Document:

ex101.htm

Exhibit 10.1

 

MEDEFILE INTERNATIONAL, INC.

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is made and entered into as of June__, 2010, by and among Medefile International, Inc., a Nevada corporation (the “Company”), and each of the purchasers listed on Exhibit A attached hereto (collectively, the “Purchasers” and individually, a “Purchaser”).

 

Recitacls

 

A.  The Company desires to issue and sell to the Purchasers, and the Purchasers desire to Purchase from the Company, up to 1,000,000,000 shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) on the terms and subject to the conditions set forth in this Stock Purchase Agreement (the “Offering”).

 

B. The Company and each Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”).

 

The parties hereto agree as follows:

 

1. Agreement To Purchase And Sell Stock.

 

(a) Authorization.  The Company’s Board of Directors has authorized the issuance and sale, pursuant to the terms and conditions of this Agreement, of up to 1,000,000,000 shares of Common Stock (the “Purchased Shares”).

 

(b) Agreement to Purchase and Sell Securities.  On the terms and subject to the conditions contained in this Agreement, each Purchaser severally agrees to purchase, and the Company agrees to sell and issue to each Purchaser, at Closing (as defined below), that number of Shares set forth on such Purchaser’s signature page  The purchase price of each Share (the “Per Share Price”) shall be $.001.

 

(c) In connection with this Offering, Lyle Hauser (“LH”) and the Company hereby agree that LH shall invest a minimum of $250,000 pursuant to this Agreement. LH further agrees to return and forfeit the Warrants to purchase up to 90,000,000 shares of Common Stock that it previously purchased under the certain Securities Purchase Agreement, dated May 14, 2010 (the “May SPA”). In consideration of the foregoing, the Company agrees to issue LH an additional 450,000,0000 shares of Common Stock so as to result in the purchase price of the shares of Common Stock previously purchased by LH under the May SPA to be reduced to the same price as the Per Share Price of the shares of Common Stock being offered and sold in this Offering (a reduction of the purchase price from $.002 per share to $.001 per share).

 

(d) Use of Proceeds.  The Company intends to apply the net proceeds from the sale of the Purchased Shares for working capital and general corporate purposes, as well as for strategic purposes in connection with selected acquisitions that may be considered in the future to expand its product and service offerings.

 

(e) Obligations Several Not Joint.  The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement.  Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement.  Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

 

  

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2. Closing.  The closing of the purchase and sale of the Purchased Shares shall take place at the offices of Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York, New York 10006 (the “SRFF Offices”) at 10:00 a.m. Eastern time on June__, 2010, or at such other time and place as the Company and Purchasers representing a majority of the Shares to be purchased mutually agree upon (which time and place are referred to in this Agreement as the “Closing”).  At the Closing, the Company shall, against delivery of payment for the Purchased Shares by wire transfer of immediately available funds in accordance with the Company’s instructions, (a) authorize its transfer agent to issue to each Purchaser one or more stock certificates (the “Certificates”) registered in the name of each Purchaser (or in such nominee name(s) as designated by such Purchaser in the Stock Certificate Questionnaire (attached hereto as Appendix I) (the “Stock Certificate Questionnaire”), representing the appropriate number of Purchased Shares based on the number of Shares to be purchased by such Purchaser as set forth on such Purchaser’s signature page, and bearing the legend set forth in Section 4(j) herein.  Closing documents may be delivered by facsimile with original signature pages sent by overnight courier. The date of the Closing is referred to herein as the “Closing Date.”

 

3. Representations and Warranties of The Company.  The Company hereby represents and warrants to each Purchaser that the statements in this Section 3 are true and correct:

 

(a) Organization, Good Standing and Qualification.  The Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed. Each of the Company and its Subsidiaries has all corporate power and authority required to carry on its business as presently conducted and as described in the SEC Documents (as described below), and the Company has all corporate power and authority required to enter into this Agreement and the other agreements, instruments and documents contemplated hereby, and to consummate the transactions contemplated hereby and thereby.  Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.  As used in this Agreement “Subsidiaries” means any entity in which the Company owns, directly or indirectly, 100% of the capital stock.  Further, as used in this Agreement, “Material Adverse Effect” means a material adverse effect on, or a material adverse change in, or a group of such effects on or changes in, the business, operations, condition, financial or otherwise, results of operations, prospects, assets or liabilities of the Company and its subsidiaries, taken as a whole.

 

(b) Capitalization.  The capitalization of the Company, without listing the Purchased Shares to be purchased pursuant to this Agreement, is as follows:

 

(i) The authorized capital stock of the Company consists of 3,000,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).

 

(ii) As of June 14, 2010, the issued and outstanding capital stock of the Company consisted of 1,463,021,410 shares of Common Stock and 10,000 shares of Preferred Stock. The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and have not been issued in violation of or are not otherwise subject to any preemptive or other similar rights.  All such shares have been issued in compliance with applicable securities laws.

 

(iii) As of June 14, 2010 the Company had (a) 0 shares of Common Stock reserved for issuance upon exercise of outstanding options granted under the Company’s incentive stock plans (the “Option Plans”); and (b) 5,640,000 shares of Common Stock reserved for issuance upon exercise of outstanding warrants.

 

With the exception of the foregoing in this Section 3(b) and except as set forth in the SEC Documents (as defined in Section 3(k)(i) below), there are no outstanding subscriptions, options, warrants, convertible or exchangeable securities or other rights granted to or by the Company to purchase shares of Common Stock or other securities of the Company and there are no commitments, plans or arrangements to issue any shares of Common Stock or any security convertible into or exchangeable for Common Stock.  Except as set forth in SEC Documents, (A) no securities of the Company are entitled to preemptive or similar rights, and no person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement; and (B)  the issue and sale of the Purchased Shares will not obligate the Company to issue shares of Common Stock or other securities to any person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(c) Subsidiaries.  Except as set forth in the SEC Documents, (i) the Company does not have any subsidiaries, and,  does not own any capital stock of, assets comprising the business of, obligations of, or any other interest (including any equity or partnership interest) in, any person or entity; (ii) the Company owns, directly or indirectly, all of the capital stock or other equity interests of each subsidiary free and clear of any liens, and all the issued and outstanding shares of capital stock of each subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

(d) Due Authorization.  All corporate actions on the part of the Company necessary for the authorization, execution, delivery of, and the performance of all obligations of the Company under this Agreement and the authorization, issuance, reservation for issuance and delivery of all of the Purchased Shares being sold under this Agreement have been taken, no further consent or authorization of the Company or the Board of Directors or its stockholders is required, and this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) as may be limited by (A) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally and (B) the effect of rules of law governing the availability of equitable remedies and (ii) as rights to indemnity or contribution may be limited under federal or state securities laws or by principles of public policy thereunder.

 

  

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(e) Valid Issuance of Purchased Shares.

 

(i) Purchased Shares.  The Purchased Shares will be, upon payment therefore by the Purchasers in accordance with this Agreement, duly authorized, validly issued, fully paid and non-assessable, free from all taxes, liens, claims, encumbrances with respect to the issuance of such Purchased Shares and will not be subject to any pre-emptive rights or similar rights

 

(ii) Compliance with Securities Laws.  Subject to the accuracy of the representations made by the Purchasers in Section 4 hereof, the Purchased Shares (assuming no unlawful redistribution of the Purchased Shares by the Purchasers or other parties as of the date hereof) will be issued to the Purchasers in compliance with applicable exemptions from (A) the registration and prospectus delivery requirements of the Securities Act and (B) the registration and qualification requirements of all applicable securities laws of the states of the United States.

 

(f) Consents and Approvals.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, or notice to, any federal, state or local governmental authority or self regulatory agency or any other person on the part of the Company is required in connection with the issuance of the Purchased Shares to the Purchasers, or the consummation of the other transactions contemplated by this Agreement, except (i) such filings as have been made prior to the date hereof and (ii) such additional post-Closing filings as may be required to comply with applicable state and federal securities laws.

 

(g) Non-Contravention.  The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby (including issuance of the Purchased Shares), do not: (i) contravene or conflict with the Certificate of Incorporation of the Company, as amended to date (the “Certificate of Incorporation”), or the Bylaws of the Company, as amended to date (the “Bylaws”) or the organizational documents of any Subsidiary; (ii) constitute a violation of any provision of any federal, state, local or foreign law, rule, regulation, order or decree applicable to the Company; or (iii) constitute a default (or an event that with notice or lapse of time or both would become a default) or require any consent under, give rise to any right of termination, cancellation or acceleration of, or to a loss of any material benefit to which the Company is entitled under, or result in the creation or imposition of any lien, claim or encumbrance on any assets of the Company under, any material contract to which the Company is a party or any material permit, license or similar right relating to the Company or by which the Company may be bound or affected.

 

(h) Litigation.  Except as set forth in the SEC Documents, there is no action, suit, proceeding, claim, arbitration or investigation (“Action”) pending or, to the Company’s knowledge, threatened in writing: (i) against the Company or any of its Subsidiaries, their respective activities, properties or assets, or any officer, director or employee of the Company or any of its Subsidiaries in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, the Company or any of its Subsidiaries, that is reasonably likely to have a Material Adverse Effect; or (ii) that seeks to prevent, enjoin, alter, challenge or delay the transactions contemplated by this Agreement (including the issuance of the Purchased Shares).  Neither the Company nor any of its Subsidiaries is a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  No Action is currently pending nor does the Company or any of its Subsidiaries intend to initiate any Action that is reasonably likely to have a Material Adverse Effect.

 

(i) Compliance.  The Company is not in violation or default of any provisions of the Certificate of Incorporation or the Bylaws and none of the Company’s Subsidiaries is in violation nor default of any provisions of their respective organizational documents.  The Company and each of its Subsidiaries has complied and is currently in compliance with all applicable statutes, laws, rules, regulations and orders of the United States of America and all states thereof, foreign countries and other governmental bodies and agencies having jurisdiction over the Company’s or each subsidiary’s respective businesses or properties, except for any instance of non-compliance that has not had, and would not reasonably be expected to have, a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), except as does not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

 

(j) Material Non-Public Information.  The Company has not provided to the Purchasers any material non-public information other than information related to the transactions contemplated by this Agreement, all of which information related to the transactions contemplated hereby shall be disclosed by the Company pursuant to Section 8(n) hereof.  The Company understands and confirms that each Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company.

 

  

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(k) SEC Documents.

 

(i) Reports.  The Company has filed in a timely manner all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder.  The Company has made available to the Purchasers prior to the date hereof copies of its Quarterly Report on Form 10-Q for the period ended March 31, 2010 (the “Form 10-Q”), its Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the “Form 10-K”) and any Current Report on Form 8-K for events occurring since December 31, 2009 (“Forms 8-K”) filed by the Company with the SEC (the Form 10-Q, Form 10-K and the Forms 8-K are collectively referred to herein as the “SEC Documents”).  Each of the SEC Documents, as of the respective dates thereof (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing), did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  Each SEC Document, as it may have been subsequently amended by filings made by the Company with the SEC prior to the date hereof, complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Document.

 

(ii) Sarbanes-Oxley.  The Chief Executive Officer and the Chief Financial Officer of the Company have signed, and the Company has furnished to the SEC, all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.  Such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither the Company nor any of its officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications.  The Company is otherwise in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations issued thereunder by the SEC.  The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

(iii) Financial Statements.  The financial statements of the Company in the SEC Documents present fairly, in accordance with United States generally accepted accounting principles (“GAAP”), consistently applied, the financial position of the Company as of the dates indicated, and the results of its operations and cash flows for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments.

 

(l) Absence of Certain Changes since the Balance Sheet Date.  Except as set forth in the SEC Documents, since December 31, 2009, the business and operations of the Company and each of its Subsidiaries have been conducted in the ordinary course consistent with past practice, and there has not been:

 

(i) any declaration, setting aside or payment of any dividend or other distribution of the assets of the Company or any of its Subsidiaries with respect to any shares of capital stock of the Company or any of its Subsidiaries or any repurchase, redemption or other acquisition by the Company or any subsidiary of the Company of any outstanding shares of the Company’s capital stock (and the Company has not made any agreements to do any of the foregoing);

 

(ii) any damage, destruction or loss, whether or not covered by insurance, except for such occurrences, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect;

 

(iii) any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it, except for such waivers, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect;

 

(iv) any material change or amendment to, or any waiver of any material right under a material contract or arrangement by which the Company or any of its Subsidiaries or any of its or their respective assets or properties is bound or subject;

 

(v) any change by the Company in its accounting principles, methods or practices or in the manner in which it keeps its accounting books and records, except any such change required by a change in GAAP or by the SEC; or

 

(vi) any other event or condition of any character, except for such events and conditions that have not resulted, and are not expected to result, either individually or collectively, in a Material Adverse Effect.

 

  

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(m) Intellectual Property.

 

(i) Except as set forth in the SEC Documents, the Company and each of its Subsidiaries owns or possesses sufficient rights to use all patents, patent rights, inventions, trade secrets, know-how, trademarks, service marks, trade names, copyrights, information and other proprietary rights and processes (collectively, “Intellectual Property”), which are necessary to conduct its or their respective businesses as currently conducted and as described in the SEC Documents free and clear of all liens, encumbrances and other adverse claims, except where the failure to own or possess free and clear of all liens, encumbrances and other adverse claims would not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect.

 

(ii) Neither the Company nor any of its Subsidiaries has received any written notice of, nor has knowledge of, any infringement of or conflict with rights of others with respect to any Intellectual Property and neither the Company nor any of its Subsidiaries has knowledge of any infringement, misappropriation or other violation of any Intellectual Property by any third party, which, in either case, either individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Material Adverse Effect.

 

(iii) To the Company’s knowledge, none of the patent rights owned or licensed by the Company or any of its Subsidiaries are unenforceable or invalid.

 

(iv) Each employee, consultant and contractor of the Company and each of its Subsidiaries who has had access to the Intellectual Property has executed a valid and enforceable agreement to maintain the confidentiality of such Intellectual Property and assigning all rights to the Company or such subsidiary to any inventions, improvements, discoveries or information relating to the business of the Company or such subsidiary.  The Company is not aware that any of its or its Subsidiaries’ employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or such subsidiary or that would conflict with the Company’s or such subsidiary’s business.

 

(v) Neither the Company nor any of its Subsidiaries is subject to any “open source” or “copyleft” obligations or otherwise required to make any public disclosure or general availability of source code either used or developed by the Company or any of its Subsidiaries.

 

(n) Registration Rights.  Except as set forth in the SEC Documents, the Company is not currently subject to any agreement providing any person or entity any rights (including piggyback registration rights) to have any securities of the Company registered with the SEC or registered or qualified with any other governmental authority.

 

(o) Title to Property and Assets.  Except as set forth in the SEC Documents, the properties and assets of the Company and its Subsidiaries are owned by the Company and its Subsidiaries free and clear of all mortgages, deeds of trust, liens, charges, encumbrances and security interests except for (i) statutory liens for the payment of current taxes that are not yet delinquent and (ii) liens, encumbrances and security interests that arise in the ordinary course of business and do not in any material respect affect the properties and assets of the Company.  With respect to the property and assets it leases, the Company is in compliance with such leases in all material respects.

 

(p) Taxes.  The Company and each of its Subsidiaries has filed or has valid extensions of the time to file all necessary federal, state, and foreign income and franchise tax returns due prior to the date hereof and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of any material tax deficiency that has been or might be asserted or threatened against it or any of its Subsidiaries.

 

(q) Insurance.  The Company and its Subsidiaries maintain insurance of the types and in the amounts that the Company reasonably believes is prudent and adequate for its business and which is at least as extensive as is customary for other companies in the Company’s industry, all of which insurance is in full force and effect.

 

(r) Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or any of its Subsidiaries.  No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

 

(s) Internal Accounting Controls.  The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(t) Transactions With Officers and Directors.  Except as set forth in the SEC Documents, none of the officers or directors of the Company has entered into any transaction with the Company or any Subsidiary that would be required to be disclosed pursuant to Item 404(a) or (c) of Regulation S-K of the SEC.

 

  

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(u) General Solicitation.  Neither the Company nor any other person or entity authorized by the Company to act on its behalf has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Purchased Shares.  The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(v) Listing Matters.  The Common Stock of the Company is listed on the Over The Counter Bulletin Board (the “OTCBB”) under the ticker symbol “MDFI.”  The issuance and sale of the Purchased Shares under this Agreement does not contravene the rules and regulations of the OTCBB.

 

(w) Investment Company.  The Company and each of its Subsidiaries is not now, and after the sale of the Purchased Shares under this Agreement and the application of the net proceeds from the sale of the Purchased Shares described in Section 1(b) herein will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(y)           No Integrated Offering.  Neither the Company, nor any Affiliate of the Company, nor any person acting on its or their behalf has, directly or indirectly, engaged in any form of general solicitation or general advertising with respect to any security or made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offering or issuance of the Purchased Shares to be integrated with prior offerings by the Company for purposes of the Securities Act which would cause Regulation D or any other applicable exemption from registration under the Securities Act to be unavailable, or would cause any applicable state securities laws exemptions or any applicable stockholder approval provisions exemptions, including, without limitation, under the rules and regulations of any national securities exchange or automated quotation system on which any of the securities of the Company are listed or designated to be unavailable, nor will the Company take any action or steps that would cause the offering or issuance of the Purchased Shares to be integrated with other offerings.

(z)           Brokers.  Neither the Company nor any Subsidiary has any liability to pay any fees, commissions or other similar compensation to any broker, finder, investment banker, financial advisor or other similar person in connection with the transactions contemplated by this Agreement.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.

(aa)           Pensions; Benefits.  (a)  Neither the Company nor any subsidiary or ERISA Affiliate maintains or contributes to any Plan other than those disclosed in the SEC Documents.

(i) The Company and each ERISA Affiliate is in compliance with ERISA and no contributions required to be made by the Company or any ERISA Affiliate to any pension plan are overdue.

 

(ii) No liability to the PBGC has been or is expected to be incurred by the Company or any ERISA Affiliate with respect to any pension plan that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  No circumstance exists that constitutes grounds under section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, any pension plan or trust created thereunder, nor has the PBGC instituted any such proceeding.

 

(iii) Neither the Company nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any multiemployer plan.  There have been no “reportable events” (as such term is defined in section 4043 of ERISA) with respect to any multiemployer plan that could result in the termination of such multiemployer plan and give rise to a liability of the Company or any ERISA Affiliate in respect thereof.  Neither the Company or any subsidiary has incurred or does it expect to incur liability under Sections 412 or 4971 of the Code; and each “pension plan” for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification.

 

For purposes of this section 3(aa) “Code” means the Internal Revenue Code of 1986; “ERISA” means the Employee Retirement Income Security Act of 1974; “ERISA Affiliate” means any person required to be aggregated with the Company or any subsidiary of the Company under Sections 414(b), (c), (m) or (o) of the Code; “PBGC” means the Pension Benefit Guaranty Corporation; and “Plan” means any employee benefit plan, program or arrangement, whether oral or written, maintained or contributed to by the Company, any subsidiary of the Company or any ERISA Affiliate, or with respect to which the Company, any of its Subsidiaries or any ERISA Affiliate may incur liability.

(bb)           Application of Takeover Protections.  The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under this Agreement, including without limitation as a result of the Company’s issuance of the Purchased Shares and the Purchasers’ ownership of the Purchased Shares.

(cc)           Purchaser Representations.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 4 hereof.

 

  

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(dd)           Solvency.  Based on the financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company of the proceeds from the sale of the Purchased Shares hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  The SEC Documents set forth as of the dates thereof all outstanding secured and unsecured Indebtedness of the Company or any subsidiary, or for which the Company or any subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any subsidiary is in default with respect to any Indebtedness.

(ee)           No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company.

(ff)           Acknowledgment Regarding Purchasers’ Purchase of Purchased Shares.  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Purchasers’ purchase of the Purchased Shares.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

(gg)           Manipulation of Price.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Purchased Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Purchased Shares or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent and any approved broker-dealers in connection with the placement of the Purchased Shares.

(hh)           Legend Removal.  The Company agrees, upon a Purchaser’s reasonable request, to reissue certificates representing any of the Purchased Shares without the legend set forth in Section 4(j)(i) below: (i) while a registration statement covering the resale of such securities is effective under the Securities Act, (ii) following any sale of such securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such Securities are eligible for sale under Rule 144(k) (to the extent that the applicable Purchaser provides a certification or legal opinion to the Company to that effect), or (iv) if such legend is not required under applicable requirements of the Securities Act (including controlling judicial interpretations and pronouncements issued by the Commission). Following the effective date of a registration statement, which includes the Purchased Shares, or at such earlier time as a legend is no longer required for the Purchased Shares and the Underlying Shares, the Company will, promptly following the delivery by a Purchaser to the Company or the Company’s transfer agent of a legended certificate representing such securities, deliver or cause to be delivered to such Purchaser a certificate representing such securities that is free from all restrictive legends.  If requested by a Purchaser, certificates for securities subject to legend removal hereunder shall be transmitted by the transfer agent of the Company to the Purchasers by crediting the account of the Purchaser’s prime broker with the Depository Trust Company (“DTC”).

(jj)           Equal Treatment of Purchasers.  No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration is also offered to all of the parties to such agreements.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

4. Representations, Warranties and Certain Agreements of The Purchasers.  Each Purchaser hereby represents and warrants to the Company, severally and not jointly, and agrees that:

 

(a) Organization, Good Standing and Qualification.  The Purchaser has all corporate, membership or partnership power and authority required to enter into this Agreement and the other agreements, instruments and documents contemplated hereby, and to consummate the transactions contemplated hereby and thereby.

 

(b) Authorization.  The execution of this Agreement has been duly authorized by all necessary corporate, membership or partnership action on the part of the Purchaser.  This Agreement constitutes the Purchaser’s legal, valid and binding obligation, enforceable in accordance with its terms, except (i) as may be limited by (A) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (B) the effect of rules of law governing the availability of equitable remedies and (ii) as rights to indemnity or contribution may be limited under federal or state securities laws or by principles of public policy thereunder.

 

  

7

  

 

(c) Litigation.  There is no Action pending to which such Purchaser is a party that is reasonably likely to prevent, enjoin, alter or delay the transactions contemplated by this Agreement.

 

(d) Purchase for Own Account.  The Purchased Shares are being acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act, without prejudice, however, to such Purchaser’s right at all times to sell or otherwise dispose of all or any part of such securities in compliance with applicable federal and state securities laws and as otherwise contemplated by this Agreement.  The Purchaser also represents that it has not been formed for the specific purpose of acquiring the Purchased Shares.

 

(e) Investment Experience.  The Purchaser understands that the purchase of the Purchased Shares involves substantial risk.  The Purchaser has experience as an investor in securities of companies and acknowledges that it can bear the economic risk of its investment in the Purchased Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Purchased Shares and protecting its own interests in connection with this investment.

 

(f) Accredited Investor Status.  The Purchaser is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act.

 

(g) Reliance Upon Purchaser’s Representations.  The Purchaser understands that the issuance and sale of the Purchased Shares to it will not be registered under the Securities Act on the ground that such issuance and sale will be exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company’s reliance on such exemption is based on each Purchaser’s representations set forth herein.

 

(h) Receipt of Information.  The Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance and sale of the Purchased Shares and the business, properties, prospects and financial condition of the Company and to obtain any additional information requested and has received and considered all information it deems relevant to make an informed decision to purchase the Purchased Shares.  Neither such inquiries nor any other investigation conducted by or on behalf of such Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of such information and the Company’s representations and warranties contained in this Agreement.

 

(i) Restricted Securities.  The Purchaser understands that the Purchased Shares have not been registered under the Securities Act and will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Purchased Shares unless (i) pursuant to an effective registration statement under the Securities Act, (ii) such holder provides the Company with an opinion of counsel, in form and substance reasonably acceptable to the Company, to the effect that a sale, assignment or transfer of the Purchased Shares may be made without registration under the Securities Act and the transferee agrees to be bound by the terms and conditions of this Agreement, (iii) such holder provides the Company with reasonable assurances (in the form of seller and broker representation letters) that the Purchased Shares or the Underlying Shares, as the case may be, can be sold pursuant to Rule 144 promulgated under the Securities Act (“Rule 144”) or (iv) pursuant to Rule 144(k) promulgated under the Securities Act following the applicable holding period.  Notwithstanding anything to the contrary contained in this Agreement, the Purchaser may transfer (without restriction and without the need for an opinion of counsel) the Purchased Shares to its Affiliates (as defined below) provided that each such Affiliate is an “accredited investor” under Regulation D, and such Affiliate agrees to be bound by the terms and conditions of this Agreement and shall have the rights of a Purchaser hereunder.

 

For the purposes of this Agreement, an “Affiliate” of any specified Purchaser means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Purchaser.  For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

(j) Legends.

 

(i) Purchased Shares and Underlying Shares. The Purchaser agrees that the certificates for the Purchased Shares and Underlying Shares shall bear the following legend and that the Purchaser will comply with the restrictions on transfer set forth in such legend:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Purchased Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Purchased Shares to the pledgees or secured parties. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Purchased Shares may reasonably request in connection with a pledge or transfer of the Purchased Shares, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

 

In addition, the Purchaser agrees that the Company may place stop transfer orders with its transfer agent with respect to such certificates in order to implement the restrictions on transfer set forth in this Agreement.  The appropriate portion of the legend and the stop transfer orders will be removed promptly (but in no event later than three (3) business days) upon delivery to the Company of such satisfactory evidence as reasonably may be required by the Company that such legend or stop orders are not required to ensure compliance with the Securities Act.  In addition, upon the declaration of the effectiveness of the Registration Statement which includes the Purchased Shares, the Company shall cause its counsel to deliver a blanket opinion (or separate opinions if the transfer agent will not accept a blanket opinion) to its transfer agent to cause the stock certificates evidencing the Purchased Shares to be issued to the Purchasers free of any Securities Act restrictive legends assuming compliance with the prospectus delivery requirements, to the extent required by Rule 172 of the Securities Act. Each of the Purchaser acknowledges and agrees that the Company will endeavor to remove any Securities Act restrictive legends pursuant to this Section j(ii) upon the representation contained herein that the Purchasers will comply with the prospectus delivery requirements, to the extent required by Rule 172 of the Securities Act.

 

  

8

  

 

(k) Questionnaires.  The Purchaser has completed or caused to be completed the Stock Certificate Questionnaire, and the answers  to such questionnaires are true and correct as of the date of this Agreement; provided, that the Purchasers shall be entitled to update such information by providing written notice thereof to the Company before the effective date of the Registration Statement.

 

(l) Prohibited Transactions.  During the last thirty (30) days prior to the date hereof, neither such Purchaser nor any Affiliate of such Purchaser, foreign or domestic, has, directly or indirectly, effected or agreed to effect any “short sale” (as defined in Rule 200 under Regulation SHO), whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, borrowed or pre-borrowed any shares of Common Stock, or granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock or otherwise sought to hedge its position in the Company’ securities (each, a “Prohibited Transaction”).

 

(m) Form D Filing; Registration; Compliance With The Securities Act. The Company hereby agrees that it shall file in a timely manner a Form D relating to the sale of the Purchased Shares under this Agreement, pursuant to Regulation D promulgated under the Securities Act;

 

5. Conditions to The Purchaser’s Obligations at the Closing. The obligations of the Purchasers under Section 1(b) of this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions:

 

(a) Representations and Warranties True.  Each of the representations and warranties of the Company contained in Section 3 shall be true and correct in all material respects on and as of the date hereof (provided, however, that such materiality qualification shall only apply to representations or warranties not otherwise qualified by materiality) and on and as of the date of the Closing with the same effect as though such representations and warranties had been made as of the Closing; provided, however, that if a representation and warranty is made as of a specific date, it shall be true and correct in all material respects only as of such date.

 

(b) Performance.  The Company shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein; provided, however, that the Company may furnish to each Purchaser a facsimile copy of stock certificate representing the Purchased Shares, with the original stock certificate held in trust by counsel for the Company until delivery thereof on the next business day.

 

(c) Reserved.

 

(d) Agreement.  The Company shall have executed and delivered to the Purchasers this Agreement.

 

(e) Securities Exemptions.  The offer and sale of the Purchased Shares to the Purchasers pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws.

 

(f) No Suspension of Trading or Listing of Common Stock.  The Common Stock of the Company (i) shall be designated for quotation or listed on the OTCBB and (ii) shall not have been suspended from trading on the OTCBB.

 

(g) Reserved.

 

(h) Reserved.

 

(i) Reserved.

 

(j) No Statute or Rule Challenging Transaction.  No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation shall have been enacted, entered, promulgated, endorsed or adopted by any court or governmental authority of competent jurisdiction or any self-regulatory organization or the staff of any of the foregoing, having authority over the matters contemplated hereby that questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement.

 

(k) Other Actions.  The Company shall have executed such certificates, agreements, instruments and other documents, and taken such other actions as shall be customary or reasonably requested by the Purchasers in connection with the transactions contemplated hereby.

 

  

9

  

 

6. Conditions to The Company’s Obligations at the Closing.  The obligations of the Company to the Purchasers under this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions:

 

(a) Representations and Warranties True.  The representations and warranties of the Purchasers contained in Section 4 shall be true and correct in all material respects on and as of the date hereof (provided, however, that such materiality qualification shall only apply to representations and warranties not otherwise qualified by materiality) and on and as of the date of the Closing with the same effect as though such representations and warranties had been made as of the Closing.

 

(b) Performance.  The Purchasers shall have performed and complied in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications necessary to complete the purchase and sale described herein.

 

(c) Agreement.  The Purchasers shall have executed and delivered to the Company this Agreement (and Appendix I hereto).

 

(d) Securities Exemptions.  The offer and sale of the Purchased Shares to the Purchasers pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state securities laws.

 

(e) Payment of Purchase Price.  The Purchasers shall have delivered to the Company by wire transfer of immediately available funds, full payment of the purchase price for the Purchased Shares as specified in Section 1(b).

 

(f) No Statute or Rule Challenging Transaction.  No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation shall have been enacted, entered, promulgated, endorsed or adopted by any court or governmental authority of competent jurisdiction or any self-regulatory organization or the staff of any of the foregoing, having authority over the matters contemplated hereby that questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement.

 

7. MISCELLANEOUS.

 

(a) Successors and Assigns.  The terms and conditions of this Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.  The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchasers holding a majority of the total aggregate number of Purchased Shares then outstanding (excluding any shares sold to the public pursuant to Rule 144 or otherwise).  Any Purchaser may assign its rights under this Agreement to any person to whom the Purchaser assigns or transfers any Purchased Shares, provided that such transferee agrees in writing to be bound by the terms and provisions of this Agreement, and such transfer is in compliance with the terms and provisions of this Agreement and permitted by federal and state securities laws.

 

(b) Governing Law.  This Agreement will be governed by and construed and enforced under the internal laws of the State of Florida, without reference to principles of conflict of laws or choice of laws.  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 HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(c) Survival.  The representations and warranties of the Company and the Purchasers contained in Sections 3 and 4 of this Agreement shall survive until the second anniversary of the Closing Date.

 

(d) Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

(e) Headings.  The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.  All references in this Agreement to sections, paragraphs, exhibits and schedules will, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by reference.

 

(f) Notices.  Any notices and other communications required or permitted under this Agreement shall be in writing and shall be delivered (i) personally by hand or by courier, (ii) mailed by United States first-class mail, postage prepaid or (iii) sent by facsimile directed (A) if to a Purchaser, at such Purchaser’s address or facsimile number set forth on such Purchaser’s signature page to this Agreement, or at such address or facsimile number as such Purchaser may designate by giving at least ten days’ advance written notice to the Company or (B) if to the Company, to its address or facsimile number set forth below, or at such other address or facsimile number as the Company may designate by giving at least ten days’ advance written notice to the Purchaser.  All such notices and other communications shall be deemed given upon (I) receipt or refusal of receipt, if delivered personally, (II) three days after being placed in the mail, if mailed, or (III) confirmation of facsimile transfer, if faxed.

 

  

10

  

 

The address of the Company for the purpose of this Section 8(f) is as follows:

 

Medefile International, Inc.

301 Yamato Road

Boca Raton, FL 33431

Tel:  (561) 912-3393

Fax:  (561) 912-3396

Attention: Milton Hauser

with a copy to:

Sichenzia Ross Friedman Ference LLP

61 Broadway

New York, NY 10018

Tel:  (212) 930-9700

Fax: (212) 930-9725

Attention: Richard A. Friedman, Esq.

(g) Amendments and Waivers. This Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of the Company and the Purchasers holding a majority of the total aggregate number of Purchased Shares then outstanding (excluding any shares sold to the public pursuant to Rule 144 or otherwise).  Any amendment effected in accordance with this Section 8(g) will be binding upon the Purchasers, the Company and their respective successors and permitted assigns.

 

(h) Severability.  If any provision of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from this Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms.

 

(i) Entire Agreement.  This Agreement, together with all exhibits and schedules hereto and thereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof.

 

(j) No Additional Agreements. The Company does not have any written or oral contract, agreement, arrangement or understanding with any Purchaser with respect to the transactions contemplated by this Agreement other than as expressly stated herein.

 

(k) Further Assurances.  From and after the date of this Agreement, upon the request of the Company or the Purchasers, the Company and the Purchasers will execute and deliver such instruments, documents or other writings, and take such other actions, as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 

(l) Meaning of Include and Including.  Whenever in this Agreement the word “include” or “including” is used, it shall be deemed to mean “include, without limitation” or “including, without limitation,” as the case may be, and the language following “include” or “including” shall not be deemed to set forth an exhaustive list.

 

(m) Fees, Costs and Expenses.  All fees, costs and expenses (including attorneys’ fees and expenses) incurred by any party hereto in connection with the preparation, negotiation and execution of this Agreement and the exhibits and schedules hereto and the consummation of the transactions contemplated hereby and thereby shall be the sole and exclusive responsibility of such party.  In addition, the Company will pay the costs associated with any filings with, or compliance with any of the requirements of any governmental authorities.

 

(n) 8-K Filing; Standstill.  On or before 5:30 p.m., eastern time, on the fourth business day following the date of this Agreement, the Company shall file a Current Report on Form 8-K describing the terms of the transactions contemplated by this Agreement in the form required by the Exchange Act and attaching this Agreement as an exhibit to such filing (the “8-K Filing”), but not including the names of the Purchasers or the individual amounts of Purchased Shares purchased hereby without the Purchaser’s consent. From and after the filing of the 8-K Filing with the SEC, the Purchasers as a consequence of participating in the transactions contemplated by this Agreement shall not be in possession of any material, nonpublic information received from the Company, any of its subsidiaries or any of their respective officers, directors, employees or agents authorized to disclose such information, that is not disclosed in the 8-K Filing.  The Company shall not, and shall cause each of its subsidiaries and its and each of their respective officers, directors, employees and agents, not to, provide the Purchasers with any material, nonpublic information regarding the Company or any of its subsidiaries from and after the filing of the 8-K Filing with the SEC without the consent of the Purchasers.  If a Purchaser has, or believes it has, received any such material, nonpublic information regarding the Company or any of its subsidiaries prior to the Closing Date, it shall provide the Company with written notice thereof and the Company shall within five (5) business days thereafter, make public disclosure of such material, nonpublic information if permitted under applicable law or without breach or violation of any agreement, contract or other obligation of the Company unless the Board of Directors of the Company shall determine that such disclosure would reasonably be expected to result in a material and adverse effect on the Company or its business, prospects, finances or properties. Except for such disclosure as the Company is advised by counsel is required to be included in documents filed with the SEC or otherwise required by law, the Company shall not use the name of, or make reference to, any Purchaser or any of its Affiliates in any press release or in any public manner (including any reports or filings made by the Company under the Exchange Act) without such Purchaser's prior written consent, which consent shall not be unreasonably withheld.

 

(o) Reserved.

 

(p) Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each Purchaser and the Company will be entitled to specific performance under this Agreement.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

(p)           Several Liability; Advice. Each Purchaser agrees that no other Purchaser nor the respective controlling persons, officers, directors, partners, agents or employees of any other Purchaser shall be liable to such Purchaser for any losses incurred by such Purchaser in connection with its investment in the Company.  Each Purchaser acknowledges that it is not relying upon any person, firm or corporation (including without limitation any other Purchaser), other than the Company and its officers and directors (acting in their capacity as representatives of the Company), in deciding to invest and in making its investment in the Company. The Company acknowledges that no Purchaser is acting or has acted as an advisor, agent or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and any advice given by any Purchaser or any of its representatives in connection with this Agreement is merely incidental to the Purchasers’ purchase of securities of the Company hereunder.

 

  

11

  

The parties hereto have executed this Agreement as of the date and year first above written.

 

	 	Medefile International, Inc.	 
	 	 	 	 
	
 

	
By: 

	/s/ 	 
	 	 	Milton Hauser	 
	 	 	Chief Executive Officer	 
	 	 	 	 

 

 

 

 

  

12

  

 

[PURCHASER SIGNATURE PAGES TO FOLLOW]

SIGNATURE PAGE TO

 

 

SECURITIES PURCHASE AGREEMENT

 

 

DATED AS OF JUNE __, 2010

 

 

BY AND AMONG

 

 

MEDEFILE INTERNATIONAL, INC.

 

 

AND EACH PURCHASER NAMED THEREIN

 

The undersigned hereby executes and delivers to Medefile International, Inc., the Securities Purchase Agreement (the “Agreement”) to which this signature page is attached, which Agreement and signature page, together with all counterparts of such Agreement and signature pages of the other Purchasers named in such Agreement, shall constitute one and the same document in accordance with the terms of such Agreement.

 

Number of Shares: __________

 

Name of Purchaser

Signature: _________________________                                                                            

By: ______________________________                                                                         

Title: _____________________________                                                                         

Address: __________________________                                                                           

Telephone: _________________________                                                                           

Fax: _______________________________                                                                            

Tax ID Number: ______________________

                                                                        

  

13

  

EXHIBIT A

 

 

Schedule of Purchasers

 

Appendix I

 

STOCK CERTIFICATE QUESTIONNAIRE

 

Please provide us with the following information:

 

	
1.The exact name that the Securities are to be registered in (this is the name that will appear on the stock certificate(s)). You may use a nominee name if appropriate:

 

	  
	
2.The relationship between the Purchaser of the Securities and the Registered Holder listed in response to item 1 above:

 

	  
	
3.The mailing address of the Registered Holder listed in response to item 1 above:

 

	  
	
4.The Tax Identification Number of the Registered Holder listed in response to item 1 above:time_8k-ex1000.htm

Exhibit 10.1

 

SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (hereinafter called "Agreement") is made as of the 7th day of July, 2010 by and among Time Associates, Inc., a Nevada corporation (hereinafter called the "Company"), Michael F. Pope and Philip C. La Puma, having an address as set forth on the signature page (hereinafter called the "Stockholders"), and William  Alverson (hereinafter called "Buyer"), an individual having an address as set forth on the signature page.

Recitals

A.           Buyer wishes to purchase from the Stockholders and the Stockholders wishes to sell to Buyer, upon the terms and conditions stated in this Agreement, 18,661,000 shares of the Company's Common Stock (together with any securities into which such shares may be reclassified as the "Common Stock") owned by the Stockholders (hereinafter called the "Shares"), for the consideration set forth in Section 2 of this Agreement; and

In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.           Definitions.  In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

"Affiliate" shall mean (a) with respect to an individual, any member of such individual's family including lineal ancestors and descendents; (b) with respect to an entity, any officer, director, Stockholders, partner, manager, investor or holder of an ownership interest of or in such entity or of or in any Affiliate of such entity; and (c) with respect to a Person, any Person which directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person or entity.

"Agreement" shall have the meaning set forth in the preamble to this Agreement.

"Buyer" shall have the meaning set forth in the preamble to this Agreement.

"Benefit Arrangement" means each (i) employee benefit plan, as defined in Section 3(3) of ERISA, (ii) employment contract and (iii) bonus, deferred compensation, incentive compensation, performance compensation, stock purchase, stock option, stock appreciation, restricted stock, phantom stock, savings, profit sharing, severance, termination pay (other than statutory or common law requirements for reasonable notice), health or other medical, salary continuation, cafeteria, dependent care, vacation, sick leave, holiday pay, fringe benefit, reimbursement, life insurance, disability or other (whether insured or self-insured) insurance, supplementary unemployment, pension retirement, supplementary retirement, welfare or other plan, program, policy or arrangement, whether written or unwritten, formal or informal, which any current or former employee, consultant or director of the Company, the Company's Subsidiaries or any ERISA Affiliate participated or participates in or was or is covered under, or was or is otherwise a party, and with respect to which the Company, the Company's Subsidiaries or any ERISA Affiliate is or ever was a sponsor or participating employer, or had or has an obligation to make contributions, or was or is otherwise a party.

 

  

  

  

 

"Capital Stock" shall have the meaning set forth in Section 4.6 of this Agreement.

"Capital Stock Equivalents" shall have the meaning set forth in Section 4.6 of this Agreement.

"Closing" shall have the meaning set forth in Section 3 of this Agreement.

"Closing Date" shall have the meaning set forth in Section 3 of this Agreement.

"Code" shall have the meaning set forth in the recitals of this Agreement.

"Common Stock" shall have the meaning set forth in the recitals to this Agreement.

"Company" shall have the meaning set forth in the preamble to this Agreement.

"Company Subsidiary" shall have the meaning set forth in Section 4.7 of this Agreement.

"Contingent Obligation" as to any Person shall mean the undrawn face amount of any letters of credit issued for the account of such Person and shall also mean any obligation of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness, leases, dividends, letters of credit or other obligations ("Primary Obligations") of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such Primary Obligation or any property constituting direct or indirect security therefore, (b) to advance or supply funds (i) for the purchase or payment of any such Primary Obligation or (ii) to maintain working capital or equity capital of the Primary Obligor or otherwise to maintain the financial condition or solvency of the Primary Obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the obligee under any such Primary Obligation of the ability of the Primary Obligor to make payment of such Primary Obligation, or (d) otherwise to assure or hold harmless the obligee under such Primary Obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.

"Contracts" shall mean all contracts, leases, subleases, notes, bonds, mortgages, indentures, Permits and Licenses, non-competition agreements, joint venture or partnership agreements, powers of attorney, purchase orders, and all other agreements, arrangements and other instruments, in each case whether written or oral, to which such Person is a party or by which any of them or any of its assets are bound.

 

  

  

  

 

"Environmental Claim" shall mean any summons, citation, directive, information request, notice of potential responsibility, notice of violation or deficiency, order, claim, complaint, investigation, proceeding, judgment, letter or other communication, written or oral, actual or threatened, from the United States Environmental Protection Agency or other federal, state, local or foreign agency or authority, or any other entity or individual, public or private, concerning (a) any intentional or unintentional act or omission which involves Regulated Substances on or off the property of a Person which might result in such Person incurring a liability; (b) the imposition of any Lien on property, including, but not limited to, Liens asserted by any Government Entity in connection with a remedial action to the presence or release of Regulated Substances; or (c) any alleged violation of or responsibility under Environmental Laws which could result in a Person incurring a liability.

"Environmental Law" shall mean any Law relating to the assessment, investigation, remediation, reduction or control of exposure to or other regulation of pollutants, contaminants, chemicals, wastes or other material in order to (1) protect human health and safety and the environment, including ambient air, soil, surface water, ground water, wetlands, land or subsurface strata and natural resources, (2) provide for worker safety and health, (3) regulate the emission, discharge, release or threat thereof of pollutants, contaminants, substances, chemicals, wastes or other material into the environment, or otherwise relating to the manufacture, generation, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, substances, chemicals, wastes or other material.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.

"ERISA Affiliate" shall mean any entity which has ever been considered a single employer with The Company or Buyer, as the case may be, under Section 4001(b) of ERISA or Section 414(b), (c), (m) or (o) of the Code.

"Financial Statements" shall have the meaning set forth in Section 4.10 of this Agreement.

"Governmental Approval" shall mean the consent, approval, order or authorization of, or registration, declaration or filing with any court, administrative agency or commission or other Governmental Entity, authority or instrumentality, domestic or foreign.

"Governmental Entity" means the government of the United States of America, any other nation or any political subdivision thereof, whether foreign, state or local, and any agency, authority, instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

  

  

  

 

"Indebtedness" shall mean as to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication: (a) every obligation of such Person for money borrowed; (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not more than 120 days overdue or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP); (e) every Capital Lease Obligation of such Person; (f) any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection with any sales by such Person unless such sales are on a non-recourse basis (as to collectability) of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables, whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection and not as a financing arrangement; (g) every obligation of such Person under any forward contract, futures contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (a "derivative contract"); (h) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefore as a result of such Person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefore and such terms are enforceable under applicable law; and (i) every Contingent Obligation of such Person with respect to Indebtedness of another Person.

"Intellectual Property" shall mean all trade names, trademarks (whether or not registered), service marks, patents and copyrights (including any registrations or pending applications for registration of any of the foregoing), trade secrets, inventions, processes, formulae, technology, technical data, information, know-how and other proprietary intellectual property, and all licenses or other rights relating to any of the foregoing that are attributable to the conduct of, used in, or related to, the operations of a Person and its subsidiaries.

"Inventories" shall mean shall mean all inventory, merchandise, finished goods, raw materials, work-in-process, packaging, supplies and similar personal property owned by the Company and held or stored by or for the Company or in transit in connection therewith (including, without limitation, held or stored for the Company at warehouses owned by third parties), for use in the operation of its business as of a particular date, whether or not recorded on its books or financial records, and any prepaid deposits for any of the same at such date.

"IP Licenses" shall have the meaning set forth in Section 4.15 of this Agreement.

"Laws" shall mean all foreign, federal, state and local statutes, laws, ordinances, regulations, rules, resolutions, orders, writs, injunctions, judgments and decrees applicable to the specified Person and to the businesses and assets thereof.

"License" shall mean any franchise, authorization, license, permit, certificate of occupancy, easement, variance, exemption, certificate, consent or approval of any Governmental Entity or other Person.

 

  

  

  

 

"Lien" shall mean any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, except for Rule 144 under the Securities  Act of 1933 restrictive legend.

"Material Adverse Effect" shall mean an event or change, individually, or in the aggregate with other events or changes, that could reasonably be expected to have a material adverse effect on (a) the business, properties, prospects, condition (financial or otherwise) or results of operations of the entity and its Subsidiaries taken as a whole (other than those events, changes or effects resulting from general economic conditions or the industry in which such entity is engaged generally) or (b) the ability of such party to consummate the transactions contemplated hereby.

"Material Contracts" shall have the meaning set forth in Section 4.19 of this Agreement.

"Permitted Liens" shall mean (a) easements, restrictions, covenants, rights of way or minor irregularities of title currently of record against any leased real property or that otherwise do not interfere with the use and occupancy thereof; (b) liens for Taxes not yet due and payable, or for Taxes being contested in good faith by appropriate proceedings, provided that in each such case, adequate reserves are maintained in accordance with GAAP; (c) warehouse and materialmen's liens which do not individually or in the aggregate interfere with the use of the related assets and (d) a blanket security interest and lien in favor of its lender.

"Person" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, Limited Liability Company, association, corporation, institution, entity, party, Governmental Entity or any other juridical entity of any kind or nature whatsoever.

"Preferred Stock" shall have the meaning set forth in Section 4.6 of this Agreement.

"Regulated Substances" shall mean any pollutant, contaminant, substance, chemical, waste or other material which is listed, defined, identified or otherwise regulated under any Environmental Law, including those materials identified as "hazardous" or "toxic," including, without limitation, petroleum or petroleum products, polychlorinated biphenyls ("PCBs"), flammable materials, explosives, radioactive materials, urea formaldehyde foam insulation, asbestos or asbestos-containing materials and "source," "special nuclear," and "by product" material as defined in the Atomic Energy Act of 1985, 42 U.S.C. §§3011 et seq.

"Retiree" shall mean (a) any retired or former employee, director or officer of the Company; or (b) any former independent contractor of the Company.

"SEC" shall mean the Securities and Exchange Commission.

"SEC Documents" shall have the meaning set forth in Section 4.9 of this Agreement.

"SEC Reports" means each report, schedule, registration statement, definitive proxy statement and other document required to be filed by the Company and its predecessors and officers and directors under the Exchange Act or the Securities Act as such documents have been amended since the time of their filing.

 

  

  

  

 

"Shares" shall have the meaning set forth in the recitals to this Agreement.

"Stockholders" shall have the meaning set forth in the recitals to this Agreement.

"Subsidiary" shall mean any Person in which another Person, directly or indirectly, owns 50% of either the equity interests in or voting control of, such Person.

"Takeover Proposal" shall mean any proposal for a tender or exchange offer, merger, consolidation, sale of all or substantially all of such party's assets, including the Shares with respect to the Stockholders, sale of in excess of fifteen percent of the shares of capital stock or other business combination involving such party or any proposal or offer to acquire in any manner a substantial equity interest (including any interest exceeding fifteen percent of the equity outstanding) in, or all or substantially all of the assets of, such party other than the transactions contemplated by this Agreement.

"Taxes" means all federal, state, county, local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, gross receipts, occupation, windfall profits, sales, use, ad valorem, value-added, profits, license, withholding, payroll, employment, excise, premium, real property, personal property, customs, net worth, capital gains, transfer, stamp, documentary, social security, disability, environmental, alternative minimum, recapture and other taxes, and including all interest, penalties and additions imposed with respect thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any Person, and any liability in respect of any Tax as a result of being a member of any affiliated, combined, consolidated, unitary or similar group.

"Tax Return" means any report, return, statement, estimate, informational return, declaration or other written information required to be supplied to a taxing authority in connection with Taxes.

"Taxing Authority" means any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority.

"Transaction Documents" shall mean this Agreement.

2.           Purchase and Sale of the Shares.  Subject to the terms and conditions of this Agreement, on the Closing Date, Buyer shall purchase, and the Stockholders shall sell to Buyer, the Shares, free and clear of any Lien, in exchange for the purchase price as specified below.  At the Closing, the Stockholders shall deliver or cause to be delivered to Buyer the certificate(s) representing the Shares, each properly endorsed for transfer to Buyer (except for the certificates representing a portion of the Shares held as pledge for the Note and subject to the lock up agreement as defined herein) and Buyer shall deliver to the Stockholders the aggregate sum of $258,000 in U.S. funds (the "Purchase Price"). A $50,000 deposit (refundable) shall be paid herewith as consideration for this Agreement, to be credited against the purchase price at closing. Balance of the purchase price (after credit of the deposit) shall be paid as $180,000 cash at closing subject to any payments under section 10.6 herein, and $78,000 in the form of promissory note and pledge agreement (the “Note”). Such Note shall be due and payable in full 60 days after Closing, as set forth in Schedule 1.  The Closing shall take place at the Law Offices of Iwona J. Alami, 620 Newport Center Dr., Suite 1100, Newport Beach, California 92660 (“Alami”) or such other place as may be agreed between the parties hereto.

 

  

  

  

 

3.           Closing.  Upon confirmation that the other conditions to closing specified herein have been satisfied or duly waived by Buyer, the Stockholders shall deliver to Alami, in trust, a certificate or certificates, registered in the name of "Buyer," representing the Shares, including the shares to be held in trust under the lock-up agreement, as set forth on Exhibit B, with instructions that such certificates are to be held for release to Buyer only upon payment in full of the Purchase Price to the Stockholders by Buyer.  Upon such receipt by Alami, Buyer shall promptly, but no more than one Business Day thereafter, cause a wire transfer in same day funds to be sent to the trust account of Alami in the amount of the Purchase in an amount representing the full amount of the Purchase Price.  On the date (the "Closing Date") the Stockholders receive the Purchase Price, the certificates evidencing the Shares shall be released to Buyer, subject to the provisions of the Note, the certificates representing a total of 800,000 shares for the Stockholders subject to the lock-up agreement shall be held by Alami as set forth in Exhibit A and payments set forth in Section 10.6 shall be made (the "Closing").  The Closing of the purchase and sale of the Shares shall take place at the offices of Alami, or at such other location and on such other date as the Stockholders and Buyer shall mutually agree on or before July 10, 2010.

4.           Representations and Warranties of the Stockholders and the Company.  The Stockholders and the Company hereby, jointly and severally, represent and warrant to Buyer that, except as set forth in the schedules delivered herewith (collectively, the "Disclosure Schedules"):

4.1.           Authority; Binding Agreements of the Stockholders.  The Stockholders has the legal capacity to own the Shares owned by the Stockholders.  The execution and delivery by the Stockholders of this Agreement and the consummation by the Stockholders of the transactions contemplated hereby has been duly and validly authorized by all necessary action of the Stockholders.  The Stockholders has the legal capacity to enter into this Agreement and to consummate the transactions contemplated hereby and the Stockholders has duly executed and delivered this Agreement.  This Agreement is a legal, valid and binding obligation of the Stockholders enforceable against the Stockholders in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization and other laws affecting the enforcement of creditors' rights generally and by general principles of equity.

 

  

  

  

 

4.2.           Ownership of Capital Stock.  The Stockholders is the record and beneficial owner of the Shares.  The Stockholders has valid and marketable title to the Shares, free and clear of any Liens and has the absolute and unrestricted right, power and capacity to sell, assign and transfer the Shares to Buyer.  The delivery to Buyer of the certificates representing the Shares and the payment to the Stockholders in accordance with Section 2 will transfer to Buyer record and beneficial ownership of the Shares free and clear of all Liens for the Purchase Price.  The Shares are not subject to any voting trust agreement or other contract, agreement, arrangement, commitment or understanding, including any such agreement, arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend rights or disposition of such Shares.  The Stockholders does not own any rights, subscriptions, warrants, options, conversion rights or agreements of any kind outstanding to purchase or otherwise acquire any shares of capital stock or other equity securities of Buyer.

4.3.           No Breach by Stockholders.  The execution and delivery of this Agreement by the Stockholders does not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation under, or result in the creation of any Lien on any of the properties or assets of the Stockholders under, any provision of (i) any contract or agreement to which the Stockholders is a party or by which any of his property or assets are bound, (ii) any license, franchise, permit or other similar authorization held by the Stockholders, or (iii) any judgment, order or decree or statute, law, ordinance, rule or regulation applicable to the Stockholders or his property or assets.

4.4.           Governmental Consents.  No permit, consent, approval, license, order or authorization of, or registration, declaration or filing with, any court or other Governmental Entity is required to be obtained or made in connection with the execution, delivery or performance of this Agreement by the Stockholders or the consummation by the Stockholders of any of the transactions contemplated hereby.

4.5           Organization of the Company.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and has all requisite corporate power and corporate authority to enter into the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby, to own, lease and operate its properties and to conduct its business.  The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to obtain such qualification or license would not, individually or in the aggregate, have a Material Adverse Effect.  The Stockholders has heretofore delivered or made available to Buyer complete and correct copies of the certificate of incorporation and by-laws of the Company.  The Company is not in violation of its organizational documents.

 

  

  

  

 

4.6           Capitalization.  The authorized capital stock of the Company consists of 200,000,000 shares of Common Stock and 200,000 shares of preferred stock (the "Preferred Stock" together with the Common Stock, the "Capital Stock"), of which 24,398,483 shares of Common Stock are issued and outstanding on the date hereof.  No other shares of any other class or series of Capital Stock or securities exercisable or convertible into or exchangeable for Capital Stock ("Capital Stock Equivalents") are authorized, issued or outstanding.  The outstanding shares of Capital Stock have been duly authorized and validly issued and are fully paid and

non-assessable and were not issued in violation of, and are not subject to, any preemptive, subscription or similar rights.  To the Stockholders' and the Company's knowledge, none of the outstanding Capital Stock was issued in violation of any Law, including without limitation, federal and state securities laws. There are no outstanding warrants, options, subscriptions, calls, rights, agreements, convertible or exchangeable securities or other commitments or arrangements relating to the issuance, sale, purchase, return or redemption, and, to the Stockholders' and the Company's knowledge, voting or transfer of any shares, whether issued or unissued, of Capital Stock, Capital Stock Equivalents or other securities of the Company.  The Company does not have outstanding Stockholders purchase rights or "poison pill" or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

4.7           Subsidiaries.  Section 4.7 of the Disclosure Schedule contains a list of the name of each Subsidiary of the Company (each such corporation, partnership or other entity being referred to herein as a "Company Subsidiary").  .  Each of the outstanding shares of capital stock of each of the Company Subsidiaries is duly authorized, validly issued, fully paid and non-assessable and owned by the Company or another Company Subsidiary free and clear of any Liens and were not issued in violation of, nor subject to, any preemptive, subscription or similar rights.  There are no outstanding warrants, options, subscriptions, calls, rights, agreements, convertible or exchangeable securities or other commitments or arrangements relating to the issuance, sale, purchase, return or redemption, or to the Stockholders' and the Company's knowledge, voting or transfer of any shares, whether issued or unissued, of any Company Subsidiary.  The Company and the Company Subsidiaries do not own any equity interests in any other Person.

4.8           No Violation; Consents and Approvals.  The execution and delivery by the Stockholders and the Company of the Transaction Documents does not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with or result in any violation of or default (or an event which, with notice or lapse of time or both, would constitute a default) under, (a) the terms and conditions or provisions of the certificate of incorporation or by-laws of the Company or any Company Subsidiary, (b) any Law applicable to the Company or any Company Subsidiary or the property or assets of the Company or any Company Subsidiary, or (c) give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Lien upon any of the properties of the Company or any Company Subsidiary under any Contract to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any assets of the Company or any Company Subsidiary may be bound, except, in the case of clauses (b) and (c), for such conflicts, violations or defaults which are set forth in Section 4.8 of the Disclosure Schedule and as to which requisite waivers or consents will have been obtained prior to the Closing or which, individually or in the aggregate, would not have a Material Adverse Effect.  No Governmental Approval is required to be obtained or made by or with respect to the Company or any Company Subsidiary in connection with the execution and delivery of this Agreement or the consummation by the Company or the Stockholders of the transactions contemplated hereby.  The Company has taken all action necessary to exempt the sale of the Shares to Buyer and the other transactions contemplated by this Agreement and the Merger Agreement from the provisions of any Stockholders rights plan or other "poison pill" arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company's certificate of incorporation or bylaws that is or could reasonably be expected to become applicable to Buyer as a result of the transactions contemplated hereby, including without limitation, the sale of the Shares to Buyer and the ownership, disposition or voting of the Shares by Buyer or the exercise of any right granted to Buyer pursuant to this Agreement.

 

  

  

  

 

4.9.           Financial Statements.  The audited consolidated financial statements for June 30, 2009 and the unaudited consolidated interim financial statements of the Company (collectively, the "Financial Statements") for March 31, 2010 (a) comply as to form in all material respects with applicable accounting requirements and published rules and regulations with respect thereto, (b) fairly present in all material respects the consolidated financial condition and the results of operations and cash flows of the Company and the Company Subsidiaries as of the dates and for the periods indicated (subject, in the case of any unaudited interim financial statements, to normal year-end adjustments and other adjustments described therein) and (c) were prepared in accordance with the rules and regulations of the SEC and generally accepted accounting principles ("GAAP"), except as disclosed therein and in the notes thereto.  All of the Company Subsidiaries have been consolidated in the Financial Statements.

 

4.10           Absence of Certain Changes or Events.  Since March 31, 2010, each of the Company and the Company Subsidiaries has conducted no business, and, other than as expressly contemplated by this Agreement, since such date, there has not been, with respect to the Company or the Company Subsidiaries, any:

(a)           change or, to the knowledge of the Stockholders and the Company, threatened change in the business, assets, operations, condition (financial or otherwise), results of operations or prospects of the business of the Company or the Company Subsidiaries, which has had or could have a Material Adverse Effect;

(b)           transactions not in the ordinary course of business consistent with past practice;

(c)           damage, destruction or loss, whether or not insured, materially affecting the Company' business or assets;

(d)           change in accounting principles, methods or practices, investment practices, claims, payment and processing practices or policies regarding intercompany transactions;

(e)           revaluation of any assets;

(f)           declaration, setting aside, or payment of a dividend or other distribution in respect of the capital stock of the Company or the Company Subsidiaries, or any direct or indirect redemption, purchase or other acquisition of any shares of such capital stock;

 

  

  

  

 

(g)           issuance or sale of any shares of any equity security or of any security exercisable or convertible into or exchangeable for equity securities;

(h)           amendment to the certificate of incorporation, by-laws or similar organizational documents of the Company or the Company Subsidiaries;

(i)           sale, assignment or transfer of or lapse of any rights with respect to Intellectual Property, other than in the ordinary course of business consistent with past practice;

(j)           indebtedness incurred for borrowed money or any commitment to borrow money, any incurrence of a contingent liability or any guaranty or commitment to guaranty the indebtedness of others entered into, by the Company or the Company Subsidiaries;

(k)           capital expenditure or capital commitment requiring an expenditure of monies in the future by the Company or the Company Subsidiaries, other than transactions in the ordinary course of business consistent with past practice not in excess of $1,000 in the aggregate for the Company and the Company Subsidiaries;

(l)           cancellation of any debt or waiver or release of any contract, right or claim;

(m)           amendment, termination or revocation of, or a failure in any material respect to perform obligations or the occurrence of any default under (i) any Contract to which the Company or the Company Subsidiaries is or, as of June 30, 2008 or to date hereof, was a party, other than in the ordinary course of business consistent with past practice, or (ii) any License;

(n)           increase or commitment to increase the salary or other compensation payable or to become payable to the Company's or the Company's Subsidiaries' officers, directors, employees, agents or independent contractors, or the payment of any bonus to the foregoing persons except in the ordinary course of business consistent with past practice;

(o)           execution of termination, severance or similar agreements with any officer, director, employee, agent or independent contractor of the Company or the Company Subsidiaries;

(p)           entering into any leases of real property or agreement to acquire real property;

(q)           new or change of any Tax election;

(r)           steps taken to incorporate any Subsidiary, other than Merger Sub;

(s)           acquisition or disposition of, or incurrence of a Lien (other than a Permitted Lien) on, any assets and properties of the Company or any Company Subsidiary;

 

  

  

  

 

(t)           transaction by the Company or any Company Subsidiary with any officer, director or Affiliate thereof or any Affiliate of any such officer, director or Affiliate; or

(u)           any agreement, or other commitment, whether in writing or otherwise, to take any of the actions specified in this Section 4.11, except as expressly contemplated by this Agreement.

4.11           Absence of Undisclosed Liabilities.  Neither the Company nor any of the Company Subsidiaries has any indebtedness, liability or obligation, whether or not accrued, absolute, contingent or otherwise, known or unknown, and whether due or to become due, which was not reflected or reserved against in the balance sheets and the notes thereto, except for those (i) incurred in connection with this Agreement or (ii) incurred in the ordinary course of business and in each such case is fully reflected on the Company' books of account and, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

4.12           Personal Property.

(a)           Each of the Company and the Company Subsidiaries has good, valid and marketable title to, or a valid leasehold interest in, all assets respectively owned or leased by each of them, including, without limitation, all assets reflected in Financial Statements and all assets acquired by the Company or the Company Subsidiaries since June 30, 2009 (except for assets which have been sold or otherwise disposed of in the ordinary course of business consistent with past practice), free and clear of all Liens, other than Permitted Liens.  All personal property of each of the Company or the Company Subsidiaries is in good operating condition and repair, ordinary wear and tear excepted, and is suitable and adequate for the uses for which it is intended or is being used and its use complies in all material respects with applicable Laws.  To the Stockholders' and the Company's knowledge, there are no facts or conditions affecting the Company, the Company Subsidiaries or their assets or business which could, individually or in the aggregate, interfere in any material respect with the use, occupancy or operation thereof as currently (or proposed to be) used, occupied or operated, or their adequacy for such use, except for facts or conditions relating solely to general economic, business or political developments affecting the economy generally.

(b)           Following the consummation of the transactions contemplated by this Agreement, each of the Company and the Company Subsidiaries will continue to own, pursuant to good, valid and marketable title, or lease, under valid and subsisting leases disclosed in Section 4.12(b) of the Disclosure Schedule, or otherwise retain its interest in, the assets of the Company or a Company Subsidiary without incurring any penalty or other adverse consequences, including, without limitation, any increase in any respect in rentals, royalties or licenses or other fees imposed as a result of, or arising from, the consummation of the transactions contemplated by this Agreement or the other Transaction Documents.

4.13.           Real Property.  The Company does not own or lease any real property.

 

  

  

  

 

4.14           Intellectual Property.

(a)           Section 4.14(a) of the Disclosure Schedule sets forth (i) all trade name registrations, trademark registrations, service mark registrations, patents and copyright registrations (and any pending applications for any of the foregoing) that are owned by the Company or any of the Company Subsidiaries, and (ii) all Intellectual Property that is licensed to the Company or any of the Company Subsidiaries by third parties and material to their business. None of the Company or the Company Subsidiaries has received any written notice that the rights of the Company or the Company Subsidiaries in their Intellectual Property have been declared unenforceable or otherwise invalid by any court or Governmental Entity.  The Company and the Company Subsidiaries have taken commercially reasonable steps to maintain and protect the rights of the Company and the Company Subsidiaries in and to each item of their Intellectual Property, it being understood that the Company has not registered Intellectual Property which it may have a legal right to register.  To the knowledge of the Stockholders and the Company, there are no rights of any Person that would interfere with or prevent the use by the Company of any of the rights of the Company and the Company Subsidiaries in and to any Intellectual Property that is material to their business.  To the Stockholders' and the Company's knowledge, there is no existing third party infringement, misuse, or misappropriation of the Intellectual Property of the Company or any of the Company Subsidiaries.  With respect to any agreements by which the Company or the Company Subsidiaries are licensed or otherwise are granted the right to use any item of third party Intellectual Property that is material to the respective businesses of the Company and the Company Subsidiaries (the "IP Licenses"), the consummation of the transactions contemplated by this Agreement shall not cause a breach of such agreements or cause the licensor under such agreements to be able to terminate such agreements.

(b)           Except as would not have a Material Adverse Effect, neither the Company nor any of the Company Subsidiaries has interfered with, infringed upon, misappropriated or otherwise violated any Intellectual Property right of any Person.

(c)           No item of Intellectual Property owned by the Company or any of the Company Subsidiaries is subject to any outstanding injunction, judgment, order, decree, ruling or charge to which the Company or any of the Company Subsidiaries is a party or to which its assets are bound. No action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand to which the Company or any of the Company Subsidiaries is a party or to which any of their assets are bound is pending or, to the Stockholders' and the Company's knowledge, threatened which challenges the legality, validity, enforceability or ownership of, or the Company or the Company Subsidiaries' right to use, any items of Intellectual Property.

(d)           Neither the Company nor any of the Company Subsidiaries has agreed to indemnify any Person for or against any interference, infringement, misappropriation, or other conflict of or with any third party Intellectual Property (other than pursuant to shrink wrap licenses for commercially available "off the shelf" software).  Except as would not have a Material Adverse Effect, (i) the Company and the Company Subsidiaries possess the sole and exclusive good, valid and transferable title in and to all items of Intellectual Property that the Company and the Company Subsidiaries purport to own, free and clear of all Liens, and (ii) no royalties or other payments are required in connection with the use and enjoyment by the Company or the Company Subsidiaries of any of their respective items of Intellectual Property (other than royalties or other payments, in each case not exceeding $5,000 with respect to licenses of commercially available software).

 

  

  

  

 

4.15           Litigation; Compliance with Laws.

(a)           There are: (i) no claims, actions, suits, investigations or proceedings pending or, to the Stockholders' and the Company's knowledge, threatened against, relating to or affecting the Company or the Company Subsidiaries, the business, the assets, or any employee, officer, director, Stockholders, or independent contractor of the Company or the Company Subsidiaries in their capacities as such, and (ii) no orders of any Governmental Entity or arbitrator outstanding against the Company or the Company Subsidiaries, the business, the assets, or any employee, officer, director, Stockholders, or independent contractor of the Company or the Company Subsidiaries in their capacities as such, or that could prevent or enjoin, or delay in any respect, consummation of the transactions contemplated hereby.  Section 4.15 of the Disclosure Schedule includes a description of all pending or threatened claims, actions, suits, investigations or proceedings involving the Company or the Company Subsidiaries, the business, the assets, or any employee, officer, director, Stockholders or independent contractor of the Company or the Company Subsidiaries in their capacities as such.

(b)           The Company and the Company Subsidiaries have complied and are in compliance in all material respects with all Laws applicable to the Company, any Subsidiary of the Company, its business or its assets, including the Sarbanes Oxley Act of 2002.  Neither the Company nor the Company Subsidiaries has received notice from any Governmental Entity or other Person of any material violation of Law applicable to the Company, any of the Company Subsidiaries, their business or their assets.  The Company and the Company Subsidiaries have obtained and hold all required Licenses (all of which are in full force and effect) from all Government Entities applicable to the Company, the Company Subsidiaries, their business or their assets.  No violations are or have been recorded in respect of any such License and no proceeding is pending, or, to the Stockholders' and the Company's knowledge, threatened to revoke or limit any such License.

4.16           Employee Benefit Plans.

(a)           (i) Neither the Company nor any of its ERISA Affiliates maintains or sponsors, or has any liability, contingent or otherwise, with respect to, any Benefit Arrangement, (ii)  no Benefit Arrangement provides or has ever provided post-retirement medical or health benefits or severance benefits, except to the extent required by Part 6 of Title I of ERISA or similar state laws, and (iii)  no Benefit Arrangement is or has ever been a "welfare benefit fund," as defined in Section 419(e) of the Code, or an organization described in Sections 501(c)(9) or 501(c)(20) of the Code.  The Company has made available to Buyer true and complete copies of: (i) each written Benefit Arrangement document and a description of each unwritten Benefit Arrangement, (ii) each summary plan description relating to any Benefit Arrangement, (iii) each trust, insurance or other funding contract or agreement relating to any Benefit Arrangement, (iv) each administrative services contract or agreement relating to any Benefit Arrangement, (v) the three most recent annual reports (Forms 5500) for each Benefit Arrangement (including all related schedules), if applicable, and (vi) the most recent Internal Revenue Service determination letter, opinion, notification or advisory letter (as the case may be) for each Benefit Arrangement which is intended to constitute a qualified plan under Section 401 of the Code.  Neither the Company nor any ERISA Affiliate has any obligation or commitment to establish, maintain, operate or administer any new Benefit Arrangement or to amend any Benefit Arrangement so as to increase benefits thereunder or otherwise.

 

  

  

  

(b)           Neither the Company nor any ERISA Affiliate has or has ever had any liability with respect to any Benefit Arrangement that is subject to Title IV of ERISA, including a "multiemployer plan," as defined in Section 3(37) of ERISA or a "single employer plan" within the meaning of Section 4001(a)(15) of ERISA.  Neither the Company nor any ERISA Affiliate has terminated a Benefit Arrangement with respect to which any liability remains outstanding.

(c)           Each Benefit Arrangement conforms in all material respects to, and has been operated and administered in material compliance with, its terms and all applicable laws, including ERISA and the Code, and including, but not limited to the requirements of ERISA Sections 601 et seq. and 701 et seq. and Sections 4980B, 9801 and 9802 of the Code.  Each Benefit Arrangement intended to be qualified under Section 401(a) of the Code is so qualified and is the subject of a currently effective favorable IRS determination, opinion, notification or advisory letter issued by the IRS.  Neither the Company nor any ERISA Affiliate has incurred or is subject to a tax under Section 4979 of the Code.  No Benefit Arrangement has assets that include securities issued by the Company or any ERISA Affiliate.

(d)           There are no pending or, to the Stockholders' and the Company's knowledge, threatened actions, suits, claims, trials, arbitrations, investigations or other proceedings by any Person or Governmental Authority, including any present or former participant or beneficiary under any Benefit Arrangement (or any beneficiary of any such participant or beneficiary) involving any Benefit Arrangement or any rights or benefits under any Benefit Arrangement other than ordinary and usual claims for benefits by participants or beneficiaries thereunder.  To the Stockholders' and the Company's knowledge, no event has occurred and no condition exists that could subject the Company or the fund of any Benefit Arrangement to the imposition of any tax or penalty with respect to any Benefit Arrangement, whether by way of indemnity or otherwise.  All contributions required to have been made or remitted and all expenses required to have been paid by the Company to or under any Benefit Arrangement under the terms of any such plan, any agreement or any applicable law have been paid within the time prescribed by any such plan, agreement or law.  All contributions to or under any Benefit Arrangement have been currently deductible under the Code when made.  No "prohibited transaction" (as defined in ERISA Section 406) or breach of fiduciary responsibility has occurred with respect to any Benefit Arrangement for which a tax, penalty or other liability of whatever nature could be incurred by the Company, whether by way of indemnity or otherwise.

 

  

  

  

 

(e)           There is no contract, agreement or benefit arrangement covering any current or former employee or director of the Company or any ERISA Affiliate which, individually or in the aggregate, could be expected to give rise to the payment of any amount which would constitute an "excess parachute payment" (as defined in Section 280G of the Code) or be nondeductible under Section 162(m) of the Code.  Neither the execution of this Agreement nor the consummation of any of the transactions contemplated hereby will, either alone or in conjunction with any other event (including the termination of an employee's employment) (i) result in any obligation or liability (with respect to accrued benefits or otherwise) on the part of the Company or any ERISA Affiliate under any Benefit Arrangement, or to any present or former employee, director, officer, Stockholders, contractor or consultant of the Company or any ERISA Affiliate, (ii) be a trigger event under any Benefit Arrangement that will result in any payment (whether of severance pay or otherwise) becoming due to any such present or former employee, officer, director, Stockholders, contractor, or consultant, or (iii) accelerate the time of payment or vesting, or increase the amount, of any compensation theretofore or thereafter due or granted to any employee, officer, director, Stockholders, contractor, or consultant of the Company or any ERISA Affiliate.

(f)           No Benefit Arrangement is required to comply with the provisions of any foreign law.

(g)           Other than routine claims for benefits under any Benefit Arrangement, there are no pending, or, to the Stockholders' and the Company's knowledge, threatened, actions or proceedings involving any Benefit Arrangement, or the fiduciaries, administrators, or trustees of any Benefit Arrangement or the Company or any of its ERISA Affiliates as the employer or sponsor under any Benefit Arrangement, with any of the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation, any participant in or beneficiary of any Benefit Arrangement or any other person whomsoever.  The Stockholders knows of no reasonable basis for any such claim, lawsuit, dispute, action or controversy.

4.17           Taxes.

(a)           The Company has not timely filed but has caused to be filed all Tax Returns required to be filed under applicable Tax Laws.  All such Tax Returns were, when filed, and continue to be, true, correct and complete in all material respects.  The Company is not currently the beneficiary of any extension of time within which to file any Tax Return.  No claim has ever been made by the Taxing Authority of any jurisdiction in which the Company does not file Tax Returns or pay Taxes that it may be subject to taxation by that jurisdiction, nor is there any meritorious basis for such a claim.

(b)           All Taxes due and owing by the Company (whether or not shown on any Tax Return) have been timely paid.  Any liability of the Company for Taxes not yet due and payable, or that are being contested in good faith by appropriate proceedings, have been provided for on the Financial Statements in accordance with GAAP.  There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company.

(c)           The Company has timely withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, Stockholders, or other third party (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable provision of any state, local or foreign Laws, any applicable Tax convention, or otherwise).

 

  

  

  

 

(d)           No foreign, federal, state or local Tax audits or administrative or judicial Tax proceedings are pending with respect to the Company.  The Company has not received from any Taxing Authority (i) any notice indicating an intent to commence any audit or other review, (ii) any request for information related to Tax matters, or (iii) any notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed by any authority against the Company.  Each deficiency resulting from any audit or examination relating to Taxes of the Company has been timely paid.  The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(e)           The Company is not a party to and is not bound by any Tax sharing agreement, Tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes, whether or not in writing (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority).

(f)           The Company has delivered to Buyer (i) complete and correct copies of all its Tax Returns for all taxable periods and (ii) complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents, submitted, received or agreed to by or on behalf of the Company and relating to Taxes for all taxable periods for which the statute of limitations has not yet expired.

(g)           The Company has no liability for the Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or similar provision of state, local or foreign Law), as a transferee, successor, by contract or otherwise.

(h)           The unpaid Taxes of the Company (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Company' books and records provided to the Company, and (ii) shall not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company.  Since its inception, the Company has not incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, other than in the ordinary course of business consistent with past practice.

(i)           The Company has not been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

4.18           Contracts and Commitments.  Section 4.17 of the Disclosure Schedule sets forth a list of all material agreements, Contracts and commitments to which the Company or any Company Subsidiary is a party or by which the Company, any Company Subsidiary or their respective assets are bound (each, a "Material Contract"), including, without limitation:

 

  

  

  

 

(a)           agreements, contracts, commitments or arrangements involving Intellectual Property;

(b)           employment agreements or severance agreements or employee termination arrangements that are not terminable at will by the Company or a Company Subsidiary without penalty;

(c)           any change of control agreements with employees of the Company or any Company Subsidiary;

(d)           agreements, contracts, commitments or arrangements containing any covenant limiting the ability of the Company or any Company Subsidiary to engage in any line of business or to compete with any business or person;

(e)           agreements or contracts with any officer, director or employee of (i) the Company or (ii) any Company Subsidiary (other than employment, severance and change of control agreements covered by clause (b) or (c) above);

(f)           agreements or contracts under which the Company or any Company Subsidiary has borrowed or loaned money, or any note, bond, indenture, mortgage, installment obligation or other evidence of indebtedness for borrowed or loaned money or any guarantee of such indebtedness, in each case, relating to amounts in excess of $5,000;

(g)           joint venture agreements or other agreements involving the sharing of profits;

(h)           leases pursuant to which personal or real property is leased to or from the Company or any Company Subsidiary;

(i)           powers of attorney from the Company or any Company Subsidiary;

(j)           guaranties, suretyships or other contingent agreements of the Company or any Company Subsidiary;

(k)           all agreements, contracts, commitments and arrangements between the Company or any Company Subsidiary and any Governmental Entity;

(l)           any agreement, contract, commitment or arrangement relating to capital expenditures with respect to the Company and involving future payments which exceed $5,000 in any 12 month period;

(m)           any agreement, contract, commitment or arrangement relating to the acquisition of assets (other than in the ordinary course of business consistent with past practice) or any capital stock of any business enterprise;

(n)           any investment banking or other professional services agreement;

 

  

  

  

 

(o)           contracts (other than those covered by clause (a) through (n) above) pursuant to which the Company and the Company Subsidiaries will receive or pay in excess of $5,000 over the life of the contract;

(p)           any other material agreements, Contracts and commitments whether or not entered into in the ordinary course of business; and

(q)           all proposed arrangements or contracts of the Company or the Company Subsidiaries which the Company reasonably expects to be near consummation and of a type that if entered into would be a Contract described in clauses (a) through (o) above.

Neither the Company, any Company Subsidiary nor, to the Stockholders' and the Company's knowledge, any other party thereto, is in material breach of or in material default under any Material Contract.  Each such Material Contract is in full force and effect, and is a legal, valid and binding obligation of the Company and/or the applicable Company Subsidiaries and, to the Stockholders' and the Company's knowledge, each of the other parties thereto, enforceable in accordance with its terms.

4.19.           Insurance.

(a)           Section 4.19 of the Disclosure Schedule contains a complete and accurate list of all insurance policies currently providing and that have been providing coverage in favor of the Company or the Company Subsidiaries (or any predecessor) specifying the insurer and type of insurance under each.  The Company has heretofore delivered to Buyer true, correct and complete copies of all such policies.  Each current policy is in full force and effect, all premiums are currently paid, no notice of cancellation or termination has been received with respect to any such policy and, to the knowledge of the Stockholders and the Company, there is no threatened increase in premiums or cancellation or termination of any such policy.  Such policies have been sufficient for compliance with all requirements of law and any Contracts to which the Company or any of the Company Subsidiaries is a party.  Neither the Company nor the Company Subsidiaries (or any predecessor) has been refused any insurance with respect to its assets and operations, nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance.  Each of the Company and the Company Subsidiaries (or any predecessor) has insured by reputable insurers the assets used by such company (or any predecessor) in the conduct of its business that are of an insurable character against risks of liability, casualty and fire in adequate amounts and consistent with prudent industry practice, and maintains such insurance against hazards, risks and liability to persons and property to the extent and in the manner customary for companies in similar businesses, similarly situated, and such insurance has been effective, in full force and effect, without interruption since the date such company (or any predecessor) commenced business.  The insurance specified in Section 4.20 of the Disclosure Schedule has been effective, in full force and effect, without interruption since the date specified in Section 4.20 of the Disclosure Schedule as the initial date of coverage.

 

  

  

  

 

(b)           There is no pending claim by the Company or the Company Subsidiaries under any insurance policy listed in Section 4.19 of the Disclosure Schedule.  Section 4.19 of the Disclosure Schedule sets forth all claims by the Company or the Company Subsidiaries (whether or not resolved) under any insurance policy, which claims have been outstanding at any time since January 1, 2010. Neither the business nor the assets of the Company or the Company Subsidiaries has had any casualty loss or occurrence which may give rise to any claim of any kind not covered by insurance and the Company and the Company Subsidiaries are not aware of any occurrence which may give rise to any claim not covered by insurance.

4.20           Labor Matters.

(a) The Company and each of the Company Subsidiaries is in compliance in all material respects with all federal, state, local and foreign Laws and regulations respecting employment and employment practices, terms and conditions of employment, wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration, withholding, unemployment compensation, worker's compensation and employee privacy and right to know; (b) there is no pending, or, to the knowledge of the Stockholders and the Company, any threatened, charge, complaint, allegation, application or other process against the Company or any Company Subsidiaries before the National Labor Relations Board or any other comparable Governmental Entity; (c) there is, and have been, (i) no labor strike, dispute, slowdown or work stoppage or other job action pending, or to the knowledge of the Stockholders and the Company, threatened against or otherwise affecting or involving the Company or any Company Subsidiaries or (ii) no lawsuits (other than grievance proceedings) pending, or to the knowledge of the Stockholders and the Company, threatened between the Company or any Company Subsidiaries and any current or former employee or independent contractor of the Company or any union or other collective bargaining unit representing any current or former employee of the Company; (d) no employees of the Company or any Company Subsidiaries are covered by any collective bargaining agreements and, to the knowledge of the Stockholders and the Company, no effort is being made by any union to organize any of the employees of the Company or any Company Subsidiaries; and (e) to its knowledge, neither the Company nor any Company Subsidiaries has hired any illegal aliens as employees or independent contractors.

4.21.           Environmental Matters.

(a)           Each of the Company and the Company Subsidiaries have complied in all material respects at all times with all applicable Environmental Laws and their requirements.  The Company and each of the Company Subsidiaries has obtained all necessary Licenses and filed all required reports and notifications pursuant to all Environmental Laws.  All such Licenses are in good standing, and each of the Company and the Company Subsidiaries has complied at all times with all terms and conditions of such Licenses.  Neither the Company nor any of the Company Subsidiaries has received any notice or communications from any Governmental Entity with respect to any violation of Environmental Law.

 

  

  

  

 

(b)           No Environmental Claim has been filed by or against the Company or any of the Company Subsidiaries, and neither the Company nor any of the Company Subsidiaries has received any written notice of any investigation, claim or review which has occurred or is pending or threatened against it by any Governmental Entity with respect to any Environmental Laws.  Neither the Company nor any of the Company Subsidiaries owns, operates or leases a treatment, storage or disposal facility requiring a permit under the Resource Conservation and Recovery Act, as amended, or under any other comparable foreign, state or local Law.  Neither the Company nor any of the Company Subsidiaries has transported or arranged for the transport, treatment or disposal of any Regulated Substances to any location.

(c)           Neither the Company nor any of the Company Subsidiaries has ever generated, manufactured, used, transported, treated, stored, handled, disposed of, discharged, released, transferred, produced or processed any Regulated Substance at, to, under or on any real property owned, operated or leased by the Company or any of the Company Subsidiaries, or any other location.  No written or oral notification of a discharge or release of Regulated Substances by the Company or any of the Company Subsidiaries has been registered or filed by or on behalf of the Company or any of the Company Subsidiaries, and no site or facility now or previously owned, operated or leased by the Company or any of the Company Subsidiaries is listed on the United States Environmental Protection Agency's National Priorities List of Uncontrolled Hazardous Waste Sites or any similar list of sites requiring investigation or clean-up.

(d)           No Liens have arisen under or pursuant to any Environmental Law on any site or facility now or previously owned, operated or leased by the Company or any of the Company Subsidiaries, and, to the knowledge of the Stockholders and the Company, no Governmental Entity has taken, or is in the process of taking, any action that could subject any such site or facility to such Liens.  There are no conditions existing at any real property ever owned, operated or leased by the Company or any of the Company Subsidiaries that will require now or in the future remedial or corrective action, removal, monitoring or closure pursuant to Environmental Law.

(e)           Neither the Company nor any of the Company Subsidiaries has contractually, or by operation of Law, assumed or succeeded to any liabilities related to Environmental Laws of any predecessors of the Company or the Company Subsidiaries.

4.22.           Transactions with Affiliates.  Except as stated in Schedule 4.22, none of the Company, the Company's Subsidiaries, the officers, directors, managers, or Affiliates of any of the Company, the Company Subsidiaries, or the Affiliates of any such officer, director or manager: (a) has borrowed money from, or loaned money to, the Company or the Company Subsidiaries, (b) is a party to any Contract with the Company or the Company Subsidiaries, (c) has asserted or threatened to assert any claim against the Company or the Company Subsidiaries, (d) is engaged in any transaction with the Company or the Company Subsidiaries, (e) has any direct or indirect financial interest in any competitor, supplier, customer, lessor, lessee, distributor, or sales agent of the Company, the Company Subsidiaries or the business, or otherwise does business with the Company or any of the Company Subsidiaries, (f) owns, directly or indirectly, in whole or in part, or has any other interest in, any tangible or intangible property or other assets which the Company or the Company Subsidiaries uses or has used or proposes to use in the conduct of its business or otherwise, or (g) has any claim whatsoever against, or owes any amount to, the Company or any of the Company Subsidiaries.  The arrangements listed in Section 4.22 of the Disclosure Schedule pursuant to clauses (a), (b) or (d) of this Section 4.22 are on an arms-length basis or on terms at least as favorable to The Company as available on an arms-length basis.

 

  

  

  

 

4.23.           Brokers.  No broker, finder or financial advisor or other person is entitled to any brokerage fees, commissions, finders' fees or financial advisory fees in connection with the transactions contemplated hereby or the Merger by reason of any action taken by the Stockholders, the Company or any of their respective directors, officers, employees, representatives or agents.

4.24.           Certain Agreements.  Neither the Company nor any Company Subsidiary is a party to any: (a) agreement with any director, officer or other employee of the Company or any Company Subsidiary, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature contemplated by this Agreement; or (b) agreement or plan, any of the benefits of or rights under which will be increased, or the vesting or payment of the benefits of or rights under which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

4.25.           Absence of Certain Commercial Practices.  Neither the Stockholders, the Company nor any Company Subsidiary, nor, to the knowledge of the Stockholders and the Company, any director, officer, agent, employee or other person acting on behalf of the Company or any Company Subsidiary, has: (i) given or agreed to give any gift or similar benefit of more than nominal value to any customer, supplier, or governmental employee or official or any other person who is or may be in a position to help or hinder the Company or any Company Subsidiary or assist the Company or any Company Subsidiary in connection with any proposed transaction, which gift or similar benefit, if not given in the past, might have materially and adversely affected the business or prospects of the Company or any Company Subsidiary, or which, if not continued in the future, might materially and adversely affect the business or prospects of the Company or any Company Subsidiary; or (ii) used any corporate or other funds for unlawful contributions, payments, gifts, or entertainment, or made any unlawful contributions, payments or gifts, or made any unlawful expenditures relating to political activity to government officials or others or established or maintained any unlawful or unrecorded funds in violation of Section 30A of the Exchange Act.  Neither the Stockholders, the Company nor any Company Subsidiary, nor, to the knowledge of the Stockholders and the Company, any director, officer, agent, employee or other person acting on behalf of the Company or any Company Subsidiary, has accepted or received any unlawful contributions, payments, gifts or expenditures.

4.26.           Bank Accounts.  Section 4.26 of the Disclosure Schedule sets forth an accurate list of each bank, trust company, savings institution or other financial institution with which the Company has an account or safe deposit box and the names and identification of all persons authorized to draw thereon or to have access thereto, and sets forth the names of each person holding powers of attorney or agency authority from the Company, as applicable, and a summary of the terms thereof and the names of each person holding credit cards in the name of the Company, with the credit cards being so held identified.

 

  

  

  

 

4.27.           Corporate Names.  Section 4.27 of the Disclosure Schedule sets forth a complete and accurate list of names used by the Company and each of the Company Subsidiaries in addition to its corporate name.

4.28.           Current Operations.  The Company and one of the Company Subsidiaries have  current business operations as disclosed in the Company’s filings with the SEC.

4.29.           Books and Records.  The books of account, minute books, stock record books and other records of the Company and the Company Subsidiaries, all of which have been made available to Buyer, are complete and correct in all material respects and have been maintained in accordance with sound business practices in all material respects.

4.30           Listing and Maintenance Requirements.  The Company's Common Stock is registered pursuant to the Securities Act of 1933, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration.  The Company has not, in the 12 months preceding the date hereof, received notice from the OTC Bulletin Board to the effect that the Company is not in compliance with the listing or maintenance requirements of such trading market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.  Following the consummation of the sale, the Common Stock will be eligible for continued trading on the OTC Bulletin Board.

4.31           Manipulation of Price.  Neither the Stockholders nor the Company has, and to their knowledge, no one acting on its behalf has, taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company.

4.32.           Full Disclosure.  No representation or warranty, exhibit or schedule furnished by or on behalf of the Company or any of the Company Subsidiaries in this Agreement or any other Transaction Document contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.  None of the Stockholders, the Company or the Company Subsidiaries has any knowledge of any facts pertaining to the Stockholders, the Company or the Company Subsidiaries, or their business or assets that could have a Material Adverse Effect and that have not been disclosed in this Agreement, the schedules and exhibits hereto and the Transaction Documents, except for any facts relating solely to general economic, business or political developments affecting the economy generally.

5.           Representations and Warranties of Buyer.  Buyer hereby represents and warrants to the Company that:

5.1          Organization of Buyer.  Buyer is an individual.

 

  

  

  

 

5.2          Authority.  The execution, delivery and performance by Buyer of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by Buyer.  The Transaction Documents have been duly executed and delivered by Buyer.

5.3           No Violation; Consents and Approvals.  The execution and delivery by Buyer of the Transaction Documents does not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not conflict with, or result in any violation of or default (or an event which, with notice or lapse of time or both, would constitute a default) under, (a) any Laws applicable to Buyer or the property or assets of Buyer, or (b) give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Lien upon any of the properties of Buyer under, any Contracts to which Buyer is a party or by which Buyer or any of its assets may be bound, except, and (i) in the case of clauses (a) and (b), for such conflicts, violations or defaults as to which requisite waivers or consents will have been obtained prior to the Closing or which, individually or in the aggregate, would not have a Material Adverse Effect.  No Governmental Approval is required to be obtained or made by or with respect to Buyer in connection with the execution and delivery of this Agreement or the consummation by Buyer of the transactions contemplated hereby, except where the failure to obtain such Governmental Approval would not, individually or in the aggregate, have an Buyer Material Adverse Effect.

5.4           Purchase Entirely for Own Account.  The Shares to be received by Buyer hereunder will be acquired for its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and Buyer has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to Buyer's right at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws.  Nothing contained herein shall be deemed a representation or warranty by Buyer to hold the Shares for any period of time.  Buyer is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered.

5.5           Restricted Securities.  Buyer understands that the Shares are characterized as "restricted securities" under the U.S. federal securities laws inasmuch as they are being acquired from the Stockholders in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.

5.6           Legends.  It is understood that, except as provided below, certificates evidencing the Shares may bear the following or any similar legend:

(a)           "The securities represented hereby have not been registered under the Securities Act of 1933, as amended (the "Act") and may not be transferred unless (i) such securities have been registered for sale pursuant to the Act, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws."

 

  

  

  

 

 

(b)           If required by the authorities of any state in connection with the issuance of sale of the Shares, the legend required by such state authority.

6.  Covenants Relating to Conduct of Business Pending the Closing

6.1           Conduct of the Business Pending the Closing.

(a)           During the period from the date of this Agreement and continuing until the Closing, each of the Stockholders and the Company agrees, that neither the Stockholders nor the Company shall, and shall cause the Company Subsidiaries not to, engage in any business whatsoever other than in connection with the consummation of the transactions contemplated by this Agreement, and shall use commercially reasonable efforts to preserve intact its business and assets, maintain its assets in good operating condition and repair (ordinary wear and tear excepted), retain the services of its officers, employees and independent contractors and use reasonable commercial efforts to keep in full force and effect liability insurance and bonds comparable in amount and scope of coverage to that currently maintained with respect to its business, unless, in any case, Buyer consents otherwise in writing.

(b)           During the period from the date of this Agreement and continuing until the Closing, each of the Stockholders and the Company agrees as to itself and, with respect to the Company, the Company Subsidiaries, that except as expressly contemplated or permitted by this Agreement, or to the extent that the other party shall otherwise consent in writing:

(i)           It shall not amend or propose to amend its certificate of incorporation or by-laws or equivalent organizational documents except as contemplated in this Agreement.

(ii)           It shall not, nor in the case of the Company shall it permit the Company Subsidiaries to, issue, deliver, sell, redeem, acquire, authorize or propose to issue, deliver, sell, redeem, acquire or authorize, any shares of its capital stock of any class or any securities convertible into, or any rights, warrants or options to acquire, any such shares or convertible securities or other ownership interest and, in the case of the Stockholders, shall not sell or otherwise transfer the Shares, provided that the Company shall be permitted to issue the shares of its Common Stock to be issued to the Stockholders of Buyer under the terms of the Merger Agreement.

(iii)           It shall not, nor in the case of the Company shall it permit any of the Company Subsidiaries to, nor shall it propose to: (i) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock or (ii) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock.

 

  

  

  

 

(iv)           Other than dispositions in the ordinary course of business consistent with past practice which would not cause a Material Adverse Effect, individually or in the aggregate, to it and its subsidiaries, taken as a whole, it shall not, nor shall it permit any of its subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to sell, lease (whether such lease is an operating or capital lease), encumber or otherwise dispose of its assets.

(v)           It shall promptly advise the other party hereto in writing of any change in the condition (financial or otherwise), operations or properties, businesses or business prospects of such party or any of its subsidiaries which would result in a Material Adverse Effect.

(vi)           It shall not permit to occur any (1) change in accounting principles, methods or practices, investment practices, claims, payment and processing practices or policies regarding intercompany transactions, (2) incurrence of Indebtedness or any commitment to incur Indebtedness, any incurrence of a contingent liability, Contingent Obligation or other liability of any type, (3) cancellation of any debt or waiver or release of any contract, right or claim, except for cancellations, waivers and releases in the ordinary course of business consistent with its past practice which do not exceed $10,000 in the aggregate, (4) amendment, termination or revocation of, or a failure to perform obligations or the occurrence of any default under, (Y) any contract or agreement (including, without limitation, leases) to which it is or, as of December 31, 2008, was a party, other than in the ordinary course of business consistent with past practice, or (Z) any License, (5) execution of termination, severance or similar agreements with any of its officers, directors, employees, agents or independent contractors or (6) entering into any leases of real property or agreement to acquire real property.

(vii)           It shall not, and the Company shall not permit any of the Company Subsidiaries to, take or agree or commit to take any action, (i) that is reasonably likely to make any of its representations or warranties hereunder inaccurate; or (ii) that is prohibited pursuant to the provisions of this Article VI.

7.           Additional Agreements.

7.1           Access to Information.  From the date hereof until the Closing or the earlier termination of this Agreement, each party shall give the other party and its respective counsel, accountants, representatives and agents full access, upon reasonable notice and during normal business hours, to such party's facilities and the financial, legal, accounting and other representatives of such party with knowledge of the business and the assets of such party and, upon reasonable notice, shall be furnished all relevant documents, records and other information concerning the business, finances and properties of such party and its subsidiaries that the other party and its respective counsel, accountants, representatives and agents, may reasonably request.  No investigation pursuant to this Section 7.1 shall affect or be deemed to modify any of the representations or warranties hereunder or the condition to the obligations of the parties to consummate the transactions contemplated hereby; it being understood that the investigation will be made for the purposes among others of the board of directors of each party determining in its good faith reasonable business judgment the accuracy of the representations and warranties of the other party.  In the event of the termination of this Agreement, each party, if so requested by the other party, will return or destroy promptly every document furnished to it by or on behalf of the other party in connection with the transactions contemplated hereby, whether so obtained before or after the execution of this Agreement, and any copies thereof (except for copies of documents publicly available) which may have been made, and will use reasonable efforts to cause its representatives and any representatives of financial institutions and investors and others to whom such documents were furnished promptly to return or destroy such documents and any copies thereof any of them may have made.

 

  

  

  

 

7.2           No Shop; Acquisition Proposals.  From the date hereof until the Closing or the earlier termination of this Agreement, neither the Stockholders nor the Company shall, nor shall they authorize or permit any of their respective officers, directors or employees or Subsidiaries or any investment banker, financial advisor, attorney, accountant or other representative retained by it to, solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Takeover Proposal, or negotiate with respect to, agree to or endorse any Takeover Proposal.  The Stockholders and the Company shall promptly advise Buyer orally and in writing of any such inquiries or proposals and shall also promptly advise Buyer of any developments or changes regarding such inquiries or proposals.  The Stockholders and the Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any persons (other than Buyer) conducted heretofore with respect to any Takeover Proposal.  The Stockholders and the Company agree not to release (by waiver or otherwise) any third party from the provisions of any confidentiality or standstill agreement to which the Stockholders or the Company is a party.

7.3           Legal Conditions to Closing; Reasonable Efforts.  Each of Buyer, the Stockholders and the Company shall take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on itself with respect to the consummation of the transactions contemplated hereby and will promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them or any of their Subsidiaries in connection with the consummation of the transactions contemplated hereby   pursuant to the terms of the Agreement.  Each of Buyer, the Stockholders and the Company will, and the Company will cause the Company Subsidiaries to, take all reasonable actions necessary to obtain (and will cooperate with each other in obtaining) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private third party, required to be obtained or made by Buyer, the Stockholders or the Company or any of the Company Subsidiaries in connection with the Closing or the taking of any action contemplated thereby or by this Agreement.

7.4           Certain Filing.  Each party shall cooperate with the other in (a) determining whether any action by or in respect of, or filing with, any governmental body, agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (b) seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.  Each party shall consult with the other in connection with the foregoing and shall use all reasonable commercial efforts to take any steps as may be necessary in order to obtain any consents, approvals, permits or authorizations required in connection with the transactions contemplated hereby and the Agreement.

 

  

  

  

 

7.5           Public Announcements and Filings.  Each party shall give the other a reasonable opportunity to comment upon, and, unless disclosure is required, in the opinion of counsel, by applicable law, approve (which approval shall not be unreasonably withheld), all press releases or other public communications of any sort relating to this Agreement or the transactions contemplated hereby.

8.  Conditions to Closing.

8.1           Conditions to Buyer's Obligations. The obligation of Buyer to purchase the Shares at the Closing is subject to the fulfillment to Buyer's satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by such Investor (as to itself only):

(a)           The representations and warranties made by the Stockholders and/or the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date.  The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.

(b)           The Stockholders and the Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the purchase and sale of the Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.

(c)           No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby, in the other Transaction Documents or in the Merger Agreement.

(d)           The Stockholders and the Company shall have delivered a Certificate, executed on behalf of the Stockholders and the Company by its Chief Executive Officer or its Chief Financial Officer, respectively, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b), (c), (g) and (i) of this Section 8.1.  Such certificates can be waived at the option of either party to this Agreement.

 

  

  

  

 

(e)           The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and the other Transaction Documents, certifying the current versions of the Articles of Organization and Bylaws or other organizational documents of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company unless otherwise waived.

(f)           No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.

(g)           All debt of the company shall have been paid or released by:

(i)           payments at closing, or

(ii)           duly executed Release documents

	
  

	
(iii)

	
subsidiary debt shall remain so long as it has not been incurred by or guaranteed by Company.

(h)           Satisfactory due diligence as to books and records prior to 5 days before closing.

(i)           Stockholders as Directors shall have appointed Buyers designees as CEO and as a director, and Stockholders shall resign officer positions from Company at closing, with Board resignations to be effective upon payment of the Purchase Price.

8.2           Conditions to Obligations of the Stockholders. The Stockholders' obligation to sell the Shares at the Closing is subject to the fulfillment to the satisfaction of the Stockholders on or prior to the Closing Date of the following conditions, any of which may be waived by the Stockholders:

(a)           The representations and warranties made by Buyer in Section 5 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.  Buyer shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the Closing Date.

(b)           Buyer shall have delivered the Purchase Price and other consideration to the Stockholders.

 

(c)           The Company agrees to spin off Time Marketing Associates, Inc., to the Company’s stockholders no later than 60 days from the date of this Agreement.

(d)           Company shall have granted the Option to Stockholders to purchase from the Company the 50% of outstanding stock of each of Tenth Street, Inc. and Time Management, Inc. which are currently 50% owned subsidiaries of the Company for $10 and assumption of debt by Stockholder and indemnity by Stockholder to Company. Such Option shall be in the form of a written document providing that the option expires 30 days from the date of this agreement. Option shall provide:

 

 

  

  

  

Certificates for the shares of the subsidiaries named shall be delivered to Stockholders in exchange for:

	
  

	
1.

	
Assumption of all tax liabilities attributable to the subsidiaries, in writing.

	
  

	
2.

	
Assumption of all of the trade payables of the subsidiaries, in writing.

	
  

	
3.

	
Executing an indemnity agreement to Company for any debts of any of the named subsidiaries; and

	
  

	
4.

	
All current receivables, liabilities, assets, cash, and deferred income in the subsidiaries, shall remain wholly in the subsidiaries, and the subsidiaries shall remain conducting business as historically conducted. Stockholders shall remain as management and directors of said subsidiaries.

8.3           Termination of Obligations to Effect Closing; Effects.

(a)           The obligations of the Stockholders, on the one hand, and Buyer, on the other hand, to effect the Closing shall terminate as follows:

(i)           Upon the mutual written consent of the Stockholders and Buyer;

(ii)           By the Stockholders if any of the conditions set forth in Section 8.2 shall have become incapable of fulfillment, and shall not have been waived by the Company;

(iii)           By Buyer if any of the conditions set forth in Section 8.1 shall have become incapable of fulfillment, and shall not have been waived by Buyer; or

(iv)           By either the Stockholders or Buyer if the Closing has not occurred on or prior to July 15, 2010;

provided, however, that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party's seeking to terminate its obligation to effect the Closing.

(b)           Nothing in this Section 8.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

(c)           In the event Buyer rejects the company books and records due to a due diligence issue, Buyer shall give Seller notice and Right to Cure the issue. If it cannot be cured the deposit shall be refunded upon 15 days written notice.

 

  

  

  

 

9.           Survival and Indemnification.

9.1  Survival.  The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement for a period of one (1) year from the Closing Date.

9.2  Indemnification.

(a)           To the extent permitted by law, the Stockholders shall indemnify and hold harmless Buyer and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, "Losses") to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and will reimburse any such Person for all such amounts as they are incurred by such Person.

(b)           To the extent permitted by law, Buyer shall indemnify and hold harmless the Stockholders from and against any and all Losses to which the Stockholders may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of Buyer under the Transaction Documents, and will reimburse any such Person for all such amounts as they are incurred by such Person.

9.3  Conduct of Indemnification Proceedings.  Promptly after receipt by any Person (the "Indemnified Person") of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 9.2, such Indemnified Person shall promptly notify the indemnifying party (the "Indemnifying Party") in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all reasonable fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure to notify.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Indemnifying Party and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Indemnifying Party shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

 

  

  

  

 

9.4           Limitations.  Notwithstanding the foregoing, the obligation under this Agreement of an Indemnifying Party to indemnify any Indemnified Party with respect to Losses shall not exceed the Purchase Price.  The foregoing limitation shall not apply, however, to (i) any breach of the representations or warranties in Sections 4.1, 4.2, 4.5, 4.6, 4.18, 4.22, 4.24, 5.1 and 5.2, (ii) any breach of representations or warranties that was made with an intent to mislead or defraud or with reckless disregard for the accuracy thereof and (iii) any breach of any covenant or agreement to be performed by a party hereunder.

10.           Miscellaneous.

10.1           Reverse Split of Issued and Outstanding Stock. Reverse split of the issued and outstanding common stock of Company at a ratio to be determined by the Company, shall be completed as soon as practical after Closing.

10.2           Successors and Assigns.  This Agreement may not be assigned by a party hereto without the prior written consent of the other party, provided, however, that Buyer may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate without the prior written consent of the Company or the Stockholders provided, that no such assignment or obligation shall affect the obligations of Buyer hereunder.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties and to successors by operation of law.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

10.3           Counterparts; Faxes.  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 instrument.  This Agreement may also be executed and transmitted via facsimile or by .pdf (portable document format) via electronic mail, each of which shall be deemed an original.

10.4           Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

10.5           Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier.  All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days' advance written notice to the other party:

 

  

  

  

 

	  	  
	
If to the Stockholders:

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

	
Michael F. Pope

	  
	
Philip C. La Puma

	
Iwona J. Alami, Esq.

	  	
Law Office of Iwona J. Alami

	
1580 N. Batavia St., Suite 2

	
620 Newport Center Dr., Suite 1100

	
Orange, CA 92867

	
Newport Beach, CA  92660

	  	
Fax: 949-495-9927

	  	  
	
If to Buyer:

	  
	  	  
	
William Alverson

	  
	
4440 PGA Blvd., Suite 600

	  
	
Palm Beach, FL 33410

	  

or such other address or telex or telecopy number as such party may hereafter specify for the purpose by notice to the other party hereto.

10.6           Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith. Stockholders agree to pay the following expenses at closing, from gross proceeds: $20,000 for legal services rendered to Iwona J. Alami, Esq., payable $15,000 cash at the Closing; $5,000 for legal services rendered to Iwona J. Alami, Esq. payable upon full payment of the Note and $8,000 for audit fees for fiscal year ended June 30, 2010 payable upon full payment of the Note.

10.7           Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Stockholders, the Company and Buyer.

10.8           Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

 

  

  

  

 

10.9           Entire Agreement.  This Agreement, including the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

10.10           Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of California located in Orange County and the United States District Court for the District of California for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

[signature page follows]

 

 

  

  

  

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

	  	  	  	  	
The Stockholders

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
/s/ Michael F. Pope

	  
	  	  	  	  	
Michael F. Pope

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
/s/ Philip C. La Puma

	  
	  	  	  	  	
    Philip C. La Puma

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
Time Associates, Inc.

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
By: /s/ Michael F. Pope

	  
	  	  	  	  	
Name:  Michael F. Pope

	  
	  	  	  	  	
Title:    President

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
Buyer:  William Alverson

	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
By: /s/ William Alverson

	  
	  	  	  	  	
Name:

	  
	  	  	  	  	
Title:

	  

 

 

 

  

  

  

DISCLOSURE SCHEDULES

 

 

  

  

  

SCHEDULE 1

Promissory Note and Pledge Agreement

The Note in the amount of $78,000 payable to Iwona J. Alami Trust Account shall be secured by pledged shares of common stock in the amount of 5,461.000 shares which shall be released to Buyer upon the full payment of the Note.  The $78,000 amount of the Purchase Price to be received upon the full payment of the Note shall be paid as follows:

$32,500 payable to Michael F. Pope

  $32,500 payable to Philip C. La Puma

$5,000 payable to Iwona J. Alami, Esq.

$8,000 payable to as directed for audit fees and expenses.

SCHEDULE 4.7

Subsidiaries

50% owned each

Time Marketing Associates, Inc.

Time Management, Inc.

Tenth Street, Inc.

SCHEDULE 4.15(a)

Intellectual Property

None

SCHEDULE 4.16

Pending or Threatened Claims, Investigations, Proceedings, Suits, or Actions

None

SCHEDULE 4.18

Contracts and Commitments

a) – q), inclusive

None, except:

Transfer agent contract for services on an ongoing basis. (Integrity Stock Transfer)

SCHEDULE 4.20

Insurance

None

  

  

  

SCHEDULE 4.22

Transactions with Affiliates

There are no other arrangements such as listed in Section 4.22 of the Share Purchase Agreement, except as shown as in the most recently filed 10K under Certain Transactions/Related Parties.

 

 

SCHEDULE 4.26

Bank Accounts

To Be Provided to Legal Counsel

SCHEDULE 4.27

Time Lending, Inc.

 

 

  

  

  

Exhibit A

19,461,000 shares of common stock to be delivered as follows: shares to be released to Buyer upon payment of $180,000 (less expenses per Section 10.6): 13,200,000 shares of common stock (6,600,000 held by each Stockholder).

Shares of common stock to be held in escrow (pursuant to an escrow agreement and the Note) until the full payment of the Note: 5,461,000 shares of common stock (2,730,500 held by each Stockholder).

The number of shares of common stock to be held in escrow subject to the lock-up agreement as provided in this Agreement: 800,000 shares of common stock (400,000 shares held by each Stockholder) which shall equal to not more than 10,000 post reverse split shares of common stock of Time as set forth in this Agreement.  Any additional shares shall be released to the Buyer.

 

 

  

  

  

Exhibit B

Lock Up Agreements

 

 

  

  

  

Exhibit C

Option Agreements

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