Attached files
EXHIBIT 10.1
AGREEMENT TO EXCHANGE SECURITIES
BETWEEN
4th GRADE FILMS, INC.
AND
A SHAREHOLDER OF STRAINWISE, INC.
AND
STRAINWISE, INC.
INDEX
Page
ARTICLE I - EXCHANGE OF SECURITIES ..................................... 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES ............................ 5
2.0l - Organization .............................................. 5
2.02 - Capital .................................................. 5
2.03 - Directors and Officers .......................... ........ 5
2.04 - Financial Statements ..................................... 5
2.05 - Absence of Changes ....................................... 6
2.06 - Absence of Undisclosed Liabilities ....................... 6
2.07 - Tax Returns .............................................. 6
2.08 - Corporate Matters......................................... 6
2.09 - Intellectual Property .................................... 6
2.l0 - Contracts and Leases ..................................... 6
2.11 - Insurance Policies ....................................... 6
2.12 - Compliance with Laws ..................................... 6
2.13 - Litigation ............................................... 7
2.14 - Ability to Carry Out Obligations ......................... 7
2.15 - Full Disclosure .......................................... 7
2.16 - Assets ................................................... 7
2A - Organization ............................................. 7
2B - Capital .................................................. 7
2C - Directors and Officers, Compensation; Banks .............. 7
2D - Financial Statements ..................................... 7
2E - Absence of Changes ....................................... 8
2F - Absence of Undisclosed Liabilities ....................... 8
2G - Tax Returns .............................................. 8
2H - Corporate Matters ........................................ 8
2I - Intellectual Property .................................... 8
2J - Contracts and Leases ..................................... 8
2K - Insurance Policies ....................................... 9
2L - Compliance with Laws ..................................... 9
2M - Litigation ............................................... 9
2N - Ability to Carry Out Obligations ......................... 9
2O - Full Disclosure........................................... 9
2P - Assets ................................................... 9
2Q - SEC Documents............................................. 9
2R - Market for Common Stock .................................. 9
2(i) - Ability to Carry Out Obligations.......................... 10
2(ii) - Restricted Securities .................................... 10
2(iii) - Risk Assessment .......................................... 10
2(iv) - Share Certificates ....................................... 10
2
ARTICLE III - OBLIGATIONS BEFORE CLOSING ............................... 10
3.0l - Investigative Rights ..................................... 10
3.02 - Conduct of Business ...................................... 10
ARTICLE IV - CONDITIONS PRECEDENT TO PERFORMANCE BY FHGR ............... 10
4.01 - Conditions ............................................... 10
4.02 - Accuracy of Representations .............................. 10
4.03 - Performance............................................... 10
4.04 - Absence of Litigation .................................... 11
4.05 - Other .................................................... 11
ARTICLE V - CONDITIONS PRECEDENT TO PERFORMANCE BY STRAINWISE
AND THE STRAINWISE SHAREHOLDER ............................ 11
5.01 - Conditions ............................................... 11
5.02 - Accuracy of Representations .............................. 11
5.03 - Performance .............................................. 11
5.04 - Absence of Litigation .................................... 11
5.05 - Other .................................................... 11
ARTICLE VI - CLOSING ................................................... 12
6.01 - Closing .................................................. 12
6.02 - Exchange of Securities ................................... 12
6.03 - Purchase of Shares ....................................... 12
6.04 - Payment of Liabilities ................................... 12
6.05 - Officers and Directors ................................... 12
6.06 - Sale of Business ......................................... 12
6.07 - Short Form Merger ........................................ 12
ARTICLE VII - REMEDIES ................................................. 12
7.01 - Arbitration .............................................. 12
7.02 - Costs .................................................... 12
7.03 - Termination .............................................. 12
ARTICLE VIII - MISCELLANEOUS ........................................... 13
8.01 - Captions and Headings .................................... 13
8.02 - No Oral Change ........................................... 13
8.03 - Non-Waiver ............................................... 13
8.04 - Time of Essence .......................................... 13
8.05 - Entire Agreement ......................................... 13
8.06 - Governing Law ............................................ 13
8.07 - Counterparts ............................................. 13
8.08 - Notices .................................................. 13
8.09 - Binding Effect ........................................... 14
8.10 - Effect of Closing ........................................ 14
8.11 - Mutual Cooperation ....................................... 14
8.12 - Expenses.................................................. 14
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LIST OF EXHIBITS
Exhibit A-1 - Allocation of Shares ................................. 19
Exhibit A-2 - Purchase of Shares from Shareholders of FHGR.......... 20
Exhibit A-3 - Payment of Liabilities................................ 21
Exhibit B - Officers and Directors (Strainwise) .................. 22
Exhibit C - Financial Statements - Changes in Financial
Condition (Strainwise) ............................... 23
Exhibit D - Patents, Trademarks, Trade Names, and Copyrights
(Strainwise) ......................................... 24
Exhibit E - Material Contracts (Strainwise)....................... 25
Exhibit F - Insurance Policies and Litigation (Strainwise)........ 26
Exhibit G - Assets (Strainwise)................................... 27
Exhibit H - Options, Warrants and Convertible Securities
(Strainwise).......................................... 28
Exhibit I - Officers and Directors (FHGR)......................... 29
Exhibit J - Financial Statements - Changes in Financial
Condition (FHGR)...................................... 30
Exhibit K - Patents, Trademarks, Trade Names and Copyrights (FHGR). 31
Exhibit L - Material Contracts (FHGR) ............................. 33
Exhibit M - Insurance Policies and Litigation (FHGR)............... 33
Exhibit N - Options, Warrants and Convertible Securities (FHGR) ... 34
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AGREEMENT TO EXCHANGE SECURITIES
THIS AGREEMENT, made this 19th day of August, 2014, by and between
Strainwise, Inc., a Colorado corporation ("Strainwise"), and a shareholder of
Strainwise (the "Strainwise Shareholder"), and 4th Grade Films, Inc., a Utah
corporation ("FHGR"), is made for the purpose of setting forth the terms and
conditions upon which FHGR will acquire approximately 91% of the outstanding
shares of Strainwise in exchange for shares of FHGR's common stock.
In consideration of the mutual promises, covenants, and representations
contained herein, the parties hereto agree as follows:
ARTICLE I
EXCHANGE OF SECURITIES
1.01 Subject to the terms and conditions of this Agreement, FHGR agrees to
issue, and the Strainwise Shareholder agrees to accept, 23,124,184 shares of
FHGR's common stock (the "Stock") in exchange for 20,430,000 outstanding shares
of Strainwise (the "Shares"). The Stock of FHGR will be issued to the Strainwise
Shareholder in accordance with Exhibit A-1 attached hereto and incorporated
herein by reference.
ARTICLE IIREPRESENTATIONS AND WARRANTIES
Strainwise represents and warrants to FHGR that:
2.01 Organization. Strainwise is a corporation duly organized, validly
existing, and in good standing under the laws of Colorado, has all necessary
corporate power to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
2.02 Capital. The authorized capital stock of Strainwise consists of
100,000,000 shares of common stock, of which 22,863,700 shares of common stock
are outstanding as of the date hereof. Except as listed on Exhibit H, there are
no subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments outstanding obligating Strainwise to issue or to
transfer from treasury any additional shares of its capital stock. All
outstanding shares of Strainwise are validly issued, fully paid, none assessable
and not subject to any preemptive rights.
2.03 Directors and Officers. Exhibit B to this Agreement contains the
names and titles of all directors and officers of Strainwise.
2.04 Financial Statements. Exhibit C to this Agreement contains the
balance sheet of Strainwise as of April 30, 2014. The Strainwise balance sheet
is complete and correct in all material respects and fairly presents in all
material respects the financial condition of Strainwise at such date and shows
all material liabilities, absolute or contingent, of Strainwise.
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2.05 Absence of Changes. Since April 30, 2014, there has not been any
material change in the financial condition or results of operations of
Strainwise, except (i) changes in the ordinary course of business, which changes
have not in the aggregate been materially adverse, and (ii) changes reflected on
Exhibit C.
2.06 Absence of Undisclosed Liabilities. Strainwise did not as of April
30, 2014 have any debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become due, that is
not reflected on Exhibit C.
2.07 Tax Returns. Within the times and in the manner prescribed by law,
Strainwise has filed all federal, state, and local tax returns required by law
and has paid all taxes, assessments, and penalties due and payable, except where
the failure to file and/or pay would not have a material adverse effect on
Strainwise. No federal income tax returns of Strainwise have been audited by the
Internal Revenue Service. The provision for taxes, if any, reflected in
Strainwise's balance sheet as of April 30, 2014, is adequate for any and all
federal, state, county, and local taxes for the period ending on the date of
that balance sheet and for all prior periods, whether or not disputed. There are
no present disputes as to taxes of any nature payable by Strainwise.
2.08 Investigation of Financial Condition. Without in any manner reducing
or otherwise mitigating the representations contained herein, FHGR shall have
the opportunity between the date of this Agreement and the Closing (as defined
in Section 6.01 hereof) to meet with Strainwise's accountants and attorneys to
discuss the financial condition of Strainwise. Strainwise shall make available
to FHGR the books and records of Strainwise. Such books and records have been
maintained in the ordinary course of business, and are true and correct copies
of such books and records. The minutes of Strainwise are a complete and accurate
record of all meetings of the shareholders and directors of Strainwise and
accurately reflect all actions taken at such meetings. The signatures of the
directors and/or officers on such minutes are the valid signatures of
Strainwise's directors and/or officers who were duly elected or appointed on the
dates that the minutes were signed by such persons. The stock book of Strainwise
contains an accurate record of all transactions with respect to the capital
stock of Strainwise.
2.09 Patents, Trademarks, Trade Names, and Copyrights. Exhibit D attached
hereto and made a part hereof lists all trademarks, trademark registrations or
applications, trade names, service marks, patents, copyrights, copyright
registrations or applications which are owned by Strainwise. No person other
than Strainwise owns any trademark, trademark registration or application,
service mark, trade name, copyright, or copyright registration or application
the use of which is necessary or contemplated in connection with the operation
of Strainwise's business.
2.10 Contracts and Leases. Exhibit E attached hereto and made a part
hereof contains a summary of the provisions of all material contracts, leases,
and other agreements of Strainwise presently in existence or which have been
agreed to by Strainwise (whether written or oral). Except as disclosed on
Exhibit E, Strainwise is not in default under of these agreements or leases.
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2.11 Insurance Policies. Exhibit F to this Agreement is a description of
all insurance policies held by Strainwise concerning its business and
properties. All these policies are in the respective principal amounts set forth
in Exhibit F and are in full force and effect.
2.12 Compliance with Laws. Strainwise has complied with, and is not in
violation of any applicable federal, state, or local statute, law or regulation
affecting its properties or the operation of its business.
2.13 Litigation. Other than discloser on Exhibit F, Strainwise is not a
party to any suit, action, arbitration, legal, administrative, or other
proceeding, or governmental investigation pending or, to the best knowledge of
Strainwise, threatened against or affecting Strainwise or its business, assets,
or financial condition. Strainwise is not in default with respect to any order,
writ, injunction, or decree of any federal, state, local, or foreign court,
department, agency, or instrumentality. Strainwise is not engaged in any legal
action to recover moneys due to Strainwise or damages sustained by Strainwise.
2.14 Ability to Carry Out Obligations. Strainwise has the right, power,
and authority to enter into, and perform its obligations under, this Agreement.
The execution and delivery of this Agreement by Strainwise and the performance
by Strainwise of its obligations hereunder will not cause, constitute, or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, charter,
instrument, articles of incorporation, by-law, or other agreement or instrument
to which Strainwise is a party, or by which it may be bound, nor will any
consents or authorizations of any party other than those hereto be required, (b)
an event that would permit any party to any agreement or instrument to terminate
it or to accelerate the maturity of any indebtedness or other obligation of
Strainwise, or (c) an event that would result in the creation or imposition or
any lien, charge, or encumbrance on any asset of Strainwise or would create any
obligations for which Strainwise would be liable, except as contemplated by this
Agreement.
2.15 Full Disclosure. None of the representations and warranties made by
Strainwise, or in any certificate or memorandum furnished or to be furnished by
Strainwise, or on its behalf, contains or will contain any untrue statement of
material fact, or omit any material fact the omission of which would be
misleading.
2.16 Assets. At Closing, Strainwise will have the assets shown on Exhibit
G.
FHGR represents and warrants to Strainwise and the Strainwise Shareholder
that:
2A. Organization. FHGR is a corporation duly organized, validly existing,
and in good standing under the laws of Utah, has all necessary corporate powers
to own its properties and to carry on its business as now owned and operated by
it, and is duly qualified to do business and is in good standing in each of the
states where its business requires qualification.
2B. Capital. The authorized capital stock of FHGR consists of 50,000,000
shares of common stock and 5,000,000 shares of preferred stock. Immediately
prior to the Closing, 2,345,000 shares of common stock will be issued and
outstanding. At the Closing, FHGR will not have any outstanding shares of
preferred stock. Except as listed Exhibit N, there are no subscriptions,
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options, rights, warrants, convertible securities, or other agreements
outstanding obligating FHGR to issue or to transfer from treasury any additional
shares of its common stock. All of the shares are validly issued, fully paid,
and non-assessable.
2C. Directors and Officers' Compensation; Banks. Exhibit I to this
Agreement contains: (i) the names and titles of all directors and officers of
FHGR and all persons whose compensation from FHGR as of the date of this
Agreement will equal or is expected to equal or exceed, at an annual rate, the
sum of $1,000; (ii) the name and address of each bank with which FHGR has an
account or safety deposit box, and the names of all persons who are authorized
to draw thereon or have access thereto; and (iii) the names of all persons who
have a power of attorney from FHGR and a summary of the terms thereof.
2D. Financial Statements. Exhibit J to this Agreement sets forth the
balance sheet of FHGR as of March 31, 2014, and the related statement of income
for the period then ended (the "FHGR Financial Statements"). The FHGR Financial
Statements comply as to form in all material respects with applicable
requirements of the U.S. Securities and Exchange Commission with respect
thereto, are accurate and in accordance with the books and records of FHGR, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the period involved, except as may be
indicated in the notes thereto or as permitted by rules of the Securities and
Exchange Commission.
2E. Absence of Changes. Since Mach 31, 2014, there has not been any
material change in the financial condition or operations of FHGR, except (i)
changes in the ordinary course of business, which changes have not in the
aggregate been materially adverse, and (ii) changes disclosed on Exhibit J.
2F. Absence of Undisclosed Liabilities. FHGR did not as of March 31, 2014
have any debt, liability, or obligation of any nature, whether accrued,
absolute, contingent, or otherwise, and whether due or to become due, that is
not reflected on Exhibit J.
2G. Tax Returns. Within the times and in the manner prescribed by law,
FHGR has filed all federal, state, and local tax returns required by law and has
paid all taxes, assessments, and penalties due and payable, except where the
failure to file and/or pay would not have a material adverse effect on FHGR. No
federal income tax returns of FHGR have been audited by the Internal Revenue
Service. The provision for taxes, if any, reflected in FHGR's balance sheet as
of March 31, 2014, is adequate for any and all federal, state, county, and local
taxes for the period ending on the date of that balance sheet and for all prior
periods, whether or not disputed. There are no present disputes as to taxes of
any nature payable by FHGR.
2H. Investigation of Financial Condition of FHGR. Without in any manner
reducing or otherwise mitigating the representations contained herein,
Strainwise shall have the opportunity between the date of this Agreement and the
Closing to meet with FHGR's accountants and attorneys to discuss the financial
condition of FHGR. FHGR shall make available to Strainwise the books and records
of FHGR. Such books and records have been maintained in the ordinary course of
business, and are true and correct copies of such books and records. The minutes
of FHGR are a complete and accurate record of all meetings of the shareholders
and directors of FHGR and accurately reflect all actions taken at such meetings.
The signatures of the directors and/or officers on such minutes are the valid
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signatures of FHGR's directors and/or officers who were duly elected or
appointed on the dates that the minutes were signed by such persons. The stock
book of FHGR contains an accurate record of all transactions with respect to the
capital stock of FHGR.
2I. Patents, Trademarks, Trade Names, and Copyrights. Exhibit K attached
hereto and made a part hereof lists all trademarks, trademark registrations or
applications, trade names, service marks, patents, copyrights, copyright
registrations or applications which are owned by FHGR. No person other than FHGR
owns any trademark, trademark registration or application, service mark, trade
name, copyright, or copyright registration or application the use of which is
necessary or contemplated in connection with the operation of FHGR's business.
2J. Contracts and Leases. Exhibit L attached hereto and made a part hereof
contains a summary of the provisions of all material contracts, leases, and
other agreements of FHGR presently in existence or which have been agreed to by
FHGR (whether written or oral). Except as disclosed on Exhibit L, FHGR is not in
default under of these agreements or leases.
2K. Insurance Policies. Exhibit M to this Agreement is a description of
all insurance policies held by FHGR concerning its business and properties. All
these policies are in the respective principal amounts set forth in Exhibit M
and are in full force and effect.
2L. Compliance with Laws. FHGR has complied with, and is not in violation
of, applicable federal, state, or local statutes, laws, or regulations affecting
its properties or the operation of its business, including, but not limited to,
federal and state securities laws.
2M. Litigation. Other than as disclosed on Exhibit M, FHGR is not a party
to any suit, action, arbitration, legal, administrative, or other proceeding, or
governmental investigation pending or, to the best knowledge of FHGR, threatened
against or affecting FHGR or its business, assets, or financial condition. FHGR
is not in default with respect to any order, writ, injunction, or decree of any
federal, state, local, or foreign court, department, agency, or instrumentality.
FHGR is not engaged in any legal action to recover moneys due to FHGR or damages
sustained by FHGR.
2N. Ability to Carry Out Obligations. FHGR has the right, power, and
authority to enter into, and perform its obligations under, this Agreement. The
execution and delivery of this Agreement by FHGR and the performance by FHGR of
its obligations hereunder will not cause, constitute, or conflict with or result
in (a) any breach or violation of any of the provisions of or constitute a
default under any license, indenture, mortgage, charter, instrument, articles of
incorporation, by-law, or other agreement or instrument to which FHGR is a
party, or by which it may be bound, nor will any consents or authorizations of
any party other than those hereto be required, (b) an event that would permit
any party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of FHGR, or (c) an event that
would result in the creation or imposition or any lien, charge, or encumbrance
on any asset of FHGR or would create any obligations for which FHGR would be
liable, except as contemplated by this Agreement.
2O. Full Disclosure. None of the representations and warranties made by
FHGR, or in any certificate or memorandum furnished or to be furnished by FHGR,
or on its behalf, contains or will contain any untrue statement of material
fact, or omit any material fact the omission of which would be misleading.
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2P. Assets. The assets of FHGR pre-Closing consist of rights to the film
"Four Stories of St. Julian," together with all related distribution agreements
and all pre-production and other rights otherwise related to the film.
2Q. SEC Documents. FHGR has furnished Strainwise with copies of its annual
report on Form 10-K for the year ended June 30, 2013 and its quarterly reports
on Form 10-Q for the periods ended September 30, 2013, December 31, 2013 and
March 31, 2014. These reports are accurate in all material respects.
2R. Market for Common Stock. FHGR's common stock is quoted on the OTC
Bulletin Board. No letter "E" has been appended to FHGR's common stock during
the past twenty-four months and FHGR has not received any notice of the possible
or pending delisting of FHGR's common stock.
The Strainwise Shareholder represents and warrants the following to FHGR:
2(i). Ability to Carry Out Obligations. She has the right, power, and
authority to enter into, and perform her obligation under this Agreement, and
that all necessary corporate actions needed to transfer shares of Strainwise to
FHGR have been taken. The execution and delivery of this Agreement by such
Shareholder and the delivery by such Shareholder of the shares in Strainwise
pursuant to Article I will not cause, constitute, or conflict with or result in
any breach or violation or any of the provisions of or constitute a default
under any license, mortgage, or agreement to which she is a party, or by which
she may be bound, and any consents or authorizations of any party which are
required, have been duly obtained or will be obtained at or prior to the
Closing. The shares of Strainwise that such Strainwise Shareholder will deliver
at the Closing are owned solely by the Strainwise Shareholder and will be free
of any liens or encumbrances.
2(ii). Restricted Securities. The Strainwise Shareholder understands that
the shares being acquired from FHGR represent restricted securities as that term
is defined in Rule l44 of the Securities and Exchange Commission.
2(iii). Risk Assessment. She is a sophisticated investor and has the
requisite knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of an investment in FHGR. In making
the decision to invest in FHGR and signing this Agreement, she has relied on her
own knowledge and upon independent investigations made by her. In addition, she
(i) has been given the full opportunity and time in which to carry out a "due
diligence" investigation of FHGR and anything else related to FHGR, (ii) has
received in the course of such "due diligence" investigation all materials,
information, documentation and answers which she requested and obtained
information necessary to verify the accuracy of the information provided to her,
(iii) is satisfied with the results of the investigation, (iv) has consulted
with her own tax and legal advisors concerning the effect of this transaction on
her personal financial and tax situations and has not relied on any other person
in regards thereto, and (v) it appears to her suitable for her objectives and
therefore has signed this Agreement.
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2(iv). Share Certificates. The Strainwise Shareholder represents and
warrants to FHGR that the Shareholder has not received a certificate
representing the Shareholder's interest in Strainwise as shown on Exhibit A. At
the Closing of this Agreement, and by virtue of such Shareholder's signature to
this Agreement, the shares of Strainwise owned by the Strainwise Shareholder
will be assigned to FHGR in exchange for the shares of FHGR shown on Exhibit A.
ARTICLE III
OBLIGATIONS BEFORE CLOSING
3.0l Investigative Rights. From the date of this Agreement until the date
of the Closing, each party shall provide to the other party, and such other
party's counsel, accountants, auditors, and other authorized representatives,
full access during normal business hours to all of each party's properties,
books, contracts, commitments, records and correspondence and communications
with regulatory agencies for the purpose of examining the same. Each party shall
furnish the other party with all information concerning each party's affairs as
the other party may reasonably request.
3.02 Conduct of Business. Prior to the Closing, and except as contemplated
by this Agreement, each party shall conduct its business in the normal course,
and shall not sell, pledge, or assign any assets, without the prior written
approval of the other party, except in the regular course of business. Except as
contemplated by this Agreement, neither party to this Agreement shall issue or
sell any shares, stock, options or other securities, amend its Articles of
Association, Articles of Incorporation or By-laws, declare dividends, redeem or
sell stock or other securities, incur additional or newly-funded material
liabilities, acquire or dispose of fixed assets, change senior management,
change employment terms, enter into any material or long-term contract,
guarantee obligations of any third party, settle or discharge any balance sheet
receivable for less than its stated amount, pay more on any liability than its
stated amount, or enter into any other transaction other than in the regular
course of business, or enter into any agreement or take any action that is
likely to cause any of the representations and warranties of such party under
this Agreement not to be true and correct as of the Closing, or that is likely
to affect the Closing. However, and notwithstanding any provision in this
Agreement to the contrary, FHGR hereby assents and permits Strainwise to raise
further financing in any manner. Notwithstanding the above, Strainwise may
continue to sell shares of common stock and warrants pursuant to its ongoing
($1.00 per unit) private offering to the Closing, and thereafter, if such
private offering is continued by FHGR.
ARTICLE IV
CONDITIONS PRECEDENT TO PERFORMANCE BY FHGR
4.01 Conditions. FHGR's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in this
Article IV. FHGR may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by FHGR of any other condition of or any of FHGR's
other rights or remedies, at law or in equity, if Strainwise shall be in default
of any of its representations, warranties, or covenants under this agreement.
4.02 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by Strainwise in this Agreement or
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in any written statement that shall be delivered to FHGR by Strainwise under
this Agreement shall be true on and as of the Closing Date as though made at
those times.
4.03 Performance. Strainwise shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the Closing. Strainwise shall
have obtained all necessary consents and approvals necessary to consummate the
transactions contemplated hereby.
4.04 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the Closing.
4.05 Other. In addition to the other provisions of this Article IV, FHGR's
obligations hereunder shall be subject to the satisfaction, at or before the
Closing, of the following:
o the liabilities of Strainwise will not exceed the amounts reflected in
its financial statements for the quarterly period ended April 30,
2014, except for liabilities subsequently incurred in the ordinary
course of its business.
o Strainwise will have submitted to FHGR financial statements, audited
and reviewed as necessary and in proper form, which will be
satisfactory for filing by FHGR in an 8-K Current Report with the
Securities and Exchange Commission.
o Strainwise shall have prepared for review by FHGR and filing with the
Securities and Exchange Commission an 8-K Current Report that
substantially contains the "Form 10 Information" referenced in
subparagraph (i) of Rule 144.
o Strainwise shall have prepared for review of FHGR and filing with the
Securities and Exchange Commission a 14F-1 Information Statement.
ARTICLE V
CONDITIONS PRECEDENT TO PERFORMANCE BY STRAINWISE AND THE STRAINWISE SHAREHOLDER
5.01 Conditions. Strainwise and the Strainwise Shareholder's obligations
hereunder shall be subject to the satisfaction, at or before the Closing, of the
conditions set forth in this Article V. Strainwise and the Strainwise
Shareholder may waive any or all of these conditions in whole or in part without
prior notice; provided, however, that no such waiver of a condition shall
constitute a waiver by Strainwise and the Strainwise Shareholder of any other
condition of or any of Strainwise's or the Strainwise Shareholder's other rights
or remedies, at law or in equity, if FHGR shall be in default of any of its
representations, warranties, or covenants under this agreement.
5.02 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by FHGR in this Agreement or in
any written statement that shall be delivered to Strainwise by FHGR under this
Agreement shall be true on and as of the Closing Date as though made at those
times.
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5.03 Performance. FHGR shall have performed, satisfied, and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the Closing. FHGR shall have
obtained all necessary consents and approvals necessary to consummate the
transactions contemplated hereby.
5.04 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the Closing.
5.05 Other. In addition to the other provisions of this Article V,
Strainwise obligations hereunder shall be subject to the satisfaction,
immediately prior to the Closing, of the following:
o The liabilities of FHGR will not exceed $134,700; and
o FHGR will not have more than 2,345,000 outstanding shares of common
stock and no outstanding shares of preferred stock, with the
understanding that 1,038,000 shares of FHGR common stock will be
cancelled to the treasury of FHGR in consideration of $120,300 to be
paid by Strainwise to the shareholders of such shares in accordance
with Exhibit A-2 attached hereto and incorporated herein by reference.
ARTICLE VI
CLOSING
6.0l Closing. The Closing of this transaction shall be held by telephone
conference call, or in such manner or other location as the parties may agree.
Unless the Closing of this transaction takes place before August 31, 2014, then
either party may terminate this Agreement without liability to the other party,
excluding claims for breaches of obligations by any party hereto prior to such
termination.
6.02 Exchange of Securities. On the Closing Date (the date of the
Closing), 20,430,000 fully paid and non-assessable shares of the common stock of
Strainwise will be exchanged for 23,124,184 fully paid and non-assessable shares
of FHGR in accordance with Exhibit A-1.
6.03 Purchase of Shares. Strainwise will pay $120,300 to the shareholders
of FHGR listed on Exhibit A-2, such shareholders will assign to FHGR
certificates representing the shares shown on Exhibit A-2, and the shares shown
on Exhibit A-2 will be returned to treasury and cancelled.
6.04 Payment of Liabilities. Strainwise will pay $134,740 to the creditors
of FHGR listed on Exhibit A-3 in full payment of the amounts owed to such
creditors and such creditors, upon receipt of such payment, will provide FHGR
with a full and complete release of all claims such creditors may have against
FHGR. It is understood that all $25,000 of the $25,000 deposit previously paid
by Strainwise to FHGR will be credited for the payment of such liabilities in
accordance with Exhibit A-3.
13
6.05 Officers and Directors. At the Closing of this Agreement, FHGR will
cause Shawn Phillips to be appointed as Chief Executive Officer and a director
of FHGR; Erin Phillips President, Chief Financial and Accounting Officer and a
director; David Modica as a director. Following such appointment, all present
officers of FHGR will resign. 10 days after the filing of a Rule 14F-1
Information Statement, all directors of FHGR, with the exception of Erin
Phillips, Shawn Phillips and David Modica, will resign.
6.06 Sale of Business. Following the Closing, FHGR will sell to Shane
Thueson all of the pre-Closing FHGR business and assets in consideration of
payment by James Doolin of all remaining outstanding payables of FHGR existing
at the Closing.
6.07 Short Form Merger. Promptly after the Closing, FHGR will acquire the
remaining outstanding shares of Strainwise on a share-for-share basis by means
of a short-form merger and exchange outstanding Strainwise warrants for like
outstanding warrants of FHGR, as may be authorized under the form of such
warrants.
ARTICLE VII
REMEDIES
7.01 Arbitration. Any dispute in any way involving this Agreement will be
settled through binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in Denver, Colorado.
7.02 Costs. If any legal action or any arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorney's fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
7.03 Termination. In addition to the other remedies, FHGR or Strainwise
may on or prior to the Closing Date terminate this Agreement, without liability
to the other party, except that the $25,000 paid by Strainwise to FHGR under the
Letter of Intent between the parties dated May 27, 2014, which shall be retained
by FHGR:
(i) If any bona fide action or proceeding shall be pending against
FHGR or Strainwise on the Closing Date that could result in an unfavorable
judgment, decree, or order that would prevent or make unlawful the carrying out
of this Agreement or if any agency of the federal or of any state or national
government shall have objected at or before the Closing Date to this acquisition
or to any other action required by or in connection with this Agreement;
(ii) If the legality and sufficiency of all steps taken and to be
taken by each party in carrying out this Agreement shall not have been approved
by the respective party's counsel, which approval shall not be unreasonably
withheld.
14
(iii) If a party breaches any representation, warranty, covenant or
obligation of such party set forth herein and such breach is not corrected
within ten days of receiving written notice from the other party of such breach.
ARTICLE VIII
MISCELLANEOUS
8.01 Captions and Headings. The Article and paragraph headings throughout
this Agreement are for convenience and reference only, and shall in no way be
deemed to define, limit, or add to the meaning of any provision of this
Agreement.
8.02 No Oral Change. This Agreement and any provision hereof, may not be
waived, changed, modified, or discharged orally, but only by an agreement in
writing signed by all parties hereto.
8.03 Non-Waiver. Except as otherwise expressly provided herein, no waiver
of any covenant, condition, or provision of this Agreement shall be deemed to
have been made unless expressly in writing and signed by the party against whom
such waiver is charged; and (i) the failure of any party to insist in any one or
more cases upon the performance of any of the provisions, covenants, or
conditions of this Agreement or to exercise any option herein contained shall
not be construed as a waiver or relinquishment for the future of any such
provisions, covenants, or conditions, (ii) the acceptance of performance of
anything required by this Agreement to be performed with knowledge of the breach
or failure of a covenant, condition, or provision hereof shall not be deemed a
waiver of such breach or failure, and (iii) no waiver by any party of one breach
by another party shall be construed as a waiver with respect to any other or
subsequent breach.
8.04 Time of Essence. Time is of the essence of this Agreement and of each
and every provision hereof.
8.05 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements,
understandings and the letters of intent between the parties.
8.06 Governing Law.This Agreement and its application shall be governed by
the laws of Utah.
8.07 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.08 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
15
Strainwise, Inc.
1350 Independence St.
Suite 300
Lakewood, CO 80125
With copy to:
William T. Hart
Will Hart
Hart & Hart, LLC
1624 Washington Street
Denver, CO 80203
harttrinen@aol.com
4th Grade Films, Inc.
1338 S. Foothill Drive, #163
Salt Lake City, Utah 84108
With a copy to:
Leonard Burningham
455 East 500 South, Suite 205
Salt Lake City, Utah 84111
lwb@burninghamlaw.com
8.09 Binding Effect. This Agreement will be binding upon the parties
herein even though this Agreement may not be signed by all persons whose names
appear on the signature page of this Agreement. This Agreement shall inure to
and be binding upon and be enforceable against the respective successors of each
of the parties to this Agreement. No party may assign or transfer any of its
rights or obligations hereunder, without the prior written consent of the other
parties hereto. Nothing in this Agreement, express or implied, shall give to any
person other than the parties hereto any benefit or any legal or equitable
right, remedy or claim under this Agreement.
8.10 Effect of Closing. All representations, warranties, covenants, and
agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion, or other writing provided for in it, shall survive the
Closing of this Agreement and shall remain in effect for a period of twelve
months thereafter.
8.11 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein. Neither party will
intentionally take any action, or omit to take any action, which will cause a
breach of such party's obligations pursuant to this Agreement.
16
8.12 Expenses. Each of the parties hereto agrees to pay all of its own
expenses (including without limitation, attorneys' and accountants' fees)
incurred in connection with this Agreement, the transactions contemplated herein
and negotiations leading to the same and the preparations made for carrying the
same into effect. Each of the parties expressly represents and warrants that no
finder or broker has been involved in this transaction and each party agrees to
indemnify and hold the other party harmless from any commission, fee or claim of
any person, firm or corporation employed or retained by such party (or claiming
to be employed or retained by such party) to bring about or represent such party
in the transactions contemplated by this Agreement.
17
AGREED TO AND ACCEPTED as of the date first above written.
STRAINWISE, INC.
By:/s/ Shawn Phillips
-----------------------------------
Shawn Phillips, Chief Executive Officer
SHAREHOLDER OF STRAINWISE, INC.
/s/ Erin Phillips
-------------------------------------
Erin Phillips
Holder 20,430,000 shares of common stock
4TH GRADE FILMS, INC.
By:/s/ Shane Thueson
---------------------------------
Shane Thueson, Chief Executive Officer
18
EXHIBIT A-1
Allocation of Shares of Common Stock
Shares of Shares of FHGR
Name of Shareholder Strainwise Owned to be Received
------------------ ---------------- --------------
Erin Phillips 20,430,000 23,124,184
19
EXHIBIT A-2
Name of Shares to be Purchase
Shareholder sold to FHGR Price for Shares
----------- ------------ ----------------
James Doolin 313,000 $ 78,250
Quad D Partnership 725,000 $ 42,050
--------- --------
TOTAL 1,038,000 $120,300
========= ========
20
EXHIBIT A-3
Amount to be Amount to be Amount to be paid
Name of Creditor Amount of Debt paid by James Doolin paid with $109,740 with $25,000 deposit
---------------- -------------- -------------------- ------------------ --------------------
James Doolin - Accounts Payable $10,850.00 $10,850.00 $ 0 $ 0
James Doolin (Note Payable) $80,916.64 $15,555.64 $ 65,361
Michael Doolin (Note Payable) $28,268.08 $ 0 $ 28,268 $ 0
Leonard W. Burningham - A/P $16,111.35 $ 0 $ 16,111 $ 0
Leonard W. Burningham - A/P $25,000.00 $ 0 $ 0 $25,000
---------- ---------- -------- -------
$161,146.07 $26,405.64 $109,740 $25,000
21
EXHIBIT B
Officers and Directors (Strainwise)
Name Position
Shawn Phillips Chief Executive Officer, Secretary, and a Director
Erin Phillips President, Chief Financial and Accounting Officer
and a Director
David Modica Quality Control Manager and a Director
22
EXHIBIT C
Strainwise Balance Sheet
The Balance Sheet of Strainwise as of April 30, 2014 is attached to the
forepart of this 8-K report.
23
EXHIBIT D
Patents, Trademarks, Trade Names and
Copyrights (Strainwise)
Patents
Patent Number Date of Patent Description
None.
Trademarks
Colorado Secretary of State Document number 20141301600
Colorado Secretary of State Document number 20141082474
Colorado Secretary of State Document number 20141092397
Trade Names
None.
Copyrights
None.
24
EXHIBIT E
Material Contracts and Leases (Strainwise)
Master Services Agreements (nine)
Non-Compete and Confidentiality Agreements
Operating Leases (four locations)
25
EXHIBIT F
Insurance Policies (Strainwise)
Coverage Expiration
Policy Insurer Limit Date
------ ------- ---------------------------
None.
Litigation (Strainwise)
Case Name Case Number Disposition Description
None.
26
EXHIBIT G
Assets (Strainwise)
As shown on the April 30, 2014 balance sheet of Strainwise
27
EXHIBIT H
Options, Warrants and Convertible Securities (Strainwise)
Between January 2014 and July 31, 2014 Strainwise sold 2,140,700 units
in a private placement. Each unit consists of one share of common stock and one
Series A warrant. Every two warrants allow the holder to purchase one share of
the common stock of Strainwise at a price of $5.00 on or before January 31,
2019.
Effective January 16, 2014, Strainwise issued 500,000 $0.10 warrants to
acquire 500,000 shares of Strainwise common stock an any time prior to January
31, 2019.
28
EXHIBIT I
Officers and Directors (FHGR)
Name Position
Shane Thueson President, Chief Executive Officer and a
Director
Nicholl Doolin Chief Financial Officer and a Director
John Winchester Secretary and a Director
Bank Accounts, Safe Deposit
Boxes, Powers of Attorney (FHGR)
4th GRADE FILMS, INC.
Wells Fargo Bank
Acct. No. - 3928070030
No safe deposit boxes or powers of attorney
29
EXHIBIT J
Financial Statements - Changes in Financial
Condition (FHGR)
Financial statements are incorporated by reference to FHGR's 10-Q report for
period ended March 31, 2014.
30
EXHIBIT K
Patents, Trademarks, Trade Names and Copyrights (FHGR)
All rights associated with the film "Four Stories of St. Julian".
31
EXHIBIT L
Contracts (FHGR)
All distribution agreements and all pre-production and other rights
otherwise related to the film "Four Stories of St. Julian".
32
EXHIBIT M
Insurance Policies (FHGR)
None.
Litigation (FHGR)
None.
33
EXHIBIT N
Options, Warrants and Convertible Securities (FHGR)
None.
3
