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SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER

Stock Conversion Exchange Agreement

SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER | Document Parties: CORNERWORLD CORPORATION | ENVERSA COMPANIES LLC | INTERNET UNIVERSITY, INC | LEADSTREAM, LLC You are currently viewing:
This Stock Conversion Exchange Agreement involves

CORNERWORLD CORPORATION | ENVERSA COMPANIES LLC | INTERNET UNIVERSITY, INC | LEADSTREAM, LLC

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Title: SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER
Governing Law: Texas     Date: 9/3/2008
Law Firm: Baker McKenzie    

SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER, Parties: cornerworld corporation , enversa companies llc , internet university  inc , leadstream  llc
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Exhibit 10.1

 

SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER

 

THIS SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER is made as of the 27th day of August, 2008

 

AMONG:

 

CORNERWORLD CORPORATION, a corporation formed pursuant to the laws of the State of Nevada and having an office for business at 12222 Merit Drive, Suite 120, Dallas, Texas 75251 ("Cornerworld")

 

AND:

 

ENVERSA COMPANIES LLC , a limited liability company formed pursuant to the laws of the State of Texas and having an office for business at 12222 Merit Drive, Suite 120, Dallas, Texas 75251 ("Leadstream Acquisition Sub")

 

AND:

 

LEADSTREAM, LLC , a limited liability company formed pursuant to the laws of the State of Texas and having an office for business located at 12404 Park Central Drive, Suite 400, Dallas, Texas 75251 ("Leadstream")

 

AND:

 

the holders of the membership interests of Leadstream, LLC, each of whom are set forth on the signature page of this Agreement (the "Leadstream Members").

 

WHEREAS:

 

A.    The Leadstream Members own such membership interests of Leadstream as set forth on Exhibit "A" annexed hereto, collectively being 100% of the presently issued and outstanding Leadstream equity;

 

B.         Cornerworld is a reporting company whose common stock is quoted on the Over-the-Counter Bulletin Board;

 

C.         The Board of Directors of Cornerworld deems it to be advisable and in the best interests of Cornerworld and its shareholders to acquire Leadstream in the manner contemplated by this Agreement;

 

D.         The sole member of Leadstream Acquisition Sub deems it advisable and in the best interests of Leadstream Acquisition Sub to merge with Leadstream in the manner contemplated by this Agreement; and

 

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E.         The managing member of Leadstream deems it advisable and in the best interests of Leadstream and its members to merge with and into Leadstream Acquisition Sub in the manner contemplated by this Agreement.

 

NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises and the mutual covenants, agreements, representations and warranties contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1

DEFINITIONS AND INTERPRETATION

 

Definitions

 

1.1

In this Agreement the following terms will have the following meanings:

 

 

(a)

" Acquisition " means the merger, at the Effective Time, of Leadstream with and into Leadstream Acquisition Sub, with Leadstream Acquisition Sub as the surviving limited liability company;

 

 

(b)

" Acquisition Consideration " means the Acquisition Notes and the Acquisition Shares;

 

 

(c)

" Acquisition Notes " means the notes in an aggregate principal amount of $1,500,000 issued on the Closing Date by Cornerworld to the Leadstream Members pursuant to the terms of this Agreement;

 

 

(d)

" Acquisition Shares " means the 3,600,000 Cornerworld Common Shares to be issued pursuant to the terms of this Agreement;

 

 

(e)

" Agreement " means this Share Exchange Agreement and Plan of Merger among Cornerworld, Leadstream Acquisition Sub, Leadstream and the Leadstream Members;

 

 

(f)

" Certificate of Merger " means the certificate of merger respecting the Acquisition, which contains the information required by the TBOC and the TMCLA;

 

 

(g)

" Closing " means the completion, on the Closing Date, of the transactions contemplated by this Agreement in accordance with Article 7 hereof;

 

 

(h)

" Closing Date " means the date of this Agreement;

 

 

(i)

" Code " means the Internal Revenue Code of 1986, as amended;

 

 

(j)

" Cornerworld Accounts Receivable " means all accounts receivable and other debts owing to Cornerworld, on a consolidated basis, as of June 30, 2008;

 

 

(k)

" Cornerworld Assets " means the undertaking and all the property and assets of the Cornerworld Business of every kind and description wheresoever situated, including, without limitation, Cornerworld Equipment, Cornerworld Inventory, Cornerworld Material Contracts, Cornerworld Accounts Receivable, Cornerworld Cash, Cornerworld Intangible Assets and Cornerworld Goodwill, and all credit cards, charge cards and banking cards issued to Cornerworld;

 

2




 

(l)

" Cornerworld Audited Financial Statements " means, collectively, the audited consolidated financial statements of Cornerworld for the fiscal year ended April 30, 2008, together with the unqualified auditors’ report thereon, true copies of which are attached as Schedule "A" hereto;

 

 

(m)

" Cornerworld Business " means all aspects of any business conducted by Cornerworld and its subsidiaries;

 

 

(n)

" Cornerworld Cash " means all cash on hand or on deposit to the credit of Cornerworld and its subsidiaries;

 

 

(o)

" Cornerworld Common Shares " means the shares of common stock, $0.001 par value, of Cornerworld;

 

 

(p)

" Cornerworld Equipment " means all machinery, equipment, furniture, and furnishings used in the Cornerworld Business;

 

 

(q)

" Cornerworld Financial Statements " means, collectively, the Cornerworld Audited Financial Statements and the Cornerworld Recent Financial Statements;

 

 

(r)

" Cornerworld Goodwill " means the goodwill of the Cornerworld Business including the right to all corporate, operating and trade names associated with the Cornerworld Business, or any variations of such names as part of or in connection with the Cornerworld Business, all books and records and other information relating to the Cornerworld Business, all necessary licenses and authorizations and any other rights used in connection with the Cornerworld Business;

 

 

(s)

" Cornerworld Intangible Assets " means all of the intangible assets of Cornerworld and its subsidiaries, including, without limitation, Cornerworld Goodwill, all trademarks, logos, copyrights, designs, and other intellectual and industrial property of Cornerworld and its subsidiaries;

 

 

(t)

" Cornerworld Inventory " means all inventory and supplies of the Cornerworld Business;

 

 

(u)

" Cornerworld Legal Fees " means the legal fees incurred by Cornerworld in connection with the transactions contemplated by this Agreement; provided , however , that the maximum amount of such fees shall be $30,000;

 

 

(v)

" Cornerworld Material Contracts " means the burden and benefit of, and the right, title and interest of Cornerworld and its subsidiaries in, to and under, all trade and non-trade contracts, engagements or commitments, whether written or oral, to which Cornerworld or its subsidiaries are entitled whereunder Cornerworld or its subsidiaries are obligated to pay or entitled to receive the sum of $10,000 or more, including, without limitation, any pension plans, profit sharing plans, bonus plans, loan agreements, security agreements, indemnities and guarantees, any agreements with employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers, directors, attorneys or others, which cannot be terminated without liability on not more than one month’s notice;

 

 

(w)

" Cornerworld Parties " means Cornerworld and Leadstream Acquisition Sub;

 

 

(x)

" Cornerworld Recent Financial Statements " means the unaudited consolidated financial statements of Cornerworld for the two (2) months ending June 30, 2008, true copies of which are attached as Schedule "A" hereto;

 

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(y)

" EBITDA " means earnings before interest, taxes, depreciation and amortization and excludes extraordinary expenses which are not incurred in the normal course of Leadstream’s business and are not part of normal historical operations of Leadstream. By way of example, and not by way of limitation, the Transaction Legal Fees and similar fees and expenses associated with this transaction or any similar transaction involving Leadstream or Cornerworld shall be excluded from the expenses used to calculate EBITDA;

 

 

(z)

" Leadstream Accounts Receivable " means all accounts receivable and other debts owing to Leadstream, as of June 30, 2008;

 

 

(aa)

" Leadstream Annual Financial Statements " means the unaudited financial statements of Leadstream for the year ending December 31, 2007 and the notes to the financial statements, true copies of which are attached as Schedule "B" hereto;

 

 

(bb)

" Leadstream Assets " means the undertaking and all the property and assets of the Leadstream Business of every kind and description wheresoever situated including, without limitation, Leadstream Equipment, Leadstream Inventory, Leadstream Material Contracts, Leadstream Accounts Receivable, Leadstream Cash, Leadstream Intangible Assets and Leadstream Goodwill, and all credit cards, charge cards and banking cards issued to Leadstream;

 

 

(cc)

" Leadstream Bank Accounts " means all of the bank accounts, lock boxes and safety deposit boxes of Leadstream or relating to the Leadstream Business;

 

 

(dd)

" Leadstream Business " means all aspects of the business conducted by Leadstream;

 

 

(ee)

" Leadstream Cash " means all cash on hand or on deposit to the credit of Leadstream on the Closing Date;

 

 

(ff)

" Leadstream Debt to Related Parties " means the debts owed by Leadstream to the Leadstream Members or to any family member thereof, or to any affiliate, manager or officer of Leadstream or the Leadstream Members;

 

 

(gg)

" Leadstream Equipment " means all machinery, equipment, furniture, and furnishings used in the Leadstream Business;

 

 

(hh)

" Leadstream Financial Statements " means the Leadstream Annual Financial Statements and the Leadstream Recent Financial Statements;

 

 

(ii)

" Leadstream Goodwill " means the goodwill of the Leadstream Business together with the exclusive right of Cornerworld to represent itself as carrying on the Leadstream Business in succession of Leadstream subject to the terms hereof, and the right to use any words indicating that the Leadstream Business is so carried on including the right to use the name "Leadstream" or "Leadstream International" or any variation thereof as part of the name of or in connection with the Leadstream Business or any part thereof carried on or to be carried on by Leadstream, the right to all corporate, operating and trade names associated with the Leadstream Business, or any variations of such names as part of or in connection with the Leadstream Business, all telephone listings and telephone advertising contracts, all lists of customers, books and records and other information relating to the Leadstream Business, all necessary licenses and authorizations and any other rights used in connection with the Leadstream Business;

 

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(jj)

" Leadstream Intangible Assets " means all of the intangible assets of Leadstream, including, without limitation, Leadstream Goodwill, all trademarks, logos, copyrights, designs, and other intellectual and industrial property of Leadstream and its subsidiaries;

 

 

(kk)

" Leadstream Inventory " means all inventory and supplies of the Leadstream Business as of June 30, 2008;

 

 

(ll)

" Leadstream Material Contracts " means the burden and benefit of, and the right, title and interest of Leadstream in, to and under, all trade and non-trade contracts, engagements or commitments, whether written or oral, to which Leadstream is entitled in connection with the Leadstream Business whereunder Leadstream is obligated to pay or entitled to receive the sum of $10,000 or more, including, without limitation, any pension plans, profit sharing plans, bonus plans, loan agreements, security agreements, indemnities and guarantees, any agreements with employees, lessees, licensees, managers, accountants, suppliers, agents, distributors, officers, attorneys or others which cannot be terminated without liability on not more than one month’s notice;

 

 

(mm)

" Leadstream Membership Interests " means all of the issued and outstanding membership interests of Leadstream, whether or not certificates have been issued with respect to such membership interests;

 

 

(nn)

" Leadstream Parties " means Leadstream and the Leadstream Members;

 

 

(oo)

" Leadstream Recent Financial Statements " means the unaudited financial statements of Leadstream for the six (6) months ended June 30, 2008, true copies of which are attached as Schedule "B" hereto;

 

 

(pp)

" Place of Closing " means the offices of Sichenzia Ross Friedman Ference LLP, or such other place as Cornerworld and Leadstream may mutually agree upon;

 

 

(qq)

" Pledge Agreements " means the Pledge Agreements of even date herewith between Cornerworld and the Leadstream Members related to the pledge of all of the equity interests of the Surviving Company as security for payment of the Acquisition Notes;

 

 

(rr)

" Primary Leadstream Member " means Internet University, Inc.;

 

 

(ss)

" Registration Rights Agreement " means that certain Registration Rights Agreement of even date herewith between Cornerworld and the Leadstream Members.

 

 

(tt)

" SEC " means the U.S. Securities and Exchange Commission;

 

 

(uu)

" Securities Act " means the Securities Act of 1933, as amended;

 

 

(vv)

" Surviving Company " means Leadstream Acquisition Sub, which the Certificate of Merger will designate as the surviving company in the Acquisition;

 

 

(ww)

" Tax " means (i) any federal, state, local, foreign and other tax, charge, fee, duty (including customs duty), levy or assessment, including any income, gross receipts, net proceeds, alternative or add-on minimum, corporation, ad valorem, turnover, real and personal property (tangible and intangible), sales, use,

 

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franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel, excess profits, profits, occupational, premium, interest equalization, windfall profits, severance, license, registration, payroll, environmental (including taxes under Section 59A of the Code), capital stock, capital duty, disability, estimated, gains, wealth, welfare, employee’s income withholding, other withholding, unemployment and social security or other tax of whatever kind (including any fee, assessment and other charges in the nature of or in lieu of any tax) that is imposed by any governmental authority, (ii) any interest, fines, penalties or additions resulting from, attributable to, or incurred in connection with any items described in this paragraph or any related contest or dispute and (iii) any items described in this paragraph that are attributable to another person or entity but that the applicable person or entity is liable to pay by law, by contract or otherwise, whether or not disputed;

 

 

(xx)

" Tax Return " means any report, return, declaration, claim for refund or information return or statement related to Taxes, including any schedule or attachment thereto, and including any amendment thereof;

 

 

(yy)

" TBOC " means the Texas Business Organizations Code;

 

 

(zz)

" TMCLA " means the Texas Miscellaneous Corporation Laws Act;

 

 

(aaa)

" Transaction Legal Fees " means the Cornerworld Legal Fees and the legal fees incurred by Leadstream in connection with the transactions contemplated by this Agreement; and

 

 

(bbb)

" Treasury Regulation " means the regulations promulgated under the Code.

 

Any other terms defined within the text of this Agreement will have the meanings so ascribed to them.

 

Captions and Section Numbers

 

1.2       The headings and section references in this Agreement are for convenience of reference only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof.

 

Section References and Schedules

 

1.3       Any reference to a particular "Article", "Section", "paragraph", "clause" or other subdivision is to the particular Article, Section, paragraph, clause or other subdivision of this Agreement and any reference to a Schedule or Exhibit by letter will mean the appropriate Schedule or Exhibit attached to this Agreement and by such reference the appropriate Schedule or Exhibit is incorporated into and made part of this Agreement. The Schedules and Exhibits to this Agreement are as follows:

 

Information concerning Cornerworld

 

 

Schedule "A"

Cornerworld Financial Statements

 

Information concerning Leadstream

 

 

Schedule "B"

Leadstream Financial Statements

 

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Exhibits

 

 

Exhibit "A"

Leadstream Capitalization, Distribution of Acquisition Shares and Payment of Purchase Price

 

Exhibit "B"

Leadstream Bank Accounts

 

Exhibit "C"

Leadstream Assets

 

Exhibit "D"

Leadstream Material Contracts

 

Severability of Clauses

 

1.4          If any part of this Agreement is declared or held to be invalid for any reason, such invalidity will not affect the validity of the remainder which will continue in full force and effect and be construed as if this Agreement had been executed without the invalid portion, and it is hereby declared the intention of the parties that this Agreement would have been executed without reference to any portion which may, for any reason, be hereafter declared or held to be invalid.

 

ARTICLE 2

THE ACQUISITION

 

The Acquisition; Certain Effects of the Acquisition

 

2.1       Subject to the terms and conditions hereof, on the Closing Date, Cornerworld and Leadstream will execute or cause to be executed the Certificate of Merger and Cornerworld will file the Certificate of Merger with the Secretary of State of the State of Texas.

 

2.2       The Acquisition will be effective at the time specified in the Certificate of Merger or, if the Certificate of Merger does not specify another time, the time the Certificate of Merger is filed with the Secretary of State of the State of Texas (the "Effective Time").

 

2.3       At and as of the Effective Time: (a) Leadstream will merge with and into Leadstream Acquisition Sub in accordance with the applicable provisions of the TBOC and the TMCLA; (b) Leadstream will cease to exist as a separate legal entity; (c) Leadstream Acquisition Sub will be the Surviving Company and, as such, will, all with the effect the TBOC and the TMCLA provide, (i) acquire all right, title and interest in and to all real estate and other property of Leadstream and Leadstream Acquisition Sub, and (ii) be responsible for all liabilities and obligations of Leadstream and Leadstream Acquisition Sub; (d) the certificate of formation of Leadstream Acquisition Sub will be the certificate of formation of the Surviving Company; and (e) the limited liability company agreement of Leadstream Acquisition Sub will be the limited liability company agreement of the Surviving Company.

 

Effect of the Acquisition on the Membership Interests

 

2.4       Subject to the provisions of applicable law related to appraisal rights, as of the Effective Time, as a result of the Acquisition and without any action on the part of the holders of the applicable membership interests, the Leadstream Membership Interests issued and outstanding immediately prior to the Effective Time will (i) convert into the right to receive from Cornerworld, on a pro rata basis, (A) the Acquisition Shares and (B) the Acquisition Notes, (ii) cease to be outstanding and to exist and (iii) be canceled and retired. Following the Acquisition, the Surviving Company will continue to be a wholly-owned subsidiary of Cornerworld. The Acquisition Shares shall be distributed on the Closing Date in accordance with Exhibit "A"; the

 

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Acquisition Shares to be subject to a leakout provision. It is understood that the Acquisition Shares will be restricted securities, as defined under the U.S. securities laws. Accordingly, such shares may be sold only in accordance with Rule 144 or other applicable exemptions. In addition, the Leadstream Members will agree that during the two-year period following the Closing, they will not sell Acquisition Shares in the aggregate in excess of 1% of Cornerworld’s outstanding shares (i.e. each Leadstream Member will be entitled to sell up to its pro rata portion of such aggregate 1%). Additionally, the Acquisition Shares shall be subject to potential restrictions imposed by an investment banker in connection with an offering of securities. In the event a placement agent advises Cornerworld that to assure the success of an offering a temporary suspension for the sales of the Acquisition Shares is advised then the Leadstream Members will agree not to sell such shares during such period which can be up to six months after the offering.

 

Options

 

2.5       Following the Closing Date, Cornerworld shall grant to the existing employees of Leadstream options to purchase 400,000 Cornerworld Common Shares in accordance with the Cornerworld existing incentive stock plan at the discretion of the Cornerworld Board.

 

Adherence with Applicable Securities Laws

 

2.6       The Leadstream Members agree that they are acquiring the Acquisition Shares for investment purposes and will not offer, sell or otherwise transfer, pledge or hypothecate any of the Acquisition Shares issued to them (other than pursuant to an effective registration statement under the Securities Act), directly or indirectly, unless:

 

 

(a)

the sale is to Cornerworld;

 

 

(b)

the sale is made pursuant to the exemption from registration under the Securities Act, provided by Rule 144 thereunder; or

 

 

(c)

the Acquisition Shares are sold in a transaction that does not require registration under the Securities Act or any applicable United States state laws and regulations governing the offer and sale of securities, and the vendor has furnished to Cornerworld an opinion of counsel to that effect or such other written opinion as may be reasonably required by Cornerworld.

 

The Leadstream Members acknowledge that the certificates representing the Acquisition Shares shall bear the following legend:

 

NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION STATEMENT UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, IN RESPECT OF SUCH SHARES IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT IS THEN IN FACT APPLICABLE TO SAID SHARES.

 

THE RESTIRICITON SHALL BE IN ACCORDANCE WITH THE SHARE EXCHANGE AGREEMENT AND PLAN OF MERGER DATED AS OF AUGUST 27, 2008 AND THE REGISTRATION RIGHTS AGREEMENT DATED AS OF AUGUST 27, 2008.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF

CORNERWORLD AND LEADSTREAM ACQUISITION SUB

 

Representations and Warranties

 

3.1          Cornerworld and Leadstream Acquisition Sub hereby represent and warrant in all material respects to Leadstream and the Leadstream Members, with the intent that Leadstream and the Leadstream Members will rely thereon in entering into this Agreement and in approving and completing the transactions contemplated hereby, that:

 

Cornerworld - Corporate Status and Capacity

 

 

(a)

Incorporation .

 

 

(i)

Cornerworld is a corporation duly incorporated and validly subsisting under the laws of the State of Nevada and in good standing with the office of the Secretary of State for the State of Nevada, and

 

 

(ii)

Each of Cornerworld’s subsidiaries is duly organized and validly subsisting under the laws of its State of organization and in good standing with the office of the Secretary of State of such State;

 

 

(b)

Carrying on Business .

 

 

(i)

The nature of the Cornerworld Business does not require Cornerworld to register or be qualified to carry on business in any jurisdiction other than Texas. Cornerworld conducts the business described in its filings with the SEC and does not conduct any other business, and

 

 

(ii)

Leadstream Acquisition Sub was formed for the purpose of entering into this Agreement and engaging in the Acquisition. Leadstream Acquisition Sub has not engaged in any other business;

 

 

(c)

Capacity . Cornerworld has the corporate power, capacity and authority to own the Cornerworld Assets and to enter into this Agreement and complete the transactions contemplated hereby; Leadstream Acquisition Sub has the limited liability company power, capacity and authority to own its assets and to enter into this Agreement and complete the transactions contemplated hereby;

 

 

(d)

Reporting Status; Listing . Cornerworld is required to file current reports with the SEC pursuant to section 15(d) of the Securities Exchange Act of 1934. Cornerworld filed a registration statement under the Securities Act. The Cornerworld Common Shares are quoted on the Over-the-Counter Bulletin Board, and all reports required to be filed by Cornerworld with the SEC or FINRA have been filed;

 

Cornerworld - Capitalization

 

 

(e)

Authorized Capital .

 

 

(i)

The authorized capital of Cornerworld consists of 250,000,000 Cornerworld Common Shares, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value, of which 43,368,317 Cornerworld Common Shares, and no shares of preferred stock, are issued and outstanding as of the date hereof, and

 

9




 

(ii)

The authorized capital of each of Cornerworld’s subsidiaries and the ownership thereof is as set forth in the attached Schedule 3.1(e)(ii);

 

 

(f)

No Option, Warrant or Other Right . No other person, firm or corporation has any agreement, option, warrant, preemptive right or any other right capable of becoming an agreement, option, warrant or right for the acquisition of Cornerworld Common Shares or equity in any of Cornerworld’s subsidiaries, or for the purchase, subscription or issuance of any of the unissued shares in the capital of Cornerworld or any of Cornerworld’s subsidiaries;

 

Cornerworld - Records and Financial Statements

 

 

(g)

Charter Documents . The charter documents of Cornerworld and its subsidiaries have not been altered since the incorporation or formation of each, respectively, except as filed in the record books of Cornerworld or its subsidiaries, as the case may be;

 

 

(h)

Corporate Minute Books . The company minute books of Cornerworld and its subsidiaries are complete and each of the minutes contained therein accurately reflect the actions that were taken at a duly called and held meeting or by consent without a meeting. All actions by Cornerworld and its subsidiaries which required director (or other governing person) or shareholder (or other owner) approval are reflected on the corporate minute books of Cornerworld and its subsidiaries. Cornerworld and its subsidiaries are not in violation or breach of, or in default with respect to, any term of their respective certificates of incorporation (or other charter documents) or by-laws (or other regulating documents);

 

 

(i)

Cornerworld Financial Statements . The Cornerworld Financial Statements present fairly, in all material respects, the assets and liabilities (whether accrued, absolute, contingent or otherwise) of Cornerworld, on a consolidated basis, as of the respective dates thereof, and the sales and earnings of the Cornerworld Business during the periods covered thereby, in all material respects, and have been prepared in substantial accordance with generally accepted accounting principles consistently applied;

 

 

(j)

Cornerworld Accounts Payable and Liabilities . There are no material liabilities, contingent or otherwise, of Cornerworld or its subsidiaries which are not reflected in the Cornerworld Financial Statements except those incurred in the ordinary course of business since the date of the said Cornerworld Financial Statements, and neither Cornerworld nor its subsidiaries have guaranteed or agreed to guarantee any debt, liability or other obligation of any person, firm or corporation. Without limiting the generality of the foregoing, all accounts payable and liabilities of Cornerworld as of April 30, 2008 are described in Schedule "A" hereto, and Cornerworld agrees to update Schedule "A" prior to the Closing to include all accounts payable and liabilities as of the Closing Date;

 

 

(k)

Cornerworld Accounts Receivable . All the Cornerworld Accounts Receivable result from bona fide business transactions and services actually rendered without, to the knowledge and belief of Cornerworld, any claim by the obligor for set-off or counterclaim;

 

 

(l)

No Debt to Related Parties . Except as set forth on the disclosure schedule, neither Cornerworld nor any of its subsidiaries is, or as of the Closing will be, indebted to any affiliate, director or officer of Cornerworld, except for accounts payable on

 

10




account of bona fide business transactions of Cornerworld incurred in the normal course of the Cornerworld Business, including employment agreements, none of which are more than 30 days in arrears;

 

 

(m)

No Related Party Debt to Cornerworld . No director or officer or affiliate of Cornerworld is now indebted to or under any financial obligation to Cornerworld or any subsidiary on any account whatsoever, except for advances on account of travel and other expenses not exceeding $1,000 in total;

 

 

(n)

No Dividends . No dividends or other distributions on any shares in the capital of Cornerworld have been made, declared or authorized since the date of Cornerworld Recent Financial Statements;

 

 

(o)

No Payments . No payments of any kind have been made or authorized since the date of the Cornerworld Recent Financial Statements to or on behalf of officers, directors, shareholders or employees of Cornerworld or its subsidiaries or under any management agreements with Cornerworld or its subsidiaries, except payments made in the ordinary course of business and at the regular rates of salary or other remuneration payable to them;

 

 

(p)

No Pension Plans . There are no pension, profit sharing, group insurance or similar plans or other deferred compensation plans affecting Cornerworld;

 

 

(q)

No Adverse Events . Since the date of the Cornerworld Recent Financial Statements:

 

 

(i)

there has not been any material adverse change in the consolidated financial position or condition of Cornerworld, its subsidiaries, its liabilities or the Cornerworld Assets or any damage, loss or other change in circumstances materially affecting Cornerworld, the Cornerworld Business or the Cornerworld Assets or Cornerworld’s right to carry on the Cornerworld Business, other than changes in the ordinary course of business,

 

 

(ii)

there has not been any damage, destruction, loss or other event (whether or not covered by insurance) materially and adversely affecting Cornerworld, its subsidiaries, the Cornerworld Business or the Cornerworld Assets,

 

 

(iii)

there has not been any material increase in the compensation payable or to become payable by Cornerworld to any of Cornerworld’s officers, employees or agents or any bonus, payment or arrangement made to or with any of them,

 

 

(iv)

the Cornerworld Business has been and continues to be carried on in the ordinary course,

 

 

(v)

Cornerworld has not waived or surrendered any right of material value,

 

 

(vi)

neither Cornerworld nor its subsidiaries have discharged or satisfied or paid any lien or encumbrance or obligation or liability other than current liabilities in the ordinary course of business, and

 

 

(vii)

no capital expenditures in excess of $15,000 individually or $30,000 in total have been authorized or made;

 

11




Cornerworld - Income Tax Matters

 

 

(r)

Tax Returns . All Tax Returns of Cornerworld and its subsidiaries required by law to be filed have been timely filed and are true, complete and correct, and all taxes payable in accordance with any such Tax Returns or in accordance with any notice of assessment or reassessment issued by any taxing authority have been paid;

 

 

(s)

Taxes .

 

 

(i)

Adequate provisions have been made in accordance with generally accepted accounting principles consistently applied for Taxes payable for which Tax Returns are not yet required to be filed and there are no agreements, waivers, or other arrangements


 
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