ASSET PURCHASE
AGREEMENT
by and between
INTERNET MEDIA SERVICES,
INC.,
as Buyer,
and
LESTER LEVIN INC.,
as Seller
Dated October 8,
2009
Table of Contents
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ARTICLE
I.
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1
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1.1
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Definitions
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1
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ARTICLE
II.
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4
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2.1
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Purchase and
Sale
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4
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2.2
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Excluded
Assets
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5
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2.3
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Assumed
Liabilities
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6
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2.4
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Closing
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6
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ARTICLE
III.
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7
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3.1
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Purchase
Price
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7
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3.2
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Legend on IMS
Common Certificate
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7
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3.3
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Allocation of
Purchase Price
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8
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ARTICLE
IV.
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REPRESENTATIONS
AND WARRANTIES OF SELLER
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8
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4.1
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Organization,
Qualification and Authority
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8
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No
Violations
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8
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Real
Property
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9
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Personal
Property
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9
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Contracts
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9
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Litigation
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9
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Intellectual
Property
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9
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Insurance
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9
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Environmental
Laws
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10
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Tax Returns;
Taxes
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12
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Affiliate
Interests
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12
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ARTICLE
V.
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REPRESENTATIONS
AND WARRANTIES OF BUYER
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12
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Organization,
Qualification and Authority
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12
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No
Violations
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13
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Broker’s
or Finder’s Fee
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13
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Working
Capital
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13
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IMS Common
Stock
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13
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5.6
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Capitalization
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14
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Contracts and
other Commitments
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14
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Table of Contents
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Page
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Registration
Rights
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14
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Litigation
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14
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Absence of
Borrowed Indebtedness and Assets; Unclosed Liabilities
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14
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Material
Liabilities
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15
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Environmental
Laws
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15
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Tax Returns;
Taxes
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15
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Disclosure
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15
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ARTICLE
VI.
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16
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Further
Assurances
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16
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Board of
Directors
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16
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Working
Capital
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16
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Registration of
Shares
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16
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Certain
Employee Matters
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16
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Extension of
Health and Dental Insurance
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16
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Non-Competition, Non-Disclosure,
Non-Solictation
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17
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6.8
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Corporate
Existence
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18
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6.9
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Certain
Negative Covenants; Misc.
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19
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6.10
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D&O
Insurance
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20
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ARTICLE
VII.
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20
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Indemnification
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20
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7.2
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Indemnification
Procedures – Third Party Claims
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21
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7.3
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Indemnification
Procedures – Other Claims, Indemnification
Generally
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22
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ARTICLE
VIII.
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23
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8.1
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Publicity
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23
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8.2
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Entire
Agreement
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23
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8.3
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Notices
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23
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8.4
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Non-Assignable
Assets
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24
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8.5
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Waivers and
Amendments
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24
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8.6
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Survival
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24
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8.7
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Counterparts
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25
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8.8
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Governing Law;
Severability
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25
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Table of Contents
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Page
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8.9
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Assignment
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25
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8.10
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Negotiated
Agreement
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25
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8.11
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Expenses;
Taxes
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25
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8.12
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Third Party
Beneficiary
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25
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8.13
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Headings
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26
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EXHIBITS
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Copyrights and
Trademarks
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Form of
Assignment of Domain Name
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Form
Registration Rights Agreement
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Form Stock
Pledge and Escrow Agreement
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Assignment and
Assumption Agreement
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SCHEDULES
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Trade Accounts
Receivable
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Cash and Cash
Equivalents
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Purchase Price
Allocation
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Schedule
4.11
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Affiliate
Interests
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Schedule
5.6
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IMS
Stockholders
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ASSET PURCHASE
AGREEMENT
ASSET PURCHASE AGREEMENT (“
Agreement ”) dated October 8, 2009 (the “
Effective Date ”), by and among Internet Media
Services, Inc., a Delaware corporation (“ Buyer
”), and Lester Levin Inc., a New York corporation (“
Seller ”).
RECITALS:
WHEREAS, Seller markets and sells legal
supplies, legal forms and legal documents through the Internet Web
site named LegalStore.com (the “ Business
”);
WHEREAS, Seller wishes to sell the certain
assets of the LegalStore.com to the Buyer, and Buyer is willing to
acquire certain assets of the LegalStore.com;
NOW, THEREFORE, in consideration of the premises
and mutual covenants contained in this Agreement and of other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound
hereby, agree as follows:
Article
I. Definitions
1.1
Definitions . For purposes of this Agreement, the
following terms shall have the respective meanings set forth
below:
“ Affiliate ” of any
specified Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and (ii) any 5%
stockholder or member of such Person. For purposes of
this definition, “control” when used with respect to
any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and
the terms “controlling” and “controlled”
have meanings correlative to the foregoing.
“ Agreement ” means this
Agreement and includes all of the schedules and exhibits annexed
hereto.
“ Allocation ” has the
meaning set forth in Section 3.3.
“ Acquired Assets ” has the
meaning set forth in Section 2.1.
“ Assignment and Assumption
Agreement ” has the meaning set forth in Section
2.4(b)(ix).
“ Assumed Liabilities ” has
the meaning set forth in Section 2.3.
“ Bill of Sale ” means a Bill
of Sale from Seller in the form of Exhibit C attached hereto
and incorporated by this reference.
“ Business ” has the meaning
set forth in the recitals to this Agreement.
“ Business Books and Records
” has the meaning set forth in Section 2.1(g).
“ By-Laws ” has the meaning
set forth in Section 5.6.
“ Certificate of Incorporation
” has the meaning set forth in Section 5.6.
“ Closing ” means the closing
of the purchase and sale of the Acquired Assets contemplated by
this Agreement.
“ Closing Balance Sheet ”
means the pro forma balance sheet of the Business dated as of the
Closing Date.
“ Closing Date ” means the
Effective Date or such other time as Buyer and Seller mutually
agree.
“ Code ” means the Internal
Revenue Code of 1986, as amended.
“ Contracts ” has the meaning
set forth in Section 2.1(c).
“ DSS ” has the meaning set
forth in Section 3.1.
“ Effective Date ” means the
date hereof.
“ Encumbrance ” means any
lien, charge, security interest, mortgage, pledge or other
encumbrance of any nature whatsoever.
“ Environmental Laws ” has
the meaning set forth in Section 4.9.
“ Equipment ” has the meaning
set forth in Section 2.1 (a).
“ Excluded Assets ” means all
of the other assets of Seller that are specifically set forth on
Schedule 2.2, and are not part of the Acquired
Assets.
“ Excluded Liabilities ”
means all liabilities and obligations of Seller, except for Assumed
Liabilities set forth in Section 2.3.
“Former Real Property
” has the meaning set forth in
Section 4.9.
“ IMS Common Stock ” has the
meaning set forth in Section 3.1.
“ Indemnification Acknowledgement
” has the meaning set forth in
Section 7.2(a)(ii).
“ Indemnitee ” has the
meaning set forth in Section 7.2(a).
“ Indemnitor ” has the
meaning set forth in Section 7.2(a).
“ Inventories ” has the
meaning set forth in Section 2.1(b).
“ Lock-Up Agreement ” has the
meaning set forth in Section 2.4(b)(vii).
“ Losses ” means any and all
out-of-pocket damages, costs, liabilities, losses (including
consequential losses), judgments, penalties, fines, expenses or
other costs, including reasonable attorney’s fees, incurred
by an Indemnitee.
“ Material Adverse Effect ”
means a material adverse effect on either (i) the assets,
operations, personnel, condition (financial or otherwise) or
prospects of Seller, taken as a whole, or (ii) any
of Seller’s or Buyer’s (as applicable) ability to
consummate the transactions contemplated hereby.
“ Notice of Claim ” has the
meaning set forth in Section 7.2(a)(i).
“ Person ” means any
individual, partnership, limited liability company, limited
liability partnership, corporation, association, joint stock
company, trust, joint venture, unincorporated organization,
governmental entity (or any department, agency or political
subdivision thereof) or any other type of legal entity.
“ Pledge Agreement ” has the
meaning set forth in Section 2.4(b)(vi).
“ Proprietary Rights ” has
the meaning set forth in Section 2.1(e).
“ Purchase Price ” has the
meaning set forth in Section 3.1.
“ Permits ” has the meaning
set forth in Section 2.1(d).
“ Real Property ” has the
meaning set forth in Section 4.9.
“ Registration Statement ”
has the meaning set forth in Section 6.5.
“ Securities Act ” means the
Securities Act of 1933, as amended.
“ Tax ” means any federal,
state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, capital gain, intangible, environmental (pursuant to
Section 59A of the Code or otherwise), custom duties, capital
stock, franchise, employee’s income withholding, foreign
withholding, social security (or its equivalent), unemployment,
disability, real property, personal property, sales, use, transfer,
value added, registration, alternative or add-on minimum, estimated
or other tax, including any interest, penalties or additions to tax
in respect of the foregoing, whether disputed or not, and any
obligation to indemnify, assume or succeed to the liability of any
other Person in respect of the foregoing.
“ Tax Return ” means any
return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
“ Third Party Claim ” means a
claim or demand made by any Person who is not a party hereto
against an Indemnitee.
“ Voting Agreement ” has the
meaning set forth in Section 2.4(a)(iii).
“ Whole Board ” means the
total number of directors which the Buyer’s Board of
Directors would have if there were no vacancies.
Article II. Purchase
and Sale
2.1
Purchase and Sale . Subject to Section 2.2,
Seller agrees to sell, transfer, assign, convey and deliver to
Buyer, and Buyer agrees to purchase from Seller, free and clear of
all Encumbrances at the Closing for the consideration specified
below in Article III, all right, title and interest of
Seller in and to the following properties, assets and rights
primarily related to or used or held for use or sale by the Seller
in connection with the Business as they exist on the Closing Date
(collectively, the “Acquired Assets”):
(a)
All machinery, equipment, tools, vehicles, furniture, furnishings,
leasehold improvements, and similar property listed on Schedule
2.1(a), which is attached and incorporated by reference
(collectively, the “Equipment”);
(b)
All inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and
office and other supplies (collectively, the
“Inventories”) wherever held or stored and as listed on
Schedule 2.1(b) to be attached and incorporated by reference as of
the close of business on the day immediately preceding the Closing
Date;
(c)
All of Seller’s rights under all contracts, commitments,
understandings, leases and agreements listed on Schedule 2.1(c)
which is attached and incorporated by reference (collectively, the
“Contracts”), including security deposits related
thereto, Seller’s right to receive payment for products sold
pursuant to, and to receive goods and services pursuant to, such
contracts and to assert claims and take other rightful actions to
enforce the Contracts;
(d)
To the extent permitted by law, all governmental licenses, permits,
approvals, applications or registrations (collectively the
“Permits”);
(e)
Any patents, trademarks, service marks or trade names, copyrights,
websites, domain names, URL’s and customer lists and
databases of Seller, together with all related applications or
registrations listed on Schedule 2.1(e) which is attached and
incorporated by reference (collectively, the “Proprietary
Rights”);
(f)
All trade accounts receivable arising out of the conduct of the
Business by the Seller prior to the Closing as listed on the
Closing Balance Sheet;
(g)
All books, records, manuals and other materials related solely to
the Acquired Assets and the operation of the Business, including
sales and advertising materials, sales and purchase correspondence,
and customer records and files (the “Business Books and
Records”); and
(h)
all cash and cash equivalents in Seller’s account at Bank of
America, Account No. 009442661376, as of the Closing Date, as
adjusted in Seller’s sole discretion for (i) any uncleared
checks and deposits in transit outstanding as of the Closing Date
within five (5) business days after the Closing under customary
bank reconciliation and (ii) such amounts to cover any bank or
credit card fees.
Buyer
acknowledges that it has fully inspected the Acquired
Assets. Except as set forth in Article IV, the tangible
Assets are being sold to Buyer in their present physical condition,
“AS IS,” “WHERE IS,” “WITH ALL
FAULTS,” and WITH NO WARRANTIES, INCLUDING THE IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
with respect to the physical condition of the tangible Acquired
Assets, and subject to normal wear and tear on the Acquired Assets
up to the Closing Date.
2.2
Excluded Assets . For the avoidance of doubt, the
following are not included in the Acquired Assets and Seller is not
selling and Buyer is not purchasing or assuming any obligations
with respect to the following assets of Seller (the “
Excluded Assets ”), and following Closing, Buyer will
not have any right, title, interest or obligation with respect to
the Excluded Assets:
(a)
Cash or cash equivalents, except as provided in Section
2.1(h);
(b) The
corporate seals, certificates of incorporation, minute books, stock
books, tax returns, books of account or other records having to do
with the corporate organization of Seller and the remaining
operations and businesses conducted by Seller;
(c) The
rights to any of Seller’s claims for any federal, state,
local or foreign tax refunds; and
(d) The
assets, properties or rights relating to the remaining operations
and businesses conducted by Seller and more fully set forth on
Schedule 2.2 attached hereto and incorporated by
reference.
2.3
Assumed Liabilities . Buyer will not assume any
liabilities of Seller, known or unknown, contingent or matured,
except as described on Schedule 2.3 attached hereto and
incorporated by this reference (the “ Assumed
Liabilities ”).
2.4
Closing . The Closing shall take place on the
Closing Date at the offices of Seller, or at such other place or at
such other time as Buyer and Seller shall agree. The
parties agree that in the event they do not meet physically to
close this transaction that faxed and couriered executed documents
shall be acceptable to close this transaction.
(a)
On the Closing Date Seller shall deliver to Buyer the
following:
(i)
One or more instruments of assignment and bills of sale dated the
Closing Date, in form and substance reasonably satisfactory to
Buyer, conveying to Buyer all of Seller’s right, title and
interest in and to the Acquired Assets.
(ii)
A Registration Rights Agreement, in the form attached hereto as
Exhibit D, executed on behalf of DSS and Seller.
(iii) A
Voting Agreement, in the form attached hereto as Exhibit E,
executed on behalf of DSS.
(iv) Pledge
Agreements, in the form attached hereto as Exhibit F, executed on
behalf of DSS and Lester Levin Inc.
(v)
Closing Balance Sheet, attached hereto as Schedule
2.4(a)(v).
(b) On
the Closing Date Buyer shall deliver to Seller the
following:
(i)
The Purchase Price specified in Section 3.1 below by delivery of
certificates representing the IMS Common Stock (defined below)
issuable to DSS hereunder.
(ii)
A certificate of an officer duly authorized to provide the same,
together with true and correct copies of a resolution of the Board
of Directors of Buyer authorizing Buyer to enter into and
consummate the transactions contemplated by this Agreement and
certified Certificate of Incorporation and By-Laws of Buyer,
together with a Good Standing Certificate issued by the State of
Delaware, and the names of the other officer or officers of Buyer
authorized to sign this Agreement, together with a sample of the
true signature of each such officer.
(iii)
An opinion of counsel to Buyer, dated the Closing Date and
addressed to Seller, in form and substance satisfactory to
Seller.
(iv)
A Registration Rights Agreement, in the form attached hereto as
Exhibit D, executed on behalf of Buyer.
(v)
A Voting Agreement, in the form attached hereto as Exhibit E,
executed on behalf of Buyer and the IMS Stockholders.
(vi)
Pledge Agreements, in the form attached hereto as Exhibit F,
executed on behalf of the IMS Stockholders.
(vii) A
Lock-Up Agreement, in the form attached hereto as Exhibit G,
executed on behalf of the IMS Stockholders.
(viii)
the original stock certificates issued to Buyer’s
shareholders representing the IMS Common Stock shares pledged under
the Pledge Agreements, to be held by an escrow agent of
Seller’s choice.
(ix)
an assignment and assumption agreement with respect to the Assumed
Liabilities, in the form attached hereto as Exhibit H.
(c) On
the Closing Date, Seller and Buyer shall deliver to each other the
agreements which are required to be executed and delivered under
the terms and conditions of this Agreement and in the form attached
to this Agreement.
Article
III. Consideration
3.1
Purchase Price . In consideration of the sale and
transfer of the Acquired Assets, on the Closing Date, Buyer shall
issue to Seller’s designee, Document Security Systems, Inc.,
a New York corporation (“DSS”), 7,500,000 shares of
newly-issued common stock, par value $.001 per share, of Buyer
(“ IMS Common Stock ”) (the “ Purchase
Price ”), which DSS intends to distribute as part of this
transaction in accordance with applicable securities
laws.
3.2
Legend on IMS Common Stock Certificate . Each
certificate representing shares issued pursuant to this Agreement
shall be endorsed with the following legend:
“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE
UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT EXEMPTIONS FROM SUCH REGISTRATION
ARE AVAILABLE.”
3.3
Allocation of Purchase Price . The Purchase Price
shall be allocated among the Acquired Assets in the manner set
forth in Schedule 3.3. T