Document:

ex-10_13.htm

Exhibit 10.13

 

 

 

	
ARTICLE 1

	
THE TRANSACTION 

	
1

 

	
  

	
1.1

	

Sale and Purchase of the Shares 

	
1

 

	
  

	
1.2

	

Purchase Price 

	
2

 

	
  

	
1.3

	

Transfer Taxes

	
2

 

	
 

	
1.4

	

Transfer Taxes

	
2

 

	
 

	
1.5

	

Payment of Purchase Price at Closing

	
2

 

	
 

	
1.6

	

Assumed Liabilities 

	
2

 

	
ARTICLE 2

	
REPRESENTATIONS AND WARRANTIES OF SELLER AND TARGET 

	
3

 

	
  

	
2.1

	
Organization

	
4

	
  

	
2.2

	
Capitalization and Ownership 

	
4

 

	
  

	
2.3

	
No Subsidiaries 

	
4

 

	
  

	
2.4

	
Title to Shares 

	
4

 

	
  

	
2.5

	
Qualification; Location of Business and Assets 

	
4

 

	
  

	
2.6

	
Authorization and Enforceability 

	
4

 

	
  

	
2.7

	
Books and Records. 

	
5

 

	
  

	
2.8

	
No Conflict; No Violation of Laws or Agreements 

	
5

 

	
  

	
2.9

	
Financial Statements 

	
5

 

	
  

	
2.10

	
No Undisclosed Liabilities 

	
6

 

	
  

	
2.11

	
No Changes 

	
6

 

	
  

	
2.12

	

Taxes 

	
8

 

	
  

	
2.13

	
Inventory 

	
8

 

	
  

	
2.14

	
Accounts Receivable 

	
9

 

	
  

	
2.15

	
Litigation and Claims 

	
9

 

	
  

	
2.16

	
Material Contracts 

	
9

 

	
  

	
2.17

	
Environmental Matters 

	
10

 

	
  

	
2.18

	
Compliance with Laws 

	
11

 

	
  

	
2.19

	
Consents 

	
11

 

	
  

	
2.20

	
Real Property 

	
11

 

	
  

	
2.21

	
Personal Property 

	
12

 

  

  

  

	
  

	
2.22

	
Intellectual Property 

	
12

 

	
  

	
2.23

	
Transactions with Related Parties 

	
12

 

	
  

	
2.24

	
Employees; Officers and Directors 

	
13

 

	
  

	
2.25

	
Labor Relations 

	
13

 

	
  

	
2.26

	
Insurance 

	
13

 

	
  

	
2.27

	
Employee Benefit Plans 

	
13

 

	
  

	
2.28

	
Customers 

	
14

 

	
  

	
2.29

	
Accounts; Lockboxes and Safe Deposit Boxes 

	
14

 

	
  

	
2.30

	
Brokerage

	
15

 

	
  

	
2.31

	
Disclosure

	
15

 

	
ARTICLE 3

	
REPRESENTATION AND WARRANTIES OF BUYER 

	
15

 

	
  

	
3.1

	
Organization; Qualification; Authority and Enforceability 

	
15

 

	
  

	
3.2

	
No Conflict; No Violation of Laws or Agreements 

	
15

 

	
  

	
3.3

	
Consents 

	
16

 

	
  

	
3.4

	
Litigation and Claims 

	
16

 

	
  

	
3.5

	
Investment Intent 

	
16

 

	
  

	
3.6

	
Broker 

	
16

 

	
ARTICLE 4

	
CERTAIN OBLIGATIONS OF SELLERS 

	
16

 

	
  

	
4.1

	
Conduct of Business Pending Closing 

	
16

 

	
  

	
4.2

	
Ordinary Course 

	
17

 

	
  

	
4.3

	
Preservation of Businesses 

	
17

 

	
  

	
4.4

	
Insurance 

	
17

 

	
  

	
4.5

	
Cooperation 

	
17

 

	
  

	
4.6

	
Access, Information, and Documents 

	
18

 

	
  

	
4.7

	
Acquisition Proposals 

	
18

 

	
ARTICLE 5

	
CONDITIONS TO CLOSING 

	
18

 

	
  

	
5.1

	
Conditions Precedent to Obligations of Seller 

	
18

 

	
  

	
5.2

	
Conditions Precedent to the Obligations of Buyer 

	
19

 

  

  

  

	
ARTICLE 6

	
DELIVERIES AND PROCEEDINGS AT CLOSING 

	
20

 

	
  

	
6.1

	
Closing Deliveries by Seller 

	
20

 

	
  

	
6.2

	
Deliveries By Buyer 

	
20

 

	
ARTICLE 7

	
TERMINATION 

	
21

 

	
  

	
7.1

	
Termination of Agreement 

	
21

 

	
  

	
7.2

	
Effect of Termination 

	
21

 

	
ARTICLE 8

	
CERTAIN ADDITIONAL COVENANTS 

	
22

 

	
  

	
8.1

	
Costs and Expenses 

	
22

 

	
  

	
8.2

	
No Solicitation 

	
22

 

	
  

	
8.3

	
Employees 

	
22

 

	
  

	
8.4

	
Tax Matters 

	
22

 

	
  

	
8.5

	
Confidentiality 

	
22

 

	
  

	
8.6

	
Litigation 

	
22

 

	
ARTICLE 9

	
INDEMNIFICATION 

	
23

 

	
  

	
9.1

	
Survival 

	
23

 

	
  

	
9.2

	
Indemnification by Seller 

	
23

 

	
  

	
9.3

	
Indemnification by Buyer 

	
24

 

	
  

	
9.4

	
Materiality 

	
24

 

	
  

	
9.5

	
Limitations 

	
24

 

	
  

	
9.6

	
Notice and Opportunity to Defend 

	
24

 

	
  

	
9.7

	
Reimbursement 

	
25

 

	
  

	
9.8

	
Adjustments to Indemnification Payments 

	
25

 

	
  

	
9.9

	
No Other Representations, Etc.; Rescission 

	
26

 

	
  

	
9.10

	
Sole and Exclusive Remedy 

	
27

 

	
  

	
9.11

	
Survival of Indemnification Obligations 

	
27

 

	
ARTICLE 10

	 GENERAL	
 27

 

	
  

	
10.1

	
Notices 

	
27

 

	
  

	
10.2

	
Successors and Assigns 

	
28

 

	
  

	
10.3

	
Construction 

	
28

 

  

  

  

	
  

	
10.4

	
Governing Law 

	
29

 

	
  

	
10.5

	
Headings 

	
29

 

	
  

	
10.6

	
Counterparts 

	
29

 

	
  

	
10.7

	
Further Assurances 

	
29

 

	
  

	
10.8

	
Course of Dealing 

	
29

 

	
  

	
10.9

	
Severability 

	
29

 

	
  

	
10.10

	
Entire Agreement 

	
30

 

  

  

  

LIST OF EXHIBITS

 

 

	
Exhibit

	
A                                Definitions

 

	
Exhibit

	
B                                Confidentiality and Non-disclosure Agreement

 

	
Exhibit

	
C                                Non-Competition Agreement

 

 

 

  

  

  

 

 

 

                                                               LIST OF SCHEDULES

 

 

	  	  
	
Schedule :

	
Title of Document/Instrument/Records

	  	  
	
1-6(a)

	
Account Payable

	
1-6(b)

	
 Purchase Orders (Unfilled)

	
1-6(e)

	
Other Liabilities/Commitments

	
2-2

	
Stock Ledger

	
2.5

	
Locations of Business Establishments

	
2.8

	
Records of Compliance

	
2.9

	
Financial Statements

	
2.11

	
Transactions Since 12/31/2012

	
2.12

	
Tax Returns of 2009, 2010, 2011

	
2.13

	
Inventory (Secured Assets Noted)

	
2.14

	
Accounts Receivable (Secured A/R Noted)

	
2.15

	
Litigation Reports

	
2.16(a)

	
 Contracts and Performance Records

	
2.18

	
Leal Compliance Records

	
2.19

	
Contracts in Dispute

	
2.21

	
Personal Property Schedule

	
2.22

	
Intellectual Property Rights

	
2.23

	
Transactions with Related Parties

	
2.24

	
Employee Compensation Schedule

	
2.25

	
Labor Activities and Insurances

	
2.26

	
Insurances

	
2.27

	
Benefit Plan

	
2.29

	
Accounts and Banking Facilities

	
2.30

	
Brokerage Contract (Sunbelt of Pasadena)

	
4.7

	
Potential Buyers (NDA Executed)

	
6.1(a)(v)

	
Officers and Directors Re-appointed

	
8.3

	
Employees Re-hired

 

  

  

  

 

 

 

 

 

STOCK PURCHASE AGREEMENT

 

By and Among

 

WESTERN PRINCIPAL PARTNERS LLC

 

 AS BUYER

 

And

 

INTERNET MEDIA SERVICES, INC

 

AS SELLER

 

 

And

 

RAYMOND MEYERS

 

AS MANAGEMENT INDEMNITOR

 

Of

 

LEGAL STORE.COM, INC.

 

 

 

Dated as of March 8, 2013

 

 

  

  

  

 

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of March 8, 2013 by and among WESTERN PRINCIPAL PARTNERS LLC, a California Limited Liability Company (“Buyer”), INTERNET MEDIA SERVICES, INC., a Delaware Corporation (“Seller”), LEGAL STORE.COM., INC. a Delaware Corporation, located at 1507 7th Street #425, Santa Monica, CA 90401 (“Target”), and Raymond Meyers, an individual residing at 4553 Glencer Ave. #325 Marina Del Ray, CA 90292 (“Management Indemnitor”).

 

 BACKGROUND:

 

Seller owns all of the issued and outstanding shares of capital stock of Target (the “Shares”), and Management Indemnitor owns approximately 9 million of the outstanding shares of capital stock of the Seller.

 

Target sells legal supplies to legal firms and institutions distributed through the Target’s website throughout the United States (the “Business”), and Management Indemnitor is the President of Target.

 

Buyer desires to purchase (directly or indirectly through a wholly owned subsidiary) from Seller, and Seller desires to sell, transfer and deliver to Buyer, all of the Shares on the terms and conditions of this Agreement.

 

All capitalized (and as noted herein, some un-capitalized) words and phrases used in this Agreement (including the Schedules and Exhibits annexed hereto) have the meanings specified in Exhibit A hereto (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

 

 

In consideration of the foregoing, the mutual representations, warranties and covenants set forth in this Agreement, and for good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

 

ARTICLE 1

 

THE TRANSACTION

 

1.1 Sale and Purchase of the Shares.   Upon the terms and subject to the conditions contained in this Agreement, at the Closing:

 

(a) Seller shall sell, transfer, assign and convey all rights, title and interest in and to the Shares to Buyer (or to such wholly-owned subsidiary as Buyer may designate in writing to Seller prior to the Closing (the “Designated Subsidiary”)) and Seller shall deliver to Buyer (or its Designated Subsidiary) a stock certificate or certificates representing all of the Shares, duly endorsed in blank or with duly executed stock powers attached, in proper form for transfer, with all signatures guaranteed and with appropriate transfer stamps, if any, affixed and free and clear of any Lien; and

 

  

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(b) Buyer (or its Designated Subsidiary) shall purchase, acquire and accept from Seller all rights, title and interest in and to the Shares.

 

1.2 Purchase Price.  The aggregate consideration for the Shares is Two Hundred and Ten Thousand US Dollars (US$210,000), payable in the manner described in Section 1.5 subject to adjustment as set forth in Section 1.5 (the “Purchase Price”).

 

1.3 Transfer Taxes.  Seller shall pay all stock transfer taxes or stamp duties resulting from the transactions contemplated hereby.

 

1.4 Closing Time and Place; Effective Date.   The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at 350 South Grand Avenue Suite 2250, Los Angeles, California at 12:00 noon on March 8, 2013, or at such other place or such earlier time as the parties to this Agreement may mutually agree.  The date on which the Closing occurs is hereinafter referred to as the “Closing Date.”  For accounting purposes, the Closing shall be effective as of March 8, 2013.

 

1.5 Payment of Purchase Price at Closing.   At the Closing, Buyer shall pay to Seller, by wire transfer of immediately available funds to an account specified to Buyer, Ninety Five  Thousand US Dollars (US$95,000.) plus the assumption of Target’s obligations not to exceed One Hundred and Fifteen Thousand US Dollars (US$115,000.).

 

1.6 Assumed Liabilities.  Subject to the terms and conditions set forth herein, at the Closing, Buyer shall assume and agree to pay, honor and discharge when due and payable (unless being contested by Buyer in good faith upon the prior written consent of Seller, which consent shall not be unreasonably withheld) the following liabilities relating to the operation of the Business or the ownership of the Purchased Assets, excluding the Excluded Liabilities, provided, however, that Buyer may elect to effect payments on such Assumed Liabilities, in whole or in part, to the respective third party creditors at Closing (collectively, the “Assumed Liabilities”):

 

(a) accounts payable of Seller relating to the Business which are unpaid on the Closing Date and accrued as current liabilities, including accounts payable relating to projects and orders completed by Seller prior to the Closing Date, in each case as listed on Schedule 1.6(a) (“Accounts Payable”) provided that such Accounts Payable relate to obligations made in the ordinary course of business of the Business and have not been accelerated;

 

(b) all of the obligations, covenants, commitments and undertakings under the open purchase orders, as listed on Schedule 1.6(b);

 

(c) all of the obligations, covenants, commitments and undertakings arising under the Assumed Contracts that relate to any period after the Closing, including, without limitation, Seller’s obligations, covenants, commitments and undertakings with respect to customer deposits, but only to the extent such Assumed Contracts were effectively assigned and transferred to Buyer pursuant to the provisions hereof;

 

  

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(d) all of the obligations, commitments and undertakings with regard to the Acquired Employees, as expressly set forth in Section 2.24; and

 

(e) those other liabilities, obligations and commitments as listed on Schedule 1.6(e).

 

(f) Closing Net Book Value.  As soon as practicable but no later than forty-five (45) days after the Closing Date, Seller shall deliver to Buyer a balance sheet of Target as of March 8, 2013 prepared in accordance with GAAP, on a basis consistent with past practice (the “Closing Balance Sheet”), and shall certify to Buyer the Net Book Value at March 8, 2013.  The Closing Balance Sheet delivered in accordance with this Section  will be final, binding, and conclusive upon Seller and Buyer and will be used to determine the post closing purchase price adjustment, if any.

 

(g) Cooperation.  Buyer will provide Seller and Seller’s accountants with reasonable access to the records and personnel of Target in order to obtain all information needed to establish the Closing Balance Sheet; provided that Seller and Seller’s accountants do not unduly interfere with the operations of Target.  Seller shall cause Seller’s accountants to make its work papers with respect to such Closing Balance Sheet available to Buyer and Buyer’s accountants as soon as practicable, and no later than five (5) days following delivery of the Closing Balance Sheet to Buyer.

 

(h) Disputes.  If Buyer disagrees in good faith with all or any portion of the Closing Balance Sheet, Buyer shall give Seller written notice of all items with which it disagrees within forty-five (45) days after receipt by Buyer of the Closing Balance Sheet (the “Disagreement Notice”).  Seller and Buyer shall then negotiate in good faith for a period of twenty (20) days following Buyer’s delivery of the Disagreement Notice to resolve any such disagreements.  Any agreement by Seller and Buyer with respect to any items set forth in the Disagreement Notice will be conclusive and binding on all the parties hereto.  If after such twenty (20) day period Seller and Buyer still disagree, any such disagreement shall be promptly submitted to a mediator agreed upon by Seller and Buyer ( “Mediator”) who shall deliver to Seller and Buyer, as promptly as practicable, a written report of its determination of the Closing Balance Sheet as of the Closing Date, which will be neither more favorable to Seller than reflected in the Closing Balance Sheet nor more favorable to Buyer than reflected in the Disagreement Notice. Mediator shall consider only those items as to which Buyer has disagreed and which remain unresolved between Buyer and Seller.  The determination made by Mediator  will be conclusive and binding on and non-appealable by all the parties hereto.  The fees, costs and expenses of Mediator shall be borne one half by Buyer and one-half by Seller.

 

 

ARTICLE 2

 

REPRESENTATIONS AND WARRANTIES OF SELLER AND TARGET

 

Each of Seller, Target and the Management Indemnitor hereby jointly and severally represent and warrant to Buyer, as of the date hereof and as of the Closing Date, as follows:

 

  

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2.1 Organization. Target is a corporation duly organized, validly existing, and in good standing under the laws of the state of Delaware.  Copies of the Charter and Bylaws of Seller and Target as previously delivered to Buyer are correct, complete and in full force and effect.

 

2.2 Capitalization and Ownership.   The authorized capital stock of Target consists of 1500 shares of common stock, no par value, of which 100 shares are issued and outstanding.  Seller is the record and beneficial owner of all the Shares.  All of the Shares have been duly authorized, validly issued, are fully paid and non-assessable, were not issued in violation of the terms of any agreement or other understanding binding upon Target or any other Person and were issued in compliance with all applicable federal, and local state securities and “blue-sky” laws and regulations.  Except as set forth in Schedule 2.2, there are no outstanding securities, options, warrants, rights, agreements, calls, subscription commitments, demands, or understandings of any character whatsoever, fixed or contingent, that directly or indirectly (a) call for the issuance, sale or other disposition of any capital stock of Target and there are no securities convertible into or exchangeable for the stock of Target or (b) obligate any Seller or the Target to grant, offer or enter into any of the foregoing or (c) relate to the voting or control of any capital stock of Target.  No person has any right to require Target or Seller to register any securities of Target under the Securities Act of 1933.

 

2.3 No Subsidiaries.   Target does not own, directly or indirectly, any equity ownership interest in any other Person.

 

2.4 Title to Shares.   Seller owns all Shares free and clear of all Liens, and the sale and delivery of the Shares to Buyer pursuant to this Agreement will vest in Buyer legal and beneficial title to the Shares free and clear of any Lien.

 

2.5 Qualification; Location of Business and Assets. Target is duly qualified and in good standing as a foreign corporation and has all requisite corporate power and authority to do business in the jurisdictions set forth on Schedule 2.5, which jurisdictions are the only jurisdictions wherein the character of the properties owned or leased or the nature of activities conducted by Target make such qualification necessary.  Set forth on Schedule 2.5 is each location (specifying state, county, and city) where Target (a) has a place of business, (b) owns or leases real property, (c) maintains inventory, or (d) maintains employees.

 

2.6 Authorization and Enforceability.   Each of Seller and Target has all requisite corporate power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder.  The execution and delivery of, and the performance of the obligations under, this Agreement by each of Seller and Target has been duly and validly authorized by all necessary corporate action.  This Agreement has been duly executed and delivered on behalf of each of Seller, Target and the Management Indemnitor and constitutes the legal, valid, and binding obligations of each of Seller, Target and the Management Indemnitor enforceable against each of them in accordance with its terms subject to general equitable principles, except as the enforceability of this Agreement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to creditors’ rights.

 

  

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2.7 Books and Records.   The minute book, stock certificate book and stock record book of Target is complete and the signatures therein are, to the best knowledge of Seller, the true signatures of the persons purporting to have signed the documents contained therein.  To the best knowledge of Seller, such minute books contain accurate and complete minutes of all meetings and written consents to action of the respective Board of Directors and shareholders of Target.  All material corporate actions taken by Target has been duly authorized or subsequently ratified.  The Books and Records of Target have been maintained in accordance with good business practice on a consistent basis and accurately reflect the condition, financial or otherwise, of Target.

 

2.8 No Conflict; No Violation of Laws or Agreements.   Except as described in Schedule 2.8, the execution and delivery of this Agreement by Seller, Target and the Management Indemnitor do not, and the consummation of the transactions contemplated by this Agreement and the compliance with the terms, conditions, and provisions of this Agreement by Seller and Target will not:

 

(a) contravene any provision of any of the Charter or Bylaws of any Seller or Target;

 

(b) conflict with, constitute or result in any breach, default or violation of (or an event which might, with or without the passage of time or the giving of notice or both, constitute or result in a breach, default or violation of) (i) any of the terms, conditions, or provisions of any indenture, mortgage, loan, credit agreement or any other instrument, contract, agreement or commitment to which Target, Seller or any Management Indemnitor is a party, or by which Target, any of the assets of Target or Seller or any Management Indemnity may be bound or affected, (ii) any judgment or order of any Governmental Authority, or (iii) any law, rule or regulation;

 

(c) result in the creation or imposition of any Lien upon any Shares or any assets of Target or give to any Person any interests or rights in any thereof;

 

(d) result in the acceleration of any liability or obligation of Target (or give any Person the right to cause such acceleration); or

 

(e) result in the termination of or loss of any right (or give any Person the right to cause such a termination or loss) under any agreement or contract to which any Seller or Target is a party or by which any Seller or Target may be bound, or to which any Shares or assets of Target are subject.

 

2.9 Financial Statements.

 

(a) Attached hereto as Schedule 2.9 are (i) a true and correct copy of the unaudited consolidated balance sheet of Seller at December 31, 2012 and the related audited consolidated statements of profit and loss and cash flows for the fiscal year then ended (collectively, the “Unaudited Financial Statements”); (ii) within sixty (60) days after the Closing date, Seller shall provide a true and correct copy of the audited consolidated balance sheet of Seller at December 31, 2012 and the related audited consolidated statements of profit and loss and cash flows for the fiscal year then ended (collectively, the “Audited Financial Statements”).

 

  

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(b) Except for as set forth on Schedule 2.9, the Financial Statements:  (i) were prepared from the Books and Records of Target, which Books and Records have been maintained in accordance with all legal and accounting requirements and completely and accurately reflect all financial transactions of Target; (ii) were prepared in accordance with GAAP consistently applied; and (iii) present fairly the financial condition of Target and the results of their operations for the periods covered by, and as at the dates of, each of the Financial Statements.  The statements of profit and loss included in the Financial Statements do not contain any material items of special or non-recurring income or other income not earned in the ordinary course of business except as expressly specified therein.

 

2.10 No Undisclosed Liabilities.  Target does not have any material liability or obligation of any nature, whether due or to become due, absolute, contingent or otherwise, direct or indirect, except (a) to the extent reflected as a liability on the Financial Statements, and (b) liabilities incurred in the ordinary course of business (and not in violation of this Agreement or any other agreement to which Target is a party or by which it or assets of Target may be bound) since December 31, 2012 and that are fully reflected as liabilities on the Books and Records of Target and will be fully reflected as liabilities on the Closing Balance Sheet.

 

2.11 No Changes.   Except as disclosed on Schedule 2.11, since December 31, 2012, Target has conducted its business only in the ordinary course of business.  Without limiting the generality of the foregoing sentence, except as disclosed on Schedule 2.11, since December 31, 2012, there has not been:

 

(a) any change in the financial condition, assets, liabilities, prospects, net worth, earning power or business of Target, except for changes in the ordinary course of business consistent with past practice, none of which, individually or in the aggregate, has been or is likely to be materially adverse to Target;

 

(b) any casualty, damage, destruction or loss, whether or not covered by insurance, adversely affecting the properties, business or prospects of Target; any material deterioration in the operating condition of the assets of Target; or any accident in which any employees or other Persons have been killed or injured;

 

(c) any Lien placed on any of the assets of Target;

 

(d) any declaration, setting aside or payment of a dividend or other distribution in respect of Target or any direct or indirect redemption, purchase or other acquisition of any capital stock of Target;

 

(e) any increase in the salary or other compensation payable or to become payable to, or any advance (excluding advances for ordinary business expenses) or loan to, any officer, director, employee or shareholder of Target (except normal merit increases made in the ordinary course of business consistent with past practice), or any increase in, or any addition to, other benefits (including any bonus, profit-sharing, pension or other plan) to which any of such officers, directors, employees or shareholders may be entitled, or any payments to any pension, retirement, profit-sharing, bonus or similar plan except payments made pursuant to the Benefit Plans in the ordinary course of business consistent with past practice, or any other payment of any kind to or on behalf of any such officer, director, employee or shareholder (other than payment of base compensation and reimbursement for reasonable business expenses in the ordinary course of business consistent with past practice);

 

  

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(f) any making or authorization of any capital expenditures in excess of One Thousand Dollars ($1,000);

 

(g) any cancellation or waiver of any right material to the operation of the business of Target, any cancellation or waiver of any debts or Claims of substantial value by Target or any cancellation or waiver of any debts or Claims against any Related Party by Target, other than write-offs of bad debts in the ordinary course of business, which write-offs have not exceeded $1,000;

 

(h) any sale, transfer, lease or other disposition of any material asset of Target;

 

(i) any amendment to, suspension or termination of, or receipt by either Seller or Target of any notice of breach or default of, any material lease, contract or other agreement to which Target is a party or from which Target, directly or indirectly, derives rights;

 

(j) any payment, discharge or satisfaction of any liability or obligation (whether accrued, absolute, contingent or otherwise) by Target, other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice, of liabilities or obligations shown or reflected on the Financial Statements or incurred in the ordinary course of business since December 1, 2012;

 

(k) any adverse change in, or any threat of any adverse change in, Target relations with, or any loss or threat of loss of, suppliers or customers which, individually or in the aggregate, had or is likely to have a Material Adverse Effect;

 

(l) any write-offs as uncollectible of any notes or accounts receivable of Target or write-downs of the value of any assets or inventory of Target, other than in the ordinary course of business consistent with past practice;

 

(m) any material change by Target in any method of accounting or keeping its books of account or accounting practices;

 

(n) any creation, incurrence, assumption or guarantee by Target of any material obligation or liability (whether absolute, accrued, contingent or otherwise and whether due or to become due), except in the ordinary course of business consistent with past practice, or any creation, incurrence, assumption or guarantee by Target of any material indebtedness for money borrowed;

 

(o) any payment, loan or advance to or in respect of, or the sale, transfer or lease of any material asset of Target (whether real, personal or mixed, tangible or intangible) to, or entering into of any agreement, arrangement or transaction with, any Related Party, except for (i) directors’ fees and (ii) compensation to the officers and employees of Target at rates not exceeding the rates of compensation disclosed on Schedule 2.24 hereto;

 

  

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(p) any disposition of (or failure to keep in effect any rights in, to or for the use of) any patent, trademark, service mark, trade name or copyright, or any disclosure to any Person not an employee or other disposal of any trade secret, process or know-how of or by Target;

 

(q) any other transaction, agreement or event outside the ordinary course of Target’s business or inconsistent with past practice; or

 

(r) any agreement or commitment to take or do any of the actions described in subsections (a) through (q) above.

 

2.12 Taxes.

 

(a) Except as set forth on Schedule 2.12, Target has (i) timely filed all Returns required to be filed by it with respect to all Taxes (which Returns have been prepared in accordance with all applicable laws and requirements and are correct and complete), and (ii) paid all Taxes required to be paid by it or caused such Taxes to have been paid on its behalf, and all Taxes that are required to be collected or withheld by or for Target have been duly collected or withheld and any such amounts that are required to be remitted to any taxing authority have been duly remitted.

 

(b) The accruals for Taxes contained in the Financial Statements are not less than all unpaid liabilities for Taxes for all periods ended on or before the respective dates of such Financial Statements and include adequate provisions for all deferred Taxes, and nothing has occurred subsequent to such dates to make any of such accruals inadequate.  All Taxes for periods beginning after January 1, 2012 have been paid or will be reflected in the Closing Balance Sheet.  Target has (i) timely filed all information Returns and reports, including Forms 1099, which are required to be filed,  and (ii) accurately reported all information required to be included on such Returns and reports.  True copies of federal and state income tax Returns of Target for each of the last three (3) fiscal years have been delivered to Buyer.

 

(c) No representative of any government taxing authority has made a pending proposal (whether in writing or verbal, formal or informal) to assert any deficiency in Taxes, adjust any Return, or revise the manner in which any Tax liability is determined with respect to any Target.  Except as disclosed on Schedule 2.12, no Return of Target has been audited by the relevant authorities for which any deficiencies or proposed deficiencies resulting from such audit have not been paid or adequately reserved in the Financial Statements.  All Returns with respect to which the statute of limitations has not expired are disclosed on Schedule 2.12.  To the best knowledge of Seller, no Return is under examination by any taxing authority.

 

2.13 Inventory.   All of the inventories of Target, including those reflected on the Financial Statements, are valued at cost and are free and clear of any Lien except as set forth on Schedule 2.13.  All of the inventories reflected in the Financial Statements or purchased or acquired thereafter have been purchased or acquired in the ordinary course of business consistent with past practice.  All of such inventory is located at the facilities of Target or Webgistix a public warehouse located at 2251 Constitution Avenue & 250 Homer Street, Olean, NY 14760 or are in transit in the ordinary course of business.  All of such inventory, net of a inventory obsolescence reserves, is saleable at current market prices.  Since December 31, 2012,  the inventory of Target has not materially increased or decreased other than in the ordinary course of business consistent with past practice.

 

  

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2.14 Accounts Receivable.  All of the accounts and notes receivable of Target represent amounts receivable for goods and services actually delivered (or in the case of non-trade accounts or notes represent amounts receivable in respect of other bona-fide business transactions), have arisen in the ordinary course of business, are free of any Lien (except as set forth on Schedule 2.14), are not subject to any counterclaims or offsets and have been billed and are generally due and are fully collectible in the normal and ordinary course of business, except to the extent of a reserve in an amount not in excess of the reserve for doubtful accounts reflected on the Financial Statements and except as such accounts receivable may be adjusted to reflect year end allowances.

 

2.15 Litigation and Claims.   Except as set forth on Schedule 2.15, there is no Claim pending or, to the best knowledge of Seller, threatened (and, to the best knowledge of Seller, no state of facts exist which reasonably could be expected to lead to any such Claim) by, against or affecting or in any way relating to Target, any asset of Target or the Shares or Seller’s rights thereto, at law or in equity, before any Governmental Authority or any arbitrator.  There are presently no outstanding judgments, decrees or orders of any Governmental Authority or any arbitrator against or affecting Target or any asset of Target or affecting the Shares.  Nothing listed on Schedule 2.15 could reasonably be expected to have a Material Adverse Effect.  There are no Claims pending or, to the best knowledge of Seller, threatened that seek to delay or prevent the consummation of the transactions contemplated by this Agreement or that would be reasonably likely to affect adversely or restrict Seller’s, Target’s and/or the Management Indemnitor’s ability to perform its or their obligations under this Agreement.

 

2.16 Material Contracts.

 

(a) Contracts.  Except as set forth in Schedule 2.16(a) and, with respect to clauses (v) and (xi) below, except as previously disclosed to Buyer, there are no contracts, agreements, arrangements, commitments, instruments, plans or leases, oral or written (collectively, the “Contracts”) to which  Target is a party or by which it is bound:

 

(i) for consulting or other services obligating Target to payments of more than One Thousand Dollars ($1,000) annually or having a duration in excess of one (1) year;

 

(ii) relating to the management of Target;

 

(iii) with any railroad, trucking, water transport or other transportation company, including sidetrack contracts, pursuant to which Target holds or uses any sidetracks, spurs or sidings, loads or ships any goods by rail, truck or water or obtains or makes use of any other services provided by railroads, trucking or water transport companies;

 

  

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(iv) relating to the lease of machinery, equipment or other personal property involving payment of fixed rentals in excess of One Thousand Dollars ($1,000) annually in the aggregate;

 

(v) for the purchase of any materials or supplies in excess of One Thousand Dollars ($1,000);

 

(vi) for the purchase, sale or transfer of equipment or any construction or other similar agreement involving any expenditure in excess of One Thousand Dollars ($1,000);

 

(vii) evidencing or related to any indebtedness, obligation or liability for borrowed money or for the deferred purchase price of property, in excess of One Thousand Dollars ($1,000) (excluding trade payables incurred in the ordinary course of business consistent with past practice), or any guaranty, indemnification or other similar commitment relating to the obligations or liabilities of any other Person;

 

(viii) involving a sharing of profits, joint venture or partnership;

 

(ix) relating to sales agency, brokerage, distribution or similar matters;

 

(x) containing covenants limiting the freedom of any of Target to compete in any line of business or in any area or with any Person;

 

(xi) relating to orders for future purchase or delivery of goods or retention of services which is material to Target or which has an aggregate future liability greater than One Thousand Dollars ($1,000); or

 

(xii) relating to the business of Target, other than specifically excepted from the descriptions set forth in Subparagraphs 2.16(a)(ii) through 2.16(a)(xi) above, and except such Contracts which are terminable on less than 30 days’ notice without penalty or payment or involving expenditures of less than One Thousand Dollars ($1,000) in the aggregate.

 

(b) Contract Compliance.  The Contracts listed on Schedule 2.16(a) are all of the Contracts that are material to Target.  Copies of all such Contracts have been provided to Buyer, are true, correct and complete and are subject to no amendment, extension or modification, except as described in Schedule 2.16(a).  Except as set forth in Schedule 2.16(a), each Contract referred to in Schedule 2.16(a) is valid and binding upon Target and, to the best knowledge of Seller, as to any other party.  With respect to such Contracts, there is no material default by Target or, to the best knowledge of Seller, by any other party, and no event which, with notice or the passage of time or both, would constitute such a default by Target, or, to the best knowledge of Seller, by any other party thereto.  Except as set forth on Schedule 2.19, upon consummation of the transactions contemplated hereby, Target will continue to be entitled to the full economic, legal and other benefits of the Contracts on their present terms.  Except as set forth on Schedule 2.19, no party has any right to cancel, terminate or modify any of the Contracts by reason of the transactions contemplated under this Agreement.

 

  

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2.17 Environmental Matters.  To the best knowledge of Seller, none of the activities of Target or any current or prior owner, occupant, subcontractor, sub-lessee, licensee or operator of any real property for which Target may be responsible as a matter of law (such Persons, other than Target, collectively, “Operators”), has failed to comply substantially with, or is in default in any material respect under, any Environmental Laws or Worker Health and Safety Laws applicable to the Real Property Interests or business operations thereon (the “Target Operations”) such that any such activities would result in (i) revocation of any license or permit, including the Authorizations, the loss of which would have a Material Adverse Effect, (ii) material impairment of the ability of Target to carry on its business, or (iii) imposition on Target or any Operator of any fines or other civil or criminal monetary penalties.

 

2.18 Compliance with Laws.   Notwithstanding any other more specific provisions of this Article 2, and except as set forth on Schedule 2.18, the business, operations and assets of Target have been conducted and are in compliance in all material respects with all applicable federal, state, local and foreign laws, rules, regulations, ordinances, judgments, decrees, orders and other requirements of any Governmental Authority.  Nothing listed on Schedule 2.18, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

2.19 Consents.   Except as set forth on Schedule 2.19, which separately lists (i) all Required Permits and Consents and (ii) all other Permits and Consents, no consent, approval, or authorization of, or registration or filing with, any Person, including any Governmental Authority, is required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, or for the continuation of the business of Target after Closing.

 

2.20 Real Property.

 

(a) Owned Real Property Interests.  Target owns no interests in land, including easements, rights of way and options.

 

(b) Leased Real Property Interests.  Schedule 2.20(a) (i) lists each lease, sublease, assignment, surface, wheelage and other agreement, instrument or consent pursuant to which Target leases, occupies or uses any Real Property Interest or has subleased or otherwise granted to any Person any interests therein (collectively, the “Realty Leases”); and (ii) the identity of each lessor, lessee, consenting party, guarantor, if applicable, and any other party to any of the Realty Leases.  Each of the Realty Leases is valid and binding without further sublease or assignment and in full force and effect as to Target and, to the best knowledge of Seller, as to any other party thereto.  There is no material default by Target or, to the best knowledge of Seller, by any other party, under any of the Realty Leases, and there is no event which, with notice or the passage of time or both, would constitute such material default by Target or, to the best knowledge of Seller, by any other party under any of the Realty Leases.  Except as set forth on Schedule 2.19, upon consummation of the transactions contemplated under this Agreement, Buyer will be entitled to the full economic, legal and other benefits under the Realty Leases on their present terms, and no Person has any right to cancel, terminate or modify any of the Realty Leases by reason of the transactions contemplated under this Agreement.

 

  

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2.21 Personal Property.   Set forth on Schedule 2.21 hereto is a complete list and summary description of all equipment, machinery, motor vehicles, furniture, trademarks, patents, and other tangible and intangible personal property (the “Personal Property”) owned or leased by Target, except for (a) any item of owned personal property with an invoice cost of less than One Thousand Dollars ($1,000), and (b) supplies which have a short-term useful life and are expensed.  Except as set forth in such Schedule 2.21, Target has good and marketable title to all the owned Personal Property and good and valid leasehold interests in all leased Personal Property, reflected in Schedule 2.21 as owned or leased by Target, free and clear of all Liens.  All Personal Property is in good operating condition and repair, ordinary wear and tear excepted, in accordance with reasonable industry standards.

 

2.22 Intellectual Property.  Set forth on Schedule 2.22 hereto is a true and correct list of all material patents and patent applications, and all registrations or applications for trademarks, trade names, service marks and copyrights that are used by, or held by or on behalf of, Target other than intellectual property rights used pursuant to software license agreements (collectively, together with all know-how of and trade secrets currently used by, or developed by the employees of, Target other than intellectual property rights used pursuant to software license agreements, the “Intellectual Property”). Target owns, free and clear of all Liens other than Permitted Encumbrances or have the right to use under a valid license, without payment to any other Person (other than under a license described on Schedule 2.16 or the non-disclosure of which on Schedule 2.16 would not constitute a misrepresentation under Section 2.16).  Since the date that is five years prior to the date hereof, (i) no Claims have been made in writing by any Person challenging or questioning the right of any of Target to use the Intellectual Property or the validity or scope thereof; (ii) no Person has made a written Claim of its right to use any Intellectual Property owned, or to Seller’s knowledge, used under license, by Target; and (iii) no Person has made a written Claim of patent, trademark, trade name, service mark, or copyright infringement by Target or with respect to the right of Target to continue to sell any product or service or to conduct its operations without payment of a royalty or license fee.  No patent or trademark owned, or to the knowledge of Seller, used under license, by Target that constitutes Intellectual Property has been declared unenforceable or otherwise invalid by any court or governmental authority.  All patent and trademark registrations or applications which constitute Intellectual Property owned, or to the knowledge of Seller, used under license, by Target, have been duly registered in, filed in, or issued by, the U.S. Patent and Trademark Office and other applicable foreign patent and trademark offices as listed on Schedule 2.22, and have been properly maintained and renewed in accordance with all applicable laws.

 

2.23 Transactions with Related Parties.   Except as disclosed on Schedule 2.23, no Related Party:

 

(a) has borrowed money from, or loaned money to, Target which has not been repaid;

 

(b) has guaranteed the performance of Target under any Contract or other agreement or instrument which is still in effect or remains outstanding or had its performance under any contract, lease or other agreement or instrument guaranteed by a Target;

 

  

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(c) has any contractual or other Claim, express or implied, of any kind against Target;

 

(d) has any interest in any assets of Target; or

 

(e) has been engaged, since the date that is two years prior to the date hereof, in any other material transaction with Target.

 

Schedule 2.23 also lists all amounts owing between Target, on the one hand, and any Related Party, on the other (“Related Party Balances”).

 

2.24 Employees; Officers and Directors.   Schedule 2.24 sets forth the names, titles and current annual salary and other compensation, including any bonus, if applicable, of all present officers, directors and employees of Target, together with a statement of the full amount of all remuneration paid to each such person during the calendar year preceding the date hereof.

 

2.25 Labor Relations. Target is not, nor has ever been, a party to, and none of its employees is otherwise subject to, any collective bargaining agreement.  Except as disclosed on Schedule 2.25, currently and during the past three (3) years there are not and have not been:  (a) to the best knowledge of Seller, any activities or proceedings of any labor union or representatives thereof to organize any employees of Target; (b) any unfair labor practice complaints or grievances against Target; or (c) any labor strike, dispute, slowdown, work stoppage, picketing, lockout or threat thereof against Target.  Target has not received any unresolved or outstanding notice of the intent of any federal, state or local agency or instrumentality having jurisdiction and responsibility for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to Target, and no such investigation is in progress.

 

2.26 Insurance.   Attached hereto as Schedule 2.26 is a complete and correct list of all policies of insurance of which Target is the owner, insured or beneficiary, or which covers Target including any of its assets, indicating for each policy the carrier, risks insured, amounts of coverage, deductible, premium rate, cash value, expiration date, and any pending Claims thereunder, excluding routine medical insurance Claims.  Except as set forth in Schedule 2.26, all such policies are in full force and effect; there is no default with respect to any provision contained in any such policy by Target or to the best knowledge of Seller any other party thereto, or, to the best knowledge of Seller, any event which, with notice or the passage of time or both would constitute such a default; and there has not been any failure to give any notice or present any Claim under any such policy in a timely fashion or in the manner or detail required by the policy.  Except as set forth on Schedule 2.26, there are no outstanding unpaid premiums or Claims under such policies.  Except as described in Section 2.26, no notice of cancellation or non-renewal with respect to, or disallowance of any Claim under, any such policy has been received.  Target has never been refused any insurance and no coverage has been limited by any insurance carrier to which an application for insurance was made or with which insurance was carried by or for Target and all general liability policies maintained by or for the benefit of Target have been “occurrence” policies.

 

  

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2.27 Employee Benefit Plans.

 

(a) Except as set forth on Schedule 2.27, neither Target nor any ERISA Affiliate maintains or has maintained, contributed or is required to contribute to any Benefit Plan. In addition, neither Target nor any ERISA Affiliate has any liability with respect to any employee, former employee, director, officer or independent contractor of any of Target.

 

(b) Except as set forth on Schedule 2.27:

 

(i) All insurance premiums with respect to any insurance policy related to a Benefit Plan for any period up to and including the Closing Date shall have been paid, or accrued and booked on the Closing Date Statement, and, with respect to any such insurance policy or premium payment obligation, neither Target, any ERISA Affiliate nor Buyer shall be subject to a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability.

 

(ii) With respect to each Benefit Plan that is a “group health plan” within the meaning of Section 607 of ERISA and that is subject to Section 4980B of the Code, Target and each ERISA Affiliate have complied with the continuation coverage requirements of the Code and ERISA.

 

(iii) No Benefit Plan provides benefits, including death or medical benefits, beyond termination of service or retirement other than (A) coverage mandated by law or (B) death or retirement benefits under a Benefit Plan qualified under Section 401(a) of the Code.  Neither Target nor any ERISA Affiliate has made a written or oral representation to any current or former employee promising or guaranteeing any employer paid continuation of medical, dental, life or disability coverage for any period of time beyond retirement or termination of employment.

 

(iv) Seller’s, Target’s and the Management Indemnitor’s execution of, and performance of the transactions contemplated by, this Agreement will not constitute an event under any Benefit Plan that will result in any payment (whether as severance pay or otherwise), acceleration, vesting, or increase in benefits with respect to any employee.  No Benefit Plan provides for “parachute payments” within the meaning of Section 280G of the Code.

 

(v) No Benefit Plan fails to meet the applicable requirements of Sections 79, 105, 120, 125 or 129 of the Code or any other nondiscrimination provision of the Code or ERISA applicable to such Benefit Plan for any period up to and including the Closing Date.

 

(vi) Target does not maintain any foreign plan, contract or program for the benefit of persons who are non-resident aliens of the United States of America.

 

2.28 Customers.   Seller has provided Buyer a true and complete list of all customers sales of Target during any of its last two fiscal years.  Seller has provided Buyer a true and complete list of all vendors who produce products for Target.

 

2.29 Accounts; Lockboxes and Safe Deposit Boxes.   Schedule 2.29 sets forth a list of:  (a) the names of each bank, savings and loan association, securities, commodities or other financial institution in which Target has an account, (b) the location of all lockboxes and safe deposit boxes of Target, and (c) the names of all Persons holding powers of attorney, including signature authority for each such or having access to each such lockbox or safe deposit box.

 

2.30 Brokerage.  Other than Sunbelt of Pasadena, neither Seller nor Target nor any Person acting on its behalf has engaged, retained or incurred any liability to any broker, investment banker, finder or agent, made any agreement or taken any other action which might cause anyone to become entitled to a broker’s fee or commission or agreed to pay any brokerage fees, commissions, finder’s fees or other fees with respect to the purchase of the Shares or as a result of the transactions contemplated by this Agreement.

 

2.31 Disclosure.   To the best knowledge of Seller, no representation or warranty in this Agreement, and no exhibit, document, statement, certificate or schedule furnished or to be furnished by Seller pursuant hereto or in connection with the transactions contemplated hereby, 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 or facts contained herein or therein not misleading, or necessary to provide Buyer with adequate and complete information as to Target, the assets of Target, and the Shares.

 

 

  

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ARTICLE 3

 

 

REPRESENTATION AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller and Target, as of the date hereof and as of the Closing Date, as follows:

 

3.1 Organization; Qualification; Authority and Enforceability.   Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.  Buyer’s execution and delivery of this Agreement, and the performance of its obligations hereunder, have been duly authorized by all necessary corporate action on the part of Buyer.  This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms subject to general equitable principles and except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to creditors’ rights.

 

3.2 No Conflict; No Violation of Laws or Agreements.   The execution and delivery of this Agreement by Buyer do not, and the consummation of the transactions contemplated by this Agreement by Buyer and the compliance with the terms, conditions and provisions of this Agreement by Buyer will not:  (a) contravene any provision of Buyer’s Charter or Bylaws, or (b) conflict with, or constitute, or result in any breach, default, violation of (or an event which might, with or without the passage of time or the giving of notice or both constitute or result in a breach, default or violation of) (i) any of the terms, conditions, or provisions of any indenture, mortgage, loan,  credit agreement or any other instrument, contract, agreement or commitment to which Buyer is a party or by which any of its assets may be bound or affected or (ii) any judgment or order of any Governmental Authority, or any law, rule or regulation applicable to Buyer.

 

3.3 Consents.   No consent, approval, or authorization of, or registration or filing with, any Person, including any Governmental Authority, is required in connection with Buyer’s execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement by Buyer.

 

3.4 Litigation and Claims.  There are no Claims pending or, to the best knowledge of Buyer, threatened that seek to delay or prevent the consummation of the transactions contemplated by this Agreement or that would be reasonably likely to affect adversely or restrict Buyer’s ability to perform its obligations under this Agreement.

 

3.5 Investment Intent.  Buyer is acquiring the Shares solely for its own account and not with a view to a sale or distribution thereof in violation of any securities laws.  Buyer acknowledges that it has received, or has had access to, all information which it considers necessary or advisable to enable it to make a decision concerning its purchase of the Shares, provided that the foregoing shall not limit or otherwise affect the rights or remedies of Buyer hereunder with respect to the breach of any representations, warranties, covenants or agreements of Seller and/or Target contained herein.

 

3.6 Broker.  Buyer nor any Person acting on behalf of any of them has engaged, retained or incurred any liability to any broker, investment banker, finder or agent, made any agreement or taken any other action which might cause anyone to become entitled to a broker’s fee or commission or agreed to pay any brokerage fees, commissions, finder’s fees or other fees with respect to the purchase of the Shares or as a result of the transactions contemplated hereby.

 

  

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ARTICLE 4

 

CERTAIN OBLIGATIONS OF SELLERS

 

4.1 Conduct of Business Pending Closing.   From and after the date hereof until Closing, and unless otherwise provided herein or Buyer otherwise consents or agrees in writing, Seller and Target covenant and agree that Target will not:

 

(a) amend its Charters or Bylaws;

 

(b) change its authorized or issued capital stock, or issue any rights or options to acquire such stock;

 

(c) enter into any contract or commitment the performance of which may extend beyond the Closing, except those made in the ordinary course of business;

 

(d) enter into any employment or consulting contract or arrangement with any Person that is not terminable at will without penalty or continuing obligation;

 

(e) incur, create, assume or suffer to exist any Lien affecting any of the assets of Target;

 

(f) make, change or revoke any tax election or any agreement or settlement with any taxing authority;

 

(g) incur any debt or other obligation for money borrowed except in the ordinary course of business consistent with past practice;

 

(h) loan, advance funds or make an investment in or capital contribution to any Person other than to Target in the ordinary course of business;

 

(i) take any action or permit to occur any event described in Section 2.11;

 

(j) sell, transfer, lease or otherwise dispose of any assets of Target other than inventory, except for one or more sales of assets of Target for aggregate proceeds not exceeding One Thousand Dollars ($1,000);

 

(k) take any action or omit to take any action that will result in a material violation of any applicable law or cause a material breach of any agreements, contracts, or commitments not in the ordinary course of business consistent with past practice; or

 

(l) enter into any agreement to do any of the foregoing.

 

  

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4.2 Ordinary Course.  Seller and Target will conduct the businesses of Target in the ordinary course, including billing, shipping, collection practices, inventory transactions and payment of accounts payable.

 

4.3 Preservation of Businesses.  Seller and Target will use their best efforts to preserve the business organization of Target and to preserve for Buyer the goodwill of the suppliers, customers and any other Person having business relations with Target.

 

4.4 Insurance.   Seller and Target will cause the insurance policies set out on Schedule 2.25 to be maintained in full force and effect, subject only to variations required by ordinary course business operations, or Seller and Target to obtain, prior to the lapse of any such policy, substantially similar coverage with insurers of recognized standing.  Seller shall notify Buyer in writing of any change of insurer or type of coverage from the policies listed on Schedule 2.25.

 

4.5 Cooperation.  Seller and Buyer shall cooperate to obtain, amend or substitute any (i) permits, authorizations, licenses, bonds and surety deposits granted by or filed with any Governmental Authorities, (ii) consents and approvals of any third Person by reason of the transactions contemplated hereby (the “Permits and Consents”).  If any Permits and Consents must be obtained prior to Closing in order to assure the continued and uninterrupted operation of the Business after the Closing as heretofore conducted or the consummation of the transactions contemplated hereby (such Permits and Consents, the “Required Permits and Consents”), all expenses in connection with obtaining such Required Permits and Consents will be borne by Target on or prior to Closing.  To the extent that any such Permits and Consents shall be conditioned on a change of the economic terms of the underlying transaction, Seller shall be responsible for any costs associated with any such change in economic terms without regard to Section 9.4.

 

4.6 Access, Information, and Documents.   After the date hereof, Buyer and Buyer’s counsel, accountant, and other representatives will have full access during normal business hours to all of Target’s properties, books, tax returns, contracts, commitments, records, officers, personnel and accountants.  Seller shall provide Buyer with all such documents and copies of documents (certified to be true copies if requested) and all information with respect to the affairs of Target as Buyer may reasonably request.  No investigation or receipt of information by Buyer pursuant to this Agreement shall diminish or obviate any of the representations, warranties, covenants or agreements of Seller or Target under this Agreement or the conditions to the obligations of Buyer under this Agreement.

 

4.7 Acquisition Proposals.   From the date hereof through the Closing, none of Seller, Target, or any of their Affiliates, nor any of their respective officers, directors, employees, representatives or agents, shall, directly or indirectly, solicit, initiate or participate in any way in discussions or negotiations with, or provide any information or assistance to, any Person or group of Persons (other than Buyer) concerning any acquisition of an equity interest in, or any merger or consolidation with, or any acquisition of a substantial portion of the assets of, Target (each, an “Acquisition Proposal”), or assist or participate in, facilitate or encourage any effort or attempt by any other Person to do or seek to do any of the foregoing.  Since February 1, 2013, none of the conduct prohibited by this sentence has occurred.  Seller and Target shall promptly communicate to Buyer the terms of any Acquisition Proposal which any of them or any such other Person may receive. Seller has provided Buyer a true and complete list of all the Persons who have entered into a Non-Disclosure Agreement regarding the sale of the Target in Schedule 4.7.

 

  

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ARTICLE 5

 

CONDITIONS TO CLOSING

 

5.1 Conditions Precedent to Obligations of Seller.   The obligations of Seller to proceed with the Closing under this Agreement are subject to the fulfillment prior to or at Closing of the following conditions (any one or more of which may be waived in whole or in part by Seller in Seller’s sole discretion):

 

(a) Material Adverse Effect.   There shall not be a breach of, or any inaccuracy contained in, the representations and warranties or covenants of Seller Target or Management Indemnitor contained in this Agreement (including the Schedules hereto) on or prior to the Closing Date, which, alone or together with other such breaches or inaccuracies, has resulted or is reasonably likely to result in a Material Adverse Effect.

 

(b) Performance and Compliance.  Seller shall have performed all of the covenants, and complied with all of the provisions required by this Agreement to be performed or complied with by it on or before the Closing, including the delivery of the items required to be made pursuant to Section 6.1 of this Agreement.

 

(c) Books and Records.  All Books and Records of Target shall have been delivered to Buyer.

 

(d) Satisfactory Instruments.  All instruments and documents required from Seller and/or Target to effectuate and consummate the transactions contemplated hereby shall be in form and substance reasonably satisfactory to Buyer and its counsel.

 

(e) Required Permits and Consents.  All Required Permits and Consents shall have been obtained.

 

(f) Litigation.  No order of any Governmental Authority shall be in effect that restrains or prohibits the transactions contemplated by this Agreement.  There shall not be threatened, nor shall there be pending, any action or proceeding (i) challenging any of the transactions contemplated by this Agreement or seeking monetary relief by reason of the consummation of such transactions, or (ii) that would likely have a Material Adverse Effect.

 

(g) Taxes.  Seller shall have caused Target to have paid all Taxes required to be paid as of the Closing Date and to have accrued on the Closing Balance Sheet all Taxes otherwise owing as of the Closing Date.

 

(h) Organizational Documents and Minute Books.  Seller shall have delivered to Buyer the Charter, Bylaws and minute book (including corporate seal and stock ledger) of Target, accompanied by a certificate of the Secretary or Assistant Secretary of Target, dated as of the Closing Date, to the effect that such Charters and Bylaws are true and complete.

 

5.2 Conditions Precedent to the Obligations of Buyer.   The obligation of Buyer to proceed with the Closing is subject to the fulfillment prior to or at Closing of the following conditions (any one or more of which may be waived in whole or in part by Buyer in its sole discretion):

 

(a) Material Adverse Effect.  All representations and warranties of Buyer contained herein shall be true, accurate, complete and correct in all material respects as of the Closing Date.  Buyer shall not have made Claims for breaches of, or inaccuracies contained in, the representations and warranties or covenants of Seller contained in this Agreement (including the Schedules hereto) on or prior to the Closing Date which, alone or together with other such breaches or inaccuracies, has resulted or is reasonably likely to result in a Material Adverse Effect.

 

(b) Performance and Compliance.  Buyer shall have performed all of the covenants and complied with all the provisions required by this Agreement to be performed or complied with by Buyer on or before the Closing.

 

(c) Litigation.  No order of any Governmental Authority shall be in effect which restrains or prohibits the transactions contemplated hereby, and there shall not have been threatened, nor shall there be pending, any action or proceeding challenging any of the transactions contemplated by this Agreement or seeking monetary relief by reason of the consummation of such transactions.

 

(d) Satisfactory Instruments.  All instruments and documents required of Buyer to effectuate and consummate the transactions contemplated hereby shall be in form and substance reasonably satisfactory to Seller and their counsel.

 

  

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ARTICLE 6

 

DELIVERIES AND PROCEEDINGS AT CLOSING

 

6.1 Closing Deliveries by Seller.   Subject to the terms and conditions of this Agreement, at the Closing, Seller shall deliver or cause to be delivered to Buyer the following documents, all in form and content reasonably satisfactory to Buyer:

 

(a) Corporate Documents.

 

(i) An Officer’s Certificate of Seller and of Target certifying as to (A) the incumbency and genuineness of the signatures of all officers of Seller and Target executing this Agreement, (B) the truth and correctness of corporate resolutions authorizing Seller and Target to enter into and perform this Agreement and the transactions contemplated hereby and (C) the truth, correctness and completeness of the Charter and Bylaws of Seller;

 

(ii) An Officer’s Certificate of Seller and of Target and a certified statement from each Management Indemnity that is an individual certifying that the representations and warranties contained herein are true, accurate, complete and correct as of the Closing Date (subject to the provisions of Section 5.1(a)) and that Seller, Target and each Management Indemnity has performed all of its obligations under this Agreement;

 

(iii) Certificates of corporate good standing or legal existence of Target as of a recent date; and

 

(iv) The duly executed resignation, effective as of the Closing, of each of the officers and directors of Target other than such parties whose names are listed on Schedule 6.1(a)(iv).

 

(v) The duly executed Non-Compete Agreement, by Management Indemnitor and Seller, effective as of the Closing which is attached here Schedule 6.1(a)(v).

 

(b) Transfer of Shares.

 

(i) Stock certificates evidencing the Shares accompanied by stock powers duly executed in blank and any other documents that are necessary to transfer to Buyer good title to the Shares, free and clear of all Liens, and, upon cancellation of such stock certificates, a newly issued stock certificate evidencing Buyer’s ownership of the Shares; and

 

6.2 Deliveries By Buyer.   Subject to the terms and conditions of this Agreement, at the Closing Buyer shall deliver or cause to be delivered to Seller the following documents all in form and content reasonably satisfactory to Seller:

 

(a) Corporate Documents.

 

(i) An Officer’s Certificates of Buyer certifying as to (A) the incumbency and genuineness of the signatures of all officers of Buyer executing this Agreement, (B) the truth and correctness of corporate resolutions authorizing the entry by Buyer into this Agreement and the transactions contemplated hereby and (C) the truth, correctness and completeness of the Charter and Bylaws of Buyer;

 

(ii) An Officer’s Certificate of Buyer certifying that the representations and warranties contained herein are true, accurate, complete and correct as of the Closing Date and that such Buyer has performed all of its obligations under this Agreement; and

 

(b) Purchase Price Payment.  By wire transfer of immediately available funds, the cash portion of the Purchase Price.

 

  

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ARTICLE 7

 

TERMINATION

 

7.1 Termination of Agreement.   This Agreement and the transactions contemplated hereby may be terminated at any time on or prior to the Closing Date:

 

(a) Mutual Consent.  By mutual written consent of Buyer and Seller;

 

(b) Termination by Buyer.  By Buyer upon notice to Seller if there has been a breach of, or inaccuracy contained in, the representations and warranties of Seller, Target or the Management Indemnitors contained in this Agreement (including the Schedules hereto) or any certificate delivered pursuant to this Agreement resulting or reasonably likely to result in a Material Adverse Effect or material breach by Seller of any of its covenants, or if any of the conditions specified in Section 5.1 hereof shall not have been substantially fulfilled by the time required and not have been waived by Buyer, or if the Closing shall not have occurred by March 11, 2013; or

 

(c) Termination by Seller.  By Seller upon notice to Buyer if there has been a material misrepresentation or material breach by Buyer of any of its representations, warranties or covenants, or if any of the conditions specified in Section 5.2 hereof shall not have been substantially fulfilled by the time required and not have been waived by Seller, or if the Closing shall not have occurred by March 11, 2013.

 

7.2 Effect of Termination.   In the event of termination of this Agreement by either Seller or Buyer, as provided above, this Agreement shall terminate as of the date of the written notice or consent described in Section 7.1 above, and there will be no liability on the part of Seller or Buyer or their respective Affiliates, except for liabilities arising from a breach of this Agreement prior to such termination; provided, however, that the obligations of the parties set forth in Sections 8.1 and 8.2 hereof shall survive such termination.

 

 

ARTICLE 8

 

CERTAIN ADDITIONAL COVENANTS

 

8.1 Costs and Expenses.   Each party hereto will pay its own costs and expenses, including legal and accounting fees, in connection with the negotiation, execution, performance of and compliance with this Agreement and, except as otherwise provided herein, none of such costs and expenses shall be paid by Target.

 

8.2 No Solicitation.   For a period of three (3) years from and after the Closing Date, neither Seller nor any Affiliate thereof will, directly or indirectly, solicit or attempt to entice away from Buyer or its Affiliates any employee who is then currently employed or retained by Buyer or its Affiliates; provided that the foregoing shall not prohibit Seller and its Affiliates from employing any individuals who have received notice of termination from, or cease to be employed by, Buyer or its Affiliates prior to the first time such individuals discussed with any representative of Seller or its Affiliates employment by Seller or any of its Affiliates.

 

8.3 Employees.  Seller shall cause Target to, and Target shall, terminate on or prior to the Closing Date, all employees of Target other than those employees listed on Schedule 8.3 hereto.  Buyer shall be liable for any costs and expenses, including, without limitation, severance expenses, incurred by Target as a result of the termination required pursuant to this Section 8.3.  Employees of Target who are not terminated on or prior to the Closing Date shall be provided such employee health and welfare benefits as Buyer provides to its employees generally, irrespective of any Benefit Plans Target may have had in place prior to the Closing Date.

  

20

  

 

8.4 Tax Matters.

 

(a) Seller is responsible for the preparation and filing of all Returns of Target for all taxable periods ending on or before the Closing Date.  Such Returns will be correct and complete and Seller will cause them to be timely filed with all relevant Governmental Authorities.  Buyer will be given a reasonable opportunity to review such Returns before they are filed.  No such Return shall contain any election that could affect any Tax liability for any period ending after the Closing Date, or that would require government permission to revoke, unless Buyer consents thereto.

 

(b) Seller and Buyer shall provide each other with reasonable cooperation in connection with (i) the preparation or filing of any Return, Tax election, Tax consent or certification, or any Claim for a Tax refund, (ii) any determination of liability for Taxes, and (iii) any audit, examination, contests, disputes, or other proceeding in respect of Taxes related to Target.

 

8.5 Confidentiality.  Seller shall keep all information about Target, Buyer and this Agreement and the transactions contemplated thereby in strictest confidence, and shall not disclose any such information to any Person without the consent of Buyer.

 

8.6 Litigation.  Seller shall cooperate with Buyer, at such time and in such manner as Buyer may reasonably request, in addressing any litigation arising after the Closing as to which Seller have knowledge.

 

 

ARTICLE 9

 

INDEMNIFICATION

 

9.1 Survival.

 

(a) General.  Except as set forth in subsections (b), (c) and (d) below, the representations, warranties, covenants and agreements of Seller and Buyer contained herein shall survive the Closing and remain in full force and effect, for one (1) year after the Closing Date, except as otherwise provided in this Section 9.1.

 

(b) Tax Matters.   The representations and warranties set forth in Section 2.12 entitled “Taxes” shall survive the Closing until sixty (60) days after the first to occur of (i) the expiration of the statute of limitations (and any extensions thereof) applicable to the Tax in respect of which indemnification is being sought without the assertion of a deficiency in respect thereof by the applicable Governmental Authority, or (ii) the completion of the final audit and determination by the applicable Governmental Authority with respect to such Tax and final disposition of any deficiency resulting therefrom.

 

(c) Environmental and Employee Benefit Matters.  The representations and warranties set forth in Sections 2.17 and 2.27 shall remain in full force and effect until the applicable period under the statute of limitations therefor has expired.

 

(d) Corporate Matters.  The representations and warranties set forth in Sections 2.2, 2.3, 2.4, 2.5 and 2.6 shall survive the Closing without any time limitation.

 

9.2 Indemnification by Seller.  Each of Seller and the Management Indenmnitor, jointly and severally, shall indemnify, defend and hold harmless Buyer, its officers, directors, employees, consultants, owners, agents and Affiliates (including Target), regardless of any investigation made by Buyer or on its behalf, for, against, from and in respect of any and all losses, damages, costs and expenses of any kind and nature whatsoever (including interest and penalties, reasonable expenses of investigation and court costs, reasonable attorneys’ fees and disbursements and the reasonable fees and disbursements of other professionals incurred in the investigation or defense of any of the same or in asserting any of their respective rights hereunder) (collectively, “Losses”) which may be sustained or suffered by any of them arising out of, resulting from or pertaining to:

 

(a) any breach of, or inaccuracy contained in, any representation or warranty made by Seller, Target or Management Indemnitor in this Agreement or in any Officer’s Certificate or any other certificate delivered pursuant to this Agreement regardless of whether such breach or inaccuracy was discovered prior to the Closing or during the twelve months thereafter;

 

(b) any failure of Seller to perform any covenant or agreement hereunder or fulfill any other obligation in respect hereof;

 

(c) any liability of Target for Taxes with respect to any taxable year (or part thereof) ending on or before the Closing Date to the extent not reflected or reserved against in the Closing Balance Sheet; or

 

(d) any potential Loss arising out of actions or inactions occurring or relating to the period prior to the Closing, provided notice of such Loss is delivered to Seller and the Management Indemnitors within twelve months after the Closing Date.

 

  

21

  

9.3 Indemnification by Buyer.  Buyer shall indemnify, defend and hold harmless Seller and Seller’s respective officers, directors, employees, consultants, owners, agents and Affiliates, for, against, from and in respect of any and all Losses which may be sustained or suffered by any of them arising out of, resulting from or pertaining to:

 

(a) any breach of, or any inaccuracy contained in, any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this Agreement regardless of when such breach or inaccuracy was discovered; or

 

(b) any failure of Buyer to perform any covenant or agreement hereunder or fulfill any other obligation in respect hereof.

 

9.4 Materiality.  Notwithstanding that certain representations or covenants set forth in this Agreement are qualified to the effect that they are not breached unless the breach is “material” or affects Buyer or Target in a “material respect” (a “materiality qualifier”), either party shall be entitled to indemnification pursuant to Section 9.2 or 9.3, as the case may be, with respect to any single occurrence of fact or related set of facts which, regardless of any materiality qualifier, would be a breach of a representation or covenant only if the Losses arising from such breach equal or exceed $10,000, in which event the Indemnified Party shall be entitled (subject to the limitations in this Article 9) to full indemnification for such Losses, including the first $10,000 thereof.

 

9.5 Limitations.

 

(a) Seller’s Maximum Liability.  Seller’s obligation to indemnify Buyer for any Losses under Section 9.2(a), (b) and (d) shall not exceed, in the aggregate, the principal amount outstanding under the Buyer’s Note at the time Buyer notifies Seller of an indemnifiable Loss.  In addition, the Management Indemnitor’s aggregate obligation to indemnify Buyer for any Losses under Section 9.2(a), (b) and (d) shall not exceed $100,000.

 

(b) Buyer’s Maximum Liability.  Buyer’s aggregate obligation to indemnify Seller for any Losses under Section 9.3(a) and (b) shall not exceed $100,000.

 

9.6 Notice and Opportunity to Defend.   Each Person seeking indemnification under this Article 9 (the “Indemnified Party”) shall promptly notify the other party obligated to provide indemnification (the “Indemnifying Party”) of any Claim as to which indemnity may be sought; provided, however, that failure to provide prompt notice relieves the Indemnifying Party of its obligations under this Agreement only to the extent that such failure prejudices the Indemnifying Party hereunder.  The Indemnified Party  has the right to control the defense of such Claim and the Indemnifying Party is entitled to participate in the defense of such claim.  In no event shall an Indemnifying Party be liable for any settlement or compromise effected without its prior consent and the Indemnifying Party, in the defense of any such Claim, shall not, except with the prior consent of the Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term a release of the Indemnified Party from all liability in respect to such Claim by the claimant or plaintiff.

 

9.7 Reimbursement. The Indemnifying Party shall, immediately, upon notice from the Indemnified Party, pay to the Indemnified Party the amount of the Indemnifiable Loss, at the time that the Indemnified Party shall suffer a loss because of a breach of, or inaccuracy contained in, any representation, warranty or covenant by the Indemnifying Party or at the time the amount of any liability on the part of the Indemnifying Party under this Article 9 is determined, which in the case of payment to third Persons shall be the earlier of (i) the date of such payments or (ii) the date that a court of competent jurisdiction shall enter a final judgment, order or decree (after exhaustion of appeal rights) establishing such liability (such loss or amount being hereinafter referred to as the “Indemnifiable Loss”).  Amounts payable to Buyer pursuant to Section 9.2(a) and (b) shall be paid first by reducing the principal amount of the Buyer’s Note effective as of the Closing, and, after the principal amount outstanding under Buyer’s Note has been reduced to zero, Buyer may seek indemnification payments form the Management Indemnitors.  If such amount is not paid immediately following receipt by the Indemnifying Party of the notice described in Section 9.6 above, the Indemnified Party may, at its option, take legal action against the Indemnifying Party for reimbursement in the amount of its Indemnifiable Loss.  For purposes hereof, the Indemnifiable Loss shall include the amounts so paid, or determined to be owing, by the Indemnified Party together with costs and reasonable attorneys’ fees and interest on the foregoing items at the annual rate of five percent (5%) from the date of notice that the Indemnifiable Loss is due from the Indemnifying Party to the Indemnified Party as provided above, until the Indemnifiable Loss shall be paid.  If such Indemnified Party does not prevail in its enforcement action hereunder, it shall reimburse the Indemnifying Party’s costs in such action.

 

In addition to its other obligations under this Section 9.7, the Indemnifying Party agrees to, as an interim measure during the pendency of any Claim for which indemnification may be required pursuant to this Article 9, reimburse the Indemnified Party on a monthly basis for all legal fees or other out-of-pocket expenses incurred in connection with investigating or defending any such Claim, notwithstanding the absence of a determination by any arbitrator or court as to the propriety and enforceability of the Indemnifying Party’s obligation to indemnify the Indemnifying Party for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction.  To the extent that any such interim reimbursement payment is so held to have been improper, the Indemnified Party shall promptly return it to the Indemnifying Party, together with interest at the annual rate of five percent (5%).  Any such interim reimbursement payments which are not made to the Indemnified Party within thirty (30) days of a request for reimbursement shall bear interest at the rate of five percent (5%) per annum from the date of such request.

 

  

22

  

9.8 Adjustments to Indemnification Payments.

 

(a) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment by the Indemnifying Party, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any Claim, recovery, settlement or payment by or against any third Person, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the rate of ten percent (5%) per annum), will promptly be repaid by the Indemnified Party to the Indemnifying Party.  Upon making any indemnity payment the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnified Party against any third Person that is not an Affiliate of the Indemnified Party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnified Party recovers full payment of its Indemnifiable Loss, any and all Claims of the Indemnifying Party against any such third Person on account of said indemnity payment will be subrogated and subordinated in right of payment to the rights of the Indemnified Party against such third Person.  Without limiting the generality or effect of any other provision hereof, each such Indemnified Party and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights.  The Indemnified Party shall use its reasonable efforts to make insurance Claims relating to any Claim for which it is seeking indemnification pursuant to this Article 9; provided that the Indemnified Party shall not be obligated to make such an insurance Claim if the Indemnified Party in its reasonable judgment believes that the cost of pursuing such an insurance Claim together with any corresponding increase in insurance premiums or other chargebacks to the Indemnified Party would exceed the value of the insurance Claim relating to any Claim for which the Indemnified Party is seeking indemnification.

 

(b) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment by the Indemnifying Party, is either reduced by any Tax benefits or increased by any Taxes attributable to the receipt of such indemnity payment by the Indemnified Party, then the amount of such reduction  or increase shall be promptly repaid by the Indemnified Party to the Indemnifying Party (in case of a reduction) or by the Indemnifying Party to the Indemnified Party (in case of an increase), but only to the extent that such Tax benefits are actually realized by the Indemnified Party.

 

(c) If an Indemnified Loss relates to Taxes resulting from the inclusion of income or disallowance of deductions in a period ending prior to or on the Closing Date and all or a portion of such income or deduction is excluded or allowed, respectively, in another period ending prior to or on the Closing Date, the amount of the Indemnified Loss shall be limited to the net Tax increase for such periods and the net amount of interest and penalties incurred with respect thereto.

 

9.9 No Other Representations, Etc.; Rescission.   Except as set forth in this Agreement, neither party makes any representation, warranty, covenant or agreement with respect to the matters contained herein.  Notwithstanding anything herein to the contrary, no breach of any representation, warranty, covenant or agreement of any party contained herein shall give rise to any right on the part of any other party, after the consummation of the purchase and sale of the Shares contemplated hereby, to rescind this Agreement or any of the transactions contemplated hereby.

 

9.10 Sole and Exclusive Remedy.   The indemnification provided under this Article 9 shall constitute the sole and exclusive remedy of Buyer and Seller subsequent to the Closing for any Losses sustained by Buyer or Seller as a result of any breach of this Agreement other than losses or liabilities based upon fraud or fraudulent misrepresentation.

 

9.11 Survival of Indemnification Obligations.   The indemnification and other obligations of Seller and Buyer under Section 9.2(a) and (b) and 9.3(a) and (b), respectively, shall survive for the same period of time set forth in Section 9.1, and shall terminate with the expiration of such survival period.  Claims or demands asserted prior to the expiration of such period shall survive until final resolution thereof.

 

  

23

  

 

ARTICLE 10

 

GENERAL

 

10.1 Notices.   All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered by courier, or if mailed, when mailed by United States first-class, certified or registered mail, postage prepaid, to the other party at the following addresses or by telecopy, receipt confirmed (or at such other address as shall be given in writing by any party to the other):

 

If to Buyer, to:

 

WESTERN PRINCIPAL PARTNERS LLC

350 South Grand Ave Suite 2250

Los Angeles, CA 90071

Attention:  Mr. Michael Turcich

Fax: (213) 680-3535

 

 

With a copy to:

 

            International Lawyers PC

            350 South Grand Ave Suite 1520

            Los Angeles, CA 90071

            Attention: Sudeok Jang, Esq.

            Fax: (415) 651-9524

 

 

 

If to Seller, to:

 

                        Internet Media Services, Inc.

                        1507 7th Street #425,

                        Santa Monica, CA 90401

                        Attention:  Mr. Raymond Meyers

                        Fax: (800) 467-1496

 

 

           With a copy to:

 

           Law Offices of Gary A. Agron

           5445 DTC Parkway #521

           Englewood, CO 80111

           Attention: Gary Agron, Esq.

           Fax:  (303) 770-7257

 

  

24

  

 

If to Target, to:

 

        Legal Store.com, Inc.

                        1507 7th Street #425,

                        Santa Monica, CA 90401

                        Attention:  Mr. Michael Turcich

Fax: (585) 546-7906

 

 

If to a Management Indemnitor, to

 

                        Mr. Raymond Meyers

                        1507 7th Street #425,

                        Santa Monica, CA 90401

                        Fax: (800) 467-1496

 

10.2 Successors and Assigns.   This Agreement, and all rights and powers granted hereby, will bind and inure to the benefit of the parties hereto and their respective successors and assigns, but neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties hereto, except that Buyer is entitled to assign all or part of its rights and obligations under this Agreement to an Affiliate of Buyer, provided, however, that Buyer shall remain fully responsible for the performance of its obligations hereunder.

 

10.3 Construction.   The parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  The word “including” and its derivatives shall mean including without limitation. The parties intend that each representation, warranty, and covenant contained herein shall have independent significance.  If any party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty, or covenant.  All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the identity of the Person or Persons may require.  All references herein to Articles, Sections (other than Sections of the Code or any other statute) and subsections shall be deemed to be references to Articles, Sections and subsections of this Agreement unless the context shall otherwise require.

 

10.4 Governing Law.   With respect to corporate governance matters concerning a corporation of any jurisdiction, this Agreement shall be governed by and construed in accordance with the laws of such jurisdiction.  With respect to all other matters, this Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions thereof.

 

  

25

  

10.5 Headings.   The headings preceding the text of the sections and subsections hereof are inserted solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction, or effect.

 

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

 

10.7 Further Assurances.   Both before and after Closing hereunder, each party shall cooperate and take such action as may be reasonably requested by another party in order to more fully carry out the provisions and purposes of this Agreement and the transactions contemplated hereby.

 

10.8 Course of Dealing.   No course of dealing and no delay on the part of any party hereto in exercising any right, power, or remedy conferred by this Agreement shall operate as a waiver thereof or otherwise prejudice such party’s rights, powers and remedies.  The failure of any of the parties to this Agreement to require the performance of a term or obligation under this Agreement or the waiver by any of the parties to this Agreement of any breach hereunder shall not prevent subsequent enforcement of such term or obligation or be deemed a waiver of an subsequent breach hereunder.  No single or partial exercise of any rights, powers or remedies conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

10.9 Severability.   This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof.  Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be valid and enforceable, so as to effect the original intent of the parties to the greatest extent possible.

 

10.10 Entire Agreement.   This Agreement and the Schedules, Exhibits and Certificates hereto, each of which is hereby incorporated herein, set forth all of the promises, covenants, agreements, conditions, and undertakings between the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, inducements, or conditions, express or implied, oral or written.  This Agreement may not be amended except by an instrument in writing signed by the party sought to be charged with effect of such amendment.

 

[Remainder of this page intentionally left blank.]

 

 

 

 

 

  

26

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.

 

 

	  	  	

WESTERN PRINCIPAL PARTNERS LLC

	  	  	  
	  	  	
By:

	
 

	  	  	
Name:

	Michael Turcich  
	  	  	
Title:

	Manager  

 

	  	  	
INTERNET MEDIA SERVICES, INC.

	  	  	  
	  	  	
By:

	
/s/

	  	  	
Name:

	Raymond Meyers  
	  	  	
Title:

	 President  
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	
 

 

 

 

 

 

  

27

  

Exhibit A

 

DEFINITIONS

 

“Affiliate” means, when used with respect to any Person, (a) if such Person is a corporation, any officer or director thereof and any Person which is, directly or indirectly, beneficial owner (by itself or as part of any group) of more than fifty percent (50%) of any class of any voting security thereof, (b) if such Person is an LLC, any officer or manager thereof and any Person which is, directly or indirectly, beneficial owner (by itself or as part of any group) of more than fifty percent (50%) of any class of any voting interest therein, (c) if such Person is a partnership, any general partner thereof and any Person which is, directly or indirectly, beneficial owner (by itself or as part of any group) of more than fifty percent (50%) of any limited partnership interest thereof, and (d) any other Person which directly or indirectly, through one or more intermediaries controls, is controlled by, or is under common control with, such Person.  For purposes of this definition:  (i) any “beneficial owner” that is a partnership shall be deemed to include any general or limited partner thereof, any “beneficial owner” that is an LLC shall be deemed to include any Person controlling, controlled by or under common control with such beneficial owner, or any officer, manager or member of such beneficial owner or of any LLC occupying any such control relationship, and any “beneficial owner” that is a corporation shall be deemed to include any Person controlling, controlled by or under common control with such beneficial owner, or any officer or director of such beneficial owner or of any corporation occupying any such control relationship; (ii) “control” (including the correlative terms “controlling,” “controlled by” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise; and (iii) all employees, stockholders, consultants and agents of Buyer and any direct or indirect stockholder of Buyer shall be considered an Affiliate of Buyer.

 

“Beneficiary” means the Person(s) designated by an employee, former employee, by operation of law or otherwise, as the party entitled to compensation, benefits, damages, insurance coverages, indemnification, or any other goods or services under any Benefit Plan.

 

“Benefit Plans” means any ”employee benefit plan,” as defined in Section 3(3) of ERISA (including any “multiemployer plan” as defined in Section 3(37) of ERISA) and all other contracts, programs or arrangements to provide any benefits, including supplemental retirement, deferred compensation, excess benefit, profit sharing, bonus, incentive, stock purchase, stock ownership, stock option, stock appreciation right, employment, severance, salary continuation, termination, change-of-control, vacation, educational assistance, scholarships, moving expenses, holiday and any other fringe benefit plan, program, contract or arrangement (whether written or unwritten, qualified or nonqualified, funded or unfunded, and including any that have been frozen or terminated).

 

“best knowledge of Seller and similar phrases means the knowledge, after due inquiry, of the managers, directors, officers, executive management personnel and beneficial owners of the Seller, which are listed on Schedule 1.

 

  

A-1

  

“Books and Records”  means and includes the original and all copies of reports, books, manuals, financial statements, or reports, price books, confirmations, telegrams, receipts, inventory books, contracts, printed matters, computer printouts, teletypes, invoices, transcripts, analyses, Returns, minutes, accounts, estimates, projections, comparisons, press releases, reviews, opinions, studies and investigations, graphic representations of any kind (including photographs, charts, graphs, videotape and motion pictures, electronic and mechanical records, tapes, cassettes, discs, and recordings, whether preserved in writing, phone record, film, tape, videotape, or computer record).

 

“Bylaws” means the bylaws of any corporation organized under the laws of any State of the United States of America and any equivalent document of any corporation or entity organized under the laws of another jurisdiction, as amended or restated through the date hereof or the Closing Date, as the case may be.

 

“Charter” means the Certificate of Incorporation or Formation, Articles of Incorporation or Organization or other organizational document of a corporation or an LLC organized under the laws of any State of the United States of America and any equivalent document of a corporation, LLC or other similar entity organized under the laws of another jurisdiction, as amended or restated through the date hereof or the Closing Date, as the case may be.

 

“Claim” means an action, suit, proceeding, hearing, investigation, litigation, charge, complaint, claim or demand.

 

“Code” means the Internal Revenue Code of 1986 and valid interpretations thereof, as reflected in Treasury regulations, published IRS rulings and court decisions.

 

“Disclosure Schedules” means the Schedules delivered by Seller to Buyer or by Buyer to Seller, as the case may be, in connection with the transactions contemplated hereby.

 

“Environmental Laws” means all federal, state or local laws, including common law, ordinances, requirements, rules, regulations, licenses, permits, orders, injunctions, judgments, or decrees relating to or addressing the environment, land use, or health and safety for the benefit and protection of the general public but excluding Worker Health and Safety Laws, which shall include the use, handling or disposal of any contaminant, subsidence, water drainage, treatment, impoundment, nuisances and zoning.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means (i) any corporation included with Target in a controlled group of corporations within the meaning of Section 414(b) of the Code; (ii) any trade or business (whether or not incorporated) which is under common control with Target within the meaning of Section 414(c) of the Code; (iii) any member of an affiliated service group of which Target is a member within the meaning of Section 414(m) of the Code; or (iv) any other Person treated as an affiliate of Target under Section 414(o) of the Code.

 

“GAAP” means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, consistently applied.

 

  

A-2

  

“Governmental Authority” means all agencies, instrumentalities, departments, commissions, courts, tribunals, or boards of any government, whether foreign, federal, state, or local.

 

“Hazardous Substances” means any pollutant, hazardous substance, radioactive substance, toxic substance, hazardous waste, medical waste, radioactive waste, special waste, petroleum or petroleum-derived substance or waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic constituent thereof and includes any substance defined in or regulated under Environmental Laws.

 

“IRS” means the Internal Revenue Service and any similar or successor agency of the federal government of the United States of America administering the Code.

 

“Lien” means, with respect to any asset or right, any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien, charge, restriction, adverse claim or right whatsoever, title defect or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, any assignment or other conveyance of any right to receive income and any assignment of receivables with recourse against assignor), any filing of any financing statement as debtor under the Uniform Commercial Code or comparable law of any jurisdiction and any agreement to give or make any of the foregoing except with respect to securities, restrictions on transferability imposed by federal and state securities laws.

 

“LLC” means limited liability company.

 

“Material” and “Materially” and derivatives thereof, whether capitalized or not, when used to qualify a representation, warranty, or covenant contained in this Agreement means, unless otherwise defined, or unless the context requires otherwise, either (i) that there is a reasonable probability, under all the circumstances and in view of the total mix of information available, that a reasonable person in the position of the party relying thereon would attach importance in deciding whether to enter into and consummate this Agreement in accordance with the specific terms contained herein; or (ii) that the magnitude of any inaccuracy in, or noncompliance with, the representation, warranty or covenant at issue is substantial enough to result in monetary liability or cost exceeding $25,000 to the party to this Agreement for whose benefit the representation, warranty or covenant is made.

 

“Material Adverse Effect” means an occurrence or event which has or is reasonably likely to have a material adverse impact or effect on the business, operations, financial conditions or prospects of Target.

 

“Net Book Value” means the actual value of the current assets (cash plus accounts receivables) of Target minus the actual value of the current liabilities (accounts payable, accured expenses and sales/corporate taxes) of Target as stated in the balance sheet of Target at such date.

 

“Permitted Encumbrances” means (i) liens for current ad valorem taxes not yet delinquent and other inchoate statutory liens for charges not yet due and payable, and (ii) private, public and utility easements, rights of way and roads and highways, if any, which do not individually or in the aggregate materially interfere with the conduct of Target’s business as presently conducted.

 

  

A-3

  

“Person” means any natural person, corporation, business trust, trust, estate, partnership, limited partnership, LLC, limited liability partnership, association, joint venture or other entity.

 

“Purchase Documents” means this Agreement and any other certificate, document, instrument, stock power or agreement executed in connection herewith.

 

“Related Party” means either of Seller, any of the members, managers, officers or directors of either Seller or any Affiliate of either Seller or any of their respective members, managers, officers or directors, or any Person in which either Seller has any direct or material indirect interest; provided, however, that no Target Company shall be considered a Related Party.

 

“Release” means the release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migrating into the indoor or outdoor environment of any contaminant through or in the air, soil, surface water, groundwater or real property.

 

“Returns” means all reports, estimates, declarations of estimated tax, information statements, forms, and returns relating to, or required to be filed in connection with, any Taxes, including information returns or reports with respect to backup withholding and other payments to third parties.

 

“Taxes” or “Tax” means all taxes, however, denominated, including any interest, penalties or other additions to tax that may become payable in respect thereof, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including federal income taxes and state income taxes), real property gains taxes, payroll and employee withholding taxes, unemployment insurance taxes, social security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which Target is required to pay, withhold or collect.

 

“Worker Health and Safety Laws” means all federal, state or local laws, including ordinances, requirements, rules, regulations, licenses, permits, orders, injunctions, judgments or decrees relating to or addressing workplace or worker safety and health.

 

  

A-4

  

 

Exhibit B

 

CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT

 

 

THIS CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT is made and entered into this 6th day of March, 2013 by and between INTERNET MEDIA SERVICES, INC., a Delaware Corporation, LEGALSTORE.COM., a Delaware Corporation, located at 1507 7th St., #425, Santa Monica, CA 90401, and Raymond Meyers, an individual located at 1507 7th St., #425, Santa Monica, CA 90401, on one hand, and WESTERN PRINCIPAL PARTNERS LLC, a California Limited Liability Company, located at 350 South Grand Avenue Suite 2250, Los Angeles, CA on the other.

 

WHEREAS, the parties are entering into discussions and negotiations that may lead to the sale and purchase of corporate shares and business interest of the parties for mutual benefits;

 

WHEREAS, in connection with such discussions and negotiations, the parties anticipate that certain confidential and proprietary information concerning their respective business may be disclosed or exchanged; and

 

WHEREAS, as an inducement for the disclosure of such confidential and proprietary information, the parties have agreed to maintain the confidentiality of, and protect the proprietary nature of, the information being disclosed or exchanged;

 

 

       NOW THEREFORE, in consideration of the foregoing, of the mutual promises and covenants herein contained, and of other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.           The parties agree to treat as confidential and not disclose to any third party without the prior written consent of all other parties hereto the fact that the parties are engaged in discussions that may develop into a business relationship and/or transaction.

 

2.           The parties further agree, for themselves and for their officers, employees, representatives and agents (collectively referred to herein as “Agents”), to maintain the confidential and proprietary nature of the information being disclosed or exchanged, that is of a confidential or proprietary nature, including, but not limited to, information regarding trade secrets, operations, business opportunities and future developments, financial condition, plans, specifications, design and operation, suppliers, cost saving techniques, niche markets, sales and marketing programs, customers, employees, and other such information relating to the parties’ respective businesses (“Confidential Information”).  Such Confidential Information may also include information developed by a non-party which a party may disclose so long as the confidentiality of such information is maintained.

 

3.           The parties shall use all precautions reasonably necessary to prevent the disclosure of the Confidential Information, including, but not limited to:

 

  

A-5

  

A.           Confidential Information provided in a tangible form shall be marked in a manner to indicate that it is considered confidential and/or proprietary.  If the Confidential Information is provided orally, the disclosing party shall clearly identify it as being confidential and/or proprietary at the time of disclosure.

 

       B.           The Confidential Information shall only be disclosed to the parties’ respective Agents on a “need to know” basis;

 

       C.           The Agents shall have the same obligations of confidentiality as the parties; and

 

       D.           The Confidential Information shall be protected in the same manner as the receiving party protects its own proprietary and Confidential Information.

 

4.           Notwithstanding the foregoing, the parties agree that the Confidential Information shall not be deemed to include information which:

 

A.           was previously known by the receiving party;

B.           is in or falls into the public domain through no wrongful act of the receiving party;

C.           is rightfully received from a third-party without restriction; or

D.           is independently developed by the receiving party or any of its divisions, subsidiaries or affiliates.

 

5.           The parties acknowledge that this Agreement shall not be construed as (I) granting or conferring any rights, by license or otherwise, in any Confidential Information disclosed, or (ii) evidencing the intent of either party to purchase or sell products or services of the other.

 

6.           The parties and their respective Agents shall use the Confidential Information solely for the purpose set forth herein and shall not any time, whether during discussions or for a period of three (3) years following the termination of such discussions, regardless of whether the discussions result in a business relationship, without the prior written consent of the disclosing party, directly or indirectly, disseminate, divulge, disclose to any person or entity, or copy, for any purpose whatsoever, or use for any purpose not covered by the Agreement, any of the Confidential Information which has been obtained by or disclosed to it.

 

7.           Upon receipt of a written request from the disclosing party, the receiving party or parties shall promptly return all written or documentary Confidential Information to the disclosing party.

 

8.           In the event of a breach or threatened breach by any party or its Agents of any of the provisions of this Agreement, the party damaged or injured by such breach or threatened breach, in addition to and not in limitation of any other rights to remedies, is entitled to a permanent injunction in order to prevent or to restrain any further breach.

 

  

A-6

  

9.           This Agreement shall be binding upon the parties hereto and their respective Agents, successors and assigns, and inure to the benefit of the parties and their respective successors and assigns.

 

10.           The provisions of this Agreement shall be deemed severed, and the validity or enforcement of any one or more of the provisions hereof shall not affect the validity and enforcement of the other provisions hereof.

 

11.           The parties warrant to each other that they each have full power and authority to execute this Agreement for and on behalf of themselves and/or their respective companies.

 

12.           Any notice required to be given hereunder shall be sufficient if in writing, and sent by certified mail, return receipt requested, first-class postage prepaid to the other party or parties at their respective addresses as set forth above.

 

13.           This Agreement contains the entire agreement and understanding of the parties with respect to the covenant against disclosure of the Confidential Information and no representation, promises, agreements or understandings, written or oral, not herein contained shall be of any force or effect.  No amendment or modification hereof shall be valid or binding unless the same is in writing and signed by the party against who enforcement is sought.

 

14.           This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California.

 

 

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

 

 

 

	
INTERNET MEDIA SERVICES, INC.  

	  	
WESTERN PRINCIPAL PARTNERS LLC

	
LEGALSTORE.COM

	 	 
	
RAYMOND MEYERS

 	 	 
	  	  	  
	
 

	  	

 

	Authorized Representative       	  	Company Officer  
	 	 	 
	 	 	 
	Print Name   	 	Print Name 
	 	 	 
	 	 	 
	Title                   Date      	  	         Title                  Date  

 

 

  

A-7

  

 

Exhibit C

 

NON-COMPETE AGREEMENT

 

This NON-COMPETITION AGREEMENT, dated as of March 7, 2013 (this “Agreement”), by and between Western Principal Partners, a California Limited Liability corporation (“Buyer”), and Internet Media Services, Inc., a Delaware corporation (“Seller”) and Raymond Meyers, an individual located at 1507 7th Street, #425 Santa Monica, CA 90401 (“Indemnitor” or “Stockholder”).  All capitalized terms used in this Agreement, and not otherwise defined, shall have the respective meanings set forth in Exhibit A of the Stock Purchase Agreement, being executed among the parties hereto.

 

WITNESSETH

 

WHEREAS, Internet Media Services, Inc. (“Seller”) desires to sell to Buyer, and Buyer desires to purchase from Seller, all the Shares issued and outstanding of LegalStore.com, an ecomerce distribution company of legal related supplies (the “Business”), upon the terms and subject to the conditions of the Stock Purchase Agreement;

 

WHEREAS, on the Closing Date, Buyer will pay to Seller, on the terms and subject to the conditions set forth in the Stock Purchase Agreement, the consideration in the amount set forth in Sections 1.2, 1.5 and 1.6 of the Stock Purchase Agreement in exchange for, among other things, (i) the Purchased Stock, (ii) Seller’s and Stockholder’s agreements and obligations under the Stock Purchase Agreement and (iii) Seller and Stockholder entering into this Agreement;

 

WHEREAS, Buyer may suffer damages, including the loss of profits, if (i) Stockholder engaged in any activity that is competitive with the Business or solicited the termination of the Business’s relationships with its suppliers, customers or employees or (ii) Stockholder does not treat and hold as confidential all Intellectual Property Rights and other information related to the Business;

 

WHEREAS, the execution by Seller and Stockholder of this Agreement is a condition precedent to the consummation by Buyer of the transactions contemplated by the Stock Purchase Agreement;

 

WHEREAS, it is the interest of Seller and Stockholder that the transactions contemplated by the Stock Purchase Agreement be consummated; and

 

WHEREAS, this Agreement has been reached in good faith in arms-length negotiations;

 

NOW, THEREFORE, in consideration of the foregoing, the execution of the Purchase Documents, the substantial and material financial performance of Buyer pursuant to the Purchase Documents without triggering a continuing, uncured financial default and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller and Stockholder hereby agree as follows:

 

  

A-8

  

ARTICLE 1

  

NON-COMPETITION

 

1.1 Non-Competition.   Seller and Stockholder hereby covenants and agrees that for a period of three (3) years after the Closing (the “Restricted Period”), Seller and Stockholder shall not in any way engage, directly or indirectly, in any business anywhere in the world in an activity competitive with the Business, without the prior written consent of Buyer, directly or indirectly, own an interest in, manage, operate, join, control, lend money or render financial or other assistance to or participate in or be connected with, as an officer, director, employee, partner, stockholder, independent contractor, principal, consultant or otherwise, on his own behalf or for the benefit of any Person that competes with the Business, Buyer, any of Buyer’s Affiliates or Seller in manufacturing, producing, supplying, marketing or distributing products or services of the kind manufactured, produced, supplied, marketed and distributed to the kinds of customers of the Business, Buyer, or any of Buyer’s Affiliates or Seller as of the Closing Date; provided, however, that, for the purposes of this Section 1.1, ownership of securities having no more than 1% percent of the outstanding voting power of any competitor which are listed on any national securities exchange shall not be deemed to be in violation of this Section 1.1 as long as the Stockholder owning such securities has no other connection or relationship with such competitor.

 

1.2 Non-Solicitation of Customers.  Seller and Stockholder hereby covenants and agrees that, during the Restricted Period, Seller and Stockholder shall not in any way, directly or indirectly, on his own behalf, or for the benefit of any other Person, for any reason, accept business for the products or services of the kind manufactured, marketed, produced or supplied with respect to the Business from, or interfere in any manner with Buyer’s business relationship with, any present or former customer of the Business.  Without limiting the generality of the foregoing, Seller and Stockholder shall not solicit or induce, or attempt to solicit or induce, business for the products or services of the kind manufactured, marketed, produced or supplied with respect to the Business as of Closing Date (directly or indirectly through any Person) from any present or former customer of the Business as of the Closing Date.

 

1.3 Non-Interference with the Business.  Seller and Stockholder hereby covenants and agrees that, during the Restricted Period, Seller and Stockholder shall not in any way, directly or indirectly, solicit, induce or influence, or otherwise assist any other Person in soliciting, inducing or influencing any supplier, lender, lessor or any other Person who has a business relationship with Buyer or any of its Affiliates to either refrain from entering into, or to discontinue or reduce the extent of, any relationship with Buyer or any of its Affiliates.

 

1.4 Non-Solicitation of Employees.  Seller and Stockholder hereby covenants and agrees that, during the Restricted Period, Seller and Stockholder shall not in any way, directly or indirectly, interfere with, entice, induce, assist, encourage, influence or recruit  or attempt to interfere with, entice, induce, assist, encourage, influence or recruit any Acquired Employees to leave the employ of Buyer or, as the case may be, any of its Affiliates or violate the terms of their contracts, or any employment arrangements, with Buyer or, as the case may be, any of its Affiliates.

 

1.5 Extension of Restricted Period. The Restricted Period shall be extended by the length of any period during which Seller and Stockholder is in breach of the terms of this ARTICLE 1.  For the avoidance of doubt, the parties hereby agree that during Stockholder’s assistance with the transition of the operation of LegalStore.com with Buyer any activities engaged in by Stockholder within the scope of his assistance and thereby, in furtherance of his assistance duties and responsibilities, shall not constitute or be deemed a breach of this Agreement.

 

  

A-9

  

 

ARTICLE 2

 

CONFIDENTIALITY

 

(a) Seller and Stockholder agrees to:  (i) treat and hold as confidential (and not disclose or provide access to any Person to) all Intellectual Property Rights, and information relating to product development, customers, suppliers, pricing and marketing plans, policies and strategies, employees, consultants, operations and all other confidential or proprietary information with respect to the Business (“Confidential Information”), except as may be required by applicable law, in which event Seller and Stockholder agrees to furnish only that portion of such confidential information which Seller and Stockholder reasonably believes is legally required to be provided and exercise its reasonable efforts to obtain assurances that confidential treatment will be accorded such information, and (ii) in the event that Seller and Stockholder, any of its Affiliates or any such agent, representative, employee, officer or director becomes legally compelled to disclose any such information, provide Buyer with prompt written notice of such requirement so that Buyer may seek a protective order or other remedy (in which event, Seller and Stockholder will cooperate with such efforts to the extent commercially reasonable).

 

(b) Except as required to be retained under applicable law, Seller and Stockholder agrees to furnish promptly following the Closing to Buyer any and all copies (in whatever form or medium) of all Confidential Information then in the possession of Seller and Stockholder or any of its Affiliates and its and their respective employees, officers and directors and to destroy any and all additional Confidential Information included in any analyses, compilations, studies or other documents prepared by or on behalf of Seller and Stockholder, in whole or in part, on the basis thereof except for that Confidential Information used by the Seller and Stockholder in the consummation and enforcement of the transactions contemplated by the Stock Purchase Agreement.

 

(c) This ARTICLE 2 shall not apply to, and the term “Confidential Information” shall not include, any information that is independently developed by Seller and Stockholder after the Closing, is or becomes publicly available through no fault of Seller and Stockholder, or is obtained by Seller and Stockholder after the Closing from a third party not known by Seller and Stockholder to be under any obligation not to disclose such information and which the receiving party has no reason to believe is not otherwise publicly available provided, however, that once Seller and Stockholder is advised that information obtained under such circumstance is indeed confidential hereunder, this ARTICLE 2 shall thereafter apply to such information.

 

 

  

A-10

  

 

ARTICLE 3

 

MISCELLANEOUS

 

3.1 Reasonableness.  Seller and Stockholder acknowledges that the covenants set forth in ARTICLE 1 and ARTICLE 2 are an essential element of this Agreement, the Stock Purchase Agreement and the transactions contemplated hereby and thereby and that, but for this Agreement, Buyer would not have entered into the transactions contemplated by the Stock Purchase Agreement. Seller and Stockholder further acknowledges that the covenants set forth in ARTICLE 1 and ARTICLE 2 constitute independent covenants and shall not be affected by performance or nonperformance of any other provision of this Agreement or any non-financial term in the Stock Purchase Agreement by Buyer.  In the event of a material breach or default of any of Buyer’s financial obligations under the Stock Purchase Agreement, Seller and Stockholder shall give prior written notice to Buyer setting out the details of any such breach or default and Buyer, in order to avoid termination of this Agreement by Seller and Stockholder, shall within thirty (30) days from and after delivery of said written notice either (i) cure said default or (ii) present reasonable assurance and evidence, in the form of a firm plan and/or firm commitment to cure said breach or default within a reasonable time period and such breach or default is in fact cured within such time period. Seller and Stockholder has independently consulted with his counsel and after such consultation agrees that the covenants set forth in ARTICLE 1 and ARTICLE 2 are reasonable and proper.

 

3.2 Remedies; Specific Performance.  Seller and Stockholder hereby acknowledges that a breach of any of its obligations under this Agreement may result in irreparable damage to Buyer, and, without limiting other remedies which may exist for a breach of the specific provisions relating to such obligations Seller and Stockholder agrees that the applicable provisions relating to such obligations may be enforced by temporary restraining order, temporary injunction, and permanent injunction restraining violation hereof to the extent permitted by law, pending or following trial on the merits.

 

3.3 Successors and Assigns.  All covenants and agreements set forth in this Agreement and made by or on behalf of any of the parties hereto shall bind and inure to the benefit of the successors and assigns of such party, whether or not so expressed, except that (a) Seller and Stockholder may not assign or transfer any of his rights or obligations under this Agreement without the prior consent in writing of Buyer and (b) Buyer shall be entitled to assign all or part of its rights and obligations under this Agreement to one or more wholly-owned Affiliates of Buyer.

 

3.4 Notices.  All notices, requests, demands, consents and communications necessary or required under this Agreement shall be made in the manner specified, or, if not specified, shall be delivered by hand or sent by registered or certified mail, return receipt requested, or by telecopy (receipt confirmed) to:

 

If to Buyer:

 

Western Principal Partners

350 South Grand Ave

Suite 2250

Los Angeles, CA 90071

Attention:  Mr. Michael Turcich

Fax:  (213) 680-3535

 

With copies to:

 

International Lawyers PC

350 South Grand Ave suite 2250

Los Angeles, CA 90071

Attention Sudeok Jang, Esq.

Fax: 415 651-9524

 

 

If to [Stockholder]:

 

Mr. Raymond Meyers

1507 7th Street #425

Santa Monica, CA 90401

Fax: (8000 467-1496

 

 

If to Seller:

 

Internet Media Services, Inc.

1507 7th Street #425

Santa Monica, CA 90401

Attention: Mr. Raymond Meyers

Fax: (8000 467-1496

 

 

With copies to:

 

Law Offices of Gary A. Agron

5445 DTC Parkway #521

Englewood, CA 80111

Attention: Gary Agron, Esq.

Fax: (303) 770-7257

 

All such notices, requests, demands, consents and other communications shall be deemed to have been duly given or sent two (2) days following the date on which mailed, or on the date on which delivered by hand, by nationally recognized overnight delivery service or by facsimile transmission (receipt confirmed), as the case may be, and addressed as aforesaid.

 

  

A-11

  

3.5 Governing Law.  This Agreement shall be governed by and be construed in accordance with the laws of the State of California.

 

3.6 Modification.  No change or modification of this Agreement shall be of any force unless such change or modification is in writing and has been signed by all parties to this Agreement.

 

3.7 Waivers.  No waiver of any breach of any of the terms of this Agreement shall be effective unless such waiver is in writing and signed by the Person against whom such waiver is claimed.  No waiver of any breach shall be deemed to be a waiver of any other or subsequent breach.

 

3.8 Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason in any jurisdiction, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected, it being intended that each of parties’ rights and privileges shall be enforceable to the fullest extent permitted by law, and any such invalidity, illegality and unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  In addition, if any provision of this Agreement shall be adjudged to be excessively broad as to duration, geographical scope, activity or subject, the parties hereto intend that such provision shall be deemed modified to the minimum degree necessary to make such provision valid and enforceable under applicable law and that such provision shall thereafter be enforced to the fullest extent possible.  Notwithstanding the foregoing, if any provision is so held to be invalid, illegal or unenforceable and if the result of the severance of such provision is that the relative economic benefits originally intended by the parties hereto would be materially affected, then the parties hereto agree to amend this Agreement in order to reflect, restore and reinstate, to the greatest extent possible, the relative economic benefits originally intended among the parties hereto.

 

3.9 Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

 

  

A-12

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

 

BUYER:

 

WESTERN PRINCIPAL PARTNERS LLC

 

By:  _____________________________     

Name: Michael Turcich, Managing Member

 

STOCKHOLDER:

 

By: __________________________

 

Raymond Meyers, Individual

 

 SELLER:

 

INTERNET MEDIA SERVICES

 

                                                      

                       __________________________

 Raymond Meyers, Presidentex10-1_agreement.htm - Generated by SEC Publisher for SEC Filing

  

 

                                                                                                                                                                                                                 

 

 

Agreement and Plan of Merger and Reorganization

among

Clear System Recycling, Inc.,

Clear System Merger Sub, Inc.

and

Experience Art & Design, Inc.

 

 January 16, 2013

 

 

                                                                                                                                                                                                                 

 

 

 

 

  

 

TABLE OF CONTENTS

ARTICLE 1 THE MERGER.. 1

ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.. 6

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.. 15

ARTICLE 4 ADDITIONAL AGREEMENTS. 23

ARTICLE 5 CLOSING; DELIVERIES. 25

ARTICLE 6 DEFINITIONS. 30

ARTICLE 7 MISCELLANEOUS. 34

 

 

 

  

 

LIST OF EXHIBITS AND DISCLOSURE SCHEDULES

Exhibits

A                     Articles of Incorporation of Merger Sub

B                     By-laws of Merger Sub

C                     Form of Opinion of Synergy Law Group, LLC

D                     Form of Opinion of Pearlman & Schneider, LLP

 

Company Disclosure Schedules (To be provided at Closing)

2.1                   Subsidiaries

2.4                   Indebtedness

2.5                   Company Stockholders and Shares; Allocation of Parent Common Stock 

2.7                   Compliance with Laws

2.11                 Adverse Officer and Director Information

2.12                 Absence of Certain Changes

2.13(a)             Schedule of Real and Personal Property

2.13(b)             Material Agreements

2.13(c)             Schedule of Insurance

2.13(d)            Schedule of Patents and Other Intangible Assets

2.14                 Employees and Employment Agreements

2.15                 Ownership of Intellectual Property

2.16                 Schedule of Employee Benefit Plans

2.18                 Product Liability Claims

2.19                 Litigation

2.21                 Interested Party Transactions

2.25                 Obligations to or by Stockholders

2.27                 Broker’s and Finder’s Fees

Parent Disclosure Schedules (To be provided at Closing)

3.1(c)               Parent Board of Directors, Committees and Officers

3.2(a)               Subsidiaries of Parent

3.2(c)               Subsidiary Board of Directors, Committees and Officers

3.10                 SEC Reporting

3.16                 Compliance with Laws

3.20                 Obligations to or by Stockholders

3.23                 Interested Party Transactions

3.25                 Bank Accounts and Safe Deposit Boxes

3.26                 Intellectual Property

 

	

   ii

 

 

  

 

Agreement and Plan of Merger and Reorganization

THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the “Agreement”) is made and entered into on January 16, 2013, by and among Clear System Recycling, Inc., a Nevada corporation (“Parent”), Clear System Merger Sub, Inc. (“Merger Sub”), a Nevada corporation and wholly-owned subsidiary of Parent, and Experience Art & Design, Inc. f/k/a CI Holdings, Inc., an Oregon corporation (“Company”).

W I T N E S S E T H: 

WHEREAS, the Board of Directors of each of the Parent, the Merger Sub and the Company have each determined that it is in the best interests of their respective entities and the stockholders thereof to enter into a business combination transaction pursuant to which the Company will merge with and into the Merger Sub (the “Merger”), with the Merger Sub continuing after the Merger as the surviving corporation and wholly-owned subsidiary of the Parent;

WHEREAS, pursuant to the Merger, (i) outstanding shares of common stock of the Company (“Company Common Stock”) will, in accordance with this Agreement, be converted into the right to receive shares of common stock, $0.001 par value per share, of the Parent (“Parent Common Stock”) and (ii) the Parent shall assume certain indebtedness (the “Assumed Indebtedness”) of the Company as provided in Schedule 2.4 hereto;

WHEREAS, the Board of Directors of Parent, the Board of Directors of the Merger Sub and the Board of Directors of the Company have each approved this Agreement and transactions contemplated hereby;

WHEREAS, the parties hereto intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder and to cause the Merger to qualify as a tax-free reorganization under the provisions of Section 368 of the Code; and

WHEREAS, the Parent Common Stock to be issued in connection with the Merger are expected to be exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder;

NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:

ARTICLE 1  
 THE MERGER

1.1                       Merger of the Company with and into the Merger Sub. Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Nevada Revised Statutes (“NRS”) and the Oregon Revised Statutes (“ORS”), at the Effective Time, the Company shall be merged with and into the Merger Sub, and the separate existence of the Company shall cease. The Merger Sub will change its name to “Experience Art & Design, Inc.” and continue as 

 

 

 

  

 

the surviving corporation (“EAD”) following the Merger. The Closing of the Merger shall be conditioned upon approval of the Stockholders of the Company.

1.2                       Effect of the Merger. The Merger shall have the effects set forth in this Agreement and the applicable provisions of the NRS and the ORS. As a result of the Merger, EAD will become a wholly-owned subsidiary of the Parent. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in EAD, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of EAD.

1.3                       Closing; Effective Time.  Subject to the terms and conditions of this Agreement, simultaneous with the Closing hereof, the parties hereto shall cause the Merger to be consummated by executing and filing with the Secretary of State of the State of Nevada and the Secretary of State of the State of Oregon articles of merger (the “Articles of Merger”) with respect to the Merger, satisfying the applicable requirements of the NRS and the ORS and in a form reasonably acceptable to the Parent, the Merger Sub and the Company. The Merger shall become effective at the time of the filing of such Articles of Merger with the Secretary of State of the State of Nevada and the Secretary of State of the State of Oregon or at such later time as may be specified in such Articles of Merger (the time as of which the Merger becomes effective being referred to as the “Effective Time”).

1.4                       Articles of Incorporation and Bylaws; Directors and Officers.  At the Effective Time:

(a)                Merger Sub Articles of Incorporation.  The Merger Sub Articles of Incorporation, as in effect immediately before the Effective Time, attached as Exhibit A hereto, shall be the Articles of Incorporation of EAD until thereafter amended as provided by the NRS and such Articles of Incorporation;

(b)               Merger Sub Bylaws.  The Merger Sub Bylaws, as in effect immediately before the Effective Time, attached as Exhibit B hereto, shall be the Bylaws of EAD until thereafter amended as provided by the NRS and such Bylaws;

(c)                Merger Sub Directors.  The directors of the Company immediately before the Effective Time shall be the directors of EAD, each to hold office in accordance with the Articles of Incorporation and bylaws of EAD; and

(d)               Merger Sub Officers.  The officers of the Company immediately before the Effective Time shall be the officers of EAD, in each case until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation or removal.

1.5     Shares to Be Issued; Effect on Capital Stock.  Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger, the following shall occur:

 

 

 

  

 

(a)                Conversion of Company Stock. Subject to the terms of Section 1.5(c), each share of Company Common Stock issued and outstanding immediately before the Effective Time will be converted automatically into the right to receive: (A) that number of shares of Parent Common Stock equal to the Exchange Ratio and (B) any fractional share be rounded up to the nearest whole number.

(b)               Capital Stock of Merger Sub.  Each stock certificate of Merger Sub evidencing ownership of any such shares shall, as of the Effective Time, evidence ownership of such shares of common stock of EAD.

(c)                No Fractional Shares.  No fractional shares of Parent Common Stock shall be issued in connection with the Merger, and no certificates or scrip representing such fractional shares shall be issued.  Fractional shares shall be rounded up to the nearest whole number. The holder of shares of Company Common Stock who would otherwise be entitled to receive a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock to be received by such holder), in lieu of such fractional share and upon surrender of such holder’s certificate representing shares of Company Common Stock (the “Company Stock Certificate”), shall instead receive Parent Common Stock rounded up to the nearest whole number.  

(d)               Cancellation of Treasury Shares. Each share of stock held in the treasury of either the Parent, Merger Sub or the Company immediately prior to the Effective Time shall be cancelled and cease to exist.

1.6                       Calculation of Exchange Ratios. The “Exchange Ratio” shall be one share of Parent Common Stock in exchange for one share of Company Common Stock outstanding immediately before the Effective Time.

1.7                       Dissenting Shares.  Notwithstanding any other provision of this Agreement to the contrary, any shares of Company Common Stock that have not been voted in favor of adoption of this Agreement, and with respect to which a demand for payment and appraisal have been properly made in accordance with ORS 60.551 through 60.594 (such shares referred to as “Dissenting Shares”), shall not be converted into or represent a right to receive Parent Common Stock pursuant to Section 1.5(a), but shall be converted in to the right to receive such consideration as may be determined to be due with respect to such Dissenting Shares pursuant to the ORS, as applicable; provided, however, that if a holder of Dissenting Shares (a “Dissenting Stockholder”) withdraws such holder’s demand for such payment and appraisal or becomes ineligible for such payment and appraisal then, as of the later of the Effective Time or the date of which such Dissenting Stockholder withdraws such demand or otherwise becomes ineligible for such payment and appraisal, such holder’s Dissenting Shares will cease to be Dissenting Shares and will be converted into the right to receive Parent Common Stock as determined in accordance with Section 1.5(a).  

1.8                       No Further Transfer of Company Common Stock.  At the Effective Time all shares of Company Common Stock outstanding immediately before the Effective Time shall automatically be exchanged, and all holders of Company Common Stock that were outstanding immediately before the Effective Time shall cease to have any rights as stockholders of the 

 

 

 

  

 

Company, except the right to receive the consideration described in Section 1.5(a) or Section 1.7, as applicable.  No further transfer of any such shares of Company Common Stock shall be made on such stock transfer books after the Effective Time. Subject to Section 1.9(f) if, after the Effective Time, any shares of Company Common Stock are presented to the Exchange Agent or to the Company or the Parent, such shares shall be canceled and shall be exchanged as provided in Section 1.9.

1.9                       Exchange of Certificates. 

(a)                Exchange Agent.  The Parent and the Company have jointly selected and designated Island Stock Transfer Company (the “Exchange Agent”) to act as agent of the Parent for purposes of, among other things, mailing and receiving transmittal letters and distributing the Parent Common Stock to the holders of Company Common Stock.

(b)               Parent to Provide Common Stock.  Promptly after the Effective Time, the Parent shall supply or cause to be supplied or made available to the Exchange Agent for exchange in accordance with this Section 1.9 through such reasonable procedures as the Parent may adopt, instructions regarding issuance of certificates evidencing the shares of Parent Common Stock issuable pursuant to Section 1.5(a) in exchange for shares of Company Common Stock outstanding immediately before the Effective Time (the “Exchange Shares”).

(c)                Exchange Procedures.  As promptly as practicable after the Effective Time, the Exchange Agent will mail to each holder of record of Company Common Stock whose shares would be converted into the right to receive shares of Parent Common Stock pursuant to Section 1.5(a), (i) a letter of transmittal in customary form; (ii) such other customary documents as may be required pursuant to such instructions; and (iii) instructions for use in effecting the surrender of Company Common Stock in exchange for certificates representing shares of Parent Common Stock. Upon surrender of Company Common Stock for cancellation to the Exchange Agent, together with such letter of transmittal and other documents, duly completed and validly executed in accordance with the instructions thereto, the holder of such Company Common Stock shall be entitled to receive in exchange therefor (y) a certificate representing the number of whole Exchange Shares into which the Company Common Stock represented thereby shall have been converted into the right to receive as of the Effective Time and (z) cash in respect of any fractional shares as provided in Section 1.5(c), and the Company Common Stock so surrendered shall forthwith be canceled. Until so surrendered, each such outstanding share of Company Common Stock will be deemed from and after the Effective Time, for all corporate purposes other than the payment of dividends, to evidence the ownership of the number of full shares of Parent Common Stock into which such shares of Company Common Stock shall have been so converted and the right to receive cash in lieu of the issuance of any fractional shares. If any Company Stock Certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the issuance of any certificate representing Parent Common Stock, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide a reasonable affidavit as indemnity against any claim that may be made against the Exchange Agent, Parent or the Company with respect to such Company Stock Certificate.

 

 

 

  

 

(d)               Distributions With Respect to Unexchanged Shares. No dividends or other distributions with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Company Common Stock with respect to the shares of Parent Common Stock represented thereby until the holder of record of such Company Common Stock shall surrender such shares of Company Common Stock. Subject to applicable law, following surrender of any such Company Common Stock, there shall be delivered to the record holder of Company Common Stock a certificate representing whole shares of Parent Common Stock issued in exchange therefor (including any cash in respect of any fractional shares), without interest at the time of such surrender, and the amount of any such dividends or other distributions with a record date after the Effective Time theretofore payable (but for the provisions of this Section) with respect to such shares of Parent Common Stock.

(e)                Transfers of Ownership.  If any certificate for shares of Parent Common Stock is to be issued in a name other than that in which Company Stock Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the Company Common Stock so surrendered will be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will have paid to Parent or the Exchange Agent any transfer or other taxes required by reason of the issuance of a certificate for shares of Parent Common Stock in any name other than that of the registered holder of the Company Common Stock surrendered, or established to the satisfaction of Parent or the Exchange Agent that such tax has been paid or is not payable, and shall provide such written assurances regarding federal and state securities law compliance as the Parent or the Exchange Agent may reasonably request.

(f)                Termination of Exchange Shares.  Any Exchange Shares which remain undistributed to the stockholders of the Company twelve (12) months after the Effective Time shall be delivered to Parent, upon demand, and any Company Stockholder who has not previously complied with this Section shall thereafter look only to Parent for payment of their claim for their portion of the Exchange Shares and any dividends or distributions with respect to the Exchange Shares.

(g)               No Liability.  Notwithstanding anything to the contrary in this Section, none of the Exchange Agent, Parent, the Company or any party hereto shall be liable to any person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

(h)               Dissenting Shares.  The provisions of this Section shall also apply to Dissenting Shares that lose their status as such, except that the obligations of Parent under this Section shall commence on the date of loss of such status and the holder of such shares shall be entitled to receive in exchange such shares to which such holder is entitled pursuant to Section 1.5.

1.10                   Further Action.  If, at any time after the Effective Time, any further action that is commercially reasonable and lawful is determined by Parent to be necessary or appropriate to carry out the purposes of this Agreement or to vest Parent with full right, title and possession of 

 

 

  

 

all shares of Company Common Stock, the officers and directors of the Company and Parent shall be fully authorized (in the name of the Company and otherwise) to take such action.

ARTICLE 2  
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Parent that, except as set forth in the Company’s Disclosure Schedules to be provided at Closing, the statements contained in this Article 2 are true and correct as set forth below:

2.1                       Organization, Standing, Etc.  The Company is a corporation duly organized and existing in good standing under the laws of the State of Oregon, and has all requisite power and authority to carry on its business, to own or lease its properties and assets, to enter into this Agreement and to carry out the terms hereof. Copies of the Articles of Incorporation and By-laws of the Company that have been delivered to the Parent prior to the execution of this Agreement are true and complete and have not since been amended or repealed. Except as provided in Schedule 2.1 hereto, the Company has no subsidiaries or direct or indirect interest (by way of stock ownership or otherwise) in any firm, corporation, limited liability company, partnership, association or business.

2.2                       Qualification.  The Company is duly qualified to conduct business as a foreign corporation and is in good standing in each state or other jurisdiction wherein the nature of its activities or properties owned or leased makes such qualification necessary, except where the failure to be so qualified could not reasonably be expected to have a material adverse effect (“Material Adverse Effect”) on the properties, assets, liabilities or results of operations of the Company taken as a whole.  

2.3                       Capitalization of the Company.  There are 6,600,000 shares of common stock of the Company issued and outstanding, and such shares are duly authorized, validly issued, fully paid and, none of such shares have been issued in violation of preemptive rights, if any, of any person. The offer, issuance and sale of the shares were (a) exempt from the registration and prospectus delivery requirements of the Securities Act, (b) registered or qualified (or were exempt from registration or qualification) under the registration or qualification requirements of all applicable state securities laws and (c) accomplished in conformity with all other applicable securities laws. The Company has no outstanding options, rights or commitments to issue shares or other equity securities, and there are no outstanding securities convertible or exercisable into or exchangeable for shares or other equity securities of the Company.

2.4                       Indebtedness.  The Company has no Indebtedness except the Assumed Indebtedness as identified on the Company Financial Statements (as defined below) or in Schedule 2.4 hereto.

2.5                       Stockholders of the Company.  Schedule 2.5 hereto contains a true and complete list of the names and addresses of the record owners of all of the outstanding shares and other equity securities of the Company, together with the number securities held. To the best knowledge of the Company, there is no voting trust, agreement or arrangement among any of the 

 

 

  

 

beneficial holders of the shares affecting the nomination or election of directors or the exercise of the voting rights of the shares.

2.6                       Acts and Proceedings.  The execution, delivery and performance of this Agreement has been duly authorized by the Board of Directors of the Company, and all of the acts and other proceedings required for the due and valid authorization, execution, delivery and performance of this Agreement have been or, at the Closing, shall be, validly and appropriately taken.

Except for the requisite approval of the Merger and the adoption of this Agreement by the Company’s stockholders and the Merger filings with the State of Oregon, no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.

2.7                       Compliance with Laws and Instruments. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated by this Agreement: (a) will not require any authorization, consent or approval of, or filing or registration with, any court or governmental agency or instrumentality, except such as shall have been obtained prior to the Closing or as set forth in Schedule 2.7, (b) will not cause the Company to violate or contravene (i) any provision of law, (ii) any rule or regulation of any agency or government, (iii) any order, judgment or decree of any court, or (iv) any provision of the Articles of Incorporation or By-laws of the Company, (c) will not violate or be in conflict with, result in a breach of or constitute (with or without notice or lapse of time, or both) a default under, any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or other contract, agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound or affected, except where any such violation, conflict, breach or default could not reasonably be expected to have a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien upon any property or asset of the Company. To the knowledge of the Company, the Company is not in violation of, or (with or without notice or lapse of time, or both) in default under, any material term or provision of its Articles of Incorporation or By-laws or any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or any other material agreement or instrument to which the Company is a party or by which the Company or any of its respective properties is bound or affected, in each case except as could not reasonably be expected to have a Material Adverse Effect.

2.8                       Binding Obligations.  This Agreement constitutes the legal, valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

2.9                       Financial Statements.  Prior to the Closing Date the Company shall furnish Parent with a true and complete copy of the following financial statements or thereafter provide such statements as shall be required by the U. S. Securities and Exchange Commission: (i) the audited balance sheets of the Company as of December 31, 2012, and the related audited statements of income and statements of cash flow of the Company for the fiscal year ended December 31, 2012; and (ii) audited balance sheets and related audited statements of income and 

 

 

  

 

audited statements of cash flow for Chiurazzi Internazionale, S.R.L. for the fiscal year ending December 31, 2011 and the period ending December 17, 2012 (together items (i) and (ii) in this section are the “Company Financial Statements”). The Company Financial Statements will fairly present in all material respects the financial position, results of operations and other information purported to be shown thereon of the Company, at the dates and for the respective periods to which they apply. The Company Financial Statements through December 31, 2012 have been audited by LBB &Associates Ltd, LLP and all Company Financial Statements (i) were prepared in conformity with United States generally accepted accounting principles consistently applied throughout the periods involved (“GAAP”); and (ii) have been adjusted for all normal and recurring accruals (and, in the case of unaudited financial information, on a basis consistent with year-end audits). The financial statements of Chiurazzi Internazionale, S.R.L. have been audited by Baker Tilly Revisa S.p.A. and were prepared in conformity with International Financial Reporting Standards.

2.10                   Liabilities.  Except as otherwise disclosed in Company Financial Statements, Notes to the Financial Statements, or in Schedule 2.4, the Company does not have any material liability or obligation whatsoever, either direct or indirect, matured or unmatured, accrued, absolute, contingent or otherwise. Furthermore, there is no pending proceeding that has been commenced against the Company that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. To the knowledge of the Company, no such proceeding has been threatened.

2.11                   Adverse Officer and Director Information. 

Except as set forth on Schedule 2.11, during the past five year period neither the Company, nor, to its knowledge, any of its executive officers, members of executive management or directors, nor any Person intended upon consummation of the Merger to be nominated by the Company to become an officer, member of executive management or director of the Surviving Company or any successor entity or subsidiary, has been the subject of:

(a)        a petition under the federal bankruptcy laws or any other insolvency or moratorium law or has a receiver, fiscal agent or similar officer been appointed by a court for the business or property of the Company or such Person, or any partnership in which the Company or any such Person was a general partner at or within two years before the time of such filing, or any corporation or business association of which the Company or any such Person was an executive officer at or within two years before the time of such filing;

(b)        a conviction in a criminal proceeding or a named subject of a pending criminal proceeding  for violation of any federal or state securities statute or regulation;(c) any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining the Company or any such Person from, or otherwise limiting (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other Person regulated by the United States Commodity Futures Trading Commission or the SEC or an associated Person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated Person, director or employee of any investment company, bank, savings and loan association or insurance company, 

or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal, state or other securities laws or commodities laws;

 

 

  

 

 (d)      a finding by a court of competent jurisdiction in a civil action or by the SEC to have violated any securities law, regulation or decree and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended or vacated; or

(e)        a finding by a court of competent jurisdiction in a civil action or by the United States Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.  

2.12                   Absence of Certain Changes.  Since the date of the Company Financial Statements, and except as set forth on Schedule 2.12, the Financial Statements or the Notes to the Financial Statements, the Company has been operated only in the ordinary course, consistent with past practice, and there has not been any adverse change, or any event, fact or circumstance which might reasonably be expected to result in an adverse change, in either event that would have a Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth on Schedule 2.12 and except in the ordinary course of business, there has not been with respect to the Company:

(a)                any sale, lease, transfer, license or assignment of any assets, tangible or intangible, of the Company;

(b)               any damage, destruction or property loss, whether or not covered by insurance, affecting adversely the properties or business of the Company;

(c)                any declaration or setting aside or payment of any dividend or distribution with respect to the shares of capital stock of the Company or any redemption, purchase or other acquisition of any such shares;

(d)               any subjection to any lien on any of the assets, tangible or intangible, of the Company;

(e)                any incurrence of indebtedness or liability or assumption of obligations by the Company;

(f)                any waiver or release by the Company of any right of any material value;

(g)               any compensation or benefits paid to officers or directors of the Company;

(h)               any change made or authorized in the articles of incorporation or bylaws of the Company; 

 

 

 

  

 

(i)                 any loan to or other transaction with any officer, director or stockholder of the Company giving rise to any claim or right of the Company against any such person or of such person against the Company; or

(j)                 any material adverse change in the condition (financial or otherwise) of the respective properties, assets, liabilities or business of the Company.

2.13                   Schedule of Assets and Contracts.  Attached hereto as Schedules 2.13(a) through 2.13(d) are various schedules listing assets and contracts of the Company, as described herein.

(a)                Schedule 2.13(a) contains a true and complete list of all real property leased by the Company, including a brief description of each item thereof and of the nature of the Company’ interest therein, and of all tangible personal property owned or leased by the Company having a cost or fair market value of greater than $25,000, including a brief description of each item and of the nature of the interest of the Company therein.  All the property listed in Schedule 2.13(a) as being leased by the Company is held by the Company under valid and enforceable leases having the rental terms, termination dates and renewal and purchase options described in Schedule 2.13(a); and there is not, under any such lease, any existing default or event of default or event which with notice or lapse of time, or both, would constitute a default by the Company, and the Company has not received any notice or claim of any such default. The Company does not own any real property.

(b)               Except as expressly set forth in this Agreement, the Balance Sheet or the notes thereto, or as disclosed in Schedule 2.13(b) hereto, the Company is not a party to any written or oral agreement not made in the ordinary course of business that is material to the Company. Except as disclosed in Schedule 2.13(b) hereto, the Company is not a party to any written or oral (a) agreement with any labor union, (b) agreement for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (c) agreement for the employment of any officer, individual employee or other Person on a full-time basis or any agreement with any Person for consulting services, (d) bonus, pension, profit sharing, retirement, stock purchase, stock option, deferred compensation, medical, hospitalization or life insurance or similar plan, contract or understanding with respect to any or all of the employees of the Company or any other Person, (e) indenture, loan or credit agreement, note agreement, deed of trust, mortgage, security agreement, promissory note or other agreement or instrument relating to or evidencing Indebtedness or subjecting any asset or property of the Company to any Lien or evidencing any Indebtedness, (f) guaranty of any Indebtedness, (g) other than as set forth in Schedule 2.13(a) hereto, lease or agreement under which the Company is lessee of or holds or operates any property, real or personal, owned by any other Person under which payments to such Person exceed $25,000 per year or with an unexpired term (including any period covered by an option to renew exercisable by any other party) of more than 60 days, (h) lease or agreement under which the Company is lessor or permits any Person to hold or operate any property, real or personal, owned or controlled by the Company, (i) agreement granting any preemptive right, right of first refusal or similar right to any Person, (j) agreement or arrangement 

 

 

  

 

with any Affiliate or any “associate” (as such term is defined in Rule 405 under the Securities Act) of the Company or any present or former officer, director or stockholder of the Company, (k) agreement obligating the Company to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (1) covenant not to compete or other restriction on its ability to conduct a business or engage in any other activity, (m) distributor, dealer, manufacturer’s representative, sales agency, franchise or advertising contract or commitment, (n) agreement to register securities under the Securities Act, (o) collective bargaining agreement, or (p) agreement or other commitment or arrangement with any Person continuing for a period of more than three months from the Closing Date which involves an expenditure or receipt by the Company in excess of $25,000. Except as disclosed in Schedule 2.13(b), none of the agreements, contracts, leases, instruments or other documents or arrangements listed in Schedule 2.13(a) through Schedule 2.13(d) requires the consent of any of the parties thereto other than the Company to permit the contract, agreement, lease, instrument or other document or arrangement to remain effective following consummation of the Merger and exchange and the transactions contemplated hereby.

(c)                Schedule 2.13(c) contains a true and complete list of all insurance policies and insurance coverage with respect to the Company, and its business, premises, properties, assets, employees and agents.

(d)               Schedule 2.13(d) contains a true and complete list of all patents, patent applications, trade names, trademarks, trademark registrations and applications, copyrights, copyright registrations and applications, and grants of licenses, both domestic and foreign, presently owned, possessed, used or held by the Company; and, except as set forth in Schedule 2.16, the Company owns the entire right, title and interest in and to the same, free and clear of all Liens and restrictions. Schedule 2.13(d) also contains a true and complete list of all licenses granted to or by the Company with respect to the foregoing. Except as disclosed in Schedule 2.13(d), none of the Company’s patents, patent applications, trade names, trademarks, trademark registrations and applications, copyrights, copyright registrations and applications and grants of licenses set forth in Schedule 2.13(d) are subject to any pending or, to the knowledge of the Company and the Stockholders, threatened challenge. Neither the execution nor delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will give any licensor or licensee of the Company any right to change the terms or provisions of, terminate or cancel, any license to which the Company is a party.

(e)                The Company has furnished to Parent true and complete copies of all agreements and other documents and a description of all applicable oral agreements disclosed or referred to in Schedule 2.13(a) through Schedule 2.13(d), as well as any additional agreements or documents, requested by Parent. The Company has in all material respects performed all obligations required to be performed by it to date and is not in default in any respect under any of the contracts, agreements, leases, documents, commitments or other arrangements to which it is a party or by which it or any of its property is otherwise bound or affected. To the best knowledge of the Company, all parties having material contractual arrangements with the Company are in substantial 

 

 

  

 

compliance therewith and none are in material default thereunder. The Company has no outstanding power of attorney.

2.14                   Employees.  The Company has complied in all material respects with all laws relating to the employment of labor, and the Company has encountered no material labor union difficulties. Except as set forth in Schedule 2.14, and other than pursuant to ordinary arrangements of employment compensation, the Company is not under any obligation or liability to any officer, director, employee or Affiliate of the Company.

2.15                   Patents and Other Intangible Assets. 

(a)                Except as set forth in Schedule 2.15, the Company (i) owns or has the right to use, free and clear of all Liens, claims and restrictions, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing used in or necessary for the conduct of its business as now conducted or proposed to be conducted without infringing upon a claimed right of any Person under or with respect to any of the foregoing and (ii) is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of, any patent, trademark, service mark, trade name, copyright or other intangible asset, with respect to the use thereof or in connection with the conduct of its business.

(b)               To the knowledge of the Company, the Company owns or has the unrestricted right to use all trade secrets, if any, including know-how, negative know-how, formulas, patterns, programs, devices, methods, techniques, inventions, designs, processes, computer programs and technical data (collectively, “intellectual property”) required for the development, operation and sale of its products, and all related technologies, products and services.

2.16                   Employee Benefit Plans; ERISA.   

(a)                Except as disclosed in Schedule 2.16 hereto, there are no “employee benefit plans” (within the meaning of Section 3(3) of the ERISA) or any other employee benefit or fringe benefit arrangements, practices, contracts, policies or programs other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by the Company.  The plans listed in Schedule 2.16 hereto are hereinafter referred to as the “Employee Benefit Plans.”

(b)               All current and prior material documents, including all amendments thereto, with respect to each Employee Benefit Plan have been given to Parent or its advisors.

(c)                All Employee Benefit Plans are in material compliance with the applicable requirements of ERISA, the Code, and any other applicable state, federal or foreign law.

(d)               There are no pending or, to the knowledge of the Company, threatened, claims or lawsuits which have been asserted or instituted against any Employee Benefit Plan, the assets of any of the trusts or funds under the Employee Benefit Plans, the plan 

 

 

  

 

sponsor or the plan administrator of any of the Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan with respect to the operation of such plan.

(e)                There is no pending or, to the knowledge of the Company, threatened, investigation or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Employee Benefit Plan. 

(f)                No actual or, to the knowledge of the Company, contingent, liability exists with respect to the funding of any Employee Benefit Plan or for any other expense or obligation of any Employee Benefit Plan, except as disclosed on the financial statements of the Company or the Schedules to this Agreement, and to the knowledge of the Company, no contingent liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.

2.17                   The Company has good, valid and marketable title to all properties and assets used in the conduct of its business free of all Liens and other encumbrances, except Permitted Liens and such ordinary and customary imperfections of title, restrictions and encumbrances as could not reasonably be expected to have a Material Adverse Effect.

2.18                   Except as disclosed in Schedule 2.18 hereto, no suit, proceeding or action or threat of suit, proceeding or action has been asserted or made against the Company within the last two years due to alleged bodily injury, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by the Company.

2.19                   Except as disclosed in Schedule 2.19 hereto, there is no legal action, suit, arbitration or other legal, administrative or other governmental proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company or its properties, assets or business that could reasonably be expected to have a Material Adverse Effect. The Company is not in default with respect to any order, writ, judgment, injunction, decree, determination or award of any court or any governmental agency or instrumentality or arbitration authority.

2.20                   The Company possesses from the appropriate governmental authorities all licenses, permits, authorizations, approvals, franchises and rights necessary for the Company to engage in the businesses currently conducted by it (except for those, the absence of which would not reasonably be expected to have a Material Adverse Effect), and all are in full force and effect.

2.21                   Except as disclosed in Schedule 2.21 hereto, no officer, director or stockholder of the Company or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any such Person or the Company has or has had, either directly or indirectly, (a) an interest in any Person that (i) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by the Company or (ii) purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial interest in any contract or agreement to which either of the Company is a party or by which either of them may be bound or affected.

 

 

 

  

 

2.22                   There is no substance or material defined or designated as hazardous or toxic waste, material, substance or other similar term, by any environmental statute, regulation or ordinance currently in effect, on, about, or in any of the real property in which the Company now has or previously had any leasehold or ownership interest.

2.23                   The Company has not been advised within the past thirty (30) days that any material customer, supplier or independent contractor of the Company intends to terminate or materially curtail its business relationship with the Company which could reasonably be expected to have a Material Adverse Effect.

2.24                   Neither the Company nor, to their knowledge, any director, officer, stockholder, agent, employee or other Person associated with or acting on behalf of the Company, has used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payments to government officials or employees from corporate funds; established or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any false or fictitious entries on the books of record of any such corporations; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

2.25                   Except as disclosed in Schedule 2.25, the Company has no liability or obligation or commitment to any Stockholder or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any Stockholder, nor does any Stockholder or any such Affiliate or associate have any liability, obligation or commitment to the Company.

2.26                   No representation or warranty by the Company herein and no information disclosed in the schedules or exhibits hereto by the Company, when considered as a whole together with all other information furnished to Parent, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

2.27                   Broker’s and Finder’s Fees.  No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity, except as disclosed in Schedule 2.27 hereto.

ARTICLE 3  
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

            Parent and Merger Sub (with respect to the representations, warranties and covenants of Merger Sub) represent and warrant to the Company that, except as set forth in the Parent’s Disclosure Schedules attached hereto, the statements contained in this Article 3 are true and correct as set forth below:  

3.1                       Organization and Good Standing. 

(a)                Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with requisite corporate power and authority to conduct its business as now being conducted and to own or use its properties 

 

 

  

 

and assets. Parent has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name.

(b)               Parent is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification except where the failure to be so qualified or in good standing would not have a Material Adverse Effect on Parent.

(c)                Schedule 3.1(c) accurately sets forth (i) the names of the members of the board of directors of Parent, (ii) the names of the members of each committee of such board of directors, and (iii) the names and titles of the officers of Parent.

(d)               Merger Sub was formed for the sole purpose of effecting a merger and, except as contemplated by this Agreement, Merger Sub has not conducted any business activities and does not have any liabilities.  

3.2                       Subsidiaries. 

(a)                Schedule 3.2(a) sets forth all direct and indirect Subsidiaries of Parent. Parent owns all of the equity of each Subsidiary. Except as set forth on Schedule 3.2(a), Parent does not have any Subsidiaries or affiliated companies and does not otherwise own any shares in the capital of or any interest in, or control, directly or indirectly, any entity. Parent has not agreed and is not obligated to make any future investment in or capital contribution to any entity. Parent has not guaranteed and is not responsible or liable for any obligation of any of the entities in which it owns or has owned any equity interest.

(b)               Each Subsidiary of Parent: (i) is a corporation duly organized and validly existing under the laws of its jurisdiction of incorporation, (ii) has all requisite corporate power and authority to own, operate or lease the properties and assets owned, operated or leased by such Subsidiary and to carry on its business as it has been and is currently conducted by such Subsidiary and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such license and qualification necessary, expect, in each of clauses (i), (ii) and (iii), such failures which, when taken together with all other such failures, would not have a Material Adverse Effect on Parent or such Subsidiary.

(c)                Schedule 3.2(c) accurately sets forth (i) the names of the members of the boards of directors of each Subsidiary of Parent, (ii) the names of the members of each committee of such boards of directors, and (iii) the names and titles of the officers of each Subsidiary of Parent.

3.3                       Authority.  Each of Parent and Merger Sub has all requisite corporate power and authority to enter into this Agreement and the ancillary agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the 

 

 

  

 

ancillary agreements and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub, subject only to the approval of this Agreement by the stockholders of Parent and Merger Sub. The Board of Directors of Parent and Merger Sub have unanimously approved this Agreement and authorized the Merger. This Agreement has been (and the ancillary agreements will be at the Closing) duly executed and delivered by Parent and Merger Sub, and this Agreement constitutes (and the ancillary agreements will constitute at the Closing) the valid and binding obligations of Parent and Merger Sub enforceable against each of Parent and Merger Sub in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to creditors' rights generally, and subject to general principles of equity. Merger Sub has been formed solely for the purpose of executing and delivering a merger agreement and consummating a merger transaction. Since the date of its incorporation, Merger Sub has neither engaged in nor transacted any business or activity of any nature whatsoever other than activities related to its corporate organization and the execution and delivery of a merger agreement and the related documents and instruments. Merger Sub has no assets or properties or debts, liabilities or obligations of any kind whatsoever, and with the exception of this Agreement and the related documents and instruments, is not a party to any contract, agreement or undertaking of any nature.

3.4                       No Conflict.  The execution and delivery by Parent of this Agreement and the ancillary agreements to which Parent is a party, does not, and the consummation of the transactions contemplated hereby and thereby will not (a) conflict with, or result in any violation of, any provision of the Parent Articles of Incorporation or Parent Bylaws, (b) conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under any mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise or license of Parent, (c) conflict with, or result in any violation of any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or any of its properties or assets, or (d) conflict with, or result in a violation of any resolution adopted by Parent’s stockholders, Parent’s board of directors or any committee of Parent’s board of directors.

3.5                       Consents.  No consent, approval, order or authorization of or registration, declaration or filing with, any governmental entity or any party to any material contract is required by or with respect to Parent or any of its subsidiaries in connection with the execution and delivery of this Agreement by Parent and any ancillary agreement to which Parent is a party or the consummation by Parent of the transactions contemplated hereby, except (a) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable securities laws, (b) the filing of the Articles of Merger with the Secretary of State of the State of Nevada and (c) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings which, if not obtained or made, would not have a Material Adverse Effect on Parent.

3.6                       Governmental Authorizations.  Parent has obtained each material federal, state, county, local or foreign governmental consent, license, permit, grant, or other authorization of a governmental entity (a) pursuant to which Parent currently operates or holds any interest in any 

 

 

  

 

of its properties, or (b) that is required for the operation of Parent’s business or the holding of any such interest, and all of such authorizations are in full force and effect.

3.7                       Broker’s and Finder’s Fees.  No person, firm, corporation or other entity is entitled by reason of any act or omission of Parent to any broker’s or finder’s fees, commission or other similar compensation with respect to the execution and delivery of this Agreement, or with respect to the consummation of the transactions contemplated hereby, including the Merger and exchange.

3.8                       Capitalization of Parent. 

(a)                The authorized capital stock of Parent consists of (i) 100,000,000 shares of Parent Common Stock, of which 36,750,000 shares are issued and outstanding on the date hereof, and (ii) 15,000,000 shares of undesignated preferred stock, none of which are issued or outstanding, prior to taking into consideration the issuance of Parent Common Stock in the exchange. Except with respect to the Parent Incentive Plan, the Parent has no other shares of capital stock reserved for issuance upon the exercise of any other options or any warrants and no shares of capital stock are reserved for issuance to any party, including upon the conversion of any outstanding convertible notes, debentures or securities. Parent has no outstanding options, rights, calls, preemptive rights, subscriptions or commitments to issue any equity Securities of Parent. 

(b)               There is no plan or arrangement to issue capital stock by Parent except as set forth in this Agreement, and there are no registration rights.  There is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or understanding to which the Parent is a party or by which it is bound with respect to any equity securities of Parent. 

(c)                There are no outstanding contractual obligations (contingent or otherwise) of Parent to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, Parent or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity or person.

3.9                       Validity of Shares.  

(a)                All outstanding shares of the capital stock of Parent are (i) validly issued and outstanding, fully paid and non-assessable, (ii) were not issued in violation of the preemptive rights of any person, (iii) were issued in transactions that were (A) exempt from the registration and prospectus delivery requirements of the Securities Act, (B) registered or qualified (or were exempt from registration or qualification) under the registration or qualification requirements of all applicable state securities laws and (C) accomplished in conformity with all other applicable securities laws.

(b)               The approximately 6,600,000 shares of Parent Common Stock to be issued at the Closing pursuant to Section 1.9(b) hereof, when issued and delivered in accordance with the terms hereof, shall be duly and validly issued, fully paid and non-assessable and not in violation of any preemptive rights. Based, in part, on the representations and warranties of the Stockholders as contemplated by Section 4 hereof and assuming the 

 

 

  

 

accuracy thereof, the issuance of the Parent Common Stock upon the Merger and exchange pursuant to Article will be exempt from the registration and prospectus delivery requirements of the Securities Act and from the qualification or registration requirements of any applicable state blue sky or securities laws.  

3.10                SEC Reporting and Compliance. 

(a)                Parent filed a registration statement on Form S-1 (No. 333-174175) under the Securities Act which became effective on July 12, 2011, and has not been withdrawn.  All shares held by selling stockholders in such registration statement, other than those held by Affiliates of Parent, have been sold in accordance with the Plan of Distribution set forth in such registration statement.

(b)               Since July 12, 2011, Parent has filed with the Commission all registration statements, proxy statements, information statements, reports, schedules, forms and other documents required to be filed pursuant to the Securities Act, the Exchange Act and the rules and regulations of the Commission on a timely basis (or has received a valid extension of such time of filing and has filed any such reports or other documents prior to the expiration of any such extension). Parent has not filed with the Commission a certificate on Form 15 pursuant to Rule 12h-3 of the Exchange Act.

(c)                Parent has delivered or made available to the Company true and complete copies of its registration statement (including all amendments thereto and supplements to the prospectus contained therein) and reports (collectively, the “Parent SEC Documents”) filed by Parent with the Commission.  The Parent SEC Documents, as of their respective dates (or, if amended, supplemented or superseded by a filing prior to the date hereof, then as of the date of such amendment, supplement or superseding filing) complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the Commission promulgated thereunder applicable thereto, and did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading.

(d)               Except as set forth on Schedule 3.10, Parent has not filed, and nothing has occurred with respect to which Parent would be required to file, any report on Form 8-K since October 3, 2012. Prior to and until the Closing, Parent will provide to the Company copies of any and all amendments or supplements to the Parent SEC Documents filed with the Commission since July 12, 2011, and all subsequent registration statements and reports filed by Parent subsequent to the filing of the Parent SEC Documents with the Commission and any and all subsequent documents or notices filed by the Parent with the Commission or delivered to the stockholders of Parent.

(e)                Parent is not an investment company within the meaning of Section 3 of the Investment Company Act.

(f)                The shares of Parent Common Stock are quoted on the Over-the-Counter (OTC) Bulletin Board under the symbol “CLRS.OB,” and Parent is in compliance in all 

 

 

  

 

material respects with all rules and regulations of the OTC Bulletin Board applicable to it and the Parent Common Stock and, except as disclosed on Schedule 3.10, has no knowledge or notice of any trading irregularities with respect to the Parent Common Stock including, without limitation, price manipulation.

(g)               The Parent SEC Documents include all certifications and statements required of it, if any, by (i) Rule 13a-14 or 15d-14 under the Exchange Act, and (ii) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), and each of such certifications and statements contain no qualifications or exceptions to the matters certified therein other than a knowledge qualification, permitted under such provision, and have not been modified or withdrawn and neither Parent nor any of its officers has received any notice from the SEC or any other governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications or statements. 

3.11                   Financial Statements.  The balance sheets, and statements of income, changes in financial position and stockholders’ equity contained in the Parent SEC Documents (i) have been prepared in accordance with GAAP applied on a basis consistent with prior periods (and, in the case of unaudited financial information, on a basis consistent with year-end audits), (ii) are in accordance with the books and records of the Parent, and (iii) present fairly in all material respects the financial condition of the Parent at the dates therein specified and the results of its operations and changes in financial position for the periods therein specified. The financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2011 (the “Parent Financial Statements”) were audited by, and include the related opinion of Sadler Gibb & Associates, Parent’s independent registered public accounting firm.

3.12                   Events Subsequent to Financial Statements. Since December 31, 2012, there has not been:

(a)                any sale, lease, transfer, license or assignment of any assets, tangible or intangible, of Parent;

(b)               any damage, destruction or property loss, whether or not covered by insurance, affecting adversely the properties or business of Parent;

(c)                any declaration or setting aside or payment of any dividend or distribution with respect to the shares of capital stock of Parent or any redemption, purchase or other acquisition of any such shares;

(d)               any subjection to any lien on any of the assets, tangible or intangible, of Parent;

(e)                any incurrence of indebtedness or liability or assumption of obligations by Parent;

(f)                any waiver or release by Parent of any right of any material value;

(g)               any compensation or benefits paid to officers or directors of Parent;

 

 

 

  

 

(h)               any change made or authorized in the articles of incorporation or bylaws of Parent; 

(i)                 any loan to or other transaction with any officer, director or stockholder of Parent giving rise to any claim or right of Parent against any such person or of such person against Parent; or

(j)                 any material adverse change in the condition (financial or otherwise) of the respective properties, assets, liabilities or business of Parent.

3.13                   Liabilities. Except as otherwise disclosed in Parent Financial Statements, Parent does not have any liability or obligation whatsoever, either direct or indirect, matured or unmatured, accrued, absolute, contingent or otherwise.  In addition, Parent represents that upon Closing, Parent will not have any liability or obligation whatsoever, either direct or indirect, matured or unmatured, accrued, absolute, contingent or otherwise.  Furthermore, there is no pending proceeding that has been commenced against Parent that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. To the knowledge of Parent, no such proceeding has been threatened.  

3.14                   Tax Matters.  Parent has duly filed all federal, state, local and foreign tax returns required to be filed by or with respect to it with the Internal Revenue Service or other applicable taxing authority, and no extensions with respect to such tax returns have been requested or granted.  Parent has paid, or adequately reserved against in Parent Financial Statements, all material taxes due, or claimed by any taxing authority to be due, from or with respect to it.  To the knowledge of Parent, there has been no material issue raised or material adjustment proposed (and none is pending) by the Internal Revenue Service or any other taxing authority in connection with any of Parent’s Tax Returns. No waiver or extension of any statute of limitations as to any material federal, state, local or foreign tax matter has been given by or requested from Parent.  For the purposes of this Section, a Tax is due (and must therefore either be paid or adequately reserved against in Parent Financial Statements) only on the last date payment of such Tax can be made without interest or penalties, whether such payment is due in respect of estimated Taxes, withholding Taxes, required Tax credits or any other Tax.

3.15                   Governmental Consents.  All consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of Parent required in connection with the consummation of the Merger and exchange have been or shall have been obtained prior to, and be effective as of, the Closing.

3.16                   Compliance with Laws and Other Instruments. The execution, delivery and performance by Parent of this Agreement and the consummation by it of the transactions contemplated by this Agreement, including the Merger and exchange:  (a) will not require any authorization, consent or approval of, or filing or registration with, any court or governmental agency or instrumentality, except (i) such as shall have been obtained prior to the Closing, or (ii) as set forth in Schedule 3.16; (b) will not cause the Parent to violate or contravene (i) any provision of law, (ii) any rule or regulation of any agency or government, (iii) any order, 

 

 

  

 

judgment or decree of any court, or (iv) any provision of its Articles of Incorporation or By-laws; (c) will not violate or be in conflict with in a material manner, result in a material breach of or constitute (with or without notice or lapse of time, or both) a material default under, any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or other material contract, agreement or instrument to which the Parent is a party or by which the Parent or any of its properties are bound or affected, except where any such violation, conflict, breach or default could not reasonably be expected to have a Material Adverse Effect; and (d) will not result in the creation or imposition of any material Lien upon any property or asset of the Parent.  Parent is not in violation of, or (with or without notice or lapse of time, or both) in default under, any term or provision of its Articles of Incorporation or By-laws, to its knowledge, or any indenture, loan or credit agreement, deed of trust, mortgage, security agreement, except as could not reasonably be expected to have a Material Adverse Effect on the Parent, or any other material agreement or instrument to which the Parent is a party or by which it or any of its properties are bound or affected.

3.17                   Binding Obligations.  This Agreement constitutes the legal, valid and binding obligation of the Parent, and is enforceable against the Parent, in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity. 

3.18                   No General Solicitation.  In issuing the Parent Common Stock in the Merger and exchange hereunder, neither Parent nor, to its knowledge, anyone acting on its behalf has offered to sell the Parent Common Stock by any form of general solicitation or advertising.

3.19                   Litigation 

.  There is no legal action, suit, arbitration or other legal, administrative or other governmental proceeding pending or, to the knowledge of Parent, threatened against or affecting Parent or its properties, assets or business.  Parent is not in default with respect to any order, writ, judgment, injunction, decree, determination or award of any court or any governmental agency or instrumentality or arbitration authority.

3.20                   Obligations to or by Stockholders.  Except as disclosed in the Parent SEC Documents or on Schedule 3.20, the Parent has no liability or obligation or commitment to any stockholder of Parent or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any stockholder of Parent, nor does any stockholder of Parent or any such Affiliate or associate have any liability, obligation or commitment to Parent.

3.21                   Material Contracts.  Parent has provided to the Company, prior to the date of this Agreement, true, correct and complete copies of each written material Parent contract, including each amendment, supplement and modification thereto.

3.22                   Employees.  Except as disclosed in the Parent SEC Documents, Parent has no employees, independent contractors or other Persons providing services to it.  Except as would not have a Material Adverse Effect, Parent is in full compliance with all relevant laws regarding employment, wages, hours, benefits, equal opportunity, collective bargaining, the payment of Social Security and other taxes, occupational safety and health and plant closing.  Parent is not liable for the payment of any compensation, damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing laws.  No director, officer or 

 

 

  

 

employee of Parent is a party to, or is otherwise bound by, any contract (including any confidentiality, non-competition or proprietary rights agreement) with any other party that in any way adversely affects or will materially affect (a) the performance of his or her duties as a director, officer or employee of Parent or (b) the ability of Parent to conduct its business.  Except as set forth in the Parent SEC Documents, each employee of Parent is employed on an at-will basis and Parent does not have any contract with any of its employees which would interfere with its ability to discharge its employees.

3.23                   Interested Party Transactions.  Except as disclosed in Schedule 3.23, no officer, director or stockholder of Parent or any Affiliate or “associate” (as such term is defined in Rule 405 of the Commission under the Securities Act) of any such party, has or has had, either directly or indirectly, (a) an interest in any Person which (a) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by Parent, or (b) purchases from or sells or furnishes to, or proposes to purchase from, sell to or furnish Parent any goods or services; or (b) a beneficial interest in any contract or agreement to which Parent is a party or by which it may be bound or affected.

3.24                   Governmental Inquiries.  Parent has provided to the Company a copy of each material written inspection report, questionnaire, inquiry, demand or request for information received by Parent from any governmental authority, and Parent’s response thereto, and each material written statement, report or other document filed by Parent with any governmental authority.

3.25                   Bank Accounts and Safe Deposit Boxes.  Schedule 3.25 discloses the title and number of each bank or other deposit or financial account, and each lock box and safety deposit box used by Parent, the financial institution at which that account or box is maintained and the names of the persons authorized to draw against the account or otherwise have access to the account or box, as the case may be.  

3.26                   Intellectual Property.  Parent does not own, use or license any Intellectual Property in its business as presently conducted, except as set forth in Schedule 3.26. 

3.27                   Parent has no stock option plans except the Clear System Recycling, Inc. 2012 Incentive Compensation Plan (the “Parent Incentive Plan”), which will be adopted prior to the Closing. Parent has made no grants under the Parent Incentive Plan. Parent has no employee benefit plans or arrangements covering their present and former employees or providing benefits to such persons in respect of services provided to Parent. Neither the consummation of the transactions contemplated hereby alone, nor in combination with another event, with respect to each director, officer, employee and consultant of Parent, will result in (a) any payment (including, without limitation, severance, unemployment compensation or bonus payments) becoming due from Parent, (b) any increase in the amount of compensation or benefits payable to any such individual or (c) any acceleration of the vesting or timing of payment of compensation payable to any such individual. No agreement, arrangement or other contract of Parent provides benefits or payments contingent upon, triggered by, or increased as a result of a change in the ownership or effective control of Parent.

 

 

 

  

 

3.28                   No representation or warranty by Parent herein and no information disclosed in the schedules or exhibits hereto by Parent when considered as a whole together with all other information furnished to the Company contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein misleading.

ARTICLE 4  
ADDITIONAL AGREEMENTS

4.1                       Within four (4) business days following the execution hereof, the Parent shall prepare file with the U.S. Securities and Exchange Commission a Current Report on Form 8-K disclosing the entry into this Agreement. Upon the closing of the Merger, the Parent shall cooperate in the filing of the Current Report on Form 8-K disclosing the closing of the Merger, the change in control of the Parent, departure of directors, election of directors, unregistered sales of equity securities, changes in Parent’s certifying accountant and any other reportable event contemplated by the Merger.

4.2                       The Company and Parent shall each afford to the other and to the other’s accountants, counsel and other representatives full access, during normal business hours throughout the period prior to the Closing, and subsequent to the Closing until all pre-Closing filing requirements are met, solely for the purposes of filing any documents required to be filed with the Commission, to all of its properties, books, contracts, commitments and records (including but not limited to tax returns) and during such period, each shall furnish promptly to the other all information concerning its business, properties and personnel as such other party may reasonably request, provided that no investigation pursuant to this Article shall affect any representations or warranties made herein.  Each party shall hold, and shall cause its employees and agents to hold, in strict confidence, all such information (other than such information which:  (i) is already in such party’s possession; (ii) becomes generally available to the public other than as a result of a disclosure by such party or its directors, officers, managers, employees, agents or advisors; or (iii) becomes available to such party on a non-confidential basis from a source other than a party hereto or its advisors provided that such source is not known by such party to be bound by a confidentiality agreement with or other obligation of secrecy to a party hereto or another party until such time as such information is otherwise publicly available; provided, however, that (A) any such information may be disclosed to such party’s directors, officers, employees and representatives of such party’s advisors who need to know such information for the purpose of evaluating the transactions contemplated hereby (it being understood that such directors, officers, employees and representatives shall be informed by such party of the confidential nature of such information), (B) any disclosure of such information may be made as to which the party hereto furnishing such information has consented in writing, and (C) any such information may be disclosed pursuant to a judicial, administrative or governmental order or request; provided, however, that the requested party will promptly so notify the other party so that the other party may seek a protective order or appropriate remedy and/or waive compliance with this Agreement and if such protective order or other remedy is not obtained or the other party waives compliance with this provision, the requested party will furnish only that portion of such information which is legally required and will exercise its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the information furnished).  If this Agreement is terminated, each party will deliver to the other all documents and other materials (including copies) obtained by such party or on its behalf from the other 

 

 

  

 

party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof.

4.3                       Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.  In order to obtain any necessary governmental or regulatory action or non-action, waiver, consent, extension or approval, each of Parent and the Company agrees to take all reasonable actions and to enter into all reasonable agreements as may be necessary to obtain timely governmental or regulatory approvals and to take such further action in connection therewith as may be necessary.  In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent and the Company shall take all such necessary action.

4.4                       No party shall issue any press release or public announcement pertaining to the Merger that has not been agreed upon in advance by Parent and the Company, except as Parent reasonably determines to be necessary in order to comply with the rules of the Commission or of the principal trading exchange or market for Parent Common Stock and after reasonable advance notice to the Company.

4.5                       At the Closing, Parent shall accept the resignations of Arthur John Carter as officer and director of Parent as provided by Section 5.3(h) hereof and cause Gordon Root, Kenneth Kepp and Michael Noonan to be elected to the Board of Directors of Parent.    

4.6                       At the Closing, each of Gordon Root and Kenneth Kepp will enter into Executive Employment Agreements with Parent or EAD to serve in the respective positions of President, Chief Executive Officer and Chief Operating Officer and Chief Financial Officer, respectively, through at least December 31, 2014.

4.7                       Simultaneously with the Closing, the Parent shall cause 23,000,000 shares of its issued and outstanding common stock to be cancelled.

4.8                       Each party to this Agreement will pay all costs and expenses (including the fees and disbursements of legal counsel, its accountants, third party fees, and other advisers) it incurs in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated by this Agreement  (whether such payables are received prior to or after Closing).   

ARTICLE 5  
CLOSING; DELIVERIES

5.1                       Closing Date.  Subject to the terms and conditions set forth herein, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take place on February 18, 2013, or on such other date agreed upon orally or in writing by the parties (the “Closing Date”). All proceedings to be taken and all documents to be executed at the Closing, including those in connection with this Agreement, shall be deemed to have been taken, delivered and executed simultaneously, and no proceeding shall be deemed taken nor documents deemed 

 

 

  

 

executed or delivered until all have been taken, delivered and executed.  The Closing shall occur via the exchange of documents and signatures at the offices of Synergy Law Group, LLC, 730 W. Randolph Street, 6th Floor, Chicago, IL 60661. At the Closing, Parent shall present to the Transfer Agent for delivery to each Stockholder the certificate representing the Parent Common Stock to be issued to them in accordance herewith. Such presentment for delivery shall be against delivery to Parent of the certificates, opinions, agreements and other instruments referred to in Section 6.2 below. Parent will deliver at such Closing to the Company the officers’ certificate, agreements, instruments and opinion referred to in Section 5.3 below. All of the other documents and certificates and agreements referenced in this Article will also be executed as described therein. The Company and the Parent may waive compliance with any of the closing deliveries specified in this Article. At or immediately following the Closing, the Parent shall cause to be delivered to the Company all records and documents relating to the Parent which the Parent possesses, including, without limitation, books, records, government filings, tax returns, charter documents, corporate records, stock record books, consent decrees, orders, and correspondence, director and stockholder minutes and resolutions, stock ownership records, financial information and records, electronic files containing any financial information and records, and other documents associated with Parent.  Should the Closing not occur within ninety (90) days following execution of this Agreement, Parent or Company may terminate this Agreement.  

5.2                       Closing Deliveries of the Company.  At Closing, the Company shall deliver the following documents to Parent:

(a)                A certificate, dated the Closing Date, executed on behalf of the Company by each of their Chief Executive Officer and President, certifying the following:

(i)                 the representations and warranties of each Company under this Agreement are true and correct in all material respects on the Closing Date;

(ii)               the Company has performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date; and

(iii)             there does not exist on the Closing Date any Default or Event of Default or any event or condition that, with the giving of notice or lapse of time, or both, would constitute a Default or Event of Default, and since the Balance Sheet Date, there has been no change that has or will have a Material Adverse Effect on such Company, except as a result of the transactions contemplated by this Agreement.

(b)               A certificate, dated the Closing Date, executed by the Company’s Secretary, certifying that:  (i) all consents, authorizations, orders and approvals of, and filings and registrations with, any court, governmental body or instrumentality that are required for the execution and delivery of this Agreement and the consummation of the Merger and exchange shall have been duly made or obtained, and all material consents by third parties that are required for the Merger and exchange have been obtained; and (ii) no action or proceeding before any court, governmental body or agency has been 

 

 

  

 

threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

(c)                Copies of resolutions of the Board of Directors, certified by the Secretary of the Company, authorizing and approving the execution, delivery and performance of this Agreement and all other documents and instruments to be delivered pursuant hereto.

(d)               A certificate of incumbency executed by the Secretary of the Company certifying the names, titles and signatures of the officers authorized to execute this Agreement and any documents referred to herein, and further certifying that the Articles of Incorporation and By-laws of the Company delivered to Parent at the time of the execution of this Agreement have been validly adopted and have not been amended or modified.

(e)                All written consents, satisfactory in form and substance to Parent, from each party to the leases, contracts, instruments and other documents listed in Schedule 2.13(a) through Schedule 2.13(d) as necessary to consent to the change in ownership upon the effectiveness of the Merger and exchange, of all of the rights and interests of the Company in and to such leases, contracts, instruments and documents, except to the extent the failure to so obtain such consents could not reasonably be expected to have a Material Adverse Effect.

(f)                Evidence as of a recent date of the good standing and existence of the Company issued by the Secretary of State of the State of Oregon and evidence that the Company is qualified to transact business as a foreign corporation and is in good standing in each state of the United States and in each other jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary.

(g)               The Company’s (i) audited consolidated balance sheet (the “Balance Sheet”) as of December 31, 2012 (the “Balance Sheet Date”) and audited consolidated statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 2012, together with the related independent auditors’ report of LBB & Associates, Ltd., LLP and (ii) audited balance sheets and related audited statements of income and audited statements of cash flow for Chiurazzi Internazionale, S.R.L. for the fiscal year ending December 31, 2011 and the period ending December 17, 2012. Such financial statements (i) are in accordance with the books and records of the Company, (ii) present fairly in all material respects the financial condition of the Company at the dates therein specified and the results of their operations and changes in financial position for the periods therein specified and (iii) have been prepared in all material respects in accordance with U.S. generally accepted accounting principles (“GAAP”) applied on a basis consistent with prior accounting periods or, with respect to Chiurazzi Internazionale, S.R.L., in accordance with International Financial Reporting Standards.

(h)               A certificate that the Company has no material obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to 

 

 

  

 

become due), arising out of any transaction entered into at or prior to the Closing, except (a) as disclosed by schedule, (b) to the extent set forth on or reserved against in the Balance Sheet or the Notes to the Financial Statements, (c) current liabilities incurred and obligations under agreements entered into in the usual and ordinary course of business since the Balance Sheet Date, none of which (individually or in the aggregate) have a Material Adverse Effect, and (d) by the specific terms of any written agreement, document or arrangement identified in the Schedules hereto or which are not required to be disclosed thereby.

(i)                 A certificate from the Company that since the Balance Sheet Date, except as disclosed by schedule, the Company has not (a) incurred any debts, obligations or liabilities, absolute, accrued, or, to the Company’s knowledge, contingent, whether due or to become due, except for fees, expenses and liabilities incurred in connection with the Merger and related transactions, and current liabilities incurred in the usual and ordinary course of business, (b) discharged or satisfied any Liens other than those securing, or paid any obligation or liability other than, current liabilities shown on the Balance Sheet and current liabilities incurred since the Balance Sheet Date, in each case in the usual and ordinary course of business, (c) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, other than in the usual and ordinary course of business, (d) sold, transferred or leased any of its assets, except in the usual and ordinary course of business, (e) cancelled or compromised any debt or claim, or waived or released any right, of material value, (f) suffered any physical damage, destruction or loss (whether or not covered by insurance) which could reasonably be expected to have a Material Adverse Effect, (g) entered into any transaction other than in the usual and ordinary course of business, (h) encountered any labor union difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension, retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary course of business consistent with past practice, or entered into any employment agreement, (j) issued or sold any shares or other securities or granted any options (including employee options), warrants or other rights with respect thereto, (k) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding shares, (l) suffered or experienced any change in, or condition affecting, the financial condition of the Company other than changes, events or conditions in the usual and ordinary course of its business, none of which (either by itself or in conjunction with all such other changes, events and conditions) could reasonably be expected to have a Material Adverse Effect, (m) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted, (n) made or permitted any amendment or termination of any material contract, agreement or license to which it is a party which has a Material Adverse Effect, (o) suffered any material loss not reflected in the Balance Sheet or its statement of operations for the period ended on the Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, director, employee, stockholder or consultant, (q) made or agreed to make any charitable contributions or incurred any non-business expenses in excess of $25,000 in the aggregate, or (r) entered into any agreement, or otherwise obligated itself, to do any of the foregoing.

 

 

 

  

 

(j)                 An opinion of Synergy Law Group, counsel for the Company, to the effect as set forth in Exhibit C hereto.

(k)        Such additional supporting documentation and other information with respect to the transactions contemplated hereby as Parent or its counsel may reasonably request.

5.3                       Deliveries of Parent.  At Closing, Parent and Merger Sub shall deliver the following documents to the Company:

(a)                Certificate, dated the Closing Date, executed on behalf of the Parent and Merger Sub by their Chief Executive Officer or other duly authorized officers, certifying the following:  (i) the representations and warranties of Parent and Merger Sub under this Agreement are true and correct in all material respects on the Closing Date; (ii) Parent and Merger Sub have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them on or before the Closing Date; and (iii) there does not exist on the Closing Date any Default or Event of Default or any event or condition, that with the giving of notice or lapse of time, or both, would constitute a Default of Event of Default, and since the Parent Balance Sheet Date, there has been no change that has or will have a Material Adverse Effect on the Parent.

(b)               An opinion of Pearlman & Schneider LLP, counsel for Parent and Merger Sub, to the effect set forth in Exhibit D hereto.

(c)                Certificates, dated the Closing Date, executed by the Secretary of the Parent and the Secretary of Merger Sub, certifying that: (i) all consents, authorizations, orders and approvals of, and filings and registrations with, any court, governmental body or instrumentality that are required for the execution and delivery of this Agreement and the consummation of the Merger and exchange shall have been duly made or obtained, and all material consents by third parties required for the Merger and exchange have been obtained; and (ii) no action or proceeding before any court, governmental body or agency has been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

(d)               Copies of resolutions of Parent’s and Merger Sub’s Boards of Directors, certified by the Secretary, authorizing and approving the execution, delivery and performance of this Agreement and the transactions contemplated hereby, including the Merger and exchange and all other documents and instruments to be delivered by it pursuant hereto.

(e)                Certificates of incumbency executed by the Secretary of Parent and the Secretary of Merger Sub certifying the names, titles and signatures of the officers authorized to execute this Agreement and any documents referred to herein, and further certifying that the Articles of Incorporation and By-laws of Parent and Merger Sub appended thereto have not been amended or modified.

 

 

 

  

 

(f)                A certificate of the Transfer Agent, certifying as of the business day prior to the date of the Merger and exchange, a true and complete list of the names and addresses of the record owners of all of the outstanding shares of Parent Common Stock, together with the number of shares of Parent Common Stock held by each record owner.

(g)               A letter from the Transfer Agent setting forth the number of shares of Parent Common Stock that would be issued and outstanding as of the Closing Date after taking into consideration the closing of the Merger and exchange (including the cancellation of the 23,000,000 shares of common stock of the Company).  

(h)               the executed resignation of Arthur John Carter as a director and officer of Parent.

(i)                 Evidence as of a recent date of the good standing and corporate existence of Parent and Merger Sub issued by the Secretary of State of the State of Nevada and evidence that the Parent and Merger Sub are qualified to transact business as foreign corporations and are in good standing in each state of the United States and in each other jurisdiction where the character of the property owned or leased by them or the nature of their activities makes such qualification necessary.

(j)                 Such additional supporting documentation and other information with respect to the transactions contemplated hereby as the Company or its counsel may reasonably request.

ARTICLE 6  
DEFINITIONS

Unless the context otherwise requires and in addition to any terms defined elsewhere in this Agreement, the terms defined in this Article shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms herein defined.

“Affiliate” shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with, the indicated Person.

“Agreement” shall mean this Agreement.

“Assumed Indebtedness” shall have the meaning assigned to it in the recitals and Schedule 2.4 hereof.

“Balance Sheet” and “Balance Sheet Date” shall have the meanings assigned to such terms in Section 5.2(g) hereof.

“Certificates” shall have the meaning assigned thereto in Section 1.4(b) hereof.

“Closing” and “Closing Date” shall have the meanings assigned to such terms in Section 6.1 hereof.

 

 

  

 

“Code” shall have the meaning assigned to it in the recitals.

“Commission” shall mean the U.S. Securities and Exchange Commission.

“Company” shall mean CI Holdings, Inc., an Oregon corporation.

“Company Common Stock” shall have the meaning assigned to it in the recitals.

“Company Common Stock Certificate” shall have the meaning assigned to it in Section 1.5(c).

 “Default” shall mean a default or failure in the due observance or performance of any covenant, condition or agreement to be observed or performed under the terms of this Agreement if such default or failure in performance shall remain unremedied for ten (10) days after receipt of written notice of such default.

“Dissenting Shares” shall have the meaning assigned to it in Section 1.7 hereof.

“Dissenting Stockholder” shall have the meaning assigned to it in Section 1.7 hereof.

“EAD” shall mean Experience Art & Design, Inc., the new name of the Merger Sub which will exist as a Nevada corporation and a wholly-owned subsidiary of the Parent following the closing of the transactions contemplated herein.

“Effective Time” shall have the meaning assigned to it in Section 1.3 hereof.

“Employee Benefit Plans” shall have the meaning assigned to it in Section 2.17 hereof.

“Equity Security” shall mean any stock, interest or similar equity security of an issuer or any security (whether stock or Indebtedness for Borrowed Money) convertible, with or without consideration, into any stock, interest or similar equity security, or any security (whether stock or Indebtedness for Borrowed Money) carrying any warrant, option or right to subscribe to or purchase any stock, interest or similar equity security, or any such warrant, option or right.

“ERISA” shall mean the Employee Retirement Income Securities Act of 1974, as amended.

 “Exchange Agent” shall have the meaning assigned to it in Section 1.9(a) hereof.

 “Exchange Ratio” shall have the meaning assigned to it in Section 1.6 hereof.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Exchange Shares” shall have the meaning assigned to it in Section 1.9(b) hereof.

“Event of Default” shall mean (a) the failure to pay any Indebtedness for Borrowed Money, or any interest or premium thereon, within five (5) days after the same shall become due, whether such Indebtedness shall become due by scheduled maturity, by required prepayment, by acceleration, by demand or otherwise, (b) an event of default under any material agreement or 

instrument evidencing or securing or relating to any such Indebtedness, or (c) the failure to perform or observe any material term, covenant, agreement or condition on one’s part to be performed or observed under any agreement or instrument evidencing or securing or relating to any such Indebtedness when such term, covenant or agreement is required to be performed or observed.

 

 

  

 

“GAAP” shall mean generally accepted accounting principles in the United States, as in effect from time to time.

"knowledge" and "know" means, when referring to any person or entity, the
actual knowledge of the Chief Executive Officer, President or Chief Financial Officer or the person or entity of the particular matter or fact with respect to which it is used,

“Indebtedness” shall mean any obligation which under generally accepted accounting principles is required to be shown on the balance sheet as a liability, excluding however, accounts payable, accrued expenses and other short term liabilities. 

“Indebtedness for Borrowed Money” shall mean (a) all Indebtedness in respect of money borrowed including, without limitation, Indebtedness which represents the unpaid amount of the purchase price of any property and is incurred in lieu of borrowing money or using available funds to pay such amounts and not constituting an account payable or expense accrual incurred or assumed in the ordinary course of business, (b) all Indebtedness evidenced by a promissory note, bond or similar written obligation to pay money, or (c) all such Indebtedness guaranteed or for which one is otherwise contingently liable.

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

“Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law.

 “Material Adverse Effect” shall have the meaning assigned to it in Section 2.2 hereof.

“Merger” shall mean the merger of the Company with and into the Merger Sub.

“Merger Sub” shall mean Clear System Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of Parent.

“NRS” shall mean the Nevada Revised Statutes.

“ORS” shall mean the Oregon Revised Statutes.

“Parent” shall mean Clear System Recycling, Inc., a Nevada corporation.

“Parent Balance Sheet Date” shall have the meaning assigned to it in Section 3.14 hereof.

 

 

  

 

“Parent Common Stock” shall have the meaning assigned to it in the recitals.

“Parent Employee Benefit Plans” shall have the meaning assigned to it in Section 3.17 hereof.

“Parent Financial Statements” shall have the meaning assigned to it in Section 3.11 hereof.

“Parent Incentive Plan” shall have the meaning assigned to it in Section 3.27 hereof.

“Parent SEC Documents” shall have the meaning assigned to it in Section 3.10 hereof.

“Permitted Liens” shall mean (a) Liens for taxes and assessments or governmental charges or levies not at the time due or in respect of which the validity thereof shall currently be contested in good faith by appropriate proceedings; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’, material-men’s’ and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings; and (c) Liens incidental to the conduct of the business that were not incurred in connection with the borrowing of money or the obtaining of advances or credits and which do not in the aggregate materially detract from the value of its property or materially impair the use made thereof in business.

“Person” shall include all natural persons, corporations, business trusts, associations, limited liability Company, partnerships, joint ventures and other entities and governments and agencies and political subdivisions.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Stockholder” or “Stockholders” shall mean the holders of common stock of the Company who are signatories to this Agreement.

“Tax” or “Taxes” shall mean (a) any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp), together with any interest thereon, penalties, fines, damages,  costs, fees, additions to tax or additional amounts with respect thereto, imposed by the United States or other applicable jurisdiction; (b) any liability for the payment of any amounts described in clause (a) as a result of being a stockholder of an affiliated, consolidated, combined, unitary or similar group or as a result of transferor or successor liability, including, without limitation, by reason of Regulation section 1.1502-6; and (c) any liability for the payments of any amounts as a result of being a party to any Tax Sharing Agreement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in clause (a) or (b).

 

 

  

 

“Tax Return” shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns (including Form 1099 and partnership returns filed on Form 1065) required to be supplied to a Tax authority relating to Taxes.

“Transfer Agent” means Island Stock Transfer Company, Parent’s transfer agent and registrar. 

ARTICLE 7  
MISCELLANEOUS

7.1                       Notices. 

Any notice, request or other communication hereunder shall be given in writing and shall be served either personally by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:

If to Parent:                 Clear System Recycling, Inc.

73 Raymar Place

Oakville, Ontario Canada

Attention:  Mr. Arthur John Carter, President

With a copy to:           

If to Merger Sub:        Clear System Merger Sub, Inc.

73 Raymar Place

Oakville, Ontario Canada

Attention:  Mr. Arthur John Carter, President

With a copy to:           Pearlman Schneider LLP

2200 Corporate Boulevard West

Suite 210

Boca Raton, FL 33431

Attention: Brian A. Pearlman, Esq.

 

                        If to the Company:     Experience Art & Design, Inc.           

                                                            386 NW 3rd Avenue

                                    Canby, OR  97013   

Attention: Mr. Gordon Root, President

With a copy to:           Synergy Law Group

730 West Randolph Street, Suite 600

Chicago, Illinois 60661

Attention: Kristen A. Baracy

Notices shall be deemed received at the earlier of actual receipt or three (3) business days following mailing.  Counsel for a party (or any authorized representative) shall have authority to accept delivery of any notice on behalf of such party.

 

 

 

  

 

7.2                       Entire Agreement.  This Agreement, including the schedules and exhibits attached hereto and other documents referred to herein, contains the entire understanding of the parties hereto with respect to the subject matter hereof.  This Agreement supersedes all prior agreements and undertakings between the parties with respect to such subject matter.

7.3                       Expenses.  Each party shall bear and pay all of the legal, accounting and other expenses incurred by it in connection with the transactions contemplated by this Agreement.

7.4                       Time.  Time is of the essence in the performance of the parties’ respective obligations herein contained.

7.5                       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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

7.6                       Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and heirs; provided, however, that no Stockholder shall directly or indirectly transfer or assign any of his or her rights hereunder in whole or in part without the written consent of the Parent and the Company, which shall not be unreasonably withheld, and any such transfer or assignment without said consent shall be void.

7.7                       No Third Parties Benefited.  This Agreement is made and entered into for the sole protection and benefit of the parties hereto (including all Stockholders who acquire shares of Parent Common Stock), their successors, assigns and heirs, and no other Person shall have any right or action under this Agreement.

7.8                       Counterparts.  This Agreement may be executed in one or more counterparts and by transmission of a digital or facsimile signature, each of which shall be deemed and accepted as an original, and all of which together shall constitute a single agreement.

7.9                       Recitals, Schedules and Exhibits.  The Recitals, Schedules and Exhibits to this Agreement are incorporated herein and, by this reference, made a part hereof as if fully set forth herein.

7.10                   Section Headings and Gender.  The Section headings used herein are inserted for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate.

7.11                   Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada. This Agreement and the transactions contemplated hereby shall be subject to the exclusive jurisdiction of the courts of the State of Nevada. The parties to this Agreement agree that any breach of any term or condition of this Agreement or the transactions contemplated hereby shall be deemed to be a breach occurring 

 

 

  

 

in the State of Nevada by virtue of a failure to perform an act required to be performed in the State of Nevada. The parties to this Agreement irrevocably and expressly agree to submit to the jurisdiction of the courts of the State of Nevada for the purpose of resolving any disputes among the parties relating to this Agreement or the transactions contemplated hereby. The parties irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby, or any judgment entered by any court in prospect hereof brought in the State of Nevada and further irrevocably waive any claim that any suit, action or proceeding brought in the State of Nevada has been brought in an inconvenient forum.  With respect to any action before the above courts, the parties hereto agree to service of process by certified or registered United States mail, postage prepaid, addressed to the party in question. 

7.12                   Amendment of Agreement.  This Agreement may be amended or modified at any time in all respects by an instrument in writing executed by Parent and the Company, provided that any amendment that materially and adversely affects the rights or changes the obligation of any Stockholder (as opposed to the Company) shall require the consent of any such Stockholder.

Survival of Representations and Warranties.  The representations and warranties of the parties made in Articles 2 and 3 of this Agreement shall survive six (6) months beyond the Closing. This Section shall not limit any claim for fraud based on such representations and warranties. Nothing in this Section shall impair or alter any covenant or agreement of the parties which by its terms contemplates performance after the Closing.

 

(Signature Page Follows)

 

 

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be binding and effective as of the day and year first above written.

PARENT:

CLEAR SYSTEM RECYCLING, INC.,

a Nevada corporation

 

 

By:      /s/ Arthur John Carter                          

Arthur John Carter

President

MERGER SUB:

CLEAR SYSTEM MERGER SUB, INC.,

a Nevada corporation 

 

By:      /s/ Arthur John Carter                          

Arthur John Carter

President

 

COMPANY:

EXPERIENCE ART & DESIGN, INC.,

an Oregon corporation

 

 

 

By:      /s/ Gordon Root                                    

Gordon Root

President

  

 

 

 

EXHIBIT A

 

MERGER SUB ARTICLES OF INCORPORATION

 

 

 

EXHIBIT B

 

MERGER SUB BY-LAWS

 

 

 

 

 

ARTICLE 8 BY-LAWS 

of

CLEAR SYSTEM MERGER SUB, INC.

A Nevada Corporation

 

 

ARTICLE I - OFFICES

1.1       Registered Office.  The registered office
shall be in Carson City, Nevada.

1.2       Additional Offices.  The corporation may also
have offices at such other places both within and without the State of Nevada
as the Board of Directors may from time to time determine or the business of
the corporation may require.

ARTICLE II - MEETINGS OF SHAREHOLDERS

2.1       Location of Meetings.  All meetings of the
shareholders for the election of directors shall be held in the State of
Nevada, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Nevada
as shall be designated from time to time by the Board of Directors and stated
in the notice of the meeting.  Meetings of shareholders for any other purpose
may be held at such time and place, within or without the State of Nevada, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.

2.2       Annual Meetings.  Annual meetings of
shareholders shall be held each year in the month of December, unless otherwise
directed by the Board of Directors, at such date and time as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting, at which the common shareholders shall elect by a plurality
vote a Board of Directors, and transact such other business as may properly be
brought before the meeting.  “Common Shareholders” shall mean the holders of
Common Stock of the corporation as duly reflected on the stock ledger of the
corporation.

2.3       Notice of Meetings.  Written notice of the
annual meeting stating the place, date and hour of the meeting, and the means
by which any remote communications shall be utilized for purposes of attending
and participating in such meeting, shall be given to each shareholder entitled
to vote at such meeting not less than ten (10) days nor more than sixty (60)
days before the date of the meeting.

2.4       Participation and Attendance at Meetings.  If
the directors shall provide for the participation of meetings of shareholders
by means of remote communication, shareholders shall be considered present and
may participate and vote in the meeting if they shall avail themselves of such
remote communication services provided for by the directors.  Any such meeting
conducted in whole or in part by means of remote communication shall be
conducted by reasonable measures as directed by the directors to ensure
verification of participating and voting is by a shareholder and that
shareholders shall have a reasonable opportunity to participate in the meeting
and vote on matters submitted to the shareholders for which they are entitled
to vote, including an opportunity to read or hear the
proceedings of the meeting substantially concurrently with such proceedings,
and if any shareholder votes or takes other action at the meeting by means of
remote communication, a record of such vote or other action shall be maintained
by the corporation.

 

 

 

2.5       Shareholder Records.  The officer who has
charge of the stock ledger of the corporation shall prepare and make, at least
ten (10) days before every meeting of shareholders, a complete list of the
shareholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
in the name of each shareholder.  Such list shall be open to the examination of
any shareholder, for any purpose germane to the meeting for a period of at
least ten (10) days prior to the meeting, either (a) on a reasonably accessible
electronic network, with sufficient access information contained in the notice
of such meeting or (b) during normal business hours at the principal place of
business of the corporation.  The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.

2.6       Calling of Special Meetings.  Unless
otherwise prescribed by statute or by the Articles of Incorporation, special
meetings of the shareholders entitled to vote on the matter, for any purpose or
purposes, may be called by the Chief Executive Officer or President and shall
be called by the Chief Executive Officer, President or Secretary at the request
in writing of a majority of the Board of Directors, or at the request in
writing of shareholders owning twenty percent (20%) of the entire capital stock
of the corporation issued and outstanding and entitled to vote on the matter. 
Such request shall state the purpose or purposes of the proposed meeting.

2.7       Notice of Special Meetings.  Written notice
of a special meeting stating the place, date and hour of the meeting, and the
means by which any remote communications shall be utilized for purposes of
attending and participating in such meeting, and the purpose or purposes for
which the meeting is called, shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting, to each shareholder
entitled to vote at such meeting.

2.8       Purpose of Meetings.  Business transacted at
any special meeting of shareholders shall be limited to the purposes stated in
the notice.

2.9       Quorum.  The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Articles of Incorporation.  If, however, such quorum shall
not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented.  At such adjourned meeting at which a quorum shall be present
or represented any business may be transacted which might have been transacted
at the meeting as originally notified.  If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.

 

 

 

2.10     Voting Approval. 
When a quorum is present at any meeting, the vote of the holders of a majority
of the stock having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which by express provision of the statutes or of the Articles of
Incorporation, a different vote is required in which case such express
provision shall govern and control the decision of such question.

2.11     Voting.  Unless otherwise provided in the
Articles of Incorporation, each shareholder having voting power on the matter
shall at every meeting of the shareholders be entitled to one (1) vote in
person or by proxy for each share of the capital stock having voting power held
by such shareholder.  At any meeting of the shareholders, every shareholder
entitled to vote may vote in person or by proxy authorized by an instrument in
writing or by a transmission permitted by law filed in accordance with the
procedure established for the meeting, but no proxy shall be voted on after
three (3) years from its date, unless the proxy provides for a longer period. 
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to this paragraph may be substituted
or used in lieu of the original writing or transmission for any and all
purposes for which the original writing or transmission could be used; provided
that such copy, facsimile telecommunication or other reproduction shall be a
complete reproduction of the entire original writing or transmission.  All
voting may (except where otherwise required by law) be by a voice vote;
provided, however, that upon demand therefor by a shareholder entitled to vote
or by his or her proxy, a stock vote shall be taken.  The corporation may, and
to the extent required by law shall, in advance of any meeting of shareholders,
appoint one or more inspectors to act at the meeting, count the votes, decide
the results and make a written report thereof.  The corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act.  If no inspector or alternate is able to act at a meeting of
shareholders, the person presiding at the meeting may, and to the extent required
by law shall, appoint one or more inspectors to act at the meeting.  Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to faithfully execute the duties of inspector with strict
impartiality and according to the best of his or her ability.

2.12     Action without Meeting.  Unless otherwise
provided in the Articles of Incorporation, any action required to be taken at
any annual or special meeting of shareholders of the corporation, or any action
which may be taken at any annual or special meeting of such shareholders, may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. A telegram, cablegram or other electronic transmission
consenting to an action to be taken and transmitted by a shareholder, or by a
person or persons authorized to act for a shareholder, shall be deemed to be
written, signed and dated for the purposes of this section, provided that any
such telegram, cablegram or other electronic transmission sets forth or is
delivered with information from which the corporation can determine (a) that
the telegram, cablegram or other electronic transmission was transmitted by the
shareholder or by a person or persons authorized to act for the shareholder and
(b) the date on which such shareholder or authorized person or persons
transmitted such telegram, cablegram or electronic transmission. The date on
which such telegram, cablegram or electronic transmission is transmitted shall
be deemed to be the date on which such consent was signed.  No consent given by
telegram, cablegram or other electronic transmission
shall be deemed to have been delivered until such consent is reproduced in
paper form and until such paper form shall be delivered to the corporation by
delivery to its registered office in this State, its principal place of
business or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of shareholders are recorded.  Delivery made
to a corporation’s registered office shall be made by hand or by certified or
registered mail, return receipt requested.  Notwithstanding the foregoing
limitations on delivery, consents given by telegram, cablegram or other
electronic transmission, may be otherwise delivered to the principal place of
business of the corporation or to an officer or agent of the corporation having
custody of the book in which proceedings of meetings of shareholders are
recorded if, to the extent and in the manner provided by resolution of the
Board of Directors of the corporation.  Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
of shareholders entitled to vote or consent on the matter shall be given to
those shareholders who have not consented in writing and who, if the action had
been taken at a meeting, would have been entitled to notice of the meeting if
the record date for such meeting had been the date that written consents signed
by a sufficient number of holders or members to take the action were delivered
to the corporation.  

 

 

 

2.13     Presiding Over Meetings.  The Chairman of the
Board of Directors shall preside at all meetings of the shareholders.  In the
absence or inability to act of the Chairman, the Vice Chairman, the Chief
Executive Officer, the President or a Vice President (in that order) shall
preside, and in their absence or inability to act, another person designated by
one of them shall preside.  The Secretary of the corporation shall act as
Secretary of each meeting of the shareholders.  In the event of his or her
absence or inability to act, the Chairman of the meeting shall appoint a person
who need not be a shareholder to act as Secretary of the meeting.

2.14     Conducting Meetings.  Meetings of the
shareholders shall be conducted in a fair manner but need not be governed by
any prescribed rules of order.  The presiding officer of the meeting shall
establish an agenda for the meeting.  The presiding officer’s rulings on
procedural matters shall be final.  The presiding officer is authorized to
impose reasonable time limits on the remarks of individual shareholders and may
take such steps as such officer may deem necessary or appropriate to assure
that the business of the meeting is conducted in a fair and orderly manner.

ARTICLE III - DIRECTORS

3.1       Directors.  The number of directors which
shall constitute the whole board shall be not less than one or more than
seven.  Thereafter, within the limits above specified, the number of directors
shall be determined by resolution unanimously approved by the Board of
Directors or, in the absence of a determination by the Board of Directors, then
by the Common Shareholders at the annual meeting.  The directors shall be
elected at the annual meeting of the Common Shareholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified or until his or her earlier resignation
or removal.  Directors need not be shareholders.

3.2       Vacancies.  Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and
until their successors are duly elected and shall qualify, or until his or her
earlier resignation or removal.  If there are no directors in office, then an
election of directors may be held in the manner provided by statute, subject to
the provisions of the Articles of Incorporation.  If, at the time of filling
any vacancy or any newly created directorship by the directors then in office,
such that the directors then in office shall constitute less than a majority of
the whole board (as constituted immediately prior to any such vacancy or
increase), a court of competent jurisdiction may, upon application of any
shareholder or shareholders holding at least ten percent of the total number of
the shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office.

 

 

 

3.3       Management of Corporation.  The business of
the corporation shall be managed by or under the direction of its Board of
Directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Articles of
Incorporation or by these by-laws directed or required to be exercised or done
by the shareholders.

ARTICLE IV - MEETINGS OF THE BOARD OF DIRECTORS

4.1       Meetings.  The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Nevada.

4.2       First Meeting.  The first meeting of each
newly elected Board of Directors shall be held at such time and place as shall
be fixed by the vote of the shareholders at the annual meeting and no notice of
such meeting shall be necessary to the newly elected directors in order legally
to constitute the meeting, provided a quorum shall be present.  In the event of
the failure of the shareholders to fix the time or place of such first meeting
of the newly elected Board of Directors, or in the event such meeting is not
held at the time and place so fixed by the shareholders, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the directors.

4.3       Regular Meetings.  Regular meetings of the
Board of Directors may be held without notice at such time and at such place as
shall from time to time be determined by the board.

4.4       Special Meetings.  Special meetings of the
board may be called by the Chief Executive Officer or President on twenty-four
hours’ notice to each director, either personally or by mail or by facsimile
communication; special meetings shall be called by the Chief Executive Officer,
President or Secretary in like manner and on like notice on the written request
of one director unless the board consists of only one director; in which case
special meetings shall be called by the Chief Executive Officer, President or
Secretary in like manner and on like notice on the written request of the sole
director.

4.5       Quorum.  At all meetings of the board, a
majority of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except
as may be otherwise specifically provided by statute or by the Articles of
Incorporation.  If a quorum shall not be present at any meeting of the Board of
Directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.

 

 

 

4.6       Informal Action.  Unless otherwise restricted
by the Articles of Incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the board
or committee, as the case may be, consent thereto in writing or by electronic
transmission, and the writing(s) or paper forms of any electronic
transmission(s) are filed with the minutes of proceedings of the board or
committee.

4.7       Participation in Meetings.  Unless otherwise
restricted by the Articles of Incorporation or these by-laws, members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by any
means permitted under the Chapter 78 of the Nevada Revised Statutes (including
participation in a meeting of the Board of Directors, or committee, by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other), and any such
participation in a meeting shall constitute presence in person at the meeting.

4.8       Presiding Over Meetings.  The Chairman of the
Board of Directors shall preside at all meetings of the directors.  In the
absence or inability to act of the Chairman, the Vice Chairman, the Chief
Executive Officer, the President or a Vice President (in that order) shall
preside, and in their absence or inability to act, another person designated by
one of them shall preside.  The Secretary of the corporation shall act as
Secretary of each meeting of the directors.  In the event of his or her absence
or inability to act, the Chairman of the meeting shall appoint a person who
need not be a shareholder to act as Secretary of the meeting.

4.9       Conducting Meetings.  Meetings of the
directors be conducted in a fair manner but need not be governed by any
prescribed rules of order.  The presiding officer of the meeting shall
establish an agenda for the meeting.  The presiding officer’s rulings on
procedural matters shall be final.  The presiding officer is authorized to
impose reasonable time limits on the remarks of individual board member and may
take such steps as such officer may deem necessary or appropriate to assure
that the business of the meeting is conducted in a fair and orderly manner.

4.10     Presumption of Assent.  A director of the
corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be conclusively presumed to have
assented to the action taken unless his or her dissent shall be entered in the
minutes of the meeting or unless he or she shall file his or her written
dissent to such action with the person acting as the Secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.

 

 

 

4.11     Committees. 

(a)        The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the corporation.  The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.  Any member of any committee appointed
by the Board of Directors, or the entire membership of such committee, may be
removed, with or without cause, by the vote of a majority of the Board of
Directors.

(b)        In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

(c)        Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to the
following matters: (i) approving or adopting, or recommending to the
shareholders, any action or matter expressly required by Chapter 78 of the
Nevada Revised Statutes to be submitted to shareholders for approval or (ii)
adopting, amending or repealing any by-law of the corporation. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.

(d)       Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.

4.12     Compensation of Directors.  Unless otherwise
restricted by the Articles of Incorporation or these by-laws, the Board of
Directors shall have the authority to fix the compensation of directors.  The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director.  No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.  Members of special or standing
committees may be allowed like compensation for attending committee meetings.

4.13     Removal and Resignation of Directors.  Unless
otherwise restricted by the Articles of Incorporation or by law, any director
or the entire Board of Directors may be removed, with or without cause, by the
holders of a majority of shares entitled to vote in the election of directors. 
Any director of the corporation may resign at any time by giving notice in
writing or electronic transmission to the Board of Directors, the Chairman, the
Chief Executive Officer or the President.  Such resignation shall take effect
at the time specified therein and, unless tendered to take effect upon
acceptance thereof, the acceptance of such resignation shall not be necessary
to make it effective.

 

 

 

ARTICLE V - NOTICES

5.1       Notice.  Whenever, under the provisions of
the statutes or of the Articles of Incorporation or of these by-laws, notice is
required to be given to any director or shareholder, it shall not be construed
to mean personal notice, but such notice may be given in any manner as
prescribed by Chapter 78 of the Nevada Revised Statutes.

5.2       Wavier of Notice.  Whenever any notice is
required to be given under the provisions of the statutes or of the Articles of
Incorporation or of these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, or a
waiver by electronic transmission by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE VI - OFFICERS

6.1       Officers.  The officers of the corporation
shall be chosen by the Board of Directors and shall include a President, a
Vice-President, a Secretary and a Treasurer.  The Board of Directors may also
appoint a Chairman of the board, Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, Chief Technology Officer, Vice President of
Development Services, one or more Senior Vice-Presidents, additional
Vice-Presidents, and one or more assistant secretaries and assistant
treasurers.  Any number of offices may be held by the same person, unless the
Articles of Incorporation or these by-laws otherwise provide.

6.2       Election of Officers.  The Board of Directors
at its first meeting after each annual meeting of shareholders shall choose a
Chief Executive Officer, President, one or more Vice-Presidents, a Secretary
and a Treasurer.  Any number of offices may be held by the same person, unless
the Articles of Incorporation or these by-laws otherwise provide.  The Board of
Directors may appoint such other officers and agents as it shall deem necessary
that shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the board. 

6.3       Compensation of Officers.  The salaries and
other compensation of all officers and agents of the corporation shall be fixed
by the Board of Directors.

6.4       Term of Officers.  The officers of the
corporation shall hold office until their successors are chosen and qualify. 
Any officer elected or appointed by the Board of Directors may be removed at
any time by the affirmative vote of a majority of the Board of Directors.  Any
vacancy occurring in any office of the corporation shall be filled by the Board
of Directors. 

6.5       Chairman of the Board.  The Chairman of the
Board shall preside at all meetings of the Board of Directors and shall see
that orders and resolutions of the Board of Directors are carried into effect. 
The Chairman of the Board shall perform such other duties as the Board of
Directors may from time to time prescribe.

 

 

 

6.6        Chief Executive Officer. 
The Board of Directors may select a Chief Executive Officer of the corporation
who, if appointed, shall be subject to the control of the Board of Directors
and have general supervision, direction and control of the business and the
officers of the corporation.  The Chief Executive Officer shall preside at all
meetings of the shareholders and, in the absence or nonexistence of a Chairman
of the board, at all meetings of the Board of Directors.  The Chief Executive
Officer shall see that the resolutions and directions of the Board of Directors
are carried into effect except in those instances in which that responsibility
is specifically assigned to some other person by the Board of Directors, and,
in connection therewith, shall be authorized to delegate to the President and
the other executive officers such of his powers and duties as Chairman of the
board at such times and in such manner as he may deem to be advisable.  In
general, he shall discharge all duties incident to such office and such other
duties as may be prescribed by the Board of Directors from time to time. 
Except where by law or by order of the Board of Directors the signature of the
President is required, the Chief Executive Officer shall have the same power as
the President to execute instruments on behalf of the corporation. 

6.7       President.  The President shall act at the
direction of the Chief Executive Officer and the Board of Directors and shall
be the executive officer next in authority to the Chief Executive Officer.  If
there shall be no Chief Executive Officer, or in his or her absence or
inability or refusal to act, then the President shall perform the duties
prescribed for such office, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Chief Executive Officer. 
The President shall assist the Chief Executive Officer in the management of the
business of the corporation, and shall have such other powers and duties as the
Board of Directors may from time to time prescribe.

6.8       Senior Vice-President(s).  In the absence of
the President or in the event of his inability or refusal to act, the Senior
Vice-President (or in the event there be more than one Senior Vice-President,
the Senior Vice-Presidents in the order designated by the directors, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the President.  The Senior
Vice-Presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.

6.9       Vice-President(s).  In the absence of the
Senior Vice-President or in the event of their inability or refusal to act, the
Vice-President (or in the event there be more than one Vice-President, the
Vice-Presidents in the order designated by the directors, or in the absence of
any designation, then in the order of their election) shall perform the duties
of the Senior Vice-President(s), and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Senior Vice-President(s). 
The Vice-Presidents shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.

6.10     Chief Financial Officer.  The Board of
Directors may select a Chief Financial Officer who, if appointed, shall be
subject to the control of the Board of Directors, the Chief Executive Officer
and the President, and shall be the principal financial and accounting officer
of the corporation.  The Chief Financial Officer shall: (a) have charge of and
be responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement thereof; and (c) perform all the duties
incident to the office of the Chief Financial Officer and such other duties as
the Chief Executive Officer, the President or the Board of Directors may from
time to time prescribe.  The duties and role of Treasurer, as set forth herein
shall be subsumed by the Chief Financial Officer if one is appointed where no
separate Treasurer is appointed.  If there shall also be a separate Treasurer,
the Treasurer shall perform his duties at the direction of the Chief Financial
Officer, the President and the Board of Directors.  If required by the Board of
Directors, the Chief Financial Officer shall give a bond for the faithful
discharge of his duties as Chief Financial Officer in such sum and with such
surety or sureties as the Board of Directors may determine.

 

 

 

6.11     Chief Operating Officer.        The Chief
Operating Officer shall be the chief operating officer of the Company, and as
such shall direct the operations of the Company within the limits prescribed by
the Chief Executive Officer, the President and the Board of Directors.  He
shall have such other powers and duties as the Chief Executive Officer, the
President or the Board of Directors may assign to him from time to time. 
He may (i) sign, alone or with the Secretary or any other proper officer of the
Company thereunto authorized by the Board of Directors, any policies, deeds,
mortgages, bonds, contracts or other instruments which the Board of Directors
has authorized to be executed except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation, or shall be required by law to be
otherwise signed or executed, (ii) notwithstanding the foregoing, sign, alone
or with the Secretary or any other proper officer of the corporation,
contracts, documents or other instruments in the ordinary course of business
consistent with past practice, and (iii) appoint and discharge agents and
employees of the corporation except those that are appointed by the Chief
Executive Officer, the President or the Board of Directors.  He shall, in
general, perform all duties incident to the office of Chief Operating Officer.

6.12     Chief Technology Officer.  The Chief
Technology Officer shall advise the Board and the Chief Executive Officer on
software and hardware technology, software architecture development,
information technology and other technical issues related to the matters which
they consider and shall oversee the technology functions of the corporation. 
The Chief Technology Officer shall identify and evaluate trends in technologies
and economic and regulatory issues, assist the Chief Executive Officer in
developing strategic goals and objectives for the Corporation, and perform all
other duties as may be incident thereto or as otherwise assigned by the Board
of Directors or the Chief Executive Officer.

6.13     Secretary.  The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all the proceedings of the meetings of the corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required.  He shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President, under whose supervision he
shall be.  He shall have custody of the corporate seal of the corporation and
he, or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such Assistant Secretary.  The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.

 

 

 

6.14     Assistant Secretary. 
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there be
no such determination, then in the order of their election) shall, in the
absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.

6.15     Treasurer and
Assistant Treasurers. 

(a)        The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.

(b)        He shall disburse the funds of the corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.

(c)        If required by the Board of Directors, he shall
give the corporation a bond (which shall be renewed every six years) in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.

(d)       He shall perform all duties incident to the
office of Treasurer and all other duties as from time to time may be assigned
to him by the Board of Directors and the President; provided, that if there
shall also be appointed a Chief Financial Officer, the Treasurer shall perform
his duties at the direction of the Chief Financial Officer, President and Board
of Directors.

(e)        The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board
of Directors may from time to time prescribe.

ARTICLE VII -
CERTIFICATES FOR SHARES

7.1       Certificates.  The shares of the corporation
shall be represented by a certificate or shall be uncertificated.  Certificates
shall be signed by, or in the name of the corporation by, the Chairman or
Vice-Chairman of the Board of Directors, or the President or a Vice-President,
and by the Treasurer- or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation.

 

 

 

7.2       Classes of Stock.  If the corporation shall
be authorized to issue more than one class of stock or more than one series of
any class, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, provided that, except as otherwise provided in Sections 78.242 and
104.8204 of the Nevada Revised Statutes, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, a statement
that the corporation will furnish without charge to each shareholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.

7.3       Uncertificated Shares.  Within a reasonable
time after the issuance or transfer of uncertificated stock, the corporation
shall send to the registered owner thereof a written notice containing the
information required to be set forth or stated on certificates pursuant to
Sections 78.235, 78.242 or 78.365(1) of the Nevada Revised Statutes or a
statement that the corporation will furnish without charge to each shareholder
who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

7.4       Signatures on Certificates.  Any of or all
the signatures on a certificate may be facsimile.  In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.

7.5       Lost Certificates.  The Board of Directors
may direct a new certificate or certificates or uncertificated shares to be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed.  When authorizing such issue of a new certificate or
certificates or uncertificated shares, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the owner
of such lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.

7.6       Transfer of Stock.  Upon surrender to the
corporation or the transfer agent of the corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, it shall be the duty of the corporation
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.  Upon receipt of proper
transfer instructions from the registered owner of uncertificated
shares such uncertificated shares shall be cancelled and issuance of new
equivalent uncertificated shares or certificated shares shall be made to the
person entitled thereto and the transaction shall be recorded upon the books of
the corporation.

 

 

 

7.7       Fixing of Record Date.  In order that the
corporation may determine the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than
sixty days prior to any other action. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to
any adjournment of the meeting: provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.

7.8       Registered Shareholders.  The corporation
shall be entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered on its
books as the owner of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Nevada.

ARTICLE VII - CONFLICT OF INTERESTS

8.1       Contract or Relationship Not Void.  No
contract or transaction between the corporation and one or more of its
directors or officers, or between the corporation and any other corporation,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest
shall be void or voidable solely for this reason, or solely because such
director or officer is present at, or participates in, the meeting of the Board
of Directors or committee thereof which authorizes the contract or transaction,
or solely because such director’s or officer’s vote is counted for such
purpose, if: 

(a)    the material facts as to such director’s or
officer’s relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
board or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or

(b)   the material facts as to such director’s or
officer’s relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or

(c)  the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by the Board
of Directors, a committee thereof, or the shareholders.

 

 

 

8.2       Quorum.  Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.

ARTICLE IX - GENERAL PROVISIONS

9.1       Dividends.  Dividends upon the capital stock
of the corporation, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to law.  Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Articles of Incorporation.

9.2       Reserves.  Before payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interest of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.

9.3       Annual Statement.  The Board of Directors
shall present at each annual meeting, and at any special meeting of the
shareholders when called for by vote of the shareholders, a full and clear
statement of the business and condition of the corporation.

9.4       Checks.  All checks or demands for money and
notes of the corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.

9.5       Fiscal Year.  The fiscal year of the
corporation shall be fixed by resolution of the Board of Directors.

9.6       Seal.  The corporation may have, but shall
not be required to have, a corporate seal.  The corporate seal shall have
inscribed thereon the name of the corporation, the year of its organization and
the words “Corporate Seal, Nevada”.  The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.

9.7       Indemnification.  The corporation shall
indemnify its officers, directors, employees and agents to the extent permitted
by Chapter 78 of the Nevada Revised Statutes and as may be set forth in the
corporation’s Articles of Incorporation.

9.8       Stock in Other Corporations.  Shares of any
other corporation which may from time to time be held by this corporation may
be represented and voted at any meeting of shareholders of such corporation by
the Chairman, the Chief Executive Officer, the President, the Chief Financial
Officer or a Vice President of the corporation, or by any proxy appointed in
writing by the Chairman, the Chief Executive Officer, the President, the Chief
Financial Officer or a Vice President of the corporation, or by any other
person or persons thereunto authorized by the Board of Directors. Shares
represented by certificates standing in the name of the corporation may be
endorsed for sale or transfer in the name of the corporation by the Chairman,
the Chief Executive Officer, the President, the Chief Financial Officer or any
Vice President of the corporation or by any other officer or officers thereunto
authorized by the Board of Directors.  Shares
belonging to the corporation need not stand in the name of the corporation, but
may be held for the benefit of the corporation in the individual name of the
Chief Financial Officer or of any other nominee designated for the purpose of
the Board of Directors.

 

 

 

ARTICLE X - AMENDMENTS

These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the shareholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Articles of
Incorporation, at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting in cases where such
action is not unanimously adopted by the Board of Directors or voting shareholders
entitled to vote on the matter, as the case may be.  If the power to adopt,
amend or repeal by-laws is conferred upon the Board of Directors by the
Articles of Incorporation it shall not divest or limit the power of the
shareholders to adopt, amend or repeal by-laws.  Notwithstanding the foregoing,
the provisions of Sections 2.2, 2.6, 2.11, 3.1, 4.4 and Article X, shall not be
altered, amended or repealed without the approval of a majority of shareholders
entitled to vote or consent on the matter.  

 

 

 

EXHIBIT C

 

FORM OF OPINION OF SYNERGY LAW GROUP, LLC

AS COUNSEL FOR COMPANY

 

 

(a)               
The Company is a corporation duly organized, validly existing and, based
solely upon information from the Secretary of State of the State of Oregon, in
good standing under the laws of Oregon.

(b)              
The Company has the requisite power and authority to execute, deliver
and perform its obligations under the Transaction Documents, including, without
limitation, the Merger Agreement.  

(c)               
All actions necessary for the authorization, execution, and delivery of
the Transaction Documents (including, without limitation, the Merger Agreement)
by the Company and the performance by the Company of the obligations to be
performed by the Company as of the date hereof under the Transaction Documents
has been taken on the part of the Company’s stockholders and directors.

(d)              
Each of the Transaction Documents (including, without limitation, the
Merger Agreement) to which Company is a party have been duly executed and
delivered by the Company.

 

 

 

 

 

EXHIBIT D 

 

FORM OF OPINION OF PEARLMAN AND SCHNEIDER, LLP

AS COUNSEL FOR PARENT AND MERGER SUB

 

1.                 
The Parent and Merger Sub is each a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Nevada. 
The Parent and Merger Sub has full corporate power and authority to own, lease
and operate its properties and to carry on its business in the places and in
the manner currently conducted.  

 

2.                 
The Parent and Merger Sub has the requisite corporate power and
authority to execute, deliver and perform the Agreement and Plan of Merger and
other transaction documents to which it is a party.  The execution, delivery
and performance of the Agreement and Plan of Merger and the other transaction
documents to which the Parent and Merger Sub are a party have been duly
authorized by all necessary corporate action on the part of the Parent and
Merger Sub.

 

3.                 
Each of the Agreement and Plan of Merger and the Transaction Documents
has been duly executed and delivered by the Parent and Merger Sub (to the
extent they are party thereto) and consented to by its shareholders, and
constitutes the legal, valid and binding obligation of each of the Parent and
Merger Sub, enforceable in accordance with its terms, except to the extent that
their enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and to general equitable principles.

4.                 
Execution and delivery by the Parent and Merger Sub of, and performance
of their agreements in, the transaction documents to which they are a party do
not (i) violate any law, statute, rule, regulation or  court order applicable
to the Parent and/or Merger Sub and known to us, (ii)  breach, result in a
default or loss of rights under, result in the creation of a right of
termination, acceleration or modification under, or result in the creation of,
or the right to create, any security interest in or lien on any assets of the
Parent and/or Merger Sub pursuant to any agreements known to us to which the
Parent and/or Merger Sub is a party or by which it or its assets is bound, or
(iii) violate, conflict with, result in a breach of any terms or provisions of,
or constitute a default under, the Parent or Merger Sub’s articles of
incorporation or bylaws.

 

5.                 
No consent, approval, authorization, order or action of, filing with or
notice or payment to any regulatory agency or authority of the State of Nevada
or the United States Federal Government is required to be obtained or made by
the Parent and/or Merger Sub to perform their obligations under the transaction
documents and consummate the transactions contemplated thereunder, except for
such as have been obtained or made other than Form D and filings with any state
securities authorities.

 

6.                 
Based solely upon a review of the Parent’s stock records, the
authorized capital stock of the Parent consists of [  ] shares, of which
[___________] shares are issued and outstanding immediately prior to the Parent
Share Cancellation, and [___________] shares are issued
and outstanding after the Parent Share Cancellation. Based solely upon a
representation from the Parent, we believe that all issued and outstanding
shares of Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and have not been issued in violation of any preemptive
right of stockholders.  Except as described in the Agreement and Plan of Merger
or the exhibits thereto, to our knowledge there are no options, warrants, or
other rights or agreements of any kind for the purchase or acquisition from, or
the issuance or sale by, the Parent of any shares of such authorized capital
stock, nor any outstanding securities or debt of any kind that is convertible
into or exchangeable for any shares of such authorized capital stock.

 

 

 

 

7.                 
The issuance of
the Shares in accordance with the Agreement and Plan of Merger will be exempt
from registration under the Securities Act of 1933, as amended.  The
Shares which are being issued on the date hereof pursuant to the Agreement and
Plan of Merger have been duly authorized and validly issued and are fully paid
and nonassessable and free of preemptive or similar rights contained in the Parent’s articles of
incorporation or Bylaws or in any agreement to which the Parent is party.

 

8.                 
   To our knowledge, there are no current claims, actions, suits,
investigations or proceedings, or any pending or threatened claim, action,
suit, investigation or proceeding against any of the Parent or the Merger Sub
before any court, arbitrator or governmental authority which, if determined
adversely to any of the Parent or the Merger Sub, as applicable, would have a
material adverse effect on the ability of the Parent or the Merger Sub to
perform their obligations under the transaction documents.

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