LOTO INC. FOUNDERS' AGREEMENT
Execution
Version
FOUNDERS'
AGREEMENT
THIS FOUNDERS' AGREEMENT (the
“Agreement”) is
made as of the date set forth on the signature page hereto by and among LOTO INC., a Nevada corporation
(the “Company”), A FEW BRILLIANT MINDS
INC. (the
“Inventor”) and
MHALKA CAPITAL INVESTMENTS
LTD. (“Mhalka,” and together
with the Inventor, the “Founders” and
together with the Company and the Inventor, the “Parties”).
Whereas, Mobilotto Systems
Inc. (“Mobilotto”) is an
Ontario corporation that has a business model utilizing a proprietary software
application which allows for the encrypted purchase of lottery tickets on a
mobile device (the “Technology”);
Whereas, as of the date
hereof, Mobilotto is the sole owner and holder of all intellectual property
rights pertaining to the Technology;
Whereas, Mhalka is a company
whose principals have expertise in the areas of corporate development, finance,
investments, mergers, acquisitions and strategic business
alliances;
Whereas, the Founders have
agreed that it is in their respective mutual best interests to enter into
strategic partnership in the form of the Company which was incorporated on April
22, 2009;
Now, therefore, in
consideration of the mutual representations, warranties, covenants and
agreements set forth in this Agreement, the Parties hereto hereby agree as
follows:
Section
1. Purchase and
Sale.
1.1 Mhalka
hereby purchases twenty million (20,000,000) shares of Company Common Stock (the
“Mhalka
Shares”) in consideration for payment of the aggregate purchase price of
twenty thousand dollars ($20,000.00) at a per share purchase price of Company
Common Stock of $0.001 par value per share (the “Mhalka Purchase
Price”);
1.2 The
Inventor hereby purchases twenty million (20,000,000) shares of Company Common
Stock (the “Inventor
Shares”) in consideration of the contribution to the Company of all of
the issued and outstanding equity interests of Mobilotto (the “Mobilotto Shares”),
the value of which is twenty thousand dollars ($20,000.00) at a per share
purchase price of Company Common Stock of $0.001 par value per share (the “Inventor Purchase
Price”).
1.3 Prior
to the Closing the Inventor shall have completed the assignment and transfer of
all of the Intellectual Property, as such term is defined below, to
Mobilotto.
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1.4 The
Parties intend that the purchase of the Mhalka Shares and the Inventor Shares
(collectively referred to herein as the “Company Shares”) and
the transfers of the Mobilotto Shares and Intellectual Property shall constitute
transactions in which no gain or loss is recognized in accordance with the
provisions of Section 351 of the Internal Revenue Code of 1986, as
amended.
1.5 The
“Intellectual
Property” which the Inventor shall transfer to Mobilotto prior to the
Closing means all rights arising from or in respect of any of the following in
any jurisdiction throughout the world as relates to the Technology: (i) patents,
patent applications, patent disclosures and inventions, utility models,
supplementary protection certificates and applications therefore (including
provisional applications, invention disclosures, certificates of invention and
applications for certificates of invention) and divisionals, continuations,
continuations-in-part, patents of addition, reissues, renewals, extensions,
re-examinations, and equivalents thereof, including any continuations,
continuations-in-part, renewals and reissues for any of the foregoing, (ii)
Internet domain names, trademarks, service marks, service names, fictional
business names, trade dress rights, trade names, brand marks and names, slogans,
logos and corporate names and registrations and applications for registration
thereof together with all of the goodwill associated therewith, (iii) copyrights
(registered or unregistered, published and unpublished) and copyrightable works
and registrations and applications for registration thereof, and mask works and
registrations and applications for registration thereof, (iv) computer software,
(specifically excluding all shrink wrap software), data, data bases and
documentation thereof, (v) trade secrets and other confidential and proprietary
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, process technology,
research and development information, drawings, blue-prints, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vi) copies
and tangible embodiments thereof (in whatever form or medium); URLs and internet
domain names, and all other intellectual property, industrial rights or
proprietary rights (however defined); in each case, owned, used, or licensed by
the Inventor as licensee or licensor.
Section
2 Closing.
The
purchase and sale of the Company Shares shall occur at a Closing to be held
contemporaneously with the execution hereof (the “Closing
Date”). At the Closing, Mhalka is hereby delivering the Mhalka
Purchase to the Company and the Company is issuing the Mhalka Shares registered
in the name of Mhalka. At the Closing, the Inventor is hereby
assigning, transferring and delivering the Inventor Purchase Price to the
Company and the Company is issuing the Inventor Shares registered in the name of
the Inventor.
Section
3. Corporate
Governance.
3.1. Composition of the
Board. The Board of Directors of the Company (the “Board”) shall be
composed of an equal number of persons nominated by each Founder. All
Founders: (i) shall accept such nominations as exclusive and binding as and when
made; and (ii) shall vote only for such persons nominated by the Founders,
respectively, so that the Board at all times consists of an equal number of
representatives of each Founder. If for any reason at any time the
Board is not composed of an equal number of persons nominated by each Founder,
no actions may be taken by the Board other than duly appointing or duly electing
a nominee of the Founder then having the right to equalize representation on the
Board with such Founder’s nominees.
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3.2. Vacancies;
Removal.
(a) If
one of the directors shall cease to serve as a director of the Company for any
reason, including without limitation any of the reasons set forth in Section
3.2(b) below, the vacancy resulting thereby shall be filled by another person
nominated by the Founder who appointed such vacating director, with the same
full force and effect as set forth in Section 3.1 above.
(b) Except
as provided in this Section 3.2 each Founder agrees that, at any time that it is
then entitled to vote for the election or removal of directors, it will not vote
in favor of the removal of a director appointed by a Founder unless: (i) the
nominating Founder of such director has recommended such removal or the
nominating Founder of such director has waived Section 3.2(a) of this Agreement;
(ii) such director has been found by a court of competent jurisdiction or
arbitral body to have acted in a manner constituting gross negligence or willful
misconduct in his or her capacity as a director of the Company; or (iii) the
Board determines in good faith on the basis of reasonable independent evidence
that such director is impaired from properly performing his or her duties by
reason of any physical or mental incapacity for a period of more than ninety
(90) consecutive days in any six month period.
3.3. Cooperation. Each
Founder shall vote all of its shares of common stock of the Company (the “Common Stock”) and
shall take all other necessary or desirable actions within its control
(including, without limitation, attending all meetings in person or by proxy for
purposes of obtaining a quorum, executing all written consents in lieu of
meetings and voting to remove members of the Board, as applicable), and the
Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special Board and shareholder meetings
and voting to remove members of the Board, as applicable), to effectuate the
provisions of this Section 3.
Section
4. Restrictions on Transfers of
Stock.
4.1. A
Founder may transfer his Common Stock to only as follows (such transfers are
referred to herein as “Permitted Transfers”)
(i) to their estate in the event of death; (ii) to such Founder's spouse or
issue; (iii) to a trust for the benefit of such Founder’s spouse or issue; (iv)
to a family partnership, limited liability company or similar entity of which
the Founder is the only member; (v) to an “affiliate” of such Founder, which
term shall include any person who, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with such
Founder; or (vi) to any other person or entity in circumstances where such
transfer is necessary for purposes of regulatory compliance, tax efficiencies or
estate planning, and where the other Founder has consented to such transfer,
which consent shall not be unreasonably withheld.
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4.2 As
a condition to any Permitted Transfer, unless otherwise agreed by unanimous
consent of the Founders, the Founder shall retain by irrevocable written proxy
all rights contained herein to nominate, vote for directors or vote for removal
of directors of the Company, and shall not permit any and all such rights to be
exercised by any other persons or legal entities other than the
Founder. In the event of the Founder’s incapacity or death, the
Founder’s legal estate, legal custodian or legal guardian shall retain all such
Founder rights.
4.3 No
Founder shall transfer any shares of Common Stock, whether owned on the date
hereof or acquired hereafter, other than in a Permitted Transfer, without the
prior unanimous written consent of the Founders.
4.4. Any
transferee of Common Stock (including any transferee pursuant to a Permitted
Transfer) who is not a Founder shall upon consummation of and as a condition to
such transfer, execute and deliver to the Company an agreement in form and
substance satisfactory to the Founders, pursuant to which it agrees to be bound
by the terms of this Agreement for the benefit of the Parties hereto and such
transferee shall thereafter be deemed to be subject to the terms and conditions
of this Agreement, except that any and all rights to nominate, vote for
directors or vote for removal of directors shall not be transferred to any such
transferee and the Founder shall retain all such rights, as provided in Section
4.2 above.
4.5. Any
transfer or attempted transfer of Common Stock in violation of any provision of
this Agreement shall be null and void, and the Company shall not record such
transfer on its books or treat any purported transferee of such Common Stock as
the owner of such Common Stock for any purpose.
Section
5. Right of First
Refusal.
5.1. Except
with respect to Permitted Transfers, in the event of any proposed transfer or
series of proposed transfers of Common Stock to a third party by any Founder (in
each case, a “Selling
Founder”), the following shall apply if and only if the other Founder
consents to such transfer:
(a) The
Selling Founder shall give the other Founders (each, a “First Offeree”) and
the Company written notice of its intent to transfer all or portion of its
Common Stock (the “First Offer Notice”)
and the minimum price and terms and conditions of such transfer, and offer to
sell such Common Stock to the First Offeree.
(b) Following
receipt of a First Offer Notice, a First Offeree may purchase such Common Stock
proposed to be sold pro rata at the percentage of Common Stock then held by such
First Offeree, which proportion shall be determined with respect to all Founders
of the Company as if the Selling Founder had no Common Stock of the
Company.
(c) If
the First Offeree shall not, within 30 days after receipt of the First Offer
Notice accept the offer contained therein, then subject to Section 4 the Selling
Founder shall be free to sell the interests specified in the First Offer Notice,
at a price and on other terms and conditions no less favorable than those
specified in the First Offer Notice, at any time within 30 days following the
expiration of the such First Offer 30-day period, after which the provisions of
the First Offer must be re-initiated.
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(d) If
the Selling Founder shall not have consummated the proposed transfer within 120
days after the expiration of the 30-day period referred to in clause (c) above,
the Selling Founder may not thereafter sell such Common Stock without again
complying with the First Offer Notice provisions hereof.
(e) If
the First Offeree shall accept such offer within 30 days after receipt of the
First Offer Notice, then the First Offeree shall purchase, for cash, the Common
Stock specified in such First Offer Notice as promptly as reasonably
practicable, but in no event later than 75 calendar days after receipt of the
First Offer Notice, or such later date as the Selling Founder may agree in
writing.
(f) In
the event that a First Offeree declines to purchase all or any portion of
Selling Founder’s Common Stock pursuant to a First Offer Notice, then other
First Offerees may purchase any or all of such declined Common Stock pro rata as
set forth in clause (b) above.
5.2. Condition Precedent on
Transfer. If any Founder shall transfer any Common Stock or
derivative interest therein to any person pursuant to the provisions hereof, it
shall be a condition precedent to such transfer that such transferee shall agree
in writing to be bound by the terms and conditions of this Agreement otherwise
such transfer shall be deemed to be null and void.
Section
6. Tag-Along
Rights.
6.1. Except
with respect to Permitted Transfers, no Selling Founder shall, in any one
transaction or any series of related transactions, directly or indirectly
transfer to a person who is not a party to this Agreement, any or all of its
shares of Common Stock unless (i) consent is granted by the other Founder; (ii)
the Selling Founder has complied with the Rights of First Refusal provided
herein; and (iii) the terms and conditions of such transfer to such third party
include an offer to each other Founder to include, at the option of such other
Founder, in such transfer, a number of shares of Common Stock owned by such
other Founder, determined in accordance with Section 6.2 hereof, on the same
terms and conditions as those applying to the Selling Founder. Prior
to effecting any transfer of Common Stock subject to this Section 6, the Selling
Founder shall send a written notice of the terms of such proposed transfer (the
“Tag-Along
Notice”) to the other Founder, who for purposes of this Section 6 shall
not be deemed to be a Selling Founder, unless such other Founder initiates any
transaction or any series of related transactions (other than a Permitted
Transfer), directly or indirectly, with a view to transfer Common Stock to a
Person who is not a party to this Agreement. At any time within 14
days after receipt of the Tag-Along Notice, each other Founder may accept the
offer included in the Tag-Along Notice for up to such number of shares of Common
Stock as is determined in accordance with the provisions of Section 6.2 by
furnishing written notice of such acceptance to the Selling Founder and
delivering to the Selling Founder the certificate or certificates representing
the shares of Common Stock to be transferred pursuant to such offer by such
other Founder.
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6.2. Each
Founder (other than the Selling Founder) shall have the right, pursuant to
Section 6.1 hereof, to sell pursuant to the third party's offer a number of
shares of Common Stock (rounded down to the nearest whole number of shares)
equal to the product of (A) the total number of shares of Common Stock to be
acquired by the third party, and (B) a fraction, the numerator of which shall be
the aggregate number of shares of Common Stock then owned by such Founder and
the denominator of which shall be the aggregate number of shares of Common Stock
then outstanding (the “Tag Along
Amount”). The Selling Founder shall reduce the number of
shares of Common Stock it is to sell accordingly to allow for the Tag Along
Amount of shares of Common Stock of the other Founder to be sold.
6.3. Simultaneously
with the consummation of the transfer of the shares of Common Stock held by the
Selling Founder and any other Founder to the third party pursuant to the third
party's offer, the Selling Founder shall notify such other Founder thereof and
shall cause the third party purchaser to remit to such other Founder the total
sale price of the shares of Common Stock transferred by such other Founder to
such third party. The Selling Founder may deduct from the sale price
payable to such other Founder pursuant to this Section 6 such other Founder's
pro rata portion of the reasonable out-of-pocket fees and expenses payable by
the Selling Founder in respect of the completion of such sale, including,
without limitation, brokers', legal and accounting fees and
expenses.
6.4. If
within 14 days after the receipt of the Tag-Along Notice, any Founder (other
than the Selling Founder) has not accepted the offer contained in the Tag-Along
Notice, such other Founder shall be deemed to have waived any and all rights
with respect to the transfer of shares of Common Stock described in the
Tag-Along Notice and the Selling Founder may for a period of 30 days from the
date of the Tag-Along Notice to transfer not more than the amount of shares of
Common Stock described in the Tag-Along Notice plus any shares of any other
Founder included in such transfer pursuant to this Section 6, on terms not more
favorable to the Selling Founder than those set forth in the Tag-Along
Notice. If, at the end of such time period the Selling Founder has
not completed the transfer of shares of Common Stock held by the Selling Founder
and any other Founder in accordance with the terms of the third party's offer,
the Selling Founder shall return to all other Founders all certificates
representing the shares of Common Stock which such other Founder delivered for
sale or other disposition pursuant to this Section 6. Any subsequent
transfer after the expiration of such 30 day period shall require re-initiation
of Tag-Along Notice.
Section
7. Conflicting
Agreements. Each Founder represents and warrants that such
Founder has not granted and is not a party to any proxy, voting trust or other
agreement which is inconsistent with or conflicts with any provision of this
Agreement, and no holder of Common Stock shall grant any proxy or become party
to any voting trust or other agreement which is inconsistent with or conflicts
with any provision of this Agreement.
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Section
8. Covenants, Representations
and Warranties.
8.1 Each
Party hereto represents and warrants to all other Parties hereto as
follows:
(a) The
Party has full power and authority to execute, deliver and perform its
obligations under this Agreement;
(b) This
Agreement has been duly and validly authorized, executed and delivered by the
undersigned Party, and constitutes a valid and binding agreement, enforceable
against such Party in accordance with the terms and conditions herein, except to
the extent that enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally; and
(c) The
Party is not a signatory or adherent to any agreement which is inconsistent with
the rights of any party hereunder or otherwise conflicts with the provisions
hereof.
(d) The
Party is in good standing and is duly authorized under its respective charter
and constitutional governing instruments to execute and deliver this
agreement. There is no order and no proceeding, investigation or
claim of any kind whatsoever, at law or in equity, pending or, to the Parties
knowledge, threatened against the Parties, which would give a third party the
right to enjoin or rescind the transactions contemplated by this Agreement or
otherwise prevent the Parties from complying with the terms and provisions of
this Agreement.
(e) The
Party does not require any governmental consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing to execute, deliver and cause the effectiveness of this
Agreement.
8.2 The
Inventor hereby covenants, represents and warrants to all other Parties hereto
as follows:
(a) The
Inventor is the sole beneficial and record owner of the Mobilotto Shares and has
good and marketable title to all Mobilotto Shares free and clear of all Liens
convertible rights, derivative rights, pre-emptive rights and contingent rights,
and the Company shall at the Closing acquire from the Inventor all of the
Inventor’s right, title and interest in and to the Mobilotto
Shares. The Mobilotto Shares represent the sole equity ownership
interests in Mobilotto. No other person has any right, title or
interest in the Inventor’s Mobilotto Shares, contingent or otherwise, or any
option or other right to acquire the Mobilotto Shares or claim of any direct or
indirect interests in the Mobilotto Shares, or any ownership or rights of any
nature or kind in any other issued or unissued securities or equity interests of
Mobilotto. The Mobilotto Shares are not the subject of any domestic
consent decree or domestic relations order. If the Mobilotto Shares
are marital property, the Inventor has fully disclosed the existence of this
Agreement to his spouse and obtained written consent for the sale of the
Mobilotto Shares hereunder. Other than the transactions contemplated
by this Agreement, the Inventor has not entered into any agreement or letter of
intent or other commitment to acquire or dispose of any securities or assets of
Mobilotto. For purposes of this Agreement “Lien” means any and
all liens, charges, mortgages, deeds of trust, pledges, easements, encumbrances
of any and all nature or kind, derivative third party rights and direct or
indirect contingent third party rights.
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(b) The
Inventor has not previously assigned, transferred, conveyed or otherwise
encumbered any of his rights, title or interests in any of the Intellectual
Property or the business plan developed for Mobilotto. The Inventor
was the sole owner of the Intellectual Property prior to its transfer to
Mobilotto and no other persons or entities has or shall have any claim of
ownership with respect to any part of the Intellectual Property. To
the best of the Inventor’s knowledge after reasonable investigation, no persons
are infringing any of the intellectual property rights of the Inventor in
connection with respect to the Technology and the Technology does not infringe
on any of the intellectual property rights of any other persons or
parties. As of the Closing Mobilotto is in compliance with any
and all federal, state, provincial, regional, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other similar
pronouncement binding upon or affecting Mobilotto as adopted or issued by any
and all governmental authorities having competent jurisdiction over Mobilotto,
except where non-compliance would not materially or adversely affect the
Company.
(c) Prior
to the Closing, the Inventor shall have transferred to Mobilotto: (i) the
Intellectual Property, and all rights and all derivative rights thereof; and
(ii) any and all rights to the Mobilotto business model, in each case free and
clear of all Liens and Indebtedness. At the Closing Mobilotto shall be the sole
owner of all of the Intellectual Property, and all rights and all derivative
rights thereof free and clear of all Liens and Indebtedness. For
purposes of this Agreement, “Indebtedness” means
(a) all liabilities and obligations for credit in advance of payment, borrowed
money or funded indebtedness or issued in substitution for or exchange for
borrowed money or funded Indebtedness (including obligations in respect of
principal, accrued interest, any applicable prepayment charges or premiums and
any unpaid fees, expenses or other monetary obligations in respect thereof); (b)
any indebtedness evidenced by any note, bond, debenture or other debt security;
(c) any lease obligations required to be capitalized in accordance with GAAP;
(d) all obligations for reimbursement then-required to be made as an obligor of
any banker’s acceptance or similar transactions (including, without limitation,
standby letters of credit and similar contingent sureties and guaranties); (e)
all obligations for the deferred purchase price of property, all conditional
sale obligations under any title retention agreement; (f) any obligations with
respect to the termination of any interest rate hedging or swap agreements; (g)
all obligations of the type referred to in clauses (a) through (f) of this
definition with respect to any Person for the payment of which either Company is
responsible or liable, directly or indirectly, as guarantor, obligor, surety or
otherwise (excluding intercompany debt); and (h) obligations of the type
referred to in clauses (a) through (g) of this definition with respect to other
Persons secured by any Lien on any property or asset of the
Company.
(d) As
of the Closing, the Inventor shall assume primary responsibility for payment of
any and all Mobilotto Indebtedness existing prior to Closing. As of
the Closing Date, Mobilotto shall have no liabilities, contingent or otherwise,
with respect to any and all vendors, suppliers, employees, former employees,
contractors, consultants or professional service providers or any other accounts
of any nature or kind.
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(e) At
the Closing, the Inventor is hereby delivering the Mobilotto Shares to the
Company together with a duly executed stock power, whereby the Company shall
irrevocably become the sole legal and equitable owner of the Mobilotto
Shares. At the Closing, there shall be no shall no direct or indirect
Liens or contingent Liens on any of the Mobilotto assets or the Mobilotto Shares
or the Intellectual Property.
(f) All
books and records of Mobilotto are true, correct and complete in all material
respects and shall continue to be maintained in accordance with good corporate
practice and as otherwise required pursuant to the laws, rules and regulations
applicable to the Company, and shall at all times be made available to all
directors of the Company and to each of the Founders and their respective
authorized representatives during ordinary business hours upon reasonable
notice. The Inventor will execute any and all agreements, filings or
other documents necessary to document and record the transfer of the
Intellectual Property to the Company, as the Company may reasonably
request.
(g) The
Inventor hereby acknowledges that no employment relationship between the Company
and the Inventor is or will be created hereby.
(h) The
Inventor represents and warrants that Inventor is acquiring the Company Shares
for investment for Inventor's own account, not as a nominee or agent and not
with the view to, or for resale in connection with, any distribution
thereof. The Inventor understands that the Company Shares have not
been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act that
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of such Inventor's representations as expressed herein.
Inventor has not been formed for the specific purpose of acquiring the Company
Shares. Inventor further understands that the Company shall have no obligation
to register the Company Shares under the Act on behalf of Inventor.
8.3 Mhalka
hereby covenants and agrees as follows:
(a) At
the Closing, Mhalka is hereby paying the Mhalka Purchase Price for the Mhalka
Shares.
(b) Mhalka
hereby covenants and agrees to develop and execute strategic plans to obtain
operational financing for the Company in accordance with the budget mutually
agreed upon by the Founders and approved by the Board of
Directors. The funds received by the Company in respect of the Mhalka
Purchase Price shall be utilized in accordance with Mhalka’s financing plans for
the Company.
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8.4 Mhalka
and the Inventor hereby covenant and agree as follows:
(a) All
fees costs, expenses and disbursements of the Company after acquisition of
Mobilotto will be at the sole charge of the Company from proceeds of financing
activities.
(b) The
Inventor and Mobilotto will execute the operation and deployment of the
Technology according to the Mobilotto business plan and assure compliance with
all applicable governmental authorities and third parties necessary for legal
operation of the Technology.
(c) The
Parties will use their respective best efforts to obtain any and all approvals
from all government authorities and contract partners which may be applicable to
formation and commencement of operations of Mobilotto and the
Company.
(d) Mobilotto
shall after acquisition by the Company continue its operations and deploy its
business plan as a wholly owned subsidiary of the Company. All
officers and employees of Mobilotto shall continue in their respective
capacities for Mobilotto.
(e) Neither
Mhalka nor Mobilotto nor any of their respective affiliates will grant any
contingent interests, pledges or options on Company Shares without the prior
unanimous consent of the Founders. Any unauthorized pledge or option
shall be deemed null and void and shall not be recorded on the books and records
of the Company.
Section
9. Indemnification. From
and after the Closing, the Inventor shall indemnify the Company and Mhalka and
their respective directors, officers, employees, affiliates, stockholders,
agents, attorneys, representatives, successors and permitted assigns, against
and hold such Parties harmless from any and all loss or costs incurred by those
Parties in any action to defend the Company’s use of or rights to the Mobilotto
Shares, the Intellectual Property and Mobilotto’s business plan, which in any
such case is attributable to facts or circumstances which existed prior to the
Closing date.
Section
10 Duration of Agreement;
Termination. The rights and obligations of each Founder under
this Agreement shall terminate at such time as the Founders shall mutually
agree.
Section
11. Amendment and
Waiver. Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement shall be effective
against the Company or any Founder unless such modification, amendment or waiver
is approved in writing by all of the Founders. The failure of any
party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
Section
12. Severability. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
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Section
13. Entire
Agreement. This agreement is the complete and entire agreement
and understanding among the Parties with respect to the subject matter hereof
and supersedes any and all prior understandings, agreements or representations
by or among the Parties, written or oral, which may have related to the subject
matter hereof in any way, including but not limited to the memorandum of
understanding contemplating this agreement. Nothing in this Agreement
shall limit or impair the right of the Company or any Founder party to this
Agreement to enter amendments, into additional agreements regarding
supplemental terms and conditions applicable to ownership or rights pertaining
to the Common Stock in accordance with the terms and conditions of this
Agreement.
Section
14. Information and
Accounting. The Company shall furnish the Founders and their
representatives with information concerning the business and operations of the
Company from time-to-time as determined by the Board.
Section
15. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the jurisdiction of incorporation of the Company
without giving effect to the principles of conflicts of law.
Section
16. Dispute
Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled exclusively
by binding arbitration in Xxxxxxx, Xxxxxxx, Xxxxxx pursuant to the rules of an
arbitral forum mutually agreed upon by the Founders. In the event
that an arbitral forum is not agreed upon after delivery of notice by the
Founder initiating such arbitration and forty-five days after confirmed receipt
of such notice by the other Founder, then any court having competent
jurisdiction over the Founders shall have full power and authority to appoint an
arbitrator in Xxxxxxx, Xxxxxxx, Xxxxxx, who shall be a solicitor with not less
than ten years corporate transactional experience. The fees and costs
of such arbitration shall be paid by the non-prevailing party.
Section
17. Confidentiality;
Non-Competition. Each Founder acknowledges that all
information about the Company and its finances and operations is confidential
and proprietary and each Founder agrees not to disclose any such information to
any other person or entity, provided, however, that the foregoing shall not
limit or restrict the ability of any Founder who is also a director, officer or
employee of the Company from taking any actions necessary or appropriate to the
performance of its duties in connection therewith; provided, further, that each
Founder may disclose such information (1) to its affiliates, attorneys,
accountants, consultants and other professionals to the extent necessary to
utilize their services in connection with investment in the Company; or (2) as
may otherwise be required by law, provided that such Founder takes reasonable
steps to minimize the extent of any such required disclosure. The
Parties hereto expressly agree that no Founder shall at any time engage in
business ventures or activities which directly compete with the Company's
business, and each Founder further agrees that the foregoing restriction shall
apply for a period of three (3) years following the date on which any person or
legal entity ceases to be a Founder of the Company. Notwithstanding
the foregoing or anything to the contrary herein, the Parties hereto expressly
acknowledge and agree that each of the Parties hereto and their affiliates are,
or may in the future, be involved in other business activities and nothing
herein shall be interpreted to limit such other activities so long as such
activities do not directly compete against the Company. The Parties
hereto and their respective affiliates may at any time engage in and possess
interests in other businesses and ventures of any and every nature and
description, independently or with others, however, neither Founder nor any
other person or affiliate of such Founder shall have any right, title or
interest in or to the other Founder’s independent activities or to the income or
profits derived therefrom.
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Loto Inc.
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Founders'
Agreement
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Section
18.
Legend. Each
Founder and the Company shall take all such action necessary (including
exchanging with the Company certificates representing shares of Common Stock
issued prior to the date hereof) to cause each certificate representing
outstanding shares of Common Stock to bear restricted transfer legends
containing the following provision:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS SET
FORTH IN THE FOUNDERS’ AGREEMENT A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE
COMPANY.
Section
19. After-Acquired
Shares. All of the provisions of this Agreement shall apply to
all of the shares of Common Stock now owned or hereafter issued or transferred
to a Founder or to its Permitted Transferees who have become a party to this
Agreement in connection with any additional issuance, purchase, exchange,
exercise of conversion rights or reclassification of shares of Common Stock,
corporate reorganization, or any other form of recapitalization, or
consolidation, or merger, or share split, or share dividend, or capitalization
issue, or which are acquired by a Founder in any other manner.
Section
20. Availability of Equitable
Remedies. Each Founder acknowledges that a breach of the
provisions of this Agreement could not adequately be compensated by money
damages. Accordingly, each party hereto shall be entitled, in addition to any
other right or remedy available to it, to an injunction restraining such breach
or a threatened breach and to specific performance of any provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the Parties hereto hereby consent to such an
injunction and to the ordering of specific performance.
Section
21. Notices. All notices
and communications to be given or otherwise to be made to any party to this
Agreement shall be deemed to be sufficient or contained in a written instrument
if sent by messenger, telecopied, faxed or mailed by registered or certified
mail, or by a recognized national or international courier service, postage or
charges prepaid, return receipt requested, to the addresses set forth on the
signature page hereto (or to such other address, as may be specified by the
Parties hereto from time to time).
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Loto Inc.
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Founders'
Agreement
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Section
22. Counterparts. This
Agreement may be executed in separate counterparts each of which shall be an
original and all of which taken together shall constitute one and the same
agreement. Signatures on this Agreement delivered electronically by
e-mail, scan, fax or telecopier shall be considered delivery of original
signatures for purposes of effectiveness of this Agreement to the same and full
extent as an original thereof.
# # #
Page 13
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Loto Inc.
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Founders'
Agreement
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IN
WITNESS WHEREOF, the Parties hereto have executed this Founders' Agreement as of
this 13th day of
May, 2009.
THE
COMPANY:
LOTO
INC.
|
By:
|
/s/ Xxxxxx Xxxxxxx
|
|
Name: Xxxxxx
Xxxxxxx
|
|
|
Title:
Corporate Secretary & Treasurer
|
|
|
Address
for Notices:
|
|
|
United
Corporate Services Inc.
|
|
|
000
Xxxxx Xxxxxxxxx Xxxxxx
|
|
|
Xxxxxx
Xxxx, XX 00000
|
THE
FOUNDERS:
A
FEW BRILLIANT MINDS INC.
|
By:
|
/s/
Xxxx Xxxxx
|
|
Name:
Xxxx Xxxxx
|
|
|
Title:
|
|
|
Address
for Notices:
|
|
|
00
XXXXXXXXX XX
|
|
|
XXXXXXX,
XXXXXXX
|
|
|
X0X
0X0
|
|
|
XXXXXX
|
MHALKA CAPITAL INVESTMENTS
LTD.
| /s/ Perpetum Finance Inc. | |
|
Name:
Perpetum Finance Inc.
|
|
|
Title:
Director
|
|
|
Address
for Notices:
|
|
|
c/o
Alyco Advisory AG
|
|
|
Xxxxxxxxxxxxxx
00/00
|
|
|
XX
Xxx 0000
|
|
|
0000
Xxxxxx
|
|
|
Xxxxxxxxxxx
|
Page 14
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