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EXHIBIT 2.1

 

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

 

 

 

 

Page

ARTICLE I.

DEFINITIONS

  1

 

1.1

Definitions

  1

ARTICLE II.

PURCHASE AND SALE

  4

 

2.1

Purchase and Sale

  4

 

2.2

Excluded Assets

  5

 

2.3

Assumed Liabilities

  6

 

2.4

Closing

  6

ARTICLE III.

CONSIDERATION

  7

 

3.1

Purchase Price

  7

 

3.2

Legend on IMS Common Certificate

  7

 

3.3

Allocation of Purchase Price

  8

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF SELLER

  8

 

4.1

Organization, Qualification and Authority

  8

 

4.2

No Violations

  8

 

4.3

Real Property

  9

 

4.4

Personal Property

  9

 

4.5

Contracts

  9

 

4.6

Litigation

  9

 

4.7

Intellectual Property

  9

 

4.8

Insurance

  9

 

4.9

Environmental Laws

  10

 

4.10

Tax Returns; Taxes

  12

 

4.11

Affiliate Interests

  12

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF BUYER

  12

 

5.1

Organization, Qualification and Authority

  12

 

5.2

No Violations

  13

 

5.3

Broker’s or Finder’s Fee

  13

 

5.4

Working Capital

  13

 

5.5

IMS Common Stock

  13

 

5.6

Capitalization

  14

 

5.7

Contracts and other Commitments

  14

 

 

 


 

 

Table of Contents

 

 

 

 

Page

 

5.8

Registration Rights

  14

 

5.9

Litigation

  14

 

5.10

Absence of Borrowed Indebtedness and Assets; Unclosed Liabilities

  14

 

5.11

Material Liabilities

  15

 

5.12

Environmental Laws

  15

 

5.13

Tax Returns; Taxes

  15

 

5.14

Disclosure

  15

ARTICLE VI.

CERTAIN COVENANTS

  16

 

6.1

Further Assurances

  16

 

6.2

Board of Directors

  16

 

6.3

Working Capital

  16

 

6.4

Registration of Shares

  16

 

6.5

Certain Employee Matters

  16

 

6.6

Extension of Health and Dental Insurance

  16

 

6.7

Non-Competition, Non-Disclosure, Non-Solictation

  17

 

6.8

Corporate Existence

  18

 

6.9

Certain Negative Covenants; Misc.

  19

 

6.10

D&O Insurance

  20

ARTICLE VII.

INDEMNIFICATION

  20

 

7.1

Indemnification

  20

 

7.2

Indemnification Procedures – Third Party Claims

  21

 

7.3

Indemnification Procedures – Other Claims, Indemnification Generally

  22

ARTICLE VIII.

MISCELLANEOUS

  23

 

8.1

Publicity

  23

 

8.2

Entire Agreement

  23

 

8.3

Notices

  23

 

8.4

Non-Assignable Assets

  24

 

8.5

Waivers and Amendments

  24

 

8.6

Survival

  24

 

8.7

Counterparts

  25

 

8.8

Governing Law; Severability

  25

 

 

 


 

 

Table of Contents

 

 

 

 

Page

 

8.9

Assignment

  25

 

8.10

Negotiated Agreement

  25

 

8.11

Expenses; Taxes

  25

 

8.12

Third Party Beneficiary

  25

 

8.13

Headings

  26

 

 

 


 

 

EXHIBITS

 

Exhibit A

Copyrights and Trademarks

Exhibit B

Form of Assignment of Domain Name

Exhibit C

Form Bill of Sale

Exhibit D

Form Registration Rights Agreement

Exhibit E

Form Voting Agreement

Exhibit F

Form Stock Pledge and Escrow Agreement

Exhibit G

Form Lock-Up Agreement

Exhibit H

Assignment and Assumption Agreement

 

SCHEDULES

 

Schedule 2.1(a)

Equipment

Schedule 2.1(b)

Inventory

Schedule 2.1(c)

Contracts

Schedule 2.1(e)

Proprietary Rights

Schedule 2.1 (f)

Trade Accounts Receivable

Schedule 2.1(h)

Cash and Cash Equivalents

Schedule 2.2

Excluded Assets

Schedule 2.3

Assumed Liabilities

Schedule 2.4(a)(v)

Closing Balance Sheet

Schedule 3.3

Purchase Price Allocation

Schedule 4.1

Shareholders of Seller

Schedule 4.2

Consent

Schedule 4.6

Litigation

Schedule 4.7

Intellectual Property

Schedule 4.8

Insurance

Schedule 4.11

Affiliate Interests

Schedule 5.6

IMS Stockholders

 

 

 


 

 

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).

 

 

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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.

 

 

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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;

 

 

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(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

 

 

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(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.

 

 

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(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.”

 

 

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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


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