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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this
"
Agreement ")
is made and entered into as of November 15, 2007, by and between
EncryptaKey, Inc., a New Jersey Corporation ("
Seller "),
and EncryptaKey, Inc., a Nevada corporation ("
Buyer ").
RECITALS
WHEREAS, Buyer
desires to purchase from Seller, and Seller desires to sell to
Buyer, certain assets, pursuant to the terms and subject to the
conditions set forth herein.
NOW THEREFORE, Seller
and Buyer agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Defined Terms .
As used herein, the terms below shall have the following
meanings:
"
Acquired Assets "
shall mean the assets of the Seller set forth on
Schedule A, B, and C hereto
.
"
Action "
shall mean any action, claim, suit, arbitration, inquiry, subpoena,
discovery request, proceeding or investigation, or threat thereof,
by or before any court or grand jury, any governmental or other
regulatory or administrative agency or commission or any
arbitration tribunal.
"
Affiliate "
shall mean, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control
with such Person and any member, general partner, director, officer
or employee of such Person. For purposes of this definition of
Affiliate, "control" shall mean the power of one or more Persons to
direct the affairs of the Person controlled by reason of ownership
of voting stock, contract or otherwise.
"
Damages "
shall mean any and all costs, losses, damages, liabilities,
demands, claims, suits, actions, judgments, causes of action,
assessments or expenses, including interest, penalties, fines and
attorneys' fees incident thereto, incurred in connection with any
claim for indemnification arising out of this Agreement, and any
and all amounts paid in settlement of any such claim.
"
Intellectual Property "
shall mean all copyrights, copyright registrations, proprietary
processes, trade secrets, license rights, specifications, technical
manuals and data, drawings, inventions, designs, patents, patent
applications, mask works, tradenames, trademarks, service marks,
product information and data, know-how and development
work-in-progress, customer lists, software, business correspondence
and marketing plans and other intellectual or
intangible
property that comprise or are necessary to the use of the
Acquired Assets, whether pending, applied for or issued,
whether filed in the United States or in other countries,
including, without limitation, all associated goodwill; all
things authored, discovered, developed, made, perfected,
improved, designed, engineered, acquired, produced, conceived
or first reduced to practice by Seller or any of its employees
or agents that are embodied in, derived from or relate to the
Acquired Assets, in any stage of development, including,
without limitation, modifications, enhancements, designs,
concepts, techniques, methods, ideas, flow charts, coding
sheets, notes and all other information relating to the
Acquired Assets.
"
Knowledge "
shall mean an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually
aware of such fact or other matter or if a prudent individual could
be expected to discover or otherwise become aware of such fact or
other matter in the course of conducting a diligent and
comprehensive investigation concerning the truth or existence of
such fact or other matter. Seller shall be deemed to have
"Knowledge" of a particular fact or other matter if any officer or
other representative of Seller has Knowledge of such fact or other
matter.
"
Person "
shall mean any person or entity, whether an individual, trustee,
corporation, general partnership, limited partnership, trust,
unincorporated organization, limited liability company, business
association, firm, joint venture, or governmental agency or
authority.
"
Taxes "
shall mean all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in
respect thereof, (i) imposed by any federal, territorial, state,
local or foreign government or any agency or political subdivision
of any such government, for which Buyer could become liable as
successor to or transferee of the Acquired Assets or which could
become a charge against or lien on the Acquired Assets
,
which
taxes shall include, without limiting the generality of the
foregoing, all sales and use taxes, ad valorem taxes, excise taxes,
business license taxes, occupation taxes, real and personal
property taxes, stamp taxes, environmental taxes, real property
gains taxes, transfer taxes, payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes
and other governmental charges, and other obligations of the same
or of a similar nature to any of the foregoing, which are required
to be paid, withheld or collected, or (ii) any liability for
amounts referred to in (i) as a result of any obligations to
indemnify another person.
ARTICLE II.
PURCHASE AND SALE OF ACQUIRED ASSETS
2.1
Transfer of Acquired Assets .
Pursuant to the terms and subject to the
conditions
of this Agreement, in exchange for the consideration set forth
in
Section
2.2 below, at the Closing, Seller shall sell, assign and deliver to
Buyer, and Buyer shall
purchase
from Seller, the Acquired Assets .
2.2
Purchase Price/ Payment Procedure
.
As consideration for the Acquired Assets, Buyer shall tender Seller
an amount equal to Six Hundred Thirty Six Thousand One
Hundred
Twenty (636,120) shares of common stock of Seller as well as
Buyer’s rights to any and all open, promised or unissued
shares of Seller (the “
Purchase Price ”),
payable as follows:
(a)
At
the Closing, Buyer shall deliver, or cause to be delivered, to
Seller a stock certificate representing the Six Hundred and
Thirty Six Thousand One Hundred and Twenty (363,120) shares of
common stock of Seller.
As
consideration for the Acquired Assets, Buyer shall tender to
Seller, as follows:
(a) At the Closing, Buyer
shall deliver, or cause to be delivered, to Seller a stock
certificate representing to Six Hundred and Thirty Six
Thousand One Hundred and Twenty (636,120) shares of common
stock of seller;
(b)
All
Buyer’s rights to any and all open, promised or unissued
shares of Seller
2.3 Assets Excluded; Liabilities
Not Assumed . Seller shall not sell nor Buyer purchase
any assets other than the Acquired Assets and, and Seller shall not
be required to, assume or be obligated to pay, discharge or
perform, any debts, liabilities, adverse claims or obligations of
any kind or nature whatsoever of Seller, whether in connection with
the Acquired Assets or otherwise and whether arising before or
after the consummation of the transactions contemplated herein, or
bear any cost or charge with respect thereto. Buyer shall assume or
be obligated to pay, discharge or perform, all debts, liabilities,
adverse claims or obligations of any kind or nature whatsoever of
Seller, in connection with the Acquired Assets arising before the
consummation of the transactions contemplated herein as listed in
Exhibit “D” with the exception of the legal fees of the
law firm Cane and Clark, the auditor’s fees and the
accounting fees.
ARTICLE III.
CLOSING
3.1
Closing .
The closing of the transactions contemplated herein (the "
Closing ")
shall occur on November 16, 2007, or at such other time and place
as the parties may agree (the "
Closing Date ")
,
provided
that all of the Closing conditions set forth in Section 3.3 hereof
shall have occurred.
3.2
Deliveries .
Together with an executed counterpart of this Agreement, the
following items shall be delivered by the parties at the
Closing:
(a)
By Buyer .
Buyer shall deliver a certificate in an amount equal to Six Hundred
and Thirty Six Thousand One Hundred and Twenty (636,120) share of
common stock of Seller as well as Buyer’s relinquishment of
any rights to any and all open, promised or unissued shares of
Seller
(b)
By Seller .
Seller shall deliver to Buyer:
(i)
This
executed document representing the Bills of Sale, in form and
substance satisfactory to Buyer and sufficient to convey the
Acquired Assets to Buyer;
(ii)
Such
electronic and paper copies and representations of the
Intellectual Property as may in Buyer’s reasonable
judgment are necessary to convey the Intellectual Property to
Buyer;
(iii)
an
Assignment of Seller’s rights in the patent application
pending before the Patent and Trademark Office as application
no. 60745514, filed by Kelly Owen on or about April 24, 2006
titled “Invisidesk Private Communication, Authentication
and Connection Portal”; and
(iv)
Such
other documents and instruments as are reasonably necessary to
consummate the transactions contemplated hereby.
3.3
Conditions to Closing .
Buyer and Seller shall not be obligated to consummate the Closing
and the transactions contemplated hereby and may terminate this
Agreement without incurring any liability unless (a) Buyer has
delivered the items specified in Section 3.2(a) and Seller has
delivered the items specified in Section 3.2(b) .
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller
represents and warrants to Buyer that:
4.1
Organization .
Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of New
Jersey and has full power and authority to own, lease and operate
its properties and to carry on its business as it is now being
conducted. Seller is duly qualified or licensed as a foreign
limited liability company to do business, and is in good standing,
in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for failures to be so
qualified or licensed and in good standing that would not,
individually or in the aggregate, affect the Acquired Assets in a
materially adverse manner.
4.2
Authorization .
Seller has all necessary power and authority and has taken all
action necessary to enter into this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by
Seller and is a valid and binding obligation of Seller, enforceable
against it in accordance with its respective terms subject to the
effect of applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the
rights of creditors generally and limitations imposed by equitable
principles, whether considered in a proceeding at
law
or in equity, and the discretion of the court before which any
proceeding therefore may be brought.
4.3
Brokers .
All negotiations relating to this Agreement and the transactions
contemplated hereby have been conducted without the intervention of
any person or entity acting on behalf of Seller in such a manner as
to give rise to any valid claim against Buyer for any broker's or
finder's commission, fee or similar compensation and Seller shall
indemnify Buyer and hold it harmless from any liability or expense
arising from any claim for brokerage commissions, finder's fees or
other similar compensation based on any agreement, arrangement or
understanding made by or on behalf of Seller.
4.4
Litigation, Proceedings and Applicable Law
.
There are no Actions, suits, investigations or proceedings, at law
or in equity or before or by any governmental authority or
instrumentality or before any arbitrator of any kind, pending or,
to Seller's Knowledge, threatened (a) against Seller which, if
determined adversely against Seller, would have a material adverse
effect on Seller's or Buyer's ability to use the Intellectual
Property in the manner in which it is now being used by
Seller ,
or
(b) seeking to delay or enjoin the consummation of the transactions
contemplated hereby. To the Knowledge of Seller, there are no
outstanding orders, decrees or stipulations issued by any federal,
state, local or foreign, judicial or administrative authority in
any proceeding to which Seller is or was a party relating to the
Acquired Assets .
4.5
No Conflict Or Violation .
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby or thereby
will result in (a) a violation of or a conflict with any provision
of the Articles of Organization or By-Laws of Seller, (b) a
material breach or termination of, or a material default under, any
term or provision of any contract to which Seller is a party or an
event which, with notice, lapse of time, or both, would result in
any such material breach, such termination or such material
default, or (c) a material violation by Seller of any Legal
Requirement or an event which, with notice, lapse of time or both,
would result in such a material violation.
4.6
Intellectual Property .
(a)
Seller
owns all rights to the Acquired Assets without any conflict or
infringement of the intellectual property rights of others.
All source code included within the Intellectual Property
constitutes a trade secret of Seller and is not part of the
public knowledge or literature, and Seller has taken
reasonable action to protect such source code as a trade
secret. In addition, Seller has taken reasonable steps
(including, without limitation, entering into Confidentiality
Agreements with all officers and employees of and consultants
involved in Seller’s business) to maintain the secrecy
and confidentiality of and its proprietary rights in, all
Intellectual Property.
(b)
(1)
Schedule A lists (i) all patents and patent applications and
all registered copyrights, trade names, trademarks, service
marks and other company, product or service identifiers
included in the Intellectual Property, and specifies the
jurisdictions in which each of the foregoing has been
registered, including the respective registration numbers,
and/or any application for any such registration has been
filed; (ii) all licenses, sublicenses and other agreements as
to which Seller is a party and pursuant to which Seller or any
other Person is authorized to use any Intellectual Property;
and (iii) all licenses under which Seller is or may be
obligated to make royalty or other payments. Copies of all
licenses, sublicenses and other agreements indentified
pursuant to clauses (ii) and (iii) above have been delivered
by Seller to Buyer. (2) Schedule B lists all equipment to be
delivered by Seller to Buyer located in Amsterdam,
Netherlands. (3) Schedule C lists all office equipment located
at 10805 Holder St., Suite 210, Cypress, CA 90630 and located
in Amsterdam, Netherlands to be delivered by Seller to
Buyer.
(c)
Seller
is not in violation in any material respect of any license,
sublicense or agreement described in Schedule A, B or C. As a
result of the execution and delivery of this Agreement or the
performance of Seller's obligations hereunder, neither Seller
nor Buyer shall be in violation in any material respect of any
license, sublicense or agreement described in such
schedule.
(d)
Seller
is the sole owner of all necessary right, title and interest
in and to (free and clear of any liens, encumbrances or
security interests) all non-public domain Intellectual
Property necessary to fully exploit the Acquired Assets and
has full rights to the use, sale, license or disposal thereof.
Except as expressly set forth in Schedule A ,
B,
C no other Person has any rights with respect to any of the
Intellectual Property, nor is any consent or approval of any
third party needed to fully utilize and exploit the Acquired
Assets as presently configured.
(e)
No
claims with respect to the Acquired Assets have been asserted
to Seller, or, to Seller's Knowledge, are threatened by any
person, and Seller knows of no claims (i) to the effect that
Seller infringes any copyright, patent, trade secret, or other
intellectual property right of any third party or violates any
license or agreement with any third party, (ii) contesting the
right of Seller to use, sell, license or dispose of any
Intellectual Property ,
or
(iii) challenging the ownership, validity or effectiveness of
any of the Intellectual Property .
(f)
To
the Knowledge of Seller, all trademarks, service marks, and
other company, product or services identifiers held by Seller
are valid and subsisting worldwide.
(g)
To
the Knowledge of Seller, and except as expressly set forth in
Schedule A, there has not been and there in not now any
unauthorized use, infringement or misappropriation of any of
the Intellectual Property by any third Party. Sell has not
been sued or, to Seller’s Knowledge, charged as a
defendant in any claim, suit, action or proceeding that
involves a claim of infringement of any patents, trademarks,
service marks, copyrights or othe
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