STOCK EXCHANGE AGREEMENT
This
Stock Exchange Agreement (the “Agreement”) dated as of January 15, 2009, by and
between AudioStocks, Inc. a Delaware corporation (“AUDIO”) and BCGU LLC
(“BCGU”). AUDIO and BCGU are each hereinafter referred to
individually as a “party” and collectively as the “parties.”
WHEREAS,
AUDIO and BCGU have each determined that the transactions contemplated by this
Agreement, on the terms and conditions hereof, would be advantageous and
beneficial to their respective interests.
WHEREAS,
the parties desire to consummate the transactions contemplated herein, pursuant
to which AUDIO will transfer to BCGU 3,624,888 of its restricted par value
$0.001 common shares (the “AUDIO Shares”), and in exchange for the AUDIO Shares,
BCGU will transfer one hundred (100) shares of AudioStocks, Inc. Series B
Preferred (the “BCGU Shares”) to AUDIO.
WHEREAS,
for United States federal income tax purposes, the transactions contemplated
hereby are intended to qualify as a tax-free reorganization under Section
368(a)(1)(B) of the Code, together with all rules and regulations issued
thereunder and this Agreement is intended to be adopted as a plan of
reorganization for purposes of Section 368 of the Code.
NOW,
THEREFORE, in consideration of the premises and the representations, warranties
and agreements herein contained, the parties hereto agree as
follows:
ARTICLE
I
DEFINITIONS
SECTION 1.1.
DEFINITIONS. As used herein, the following terms shall have the
following meanings:
“Act”
means the Securities Act of 1933, as amended, and the rules and regulations
issued in respect thereto.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Commission”
means the Securities and Exchange Commission.
“Encumbrance”
means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or otherwise), charge against
or interest in property to secure payment of a debt or performance of an
obligation or other priority or preferential arrangement of any kind or nature
whatsoever.
“Law”
means any law, statute, regulation, rule, ordinance, requirement or other
binding action or requirement of any governmental, regulatory or administrative
body, agency or authority or any court of judicial authority.
“Order”
means any decree, order, judgment, writ, award, injunction, stipulation or
consent of or by any Federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign.
“Person”
means any individual, corporation, general or limited partnership, joint
venture, association, limited liability company, joint stock company, trust,
business, bank, trust company, estate (including any beneficiaries thereof),
unincorporated entity, cooperative, association, government branch, agency or
political subdivision thereof or organization of any kind.
“Transaction
Documents” means any ancillary contracts, agreements or other documents that are
to be entered into in connection with the transactions contemplated
hereby.
ARTICLE
II
AUTHORIZATION
AND SALE OF STOCK
Section 2.1
Authorization of the
Shares. AUDIO has authorized the issuance and exchange of the
AUDIO Shares for the BCGU Shares, and BCGU has agreed to exchange the BCGU
Shares for the AUDIO Shares, pursuant to the terms and conditions fully set
forth in this Agreement.
Section 2.2
Exchange of
Shares. Subject to the terms and conditions hereof, contemporaneously
with the execution of this Agreement, AUDIO will issue to BCGU the AUDIO Shares,
in exchange for the BCGU Shares, and BCGU shall cause to be transferred to
AUDIO, all right, title and interest in the BCGU Shares to AUDIO, in exchange
for the AUDIO Shares.
ARTICLE
III
CLOSING
DATE; DELIVERY; CLOSING FINANCING
Section 3.1
Closing Date.
The consummation of the exchange of the AUDIO Shares and the BCGU Shares (the
“Closing”) shall be held at the offices of Shrink, located at 0000 Xxxxx xxx
Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, contemporaneously with the
execution of this Agreement or at such other time and place as AUDIO and BCGU
mutually agree upon in writing (the “Closing Date”).
Section 3.2
Delivery. At
the Closing, AUDIO shall deliver to BCGU, certificate(s) representing the AUDIO
Shares, and BCGU shall deliver to AUDIO certificate(s) representing the BCGU
Shares.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF AUDIO
AUDIO
hereby represents and warrants to BCGU, as of the date of this Agreement and as
of the Closing Date, as follows:
Section 4.1
Organization.
AUDIO is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power to
own, lease and operate its property and to carry on its business as now being
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would be reasonably likely to have a material adverse effect on the
business, assets (including intangible assets), liabilities, condition
(financial or otherwise), prospects, value, property or results or operations (a
"Material Adverse Effect") of AUDIO.
Section 4.2
Valid Issuance of
Common Stock. The AUDIO Shares, when issued and paid for in
accordance with this Agreement will be duly authorized, validly issued, fully
paid, and non-assessable, and issued in compliance with all applicable federal
or state securities laws.
Section 4.3
Authority; No
Conflict; Required Filings and Consents.
(a) AUDIO
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated by this Agreement, including the
acquisition of the BCGU Shares. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of AUDIO. This
Agreement has been duly executed and delivered by AUDIO, and constitutes the
valid and binding obligation of AUDIO, enforceable in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of
equity.
(b) The
execution and delivery by AUDIO of this Agreement does not, and consummation of
the transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of any provision of the Articles of
Incorporation or Bylaws of AUDIO, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which AUDIO is a party or by which any of
its properties or assets may be bound, or (iii) conflict or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to AUDIO or any of its properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not be
reasonably likely to have a Material Adverse Effect on AUDIO and its
subsidiaries, taken as a whole.
(c) No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality (“Governmental Entity”) is required by
or with respect to AUDIO in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country, and (ii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would be reasonably expected to have a Material Adverse Effect
on AUDIO and its subsidiaries, taken as a whole.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF BCGU
BCGU
hereby represents and warrants to AUDIO, at and as of the date of this Agreement
and as of the Closing, as follows:
Section 5.1
Authority; No
Conflict; Required Filings and Consents.
(a) BCGU
has all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, including the
acquisition of the AUDIO Shares. The execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement have
been duly authorized by all necessary action on the part of
BCGU. This Agreement has been duly executed and delivered by BCGU,
and constitutes the valid and binding obligation of BCGU, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity.
(b) The
execution and delivery by BCGU of this Agreement does not, and consummation of
the transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of any agreement BCGU has with any third
party, (ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which BCGU is a party or by which any of its properties or assets
may be bound, or (iii) conflict or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to BCGU or any of his properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not be reasonably likely to have a
Material Adverse Effect on BCGU’s business affairs, taken as a
whole.
(c) No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to BCGU in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the laws
of any foreign country, and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would be reasonably
expected to have a Material Adverse Effect on BCGU and its subsidiaries, taken
as a whole.
Section 5.4
Restricted
Securities. BCGU understands that the AUDIO Shares are characterized as
“restricted securities” under applicable U.S. federal and state securities laws
inasmuch as they are being acquired from AUDIO in a transaction not involving a
public offering and that, pursuant to these laws and applicable regulations,
BCGU must hold the AUDIO Shares indefinitely unless they are registered with the
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. BCGU further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the AUDIO
Shares, and on requirements relating to AUDIO which are outside of AUDIO's
control, and which AUDIO is under no obligation and may not be able to
satisfy.
Section 5.5
Legends. BCGU understands that the AUDIO Shares, and any securities
issued in respect thereof or exchange therefor, may bear one or all of the
following legends:
(a) “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.”
(b) Any
legend required by the Blue Sky laws of any state to the extent such laws are
applicable to the shares represented by the certificate so
legended.
ARTICLE
VI
MISCELLANEOUS
Section 6.1
Governing
Law. This Agreement shall be governed in all respects by the
laws of the State of California (without reference to its conflicts of laws
principles).
Section 6.2
Survival. The
representations, warranties, covenants and agreements made herein shall survive
the closing of the transactions contemplated hereby.
Section 6.3
Successors and
Assigns. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
Section 6.4
Entire Agreement;
Amendment; Waiver; Modification. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of AUDIO and
BCGU. Either Party to this Agreement may unilaterally waive, in
writing, any section or portion thereof, of this Agreement. Any
modification of this Agreement must be made in writing and executed by both
Parties to the Agreement.
Section 6.5
Notices and Other
Communications. Every notice or other communication required
or contemplated by this Agreement by either party shall be delivered either by
(i) personal delivery, (ii) postage prepaid return receipt requested registered
or certified mail or the equivalent of registered or certified mail under the
laws of the country where mailed, (iii) nationally recognized overnight courier,
such as Federal Express or UPS, or (iv) facsimile with a confirmation copy sent
simultaneously by postage prepaid, return receipt requested, registered or
certified mail at such address as the intended recipient previously shall have
designated by written notice to the other party (with copies to counsel as may
be indicated on the signature page). Notice by registered or
certified mail shall be effective on the date it is officially recorded as
delivered to the intended recipient by return receipt or equivalent, and in the
absence of such record of delivery, the effective date shall be presumed to have
been the fifth (5th) business day after it was deposited in the
mail. All notices delivered in person or sent by courier shall be
deemed to have been delivered to and received by the addressee and shall be
effective on the date of personal delivery; notices delivered by facsimile with
simultaneous confirmation copy by registered or certified mail shall be deemed
delivered to and received by the addressee and effective on the date sent.
Notice not given in writing shall be effective only if acknowledged in writing
by a duly authorized representative of the party to whom it was
given.
Section 6.7
Severability. In
case any provision of this Agreement shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 6.8
California Corporate Securities
Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAVE NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
Section 6.09
Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.
Execution and delivery of this Agreement by exchange of facsimile copies bearing
the facsimile signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party. Such facsimile copies
shall constitute enforceable original documents.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
set forth in the first paragraph hereof.
AudioStocks,
Inc. BCGU
LLC
_____________________________ _______________________________
By: Xxxx
Xxxxx By:
Xxxxx X. Panther II
Its:
Chief Executive
Officer For:
BCGU’s Administrative Manager
