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SHARE EXCHANGE AGREEMENT

Stock Conversion Exchange Agreement

SHARE EXCHANGE AGREEMENT | Document Parties: COLOR ACCENTS HOLDINGS, INC. | M2 Systems Corporation You are currently viewing:
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COLOR ACCENTS HOLDINGS, INC. | M2 Systems Corporation

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Title: SHARE EXCHANGE AGREEMENT
Governing Law: Nevada     Date: 10/1/2009

SHARE EXCHANGE AGREEMENT, Parties: color accents holdings  inc. , m2 systems corporation
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Exhibit 10.1

 

SHARE EXCHANGE AGREEMENT

 

SHARE EXCHANGE AGREEMENT , dated as of September 30, 2009 (this “ Agreement ”) by and among Color Accents Holdings, Inc. , a corporation organized under the laws of the State of Nevada   (“ Color Accents ”); M2 Systems Corporation (“ M2 Systems ”); Michael Muscato and Joseph Adams (the “ M2 Systems’ Shareholders ”); and Diane Pyun (“ Pyun ” or the “ Color Principal Stockholder ”). Color , M2 Systems , the M2 Systems’ Shareholders , and the Color Principal Stockholder hereinafter sometimes individually referred to as a “ Party ” and collectively referred to as the “ Parties .”.

 

WHEREAS , the M2 Systems’ Shareholders own 100% of the issued and outstanding ordinary shares of M2 Systems (such shares being hereinafter referred to as the “M2 Shares”) ; and

 

WHEREAS , (i) the M2 Systems’ Shareholders and M2 Systems believe it is in their respective best interests for the M2 Systems’ Shareholders to exchange all of the M2 Shares for 6,600,000 newly-issued shares as set forth on Schedule I hereto (the “ New Color AccentsShares ”) of common stock, $0.0001 par value per share, of M2 Systems (the “ Common Stock ”), which, at the time of this Agreement, shall constitute 81.2% of the issued and outstanding shares of Color Accents’ Common Stock immediately after the closing of the transaction contemplated herein, and (ii) Color Accents believes it is in its best interest and the best interest of its stockholders to acquire the M2 Shares in exchange for the New Color Accents Shares, all upon the terms and subject to the conditions set forth in this Agreement (the “ Share Exchange ”); and

 

WHEREAS, it is the intention of the parties that: (i) the Share Exchange shall qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”); and (ii) the Share Exchange shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended and in effect on the date of this Agreement (the “ Securities Act ”); and

 

NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto agree as follows:

 

ARTICLE I

 

EXCHANGE OF M2 SYSTEMS SHARES FOR COLOR ACCENTS SHARES

 

Section 1.1 Agreement to Exchange M2 Systems Shares for Color Accents Shares . On the Closing Date (as hereinafter defined) and upon the terms and subject to the conditions set forth in this Agreement, the M2 Systems’ Shareholders shall assign, transfer, convey and deliver the M2 Systems’ Shares to Color Accents. In consideration and exchange for the M2 Systems’ Shares, Color Accents shall issue, transfer, convey and deliver the New Color Accents Shares to the M2 Systems’ Shareholders.

  

Section 1.2   Closing and Actions at Closing . The closing of the Share Exchange (the “ Closing ”) shall take place remotely via the exchange of documents and signatures at 10:00 a.m. E.D.T. on the day the conditions to closing set forth in Articles V and VI herein have been satisfied or waived, or at such other time and date as the parties hereto shall agree in writing (the “ Closing Date ”).

 

Section 1.3 Directors of Color Accents at Closing Date . On the Closing Date, Diane Pyun, the current director of Color Accents, shall resign from the board of directors of Color Accents (the “ Color Accents Board ”) and Michael A. Muscato, Joseph W. Adams and Malcolm Kirschenbaum’s appointment to the Color Accents Board shall become effective.

 

 

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Section 1.4 Officers of Color Accents at Closing Date . On the Closing Date, Diane Pyun shall resign from each officer position held at Color Accents and immediately thereafter, the Color Accents Board shall appoint Michael A. Muscato to serve as Chief Technology Officer, Joseph Adams to serve as the Chief Executive Officer and Randy Oveson to serve as Chief Financial Officer.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF COLOR ACCENTS

 

Color Accents represents, warrants and agrees that all of the statements in the following subsections of this Article II are true and complete as of the date hereof.

 

Section 2.1 Corporate Organization

 

a. Color Accents is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and has all requisite corporate power and authority to own its properties and assets and governmental licenses, authorizations, consents and approvals to conduct its business as now conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its activities makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a Material Adverse Effect on the activities, business, operations, properties, assets, condition or results of operation of Color Accents. “ Material Adverse Effect ” means, when used with respect to Color Accents, any event, occurrence, fact, condition, change or effect, which, individually or in the aggregate, would reasonably be expected to be materially adverse to the business, operations, properties, assets, condition (financial or otherwise), or operating results of Color Accents, or materially impair the ability of Color Accents to perform its obligations under this Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement, or (ii) changes in the United States securities markets generally.

 

b. Copies of the certificate of incorporation and by-laws of Color Accents with all amendments thereto, as of the date hereof (the “ Color Accents Charter Documents ”), have been furnished to the M2 Systems Shareholders and to M2 Systems, and such copies are accurate and complete as of the date hereof. The minute books of Color Accents are current as required by law, contain the minutes of all meetings of the Color Accents Board and stockholders of Color Accents from its date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the Color Accents Board and stockholders of Color Accents. Color Accents is not in violation of any of the provisions of the Color Accents Charter Documents.

 

Section 2.2 Capitalization of Color Accents

 

a. The authorized capital stock of Color Accents consists of 100,000,000 shares authorized as Common Stock, of which 8,127,500 shares are issued and outstanding immediately prior to this Share Exchange and 10,000,000 shares of Preferred Stock authorized for issuance but no preferred shares are issued.

 

b. All of the issued and outstanding shares of Common Stock of Color Accents immediately prior to this Share Exchange are, and all shares of Common Stock of Color Accents when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, have been issued in compliance with all applicable U.S. federal and state securities laws and state corporate laws, and have been issued free of preemptive rights of any security holder. Except with respect to securities to be issued to the M2 Systems’ Shareholders pursuant to the terms hereof, as of the date of this Agreement there are no outstanding or authorized options, warrants, agreements, commitments, conversion rights, preemptive rights or other rights to subscribe for, purchase or otherwise acquire or receive any shares of Color Accents’ capital stock, nor are there or will there be any outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights, pre-emptive rights or rights of first refusal with respect to Color Accents or any Common Stock, or any voting trusts, proxies or other agreements, understandings or restrictions with respect to the voting of Color Accents’ capital stock.

 

 

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There are no registration or anti-dilution rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or understanding to which Color Accents is a party or by which it is bound with respect to any equity security of any class of Color Accents. Color Accents is not a party to, and it has no knowledge of, any agreement restricting the transfer of any shares of the capital stock of Color Accents.  The issuance of all of the shares of Color Accents described in this Section 2.2 have been, or will be, as applicable, in compliance with U.S. federal and state securities laws and state corporate laws and no stockholder of Color Accents has any right to rescind or bring any other claim against Color Accents for failure to comply with the Securities Act of 1933, as amended (the “Securities Act”), or state securities laws.

 

c. There are no outstanding contractual obligations (contingent or otherwise) of Color Accents to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, Color Accents or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other person.

 

Section 2.3 Subsidiaries and Equity Investments . Color Accents does not directly or indirectly own any capital stock or other securities of, or any beneficial ownership interest in, or hold any equity or similar interest, or have any investment in any corporation, limited liability company, partnership, limited partnership, joint venture or other company, person or other entity.

 

Section 2.4 Authorization, Validity and Enforceability of Agreements . Color Accents has all corporate power and authority to execute and deliver this Agreement and all agreements, instruments and other documents to be executed and delivered in connection with the transactions contemplated by this Agreement to perform its obligations hereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement by Color Accents and the consummation by Color Accents of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of Color Accents, and no other corporate proceedings on the part of Color Accents are necessary to authorize this Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement constitutes the valid and legally binding obligation of Color Accents and is enforceable in accordance with its terms, except as such enforcement may be limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally. Color Accents does not need to give any notice to, make any filings with, or obtain any authorization, consent or approval of any government or governmental agency or other person in order for it to consummate the transactions contemplated by this Agreement, other than filings that may be required or permitted under states securities laws, the Securities Act and/or the Exchange Act resulting from the issuance of the New Color Accents Shares.

 

Section 2.5 No Conflict or Violation . Neither the execution and delivery of this Agreement by Color Accents, nor the consummation by Color Accents of the transactions contemplated hereby will: (i) contravene, conflict with, or violate any provision of the Color Accents Charter Documents; (ii) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, court, administrative panel or other tribunal to which Color Accents is subject, (iii) conflict with, result in a breach of, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which Color Accents is a party or by which it is bound, or to which any of its assets or properties are subject; or (iv) result in or require the creation or imposition of any encumbrance of any nature upon or with respect to any of Color Accents’ assets, including without limitation the Color Accents Shares.

 

Section 2.6 Agreements . Except as disclosed on Schedule 2.6, Color Accents is not a party to or bound by any contracts, including, but not limited to, any:

 

a. employment, advisory or consulting contract;

 

b. plan providing for employee benefits of any nature, including any severance payments;

 

 

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c. lease with respect to any property or equipment;

 

d. contract, agreement, understanding or commitment for any future expenditure in excess of $5,000 in the aggregate;

 

e. contract or commitment pursuant to which it has assumed, guaranteed, endorsed, or otherwise become liable for any obligation of any other person, entity or organization; or

 

f. agreement with any person relating to the dividend, purchase or sale of securities, that has not been settled by the delivery or payment of securities when due, and which remains unsettled upon the date of this Agreement, except with respect to the Color Accents Shares.

 

Color Accents has provided to M2 Systems and the M2 Systems’ Shareholders, prior to the date of this Agreement, true, correct and complete copies of each contract (whether written or oral), including each amendment, supplement and modification thereto (the “ Color Accents Contracts ”).  The Company shall satisfy all liabilities due under the Color Accents Contracts as of the date of Closing.  All such liabilities shall be satisfied or released at or prior to Closing.  Any amounts accrued post-Closing shall be the sole responsibility of M2 Systems.

 

Section 2.7 Litigation . There is no action, suit, proceeding or investigation (“ Action ”) pending or, to the knowledge of Color Accents, currently threatened against Color Accents or any of its affiliates, that may affect the validity of this Agreement or the right of Color Accents to enter into this Agreement or to consummate the transactions contemplated hereby or thereby. There is no Action pending or, to the knowledge of Color Accents, currently threatened against Color Accents or any of its affiliates, before any court or by or before any governmental body or any arbitration board or tribunal, nor is there any judgment, decree, injunction or order of any court, governmental department, commission, agency, instrumentality or arbitrator against Color Accents or any of its affiliates. Neither Color Accents nor any of its affiliates is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no Action by Color Accents or any of its affiliates relating to Color Accents currently pending or which Color Accents or any of its affiliates intends to initiate.

 

Section 2.8 Compliance with Laws. Color Accents has been and is in compliance with, and has not received any notice of any violation of any, applicable law, order, ordinance, regulation or rule of any kind whatsoever, including without limitation the Securities Act, the Exchange Act, the applicable rules and regulations of the SEC or the applicable securities laws and rules and regulations of any state.

 

Section 2.9 Financial Statements; SEC Filings .

 

a. Color Accents’ financial statements (the “ Financial Statements ”) contained in its periodic reports filed with the SEC have been prepared in accordance with generally accepted accounting principles applicable in the United States of America ( “U.S. GAAP” ) applied on a consistent basis throughout the periods indicated, except that those Financial Statements that are not audited do not contain all footnotes required by U.S. GAAP. The Financial Statements fairly present the financial condition and operating results of Color Accents as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments. Color Accents has no material liabilities (contingent or otherwise). Color Accents is not a guarantor or indemnitor of any indebtedness of any other person, entity or organization. Color Accents maintains a standard system of accounting established and administered in accordance with U.S. GAAP.

 

b.  Color Accents has timely made all filings with the SEC that it has been required to make under the Securities Act and the Exchange Act ( the “ Public Reports ”). Each of the Public Reports has complied in all material respects with the applicable provisions of the Securities Act, the Exchange Act, and the Sarbanes/Oxley Act of 2002 (the “ Sarbanes/Oxley Act ”) and/or regulations promulgated thereunder. None of the Public Reports, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. There is no event, fact or circumstance that would cause any certification signed by any officer of Color Accents in connection with any Public Report pursuant to the Sarbanes/Oxley Act to be untrue, inaccurate or incorrect in any respect. There is no revocation order, suspension order, injunction or other proceeding or law affecting the trading of Color Accents’ Common Stock.

 

 

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Section 2.10 Books, Financial Records and Internal Controls . All the accounts, books, registers, ledgers, Color Accents Board minutes and financial and other records of whatsoever kind of Color Accents have been fully, properly and accurately kept and completed; there are no material inaccuracies or discrepancies of any kind contained or reflected therein; and they give and reflect a true and fair view of the financial, contractual and legal position of Color Accents. Color Accents maintains a system of internal accounting controls sufficient, in the judgment of Color Accents, 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 GAAP 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 actions are taken with respect to any differences.

 

Section 2.11 Employee Benefit Plans . Color Accents does not have any “Employee Benefit Plan” as defined in the U.S. Employee Retirement Income Security Act of 1974 or similar plans under any applicable laws.

 

Section 2.12 Tax Returns, Payments and Elections . Color Accents has filed all Tax (as defined below) returns, statements, reports, declarations and other forms and documents (including, without limitation, estimated tax returns and reports and material information returns and reports) (“ Tax Returns ”) required pursuant to applicable law to be filed with any Tax Authority (as defined below). All such Tax Returns are accurate, complete and correct in all material respects, and Color Accents has timely paid all Taxes due and adequate provisions have been and are reflected in Color Accents’ Financial Statements for all current taxes and other charges to which Color Accents is subject and which are not currently due and payable. None of Color Accents’ federal income tax returns have been audited by the Internal Revenue Service. Color Accents has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Color Accents for any period, nor of any basis for any such assessment, adjustment or contingency. Color Accents has withheld or collected from each payment made to each of its employees, if applicable, the amount of all Taxes (including, but not limited to, United States income taxes and other foreign taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax Authority. For purposes of this Agreement, the following terms have the following meanings: “ Tax ” (and, with correlative meaning, “ Taxes ” and “ Taxable ”) means any and all taxes including, without limitation, (x) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, value added, net worth, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any United States, local or foreign governmental authority or regulatory body responsible for the imposition of any such tax (domestic or foreign) (a “ Tax Authority ”), (y) any liability for the payment of any amounts of the type described in (x) as a result of being a member of an affiliated, consolidated, combined or unitary group for any taxable period or as the result of being a transferee or successor thereof, and (z) any liability for the payment of any amounts of the type described in (x) or (y) as a result of any express or implied obligation to indemnify any other person.

 

Section 2.13 No Debt Obligations . Upon the Closing Date, Color Accents will have no debt, obligations or liabilities of any kind whatsoever other than with respect to the transactions contemplated hereby. Color Accents is not a guarantor of any indebtedness of any other person, entity or corporation.

 

 

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Section 2.14 No Broker Fees . No brokers, finders or financial advisory fees or commissions will be payable by or to Color Accents or any of their affiliates with respect to the transactions contemplated by this Agreement.

 

Section 2.15 No Disagreements with Accountants and Lawyers . There are no disagreements of any kind presently existing, or anticipated by Color Accents to arise, between Color Accents and any accountants and/or lawyers formerly or presently engaged by Color Accents. Color Accents is current with respect to fees owed to its accountants and lawyers.

 

Section 2.16 Disclosure . This Agreement and any certificate attached hereto or delivered in accordance with the terms hereby by or on behalf of Color Accents in connection with the transactions contemplated by this Agreement do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.

 

Section 2.17 Absence of Undisclosed Liabilities . Since the date of the filing of its annual report on Form 10-K for the fiscal year ended July 31, 2009, except as specifically disclosed in the Public Reports: (A) there has been no event, occurrence or development that has resulted in or could result in a Material Adverse Effect; (B) Color Accents has not incurred any liabilities, obligations, claims or losses, contingent or otherwise, including debt obligations, other than professional fees; (C) Color Accents has not declared or made any dividend or distribution of cash or property to its shareholders, purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, or issued any equity securities other than with respect to transactions contemplated hereby; (D) Color Accents has not made any loan, advance or capital contribution to or investment in any person or entity; (E) Color Accents has not discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business; (F) Color Accents has not suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business; and (G) except for the Share Exchange, Color Accents has not entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business.

 

Section 2.18 No Integrated Offering. Color Accents does not have any registration statement pending before the Commission or currently under the Commission’s review and since the Closing Date, except as contemplated under this Agreement, Color Accents has not offered or sold any of its equity securities or debt securities convertible into shares of Common Stock.

 

Section 2.19 Employees .

 

a. Color Accents has no employees.

 

b. Other than Diane Pyun, Color Accents does not have any officers or directors. No director or officer of Color Accents is a party to, or is otherwise bound by, any contract (including any confidentiality, non-competition or proprietary rights agreement) with any other person that in any way adversely affects or will materially affect (a) the performance of his duties as a director or officer of Color Accents or (b) the ability of Color Accents to conduct its business.

 

Section 2.20 No Undisclosed Events or Circumstances . No event or circumstance has occurred or exists with respect to Color Accents or its respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by Color Accents but which has not been so publicly announced or disclosed. Color Accents has not provided to M2 Systems, or the M2 Systems’ Shareholders, any material non-public information or other information which, according to applicable law,


 
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