to, theAgreement andthe transactions contemplated thereby (the “Transactions”), (ii) to act in thename, place andsteadofeach Appointing Shareholder inconnection with the Transactions, inaccordance with theterms andprovisionsof theAgreement, and(iii) to do orrefrain from doing all suchfurther acts and things, and toexecute all suchdocuments asthe Shareholders Representative shall deemnecessary orappropriate inconnection withthe Transactions (including anyTransaction Document). This power ofattorney iscoupled with an interest and isirrevocable. Allactions, decisions andinstructions ofthe Shareholders Representative shall beconclusive and binding uponeach Appointing Shareholder. Each Appointing Shareholder acknowledges andagrees that uponexecutionof theAgreement, upon anydelivery by theShareholders Representativeofany waiver, amendment, agreement, certificate orother document executed by theShareholders Representative, such Appointing Shareholder shallbebound bysuch documents as fully as ifsuch Appointing Shareholder had executed and delivered such documents.
(b) Without derogating from thegenerality of theforegoing, as of thedate hereoftheShareholders Representative shallhave theright, power andauthority to:
(1) actfor each Appointing Shareholder with regard to allmatters set forth in theAgreement andthe other Transaction Documents;
(2) execute anddeliver all amendments, waivers, ancillary agreements, share powers, certificates anddocuments that the Shareholders Representative deems necessary orappropriate inconnection with theconsummation ofthe Transactions;
(3) do orrefrain from doing anyfurther actor deed onbehalf ofeach Appointing Shareholder that the Shareholders Representative deems necessary orappropriate in hissole discretion relating to thesubjectmatter ofthe Agreement and theother Transaction Documents asfully andcompletely asthe Appointing Shareholder could doif personally present;
(4) deliver andreceive allnotices orother communications ordocuments given orto begiven to or from anAppointing Shareholder pursuant tothe Agreementand theother Transaction Documents;
(5) agree to anymodification oramendment of, orsupplements to, orwaiver relating to theAgreement andthe other Transaction Documents (provide the same applies equally to allAppointing
Shareholders) andexecute anddeliver anagreement ofsuch modification, amendment, supplement orwaiver; and
(6) take all such other actions as the Shareholders Representativemay deemnecessary, appropriateoradvisable tocarry outthe intents and purposesofthisAnnex B, in each case without having toseek orobtain the consent of anyAppointing Shareholder under any circumstance.
(c) TheShareholders Representativemay beremoved orreplaced fromtime totime bytheAppointing Shareholders holding atleast amajority of theR2 Shares held bythe Appointing Shareholders (including thoseheld bythe thenexisting Shareholders Representative) as ofimmediately prior tothe Closing. Any new orsuccessor Shareholders Representative appointed as aforesaid shallbedeemed forall purposes as anagent under thisAnnex Bhaving thepowers and authorities set forth herein.
(d) TheShareholders Representative may resign at anytime onwritten notice tothe Appointing Shareholdersofsuchdecision toresign.
(e) No bondshall berequired of theShareholders Representative and theShareholders Representative shall not receive compensation forservice in suchcapacity.
(f) Any notice orcommunication given orreceived by, and anydecision, action, failure toactwithin adesignated period oftime, agreement, consent, orinstruction of, the Shareholders Representative shall constitute anotice orcommunication to orby, or a decision,action, failure to actwithin adesignated periodoftime, agreement, consent,orinstructionof theAppointing Shareholders and shall befinal, binding andconclusive upon theAppointing Shareholders. All personsmayconclusively andabsolutely rely, without inquiry, upon anynotice, communication, decision, action, failure toact within adesignated period oftime, agreement, consent orinstruction ofthe Shareholders Representative in allmatters referred toherein.
Section1.02Liability.
Each Appointing Shareholder hereby releases the Shareholders Representative from any and allliability arising outof or inconnection with theacceptanceoradministration ofthe Shareholders Representative’s duties hereunderorany action taken or nottaken by him in hiscapacity as suchagent(including thelegal costs and expensesofdefending the Shareholders Representative against anyclaim orliability (andall actions, claims, proceedings and investigations inrespect thereof) inconnection with, caused by orarising outof,directly orindirectly, the performanceofthe Shareholders Representative’s duties hereunder), except for theliability of theShareholders Representative to anAppointing Shareholder forlosses which such holdermaysuffer fromgross negligence, willful misconduct or afraudof theShareholders Representative incarrying out theShareholders Representative’s duties hereunder.Inall questions arising under this Agreement, theShareholders Representativemay rely onthe adviceofcounsel, andthe Shareholders Representative will notbeliable to anyAppointing Shareholder for anything done,omittedorsuffered by theShareholders Representative based onsuch advice.