ASSET PURCHASE AGREEMENT

EXHIBIT 2.1

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 ”).

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:

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.

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.

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.  The Purchase Price shall be deemed for all purposes (e.g., those relating to Taxes and tax returns of any kind whatsoever, including, without limitation, Internal Revenue Service Form 8594) to be allocated in accordance with the allocation schedule to be mutually prepared by Buyer and Seller and attached hereto as Schedule 3.3 within sixty (60) days after the Closing Date.  Neither Buyer, Seller nor any of their affiliates shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with such allocation unless required to do so by applicable law.

As a material inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Seller represents and warrants to Buyer as follows:

4.1            Organization, Qualification and Authority .  The Seller is a corporation duly organized and validly existing under the laws of the State of New York, and is in good standing and duly qualified to do business as a foreign corporation in all jurisdictions where the operation of its respective business or the ownership of its respective properties make such qualification necessary.  Seller has full power and authority to own, lease and operate their facilities and assets as presently owned, leased and operated, and to carry on their business as they are now being conducted.  Seller owns no capital stock, security, interest or other right, or any option or warrant convertible into the same, of any Person.  The shareholders of Seller as of the date hereof are set forth on Schedule 4.1 .  Seller has the full right, power and authority to execute, deliver and carry out the terms of this Agreement and all documents and agreements necessary to give effect to the provisions of this Agreement and to consummate the transactions contemplated hereby.  The execution, delivery and consummation of this Agreement, and all other agreements and documents executed in connection herewith by Seller, have been duly authorized by all necessary action on the part of Seller.  No other action, consent or approval on the part of Seller or any other Person or entity is necessary to authorize each of Seller’s due and valid execution, delivery and consummation of this Agreement and all other agreements and documents executed in connection herewith.  This Agreement and all other agreements and documents executed in connection herewith by Seller, upon due execution and delivery thereof, shall constitute the valid and binding obligations of Seller, enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by general principles of equity.

4.2            No Violations .  Except as set forth on Schedule 4.2 attached hereto, the execution and delivery of this Agreement and the performance by Seller of their obligations hereunder, to the best knowledge of Seller (i) do not and will not conflict with or violate any provision of the articles of incorporation, bylaws, or similar organizational documents of Seller, and (ii) do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in the creation of any Encumbrance upon the capital stock or assets of Seller pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative, arbitration or governmental body or other third party pursuant to, any law, statute, rule or regulation or any contract, judgment or decree to which Seller is subject or by which any of its assets are bound.

4.3            Real Property .  Seller does not own any real property, but does lease real property located at 320 North Goodman Street, Suite 209, Rochester, New York 14607.

4.4            Personal Property .  Seller has good and marketable title to the Acquired Assets free and clear of all Encumbrances.

4.5            Contracts .  Except as set forth on Schedule 2.1, Seller is not a party to any contract in which the Acquired Assets are subject.

4.6            Litigation .  Except as set forth on Schedule 4.6 (for which Buyer assumes no liability), Seller has not received notice of any violation of any law, rule, regulation, ordinance or order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, legislation and regulations applicable to environmental protection, civil rights, public health and safety and occupational health).  Except as set forth on Schedule 4.6 (for which Buyer assumes no liability), there are no lawsuits, proceedings, actions, arbitrations, governmental investigations, claims, inquiries or proceedings pending or, to each of the Seller’s knowledge, threatened involving Seller, any of the Acquired Assets or the Business, and no reasonable basis exists for the bringing of any such claim.  At Closing, Seller shall indemnify and hold Buyer harmless from any Losses incurred by Buyer as a result of the litigation described on Schedule  4.6 .

4.7            Intellectual Property .  All Proprietary Rights owned by Seller, and used in connection with the Business are listed and described in Schedule 4.7 .  No proceedings have been instituted or are pending or, to each of the Seller’s knowledge, threatened which challenge the validity of the ownership by Seller of any such Proprietary Rights.  Other than to Buyer, Seller has not licensed anyone to use any such Proprietary Rights and, to each of the Seller’s knowledge, there has been no use or infringement of any of such Proprietary Rights by any other person.

4.8            Insurance .  Seller has in effect and has continuously maintained insurance coverage for all of its operations, personnel and assets, and for the Acquired Assets and the Business.  A complete and accurate list of all such insurance policies is set forth in Schedule 4.8 , which policies have previously been provided to Buyer.   Schedule 4.8 also sets forth a summary of Seller’s current insurance coverage (listing type, carrier and limits), and includes a list of any pending insurance claims relating to Seller.  Seller is not in default or breach with respect to any provision contained in any such insurance policies, nor has Seller failed to give any notice or to present any claim thereunder in due and timely fashion.

4.9            Environmental Laws .  All of the Permits required under Environmental Laws for the operation of the Business have been obtained and maintained in effect in good standing by Seller.  No material change in the facts or circumstances reported or assumed in the applications for such Permits exists. Seller is in compliance, and at all times has complied, with all Environmental Laws applicable to the operations associated with the Business and each of the properties currently owned, leased or operated by Seller (the “Real Property”) and each of the properties formerly owned, leased or operated by Seller (the “Former Real Property”) and with all of the Permits.  Seller is not aware of any violation with respect to any of the Permits, which violations are outstanding or uncured as of the date hereof, and no proceeding is pending, or to Seller’s knowledge, threatened, to revoke or limit any of the Permits.

Seller has not performed or suffered any act which could give rise to, or has otherwise incurred, liability to any Person, including itself, under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”) or any of the Environmental Laws, nor does Seller have notice of any such liability or any claim therefor or submitted notice pursuant to Section 103 of CERCLA to any Governmental Authority nor provided information in response to a request for information pursuant to Section 104(e) of CERCLA or any analogous state or local information gathering authority.

Since November 2005, no Hazardous Substances has been released, placed, dumped, disposed of, manufactured, stored or otherwise come to be located in, on, at, beneath or near any of the Real Property or the Former Real Property or any surface waters or groundwaters thereon or thereunder in excess of the levels prescribed or permitted under Environmental Laws.

To Seller’s knowledge, there have been and are no aboveground or underground storage tanks, polychlorinated biphenyls or asbestos-containing materials located at or within the Real Property or the Former Real Property.

To Seller’s knowledge, none of the Real Property or the Former Real Property is identified or proposed for listing on the National Priorities List under 40 C.F.R. § 300 Appendix B, the Comprehensive Environmental Response Compensation and Liability Inventory System (“CERCLIS”) or any analogous list of any Government Authority and Seller is not aware of any conditions on such properties which, if known to a Governmental Authority, would qualify such properties for inclusion on any such list.

None of the Real Property or the Former Real Property, or any current or previous business operations conducted by Seller, is the subject of any pending or threatened investigation or judicial or administrative proceeding, notice, decree or settlement respecting any actual, potential or alleged violation of any Environmental Law, or any Releases of Hazardous Substances into any surface water, ground water, drinking water supply, soil, land surface or subsurface strata, or ambient air (the “Environment”). Seller has not received from any Governmental Authority, insurance company or other Person, any request for information that Seller is the subject of an investigation under Environmental Laws, notice of any potential or alleged violations of any Environmental Laws or of any proposed order under any Environmental Laws or any order or proposed order requiring any of such parties to prepare studies, action plans, or clean-up strategies in respect of an Environmental Condition on any of the Real Property or the Former Real Property.  Seller has not received notice of any inquiry or investigation by any Person concerning matters regulated by Environmental Laws.

Seller has not reported any violation of any applicable Environmental Laws to any Governmental Authority.  Since November 2005, no Releases have occurred on any of the Real Property or Former Real Property which would require reporting to any Governmental Authority under any Environmental Laws.

Seller has not sent, transported, or directly arranged for the transport of any garbage, solid waste or Hazardous Substances, whether generated by Seller or another Person, to any site listed on the National Priorities List or proposed for listing on the National Priorities List or to a site included on the CERCLIS list or any analogous state list of sites.

There is not now, nor to Seller’s knowledge has there ever been, on or in any Real Property or Former Real Property, any generation, treatment, recycling, storage or disposal of any hazardous waste, as that term is defined under 40 C.F.R. Part 261 or any state or foreign equivalent, except in accordance with Environmental Laws.

“Hazardous Substances” means and includes any flammable explosives, radioactive materials or hazardous, toxic or dangerous wastes, substances or related materials or any other chemicals, materials or substances, exposure to which is prohibited, limited or regulated by any federal, state, county, regional or local authority including, but not limited to, asbestos, PCBs, pe