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.
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.
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.
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.
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:
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.
(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.
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.
(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.
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.
(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.
(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.
(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.
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.
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 (incl
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