Document:

ex41.htm

Exhibit 4.1

 

CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF

of

SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK

of

DECISIONPOINT SYSTEMS, INC.

DECISIONPOINT SYSTEMS, INC., a Delaware corporation (the “Corporation”), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, does hereby make this Certificate of Designation and does hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Corporation by the Certificate of Incorporation of the Corporation, the Board of Directors duly adopted the following resolutions, which resolutions remain in full force and effect as of the date hereof:

 

RESOLVED, that, pursuant to Article FOURTH of the Certificate of Incorporation of the Corporation, as amended to date, the Board of Directors hereby authorizes the issuance of, and fixes the designation and preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions, of a series of preferred stock of the Corporation consisting of 5,000,000 shares, par value $0.001 per share, to be designated “Series C Cumulative Convertible Preferred Stock.”

 

RESOLVED, that all shares of Series C Cumulative Convertible Preferred Stock shall rank equally in all respects and shall be subject to the following terms and provisions:

 

There is hereby created out of the authorized and unissued shares of the preferred stock of the Corporation a series of preferred stock designated as the “Series C Cumulative Convertible Preferred Stock” (the “Convertible Preferred Stock”).  The number of shares constituting such series shall be 5,000,000.

 

1.           Dividends. The holders of the Convertible Preferred Stock shall be entitled to receive, when and as declared by the Corporation’s Board of Directors (the “Board of Directors”), out of funds legally available therefor, cumulative dividends payable per share at the applicable Dividend Rate (as defined below) as set forth in this Section 1.

 

(a)           Dividends on the Convertible Preferred Stock shall accrue and be cumulative and accumulate from the date of issuance of the shares of Convertible Preferred Stock (the “Date of Original Issue”), whether or not earned or declared by the Board of Directors of the Corporation, until paid.  The Corporation shall declare and pay dividends on the Convertible Preferred Stock in arrears, on March 31, June 30, September 30 and December 31 of each year (each, a “Dividend Payment Date”), commencing on the first Dividend Payment Date after the Date of Original Issue, except that if such Dividend Payment Date is not a business day, then the Dividend Payment Date will be the next business day.  The holders of the Convertible Preferred Stock shall have the right to receive any such dividend payments in the form of either (i) cash or (ii) additional duly authorized, validly issued, fully paid and nonassessable shares of Convertible Preferred Stock, at the election of a majority in interest of the Convertible Preferred Stock.  With respect to any dividend payment in the form of shares of Convertible Preferred Stock, the Convertible Preferred Stock to be issued shall be valued at the Stated Value (as hereinafter defined) and the Corporation shall set aside a sufficient number of shares of Convertible Preferred Stock for the payment of such declared dividends and deliver certificates representing such shares of Convertible Preferred Stock to the holders of shares of Convertible Preferred Stock as of the record date in payment of such declared dividends within three (3) business days after the Dividend Payment Date.  Each such dividend, whether paid in cash or shares of Convertible Preferred Stock, shall be payable to holders of record of shares of the Convertible Preferred Stock as they appear on the Corporation’s stock register on the record date which shall be the business day following a Dividend Payment Date.  Dividends in arrears for any past dividend period may be declared by the Board of Directors of the Corporation and paid on shares of the Convertible Preferred Stock on any date fixed by the Board of Directors of the Corporation, whether or not a regular Dividend Payment Date, to holders of record of shares of the Convertible Preferred Stock as they appear on the Corporation’s stock register on the record date, which record date shall not be greater than five (5) days before such Dividend Payment Date, as fixed by the Board of Directors of the Corporation.  Any dividend payment made on shares of the Convertible Preferred Stock shall first be credited against the dividends accumulated with respect to the earliest dividend period for which dividends have not been paid.

 

 

  

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(b)           The dividend rate, as adjusted from time to time as hereinafter provided (the “Dividend Rate”), on each share of Convertible Preferred Stock shall be as follows: 8% per share per annum on $3.20 (the “Stated Value” of each such share) for the period from the Date of Original Issue through the last day of the sixteenth (16th) month after the Date of Original Issue; 12% per share per annum on the Stated Value commencing on the first day of the seventeenth (17th) month through the last day of the thirtieth month (30th) after the Date of Original Issue; and 20% per share per annum on the Stated Value for each dividend period thereafter commencing on the first day of the thirty-first (31st) month after the Date of Original Issue.  Notwithstanding the foregoing, if at any time a Breach Event (as defined below) occurs, then the Dividend Rate shall be 20% per annum on the Stated Value for each dividend period or part thereof in which a Breach Event has occurred or is outstanding.  The amount of dividends per share of the Convertible Preferred Stock payable for each dividend period or part thereof shall be computed by multiplying the Dividend Rate for such dividend period by a fraction the numerator of which shall be the number of days in the dividend period or part thereof on which such share was outstanding and the denominator of which shall be 365 and multiplying the result by the Stated Value.

 

“Breach Event” means either:

 

(i)           Any material breach of any warranty or representation of the Corporation as of the date made in that certain Exchange Agreement (the “Exchange Agreement”) entered into among the Corporation and the purchasers of the Convertible Preferred Stock or any other agreement delivered in connection therewith; or

 

(ii)           Any breach by the Corporation of any covenant or obligation under this Certificate of Designations, the Exchange Agreement or any other agreement delivered in connection herewith or therewith, including, without limitation, failure to pay dividends to the holders of the Convertible Preferred Stock or redeem the Convertible Preferred Stock in accordance with this Certificate of Designation, and which breach, if capable of being cured, has not been cured within fifteen (15) days after notice of such breach has been given by the holders of a majority of Convertible Preferred Stock to the Corporation.

 

(c)           Dividends on the Convertible Preferred Stock may be paid even if, after giving effect thereto, the Corporation’s total assets would be less than the sum of its total liabilities, plus the amount that would be needed, if the Corporation were to be dissolved at the time of such distribution, to satisfy the preferential rights upon dissolution of stockholders, if any, whose preferential rights are superior to those receiving the distribution.

 

 

  

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(d)           The Convertible Preferred Stock shall, with respect to dividend rights, rank (i) senior to all classes and series of the Corporation’s common stock, par value $.001 per share (the “Common Stock”), and any class or series of capital stock of the Corporation hereafter created (together with the Common Stock, the “Junior Securities”); and (ii) pari passu with the Corporation’s Series A and Series B convertible preferred stock (collectively, the “Existing Preferred Stock”), except that, notwithstanding the foregoing, the Convertible Preferred Stock shall rank senior to the Existing Preferred Stock with respect to any dividends with respect to periods prior to the date hereof on the Existing Preferred Stock (the “Existing Accrued Dividends”).  Except as hereinafter provided, no dividends shall be declared or paid or set apart for payment on Junior Securities for any dividend period unless full cumulative dividends have been or contemporaneously are declared and paid on the Convertible Preferred Stock through the most recent Dividend Payment Date.  If full cumulative dividends have not been paid on shares of the Convertible Preferred Stock, all dividends declared on shares of the Convertible Preferred Stock shall be paid pro rata to the holders of outstanding shares of the Convertible Preferred Stock.

 

(e)            In addition to the dividend rights set forth above, the holders of the Convertible Preferred Stock shall each be entitled to receive dividends payable on the Common Stock, on a pari passu basis with the holders of shares of Common Stock, out of any assets legally available therefor, with the amount of such dividends to be distributed to the holders of Convertible Preferred Stock computed on the basis of the number of shares of Common Stock which would be held by such holder if, immediately prior to the declaration of the dividend, all of the shares of Convertible Preferred Stock had been converted into shares of Common Stock at the then current Conversion Value (as hereinafter defined).

 

2.           Voting Rights.

 

(a)           While the Convertible Preferred Stock is outstanding, and except as otherwise provided herein or by law, the holders of the Convertible Preferred Stock shall have full voting rights and powers equal to the voting rights and powers of holders of Common Stock and shall be entitled to notice of any stockholders meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote, with respect to any question upon which holders of Common Stock have the right to vote, voting together with the holders of Common Stock as one class.  Each holder of shares of Convertible Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Convertible Preferred Stock could be converted on the record date for the taking of a vote or, if no record date is established, at the date such vote is taken or any written consent of stockholders is first executed.  Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Convertible Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

 

(b)           The holders of the Convertible Preferred Stock, voting together as a single class, so long as they collectively own at least 100,000 shares of Common Stock (including shares of Common Stock underlying the Preferred Stock) (as adjusted for stock splits, stock dividends, reorganizations and the like), shall have the right to elect one (1) member to the Board of Directors at each meeting of stockholders at which members of the Board of Directors are to be elected or whenever members of the Board of Directors are to be elected by written consent of the stockholders and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director. Notwithstanding the foregoing, if holder has not been paid all accrued, earned and payable dividends and other amounts due on the Preferred Stock, then the right to elect a director shall apply so long as holder owns any Preferred Stock or at least 100,000 shares of Common Stock. Any director who shall have been elected by the holders of the Convertible Preferred Stock as provided in the immediately preceding sentences hereof, may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of a majority in interest of the holders of the Convertible Preferred Stock entitled to elect such director, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of these stockholders, and any vacancy created thereby shall be filled by the holders of the Convertible Preferred Stock represented at a meeting or pursuant to unanimous written consent.

 

 

  

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3.           Rights on Liquidation; Rank.

 

(a)           In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (any such event being hereinafter referred to as a “Liquidation”), before any distribution of assets or funds of the Corporation shall be made to or set apart for the holders of Junior Securities or the Existing Preferred Stock, the holders of Convertible Preferred Stock then outstanding shall be entitled to receive payment out of such assets and funds of the Corporation in an amount equal to $6.40 per share of Convertible Preferred Stock (such applicable amount being referred to as the “Liquidation Preference” for the Convertible Preferred Stock), plus the aggregate amount of any accumulated and unpaid dividends thereon (whether or not earned or declared) on the Convertible Preferred Stock.  If the assets or funds of the Corporation available for distribution upon a Liquidation shall not be sufficient to pay in full the payments required to the holders of outstanding Convertible Preferred Stock, then all of the assets or funds to be distributed to the holders of outstanding Convertible Preferred Stock shall be ratably distributed among the holders of the Convertible Preferred Stock in proportion to the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.

 

(b)           A Change of Control (as defined below) of the Corporation shall be governed by the terms of Section 7 below.

 

(c)           The Convertible Preferred Stock shall, with respect to redemption rights, rights on Liquidation, Change of Control and all other rights (other than dividends) in any manner, whether voluntary or involuntary, rank senior to the Junior Securities and Existing Preferred Stock.

 

4.           Actions Requiring the Consent of the Holder of Convertible Preferred Stock.  So long as any shares of Convertible Preferred Stock are outstanding, the prior written consent of the holders of a majority in interest of the Convertible Preferred Stock shall be necessary for effecting or validating any of the following transactions or acts:

 

(a)           Any amendment, alteration or repeal of any of the provisions of this Certificate of Designation (whether by merger, consolidation or otherwise);

 

(b)           Any amendment, alteration or repeal of the Certificate of Incorporation of the Corporation that will adversely affect the rights of the holders of the Convertible Preferred Stock (whether by merger, consolidation or otherwise);

 

(c)           (i) The issuance or reissuance by the Corporation of any (A) shares of preferred stock or (B) debt with an interest rate above 12% and/or a conversion feature at or below the Conversion Value, (ii) the increase in the number of authorized shares of any series of preferred stock or (iii) the authorization or creation by the Corporation of any new class or series of preferred stock (or any other action which would result in another series of preferred stock); provided that the limitations of this Section 4(c) shall not apply to preferred stock issued in payment of dividends on the Convertible Preferred Stock pursuant to this Certificate of Designation; provided further that consent of the holders of the Convertible Preferred Stock shall not be unreasonably withheld;

 

(d)           The redemption, purchase or other acquisition, directly or indirectly, of any shares of capital stock of the Corporation or any of its subsidiaries or any option, warrant or other right to purchase or acquire any such shares, or any other security, other than the redemption of Convertible Preferred Stock pursuant to the terms hereof; and

 

(e)           The declaration or payment of any dividend or other distribution (whether in cash, stock or other property) with respect to the capital stock of the Corporation or any subsidiary, other than a dividend or other distribution pursuant to the terms of the Convertible Preferred Stock and Existing Preferred Stock (excluding the Existing Accrued Dividends).

 

 

  

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5.           Conversion.

 

(a)           Right to Convert.  The holder of any shares of Convertible Preferred Stock shall have the right at any time and from time to time, including, without limitation, after receipt of a notice of redemption from the Corporation through the Redemption Date (as defined below), at such holder’s option, to convert all or any lesser portion of such holder’s shares of Convertible Preferred Stock into such number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, free and clear of all encumbrances, restrictions and legends (provided a registration statement covering such shares is declared effective), as is determined by dividing (i) the aggregate Stated Value of the shares of Convertible Preferred Stock to be converted plus accrued and unpaid dividends thereon by (ii) the Conversion Value then in effect for such Convertible Preferred Stock.  No fractional shares or scrip representing fractional shares shall be issued upon the conversion of any Convertible Preferred Stock.  With respect to any fraction of a share of Common Stock called for upon any conversion, the Corporation shall round up to the next whole share.

 

(b)           Forced Conversion.  Subject to the terms hereof, if at any time during the thirty (30) consecutive months immediately following the Date of Original Issue (i) the Corporation’s VWAP (as defined below) exceeds $10 per share (subject to adjustment for any reorganizations, stock splits, stock dividends or other similar transaction occurring after the Date of Original Issue) on each trading day for any forty-five consecutive trading days (a “Pricing Period”), and (ii) the daily average trading volume during the same Pricing Period exceeds 25,000 shares (the “Trading Volume Amount”) of Common Stock per day (such Trading Volume Amount being subject to appropriate adjustment for any reorganizations, stock splits, stock dividends or other similar transaction occurring subsequent to the Date of Original Issue, which, by way of example, shall mean that a 2:1 Common Stock split will increase the Trading Volume Amount to 50,000 shares), then the Corporation shall have the right to compel each holder of Convertible Preferred Stock to convert any or all of the Convertible Preferred Stock then held by such holder by delivering a written notice (“Forced Conversion Notice”) to each such holder; provided that (1) such Forced Conversion Notice must specify the number of shares of Convertible Preferred Stock to be converted by such holder and the date by which such holder must have completed conversion(s) of Convertible Preferred Stock aggregating to such amount (“Forced Conversion Date”), which date shall be at least 10 trading days after such holder’s receipt of such Forced Conversion Notice (a “Notice Period”), (2) the Corporation may deliver such Forced Conversion Notice(s) hereunder only within five (5) trading days following the occurrence of such Pricing Period and not prior to the completion of such Pricing Period, and (3) all holders of Convertible Preferred Stock shall be treated proportionately with respect to the Corporation’s election to force conversion hereunder.  Such forced conversion shall be subject to and governed by all the provisions relating to voluntary conversion of Convertible Preferred Stock contained herein.  Notwithstanding anything contained herein, the Corporation shall not be entitled to exercise any forced conversion right set forth in this subsection 5(b) unless at all times during the applicable Pricing Period and Notice Period (i) the resale of all Registrable Securities (as defined in the Investor Rights Agreement entered into pursuant to the Exchange Agreement, the “Investor Rights Agreement”) is covered by an effective registration statement in accordance with the terms of the Investor Rights Agreement which registration statement is not subject to any suspension or stop orders or the Registrable Securities may be sold pursuant to Rule 144 without volume limitation (“Rule 144”); (ii) the resale of such Registrable Securities may be effected pursuant to a current and deliverable prospectus that is not subject at the time to any blackout or similar circumstance or may be sold pursuant to Rule 144 without volume limitation; (iii) such Registrable Securities are listed, or approved for listing prior to issuance, on the Nasdaq Stock Market, the New York Stock Exchange or NYSE AMEX or the OTC Bulletin Board, and are not subject to any trading suspension (nor shall trading generally have been suspended on such exchange or market), and the Corporation shall not have been notified of any pending or threatened proceeding or other action to delist or suspend the Common Stock on any of such markets on which the Common Stock is then traded or listed; (iv) the requisite number of shares of Common Stock has been duly authorized and reserved for issuance as required by the terms of the Exchange Agreement; (v) none of the Corporation or any direct or indirect subsidiary of the Corporation shall be subject to any bankruptcy, insolvency or similar proceeding; (vi) the Corporation is in compliance with all its obligations hereunder to the holders of Convertible Preferred Stock, (vii) the Corporation has paid all prior dividend payments due hereunder; and (viii) the Corporation shall not be  considering a transaction that would result in a Change of Control, as contemplated by Section 7 hereof.  The Corporation shall be required on a commercially best efforts basis to keep any such registration statement continuously effective under the Securities Act until such date as is the earlier of (x) the date when all Registrable Securities covered by such registration statement have been sold or (y) the date on which all Registrable Securities may be sold without any restriction pursuant to Rule 144 as determined by the counsel to the Corporation pursuant to a written opinion letter, addressed to the Corporation’s transfer agent to such effect.

“VWAP” shall mean the daily dollar volume-weighted average sale price for the Common Stock on the principal exchange or market on which the Common Stock is then listed or admitted to trading on any particular trading day during the period beginning at 9:30 a.m., New York City Time (or such other time as such exchange or market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as such exchange or market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions.  All such determinations of VWAP shall be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock combination or other similar transaction occurring subsequent to the Date of Original Issue.

 

 

  

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(c)           Mechanics of Conversion.

 

(i)           The right of conversion hereunder shall be exercised by the holder of shares of Convertible Preferred Stock by delivering to the Corporation a conversion notice in the form attached hereto as Exhibit A (the “Conversion Notice”), appropriately completed and duly signed and specifying the number of shares of Convertible Preferred Stock that the holder elects to convert (the “Converting Shares”) into shares of Common Stock.  Promptly after the receipt of the Conversion Notice, the Corporation shall issue and deliver or transmit, or cause to be delivered or transmitted, to the holder of the Converting Shares or such holder’s nominee, such number of shares of Common Stock issuable upon the conversion of such Converting Shares.  Such conversion shall be deemed to have been effected as of the close of business on the date of receipt by the Corporation of the Conversion Notice (the “Conversion Date”), and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the holder or holders of record of such shares of Common Stock as of the close of business on the Conversion Date.

(ii)           The Corporation shall effect such issuance of Common Stock (and certificates representing the balance for unconverted Convertible Preferred Stock) within three (3) trading days of the Conversion Date and shall electronically transmit the Common Stock issuable upon conversion to the holder by crediting the account of the holder’s prime broker with Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system using the Fast Automated Securities Transfer (“FAST”) program.  The parties agree to coordinate with DTC to accomplish this objective.  If such shares of Common Stock are not received by the holder within three (3) trading days of the Conversion Notice, then the holder will be entitled to revoke and withdraw its Conversion Notice, in whole or in part, at any time prior to its receipt of the Common Stock.  Any such rescission by the holder shall not affect the Corporation’s obligations to make any payments which have accrued hereunder prior to the date of such rescission or otherwise prejudice the rights of the holder to hold the Corporation liable for any payments, costs, losses or damages owed to the holder.  In lieu of such electronic delivery through DWAC, the Corporation shall deliver physical certificates representing the Common Stock issuable upon conversion of Converting Shares to the extent requested by the holder or required by law.  The time periods for delivery of physical certificates evidencing the Common Stock issuable upon conversion of the Converting Shares hereunder are the same as those described above.  The person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at the close of business on the Conversion Date.  If the conversion has not been rescinded in accordance with this paragraph and the Corporation fails to deliver to the holder such certificate or certificates or shares through DTC pursuant to this Section 5 (free of any restrictions on transfer or legends, if such shares have been registered) in accordance herewith, on or prior to the third trading day after the Conversion Date (assuming timely surrender of the Convertible Preferred Stock certificates), the Corporation shall pay to such holder, in cash, on a per diem basis, an amount equal to 0.5% of the Liquidation Preference of all Convertible Preferred Stock held by such holder per month until such delivery takes place.

 

The Corporation’s obligation to issue Common Stock upon conversion of Convertible Preferred Stock shall be absolute, is independent of any covenant of any holder of Convertible Preferred Stock, and shall not be subject to: (i) any offset or defense; or (ii) any claims against the holders of Convertible Preferred Stock whether pursuant to this Certificate of Designation, the Exchange Agreement, the Investor Rights Agreement or otherwise.

 

(iii)           Book-Entry.  Notwithstanding anything to the contrary set forth herein, upon conversion of any shares of Convertible Preferred Stock in accordance with the terms hereof, the holder thereof shall not be required to physically surrender such holder’s certificates for Convertible Preferred Stock to the Corporation unless such holder is converting all of the Convertible Preferred Stock then held by such holder.  The holders of Convertible Preferred Stock and the Corporation shall maintain records showing the number of shares of Convertible Preferred Stock so converted hereunder, the number of shares of Common Stock received upon conversion and the dates of such conversions, or shall use such other method, reasonably satisfactory to the holders and the Corporation, so as not to require physical surrender of certificates for Convertible Preferred Stock upon each such conversion.

 

 

  

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(d)           Conversion Prices.   The initial conversion value for the Convertible Preferred Stock shall be $3.20 per share of Common Stock, such value to be subject to adjustment in accordance with the provisions of this Section 5.  Such conversion value in effect from time to time, as adjusted pursuant to this Section 5, is referred to herein as the “Conversion Value.” All of the remaining provisions of this Section 5 shall apply separately to each Conversion Value in effect from time to time with respect to Convertible Preferred Stock.

 

(e)           Stock Dividends, Subdivisions and Combinations. If at any time while the Convertible Preferred Stock is outstanding, the Corporation shall:

 

(i)           cause the holders of its Common Stock to be entitled to receive a dividend payable in, or other distribution of, additional shares of Common Stock,

 

(ii)           subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

 

(iii)           combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock,

 

then in each such case the Conversion Value shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.  If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Value is calculated hereunder, then the calculation of such Conversion Value shall be adjusted appropriately to reflect such event.

 

(f)           Certain Other Distributions. If at any time while the Convertible Preferred Stock is outstanding the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of:

 

(i)           cash,

 

(ii)           any evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever (other than cash or additional shares of Common Stock as provided in Section 5(e) hereof), or

 

(iii)           any warrants or other rights to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property or assets of any nature whatsoever (in each case set forth in subparagraphs 5(f)(i), 5(f)(ii) and 5(f)(iii) hereof, the “Distributed Property”),

 

 

  

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then upon any conversion of Convertible Preferred Stock that occurs after such record date, the holder of Convertible Preferred Stock shall be entitled to receive, in addition to the Common Stock otherwise issuable upon such conversion, the Distributed Property that such holder would have been entitled to receive in respect of such number of shares of Common Stock had the holder been the record holder of such Common Stock as of such record date.  Such distribution shall be made whenever any such conversion is made.  In the event that the Distributed Property consists of property other than cash, then the fair value of such Distributed Property shall be as determined in good faith by the Board of Directors of the Corporation and set forth in reasonable detail in a written valuation report (the “Valuation Report”) prepared by the Board of Directors. The Corporation shall give written notice of such determination and a copy of the Valuation Report to all holders of Convertible Preferred Stock, and if the holders of a majority of the outstanding Convertible Preferred Stock object to such determination within twenty (20) business days following the date such notice is given to all of the holders of Convertible Preferred Stock, the Corporation shall submit the Valuation Report to an investment banking firm of recognized national standing selected by not less than a majority of the holders of the Convertible Preferred Stock and acceptable to the Corporation in its reasonable discretion, whose opinion shall be binding upon the Corporation and the holders of the Convertible Preferred Stock.  A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Corporation to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 5(f) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 5(e).

 

(g)           Common Stock Reserved. The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock, solely for issuance upon the conversion of shares of Convertible Preferred Stock as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Convertible Preferred Stock at the time outstanding.

 

(h)           Securities Issuances.  Other than with respect to Exempt Issuances, as defined below, in the event that the Corporation or any of its subsidiaries (A) issues or sells any Common Stock or convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock (“Convertible Securities”) or (B) directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, at or to an effective Per Share Selling Price (as defined below) which is less than the Conversion Value, then in each such case the Conversion Value in effect immediately prior to such issue or sale or record date, as applicable, shall be automatically reduced effective concurrently with such issue or sale to the Per Share Selling Price.  The foregoing provision shall not apply to any issuances or sales of Common Stock or Convertible Securities pursuant to any Convertible Securities currently outstanding on the date hereof in accordance with the terms of such Convertible Securities in effect on the date hereof.  The Corporation shall give to each holder of Convertible Preferred Stock written notice of any such sale of Common Stock within 24 hours of the closing of any such sale and shall within such 24 hour period issue a press release announcing such sale if such sale is a material event for, or otherwise material to, the Corporation.  For purposes of this Agreement, “Exempt Issuance” means the issuance of (a) securities issuable or issued upon the exercise, exchange, or conversion of, or otherwise in connection with, any Convertible Preferred Stock, (b) securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on June 30, 2011 as disclosed in the Exchange Agreement, provided that such securities have not been amended since such date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or in any other material respect, and (c) securities issued pursuant to that certain agreement entered into as of June 30, 2011 among the Corporation, Donald W. Rowley and a purchaser of the Convertible Preferred Stock.

 

For the purposes of the foregoing adjustments, in the case of the issuance of any Convertible Securities, the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities.

 

For purposes of this Section 5(h), if an event occurs that triggers more than one of the above adjustment provisions, then only one adjustment shall be made and the calculation method which yields the greatest downward adjustment in the Conversion Value shall be used.

 

“Per Share Selling Price” shall include the amount actually paid by third parties for each share of Common Stock in a sale or issuance by the Corporation.  In the event a fee is paid by the Corporation in connection with such transaction directly or indirectly to such third party or its affiliates, any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price.  A sale of shares of Common Stock shall include the sale or issuance of Convertible Securities, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Corporation upon such sale or issuance less the fee amount as provided above).  In case of any such security issued in a transaction in which the purchase price or the conversion, exchange or exercise price is directly or indirectly subject to adjustment or reset based on a future date, future trading prices of the Common Stock, specified or contingent events directly or indirectly related to the business of the Corporation or the market for the Common Stock, or otherwise (but excluding standard stock split anti-dilution provisions, provided that any actual reduction of such price under any such security pursuant to such anti-dilution provision shall be included and cause an adjustment hereunder), the Per Share Selling Price shall be deemed to be the lowest conversion, exchange, exercise or reset price at which such securities are converted, exchanged, exercised or reset or might have been converted, exchanged, exercised or reset, or the lowest adjustment, as the case may be, over the life of such securities.  If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by the independent certified public accountants chosen by the holders of a majority of the Convertible Preferred Stock.  The Corporation shall pay all of the reasonable fees and expenses of the independent certified public accountants incurred under this Section 5(h).  In the event the Corporation directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, then the Per Share Selling Price shall equal such effectively reduced conversion, exercise or exchange price.

 

 

  

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6.           Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock into which the Convertible Preferred Stock is convertible and the current Conversion Value provided for in Section 5:

 

(a)           When Adjustments to Be Made. The adjustments required by Section 5 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment to the Conversion Value that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 5(e)) up to, but not beyond the Conversion Date if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock into which the Convertible Preferred Stock is convertible immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by Section 5 and not previously made, would result in a minimum adjustment or on the Conversion Date. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence.

 

(b)           Fractional Interests. In computing adjustments under Section 5, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share.

 

(c)           When Adjustment Not Required. If the Corporation undertakes a transaction contemplated under Section 5(f) and as a result takes a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights or other benefits contemplated under Section 5(f) and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights or other benefits contemplated under Section 5(f), then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.

 

7.           Merger, Consolidation or Disposition of Assets.

 

(a)           If, after the Date of Original Issue and while the Convertible Preferred Stock is outstanding, the Board of Directors approves and there occurs: (i) an acquisition by an individual or legal entity or group (as set forth in Section 13(d) of the Exchange Act) of more than one-half of the voting rights or equity interests in the Corporation other than in connection with a transaction that is outside  the control of the Corporation and its Board of Directors; or (ii) a merger or consolidation of the Corporation or a sale, transfer or other disposition of all or substantially all the Corporation’s property, assets or business to another corporation where the holders of the Corporation’s voting securities prior to such transaction fail to continue to hold at least 50% of the voting power of the Corporation other than in connection with  a transaction that is outside  the control of the Corporation and its Board of Directors (events noted in (i) and (ii) above are hereinafter defined as a “Change of Control”), then the successor or acquiring corporation (if other than the Corporation) shall expressly assume the due and punctual observance and performance of each and every covenant and condition contained in this Certificate of Designation to be performed and observed by the Corporation and all the obligations and liabilities hereunder, with such modifications and adjustments as equitable and appropriate in order to place the holders of Convertible Preferred Stock in the equivalent economic position as prior to such Change in Control.  For purposes of clarification, an event noted in (i) and (ii) must be approved by the Board of Directors to meet the definition of a “Change of Control.”  Accordingly, events noted in (i) and (ii) (such as hostile mergers, amongst other things that are outside of the control of the Board of Directors) that occur without the approval of the Board of Directors are considered outside the control of the Corporation, and will not meet the definition of a “Change of Control.”  Notwithstanding the foregoing, the Board of Directors shall not fail to approve a transaction for the purpose of avoiding the applicability of this Section 7.

 

 

  

9

  

 

 

           (b)           In case of any such Change of Control event as defined in paragraph 7(a) above, each holder of Convertible Preferred Stock shall have the right thereafter to, at its option (A) receive such amount of securities, cash or property as the shares of the Common Stock of the Corporation  into which such holder’s Convertible Preferred Stock could have been converted immediately prior to such Change of Control would have been entitled if such conversion were effected immediately prior to Change of Control, subject to such further applicable adjustments set forth in this Certificate of Designation, or (B) require the Corporation or its successor to redeem such holder’s Convertible Preferred Stock, in whole or in part, at a redemption price equal to 100% of the Liquidation Preference of such Convertible Preferred Shares being redeemed payable in the same form as the consideration being paid to the holders of Common Stock of the Corporation in the Change of Control transaction.

 

(c)           In case of any such Change of Control, without in any way limiting the terms and conditions of the Investor Rights Agreement, the Corporation agrees to use its best efforts to minimize the length of any Blackout Period (as defined in the Investor Rights Agreement) associated with such Change of Control.

 

(d)           The foregoing provisions of this Section 7 shall similarly apply to successive Change of Control transactions.

 

8.           Other Action Affecting Common Stock.  In case at any time or from time to time the Corporation shall take any action in respect of its Common Stock, other than the payment of dividends permitted by Section 5 or any other action described in Section 5, which shall have an adverse effect upon the rights of the holder of Convertible Preferred Stock or the number of shares of Common Stock or other stock into which the Convertible Preferred Stock is convertible, then the exercisable and/or the purchase price thereof shall be adjusted in such manner as may be equitable in the circumstances

 

9.           Certain Limitations.  Notwithstanding anything herein to the contrary, the Corporation agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the current Conversion Value to be less than the par value per share of Common Stock.

 

10.           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Value, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Convertible Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, upon the written request at any time of any holder of Convertible Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Value at the time in effect for the Convertible Preferred Stock and (iii) the number of shares of Common Stock and the amount, if any, or other property which at the time would be received upon the conversion of Convertible Preferred Stock owned by such holder.

 

11.           Notices of Record Date. In the event of any fixing by the Corporation of a record date for the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, any shares of Common Stock or other securities, or any right to subscribe for, purchase or otherwise acquire, or any option for the purchase of, any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Convertible Preferred Stock at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or rights, and the amount and character of such dividend, distribution or right.

 

 

  

10

  

 

 

 

12.           Redemption.

 

(a)           Redemption by the Corporation.  From and after one year from the Date of Original Issue, the Corporation, at its option, may redeem, in whole or in part from time to time, the Convertible Preferred Stock then outstanding, upon giving a Notice of Redemption in accordance with Section 12(b) below.  The Corporation shall effect any such redemption on the Redemption Date (as defined below), by paying in cash for each share to be redeemed an amount equal to the Stated Value of such share, plus any accumulated but unpaid dividends, whether or not declared, through the Redemption Date (the “Redemption Price”).  Payment of the Redemption Price shall be made not later than two (2) business days after the Redemption Date, provided that the holder has delivered the certificates evidencing the shares of Convertible Preferred Stock to be redeemed. Notwithstanding the foregoing, the Corporation shall not be permitted to redeem at its option any shares of Convertible Preferred Stock if the Corporation, at such time, is considering a transaction that would result in a Change of Control, as contemplated by Section 7 hereof.

 

(b)           Notice of Redemption.  The Corporation shall provide written notice of redemption of shares of Convertible Preferred Stock to each holder of record of the shares to be redeemed at such holder’s registered address, not less than 20 calendar days prior to the date fixed for redemption (the “Redemption Date”) specifying the following:

 

(i)           the Redemption Date;

 

(ii)           the number of shares of Convertible Preferred Stock to be redeemed and the aggregate Redemption Price;

 

(iii)           the place(s) where certificates for such shares are to be surrendered for payment of the Redemption Price; and

 

(iv)           the address to which the payment of the Redemption Price shall be delivered, or, at the election of the holder, wire instructions with respect to the account to which payment of the Redemption Price shall be required.

 

(c)           Partial Redemption.  In the event that less than all of the outstanding shares of Convertible Preferred Stock are redeemed, the shares to be redeemed shall be selected pro rata among the holders of the Convertible Preferred Stock.  If fewer than all the shares represented by a certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

 

(d)           Status of Redeemed or Purchased Shares. Any shares of the Convertible Preferred Stock at any time purchased, redeemed or otherwise acquired by the Corporation shall not be reissued and shall be retired.

 

 

  

11

  

 

 

13.           Stock Transfer Taxes. The issue of stock certificates upon conversion of the Convertible Preferred Stock shall be made without charge to the converting holder for any tax in respect of such issue; provided, however, that the Corporation shall be entitled to withhold any applicable withholding taxes with respect to such issue, if any. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares in any name other than that of the holder of any of the Convertible Preferred Stock converted, and the Corporation shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

 

14.           Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a business day or later than 5:00 p.m. (New York City time) on any business day, (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service such as Federal Express, or (d) actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as follows: (i) if to the Corporation, to Decisionpoint Systems, Inc., 19655 Descartes, Foothill Ranch, California 92610-2609; Attention: CEO; facsimile: (949) 215-9642, with a copy to Gregory Sichenzia, Esq. at Sichenzia Ross Friedman Ference LLP; Facsimile: (212) 930-9725, or (ii) if to a holder of Convertible Preferred Stock, to the address or facsimile number appearing on the Corporation’s stockholder records or, in either case, to such other address or facsimile number as the Corporation or a holder of Convertible Preferred Stock may provide to the other in accordance with this Section.

 

15.           Attorneys’ Fees. In connection with enforcement by a holder of Convertible Preferred Stock of any obligation of the Corporation hereunder, the prevailing party shall be entitled to recovery of reasonable attorneys’ fees and expenses incurred.

 

16.           Specific Enforcement. The Corporation agrees that irreparable damage would occur in the event that any of the provisions of this Certificate of Designation were not performed in accordance with their specific terms or were otherwise breached.  Each holder of Convertible Preferred Stock and each permitted assignee shall have all rights and remedies set forth in this Certificate of Designation and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law.  Any person having any rights under any provision of this Certificate of Designation shall be entitled to enforce such rights specifically or pursue other injunctive relief or other equitable remedies (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Certificate of Designation and to exercise all other rights granted by law.  Each holder of Convertible Preferred Stock and each permitted assignee without prejudice may withdraw, revoke or suspend its pursuit of any remedy at any time prior to its complete recovery as a result of such remedy.

 

17.           Severability of Provisions.  If any right, preference or limitation of the Convertible Preferred Stock set forth in this Certificate of Designation (as this Certificate of Designation may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule or law or public policy, all other rights, preferences and limitations set forth in this Certificate of Designation, which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall nevertheless remain in full force and effect, and no right, preference or limitation herein set forth be deemed dependent upon any such other right, preference or limitation unless so expressed herein.

 

 

[Signature page follows]

 

  

12

  

IN WITNESS WHEREOF, the undersigned have executed this Certificate of Designation on behalf of the Corporation and affixed the corporate seal hereto this 30th day of June, 2011.

 

 

	 	DECISIONPOINT SYSTEMS, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ Donald Rowley	 
	 	 	Name: Donald Rowley	 
	 	 	Title: CFO	 
	 	 	 	 
	 	By:	/s/	 
	 	 	Name	 
	 	 	Title	 
	 	 	 	 
	 	 	 	 

 

  

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EXHIBIT A

FORM OF CONVERSION NOTICE

(To be executed by the registered Holder in order to convert shares of Preferred Stock)

The undersigned hereby irrevocably elects to convert the number of shares of Series C Cumulative Convertible Preferred Stock (the “Preferred Stock”) indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of Decisionpoint Systems, Inc., a Delaware corporation (the “Corporation”), according to the Certificate of Designation of the Preferred Stock and the conditions hereof, as of the date written below. The undersigned hereby requests that certificates for the shares of Common Stock to be issued to the undersigned pursuant to this Conversion Notice be issued in the name of, and delivered to, the undersigned or its designee as indicated below.  If the shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto.

 

 

	 	 	 
	Date of Conversion (Date of Notice)	 	 
	 	 	 
	 	 	 
	Number of shares of Preferred Stock owned prior to Conversion	 	 
	 	 	 
	 	 	 
	Number of shares of Preferred Stock to be Converted	 	 
	 	 	 
	 	 	 
	Stated Value of Preferred Stock to be Converted	 	 
	 	 	 
	 	 	 
	Amount of accumulated and unpaid dividends on shares of Preferred Stock to be Converted	 	 
	 	 	 
	 	 	 
	Number of shares of Common Stock to be Issued (including conversion of accrued but unpaid dividends on shares of Preferred Stock to be Converted)	 	 
	 	 	 
	 	 	 
	Applicable Conversion Value	 	 
	 	 	 
	 	 	 
	Number of shares of Preferred Stock owned subsequent to Conversion	 	 
	
 

	 	 

 

	 	 	 	 
	Conversion Information: 	NAME OF HOLDER:	 	 
	 	 	 	 
	 	By:	 	 
	 	 Print Name:	 	 
	 	 Print Title:	 	 
	 	 	 	 
	 	Print Address of Holder:	 	 
	 	 	 	 
	 	 	 	 
	 	Issue Common Stock to:	 	 
	 	at:	 	 

 

 

14ex101.htm

EXHIBIT 10.1

 

RESCISSION OF SHARE EXCHANGE AGREEMENT

 

BETWEEN

 

VANITY EVENTS HOLDING, INC. AND SHOGUN ENERGY, INC.

 

THIS RESCISSION AGREEMENT, dated June 30, 2011 is made by and between VANITY EVENTS HOLDING, INC., a Delaware corporation (“Vanity”), SHOGUN ENERGY, INC. a South Dakota corporation (the “Shogun”), SHAWN KNAPP (“Mr. Knapp”), ROXANNE KNAPP (“Mrs. Knapp”) and the other shareholders of Vanity identified on Schedule A annexed hereto (each a “Shareholder” and collectively, the “Shareholders”).  Vanity, Shogun, Mr. Knapp, Mrs. Knapp and the Shareholders are referred to herein collectively as the “Parties.”

 

WHEREAS, the Shogun is a wholly-owned subsidiary of Vanity; and

 

WHEREAS, on December 31, 2010, Vanity entered into a share exchange agreement (“Exchange Agreement”) by and among Vanity, Shogun, Mr. Knapp and the other shareholders of Shogun (the “Shogun Shareholders” and collectively with Mr. Knapp, the “Shareholders”) pursuant to which the Shareholders exchanged an aggregate of 100% of the issued and outstanding shares of capital stock of Shogun in exchange for 500,000 shares of Vanity’s series A preferred stock (the “Exchange”); and

 

WHEREAS, the Parties have amicable decided that it is in their collective best interest to rescind the Exchange Agreement in accordance with the terms hereunder.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

1. Rescission of the Exchange Agreement.  

a. On the Closing Date (as defined below), the Exchange Agreement is hereby rescinded and any and all obligations of any party arising from such Exchange  Agreement, shall, in all respects, be deemed to be null and void and of no further force and effect (the “Rescission”).  Furthermore, on and after the Closing Date (as defined below), no party to the Exchange Agreement shall have any further obligations of any nature whatsoever with respect to the other parties pursuant to or arising from the Exchange Agreement.  

b. By executing this Agreement, Mr. Knapp and each Shareholder hereby surrenders to Vanity such number of shares of Vanity’s series A preferred stock opposite such person name on Schedule I annexed hereto which they are entitled to pursuant to the Exchange Agreement but have yet to be put into certificate form.  Vanity hereby acknowledges receipt from such shares of series A preferred stock for the sole purpose of retiring Vanity’s series A preferred stock.

c. On the Closing Date (as defined below), Vanity shall transfer to Mr. Knapp and the Shareholders all of the shares of Shogun’s common stock held by Vanity as of the Closing Date (as defined below).  Mr. Knapp and the Shareholders acknowledge receipt of such shares for the sole purpose of transferring the entire ownership of Shogun to Mr. Knapp and the Shareholders.

d. On the Closing Date (as defined below), Mr. Knapp, Darrick Wika and John Carmichael shall each deliver to the Company their respective written resignation of all officer and director positions currently held in Vanity, said resignations to be effective immediately.

e. The closing of the Rescission (the “Closing”) shall take place at the offices of Sichenzia Ross Friedman Ference LLP or such other location as the parties shall mutually agree, as promptly as practicable but in no event later than the second (2nd) business day following receipt by Vanity of shareholder approval for consummation of the Rescission in accordance with the general corporation law of the State of Delaware and the Securities Exchange Act of 1934, as amended. The date on which the Closing occurs is hereinafter referred to as the “Closing Date.”

2. Cooperation of Shogun after the Closing Date.  Beginning on the Closing Date, Shogun shall continue to provide such information to Vanity as may be necessary for Vanity to comply with its continuing reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  This information shall include, but not be limited to financial statements of Shogun for the three and six months ended June 30, 2011 and 2010, the three and nine months ended September 30, 2011 and 201,0 as well as any other financial information or financial statements for any interim period or annual period as Vanity as may reasonably request hereunder. Due to the unique and valuable nature of the information to be provided by Shogun, Shogun hereby agrees and acknowledges that in the event Shogun fails to comply with its obligations under this Section 2, that monetary damages may be inadequate to compensate Vanity. Accordingly, Shogun agrees that Vanity shall, in addition to any other remedies available to it at law or in equity in accordance with this Agreement, be entitled to seek injunctive relief to enforce the terms of this Section 2 of this Agreement.

 

  

1

  

3. Non-Exclusive Distributorship Agreement with Shogun.  On the Closing Date, Vanity and Shogun shall enter into a non-exclusive distributorship agreement, substantially in the form annexed hereto as Exhibit A, pursuant to which Shogun shall grant Vanity a non-exclusive distributorship to sell Shogun’s products in the United States for a period of 12 months from the Closing Date.

4. Consulting Agreement with Mr. Knapp.  On the Closing Date, Vanity and Mr. Knapp shall enter into a consulting agreement, substantially in the form annexed hereto as Exhibit B, pursuant to which Mr. Knapp shall provide certain consulting services to Vanity for a period of 6 months from the Closing Date.

5. Execution of a General Release.  On the Closing Date, Mr. Knapp and Mrs. Knapp shall each enter into a general release, substantially in the form annexed hereto as Exhibit C, pursuant to which each of Mr. Knapp and Mrs. Knapp shall, among other things, release and forever discharge Vanity, its assigns, predecessors, successors, joint venturers, personal representatives, stockholders, officers, directors, employees, underwriters, attorneys, and trustees, and any other person at interest therewith, from and against any and all claims, demands, debts, interest, expenses, dues, liens, liabilities, causes of action including court costs or attorneys’ fees, or any other form of compensation, he may now own or hereafter acquire against Vanity, whether statutory, in contract, in tort, either at law or in equity, including quantum meruit, as well as any other kind or character of action on account of, growing out of, relating to or concerning, whether directly or indirectly, the Exchange Agreement and the Exchange, any other instrument, agreement or transaction, whether written or oral, in connection with the Exchange Agreement and the Exchange, or any other transaction or occurrence of any nature whatsoever occurring before the execution of this Agreement.

6. Release by each Shareholder.  By executing this Agreement, on the Closing Date, each Shareholder hereby releases and forever discharges Vanity, its assigns, predecessors, successors, joint venturers, personal representatives, stockholders, officers, directors, employees, underwriters, attorneys, and trustees, and any other person at interest therewith, from and against any and all claims, demands, debts, interest, expenses, dues, liens, liabilities, causes of action including court costs or attorneys’ fees, or any other form of compensation, he may now own or hereafter acquire against Vanity, whether statutory, in contract, in tort, either at law or in equity, including quantum meruit, as well as any other kind or character of action on account of, growing out of, relating to or concerning, whether directly or indirectly, the Exchange Agreement and the Exchange, any other instrument, agreement or transaction, whether written or oral, in connection with the Exchange Agreement and the Exchange, or any other transaction or occurrence of any nature whatsoever occurring before the execution of this Agreement.

7. Indemnification Agreement with Mr. Knapp.  On the Closing Date, Vanity and Mr. Knapp shall enter into an indemnification agreement, substantially in the form annexed hereto as Exhibit D.

 

8. Assumption of Liabilities.  On the Closing Date, Shogun shall assume, and hereby agrees to pay, perform, fulfill and discharge the liabilities incurred by Vanity in connection with the consummation of the Exchange Agreement as set forth on Schedule 8 annexed hereto.

9. Miscellaneous

a. Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

b. Governing Law; Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by and construed under the laws of the State of New York without regard to the choice of law principles thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York located in The City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or therewith or with any transaction contemplated hereby or thereby, and hereby irrevocably waives any objection that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

c. Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each party to this Agreement will be entitled to specific performance hereunder.  Accordingly, Recipient agrees that the Company shall, in addition to any other remedies available to it at law or in equity, any party shall be entitled to seek injunctive relief to enforce the terms of this Agreement.

d. Severability.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

e. Counterparts/Execution.  This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.

 

  

2

  

f. Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

g. Notices.  All notices, requests, demands, and other communications hereunder shall be in writing and delivered personally or sent by registered or certified United States mail, return receipt requested with postage prepaid, or by telecopy or e-mail, addressed as follows: if to Vanity: Mr. Lloyd Lapidus, 1111 Kane Concourse, Suite 304, Bay Harbor Islands, Florida 33154, telephone (786) 530-2164, telecopier (___) ______, and e-mail Lloyd.vanity@gmail.com ; and if to Mr. Knapp, Mrs. Knapp or the Shareholders, addressed to Shogun Energy, Inc., 118 Front Street, Brookings, South Dakota, 57006, a telephone (605) 692-8226, telecopier (605) 692-8368, and e-mail shawn@shogunenergy.com.  Any party hereto may change its address upon 10 days’ written notice to any other party hereto.

h. Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith.

i. Attorneys’ Fees.  In the event that it should become necessary for any party entitled hereunder to bring suit against any other party to this Agreement for a breach of this Agreement, the parties hereby covenant and agree that the party who is found to be in breach of this Agreement shall also be liable for all reasonable attorneys’ fees and costs of court incurred by the other parties.  Provided, however, in the event that there has been no breach of this Agreement, whether or not the transactions contemplated hereby are consummated, each party shall bear its own costs and expenses (including any fees or disbursements of its counsel, accountants, brokers, investment bankers, and finders fees).

j. Entire Agreement; Amendments.  This Agreement constitutes the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties.  No amendment, modification or other change to this Agreement or waiver of any agreement or other obligation of the parties under this Agreement may be made or given unless such amendment, modification or waiver is set forth in writing and is signed by all parties to this Agreement.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

k. Headings.  The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

l. Construction.  Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

 

[Remainder of page intentionally left blank.]

 

 

 

 

 

 

 

 

 

 

 

 

  

3

  

IN WITNESS WHEREOF the parties have executed this Agreement effective as of the day and year first above written.

 

	
VANITY EVENTS HOLDING, INC. 

	 	 	
Address for Notice:

	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	
/s/ Lloyd Lapidus

	 	 	
Fax:

	 
	 	
Name: Lloyd Lapidus

	 	 	 	 
	 	
Title: Interim Chief Executive Officer

	 	 	 	 
	 	 	 	 	 	 
	
With a copy to (which shall not constitute notice):

 

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

Fax: (212) 930-9725

Attn: Richard A. Friedman

	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	
SHOGUN ENERGY, INC.

	 	 	
Address for Notice:

	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By: 	/s/ Shawn Knapp	 	 	
Fax:

	 
	 	Name: Shawn Knapp	 	 	 	 
	 	Title: CEO	 	 	 	 
	 	 	 	 	 	 
	
With a copy to (which shall not constitute notice):

	 	 	 	 

 

	 	 	 	 	 
	
/s/ Shawn Knapp

	 	 	 	 
	

Shawn Knapp

	 	 	 	 
	 	 	 	 	 

	 	 	 	 	 
	
/s/ Roxanne Knapp

	 	 	 	 
	

Roxanne Knapp

	 	 	 	 
	 	 	 	 	 

 

  

4

  

SHAREHOLDERS

 

	 	 	 	
Winter Bros Underground, Inc.

	 
	 	 	 	 	 	 
	 	
/s/ Dave Ekern

	 	By:	

/s/ Robert Winter

	 
	 	
Dave Ekern

	 	 	Name: Robert Winter	 
	 	 	 	 	Title: President	 
	 	 	 	 	 	 
	 	
/s/ Dave Ekern

	 	 	
/s/ Brian Schmidt

	 
	 	
Dave Ekern

	 	 	
Brian Schmidt

	 
	 	 	 	 	 	 
	 	
/s/ Chip and Janet Bortnem

	 	 	
/s/ David M. Rustan

	 
	 	
Chip and Janet Bortnem

	 	 	
David M. Rustan

	 
	 	 	 	 	 	 
	 	
/s/ Jeff Jacobsen

	 	 	
/s/ Eric Peterson

	 
	 	
Jeff Jacobsen

	 	 	
Eric Peterson

	 
	 	 	 	 	 	 
	 	
/s/ Darrick Wika

	 	 	
/s/ Bob Winter

	 
	 	
Darrick Wika

	 	 	
Bob Winter

	 
	 	 	 	 	 	 
	 	
/s/ Mike Brunch

	 	 	
/s/ Richard A. Anderson

	 
	 	
Mike Brunch

	 	 	
Richard A. Anderson

	 
	 	 	 	 	 	 
	 	
/s/ Mike Steffensen

	 	 	
/a/ Alan Bruty

	 
	 	
Mike Steffensen

	 	 	
Alan Bruty

	 
	 	 	 	 	 	 
	 	
/s/ Dan Ziegler

	 	 	
/s/ Brian D. Landry

	 
	 	
Dan Ziegler

	 	 	
Brian D. Landry

	 
	 	 	 	 	 	 
	
BBR Land, Inc.

	 	 	 	 
	 	 	 	 	 	 
	By:	/s/ Robert Winter	 	 	
/s/ Brian Sander

	 
	 	Name: Robert Winter	 	 	
Brian Sander

	 
	 	Title:VP	 	 	 	 
	 	 	 	 	 	 
	 	
/s/ Duane Knapp

	 	 	
/s/ Gary Jensen

	 
	 	
Duane Knapp

	 	 	
Gary Jensen

	 
	 	 	 	 	 	 
	 	
/s/ Greg Holm

	 	 	 	 
	 	
Greg Holm

	 	 	 	 
	 	 	 	 	 	 
	 	
/s/ Reed Intermill

	 	 	 	 
	 	
Reed Intermill

	 	 	 	 

          

  

5

  

 

	 	 	 	 	 	 
	 	
/s/ Mark Morgan

	 	 	
/s/ Lee & Kibbi McCormick

	 
	 	
Mark Morgan

	 	 	
Lee & Kibbi McCormick

	 
	 	 	 	 	 	 
	 	
/s/ Randy Stanford

	 	 	
/s/ Danny & Tracy Nelson

	 
	 	

Randy Stanford

	 	 	
Danny & Tracy Nelson

	 
	 	 	 	 	 	 
	 	
/s/ Shelly Justice

	 	 	
/s/ Ken Dunlap

	 
	 	
Shelly Justice

	 	 	
Ken Dunlap

	 
	 	 	 	 	 	 
	 	
/s/ Chad & Gordy Bortnem

	 	 	
/s/ Mark D. Weber

	 
	 	
Chad & Gordy Bortnem

	 	 	
Mark D. Weber

	 
	 	 	 	 	 	 
	 	
/s/ Ron Longville

	 	 	/s/ Rick A. Dunlap	 
	 	
Ron Longville

	 	 	
Rick A. Dunlap

	 
	 	 	 	 	 	 
	 	
/s/ Rick Longville

	 	 	
/s/ Scott & Nancy Gusso

	 
	 	
Rick Longville

	 	 	
Scott & Nancy Gusso

	 
	 	 	 	 	 	 
	 	
/s/ Scott Anderson

	 	 	
/s/ Larry & Julaine Wittmeier

	 
	 	
Scott Anderson

	 	 	
Larry & Julaine Wittmeier

	 
	 	 	 	 	 	 
	
Wittmeier Living Trust

	 	 	
/s/ Christy Sik

	 
	 	 	 	 	
Christy Sik

	 
	By: 	
/s/ Julaine N. Wittmeier

	 	 	 	 
	 	Name: Julaine N. Wittmeier	 	 	
/s/ Daniel P and Jerilee Kinard

	 
	 	Title: Trustee	 	 	
Daniel P and Jerilee Kinard

	 
	 	 	 	 	 	 
	 	
/s/ Elisabeth & Keith Nelson

	 	 	
/s/ Derald Adolphsen

	 
	 	
Elisabeth & Keith Nelson

	 	 	
Derald Adolphsen

	 
	 	 	 	 	 	 
	 	
/s/ David B. & Sharon L. Johnson

	 	 	
/s/ Jessica Reuer

	 
	 	
David B. & Sharon L. Johnson

	 	 	
Jessica Reuer

	 
	 	 	 	 	 	 
	 	
/s/ Donald Weber

	 	 	
/s/ Kenneth & Karen Bothwell

	 
	 	
Donald Weber

	 	 	
Kenneth & Karen Bothwell

	 
	 	 	 	 	 	 
	 	
/s/ Kenny Longville

	 	 	 	 
	 	
Kenny Longville

	 	 	 	 
	 	 	 	 	 	 

 

 

6

 

 

	 	
/s/ Kip and Nikol Bothwell

	 	 	 	 
	 	
Kip and Nikol Bothwell

	 	 	 	 
	 	 	 	 	 	 
	 	
/s/ Matt Volkers

	 	 	 	 
	 	
Matt Volkers

	 	 	 	 
	 	 	 	 	 	 
	 	
/s/ Randy Hillestad

	 	 	 	 
	 	
Randy Hillestad

	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

7

  

Schedule I

 

	
 

Name

	
 

Number of shares of Shogun Common Stock

	
Number of shares of

Vanity Series A Preferred Stock

	
Shawn Knapp

	
400,000

	
400,000

	
Dave Ekern

	
14,000

	
13,392

	
Chip or Janet Bortnem

	
10,000

	
9,566

	
Jeff Jacobsen

	
10,000

	
9,566

	
Darrick Wika

	
7,000

	
6,696

	
Mike Brunch

	
6,000

	
5,739

	
Mike Steffensen

	
6,000

	
5,739

	
Dan Ziegler

	
5,000

	
4,783

	
BBR Land, Inc.

	
4,000

	
3,826

	
Duane Knapp

	
4,000

	
3,826

	
Greg Holm

	
4,000

	
3,826

	
Reed Intermill

	
4,000

	
3,826

	
Winter Bros Underground Inc

	
4,000

	
3,826

	
Brian Schmidt

	
2,000

	
1,913

	
David M Rustan

	
2,000

	
1,913

	
Eric Peterson

	
2,000

	
1,913

	
Bob Winter

	
1,600

	
1,531

	
Richard A Anderson

	
1,300

	
1,244

	
Alan Bruty

	
1,000

	
957

	
Brain D Landry

	
1,000

	
957

	
Brain Sander

	
1,000

	
957

	
Gary Jensen

	
1,000

	
957

	
Mark Morgan

	
1,000

	
957

	
Randy Stanford

	
1,000

	
957

	
Shelly Justice

	
1,000

	
957

	
Chad & Gordy Bortnem

	
800

	
765

	
Ron Longville

	
800

	
765

	
Rick Longville

	
700

	
670

	
Scott Anderson

	
700

	
670

	
Wittmeier Living Trust

	
700

	
670

	
Elisabeth & Keith Nelson

	
640

	
612

	
David B & Sharon L Johnson

	
600

	
574

	
Donald Weber

	
600

	
574

	
Kenny Longville

	
600

	
574

	
Lee & Kibbi McCormick

	
600

	
574

	
Danny & Tracy Nelson

	
400

	
383

	
Ken Dunlap

	
400

	
383

	
Mark D Weber

	
400

	
383

	
Rick Dunlap

	
400

	
383

	
Scott & Nancy Gusso

	
400

	
383

	
Larry & Julaine Wittmeier

	
300

	
287

	
Christy Sik

	
200

	
191

	
Daniel P and Jerilee Kinard

	
200

	
191

	
Derald Adolphsen

	
200

	
191

	
Jessica Reuer

	
200

	
191

	
Kenneth & Karen Bothwell

	
200

	
191

	
Kip and Nikol Bothwell

	
200

	
191

	
Matt Volkers

	
200

	
191

	
Randy Hillestad

	
200

	
191

 

  

8

  

Exhibit A

 

 

 

Sales Distribution Agreement

 

THIS AGREEMENT is made as of the ___ day of June, 2011, by and between Shogun Energy, Inc., a corporation organized and existing under the laws of the State of South Dakota  with an office at 118 Front Street, Brookings, SD  57006  (the “Company”), and Vanity Event Holdings, Inc., a corporation organized and existing under the laws of the State of Delaware  with an office at 1111 Kane Concourse, Suite 304, Bay Harbor Islands, Florida 33154 (“Vanity”).

WHEREAS, Company currently manufactures and sells energy drinks; and

WHEREAS, Company is willing to appoint Vanity as an authorized sales distributor and dealer, and Vanity is willing to accept such appointment, all upon the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual agreements and understandings herein contained, the parties hereby agree as follows:

 

1. Appointment.

 

a. Upon the terms and conditions hereinafter set forth, Company hereby appoints Vanity  as the authorized non-exclusive sales distributor and dealer for the purchase and resale of the Company's beverage line (“Products”) within the United States (“Nonexclusive Territory”) between June ___ 2011 and June __, 2012 (“Distributorship Period”) through conventions wholesale and retail channels and as an authorized sales agent for the purchase and resale of Products through internet sales channels; and

 

b. Vanity hereby accepts such appointment and agrees to perform the duties and obligations set forth herein.

 

2. Duties of Vanity. In the performance of its duties under this Agreement, Vanity shall:

 

a. Use its best efforts to promote the sale of, and stimulate interest in, the Products in the Nonexclusive Territory;

b. Collect and transmit any and all applicable municipal, county, state, or nationals sales, use or excise tax associated with any internet sales;

c. Submit for approval all internet based materials whether for the web site associated with the domain name described above in section 2.c., social media site, email, SMS, text campaign, or other similar means of communication (collectively “Web Site” ) no less than ten business day prior to their use; such approval shall be granted at Shogun’s sole discretion;

d. Submit appropriate Privacy Policy, Site Usage Terms and Conditions, and Legal Notice to be used in conjunction with the Web Site no less than ten business days prior to their use such approval shall be granted at Shogun’s sole discretion; and

e. Provide Shogun with copies of all customer contacts, including demographic information, all sales orders and fulfillment status on no less than a weekly basis.

 

  

A - 1

  

 

3. Terms of a Sale.

 

a. Company shall sell Product to Vanity at the then best available distributor price.

 

b. All prices for Product shall be F.O.B. Brookings, South Dakota. All freight, insurance, handling and forwarding agent's fees, taxes, storage, and all other charges applicable to the Products, if any, from the time such Products leave Company's factory shall be borne by the Vanity.

 

c. At any time during the term of this Agreement, Company may, in its sole discretion, (i) modify the specifications of any Product or (ii) discontinue the manufacture and sale of any Product; provided, however, that in the event that Company discontinues the manufacture or sale of any Product subsequent to the acceptance by Company of a purchase order therefor but prior to the delivery thereof to the customer, Company shall be obligated to effect delivery under such purchase order.

 

d. Unless otherwise agreed to in writing by Company and Vanity, payment for any Product sold to Vanity hereunder shall be made, in cash, by wire transfer or by certified check, not later than 30 days after the date of the invoice relating to such Product. In the case of any invoice that is not paid in full on or before the date 30 days after the date of such invoice, interest shall accrue on the unpaid amount of such invoice, from the date of such invoice until the date of payment, at the rate of 18% per annum.

 

4. Shipment, Risk of Loss, Force Majeure.

 

a. After acceptance by Company of a purchase order submitted by Vanity, and as promptly as reasonably possible in accordance with the date of shipment specified in such purchase order or otherwise agreed to in writing by Company and Vanity, Company shall deliver the Products in such quantities and amounts as specified in such purchase order.

 

b. Company shall not be liable for any delay in delivery or for non-delivery, in whole or in part, caused by the occurrence of any contingency beyond the control of Company, including, without limitation, war (whether an actual declaration thereof is made or not), sabotage, insurrection, riot or other act of civil disobedience, act of a public enemy, failure or delay in transportation, act of any government or an agency or subdivision thereof, judicial action, labor dispute, accident, fire, explosion, flood, storm or other act of God, and shortage of labor, fuel, raw material, or machinery.

 

5. Warranties.

 

COMPANY MAKES NO EXPRESS WARRANTIES TO VANITY WITH RESPECT TO THE PRODUCTS OTHER THAN AS CONTAINED IN THE WARRANTY. ALL IMPLIED WARRANTIES ARE HEREBY EXCLUDED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Vanity shall make no warranties to its customers regarding the Products in the name of Company.

 

6. Reports by Vanity.  Vanity shall maintain accurate and complete books and records with respect to all sales of Products and other goods purchased from Company and shall, at any time and from time to time upon Company's request, provide Company with copies of such books and records or any part thereof.

 

7. Trade Names and Trademarks.

 

a. Company grants to Vanity the license and right to use Company trade names and trademarks in connection with the advertising, sale, offer for sale or distribution of Products in the Territory. Such trade names and trademarks shall not be used by Vanity in combination with any other trade names or trademarks without the prior written approval of Company. Vanity shall diligently promote the identity and market recognition of Company as the manufacturer of the Products.

 

b. Vanity recognizes the right, title, and interest of Company in and to all trademarks and trade names used by Company on or in connection with Products and agrees not to engage, directly or indirectly, in any activities which may contest or otherwise impair the right, title, and interest of Company therein. Vanity shall neither acquire, nor claim for itself any right, title, or interest in or to Company's trademarks and trade names by virtue of this Agreement or through the use by Vanity of Company's trademarks and trade names. The parties hereto agree that all uses of Company's trademarks and trade names by Vanity shall be in such manner as to inure to the benefit of Company.

 

8. Modification of Geographic Territory

 

The parties mutually acknowledge the need to develop a strong distributor network to support the sales and marketing of the Products.  Accordingly Vanity hereby consents to having its territory reduced, by account, city, county, state, or other geographic bound as may be reasonable (“Territory Reduction”) in favor of another distributor without any further consideration.  Such Territory Reduction shall not impact any previously books orders, and shall not be effective until Vanity has received ten business days written notice.  Shogun shall use commercially reasonable efforts to limit Territory Reductions only to the extent necessary to support the development of a distribution network.

 

  

A - 2

  

 

9. Termination

 

a. This Agreement is for an initial twelve-month Distribution Period, ending on the date listed above in section 1A, unless terminated earlier as described in section 9.c below.

 

b. This Agreement may be renewed by mutual written consent for one (1) additional twelve month period.

(i) Shogun has the right to terminate this agreement with three (3) days written notice upon the occurrence of if the other party fails or becomes unable to observe or perform any of its material obligations under this Agreement and such default or inability is not cured within twenty (20) days after notice of the same.

 

(ii) If the other party makes an assignment for the benefit of creditors; is adjudicated bankrupt or insolvent; petitions or applies to any tribunal for the appointment of a trustee or receiver for such party for any substantial part of its assets; commences any proceedings seeking to take advantage of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect; consents to or approves or, by any conduct or action acquiesces in or to any such petition or application filed, or any such proceedings commenced against it by any other person; or failing to remove an order entered appointing any such trustee or receiver or approving the petition in any such proceedings or decreeing its dissolution or liquidation within ninety (90) days after such order is entered.

 

10. Miscellaneous.

 

a. The validity, construction, and performance of this Agreement shall be governed by and interpreted in accordance with the laws of the State of South Dakota.

 

b. No addition to or modification of this Agreement, or of a purchase order submitted to Company by Vanity, or of an acceptance of a purchase order dispatched by Company to Vanity shall be effective or binding on either of the parties hereto unless reduced to writing and executed by the respective duly authorized representatives of each of the parties hereto. In the event of any conflict or other inconsistency between this Agreement and any purchase order, this Agreement shall govern in all respects.

 

c.Intentionally Omitted.

 

d. This Agreement, and all rights and obligations hereunder, are personal as to the parties hereto and shall not be assigned in whole or in part by either of the parties hereto to any other person, firm, or corporation without the prior written consent thereto by the other party hereto; provided, however, that Company may assign this Agreement and purchase orders hereunder, without the prior written consent of Vanity, to any person, firm, or corporation acquiring all or substantially all of the assets of Company or to any successor to Company by merger.

 

e. Any waiver by either party hereto to any right hereunder or of any failure to perform or breach hereof by the other party hereto must be express and in writing and shall not constitute or be deemed a waiver of any other right hereunder or any other failure to perform or breach hereof by the other party hereto, whether of a similar or dissimilar nature.

 

f. Company and Vanity acknowledge that Vanity is and shall at all times be an independent distributor for Company. Vanity is not authorized to act as an agent for or legal representative of Company. Vanity shall not have authority to assume or create any obligation on behalf or in the name of, or binding upon, Company, nor to represent Company as a distributor in any matter not specifically provided for herein. All sales by Vanity shall be in its own name and for its own account.

 

g. This Agreement is the entire agreement between the parties hereto respecting the subject matter hereof and supersedes all prior agreements between the parties hereto relative to the subject matter hereof.

 

h. Except as otherwise provided in this Agreement, all notices required or permitted to be given hereunder shall be in writing and shall be valid and sufficient if dispatched by registered mail, postage prepaid, in any post office in the United States, or in the Territory, as the case may be, addressed as follows:

 

	
If to the Company:

	
Shogun Energy Inc

	
 

	  	
Att: Mr. Shawn Knapp

118 Front Street, Brookings, SD  57006

	
 

	  	  	
 

	
If to the Vanity:

	
Vanity Event Holding, Inc.

	
 

	  	
Att: Mr. Lloyd Lapidus

1111 Kane Concourse, Suite 304, Bay Harbor Islands, Florida 33154

	
 

 

Either party hereto may change its address by a notice given to the other party hereto in the manner set forth above. Notice given as herein provided shall be considered to have been given upon the mailing thereof.

 

i. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

 

j. Each party shall, without payment of any additional consideration by any other party, at any time on or after the execution of this Agreement take such further action and execute such other and further documents and instruments as the other party may request in order to provide the other party with the benefits of this Agreement.

 

k. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same documen

  

A - 3

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.

 

	 	
Shogun Energy Inc.

	 
	 	 	 	 
	 	 	/s/ 	 
	 	 	
By: Mr. Shawn Knapp, CEO

	 
	 	 	 	 
	 	 	 	 
	 	
Vanity Event Holding, Inc.

	 
	 	 	 	 
	 	 	/s/	 
	 	 	
By: Mr. Lloyd Lapidus, Interim CEO

	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

A - 4

  

Exhibit B

 

 

CONSULTING AGREEMENT

This Agreement is made and entered into as of the __ day of June, 2011 by and between Shawn Knapp (“Consultant”) and Vanity Events Holding, Inc. (the “Company”).

WHEREAS, the Company desires to engage Consultant to provide certain consulting services, and Consultant is willing to be engaged by the Company to provide such services, on the terms and conditions set forth below;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.           Purpose. The Company hereby engages Consultant for the term specified in Paragraph 2 hereof to render consulting advice to the Company relating to the sale of Shogun Energy, Inc.’s products upon the terms and conditions set forth herein.

2.           Effective Date and Term. This Agreement shall be effective as of June __, 2011 (the “Effective Date”).  Unless earlier terminated pursuant to Section 10 hereof, the term of this Agreement shall commence upon the Effective Date and shall continue until December 31, 2011 (the “Consulting Term”).

3.     Duties of Consultant.  During the term of this Agreement, the Consultant shall provide the Company with the services set forth in Paragraph 1 above and such additional services as is reasonably requested by the Company’s management and Board of Directors, provided that Consultant shall not be required to undertake duties not reasonably within the scope of this Agreement.  The Consultant shall not be required to provide services in excess of ten (10) hours per week.

 

4.           Compensation.  In consideration for the services rendered by Consultant to the Company pursuant to this Agreement, the Company agrees to pay Consultant the sum of $26,086.50 during the Consulting Term (“Consulting Fee”) to be payable as follows: (a) $13,043.25 to be payable within fifteen (15) business days after the Effective Date and (b) $13,043.25 to be payable within five (5) business days after the filing of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 with the Securities and Exchange Commission.

5.           Expenses.  The Company shall reimburse Consultant for reasonable out-of-pocket expenses incurred in connection with this Agreement.

 

6.           Company Information.  Consultant recognizes and acknowledges that by reason of Consultant’s retention by and service to the Company before, during and, if applicable, after the  Consulting Term, Consultant will have access to certain confidential and proprietary information relating to the Company’s business, which may include, but is not limited to, trade secrets, trade “know-how,” product development techniques and plans, formulas, customer lists and addresses,  financing services, funding programs, cost and pricing information, marketing and sales techniques, strategy and programs, computer programs and software and financial information relating to the field of in which the Company is actually engaged in research, development, collaboration or sales at the time of such disclosure (collectively referred to as “Confidential Information”).  Consultant acknowledges that such Confidential Information is a valuable and unique asset of the Company and Consultant covenants that it will not, unless expressly authorized in writing by the Company, at any time during the Consulting Term use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Consultant’s duties for the Company and in a manner consistent with the Company’s policies regarding Confidential Information.  Consultant also covenants that at any time after the termination of this Agreement, directly or indirectly, it will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Consultant or except when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order Consultant to divulge, disclose or make accessible such information.  All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Consultant’s possession during the Consulting Term shall remain the property of the Company.  Except as required in the performance of Consultant’s duties for the Company, or unless expressly authorized in writing by the Company, Consultant shall not remove any written Confidential Information from the Company’s premises, except in connection with the performance of Consultant’s duties for the Company and in a manner consistent with the Company’s policies regarding Confidential Information.  Upon termination of this Agreement, the Consultant agrees to return immediately to the Company all written Confidential Information (including, without limitation, in any computer or other electronic format) in Consultant’s possession.

 

  

B - 1

  

7.           Consultant an Independent Contractor.  Consultant shall perform its services hereunder as an independent contractor and not as an employee of the Company or an affiliate thereof.  It is expressly understood and agreed to by the parties hereto that Consultant shall have no authority to act for, represent or bind the Company or any affiliate thereof in any manner, except as may be agreed to expressly by the Company in writing from time to time.

8.           Termination. The Company may terminate this Agreement in its sole discretion and at its sole option at any time upon 3 day written notice to Consultant.

 

9.           Waiver of Breach.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate nor be construed as a waiver of any subsequent breach.

 

10.           Binding Effect; Benefits.  None of the parties hereto may assign his or its rights hereunder without the prior written consent of the other parties hereto, and any such attempted assignment without such consent shall be null and void and without effect.  This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, permitted assigns, heirs and legal representatives.

 

11.           Notices.  All notices and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) one (1) business day after being mailed with a nationally recognized overnight courier service, or (c) three (3) business days after being mailed by registered or certified first class mail, postage prepaid, return receipt requested, to the parties hereto at:

 

If to the Company, to:                         1111 Kane Concourse, Suite 304,

Bay Harbor Islands, Florida 33154

Facsimile: ___________

If to the Consultant, to:                       118 Front Street

Brookings, South Dakota  57006

Facsimile: (605) 692-8368

12.           Entire Agreement; Amendments.  This Agreement contains the entire agreement and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof.  This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge is sought.

 

13.           Severability.  The invalidity of all or any part of any provision of this Agreement shall not render invalid the remainder of this Agreement or the remainder of such provision.  If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

 

14.           Governing Law; Consent to Jurisdiction.  This Agreement shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof.  The parties hereto each hereby submits herself or itself for the sole purpose of this Agreement and any controversy arising hereunder to the exclusive jurisdiction of the state courts in the State of New York.

 

15.  Assignment.  Neither party may assign this Agreement without the prior written consent of the other party.

 

16.  Headings.  The headings herein are inserted only as a matter of convenience and reference, and in no way define, limit or describe the scope of this Agreement or the intent of the provisions thereof.

 

17.           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.  Signatures evidenced by facsimile transmission will be accepted as original signatures.

 

[SIGNATURE PAGE FOLLOWS]

  

B - 2

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the date first above written.

 

	 	
CONSULTANT

	 
	 	 	 	 
	 	 	 
	 	
Shawn Knapp

	 
	 	 	 
	 	
VANITY EVENTS HOLDING, INC.

	 
	 	 	 	 
	 	By: 	 	 
	 	 	
Name: Lloyd Lapidus

	 
	 	 	
Title:   Interim Chief Executive Officer

	 
	 	 	 	 

 

 

 

 

 

 

 

 

  

B - 3

  

Exhibit C

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is executed by Shawn Knapp, individually and Roxanne Knapp, individually (each an “Indemnitor” and collectively, the “Indemnitors”), in favor of Vanity Events Holding, Inc., a Delaware corporation (the “Vanity”).

WITNESSETH:

WHEREAS, prior to the date hereof, the Indemnitors were the management team of Shogun Energy, Inc., a wholly-owned subsidiary of Vanity (“Shogun”);

WHEREAS, on December 31, 2010, Vanity entered into a share exchange agreement (“Exchange Agreement”) by and among Vanity, Shogun, Mr. Knapp and the other shareholders of Shogun (the “Shogun Shareholders” and collectively with Mr. Knapp, the “Shareholders”) pursuant to which the Shareholders exchanged an aggregate of 100% of the issued and outstanding shares of capital stock of Shogun in exchange for 500,000 shares of Vanity’s series A preferred stock (the “Exchange”); and

 

WHEREAS, on or about the date hereof, Vanity entered into a rescission of the share exchange agreement (“Rescission Agreement”) by and among Vanity, Shogun, Mr. Knapp, Roxanne Knapp and the other shareholders of Shogun pursuant to which the parties have agreed, among other things, to rescind the Rescission Agreement (the “Rescission”).

 

NOW, THEREFORE, as partial consideration for the execution of the Rescission Agreement by Vanity, the Indemnitors hereby covenant and agree as follows:

1.              Indemnitors, shall defend, protect, indemnify and hold harmless each Vanity and all of their stockholders, partners, members, officers, directors, employees and direct or indirect investors, and any of their agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by the Exchange Agreement and the Rescission Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (each, an “Indemnified Liability” and collectively, the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Indemnitors or Shogun in the Exchange Agreement and the Rescission Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Indemnitors or the Shogun contained in the Exchange Agreement and the Rescission Agreement or any other certificate, instrument or document contemplated hereby or thereby (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of Vanity) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of the Exchange Agreement and the Rescission Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (ii) any claims made by investors in a financing transaction based upon any matter relating to Vanity that occurred on or prior to the date hereof or (d) any cause of action, suit or claim brought or made against such Indemnitee by any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government (“Government Entity”) arising out of or resulting from any failure by Shogun (i) to timely pay any national, provincial or local income, sales and use, excise, franchise, real and personal property, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, severance or withholding tax or charge imposed by any Government Entity, any interest and penalties (civil or criminal) related thereto or to the nonpayment thereof, and any loss or tax liability incurred in connection with the determination, settlement or litigation of any tax liability arising therefrom (“Taxes”) due and payable thereby (or subject to withholding and remittance thereby), (ii) to timely file any tax return, declaration, reports, estimates, claim for refund, claim for extension, information returns, or statements relating to Taxes, including any schedule or attachment thereto (“Tax Return”), (iii) to comply with any applicable law relating to Taxes.

 

  

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2.           Promptly after receipt by an Indemnitee of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against any Indemnitors under this Indemnification Agreement, deliver to the Indemnitors a written notice of the commencement thereof, and the Indemnitors shall have the right to participate in, and, to the extent the Indemnitors so desire, jointly with any other Indemnitors similarly noticed, to assume control of the defense thereof with counsel mutually reasonably satisfactory to the Indemnitors and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnitee to be paid by the Indemnitors, if the named parties to such proceeding include both the Indemnitors and the Indemnitee and, in the reasonable opinion of the Indemnitee, the representation by such counsel of the Indemnitee and the Indemnitors would be inappropriate due to actual or potential differing interests between such Indemnitee and any other party represented by such counsel in such proceeding.  The Indemnitee shall cooperate fully with the Indemnitors in connection with any negotiation or defense of any such action or claim by the Indemnitors and shall furnish to the Indemnitors all information reasonably available to the Indemnitee which relates to such action or claim.  The Indemnitors shall keep the Indemnitee fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  No Indemnitor shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, that the Indemnitors shall not unreasonably withhold, delay or condition its consent.  No Indemnitor shall, without the prior written consent of the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnitee of a release from all liability in respect to such claim or litigation and such settlement shall not include any admission as to fault on the part of the Indemnitee.  Following indemnification as provided for hereunder, the Indemnitors shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.  The failure to deliver written notice to the Indemnitors within a reasonable time of the commencement of any such action shall not relieve such Indemnitors of any liability to the Indemnitee, except to the extent that the Indemnitors is prejudiced in its ability to defend such action.

3.           The indemnification required by this Indemnification Agreement shall be made by periodic payments of the amount thereof during the course of the defense against any of the Indemnified Liabilities, reasonably promptly upon the receipt by such Indemnitee of written bills (with such appropriate supporting information as is reasonably requested by the Indemnitors that damages have been incurred and the amount thereof (together with such appropriate supporting information as is reasonably requested by the Indemnitors); provided that the Indemnitee, as applicable, shall reimburse all such payments to the extent it is finally judicially determined that such Indemnitee is not entitled to indemnification hereunder.

4.           To the extent that the undertaking by the Indemnitors hereunder may be unenforceable for any reason, the Indemnitors shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

 

5.           All notices, requests, claims, demands and other communications under this Indemnification Agreement shall be in writing and shall be deemed given upon receipt by the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Indemnitor, to:

118 Front Street

Brookings, South Dakota  57006

Attention:  Shawn Knapp

If to the Indemnitees, to

Vanity Events Holding, Inc.

1111 Kane Concourse STE 304

Bay Harbor Islands FL 33154

 Attn: Lloyd Lapidus, Interim CEO

 

  

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with a copy to:

 

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

Tel: (212) 930-9700

Fax: (212) 930-9725

6.           Notwithstanding any other provision contained in any of the Transaction Documents, the Indemnification provided under this Indemnification Agreement is a continuing Indemnification and shall remain in full force and in effect so long as any obligation referred to herein exists.  The Indemnification contained herein shall be in addition to (i) any cause of action or similar right of any Indemnitee against the Indemnitors or others, and (ii) any liabilities the Indemnitors may be subject to pursuant to applicable law.

7.           This Indemnification Agreement shall be deemed to have been made under and be governed by, and construed in accordance with, the laws of the State of New York, in all respects, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, except to the extent the laws of Delaware are mandatorily applicable to any of the transactions.

8.           This Indemnification Agreement may not be amended, modified, or supplemented except in writing executed by Indemnitor, Parent and the Company.  No provision contained herein shall be waived unless the same shall be in writing and signed by each of the Indemnitees and the Indemnitors and shall be effective only in the specific instance and for the specific purpose given.

9.           This Indemnification Agreement may be executed, and accepted and agreed to in several counterparts, each of which will be deemed to be an original, and such counterparts together will constitute but one and the same instrument.  Facsimile signatures shall be deemed to have the same effect as originals.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

  

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[Signature Page to Indemnification Agreement]

IN WITNESS WHEREOF, the Indemnitor has executed this Indemnification Agreement, effective as of the ___ day of _________, 2011.

	 	 	 	 
	 	 	 	 
	 	 	Shawn Knapp, Individually	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	
Roxanne Knapp, Individually

	 

 

                                                                           

 

                                                      

 

  

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Exhibit D

GENERAL RELEASE

TO ALL WHOM THESE PRESENTS SHALL COME OR MAY CONCERN, KNOW THAT Shawn Knapp (hereinafter referred to as  “Releaser”), for himself and his present and former representatives, agents, attorneys, administrators, heirs, executors and assigns, in consideration of the sum of One ($1.00) Dollar, plus other good and valuable consideration, received from or on behalf of Vanity Events Holding, Inc., receipt whereof is hereby acknowledged, for itself and its present and former representatives, officers, directors, members, agents, attorneys, predecessors, successors, insurers, administrators, heirs and assigns (hereinafter referred to as  “Releasees”), do hereby remise, release, acquit, satisfy and forever discharge for himself and for all persons who may claim by, through or under them, from any and all manner of action or actions, cause or causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims and demands whatsoever, whether in law, admiralty or in equity, which against the Releasees the Releaser ever had, now has or which can, shall or may have for, upon or by reason of any matter, cause, or thing whatsoever, from the beginning of the world to the date of this Release.

 

The words “Releaser” and “Releasees” include all releasers and all releasees under this Release. This Release may not be changed orally.

 

  

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IN WITNESS WHEREOF, the Releaser have hereunto set Releaser hand and seal this ____ day of June, 2011.

 

	 	 	 	 	 
	 	 	 	 	 
	
Shawn Knapp

	 	 	
 

	 

 

STATE OF _________________       )

) ss.:

COUNTY OF _________________    )

On this ___ day of June, 2011, before me personally came Shawn Knapp, to me known and known to me to be the individual described therein, and who executed the foregoing, and duly acknowledged to me that he executed the same on behalf of himself.

IN WITNESS WHEREOF, I have set my hand and official seal.

 

	 	 	 	 
	 	 	 	 
	 	 	
Notary Public

	 

 

 

 

 

 

 

 

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