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STOCK PURCHASE AGREEMENT

Purchase and Sale Agreement

STOCK PURCHASE AGREEMENT | Document Parties: STONE CONSULTING SERVICES INC | Yatinoo Inc | Yatinoo International, SA You are currently viewing:
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STONE CONSULTING SERVICES INC | Yatinoo Inc | Yatinoo International, SA

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Title: STOCK PURCHASE AGREEMENT
Governing Law: New York     Date: 11/12/2008

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STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT (the “Agreement") dated November 6, 2008, by and among Stone Consulting Services Inc., a Delaware corporation (the “Buyer”); the stockholders of Yatinoo International, S.A. set forth on Schedule B annexed hereto (each such stockholder is referred to individually as a “Seller” and collectively as the “Sellers”); Yatinoo International, S.A., a Public Limited Company formed in Spain and its subsidiaries (collectively, the “Corporation”); and Khaled Akid, as agent for the Sellers (the “Sellers’ Agent” and the “Exchange Agent”).

 

WITNESSETH :

 

WHEREAS , the Corporation is engaged in activity related to the Internet, in particular, the development and the communication of gates and web sites in the Arabic and African countries regions;

 

WHEREAS , the Sellers own 100% of the issued capital stock (the "Stock") of the Corporation;

 

WHEREAS , the Sellers wish to sell and the Buyer wishes to purchase the Stock on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS , the Boards of Directors of the Buyer and the Corporation have determined that the YI Acquisition (defined in Section 1.1 below) is consistent with and in furtherance of its long-term business strategy and fair to, and in the best interests of the Buyer, the Corporation and their respective stockholders;

 

WHEREAS , in furtherance of YI Acquisition, the parties intend that: (i) the existing Board of Directors and Shareholders of Buyer have approved a 30-for-one forward stock split (“Forward Split”) effective immediately prior to the Closing (defined in Article II) and all references in this Agreement except where otherwise stated give effect to the Forward Split; (ii) simultaneous with the Closing, Michael Stone, the President of Buyer (the “Stone Principal”) and/or his designees shall return to Stone for cancellation all but 600,000 shares of the Stone Principal’s shares; (iii) the existing officers and directors of Buyer will resign and be replaced with the Sellers’ designees; (iv) the existing business, assets and liabilities of Buyer will be spun off or otherwise transferred to the Stone Principal or his designees; and (v) Buyer will change its corporate name to “Yatinoo, Inc.” or as otherwise designated by the Sellers’ Agent; and

 

WHEREAS , the parties have determined that it is in their respective best interests to consummate the YI Acquisition and to undertake such other actions as described herein, all on the terms and subject to the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, representations, warranties and covenants appearing in this Agreement, the parties hereto agree as follows:

 


 

ARTICLE I

Sale and Purchase of the Stock.

 

1.1.   YI Acquisition . Upon the terms and subject to the conditions set forth in this Agreement, including, but not limited to, the condition precedent that all deliveries pursuant to Article VI have been satisfied, at the Closing the Sellers shall sell, transfer and deliver to the Buyer, and the Buyer shall purchase (the “YI Acquisition”) from the Sellers, the Stock, which constitutes one hundred percent (100%) of the issued and outstanding shares of capital stock of the Corporation, as set forth in Schedule B annexed hereto, free and clear of all liens, mortgages, deeds of trust, security interests, pledges, charges, encumbrances, liabilities and claims of every kind.

 

1.2.   Purchase Price . The purchase price of FOURTEEN MILLION FOUR HUNDRED THOUSAND (14,400,000) restricted shares (the "Purchase Price") of $.001 par value Common Stock of the Buyer (the “Buyer’s Shares”), payable by the Buyer to the Sellers for the Stock, shall be delivered to the Exchange Agent on behalf of the subscribers (“Subscribers”) in the amounts set forth opposite each Subscriber’s name on Schedule A annexed hereto. The Purchase Price shall be equal to forty-eight (48%) percent of the issued and outstanding capital stock of Buyer immediately post closing and post Forward Split.

 

1.3.   Appointment of Exchange Agent . The Subscribers shall designate Khaled Akid to act as Exchange Agent for the Subscribers in connection with the YI Acquisition to receive in trust for the Subscribers, in accordance with the amount of Buyer’s Shares set forth on Schedule A for each Subscriber, to which the Subscribers shall become entitled pursuant to this Agreement. If Khaled Akid becomes unable to serve as Exchange Agent, another Subscriber or other person, as may be designated by a majority of the Subscribers, shall succeed as the Exchange Agent.

 

1.4.   Exchange of Corporation Certificates . In consideration of the Purchase Price, the Exchange Agent shall surrender at the Closing certificates with stock powers endorsed in blank (the “Certificates”) for the Stock of the Corporation. Until surrendered as contemplated by this Section 1.4, each Certificate shall be deemed at any time after the Closing to represent only the right to receive its pro rata portion of the Purchase Price as contemplated by Section 1.2 hereof.

 

1.5.   Options, Warrants and Treasury Stock . All outstanding options, warrants and other convertible securities and any Stock owned and treasury stock of the Corporation, shall be surrendered at the Closing and retired by the Corporation. All securities of the Corporation other than the Stock shall be cancelled without payment of any consideration therefore and shall cease to exist.

 

1.6.     Transfer Books; No Further Ownership Rights in the Stock . At the Closing, the stock transfer books of the Corporation shall be closed, and thereafter there shall be no further registration of transfers of the Stock on the records of the Corporation by the Sellers. From and after the Closing, the holders of Certificates evidencing ownership of the Stock outstanding immediately prior to the Closing shall cease to have any rights with respect to such Stock, except as otherwise provided for herein or by applicable law. If, after the Closing, Certificates are presented to the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Section 1.6.

 

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1.7.   Directors and Officers . At the Closing, the officers of the Corporation immediately prior to the Closing shall be the officers and directors of the Buyer until the expiration of their respective terms and until their successors have been elected and qualified. Frank Magliochetti and/or his designees shall have the right to appoint two members out of six of the Board of Directors of Buyer at the Closing and the Sellers shall have the right to appoint four members, subject to Yatinoo, Inc. accepting such nominations for a period until the later of (i) 12 months following the Closing of the YI Acquisition or (ii) the next annual meeting of shareholders following the YI Acquisition. Pursuant to Section 6.2 below, Buyer shall deliver to the Sellers a certified copy of Board of Directors resolutions electing the aforementioned six (6) member Board of Directors and accepting the resignation of all existing officers and directors of the Buyer.

 

1.8.   Buyer Forward Split . Prior to the Closing, the Board of Directors and a majority of the stockholders of Buyer shall have authorized a 30-for-one forward split of all of Buyer’s outstanding shares of Common Stock and an increase in the number of authorized shares of Common Stock to 500 million shall have been made effective by filing a Certificate of Amendment to the Buyer’s Certificate of Incorporation with the Secretary of State of Delaware.

 

1.9.   Cancellation of Buyer Shares . Michael Stone, the Stone Principal, and/or his designees, shall surrender for cancellation at the Closing certificates with stock powers endorsed in blank for cancellation at the Closing respecting an aggregate of 134,400,000 post-Forward Split shares of a total 135,000,000 restricted shares issued and outstanding of the Buyer for payment to the Stone Principal of $200,000 consideration therefore and such shares shall cease to exist. Payment to the Stone Principal shall be made at the closing by a cash payment of $120,000 and a full recourse promissory note in the amount of $80,000 from Joy Terrace Capital Incorporated (“JTC”) and personally guaranteed by Frank Magliochetti. The forms of Promissory Note and Guaranty Agreement are attached hereto as Exhibits A and B , respectively.

 

1.10.   Spin-Off of Buyer’s Business . At and as of the Closing, Buyer shall transfer all of the assets, liabilities and business that exist immediately before the Closing to either Michael Stone or an entity designated by Michael Stone. This transaction shall be evidenced by an Assumption of Assets and Liabilities Agreement in the form attached hereto as Exhibit C .

 

1.11.   Additional Actions . If at any time after the Closing, the Buyer shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Buyer its right, title or interest in, to or under any of the rights, properties or assets of the Corporation or otherwise carry out this Agreement, the officers and directors of the Buyer shall be authorized to execute and deliver, in the name and on behalf of Corporation or the Buyer, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of Corporation or the Buyer, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Buyer or otherwise to carry out this Agreement.

 

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ARTICLE II

Closing

 

The closing of the sale and purchase of the Stock provided for in Section 1 of this Agreement (the "Closing") shall take place at the offices of Phillips Nizer LLP, 666 Fifth Avenue, New York, New York 10103 at 10:00 a.m. (E.S.T) on or before November 30, 2008 (the "Closing Date") or at such other date, time or location as may be mutually agreed upon in writing by the parties. All proceedings to be taken and all documents to be executed at the Closing, including this Agreement, shall be deemed to have been taken, delivered and executed simultaneously, and no proceeding shall be deemed taken nor documents deemed executed or delivered until all have been taken, delivered and executed.

 

ARTICLE III

Representations and Warranties of the Sellers

 

Each of the Sellers hereby severally and not jointly, warrants and represents to the Buyer as follows (as used herein, "Seller’s best knowledge" or "to the best knowledge of the Seller" shall mean information actually known by the Sellers without due inquiry):

 

3.1.   Ownership of Shares . The Sellers are the owners, beneficially and of record, of the Stock, which constitutes one hundred percent (100%) of the issued and outstanding shares of capital stock of the Corporation. The Stock is the sole voting stock of the Corporation and is duly authorized, validly issued, fully paid and non-assessable. The Stock has not been pledged, mortgaged or otherwise encumbered in any way and there is no lien, mortgage, charge, claim, liability, security interest or encumbrance of any nature against the Stock. There are no options, warrants, rights of subscription or conversion, calls, commitments, agreements, arrangements, understandings, plans, contracts, proxies, voting trusts, voting agreements or instruments of any kind or character, oral or written, to which the Sellers or the Corporation is a party, or by which the Sellers or the Corporation is bound, relating to the issuance, voting or sale of the Stock or any authorized but unissued shares of capital stock of the Corporation or of any securities representing the right to purchase or otherwise receive any such shares of capital stock. There are no stockholders agreements, preemptive rights or other agreements, arrangements, groups, commitments or understandings, oral or written, that have not been disclosed to the Buyer, relating to the voting, issuance, acquisition or disposition of shares of the Corporation or the conduct or management of the Corporation by its Board of Directors. The Sellers have, and at the Closing shall have, good and marketable title to the Stock and full right to transfer title to the Stock, subject to any restrictions imposed by state or federal securities laws, free and clear of all liens, mortgages, charges, liabilities, claims, security interests or encumbrances of every type whatsoever. The sale, conveyance, transfer and delivery of the Stock by the Sellers to the Buyer pursuant to this Agreement will transfer full legal and equitable right, title and interest in the Stock to the Buyer, free and clear of all liens, mortgages, charges, claims, liabilities, security interests and encumbrances of any nature whatsoever.

 

3.2.   Capacity, Organization, Standing, Capitalization . The Sellers have full power and authority to enter into and perform under this Agreement and all other agreements and instruments to be entered into in connection with the transactions contemplated hereby, and to consummate such transactions, and, no other consent or joinder of any other persons or corporations is required to consummate such transactions. Except as set forth on Schedule 3.2 of this Agreement, the Corporation has no subsidiaries. This Agreement has been, and each of the other agreements and instruments executed hereunder (the "Other Agreements") will at the Closing, be duly executed and delivered by the Sellers. This Agreement constitutes, and each of the Other Agreements will constitute, the legal, valid and binding obligation of the Sellers enforceable in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights generally or by general equitable principles.

 

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3.3.   Conflicts . Neither the execution and delivery of this Agreement or any of the other agreements to which such Seller is a party, nor the consummation or performance of the YI Acquisition will, directly or indirectly (with or without notice or lapse of time):

 

(a)   contravene, conflict with or result in a violation of any Legal Requirement or any Order to which such Seller, or the Corporation is subject; or

 

(b)   contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Corporation;

 

except for any such contravention, conflict or violation which would not reasonably be expected to make illegal or materially delay or impair the consummation of the YI Acquisition, or

 

(c)   (i) conflict with or result in a violation or breach of (ii) constitute (with or without notice or passage of time) a default under (iii) result in or give any person the right of termination, cancellation, acceleration or modification in or with respect to (iv) result in or give to any person any additional rights under or (v) result in the creation or imposition of an Encumbrance upon the assets of the Corporation under, any Applicable Contract or other arrangement to which the Corporation or any of the Sellers is a party or is bound.

 

3.4.   No Finder’s Fee . The Sellers have not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the YI Acquisition.

 

3.5.   Purchase Entirely for Own Account . The Buyer’s Shares proposed to be acquired by each Seller hereunder will be acquired for investment for its own account, and not with a view to the resale or distribution of any part thereof, and the Seller has no present intention of selling or otherwise distributing the Buyer’s Shares, except in compliance with applicable securities laws.

 

3.6.   Available Information . The Seller has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Buyer.

 

3.7.   Non-Registration . The Seller understands that the Buyer’s Shares have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”) and if issued in accordance with the provisions of this Agreement, will be issued by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Seller’s representations as expressed herein.

 

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3.8.   Restricted Securities . The Seller understands that the Buyer’s Shares are characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Seller pursuant hereto, the Buyer’s Shares would be acquired in a transaction not involving any public offering. The Seller further acknowledges that if the Buyer’s Shares was issued to the Seller in accordance with the provisions of this Agreement, such Buyer’s Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. In this connection, the Seller represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

3.9.   Legends . It is understood that the Buyer’s Shares will bear one or all of the following legends:

 

(a)   “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”

 

(b)   Any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented by the certificate so legended.

 

3.10.   Schedule 13D; Section 16(b). If the number of Buyer’s Shares acquired by any Seller, when aggregated with all other shares of Common Stock of Buyer owned by such Seller at such time would result in Seller beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules thereunder) in excess of 4.99% of the then issued and outstanding Buyer’s Shares and the Buyer’s Shares are then registered under Section 12(g) of the Exchange Act, such Seller shall comply with the disclosure requirements of Schedule 13D and, if such amount exceeds 9.99%, such Seller shall also comply under the reporting obligations of Sections 16(a) and 16(b) of the Exchange Act and the rules promulgated thereunder.

 

ARTICLE IV

Representations and Warranties of the Corporation

 

The Corporation and it Subsidiaries (collectively, the "Corporation") represent, covenant and warrant to Buyer, jointly and severally, as follows:

 

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4.1.   Corporate Organization; Etc . The Corporation and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to engage it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on the Corporation, a material adverse effect on the ability of the Corporation to perform its obligations under this Agreement or on the ability of the Corporation to consummate the YI Acquisition (a " Corporation Material Adverse Effect "). The Corporation and each of its Subsidiaries is duly qualified or licensed to do business as a foreign corporation in good standing in the jurisdictions where the nature of its business or its ownership or leasing of its properties make such qualification necessary except where the failure to so qualify would not reasonably be expected to have a Corporation Material Adverse Effect. The copies of the Organizational Documents and all amendments thereto of the Corporation and its Subsidiaries heretofore delivered to Buyer are complete and correct copies of such instruments as presently in effect.

 

4.2.   Capitalization of Companies . Sellers own in the aggregate all of the issued and outstanding other equity interest of each of the Corporation and the Corporation owns all of the issued and outstanding equity interests of its Subsidiaries, in each case free and clear of all Encumbrances, other than Encumbrances which will be extinguished on or prior to the Closing Date.

 

4.3.   Authority; Execution and Delivery; Enforceability . The Corporation has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the YI Acquisition. The execution and delivery by the Corporation of this Agreement and the consummation" by the Corporation of the YI Acquisition have been duly authorized and approved by the Board of Directors of the Corporation and no other corporate proceedings on the part of the Corporation are necessary to authorize this Agreement and the YI Acquisition. When executed and delivered, this Agreement will be enforceable against the Corporation in accordance with its terms.

 

4.4.   No Conflict . Neither the execution and delivery of this Agreement or any of the Documents nor the consummation or performance of the YI Acquisition will, directly or indirectly (with or without notice or lapse of time):

 

(a)   contravene, conflict with or result in a violation of, or give any Person the right to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Corporation or any of its Subsidiaries is subject;

 

(b)   contravene, conflict with or result in a violation of any of requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by any of the Corporation or its Subsidiaries;

 

(c)   except as set forth in Section 4.4(c) of Corporation’s Disclosure Schedule, and except as required filings with the Securities and Exchange Commission (the " SEC ") and applicable "Blue Sky" or state securities commissions, no material consent, approval, license, permit, order or authorization (" Consent ") of, or registration, declaration or filing with, or permit from, any Governmental Body is required to be obtained or made by or with respect to the Corporation in connection with the execution, delivery and performance of this Agreement or the consummation of the YI Acquisition.

 

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(d)   result in the imposition or creation of any Encumbrance upon or with respect to any of the Assets, except Permitted Encumbrances;

 

4.5.   Financial Statements . The Corporation has heretofore delivered to Buyer and attached hereto as Section 4.5 of Corporation’s Disclosure Schedule and the accompanying financial statements of YATINOO INTERNATIONAL, S.A. and its group, which comprise the consolidated balance sheet as of the 30th of June 2008 (the " Balance Sheet Date ") and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the six months ended June 30, 2008 and the year ended December 31, 2007, and a summary of significant accounting policies and other explanatory notes and those corresponding to the financial year end as of December 31, 2007 (all such financial statements, collectively, the " Consolidated Financial Statements").The Sellers have also delivered to Buyer and attached hereto as Section 4.5 of Corporation’s Disclosure Schedule, the unaudited consolidated balance sheet as of June 30, 2007 and the consolidated income statement and statement of charges in consolidated cash flow for the six months ended June 30, 2007. Except as detailed in the report of Albor Auditors S.L. dated September 5, 2008, the Consolidated Financial Statements give a true and fair view, in all significant aspects, of the consolidated balance sheet position of the company YATINOO INTERNATIONAL and its group, as at 30th of June 2008 and its consolidated results, the changes in equity and cash flows resulting from the financial year ended as of that date, and they contain sufficient and appropriate information for its adequate interpretation and comprehension according to international standards of financial reporting adopted by the European Union (IFRS). The Consolidated Financial Statements attached hereto in Section 4.5 of Corporation’s Disclosure Schedule have been reconciled to U.S. GAAP.

 

4.6.   No Unknown Liabilities, Etc . As of the Balance Sheet Date, the Corporation had no liability or obligation of any nature (absolute, accrued, contingent or otherwise) not otherwise disclosed herein which is not fully reflected or reserved against in the Balance Sheet, which, in accordance with IFRS, should have been shown or reflected in the Balance Sheet. There has been no material change in the assets (other than cash) or liabilities (other than tax liabilities calculated in accordance with IFRS) of the Corporation since June 30, 2008.

 

4.7.   Title to Properties; Encumbrances . Except as set forth in Section 4.7(a) of Corporation’s Disclosure Schedule, each of the Corporation and its Subsidiaries has good title to, or in the case of assets held pursuant to a lease or a license, valid and binding leasehold interests or licenses in, the Assets (whether real, personal and mixed, tangible and intangible) which it purports to own including, without limitation, all the properties and assets reflected in the Balance Sheet (except for accounts receivable collected, and properties and assets sold, since the date of the Balance Sheet in the Ordinary Course of Business). Except as set forth in Section 4.7(b) of Corporation’s Disclosure Schedules all such owned Assets are free and clear of all Encumbrances other than Permitted Encumbrances. The Assets presently owned, leased or licensed by the Corporation and its Subsidiaries and described elsewhere in this Agreement include all rights, properties and other assets necessary to permit the Corporation and its Subsidiaries to conduct the Business in all material respects in the same manner as conducted by the Corporation and its Subsidiaries prior to the date hereof.

 

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4.8.   Property, Plant and Equipment . Except as set forth in Section 4.8 of the Corporation’s Disclosure Schedule, the property, plant and equipment of the Corporation and its Subsidiaries are in good operating condition and repair (normal wear and tear excepted) and are reasonably adequate for the uses to which they are being put, and none of such equipment is in need of material maintenance or repairs except for ordinary, routine maintenance and repairs.

 

4.9.   Legal Proceedings .

 

(a)   Except as set forth in Schedule 4.9 of the Corporation’s Disclosure Schedule, neither the Sellers in their capacity as stockholders and/or as officers or directors of the Corporation, nor the Corporation is a party to any pending litigation, arbitration or administrative proceeding or, to the best of Sellers' knowledge, to any investigation, and no such litigation, arbitration or administrative proceeding. or investigation that might result in any material adverse change in the financial condition, business or properties of the Corporation or of the Sellers is threatened.

 

(b)   Except as disclosed in Schedule 4.9 of the Corporation’s Disclosure Schedule, the Sellers and the Corporation have no knowledge of and have not received notice of any complaints, claims or threats, plans or intentions to discontinue commercial relations or transactions from any customer of the Corporation, any purchaser of goods or services from the Corporation, any employee or independent contractor significant to the conduct or operation of the Corporation or its businesses or any party to any agreement to which the Corporation is a party.

 

(c)   Except as disclosed in Schedule 4.9 of the Corporation’s Disclosure Schedule, there is no claim (whether based on statute, negligence, breach of warranty, strict liability or any other theory) relating directly or indirectly to any product manufactured or sold, or any services performed by the Corporation.

 

(d)   Except as disclosed in Schedule 4.9 of the Corporation’s Disclosure Schedule, the Corporation is under no obligation with respect to the return of goods in the possession of customers.

 

4.10.   Encumbrances . Except as disclosed in Schedule 4.10 of the Corporation’s Disclosure Schedule, there are no liens, mortgages. deeds of trust, claims, charges, security interests or other encumbrances or liabilities of any type whatsoever to which any of the assets of the Corporation.

 

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4.11.   Proprietary Rights .

 

(a)   The Corporation owns all right, title and interest in and to, or otherwise possesses legally enforceable rights, or is licensed to use, all patents, copyrights, technology, software, software tools, know-how, processes, trade secrets, trademarks, service marks, trade names, Internet domain names and other proprietary rights used in or necessary for the conduct of the Corporation’s business as conducted to the date of this Agreement, including, without limitation, the technology, information, databases, data lists, data compilations, and all proprietary rights developed or discovered or used in connection with or contained in all versions and implementations of the Corporation's World Wide Web sites or any product which has been or is being distributed or sold by the Corporation or currently is under development by the Corporation or has previously been under development by the Corporation (collectively, including such Web site, the "Yatinoo Products"), free and clear of all liens, claims and encumbrances (including without limitation linking, licensing and distribution rights) (all of which are referred to as "Yatinoo Proprietary Rights"). In addition, the Corporation is not aware of any legal restrictions or impediments that would prevent the Corporation from conducting its business as proposed to conducted in the Corporation’s Business Plan dated July 2008. Section 4.11(a) of the Corporation’s Disclosure Schedule contains an accurate and complete (i) description of all patents, trademarks (with separate listings of registered and unregistered trademarks), trade names, Internet domain names and registered copyrights in or related to the Yatinoo Products or otherwise included in the Yatinoo Proprietary Rights and all applications and registration statements therefor, including the jurisdictions in which each such Yatinoo Proprietary Right has been issued or registered or in which any such application of such issuance and registration has been filed, (ii) list of all licenses and other agreements with third parties (the "Third Party Licenses") relating to any material patents, copyrights, trade secrets, software, inventions, technology, know-how, processes or other proprietary rights that the Corporation is licensed or otherwise authorized by such third parties to use, market, distribute or incorporate in Yatinoo Products (such patents, copyrights, trade secrets, software, inventions, technology, know-how, processes or other proprietary rights are collectively referred to as the "Third Party Technology") and (iii) list of all licenses and other agreements with third parties relating to any material information, compilations, data lists or databases that the Corporation is licensed or otherwise authorized by such third parties to use, market, disseminate, distribute or incorporate in Yatinoo Products. All of the Corporation's patents, copyrights, trademark, trade name or Internet domain name registrations related to or in the Yatinoo Products are valid and in full force and effect; and consummation of the transactions contemplated by this Agreement will not alter or impair any such rights. No claims have been asserted or threatened against the Corporation (and the Corporation is not aware of any claims which are likely to be asserted or threatened against the Corporation or which have been asserted or threatened against others relating to Yatinoo Proprietary Rights or Yatinoo Products) by any person challenging the Corporation's use, possession, manufacture, sale or distribution of Yatinoo Products under any Yatinoo Proprietary Rights (including, without limitation, the Third Party Technology) or challenging or questioning the validity or effectiveness of any material license or agreement relating thereto (including, without limitation, the Third Party Licenses) or alleging a violation of any person's or entity's privacy, personal or confidentiality rights. There is no valid basis for any claim of the type specified in the immediately preceding sentence which could in any material way relate to or interfere with the continued enhancement and exploitation by the Corporation of any of the Yatinoo Products. None of the Yatinoo Products nor the use or exploitation of any Yatinoo Proprietary Rights in its current business infringes on the rights of or constitutes misappropriation of any proprietary information or intangible property right of any third person or entity, including without limitation any patent, trade secret, copyright, trademark or trade name and the Corporation has not been sued in any suit, action or proceeding which involves a claim of such infringement, misappropriation or unfair competition.

 

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(b)   Except as set forth in Section 4.11(b) of the Corporation’s Disclosure Schedule, the Corporation has not granted any third party any right to manufacture, reproduce, distribute, market or exploit any of the Yatinoo Products or any adaptations, translations, or derivative works based on the Yatinoo Products or any portion thereof. The Corporation has not knowingly granted any third party any right to allow users of the Corporation's World Wide Web site to link to other World Wide Web or Internet sites. Except with respect to the rights of third parties to the Third Party Technology, no third party has any express right to manufacture, reproduce, distribute, market or exploit any works or materials of which any of the Yatinoo Products are a "derivative work" as that term is defined in the United States Copyright Act, Title 17, U.S.C. Section 101.

 

(c)   All material designs, drawings, specifications, source code, object code, scripts, documentation, flow charts, diagrams, data lists, databases, compilations and information incorporating, embodying or reflecting any of the Yatinoo Products at any stage of their development (the "Yatinoo Components") were written, developed and created solely and exclusively by employees of the Corporation without the assistance of any third party or entity or were created by third parties who assigned ownership of their rights to the Corporation by means of valid and enforceable consultant confidentiality and invention assignment agreements, copies of which have been delivered to Buyer. The Corporation has at all times used commercially reasonable efforts customary in its industry to treat the Yatinoo Proprietary Rights related to Yatinoo Products and Yatinoo Components as containing trade secrets and has not disclosed or otherwise dealt with such items in such a manner as intended or reasonably likely to cause the loss of such trade secrets by release into the public domain.

 

(d)   To the Corporation's knowledge, no employee, contractor or consultant of the Corporation is in violation in any material respect of any term of any written employment contract, patent disclosure agreement or any other written contract or agreement relating to the relationship of any such employee, consultant or contractor with the Corporation or, to the Corporation's knowledge, any other party because of the nature of the business conducted by the Corporation.

 

(e)   Each person presently or previously employed by the Corporation (including independent contractors, if any) with access authorized by the Corporation to confidential information has executed a confidentiality and non-disclosure agreement pursuant to the form of agreement previously provided to Buyer or its representatives. Such confidentiality and non-disclosure agreements constitute valid and binding obligations of the Corporation and such person, enforceable in accordance with their respective terms.

 

(f)   No product liability or warranty claims have been communicated in writing to or threatened against the Corporation.

 

 

(g)   To the Corporation's knowledge, there is no material unauthorized use, disclosure, infringement or misappropriation of any Yatinoo Proprietary Rights, or any Third Party Technology to the extent licensed by or through the Corporation, by any third party, including any employee or former employee of the Corporation. The Corporation has not entered into any agreement to indemnify any other person against any charge of infringement of any Yatinoo Proprietary Rights, other than indemnification provisions contained in purchase orders arising in the ordinary course of business.

 

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(h)   The Corporation has taken all steps customary and reasonable in the industry to protect and preserve the confidentiality and proprietary nature of all Intellectual Property and other confidential information not otherwise protected by patents, patent applications or copyright ("Confidential Information"). All use, disclosure or appropriation of Confidential Information owned by the Corporation by or to a third party has been pursuant to the terms of a written agreement between the Corporation and such third party. All use, disclosure or appropriation of Confidential Information not owned by the Corporation has been pursuant to the terms of a written agreement between the Corporation and the owner of such Confidential Information, or is otherwise lawful.

 

4.12.   Contracts . Except as disclosed in Section 4.12 of Corporation’s Disclosure Schedule, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of the Corporation and its Subsidiaries taken as a whole. Neither the Corporation nor any Subsidiary is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such violation of or default under) any Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

4.13.   Business Plan . The information set forth in the Business Plan of the Corporation dated July 2008 with respect to the operations of the Corporation and its Subsidiaries is true and complete in all material respects and accurately reflects such operations for the periods indicated herein.

 

4.14.   Taxes .

 

(a)   Except as set forth in Section 4.14 of the Corporation’s Disclosure Schedule, each of the Corporation and each Subsidiary has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Corporation Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owned, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.

 

(b)   The Financial Statements (as defined in Section 4.5) reflect an adequate reserve for all Taxes payable by the Corporation and the Subsidiaries (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all Taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against the Corporation or any Subsidiary, and no requirements for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had any would not reasonably be expected to have a Corporation Material Adverse Effect.

 

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4.15.   Compliance with Applicable Laws . The Corporation and its Subsidiaries are in compliance with all applicable Laws, including those relating to occupational health and safety and the environment, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Corporation Material Adverse Effect. Except as set forth in Section 4.15 of the Corporation’s Disclosure Schedule, the Corporation has not received any written communication during the past two years from a Governmental Entity that alleges that the Corporation is not in compliance with any material respect with any applicable Law.

 

4.16.   Default; Violations or Restrictions . The execution, delivery and performance of this Agreement and of any agreement to be executed and delivered by the Corporation in connection with the transactions contemplated hereby and the consummation of any of the transactions contemplated hereby or thereby will not (or with the giving of notice or the lapse of time or both would) result in the breach of any term or provision of the Articles of Incorporation or by-laws of the Corporation or violate any provision of or result in the breach of, modification of, acceleration of the maturity of obligations under, or constitute a default, or give rise to any right of termination, cancellation, acceleration or otherwise be in conflict with or result in a loss of contractual benefits to the Corporation, under any law, order, writ, injunction, decree, statute, rule or regulation of any court, governmental agency or arbitration tribunal or any of the terms, conditions or provisions of any contract, lease, note, bond, mortgage, deed of trust, indenture, license, securities agreement, agreement or other instrument or obligation by which the Corporation or the Sellers is a party or by which either of them may be bound, or require any consent, approval or notice under any law, rule or decree or any such document or instrument; or result in the creation or imposition of any lien, claim, restriction, charge or encumbrance upon the Corporation’s assets or interfere with or otherwise adversely affect the ability to carry on the business of the Corporation after the Closing Date on substantially the same basis as it is not conducted by the Corporation.

 

4.17.   Books and Records . The books and records of the Corporation are, in all material respects, complete and correct and have been maintained in accordance with good business practice. True and complete copies of the Articles of Incorporation and By-laws of the Corporation and all amendments thereto and true and complete copies of the Articles of Incorporation and By-laws of the Corporation and all amendments thereto and true and complete copies of all minutes, resolutions, stock certificates and stock transfer records of the Corporation are contained in the minute books and stock transfer books that have been delivered to the Buyer for inspection and will be delivered to the Buyer at the Closing. The minute books, stock certificate books, stock transfer records and such other books and records as may be requested by the Buyer, as exhibited to the Buyer, and its representatives, are complete and correct in all material respects.

 

4.18.   Relationships with Vendors and Customers . The Corporation and the Sellers have no knowledge of any present or future conditions or state of facts or circumstances which would materially adversely affect the Corporation after the Closing Date. The Corporation’s relationships with its customers, client and vendors are satisfactory, and the Corporation and the Sellers have no knowledge of any facts or circumstances which might materially alter, negate, impair or in any way materially adversely affect the continuity of any such relationships. The Corporation and the Sellers have no knowledge of any material outstanding claims of any of its customers or clients presently outstanding, pending or threatened against the Corporation. The Corporation and the Sellers have no knowledge of any present or future conditions or state of facts or circumstances which would prevent the business of the Corporation from being carried on by the Buyer after the Closing Date in essentially the same manner as it is presently being carried on.

 

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4.19.   Insurance . The Corporation and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Corporation and its Subsidiaries are engaged and in the geographic areas where they engage in such businesses. The Corporation has no reason to believe that it will not be able to renew its and its subsidiaries’ existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Corporation and such Subsidiaries’ respective lines of business.

 

4.20.   Internal Accounting Controls . The Corporation and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Corporation has established disclosure controls and procedures for the Corporation and designed such disclosure controls and procedures to ensure that material information relating to the Corporation, including its subsidiaries, is make known to the officers by others within those entities. The Corporation’s officers have evaluated the effectiveness of the Company’s controls and procedures. Since December 31, 2007, there have been no significant changes in the Corporation’s internal controls or, to the Corporation’s knowledge, in other factors that could significantly affect the Corporation’s internal controls.

 

4.21.   No Additional Agreements . The Corporation does not have any agreement or understanding with any Seller with respect to the transactions contemplated by this Agreement other than as specified in this Agreement.

 

4.22.   Disclosure . The Corporation confirms that neither it nor any person acting on its behalf has provided any Seller or its respective agents or counsel with any information that the Corporation believes constitutes material, non-public information except insofar as the existence and terms of the proposed YI Acquisition hereunder may constitute such information and except for information that will be disclosed by the Buyer under a current report on Super Form 8-K. The Corporation understands and confirms that the Sellers will rely on the foregoing representations and covenants in effecting transactions in securities of the Corporation. All disclosure provided to the Sellers regarding the Corporation, its business and the transactions contemplated hereby, furnished by or on behalf of the Corporation (inc


 
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