STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), dated December 31 , 2005,
is by and among Liberty Diversified Holdings, Inc., a Nevada corporation
("Buyer"), Xxxxx Xxxxxxx ("Stockholder") and MCR Printing & Packaging,
Inc., a California corporation (the "Company"). The Company and the
Stockholder are sometimes collectively referred to as the "Stockholders."
RECITAL:
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WHEREAS, the Company is in the business of printing packaging
materials.
WHEREAS, Stockholder owns one hundred percent (100%) of the
outstanding capital stock of Company (the "Shares");
WHEREAS, Buyer has engaged Avalon Advisors to provide an appraisal of
the Company and the Company has an appraised value of $8,000,000.
WHEREAS, Buyer desires to acquire the Company and make it a wholly-
owned subsidiary of Buyer; and
WHEREAS, Stockholder desires to sell, and Buyer desires to purchase
the Shares of the Company upon the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, the parties agree as follows.
ARTICLE I
PURCHASE AND SALE OF STOCK
---------------------------
1.1. Sale of Common Stock.
---------------------
Stockholder hereby agrees to sell, convey, transfer, assign and
deliver to Buyer on the Closing Date (as defined in Section 1.3), free and
clear of all liens, encumbrances, purchase rights, claims, pledges,
mortgages, security interests, or other limitations or restrictions
whatsoever, 10,000 shares of duly and validly issued, fully paid and
nonassessable common stock of the Company, representing all of the Shares.
1.2. Purchase Price.
---------------
(a) Purchase Price.
---------------
Subject to the terms and conditions of this Agreement and in
reliance upon the respective representations, warranties and covenants of
Buyer, Stockholder and the Company herein contained and in full
consideration of such sale, conveyance, transfer, assignment and delivery
of the Shares to Buyer, Buyer agrees to deliver to Stockholder 800,000
shares of Buyer's newly created Class D Preferred stock with rights and
preferences described in section 1.2(b) (the "Class D Preferred Stock").
(b) Preferred Stock Description.
----------------------------
The Class D Preferred Stock shall have rights and preferences as
follows:
(i) Liquidation Preference.
-----------------------
The Class D Preferred Stock shall be senior to all other
classes of securities in the event of a liquidation of
Buyer. Buyer shall not incur debt (other than ordinary
course of business accounts payable) without the consent of
the holder of the Class D Preferred Stock.
(ii) Dividend.
---------
In the event Buyer declares a dividend to the holders of the
common stock, then the holders of the Class D Preferred
Stock shall participate in such dividend, on a pro rata
basis, as if 100% of the outstanding shares of the Class D
Preferred Stock had been converted as of the effective date
of such dividend.
(iii)Voting.
--------
The Class D Preferred Stock shall vote as if all shares of
the Class D Preferred Stock had been converted as of the
record date for such vote.
(iv) Terms of Conversion.
--------------------
100% of the shares of Class D Preferred Stock shall be
assigned the fair market value of substantially all of the
Company's assets (excluding all real estate and improvements
upon such real estate, which shall be removed from the
Company), to be mutually agreed upon between the parties
(the "Company Assets FMV"). The Class D Preferred Stock
shall be convertible in 100,000 share minimum blocks. Each
100,000 share block shall be valued at 1/8 multiplied by the
Company Assets FMV. The number of shares of the Buyer's
common stock into which the 100,000 share block may be
converted shall equal: the assigned value of the 100,000
share block divided by the Common Stock Market Price (as
hereinafter defined). The Common Stock Market Price shall be
the ten day weighted average trading price of the Buyer's
common stock, with a ceiling of $1.00 and a floor of $.05.
1.3. Closing.
--------
The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the offices of Xxxxxx & Yap at 9:00 a.m.
on December 31, 2005, or such other place and time that the parties decide
to meet on December 31, 2005 . The date and time of the Closing are
herein referred to as the "Closing Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
----------------------------------
STOCKHOLDER CONCERNING THE COMPANY
----------------------------------
To induce Buyer to enter into this Agreement, Stockholder represents
and warrants to Buyer as follows:
2
2.1. Organization and Qualifications of the Company.
-----------------------------------------------
The Company is a corporation lawfully existing and in good
standing under the laws of California with full power and authority to own
or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
conducted by it. The Company is duly qualified and in good standing as a
foreign corporation in each state where such qualification is required.
2.2. Capitalization of the Company.
------------------------------
The authorized capital stock of the Company consists of 100,000
shares of Common Stock of which 10,000 are issued and outstanding, fully
paid and non-assessable. There are no outstanding warrants, options,
preemptive rights, or other rights to purchase or acquire any shares of the
Company's capital stock. No securities of the Company are either directly
or indirectly convertible into or exchangeable for shares of capital stock
of the Company and there are no stock appreciation, phantom or similar
rights based on the book value or any other attribute of any capital stock
of the Company.
2.3. Subsidiaries.
-------------
The Company does not have any subsidiaries or own any securities
issued by any other business organization or governmental authority. The
Company is not a partner or joint venturer in any partnership or joint
venture.
2.4. Title to Properties; Condition of Properties.
---------------------------------------------
The Company has good and marketable title to all of the assets
listed on the Latest Balance Sheet (defined in Section 2.7) (other than
inventory and other assets sold since the date of the Latest Balance Sheet
in the ordinary course of business) and all other assets used in its
business free and clear of any encumbrance of any kind (collectively,
"Encumbrances"), except liens securing debt reflected on the Latest Balance
Sheet. All machinery and equipment owned by the Company is in good repair,
has been well maintained and is in good working order, normal wear and tear
excepted. All assets necessary for the continued operation of the
Company's business as it is currently being conducted and as it has been
conducted since December 31, 2004, are owned by the Company or subject to
valid leasehold interests.
2.5. Real Property.
--------------
All real property leased by the Company (the "Real Property") is
described in Schedule 2.5. The Real Property is expressly excluded from
the purchase and sale transaction contemplated by this Agreement. The Real
Property shall be transferred from the Company to Stockholder or his
designee. Buyer shall however be granted a two year option from the
Closing Date to acquire the Real Estate at a mutually agreed upon fair
market value for the Real Property at the time of such exercise of the
option.
2.6. Environmental Matters.
----------------------
(a) Other than as disclosed on Schedule 2.6, neither the Real
Property nor any property previously owned or operated by the Company
has been used by the Company, or to the best knowledge of each
Stockholder, by any other party, for the purpose of generating,
storing, disposing or treating of any hazardous, toxic or dangerous
substance, waste or material ("Hazardous Materials") as defined under
or regulated by any federal, state or local laws relating to
pollution, protection of the environment or worker health and safety
(collectively, the "Environmental Laws") except to the extent such
generating, storing, disposing or treating is not in violation of the
Environmental Laws. Except as set forth on Schedule 2.6, there has
been no release or threatened release of Hazardous Materials on the
Real Property by the Company or, to the best knowledge of each
Stockholder, by any other party. All releases of Hazardous Materials
listed on Schedule 2.6, if any, on the Real Property have been fully
remediated as required by the Environmental Laws. Neither the Company
nor any Stockholder has received any notice of any asserted present or
past failure by the Company or by any other party to comply with any
Environmental Laws or any rule or regulation adopted pursuant to such
laws in connection with the Real Property.
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(b) Other than as disclosed on Schedule 2.6, the Company has not
transported Hazardous Materials, or arranged for the transportation of
Hazardous Materials to any disposal, treatment or storage site which
is the subject of federal, state or local enforcement actions, or, to
the best knowledge of each Stockholder, other governmental or private
investigations, or which may lead to claims against the Company for
clean up costs, remedial work, or for damages.
(c) There are no underground storage tanks, as defined under
federal or applicable state law, located on the Real Property, and
none has been placed on the Real Property during the Company's
possession of the Real Property.
(d) There are no expenditures required to bring the Real
Property in compliance with the Environmental Laws.
2.7. Financial Statements.
---------------------
Stockholder has delivered to Buyer the following financial
statements (collectively, the "Financial Statements"):
(a) Unaudited Income Statement, Balance Sheet, and Statement of
Cash Flow of the Company for the year ending December 31, 2004.
(b) Unaudited Balance Sheet of the Company as of September 30,
2005 (the "Latest Balance Sheet"), and an Income Statement for the
six-month period then-ended prepared by the Company.
All of the financial statements referred to in this Section 2.7 have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the Company's past practices, are
complete and correct and present fairly the financial condition of the
Company at the dates of said statements and the results of its operations
for the periods covered.
4
2.8. Payment of Taxes.
-----------------
The Company has filed all federal, state and local income, excise
or franchise tax returns, real estate and personal property tax returns,
sales and use tax returns and other tax returns required to be filed by it
and has paid all taxes owing by it except taxes which have not yet accrued
or otherwise become due and taxes for which adequate provision has been
made in the Latest Balance Sheet.
2.9. Absence of Undisclosed Liabilities.
-----------------------------------
Except as set forth on Schedule 2.9, the Company has no
liabilities of any nature, whether accrued, absolute or contingent, other
than and to the extent reflected or reserved against on the Latest Balance
Sheet and liabilities incurred in the ordinary course of business since the
date of the Latest Balance Sheet. There is no agreement, judgment, decree,
order or, to the best knowledge of Stockholder, any facts which materially
affects, or may in the future (so far as can now be reasonably foreseen)
materially affect, the business, properties, operations or condition of the
Company which has not been specifically disclosed in this Agreement.
2.10.Accounts Receivable.
---------------------
All of the accounts receivable of the Company reflected on the
Latest Balance Sheet or thereafter acquired are valid and enforceable
claims, fully collectible and subject to no setoff or counterclaim in the
recorded amounts, subject only to the allowance for doubtful accounts
maintained in accordance with the Company's past practices.
2.11.Inventories.
------------
The inventory of the Company consists of items of a quantity
consistent with normal inventory levels of the Company and of a quality and
condition that is usable and saleable in the ordinary course of business
for the purposes for which intended. Such inventory is carried on the
Company's books of account in accordance with generally accepted accounting
principles consistently applied.
2.12.Conduct of Business in the Ordinary Course.
-------------------------------------------
The Company has conducted its business since December 31, 2004,
only in the usual and ordinary course consistent with past practice and
since such date, the Company has not (i) sold or transferred any of its
assets, except inventory in the ordinary course of business; (ii) changed
any method of accounting or accounting practice; (iii) increased or
promised to increase the compensation payable to any employee; (iv) made
any direct or indirect payments, dividends, distributions, sales or
transfers of assets, other than normal compensation, to any officer,
director, shareholder or employee of the Company or any of their
affiliates; (v) changed its outstanding shares of capital stock or
repurchased, redeemed or acquired any outstanding shares of capital stock
or other ownership interest in securities of the Company; or (vi) suffered
any damage or casualty to its assets.
2.13.Patents, Trade Names, Trademarks and Copyrights.
------------------------------------------------
The Company owns and has the right to use, free and clear of any
claims or rights of others, all patents, trademarks, service marks,
tradenames, formulations, lab manuals, know-how, unpatented technology,
trade secrets and customer lists which it is using. A list of all
registered trademarks is attached as Schedule 2.13.
5
2.14.Contracts.
----------
Except for contracts, commitments, plans, agreements and licenses
described on Schedule 2.14 (the "Contracts"), the Company is not a party to
or subject to:
(a) any contract or agreement providing for the purchase of
all or substantially all of the Company's requirements of a
particular product from a supplier, or for periodic minimum
purchases of a particular product from a supplier;
(b) any contract or agreement not terminable on 30-days
notice without penalty to the Company;
(c) any contract with any sales agent or distributor;
(d) any contract containing covenants limiting the
Company's freedom to compete in any line of business or with any
person or entity;
(e) any license agreement (as licensor or licensee);
(f) any contract or agreement with any present or former
officer, director or shareholder of the Company or with any
persons or organizations controlled by or affiliated with any of
them; or
(i) any other material contract not entered into in the
ordinary course of business.
All Contracts are in full force and effect and have not been amended,
extended or otherwise modified. Neither the Company nor, to the best
knowledge of Stockholder, any other party is in default under any of the
Contracts.
2.15.Litigation.
-----------
There is no legal, administrative, arbitration or other
proceeding or governmental investigations pending or, to the best knowledge
of Stockholder, threatened against the Company.
2.16.Compliance with Laws.
---------------------
The Company has not violated, and is not violating, any laws,
regulations or permits which apply to the conduct of its business or the
Real Property, the failure with which to comply would have a material
adverse effect on the Company.
2.17.Permits.
--------
The Company holds all licenses, permits and franchises which are
required to permit it to conduct its business, and all such licenses,
permits and franchises are listed on Schedule 2.17.
6
2.18.Transactions with Interested Persons.
-------------------------------------
Stockholder does not own directly or indirectly any material
interest in, or serve as an officer or director of, any customer,
competitor or supplier of the Company, or any organization which has a
material contract or arrangement with the Company.
2.19.Warranty or Other Claims.
-------------------------
There are no existing material claims against the Company for
goods or services which are defective or fail to meet any product
warranties or contract or industry standards. To the best knowledge of
each Stockholder, there are no threatened claims, or any facts upon which a
claim could be based, against the Company for goods or services which are
defective or fail to meet any product warranties or contract or industry
standards.
2.20.Employee Benefit Programs.
--------------------------
(a) All employee benefit plans as that term is defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA"), as amended, which are maintained or contributed
to by the Company for the benefit of its employees or former
employees are described in Schedule 2.20. To the best knowledge
of Stockholder, the Company is in full compliance with the
Internal Revenue Code of 1986, as amended (the "Code") and ERISA
with respect to all such employee benefit plans.
(b) Other than claims for benefits by employees,
beneficiaries or dependents arising in the normal course of the
operation of such plans, no claim is currently pending or, to the
best knowledge of each Stockholder, threatened against any such
plan. There are no unfunded obligations of the Company under any
of its retirement, pension, profit-sharing and deferred
compensation plans and programs.
(c) the Company has filed all returns required under the
Code and ERISA with respect to its employee benefit plans,
including returns required by the Department of Labor.
(d) the Company has complied with all obligations under the
Consolidated Omnibus Budget Reconciliation Act ("COBRA").
2.22 Employee Matters.
-----------------
(a) Schedule 2.22 contains a true and complete list of all
employees of the Company as of the date hereof, and their salaries and
wages;
(b) the Company is not a party to any collective bargaining
agreement and, to the best knowledge of each Stockholder, no labor
union or group is attempting to organize or represent any employees of
the Company;
7
(c) the Company is in substantial compliance with applicable
federal, state and local laws respecting terms and conditions of
employment, occupational safety and health and wages and hours;
(d) To the best knowledge of each Stockholder, none of the
employees of the Company has suffered or is suffering from any illness
or disease caused directly or indirectly by any employment related
condition or by contact with any Hazardous Materials within the scope
of such employee's employment with the Company.
(e) No employees of the Company are currently on temporary or
permanent disability or other leave;
(f) there are no labor strikes or work stoppages threatened
against the Company; and
(g) there are no material pending or threatened grievance or
arbitration proceedings regarding labor matters, and the Company has
not experienced any work stoppage or other labor difficulty.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
----------------------------------------------
Stockholder represents and warrants to Buyer as follows:
3.1. Ownership of the Shares.
------------------------
Stockholder is the record and beneficial owner of the Shares set
forth on Exhibit A attached hereto free and clear of all liens,
encumbrances, purchase rights, claims, pledges, mortgages, security
interests, or other limitations or restrictions. Stockholder is not
subject to, or a party to, any Articles of Incorporation or Bylaws
provisions, shareholder control agreements, buy-sell agreements, contracts,
instruments or other restrictions of any kind or character which directly
or indirectly restrict or otherwise limit in any manner the voting, sale or
other disposition of such Shares.
3.2. Authority of Stockholder.
-------------------------
Stockholder has full and unrestricted legal right, power and
authority to enter into this Agreement, and to sell, assign, transfer, and
deliver to Buyer valid, lawful and marketable title to such Shares to be
sold, assigned and transferred by Stockholder pursuant to this Agreement.
Such Stockholder represents that neither the execution and delivery of this
Agreement or any other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby will conflict with or result in any
violation of, or result in default or loss of a benefit under, or permit
the acceleration of any obligation under, any judgment, order, decree,
mortgage, contract, agreement, deed of trust, indenture, lease or other
instrument or any federal, state or local statute, law, ordinance, rule, or
regulation applicable to such Stockholder or the Company or any of his or
its assets or property or business.
8
3.3. Title.
------
Upon delivery to Buyer of certificates representing all of such
Stockholder's Shares at Closing, Buyer will acquire lawful, valid and
marketable title to such Shares free and clear of all liens, encumbrances,
purchase rights, claims, pledges, mortgages, security interests, or other
limitations or restrictions whatsoever.
3.4. Prohibitions of Transactions.
-----------------------------
Stockholder is not presently a party to or subject to or bound by
any agreement or any judgment, order, writ, injunction or decree of any
court or any governmental body which contains any provision which would or
could operate to prevent the carrying out of this Agreement or the
transactions contemplated hereby. There are no actions, suits, proceedings
at law or in equity by any person or entity, or any arbitration or
administrative proceeding or other proceeding pending or threatened, which
could prevent consummation of the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
----------------------------------------
Buyer represents and warrants to the Company and Stockholder as
follows:
4.1. Approval.
---------
Buyer has all necessary corporate power and is duly authorized to
purchase, acquire and accept the Shares as specified in this Agreement.
Buyer has taken all action required to authorize and approve the execution
and delivery of this Agreement and the consummation by Buyer of the
transactions contemplated hereby.
4.2. Prohibitions of Transactions.
-----------------------------
Buyer is not presently a party to or subject to or bound by any
agreement or any judgment, order, writ, injunction or decree of any court
or any governmental body which contains any provision which would or could
operate to prevent the carrying out of this Agreement or the transactions
contemplated hereby. There are no actions, suits, proceedings at law or in
equity by any person or entity, or any arbitration or administrative
proceeding or other proceeding pending or threatened, which could prevent
consummation of the transactions contemplated by this Agreement.
4.3. Capitalization of Buyer.
------------------------
The authorized capital stock of Buyer consists of 100,000,000
shares of Common Stock as of January 3, 2006 of which 31,782 are issued and
outstanding, fully paid and non-assessable. Buyer also has authorized
three classes of preferred stock consists of 70,000,000 shares of which a
total of 42,862,085 are issued and outstanding, fully aid and non-
assessable. There are no outstanding warrants, options, preemptive rights,
or other rights to purchase or acquire any shares of Buyer's capital stock.
No securities of Buyer are either directly or indirectly convertible into
or exchangeable for shares of capital stock of Buyer, except for the
conversion rights of the existing classes of preferred stock, and there
are no stock appreciation, phantom or similar rights based on the book
value or any other attribute of any capital stock of Buyer.
9
4.4. Subsidiaries.
-------------
Buyer has three wholly owned subsidiaries: (1) eWorldMedia, Inc.;
(2) Corporate Media Solutions, Inc.; and (3) Peaceful Feet Shoeshine, Inc.
Buyer is not a partner or joint venturer in any partnership or joint
venture.
4.5. Title to Properties; Condition of Properties.
---------------------------------------------
Buyer has good and marketable title to all of the assets listed
on the Latest Balance Sheet (defined in Section 4.8) (other than inventory
and other assets sold since the date of the Latest Balance Sheet in the
ordinary course of business) and all other assets used in its business free
and clear of any encumbrance of any kind (collectively, "Encumbrances"),
except liens securing debt reflected on the Latest Balance Sheet. All
machinery and equipment owned by Buyer is in good repair, has been well
maintained and is in good working order, normal wear and tear excepted.
All assets necessary for the continued operation of Buyer's business as it
is currently being conducted and as it has been conducted since December
31, 2004, are owned by Buyer or subject to valid leasehold interests.
4.6. Real Property.
--------------
All real property leased by Buyer (the "Buyer's Real Property")
is described in Schedule 4.6. Buyer does not own any real property.
4.7. Environmental Matters.
----------------------
(a) Other than as disclosed on Schedule 4.7, neither Buyer's
Real Property nor any property previously owned or operated by Buyer has
been used by Buyer by any other party, for the purpose of generating,
storing, disposing or treating of any hazardous, toxic or dangerous
substance, waste or material ("Hazardous Materials") as defined under or
regulated by any federal, state or local laws relating to pollution,
protection of the environment or worker health and safety (collectively,
the "Environmental Laws") except to the extent such generating, storing,
disposing or treating is not in violation of the Environmental Laws.
Except as set forth on Schedule 4.76, there has been no release or
threatened release of Hazardous Materials on Buyer's Real Property by Buyer
or by any other party. All releases of Hazardous Materials listed on
Schedule 4.7, if any, on Buyer's Real Property have been fully remediated
as required by the Environmental Laws. Buyer has received any notice of
any asserted present or past failure by Buyer or by any other party to
comply with any Environmental Laws or any rule or regulation adopted
pursuant to such laws in connection with Buyer's Real Property.
(b) Other than as disclosed on Schedule 4.7, Buyer has not
transported Hazardous Materials, or arranged for the transportation of
Hazardous Materials to any disposal, treatment or storage site which is the
subject of federal, state or local enforcement actions, or other
governmental or private investigations, or which may lead to claims against
Buyer for clean up costs, remedial work, or for damages.
10
(c) There are no underground storage tanks, as defined under
federal or applicable state law, located on Buyer's Real Property, and none
has been placed on Buyer's Real Property during Buyer's possession of
Buyer's Real Property.
(d) There are no expenditures required to bring Buyer's Real Property
in compliance with the Environmental Laws.
4.8. Financial Statements.
---------------------
Buyer has delivered to Stockholder the following financial
statements (collectively, the "Financial Statements"):
(a) Audited Income Statement, Balance Sheet, and Statement
of Cash Flow of Buyer for the year ending December 31, 2004.
(b) Reviewed Balance Sheet of Buyer as of September 30,
2005 (the "Latest Balance Sheet"), and an Income Statement for
the six-month period then-ended prepared by Buyer.
All of the financial statements referred to in this Section 4.8 have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with Buyer's past practices, are complete and
correct and present fairly the financial condition of Buyer at the dates of
said statements and the results of its operations for the periods covered.
4.9. Payment of Taxes.
-----------------
Buyer has filed all federal, state and local income, excise or
franchise tax returns, real estate and personal property tax returns, sales
and use tax returns and other tax returns required to be filed by it and
has paid all taxes owing by it except taxes which have not yet accrued or
otherwise become due and taxes for which adequate provision has been made
in the Latest Balance Sheet.
4.10.Absence of Undisclosed Liabilities.
-----------------------------------
Except as set forth on Schedule 4.10, Buyer has no liabilities of
any nature, whether accrued, absolute or contingent, other than and to the
extent reflected or reserved against on the Latest Balance Sheet and
liabilities incurred in the ordinary course of business since the date of
the Latest Balance Sheet. There is no agreement, judgment, decree, order
or any facts which materially affects, or may in the future (so far as can
now be reasonably foreseen) materially affect, the business, properties,
operations or condition of Buyer which has not been specifically disclosed
in this Agreement.
4.11.Accounts Receivable.
--------------------
All of the accounts receivable of Buyer reflected on the Latest
Balance Sheet or thereafter acquired are valid and enforceable claims,
fully collectible and subject to no setoff or counterclaim in the recorded
amounts, subject only to the allowance for doubtful accounts maintained in
accordance with Buyer's past practices.
11
4.12.Inventories.
------------
The inventory of Buyer consists of items of a quantity consistent
with normal inventory levels of Buyer and of a quality and condition that
is usable and saleable in the ordinary course of business for the purposes
for which intended. Such inventory is carried on Buyer's books of account
in accordance with generally accepted accounting principles consistently
applied.
4.13.Conduct of Business in the Ordinary Course.
-------------------------------------------
Buyer has conducted its business since December 31, 2004, only in
the usual and ordinary course consistent with past practice and since such
date, Buyer has not (i) sold or transferred any of its assets, except
inventory in the ordinary course of business; (ii) changed any method of
accounting or accounting practice; (iii) increased or promised to increase
the compensation payable to any employee; (iv) made any direct or indirect
payments, dividends, distributions, sales or transfers of assets, other
than normal compensation, to any officer, director, shareholder or employee
of Buyer or any of their affiliates; or (v) suffered any damage or casualty
to its assets.
4.14.Patents, Trade Names, Trademarks and Copyrights.
------------------------------------------------
Buyer owns or has the right to use, free and clear of any claims
or rights of others, all patents, trademarks, service marks, tradenames,
formulations, lab manuals, know-how, unpatented technology, trade secrets
and customer lists which it is using. A list of all registered trademarks
is attached as Schedule 4.14.
4.15.Contracts.
----------
Except for contracts, commitments, plans, agreements and licenses
described on Schedule 4.15 (the "Contracts"), Buyer is not a party to or
subject to:
(a) any contract or agreement providing for the purchase of all
or substantially all of Buyer's requirements of a particular product
from a supplier, or for periodic minimum purchases of a particular
product from a supplier;
(b) any contract or agreement not terminable on 30-days notice
without penalty to Buyer;
(c) any contract with any sales agent or distributor;
(d) any contract containing covenants limiting Buyer's freedom
to compete in any line of business or with any person or entity;
(e) any license agreement (as licensor or licensee);
(f) any contract or agreement with any present or former
officer, director or shareholder of Buyer or with any persons or
organizations controlled by or affiliated with any of them; or
(g) any other material contract not entered into in the ordinary
course of business.
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All Contracts are in full force and effect and have not been amended,
extended or otherwise modified. Neither Buyer nor any other party is in
default under any of the Contracts.
4.16.Litigation.
-----------
There is no legal, administrative, arbitration or other
proceeding or governmental investigations pending or threatened against
Buyer.
4.17.Compliance with Laws.
---------------------
Buyer has not violated, and is not violating, any laws,
regulations or permits which apply to the conduct of its business, the
failure with which to comply would have a material adverse effect on Buyer.
4.18.Permits.
--------
Buyer holds all licenses, permits and franchises which are
required to permit it to conduct its business, and all such licenses,
permits and franchises are listed on Schedule 4.18.
4.19.Regulatory Matters.
-------------------
Buyer has filed and is current with all filings with the
Securities and Exchange Commission ("SEC") and any other applicable
regulatory, listing or exchange agency. All filing with the SEC or other
applicable regulatory, listing or exchange agency are true and correct and
contain no material inaccuracies.
4.20 Transactions with Interested Persons.
-------------------------------------
Buyer does not own directly or indirectly any material interest
in any customer, competitor or supplier of Buyer, or any organization which
has a material contract or arrangement with Buyer.
4.21.Warranty or Other Claims.
-------------------------
There are no existing material claims against Buyer for goods or
services which are defective or fail to meet any product warranties or
contract or industry standards. There are no threatened claims, or any
facts upon which a claim could be based, against Buyer for goods or
services which are defective or fail to meet any product warranties or
contract or industry standards.
4.22.Employee Benefit Programs.
--------------------------
(a) All employee benefit plans as that term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended, which are maintained or contributed to by the
Company for the benefit of its employees or former employees are
described in Schedule 4.21. To the best knowledge of Stockholder,
Buyer is in full compliance with the Internal Revenue Code of 1986, as
amended (the "Code") and ERISA with respect to all such employee
benefit plans.
(b) Other than claims for benefits by employees, beneficiaries
or dependents arising in the normal course of the operation of such
plans, no claim is currently pending or threatened against any such
plan. There are no unfunded obligations of Buyer under any of its
retirement, pension, profit-sharing and deferred compensation plans
and programs.
13
(c) Buyer has filed all returns required under the Code and
ERISA with respect to its employee benefit plans, including returns
required by the Department of Labor.
(d) Buyer has complied with all obligations under the
Consolidated Omnibus Budget Reconciliation Act ("COBRA").
4.24.Employee Matters.
-----------------
(a) Schedule 4.24 contains a true and complete list of all
employees of Buyer as of the date hereof, and their salaries and
wages;
(b) Buyer is not a party to any collective bargaining agreement
and no labor union or group is attempting to organize or represent any
employees of Buyer;
(c) Buyer is in substantial compliance with applicable federal,
state and local laws respecting terms and conditions of employment,
occupational safety and health and wages and hours;
(d) None of the employees of Buyer has suffered or is suffering
from any illness or disease caused directly or indirectly by any
employment related condition or by contact with any Hazardous
Materials within the scope of such employee's employment with Buyer.
(e) No employees of Buyer are currently on temporary or
permanent disability or other leave;
(f) there are no labor strikes or work stoppages threatened
against Buyer; and
(g) there are no material pending or threatened grievance or
arbitration proceedings regarding labor matters, and Buyer has not
experienced any work stoppage or other labor difficulty.
14
ARTICLE V
CLOSING DOCUMENTS
-----------------
5.1 Deliveries of Stockholder.
--------------------------
Stockholder shall deliver to Buyer on the Closing Date all of
the following, executed as appropriate:
(a) a Certificate executed by the Secretary of the Company certifying
as to (i) an attached copy of the Company's Articles of Incorporation in
effect as of the date hereof, (ii) an attached copy of the Company's Bylaws
in effect as of the date hereof, and (iii) a Certificate of Good Standing
of the Company from the California Secretary of State, dated no more than
ten (10) days prior to the Closing Date;
(b) the stock certificate(s) representing all of the Shares, duly
endorsed for transfer or accompanied by an executed stock power; and
(c) opinion of counsel(s) for the Stockholders with respect to
matters set forth in Article III herein.
5.2 Deliveries of Buyer.
--------------------
Buyer shall deliver to Stockholder on the Closing Date all of
the following, executed as appropriate:
(a) the Class D Preferred Shares in accordance with Section 1.2
hereof within 20 days of the Closing Date; and
(b) an Employment Agreement between the Company and Stockholder upon
terms and conditions satisfactory to Buyer and Stockholder.
ARTICLE VI
COVENANTS
----------
6.1. General Release.
----------------
On the Closing Date, Stockholder releases the Company and its
directors, officers, shareholders, agents and employees and discharges them
from any and all obligations and claims which have arisen or might arise
out of facts or actions existing or taken on or prior to the Closing Date,
except obligations or claims which may be made under this Agreement. In
the event that Buyer is entitled to any claim for indemnification under
this Agreement, Stockholder agrees that he shall not have the right to seek
indemnity or contribution with respect to any such claim from, or have any
similar right with respect to, the Company, Buyer or their respective
affiliates whether by contract, agreement, bylaw, corporate law statute,
common law or otherwise.
15
6.2 Confidential Information.
-------------------------
Each party to this Agreement recognizes that the other parties'
business interests require the fullest practical protection and
confidential treatment of all information not generally known within the
relevant trade group or by the public, including, without limitation, all
documents, writings, memoranda, business plans, illustrations, designs,
plans, know-how, technology, financial information, personnel data,
processes, formulas, programs, inventions, computer software, reports,
sources of supply, customer lists, supplier lists, pricing policies,
operational methods, marketing plans or strategies, product development
techniques, business acquisition plans, methods of manufacture, trade
secrets and all other valuable or unique information and techniques
acquired, developed or used by the Company relating to its business,
operations, employees or customers (hereinafter collectively termed
"Protected Information"). Each party to this Agreement expressly
acknowledges and agrees that Protected Information constitutes trade
secrets and confidential and proprietary business information of Buyer and
the Company. Protected Information shall not include information which is
or becomes part of the public domain through no breach of this Agreement by
any party. Each party to this Agreement acknowledges that Protected
Information is essential to the success of business, and it is the policy
of Buyer and the Company to maintain as secret and confidential Protected
Information. Accordingly, each party to this Agreement agrees to hold such
Protected Information in a fiduciary capacity, to keep secret and to treat
confidentially and not to, and not to permit any other entity or person to,
directly or indirectly, appropriate, divulge, disclose or otherwise
disseminate to any other entity or person nor use in any manner for any
parties' or any other entity's or person's purposes or benefit any
Protected Information, and not to use or aid others in using any such
Protected Information except to the extent that disclosure is required by
law; provided, however, that the parties shall provide Buyer and the
Company with notice as far in advance of any required disclosure as is
practicable in order for Buyer and the Company to obtain an order or other
assurance that any information required to be disclosed will be treated as
Protected Information and all parties shall use all reasonable efforts to
cooperate with Buyer and the Company in connection therewith and in
furtherance thereof. This obligation of non-disclosure of information
shall continue to exist for so long as such information remains Protected
Information.
6.3 Scope.
------
If, at the time of enforcement of Section 6.2, a court of
competent jurisdiction shall hold that the duration, scope or area
restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope or area
reasonable under such circumstances shall be substituted for the stated
duration, scope or area.
6.4 Remedies.
---------
Each party to this Agreement agrees that if he or it shall commit
or threaten to commit a breach of any of the covenants and agreements
contained in this Article VI, then Buyer or the Company shall have the
right to seek and obtain all appropriate injunctive and other equitable
remedies therefor, in addition to any other rights and remedies that may be
available at law, it being acknowledged and agreed that any such breach
would cause irreparable injury to Buyer and the Company and that money
damages would not provide an adequate remedy therefor. If any party to
this Agreement violates any of the terms of this Article VI, the running of
the periods of limitation referred to in this Agreement shall be tolled
from the date that Buyer or the Company gives to the violating party notice
of such violation until such violation shall cease and shall begin to run
again only when the violating party is in compliance with the terms hereof,
whether voluntarily or pursuant to an order of a court.
16
ARTICLE VII
INDEMNIFICATION
----------------
7.1 By Buyer.
---------
Buyer agrees to indemnify, reimburse, defend and hold harmless
Stockholder from and against any and all costs, losses, liabilities,
damages, lawsuits, deficiencies, claims and expenses, including without
limitation, interest, penalties, costs of mitigation, reasonable attorneys'
fees and all amounts paid in investigation, defense or settlement of any of
the foregoing less any undisputable net tax benefits recognized by the
party seeking indemnification as a result of the matter which is the
subject of the indemnification claim (collectively, the "Damages"),
incurred in connection with, arising out of, resulting from or incident to:
(a) any breach of or any inaccuracy in (or any alleged breach of
or inaccuracy in) any representation or warranty made by Buyer in this
Agreement or any other document delivered by Buyer at the Closing; or
(b) any breach of or failure by Buyer to perform any covenant or
obligation of Buyer set out or contemplated in this Agreement or any other
document delivered by Buyer at the Closing.
7.2 By the Company.
---------------
The Company agrees to indemnify, reimburse, defend and hold
harmless Buyer and its officers, directors, partners, employees, agents,
successors, assigns and affiliates (collectively the "Buyer Group"), from
and against any and all Damages incurred in connection with, arising out
of, resulting from or incident to:
(a) any breach of or any inaccuracy in (or any alleged breach of
or inaccuracy in (i) any representation or warranty made by Stockholder in
Article III or (ii) any other document delivered by Stockholder at the
Closing; or
(b) any breach of or failure by the Company to perform any
covenant or obligation of the Company set out or contemplated in this
Agreement or any other document delivered by the Company at the Closing; or
(c) any and all claims related to disclosed or undisclosed
liabilities not reserved for on the Financial Statements related to the
Company or the operation of its business on or prior to the Closing Date
other than liabilities arising under any Contract after the Closing Date;
or
(d) any and all claims related to any and all taxes due from and
owed (i) by the Company on or prior to the Closing Date; or
(e) any breach by the Company of Article VI.
17
7.3 By Stockholder.
---------------
Subject to Section 7.4, Stockholder indemnify, reimburse, defend
and hold harmless Buyer Group from and against any and all Damages incurred
in connection with, arising out of, resulting from or incident to:
(a) any breach of or any inaccuracy in (or any alleged breach of
or inaccuracy in) (i) any representation or warranty made by Stockholder in
Article II, or (ii) any other document delivered by Stockholder at the
Closing; or
(b) any breach of or failure by Stockholder to perform any
covenant or obligation of Stockholder set out or contemplated in this
Agreement or any other document delivered by Stockholder at the Closing; or
(c) any and all claims related to disclosed or undisclosed
liabilities not reserved for on the Financial Statements related to the
Company or the operation of its business on or prior to the Closing Date
other than liabilities arising under any Contract after the Closing Date;
or
(d) any and all claims related to any and all taxes due from and
owed by Stockholder; or
(e) any breach by Stockholder of Article VI.
7.4 Limitations on Liability.
-------------------------
On the second anniversary of the Closing Date, the parties shall
be released from the agreements of indemnification contained in Sections
7.1, 7.2 and 7.3 in respect of any claims which have not been made prior to
such date; provided, however, that the parties shall not be released from
the agreements of indemnification of 7.1, 7.2 and 7.3 which relate to (i) a
breach of the representations and warranties contained in Sections 2.2,
2.8, 4.3, 4.9 and Article III or (ii) fraud on the part of the disclosing
party
7.5 Defense of Claims.
------------------
If any action, claim, suit, proceeding, arbitration, order, or
governmental investigation or audit (an "Action or Proceeding") is filed or
initiated by any third party against any party entitled to the benefit of
indemnity hereunder (an "Indemnified Party"), Indemnified Party shall give
written notice of such Action or Proceeding to the party owing indemnity
hereunder (an "Indemnifying Party") as promptly as practicable (and in any
event within thirty (30) days after the service of the citation or summons
in respect of such Action or Proceeding); provided, however, that the
failure of any Indemnified Party to give timely notice of any Action or
Proceeding shall not affect any rights to indemnification hereunder except
to the extent that the Indemnifying Party demonstrates actual damage caused
by such failure.
18
After an Indemnified Party gives notice of an Action or Proceeding to
an Indemnifying Party, if the Indemnifying Party acknowledges in writing to
the Indemnified Party that the Indemnifying Party is obligated under the
terms of his, her or its indemnity hereunder in connection with such Action
or Proceeding, then the Indemnifying Party shall be entitled, if he, she or
it so elects, to take control of the defense and investigation of such
Action or Proceeding and to employ and engage attorneys of his, her or its
own choice to handle and defend the same, such attorneys to be reasonably
satisfactory to the Indemnified Party, at the Indemnifying Party's cost,
risk and expense (unless (i) the Indemnifying Party has failed to assume
the defense of such Action or Proceeding or (ii) the named parties to such
Action or Proceeding include both of the Indemnifying Party and the
Indemnified Party and the Indemnified Party has been advised in writing by
counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available
to the Indemnifying Party), and to compromise or settle such Action or
Proceeding, which compromise or settlement shall be made only with the
written consent of the Indemnified Party, such consent not to be
unreasonably withheld. The Indemnified Party may withhold such consent if,
among other things, such compromise or settlement (x) would adversely
affect the conduct of business of such Indemnified Party or (y) requires
less than an unconditional release to be obtained. If the Indemnifying
Party takes control of the defense and investigation of an Action or
Proceeding under this Section 7.4, the Indemnifying Party will provide the
Indemnified Party access to all records, documents and personnel of the
Indemnifying Party and keep the Indemnified Party informed relating to any
Action or Proceeding under this Section 7.5.
If (i) the Indemnifying Party fails to assume the defense of such
Action or Proceeding within fifteen (15) days after the Indemnified Party
gives notice thereof pursuant to this Section 7.5, or (ii) the named
parties to such Action or Proceeding include both of the Indemnifying Party
and the Indemnified Party and the Indemnified Party has been advised in
writing by counsel that there may be one or more legal defenses available
to such Indemnified Party that are different from or additional to those
available to the Indemnifying Party, the Indemnified Party against which
such Action or Proceeding has been filed or initiated will (upon delivering
notice to such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost and expense, the defense,
compromise or settlement of such Action or Proceeding on behalf of and for
the account and risk of the Indemnifying Party; provided, however, that
such Action or Proceeding shall not be compromised or settled without the
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld. In the event the Indemnified Party assumes the
defense of the Action or Proceeding, the Indemnified Party will keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement.
The Indemnifying Party shall be liable for any settlement of any
action effected pursuant to and in accordance with this Section 7.5 and for
any final judgment (subject to any right of appeal), and the Indemnifying
Party agrees to indemnify and hold harmless the Indemnified Party from and
against any Damages by reason of such settlement or judgment. Regardless of
whether the Indemnifying Party or the Indemnified Party assumes the defense
of any Action or Proceeding under this Section 7.5, the Indemnifying Party
will pay all costs and expenses in connection with the defense, compromise
or settlement for such Action or Proceeding.
19
If the Indemnifying Party assumes the defense of any Action or
Proceeding under this Section 7.5, the Indemnified Party shall cooperate in
all reasonable respects with the Indemnifying Party and the Indemnifying
Party's attorneys in the investigation, trial and defense of such Action or
Proceeding and any appeal arising therefrom; provided, however, that the
Indemnified Party may, at his or its own cost, participate in the
investigation, trial and defense of such Action or Proceeding and any
appeal arising therefrom. The Indemnifying Party shall pay all expenses
due under this Section 7.5 as such expenses become due. In the event such
expenses are not so paid, the Indemnified Party shall be entitled to settle
any Action or Proceeding under this Section 7.5 without the consent of the
Indemnifying Party and without waiving any rights the Indemnified Party may
have against the Indemnifying Party.
7.6 Claims.
-------
After becoming aware of a claim for indemnification under this
Article VII not involving any Action or Proceeding of the type described in
Section 7.5, the Indemnified Party shall give notice to the Indemnifying
Party of such claim and the amount the Indemnified Party will be entitled
to receive hereunder from the Indemnifying Party; provided, however, that
the failure of the Indemnified Party to give notice shall not relieve the
Indemnifying Party of its obligations under this Article VII except to the
extent (if any) that the Indemnifying Party shall have been actually
prejudiced thereby. If the Indemnified Party does not receive an objection
in writing (a "Notice of Disagreement") to such indemnification claim
within thirty (30) days of receiving notice thereof, the Indemnified Party
shall be entitled to recover promptly from the Indemnifying Party the
amount of such claim, and no later objection by the Indemnifying Party
shall be permitted. If the Indemnifying Party agrees that it has an
indemnification obligation but objects in a timely-delivered Notice of
Disagreement that it is obligated to pay only a lesser amount, the
Indemnified Party shall nevertheless be entitled to recover promptly from
the Indemnifying Person the lesser amount, without prejudice to the
Indemnified Party's claim for the difference.
ARTICLE VIII
RESCISSION RIGHTS
-------------------
8.1 Sellers shall have the right of rescind the purchase and sale set
forth in this Agreement during the 13 month period of time following the
Closing Date. This right of rescission shall be exercisable by Sellers in
the event: (i) Buyer does not raise $1 million for the purpose of financing
the Company's operations during the six month period following the Closing
Date; or (ii) Buyer does not raise $3 million for the purpose of financing
the Company's operations during the 12 month period following the Closing
Date. If Stockholder elects to exercise his rights under this section,
Stockholder shall return the Class D Preferred Shares and all monies
received and invested by investors based of the acquisition of the Company
by Buyer.
20
ARTICLE IX
MISCELLANEOUS
--------------
9.1. Survival of Representations and Warranties.
-------------------------------------------
The representations, warranties, covenants and agreements set
forth in this Agreement or in any writing delivered to Buyer, the Company
or Stockholder in connection with this Agreement will survive the Closing
Date and the consummation of the transactions contemplated hereby.
9.2. Expenses.
---------
Buyer and the Company will each pay all of their respective legal
and other expenses incurred in the preparation of this Agreement and the
performance of the terms and conditions hereof. All sales and transfer
taxes required to be paid pursuant to the consummation of the transactions
contemplated hereunder shall be paid fifty percent (50%) by Buyer on the
one hand and fifty percent (50%) by the Company on the other hand.
9.3. Governing Law.
--------------
This Agreement shall be construed and enforced in accordance with
the internal laws (and not the law of conflicts) of the State of
California.
9.4. Entire Agreement.
-----------------
This Agreement, including the other documents referred to herein
which form a part hereof, contains the entire understanding of the parties
hereto with respect to the subject matter contained herein. There are no
restrictions, promises, warranties, covenants, or undertakings, other than
those expressly provided for herein. This Agreement supersedes all prior
agreements and undertakings between the parties with respect to such
subject matter. No waiver and no modification or amendment of any
provision of this Agreement shall be effective unless specifically made in
writing and duly signed by the party to be bound thereby.
9.5. Severability of Invalid Provision.
----------------------------------
If any one or more covenants or agreements provided in this
Agreement should be contrary to law, then such covenant or covenants,
agreement or agreements shall be null and void and shall in no way affect
the validity of the other provisions of this Agreement.
9.6. Successors and Assigns.
-----------------------
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of
this Agreement.
9.7. Section Headings.
-----------------
Section headings contained in this Agreement are inserted only as
a matter of convenience and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any of the provisions hereof.
9.8. Counterparts.
-------------
This Agreement may be executed in one or more counterparts, and
shall become effective when one or more counterparts have been signed by
each of the parties.
21
9.9. Waiver.
-------
Waiver by any party hereunder of any breach of or failure to
comply with any provision of this Agreement by the other party shall not be
construed as, or constitute a continuing waiver of, or a waiver of any
other breach of, or failure to comply with, any other provision of this
Agreement.
9.10.Non-exclusivity.
----------------
The rights, remedies, powers and privileges provided in this
Agreement are cumulative and not exclusive and shall be in addition to any
and all other rights, remedies, powers and privileges granted by law, rule,
regulation or instrument.
9.11 Notices.
--------
All notices, requests, consents and other communications required
or permitted hereunder must be in writing and must be personally delivered,
mailed first-class postage prepaid, registered or certified mail, or
delivered by a nationally recognized overnight courier:
If to the Stockholder:
Xxxxx Xxxxxxx
Xxxxx Xxxxxx Xxxxx
Xxxx, Xxxxxxxxxx 00000
with a copy to:
Xxxxxxx & Cron
0 Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx, Esq.
If to the Company
MCR Printing & Packaging, Inc.
Xxxxx Xxxxxx Xxxxx
Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
with a copy to:
Xxxxxxx & Cron
0 Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxx, Esq.
22
If to the Buyer, at:
Liberty Diversified Holdings, Inc.
000 Xxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxx Xxxxxxxx
(000) 000-0000
with a copy to:
Xxxxxx & Yap, LLP
00000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
Attn: Xxxxx Xxxxxx, Esq.
or to such other address as the Stockholder or the Buyer may specify to the
other by written notice, and such notices and other communications will be
treated as being effective or having been given when delivered, if personally
delivered, or when received, if sent by mail.
THIS AGREEMENT MAY HAVE AMENDMENTS AFTER REVIEW BY LEGAL COUNSEL OF BOTH
PARTIES AND IF THEY ARE MUTUALLY AGREED UPON BY BOTH PARTIES.
23
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first above written.
BUYER:
LIBERTY DIVERSIFIED HOLDINGS, INC.
By:_________________________________________
Its:________________________________________
STOCKHOLDER:
_______________________________
Xxxxx Xxxxxxx, individually
MCR PRINTING & PACKAGING, INC.
By:_________________________________________
Its:________________________________________
24
