EXHIBIT 99.1
HOLDBACK ESCROW AGREEMENT
THIS HOLDBACK ESCROW AGREEMENT (this "Agreement"), dated as of October
31, 2005, is made by and among RelationServe Media, Inc., a Nevada corporation
("Buyer"), xxxxxxxx.xxx, inc., a Delaware corporation ("Globe"), SendTec, Inc.,
a Florida corporation ("Seller") and, together with SendTec, the "Seller
Parties"), and Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP, a New York
limited liability partnership (the "Escrow Agent"). Unless otherwise defined,
capitalized terms used herein shall have the meaning assigned to them in the
Asset Purchase Agreement (as defined below).
Preliminary Statement
WHEREAS, Buyer and the Seller Parties have entered into that certain
Asset Purchase Agreement, of even date herewith;
WHEREAS, Sections 3.1(b) and 3.2 of the Asset Purchase Agreement
provides for Buyer to deposit One Million Dollars ($1,000,000) (the "Holdback
Cash") and for Globe to deposit a number of shares of its restricted Common
Stock, par value $.001 per share having an aggregate value of Seven Hundred and
Fifty Thousand ($750,000) Dollars (the "Holdback Shares," and together with the
Holdback Cash, the "Escrow Property") with the Escrow Agent contemporaneously
with the execution thereof, such amount to be held by the Escrow Agent subject
to the terms and conditions of this Agreement and the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions contained herein, the parties hereto hereby agree as follows:
Section 1. Establishment of Escrow Accounts. Buyer and the Seller
Parties hereby authorize the Escrow Agent to establish an escrow account (the
"Escrow Account") to hold the Escrow Property. Buyer has delivered to the Escrow
Agent the Holdback Cash upon execution of this Escrow Agreement, and Globe has
delivered to the Escrow Agent the Holdback Shares upon execution of this
Agreement. The Escrow Property shall be held, administered and disposed of by
the Escrow Agent in accordance with the terms and conditions hereinafter set
forth.
Section 2. Investment of Escrow Amount Fund; Distribution of Interest.
(a) The Escrow Agent shall act as custodian of the Escrow
Property and shall from time to time invest and reinvest the Escrow Property and
other proceeds in any commercial bank Money Market Deposit Account. No other
type of investment is permitted.
(b) The Escrow Agent shall have the power to sell or liquidate
the foregoing investments whenever the Escrow Agent shall be required to release
the Escrow Property pursuant to Section 3 of this Agreement. The Escrow Agent
shall have no responsibility for any investment losses resulting from the
investment, reinvestment or liquidation of the Escrow Property, provided such
investment, reinvestment and liquidation occurs in accordance with this
Agreement.
(c) Any interest or other income received on such investment and
reinvestment of the Escrow Property shall become part of the Escrow Property.
Section 3. Release of the Escrow Property.
(a) As used herein, the following terms shall have the following
meanings:
(i) "Award Notice" shall mean a true copy of a final,
non-appealable order of a court or other tribunal in any dispute over a Notice
of Claim resolved by litigation or binding arbitration.
(ii) "Notice of Claim" shall mean a claim or claims by Buyer
or either Seller Party, as the case may be, that it is entitled to the Escrow
Property pursuant to the terms of the Asset Purchase Agreement.
(iii) "Notice of Release" shall mean a written declaration,
executed by the Seller Parties and Buyer, specifying the resolution of a dispute
with regard to a Notice of Claim and the disposition to be made of the Escrow
Property or any portion thereof that was the subject of such dispute.
(iv) "Objection" shall mean a written objection by either
Seller Party or Buyer, as the case may be, to a Notice of Claim stating in
reasonable detail the basis for such objection.
(v) "Withdrawal Notice" shall mean a written declaration by
the party that filed the Notice of Claim or Objection by withdrawing a Notice of
Claim or Objection.
(b) At any time prior to the Closing Date (the "Expiration
Date"), a party seeking payment from the Escrow Property (an "Indemnified
Party") may deliver to Escrow Agent (with a copy being contemporaneously
delivered to the other parties) a Notice of Claim. The party against whom
indemnification is sought (the "Indemnifying Party") shall have ten (10)
business days following receipt of a Notice of Claim to deliver to the Escrow
Agent (with a copy being contemporaneously delivered to the Indemnifying Party)
an Objection. If no Objection is interposed by an Indemnifying Party within ten
(10) business days after receipt by the Indemnifying Party of a Notice of Claim,
such claim is an "Uncontested Claim." If an Objection is filed by the
Indemnifying Party within such ten (10) business day period, such claim will be
deemed to be a "Contested Claim."
(c) Escrow Agent shall pay and disburse the Escrow Property as
follows:
(i) To the Indemnified Party as specified in any Notice of
Claim received by Escrow Agent which is an Uncontested Claim;
(ii) To the Indemnified Party as specified in any Notice of
Claim that is a Contested Claim, if the Indemnifying Party shall have delivered
a Withdrawal Notice to the Escrow Agent with respect to such Contested Claim;
(iii) As specified in any Notice of Release received by
Escrow Agent;
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(iv) To the party as specified in any Award Notice
evidencing a final determination by final, non-appealable order of any dispute
with regard to a Notice of Claim;
(v) To Globe at Closing; or
(d) The Escrow Agent shall disburse all Holdback Cash prior to
disbursing any Holdback Shares hereunder.
(e) If the Indemnifying Party contests all or any part of any
claim in a Notice of Claim, then the Contested Claim shall be first presented
for resolution to Buyer and the Seller Parties by consultation for a period not
to exceed ten (10) business days, and, if not resolved within such period, shall
be then adjudicated in accordance with Section 4(m) of this Agreement. In the
event of a Contested Claim, the Escrow Agent shall hold the Escrow Property
until the Escrow Agent receives (x) delivery of a copy of a Notice of Release as
to the resolution of such Contested Claim and the disbursement of Escrow
Property retained in respect of such Contested Claim, or a Withdrawal Notice the
party that made the claim by withdrawing its Notice of Claim or Objection, or
(y) delivery of a copy of an Award Notice resolving the Contested Claim and
directing the disbursement of Escrow Property retained in respect of such
Contested Claim.
(f) Notwithstanding anything to the contrary contained in
Sections 3(a) - 3(e), if none of the events described in Sections 3(g)(i) - (iv)
have occurred, upon the earlier to occur of: (i) the date that is six months
after the Closing Date, or (ii) the date the Buyer has received audited
financial statements of the Business for the fiscal year ended December 31, 2005
(the "Partial Release Date"), the Escrow Agent shall pay $750,000 (the "Partial
Release Amount") in cash to Globe.
(g) Notwithstanding the foregoing, the Escrow Agent shall not
release the Partial Release Amount if, on the Partial Release Date, the Buyer
(i) shall have sustained indemnifiable Losses (as defined in the Asset Purchase
Agreement) in excess of $100,000 that have already been satisfied by recourse
against the Holdback Cash; (ii) shall have pending any good faith Contested
Claims or Uncontested Claims for indemnifiable Losses that are reasonably
estimated by the Buyer to exceed $100,000 in the aggregate or (iii) shall have
pending any good faith Contested Claims or Uncontested Claims for indemnifiable
Losses that would, when Buyer's reasonable estimates thereof are aggregated with
any indemnifiable Losses sustained by Buyer that have already been satisfied by
recourse against the Holdback Cash exceed $100,000.
(h) This Escrow Agreement will terminate upon the release of the
entire Escrow Property pursuant to this Section 3.
Section 4. Language Concerning the Escrow Agent. To induce the Escrow
Agent to act hereunder, it is further agreed by Buyer and the Seller Parties
that:
(a) The Escrow Agent shall not be under any duty to give the
Escrow Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed in this Escrow Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
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(b) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
(c) The Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys' fees and disbursements, arising out of
and in connection with this Escrow Agreement. Without limiting the foregoing,
the Escrow Agent shall in no event be liable in connection with its investment
or reinvestment of any cash held by it hereunder in good faith, in accordance
with the terms hereof, including without limitation any liability for any delays
(not resulting from its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrow Property, or any loss of interest
incident to any such delays.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity or the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so.
(e) Subject to Section 4(c) hereof, The Escrow Agent may act
pursuant to the advice of counsel with respect to any matter relating to this
Escrow Agreement and shall not be liable for any action taken or omitted in
accordance with such advice.
(f) The Escrow Agent does not have any interest in the Escrow
Property deposited hereunder but is serving as escrow holder only and having
only possession thereof. The Seller Parties, on the one hand and Buyer on the
other hand shall jointly pay or reimburse the Escrow Agent upon request for any
transfer taxes or other taxes relating to the Escrow Property incurred in
connection herewith and shall indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. Any payments
of income from this Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The parties hereto will
provide the Escrow Agent with appropriate W-9 forms for tax identification or
W-8 forms for non-resident alien certifications. It is understood that the
Escrow Agent shall be responsible for income reporting only with respect to
income earned on investment of funds that are a part of the Escrow Property and
is not responsible for any other reporting. This paragraph and paragraph (c)
shall survive notwithstanding any termination of this Escrow Agreement or the
resignation of the Escrow Agent.
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(g) The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by delivering the Escrow Property to any successor Escrow
Agent jointly designated by the other parties hereto in writing, or to any court
of competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement. The resignation of the Escrow Agent will take effect on the earlier
of (i) the appointment of a successor (including a court of competent
jurisdiction) or (ii) the day that is thirty (30) days after the date of
delivery of its written notice of resignation to the other parties hereto. If at
that time the Escrow Agent has not received a designation of a successor Escrow
Agent, the Escrow Agent's sole responsibility after that time shall be to
safekeep the Escrow Property until receipt of a designation of successor Escrow
Agent or a joint written disposition instruction by the other parties hereto or
a final, non-appealable order of a court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
(k) In the event of any disagreement between the other parties
hereto resulting in adverse claims or demands being made in connection with the
Escrow Property, or in the event that the Escrow Agent in good faith is in doubt
as to what action it should take hereunder, the Escrow Agent shall be entitled
to retain the Escrow Property until the Escrow Agent shall have received (i) a
final, non-appealable order of a court of competent jurisdiction directing
delivery of the Escrow Property or (ii) a written agreement executed by the
other parties hereto directing delivery of the Escrow Property, in which event
the Escrow Agent shall disburse the Escrow Property in accordance with such
order or agreement. Any court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to the Escrow Agent to the effect
that said opinion is final and non-appealable. The Escrow Agent shall act on
such court order and legal opinions without further question. Notwithstanding
the foregoing, if requested by Buyer, in the event of a dispute or disagreement
between Buyer and the Seller Parties with respect to the Escrow Property
disbursement which is not resolved within a reasonable time and which is not the
subject of a mediation, arbitration or legal proceeding for such resolution, the
Escrow Agent shall deposit the Escrow Property with a court of competent
jurisdiction and interplead the Seller Parties and Buyer in accordance with
applicable rules of legal procedure.
(l) The Seller Parties and Buyer agree to reimburse the Escrow
Agent for all reasonable expenses, disbursements and advances incurred or made
by the Escrow Agent in performance of its duties hereunder (including reasonable
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fees and expenses). Any fees or expenses of the Escrow Agent or its counsel
which are not paid as provided for herein may be taken from any property held by
the Escrow Agent hereunder.
(m) This Agreement shall be governed by, and shall be construed
in accordance with, the internal laws of the State of New York governing
contracts made and to be performed entirely within such State, without reference
to any choice-of-law principles of the laws of such State. If any provision
herein shall be held to be invalid or unenforceable by any court of competent
jurisdiction or as a result of future legislative or administrative action, such
holding or action shall be strictly construed and shall not affect the validity
or the enforceability of any other provision herein. The parties hereto agree
that any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement shall
be brought in the United States District Court for the Southern District of New
York or any New York State court sitting in New York City, so long as one of
such courts shall have subject matter jurisdiction over such suit, action or
proceeding, and that any cause of action arising out of this Agreement shall be
deemed to have arisen from a transaction of business in the State of New York,
and each of the parties hereby irrevocably consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 5 shall be deemed
effective service of process on such party.
(n) No printed or other matter in any language (including
without limitation prospectuses, notices, reports and promotional material) that
mentions the Escrow Agent's name or the rights, powers, or duties of the Escrow
Agent shall be issued by the other parties hereto or on such parties' behalf
unless the Escrow Agent shall first have given its specific written consent
thereto.
(o) This Escrow Agreement shall be binding upon and inure solely
to the benefit of the parties hereto and their respective successors and
assigns, heirs, administrators and representatives and shall not be enforceable
by or inure to the benefit of any third party except as provided in paragraph
(i) with respect to a resignation by the Escrow Agent. No party may assign any
of its rights or obligations under this Escrow Agreement without the written
consent of the other parties.
(p) This Escrow Agreement may only be modified by a writing
signed by all of the parties hereto, and no waiver hereunder shall be effective
unless in a writing signed by the party to be charged.
(q) The other parties hereto authorize the Escrow Agent, for any
securities held hereunder, to use the services of any United States central
securities depository it deems appropriate, including, but not limited to, the
Depository Trust Company and the Federal Reserve Book Entry System.
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(r) The Seller Parties acknowledge and agree that the Escrow
Agent is legal counsel to Buyer. In the event of a dispute in respect of the
Escrow Property or this Escrow Agreement, Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx &
Xxxxxxx LLP ("Xxxxxx") shall have the right to continue to represent Buyer. All
parties hereto hereby waive any conflict of interest associated with Xxxxxx'x
continued representation of Buyer with respect to any dispute.
Section 5. Notices. All notices, requests, elections, demands and other
communications given pursuant to this Agreement shall be in writing and shall be
duly given when delivered personally or when deposited in the mails, certified
or registered mail, postage prepaid, return receipt requested, or when delivered
by a nationally recognized courier, and shall be addressed as follows:
If to either Seller Party, to:
xxxxxxxx.xxx, inc.
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, President
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with copies to (which shall not constitute notice to
either Seller Party):
Proskauer Rose
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, XX 00000-0000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
D. Xxxxx Xxxxxxxx, Esq.
If to Buyer, to:
RelationServe Media, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xx. Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx Xxxxx
with copies to (which shall not constitute notice to
Buyer):
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
If to Escrow Agent, to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Each of the parties hereto may change the address to which it desires
notices to be sent if it notifies the other party of such change in accordance
with the provisions of this Section 5. Any such notice will be deemed to be
given when received, if personally delivered and, if mailed, two business days
after deposit in the United States mail, properly addressed, with proper postage
affixed.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO ESCROW AGREEMENT]
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date set forth above.
BUYER:
RELATIONSERVE MEDIA, INC.
By: /s/ Xxxxxx Xxxxxx Xxxxx
-----------------------
Name: Xxxxxx Xxxxxx Xxxxx
Title: Chief Executive Officer
SELLER PARTIES:
XXXXXXXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxxxx
--------------------
Name: Xxxxxx Xxxxxxxx
Title: President
SENDTEC, INC.
By: /s/ Xxxxxx Xxxxxxxx
--------------------
Name: Xxxxxx Xxxxxxxx
Title: President
Agreed and Accepted as of the date
first written above:
XXXXXX XXXXXXXX FROME
XXXXXXXXXX & XXXXXXX LLP, as Escrow Agent
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Partner
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