ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of August 10, 2005, by
and between RelationServe Media, Inc., a Nevada corporation, or a designated
subsidiary thereof (the "Buyer"), xxxxxxxx.xxx, inc., a Delaware corporation
("Globe") and SendTec, Inc., a Florida corporation ("Seller").
WHEREAS, Seller is engaged in the direct-response marketing business;
WHEREAS, Seller is a wholly-owned subsidiary of Globe;
WHEREAS, Seller and Globe desire that Seller sell, and Buyer desires to
purchase, substantially all of the business and assets of Seller (the
"Business") on the terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants contained herein and intending to be legally bound, Buyer and
Seller hereby agree as follows:
ARTICLE 1. SALE AND TRANSFER OF ASSETS.
1.1. Acquired Assets. Subject to the terms and conditions set forth
herein, including, without limitation, satisfaction or waiver of the conditions
set forth in Sections 9 and 10 hereof, at the Closing (as defined herein),
Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase from Seller, all of Seller's right, title and interest in, to and
under the business, rights, claims and assets (of every kind, nature and
description, whether tangible or intangible, whether accrued, contingent or
otherwise, and wherever situated and whether or not reflected on the books and
records of Seller) relating to or used in connection with, or necessary for the
conduct of, the Business, except the Excluded Assets (as defined herein) (the
"Acquired Assets"), free and clear of any and all liens, security interests,
claims, charges, options, mortgages, debts, leases (or subleases), conditional
sales agreements, title retention agreements, material defects as to title or
restrictions against the transfer or assignment thereof and encumbrances of any
kind (collectively, "Encumbrances") except for such Encumbrances listed on
Schedule 1.1 hereto ("Permitted Encumbrances"). The Acquired Assets shall
include, without limitation, the following:
(a) All tangible assets used in or necessary to the Business,
whether owned or leased and whether located on the property of the Business or
elsewhere, including, without limitation, all manufacturing, production,
maintenance, testing and other machinery, motor vehicles, furniture, computers,
printers and office equipment;
(b) All intangible assets used or useful in or necessary to the
Business, including, without limitation: the name "SendTec" and all derivations
thereof, all trade names, domain names, websites, service marks names, trade
dress, logos, trade secrets, copyrights, designs, technical information,
know-how, processes, techniques, research and development information, supplies,
plans, proposals, technical data, computer software, financial, marketing and
business data, pricing and cost information, business and marketing plans,
formulas, devices, software or compilations of information; all patents, license
rights and sublicense rights to all patents and trademarks, and other intangible
assets registered in the name of Seller and currently used or proposed to be
used by Seller or any of its Affiliates in connection with, or necessary or
useful for the conduct of the Business, all registrations and applications
therefore and all licenses (as licensee or licensor) and other agreements
related thereto (the "Intellectual Property") all of which are listed on
Schedule 5.11(a) hereto, and all of Seller's rights to use or allow others to
use such Intellectual Property and all claims for infringement of any
Intellectual Property, and intangible rights relating thereto;
(c) All current customer or client lists, files, documentation,
records and related documentation used in connection with the Business, all of
which customers (but not other information) are listed on Schedule 1.1(c)
hereto;
(d) All of Seller's rights to the products, services and product or
service line extensions of the Business, whether now existing or currently under
development;
(e) All of the Seller's rights and interests arising under or in
connection with Contracts (as defined in Section 5.14 hereof), all of which are
listed on Schedule 1.1(e) hereto;
(f) All franchises, licenses, permits, consents, authorizations,
approvals and certificates, or any waiver of the foregoing, required by any
person or organization including any Governmental Authority (as defined herein),
held, used or otherwise possessed by Seller in connection with and/or necessary
to the operation of the Business, to the extent transferable to Buyer under
applicable laws, all of which are listed on Schedule 1.1(f) (the "Permits");
(g) All leases of equipment, machinery or other tangible personal
property used in connection with and/or necessary to the operation of the
Business, all of which are listed on Schedule 1.1(g) (the "Personal Property
Leases" and the personal property subject to such leases to the extent of
Seller's leasehold interest therein);
(h) All leases of real property used in connection with and/or
necessary to the operation of the Business as listed on Schedule 1.1(h) (the
"Real Property Leases", and the real property subject to such leases to the
extent of Seller's leasehold interest therein, the "Leased Real Property");
(i) All goodwill and going concern value associated with the
Business;
(j) All books of account, general, financial, Tax (as defined
herein) and personal records, property records, purchasing and sales records,
credit and collections records, personnel and payroll records, invoices,
shipping records, warranties on all services, supplies and equipment,
correspondence and other documents, files, papers, mailing lists, customer,
licensee, representative and vendor lists, and all computer software, programs
and data and any rights thereto owned, associated with or employed by Seller or
its Affiliates used in, or relating to, the Business;
(k) All rights with respect to unemployment, workers' and workmen's
compensation, and other similar insurance reserves and rebates relating to
Transferred Employees (as defined herein);
2
(l) All amounts owing Seller or any of its Affiliates as of the
Closing for services or products provided by the Business prior to the Closing,
whether or not an invoice for such services or products has been submitted,
including, without limitation, prepaid assets and expenses, insurance
allocations, travel advances, rent and utility deposits and deposits for goods
and services relating to the operation of the Business (the "Accounts
Receivable") as listed on Schedule 1.1(l);
(m) All cash, commercial paper, cash equivalents and marketable
securities of the Business on hand or in any bank accounts or securities
accounts owned by Seller, each of which is listed on Schedule 1.1(m).
(n) All customer deposits of the Business owned by Seller;
(o) All information services systems and computer hardware and
software of the Business;
(p) All sales data, including all sales representatives, account
books, logs and other documents reflecting sales strategies and appointments and
suppliers' names of the Business and all sales and promotional materials used by
Seller in connection with the Business;
(q) All of Seller's inventories of the Business existing on the
Closing Date (as defined herein), including but not limited to, disposables,
spare parts, materials, works-in-process, active shipments, ordered goods and
supply items, that are (i) held for sale or rent, (ii) used in connection with
the sale or rental or other Acquired Assets, (iii) parts used in the repair of
Acquired Assets, or (iv) held by a third party under a rental arrangement
whether located on the premises of either Seller, in transit to or from such
premises, in warehouses, in premises of manufacturers (collectively
"Inventory");
(r) All claims, causes of action, rights of recovery and rights of
set-off of any kind (including rights to insurance proceeds, indemnity claims
and rights under and pursuant to all warranties, service contracts,
representations and guaranties made by suppliers of products, materials or
equipment, or components thereof and third-party service providers), pertaining
to or arising out of, the Business and inuring to the benefit of Seller with
respect to the Business;
(s) All products, ideas or concepts of the Seller under research on
or prior to the Closing Date that relate to the Business;
(t) All other assets, properties, rights and business of every kind
and nature owned or held by Seller or its Affiliates which are used in the
Business, or in which Seller has an interest, known or unknown, fixed or
unfixed, xxxxxx or inchoate, accrued, absolute, contingent or otherwise, whether
or not specifically referred to in this Agreement, except the Excluded Assets.
1.2. Excluded Assets. Notwithstanding the foregoing, the following assets
relating to the Business are being retained by Seller, are expressly excluded
from the purchase and sale contemplated hereby, and, as such, are not included
in the Acquired Assets (the "Excluded Assets"):
3
(i) All property and assets of Seller that are not related to
the Business;
(ii) All insurance policies, other than rights to receive
proceeds of insurance policies related to the Acquired Assets or the Business,
and all rights of offset, counterclaims and insurance coverage thereunder;
(iii) All severance, pension, retirement and other employee
benefit plans other than the right to any refunds or reimbursements thereunder;
(iv) All rights of Seller with respect to the claims, refunds,
causes of action, rights of recovery, rights of set-off and all other rights and
assets of every kind and nature related to the Excluded Liabilities (as defined
below);
(v) All monies to be received by Seller and all other rights
of Seller under this Agreement including, without limitation, the Purchase Price
(as defined herein) and the other agreements, documents, and instruments
executed or delivered in connection with this Agreement; and
(vi) The right to receive mail and other communications
addressed to Seller relating to any of the assets described in the foregoing
clauses (i) through (v) or the Excluded Liabilities.
ARTICLE 2. ASSUMPTION OF OBLIGATIONS.
2.1. Assumption of Certain Liabilities. Buyer is assuming only the
following liabilities and obligations of Seller, and Buyer and Seller agree that
there will be no other outstanding liabilities, to suppliers or otherwise, of
the Business assumed by Buyer, other than those listed in this Section 2.1:
(a) The liabilities reflected on the Balance Sheet and all other
liabilities of the Business incurred thereafter in the Ordinary Course; and
(b) All other liabilities and obligations of the Business and the
Acquired Assets to the extent first arising or maturing (but only to the extent
so maturing) after the Closing Date.
The liabilities and obligations of Seller identified in subsections (a)
and (b) of this Section 2.1 are hereinafter collectively referred to as the
"Assumed Liabilities."
2.2. Liabilities Not Assumed. With the exception of the Assumed
Liabilities, Buyer shall not by execution and performance of this Agreement or
otherwise, assume or otherwise be responsible in any way for any liability or
obligation of any nature, whether absolute, contingent, accrued, or known or
unknown, of Seller or any Affiliate of Seller whether or not relating to the
Business.
4
ARTICLE 3. PURCHASE PRICE. The total purchase price for the Acquired
Assets to be paid to Seller by Buyer shall be Thirty-Seven Million Five Hundred
Thousand Dollars ($37,500,000) (the "Purchase Price") and shall be paid in the
following manner:
3.1. Closing Payment. At the Closing (as defined herein), against delivery
of appropriate instruments of sale, transfer, conveyance and assignment with
respect to the Acquired Assets, Buyer shall deliver to Seller:
(a) Thirty-Six Million Five Hundred Thousand Dollars ($36,500,000)
to be paid as follows at Closing:
(i) Thirty-Five Million Five Hundred Thousand Dollars
($35,500,000) (the "Closing Amount") to be paid in immediately available funds
by wire transfer to the bank account of Globe; and
(ii) One Million Dollars ($1,000,000) (the "Escrow Amount"),
which shall be released pursuant to the terms of the that certain Escrow
Agreement by and between Buyer, Globe and Proskauer Rose LLP (the "Escrow
Agent"), dated as of the date hereof, substantially in the form of Exhibit A
hereto (the "Escrow Agreement") and sent by wire transfer to the bank account of
Globe; and
(b) One Million Dollars in cash ($1,000,000) (the "Holdback Cash"),
which shall, together with the Escrowed Shares, be held by the Holdback Escrow
Agent pursuant to the terms of the Holdback Escrow Agreement (as such terms are
defined in Section 3.2 below).
3.2. Escrowed Shares.
(a) As additional protection for the Buyer in the event that the
Buyer suffers any Losses for which the Buyer is entitled to indemnification
hereunder, Globe shall, at the Closing, issue to the Buyer and deposit with
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx, LLP (the "Holdback Escrow Agent"), a
number of shares of restricted common stock of Globe (the "Escrowed Shares")
having an aggregate value of Seven Hundred and Fifty Thousand Dollars ($750,000)
(valued at the average closing price of Globe common stock over a trailing ten
(10) day period prior to the Closing, which shares shall be entitled to
customary "piggyback" registration rights). Unless and until any Escrowed Shares
are released to the Buyer pursuant to the Holdback Escrow Agreement (as defined
below), the Buyer may not sell, assign, pledge, encumber or otherwise transfer
such Escrowed Shares, nor shall the Buyer have the right to vote such Escrowed
Shares.
(b) Partial Release of Holdback Cash. On the first to occur of: (i)
the date that is six months after the Closing Date; or (ii) the date that Buyer
receives audited financial statements of the Business for the fiscal year ended
December 31, 2005 (the first of such dates being the "Partial Release Date"),
the parties shall cause the Holdback Escrow Agent to release from the Holdback
Escrow Agreement (as defined below) and pay to Globe the sum of Seven Hundred
Fifty Thousand Dollars ($750,000) in cash; provided, however, that if, on the
Partial Release Date, the Buyer (A) shall have sustained indemnifiable Losses in
excess of $100,000 that have already been satisfied by recourse against the
Holdback Cash, (B) shall have pending any good faith Claims for indemnifiable
Losses that are reasonably estimated by the Buyer to exceed $100,000 in the
aggregate or (C) shall have pending any good faith 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, then such $750,000 sum
shall not be paid to Globe on the Partial Release Date and the entire balance of
the Holdback Cash remaining on the Partial Release Date shall continue to be
held and disbursed by the Holdback Escrow Agent pursuant to the terms of the
Holdback Escrow Agreement.
5
(c) Holdback Escrow Agreement. The Holdback Cash and the Escrowed
Shares shall be held by the Holdback Escrow Agent pursuant to an Escrow
Agreement substantially in the form of Exhibit B hereto (the "Holdback Escrow
Agreement") during the Indemnification Period (as defined herein). At the
expiration of the Indemnification Period, (i) the then remaining balance of the
Holdback Cash shall be paid to Globe and (ii) the then remaining number of
Escrowed Shares shall be returned to Globe, whereupon such Escrowed Shares shall
be cancelled and shall cease to be issued and outstanding. The Holdback Cash and
Escrowed Shares shall not, to the extent permitted by law, be subject to claims
of any creditors of Globe or Seller.
(d) Globe's Election. In the event that the Buyer suffers any
Loss(es), for which the Buyer is entitled to indemnification hereunder for which
the Holdback Cash shall not be sufficient to fully indemnify Buyer as provided
in Article 11, Buyer shall have the right at the time of payment of any such
Claim(s) to payment of the deficit by transfer to Buyer by the Holdback Escrow
Agent of such number of the Escrowed Shares that shall have an aggregate Fair
Market Value that is sufficient to pay such deficit. If the Fair Market Value of
the Escrowed Shares is less than the amount required to be remitted to Buyer,
then Seller and Globe shall be jointly and severally liable and shall be
required at the time required for payment of such Claim(s) to immediately pay to
the Buyer the difference between the Fair Market Value of the Escrowed Shares
(or the then remaining Escrowed Shares) and the amount of such Loss(es) payable
in respect of such Claim(s) (such difference, the "Share Value Deficit");
provided, however, that in no event shall more than an aggregate of $750,000 in
value (whether in the transferred Escrowed Shares' Fair Market Value or in cash
required to fund a Share Value Deficit) be payable in respect of any Loss(es)
that cumulatively become payable for which the Holdback Cash shall not be
sufficient to fully indemnify as provided in Article 11. In addition, in the
event that the Buyer suffers any Loss(es) for which Buyer is entitled to
indemnification hereunder for which the Escrowed Shares shall be paid to Buyer,
Globe shall have the right to elect to pay all or a portion of such Loss(es) in
cash in lieu of Escrowed Shares, provided, further, that Globe (i) gives prompt
written notice of such election to Buyer prior to delivery of the Escrowed
Shares to Buyer by the Holdback Escrow Agent, and (ii) pays to Buyer by wire
transfer of immediately available funds an amount equal to the Fair Market Value
of the Escrowed Shares that would have been released to Buyer had Globe not
elected to pay such Loss(es) in cash.
3.3. Adjustments to Purchase Price.
(a) Closing Date Balance Sheet Adjustment. The Purchase Price shall
be adjusted at Closing in accordance with the Closing Date Balance Sheet, as
defined below, to the extent that Seller's Net Working Capital as reflected on
the Closing Date Balance Sheet is more than or less than $0.
6
(b) Closing Date Balance Sheet. Seller shall prepare and deliver an
estimated balance sheet dated as of the Closing Date (the "Closing Date Balance
Sheet"), as soon as practical, but in all cases, within one (1) Business Day (as
defined herein) prior to the Closing Date. Such Closing Date Balance Sheet shall
be prepared by Seller's accountants in accordance with GAAP applied consistently
with past accounting practices of Seller. If the Closing Date Balance Sheet
establishes that Seller's Net Working Capital is more or less than $0, then, in
that event, the Purchase Price shall be increased or decreased dollar-for-dollar
(the "Adjustment") by the amount of the excess or deficiency. Thus, for example,
if the Closing Date Balance Sheet shows Net Working Capital of $250,000, the
Purchase Price shall be increased by $250,000. If, on the other hand, the
Closing Date Balance Sheet shows Net Working Capital of less than $0, the
Purchase Price shall be reduced to the extent of such deficit.
3.4. Post-Closing Audit Adjustment. Buyer shall direct the preparation of
an audit of the Closing Date Balance Sheet and shall deliver the same to the
Globe and Seller prior to March 31, 2006. To the extent that the audited Closing
Date Balance Sheet shows a different Net Working Capital as of the Closing Date
than the estimate previously prepared by Seller, Globe and Seller shall be
responsible to pay to Buyer the amount of any deficit by which Net Working
Capital is less than the estimate, and Buyer shall pay to Seller, any greater
amount by which the audited Closing Date Balance Sheet Net Working Capital
exceeds the estimate within 15 days of delivery of the audited Closing Date
Balance Sheet to Seller.
3.5. Allocation of Purchase Price. The parties hereto agree that the
taxable purchase of the Acquired Assets shall be an "applicable asset
acquisition" governed by Section 1060 of the Code. The parties hereto further
agree that the Purchase Price shall be allocated in accordance with Schedule 3.5
hereto (as may be later adjusted in accordance with Section 3.3). Each of Buyer
and Seller agrees to complete IRS Form 8594 consistently with such allocation
and, if requested by the other, to furnish the other with a copy of such Form
prepared in draft form no less than 45 days prior to the filing due date of such
Form. None of Buyer, Seller or Seller's Affiliates shall file any return or take
a position with any taxing authority or in connection with any tax related
litigation that is inconsistent with this Section 3.5, unless required to do so
pursuant to a determination within the meaning of Section 1313(a) of the
Internal Revenue Code (the "Code").
ARTICLE 4. CLOSING.
4.1. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall be held at such date, time and place as Buyer and Seller
mutually agree but in any event prior to October 31, 2005 (the "Closing Date").
4.2. Deliveries at Closing. Upon satisfaction or waiver of all conditions
set forth herein, at the Closing:
(a) Seller shall duly execute and deliver to the Buyer bills of sale
and instruments of assignment and transfer as may be necessary to vest in the
Buyer good and marketable title to all of the Acquired Assets, in each case
subject to no Encumbrance, and for assumption of the Assumed Liabilities.
7
(b) The Buyer shall deliver or cause to be delivered the Closing
Amount to Seller.
(c) The Escrow Amount shall be released to Seller pursuant to the
terms of the Escrow Agreement.
(d) The Holdback Amount shall be delivered into escrow for the
Indemnification Period under the Holdback Escrow Agreement.
(e) Each of the parties thereto shall execute and deliver each of
the documents, instruments or agreements required to be executed and delivered
pursuant to Sections 9 and 10 hereof.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER AND GLOBE. The Seller
and Globe, jointly and severally, represent and warrant to the Buyer as of the
date hereof (except as otherwise indicated) as follows, provided, however, that
Seller's and Globe's representations and warranties contained in Section 5.3(b)
or (c) (as it relates to Seller and/or the Business), 5.5 (as it relates to
Seller and/or the Business) 5.6, 5.7, 5.8, 5.9 (as it relates to Seller and/or
the Business), 5.10 (as it relates to Seller and/or the Business) 5.11, 5.12,
5.13, 5.14, 5.15, 5.16 (as it relates to Seller and/or the Business), 5.17,
5.18, 5.19 and 5.20 (collectively, the "Operational Representations") shall not
be deemed to have been made upon execution by Globe hereof, and shall only be
deemed made when, and if, comparable representations and warranties are made by
Seller Management (as defined in Section 9.11) to Globe (and as to which
representations and warranties by Seller Management Buyer shall also be entitled
to rely upon hereunder provided, however, neither Seller nor Globe shall be
required to obtain Seller Management consent to any such reliance), which may be
made in the Globe Redemption Agreement (as defined in Section 9.10) or in any
another document or agreement, relating to such matters, and upon obtaining such
management representations, the Operational Representations shall be deemed to
be made by Globe:
5.1. Organization; Authority. (a) Globe is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida (i.e., Seller is organized and its status
is "active"). Seller and Globe are each duly licensed or qualified to do
business as a foreign entity, and are each in good standing in each jurisdiction
where such qualification is necessary as listed on Schedule 5.1, which, with
respect to Seller, are the only jurisdictions in which qualifications are
required in connection with the operation of the Business. True and complete
copies of the charter and bylaws, including any amendments thereto through the
date hereof (certified as of a recent date hereof by the Secretary of each
Seller), of each of Seller and Globe have been delivered to Buyer.
(b) Seller and Globe each have all requisite corporate power and
authority to (i) execute and deliver this Agreement, the other Transaction
Documents to which each is a party (the "Seller Transaction Documents") and any
related agreements to which either of them is a party and to perform the
transactions contemplated hereby and thereby (the "Contemplated Transactions"),
(ii) to use its corporate name, (iii) to operate its business and to carry on
its business as presently conducted, and (iv) to own, lease and otherwise hold
its properties and assets. All of the issued and outstanding capital stock of
Seller is owned beneficially and of record by Globe.
8
5.2. Authority Relative to the Transaction Documents. Seller and Globe
have all requisite corporate authority and power to execute and deliver this
Agreement and the other Seller Transaction Documents to which it is or will
become a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the other Seller
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all required
corporate and stockholder action on the part of Seller and by all required
corporate and stockholder action on the part of Globe and no other corporate,
shareholder or other proceedings on the part of Seller or Globe (other than
stockholder approval by the stockholders of Globe) are necessary to authorize
this Agreement or the other Seller Transaction Documents or to consummate the
Contemplated Transactions. The Seller Transaction Documents have been duly and
validly executed and delivered by Seller and Globe as applicable, and, assuming
the Seller Transaction Documents have been duly authorized, executed and
delivered by Buyer, the Seller Transaction Documents constitute the valid and
binding agreement of Seller and Globe enforceable against Seller and Globe in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, including the
effect of statutory and other laws regarding fraudulent conveyances and
preferential transfers and subject to the limitations imposed by general
equitable principles (regardless whether such enforceability is considered in a
proceeding at law or in equity).
5.3. Non-Contravention. Except as listed on Schedule 5.3, the execution
and delivery by Seller and Globe of this Agreement and the Seller Transaction
Documents and the consummation by the Seller and Globe of the Contemplated
Transactions will not (a) violate or conflict with any provision of their
respective charters or bylaws, each as amended to date; (b) conflict with or
result in the breach or termination of (or constitute a default for any event
which, with notice or lapse of time or both would constitute a default) under,
or give to others any rights of termination or cancellation of, or accelerate
the performance required by, or maturity of, or result in the creation of any
Encumbrance pursuant to any of the terms, conditions or provisions of, any
Contract which either Seller or Globe is a party; (c) constitute a violation of,
or be in conflict with, or constitute or create a default under, or result in
the creation or imposition of any Encumbrance; or (d) violate any statute, law,
ordinance, guideline, interpretation, judgment, decree, order, regulation or
rule of any Governmental Authority (as defined herein). The execution and
delivery of this Agreement by Seller and Globe and the performance of this
Agreement, the Seller Transaction Documents and the related or Contemplated
Transactions by Seller and Globe will not require filing or registration with,
or the issuance of any Permit by, any Person or Governmental Authority under any
applicable Law (other than any obligations to file an Information Statement and
other reports as required by the Exchange Act (as defined herein) or any
contracts to which Seller and Globe is a party. The Contemplated Transactions
will not violate or conflict with any contract, agreement, or understanding
relating to the acquisition of Seller by Globe.
9
5.4. Compliance with Law. Except as set forth on Schedule 5.4, the
Business has been conducted in accordance with all applicable Laws (except, in
each such case, for any non-compliance that individually or in the aggregate has
not had, and would not reasonably be expected to have, a Material Adverse
Effect). Seller has complied with, and is in compliance with (a) all Laws
applicable to Seller or any of its properties and (b) all terms and provisions
of all Contracts to which Seller is a party, or to which the Acquired Assets or
the Business is subject (except, in each such case, for any non-compliance that
individually or in the aggregate has not had, and would not reasonably be
expected to have, a Material Adverse Effect). Except as set forth in Schedule
5.4 hereto, neither Seller nor Globe has committed, been charged with, or been
under investigation with respect to, nor does there exist, any violation of any
provision of any Law with respect to the Acquired Assets or the Business.
Neither the Seller nor Globe is subject to any decree, injunction, judgment,
order, ruling, assessment or writ issued by any Governmental Authority which
could impair its ability to consummate the transactions contemplated hereby or
adversely affect Buyer's ownership of the Acquired Assets or conduct of the
Business from and after Closing.
5.5. SEC Documents; Financial Statements. (a) Since August 30, 2004, Globe
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the Securities and Exchange Commission ("SEC") pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (all of the foregoing filed prior to the date hereof and
all exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements included
in the SEC Documents ("SEC Financial Statements") complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. The SEC Financial
Statements have been prepared in accordance with generally accepted accounting
principles in the United States ("GAAP"), consistently applied during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of Seller and Globe (as it relates to Seller and the Business) as of
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). As at the respective dates of the SEC Financial
Statements, there were no material liabilities or obligations of Seller (whether
absolute or contingent) except for those liabilities and obligations reflected
on or adequately reserved for therein. To the knowledge of the executive
officers of Globe, no information provided by or on behalf of Seller to Buyer or
which is included in the SEC Documents contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they are or were
made, not misleading.
10
(b) Certain Financial Information. Globe has delivered to Buyer
complete and correct copies of (i) audited financial statements for Seller as of
and for the calendar year ended December 31, 2004 and the related statements of
income and cash flows for the periods ending on such date; and (ii) the
unaudited financial statements for Seller as of and for the 6-month period ended
June 30, 2005 (the "Balance Sheet Date") and the related statements of income
and cash flows for the periods ending on such dates (the "Seller Financial
Statements", and together with the SEC Financial Statements, the "Financial
Statements"), copies of which are attached as Exhibit 5.8(b) hereto. The
unaudited balance sheet of Seller as of the Balance Sheet Date is hereinafter
referred to as the "Balance Sheet". Each of the Seller Financial Statements has
been prepared in accordance with GAAP, applied on a consistent basis throughout
the relevant periods (except as may be otherwise indicated in such Seller
Financial Statements or the notes thereto), and fairly presents in all material
respects the assets, liabilities and financial position of Seller as of such
dates and for the periods indicated subject, in the case of unaudited financial
statements, to normal year end adjustments. Since the Balance Sheet Date, there
has been no change in any of the significant accounting policy practices or
procedures of Seller or Globe.
5.6. Absence of Certain Changes and Events. Since the Balance Sheet Date,
Seller's business has been conducted only in the ordinary course of business
consistent with past practice of Seller (the "Ordinary Course"). Without
limiting the foregoing, except as set forth on Schedule 5.6, since the Balance
Sheet Date, there has not been, occurred or arisen:
(a) any material adverse change in the operations (as now conducted
or as presently proposed to be conducted), assets, liabilities, earnings,
business, properties, rights, net worth, or condition (financial or otherwise)
of Seller, nor are any such changes threatened, anticipated or contemplated;
(b) any sale, lease or other disposition of any properties or assets
of Seller, or any transaction that is material to the business of Seller entered
into or carried out, except in the Ordinary Course;
(c) any material change made in the methods of doing business, nor
has a Material Adverse Effect in the accounting principles or practices or the
method of application of such principles or practices used by Seller or any
change in depreciation or amortization policies or rates theretofore adopted
occurred;
(d) any Encumbrance imposed or agreed to be imposed on or with
respect to any of the Acquired Assets or capital stock of Seller, other than the
Permitted Encumbrances;
(e) any modification, waiver, change, amendment, release, rescission
or termination of, or accord and satisfaction with respect to, any material
term, condition or provision of any Contract (as defined herein), other than any
satisfaction by performance in accordance with the terms thereof in the Ordinary
Course;
11
(f) any actual, threatened, anticipated or contemplated casualty,
loss, damage or destruction (whether or not covered by insurance), conversion,
termination, cancellation, default or taking by eminent domain or other action
by any Governmental Authority that has had or could reasonably be expected to
have a Material Adverse Effect;
(g) any adverse pending, threatened, anticipated or contemplated
dispute of any kind with any contractor, subcontractor, customer, supplier,
source of financing, employee, landlord, subtenant or licensee of Seller that is
reasonably likely to result in any material reduction in the amount, or any
change in the material terms or conditions, of business with any material
customer, supplier or source of financing of Seller;
(h) any increase, other than in the Ordinary Course, in the
compensation payable or to become payable to any of Seller's officers,
employees, agents or consultants (including, without limitation, any increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment), or
the entering into with or modification of any employment contract or other
agreement concerning the compensation of any officer, or employee, or the making
of any loan to, or engagement in any transaction with, any officers, directors
or shareholders of Seller, or the establishment of any new, or the modification
of any existing, employee benefit, compensation or stock plan of Seller that
affects the employees of Seller;
(i) capital expenditures or commitments therefore by Seller in
excess of $10,000 in the aggregate for additions, alterations or modifications
to the property, plant or equipment of Seller;
(j) the incurrence of any material obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become due) or
the incurrence or entering into of any transaction, contract or commitment by
Seller with respect to its business, other than items incurred or entered into
(as the case may be) in the Ordinary Course;
(k) any payment, discharge or satisfaction of any claim, Encumbrance
or liability by Seller other than in the Ordinary Course (whether absolute,
accrued, contingent or otherwise and whether due or to become due);
(l) any labor trouble, problem or grievance that has had or could
reasonably be expected to have a Material Adverse Effect;
(m) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset or Intellectual Property of
Seller other than in the Ordinary Course;
(n) any cancellation of any Indebtedness (as defined herein) or
claims or any amendment, termination, diminution or waiver of any rights of
material value to Seller;
(o) any change in the customers or the personnel of Seller other
than such routine changes which occur in the Ordinary Course;
(p) any material decrease in the level of maintenance of any
material tangible assets of Seller from that level generally in effect prior to
the date hereof;
12
(q) any material failure to operate the business of Seller in the
Ordinary Course, including, but not limited to, any failure by Seller to make
capital expenditures or investments in Seller or any failure to pay trade
accounts payable consistent with past practice;
(r) any pending, threatened, anticipated or contemplated occurrence
or situation of any kind, nature or description (including, without limitation,
the enactment of any Laws (as defined herein)) that has had or could reasonably
be expected to have a Material Adverse Effect; and
(s) any agreement or understanding, whether in writing or otherwise,
for Seller to take any of the actions specified in (a) through (r) above.
5.7. Title to Properties.
(a) Acquired Assets. Seller has, and is transferring to Buyer, good,
clear and valid record and marketable title to, and possession of, all of the
Acquired Assets owned by Seller, free and clear of any Encumbrances (other than
Permitted Encumbrances). Seller has, and is transferring to Buyer, valid and
subsisting leasehold interests or licenses in, and possession of, all of the
Acquired Assets that are leased by Seller. Seller has the full right, power and
authority to sell, convey, transfer, assign and deliver the Acquired Assets,
without the need to obtain the consent or approval of any third party, except as
listed on Schedule 5.7(a). At and as of the Closing, Seller will convey the
Acquired Assets to Buyer by deeds, bills of sale, certificates of title and
other instruments of assignment and transfer effective in each case to vest in
Buyer, and Buyer will have, good and valid record and marketable title to all of
the Acquired Assets, free and clear of any and all Encumbrances, except for
Permitted Encumbrances. The Acquired Assets are, in all material respects, in
good condition and repair and are adequate and sufficient for Seller's intended
purposes, ordinary wear and tear excepted. The Acquired Assets will transfer to
Buyer under this Agreement (and other documents contemplated hereby), and
constitute, all of the material assets and properties (personal and mixed,
tangible and intangible) and rights necessary or desirable to permit Buyer to
conduct the Business consistent with Seller's past business practice.
(b) Leases. (i) Schedule 1.1(h) contains a list of all material
agreements under which real property is leased by Seller and used in connection
with the Business. All of the Leased Real Property including any buildings,
structures and appurtenances thereon, are, to Seller's knowledge, in good
operating condition and repair, are in such condition as to permit surrender by
Seller to the lessors thereof without any material cost or expense for repair or
restoration if any of the Real Property Leases were terminated on the date
hereof, are adequate and suitable for the uses for which intended by Seller,
each has adequate rights of ingress and egress for operation of the Business in
the Ordinary Course and there does not exist any condition that interferes in
any material may with the use or the economic value thereof.
13
(ii) Schedule 1.1(g) contains a list of all leases or material
agreements under which Seller, with respect to the Business, is lessee of or
holds or operates any items of machinery, equipment, motor vehicles, computer
equipment, printers, office furniture or fixtures owned by any third party,
true, complete and correct copies (or, in the case of oral leases or agreements,
descriptions) of which leases and agreements have been furnished to Buyer.
Seller are the owners and holders of all of the leasehold estates purported to
be granted by such leases or agreements and all other leases or agreements under
which Seller are lessee of or hold or operate any such items owned by a third
party, and each of such leases and agreements is in full force and effect and
constitutes a legal, valid and binding obligation of the respective parties
thereto enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity. There is not under any of such
leases any existing default or, to the knowledge of Seller, event, condition or
occurrence which, with the giving of notice or lapse of time, or both, would
constitute a default thereunder. Except as provided on Schedule 5.7(c)(ii)
hereto, to Seller's knowledge, each of the items of machinery, equipment,
printers, office furniture and fixtures covered by the Personal Property Leases
is in good operating condition and repair, is in such condition as to permit
surrender thereof by Seller to the lessors without any material cost or expense
for repair or restoration if such leases were terminated on the date hereof, is
suitable for the uses for which intended by Seller in the Ordinary Course and
there does not exist any condition that interferes in any material way with the
use or economic value thereof.
5.8. Absence of Liabilities. Except for the Assumed Liabilities, and
except as set forth on Schedule 5.8 there are no material liabilities or
obligations of any nature (whether liquidated, unliquidated, accrued, absolute,
contingent or otherwise, and whether due or to become due) probable of assertion
relating to the Business except for:
(a) liabilities set forth or reflected (or reserved against) in the
Balance Sheet that have not been paid or discharged since the date thereof;
(b) liabilities arising under agreements or other commitments listed
on Schedule 5.8(b) hereto;
(c) current liabilities arising in the Ordinary Course subsequent to
the Balance Sheet Date, that are accurately reflected on its books and records
in a manner consistent with past practice; or
(d) the Excluded Liabilities, which shall be retained by Seller.
5.9. Consents; Transferability of Licenses, Etc.
(a) Except as set forth on Schedule 5.9(a) hereto, no consent,
approval or authorization of, or registration, qualification or filing with, any
Person or Governmental Authority is required for the execution and delivery by
Seller and Globe of this Agreement and the Seller's Transaction Documents or for
the consummation by Seller of the Contemplated Transactions. Except as set forth
on Schedule 5.9(a), no consent of any third party is required for the transfer
of the Acquired Assets as provided in this Agreement.
5.10. Litigation, etc. Except as set forth on Schedule 5.10 hereto, no
claim, action, suit, proceeding or investigation whether civil or criminal, in
law or equity, before any arbitration or Governmental Authority is pending or
threatened in writing: (i) against Seller, (ii) relating to or affecting the
ability of Seller to execute this Agreement or the Seller's Transaction
Documents or consummate the transactions contemplated herein or therein, or
(iii) which questions the validity of this Agreement or any of the Seller's
Transaction Documents or challenges any of the transactions contemplated hereby
or thereby, nor to Seller's and Globe's knowledge is there any basis for any
such action, suit, proceeding or investigation. None of the matters set forth in
Schedule 5.10 hereto, either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
14
5.11. Intellectual Property.
(a) Schedule 5.11(a) hereto sets forth a complete and accurate list
of all Intellectual Property, which is the only intellectual property or other
proprietary rights of any kind or nature necessary to permit Buyer to carry on
the business of Seller after the Closing as presently conducted by Seller.
Schedule 5.11(a) also includes a complete and accurate list of all United States
and foreign patent, copyright, trademark, service xxxx, trade dress, domain name
and other registrations and applications, indicating for each the applicable
jurisdiction, registration number (or application number), and date issued or
filed, and all unregistered Intellectual Property. Except to the extent set
forth in Schedule 5.11(a), Seller owns or has the sole and exclusive right to
use all of the Intellectual Property used or necessary for use in connection
with the business of Seller as presently conducted or proposed to be conducted,
and the consummation of the transactions contemplated by the Transaction
Documents will not alter or impair any such right. All Intellectual Property is
valid, subsisting, in full force and effect, enforceable and has not been
abandoned as of the date hereof. Except as has not or would not reasonably be
expected to have a Material Adverse Effect, Seller has taken all action
necessary or desirable to maintain and protect each item of Intellectual
Property. The Intellectual Property of Seller is free and clear of any
Encumbrances other than Permitted Encumbrances and, except as set forth on
Schedule 5.11(a), is fully assignable by Seller to any Person, without payment,
consent of any person or other condition or restriction. Seller does not use any
Intellectual Property in connection with the Business other than as set forth on
Schedule 5.11(a). No registered Intellectual Property has been or is now
involved in any cancellation, dispute or litigation, and, to the knowledge of
Seller, no such action is threatened. Except as set forth in Schedule 5.11(a),
no patent of Seller included in the Intellectual Property has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
(b) License Agreements. Schedule 5.11(b) sets forth a complete and
accurate list of all licenses, sublicenses, consent, royalty or other agreements
concerning Intellectual Property to which Seller is a party or by which any of
the assets of Seller is bound (other than generally commercially available,
non-custom, off-the-shelf software application programs having a retail
acquisition price of less than $10,000 per license) relating to the Business
(collectively, "License Agreements"). All of the License Agreements are valid
and binding obligations of Seller enforceable in accordance with their terms
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity, and to Seller's knowledge, there exists no event or condition
which will result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default by Seller under any such License
Agreement. Seller has performed all obligations required to be performed by it,
and Seller is not in default (or alleged to be in default) under any Contract
relating to any of the foregoing in any way that would or reasonably could be
expected to have a Material Adverse Effect. No party to any Contract relating to
Intellectual Property has given Seller notice of its intention to cancel,
terminate or fail to renew such License Agreement.
15
(c) No Infringement. Seller has taken all commercially reasonable
steps to maintain, police and protect the Intellectual Property of Seller.
Except as disclosed in Schedule 5.11(c), (i) to the knowledge of Seller, the
conduct of Seller's businesses as currently conducted does not infringe or
otherwise impair or conflict with ("Infringe") any Intellectual Property rights
of any Person, and the Intellectual Property rights of Seller are not being
Infringed by any Person; and to the knowledge of Seller (ii) there is no
litigation or order pending or outstanding, or to the knowledge of Seller,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
Seller's use of any Intellectual Property owned by a third party, and, to the
knowledge of Seller, there is no valid basis for the same.
(d) Royalties. No royalties, honoraria or other fees are payable by
Seller to any Person for the use of or right to use any Intellectual Property,
except as set forth in Schedule 5.11(d).
5.12. Permits. The Permits listed in Schedule 5.12 constitute all of the
licenses, permits, certificates, approvals, exemptions, franchises,
registrations, variances, accreditations or authorizations currently used in or
required for the operation of the Business as operated by Seller prior to the
Closing Date except for any Permits the absence of which would not have a
Material Adverse Effect. The Permits are valid and in full force and effect and
there are no pending proceedings which could result in the termination,
revocation, limitation or impairment of any of the Permits. Seller has not
received notice of any violations in respect of any of the Permits.
5.13. Labor and Employment Matters; ERISA Matters.
(a) Schedule 5.13 contains a list of each employee of Seller (such
employees, the "Seller Employees"). Except as set forth on Schedule 5.16, there
are no employment, consulting, severance or indemnification contracts between
Seller and any of the Seller Employees. Seller either has paid to date or will
pay within the normal payroll cycle after the Closing Date all accrued wages,
salary, commissions, vacation and sick pay accrued on or before the Closing Date
for all of the Seller Employees and, agents and representatives of Seller.
Seller is in compliance with Laws respecting employment and employment
practices, terms and conditions of employment and wages and hours.
(b) Except as set forth on Schedule 5.13(b), Seller maintains no
employee welfare benefit plans or employee pension benefit plans (within the
meaning of Section 3(1) or Section 3(2), respectively, of the Employee
Retirement Income Security Act of 1974, as amended (ERISA). Seller shall be
solely liable for all obligations with respect to all employee welfare benefit
plans (within the meaning of Section 3(1) of ERISA) of which Seller is or ever
has been a party or by which it is or ever has been bound.
16
(c) To Globe's knowledge, there are no pending investigations
involving Seller by the U.S. Department of Labor or any other Governmental
Agency. There is no unfair labor practice charge or complaint against Seller
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against Seller. No
collective bargaining agreement or modification thereof is currently being
negotiated by Seller. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of Seller. No material
labor dispute with Seller Employees exists or, to the knowledge of Globe, is
imminent.
5.14. Contracts, Etc. Schedule 1.1(e) sets forth a complete and accurate
list of all written Contracts to which Seller is a party. As used in this
Agreement, the word "Contract" means:
(a) agreement for the purchase, sale, lease, or license of services,
products, or assets that are not cancelable without penalty and that require
total future payments in excess of $50,000 in any fiscal year in any instance,
or entered into other than in the Ordinary Course (but excluding, for the
avoidance of doubt, any such agreement whereby payments are contingent in
nature);
(b) agreements to purchase all or substantially all of its
requirements for a particular product or service from a particular supplier or
suppliers, or to supply all of a particular customer's or customers'
requirements for a certain service or product;
(c) agreement or other commitment pursuant to which any Person has
agreed to indemnify or hold harmless any other Person;
(d) employment agreement, consulting agreement, or agreement
providing for severance payments or other additional rights or benefits (whether
or not optional) in the event of the sale or other change in control;
(e) agreement with any current or former Affiliate, shareholder,
officer, director, employee, or consultant, or with any Person in which any such
Affiliate, shareholder, officer, director, employee, or consultant has an
interest;
(f) joint venture or teaming agreement;
(g) agreement with any domestic or foreign government or agency or
executive office thereof or any subcontract and any third party relating to a
contract between such third party and any domestic or foreign government or
agency or executive office thereof; or
(h) agreement imposing non-competition or exclusive dealing
obligations.
17
Seller has delivered to the Buyer true, correct and complete copies of all such
Contracts, together with all amendments, modifications and supplements thereto.
Each of the Contracts listed on Schedule 5.14 hereto is in full force and
effect, the Seller is not in breach of any of the provisions of any such
Contract (to the extent that any such breach has or could reasonably be expected
to have a Material Adverse Effect), nor to Seller's knowledge is Seller or any
other party to any such Contract in default thereunder, nor to Seller's
knowledge does any event or condition exist which with notice or the passage of
time or both would constitute a default thereunder. Seller has performed in all
material respects with all obligations required to be performed by Seller to
date under each such Contract. Except as set forth in Schedules 5.14(a) and
5.14(b), no approval or consent of any Person is needed in order that the
Contracts continue in full force and effect following the consummation of the
transactions contemplated by this Agreement, and no such Contract includes any
provision the effect of which may be to enlarge or accelerate any obligations of
the Seller thereunder or give additional rights to any other party thereto or
shall in any other way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement or the Seller's Transaction
Documents.
5.15. Environmental Matters. Except as set forth on Schedule 5.15: (a)
Seller is in material compliance with all applicable Environmental Laws; (b)
there is no Environmental Claim pending against the Seller with regard to the
Acquired Assets, Leased Real Property, or Business; (c) Seller has obtained all
material Permits, approvals, identification numbers, licenses or other
authorizations required under any applicable Environmental Laws with regard to
the Acquired Assets or Business (the "Environmental Permits") and is in material
compliance with their requirements; (d) to the knowledge of Seller, there are no
underground or aboveground storage tanks or any surface impoundments, septic
tanks, pits, sumps or lagoons in which Hazardous Materials (as defined herein)
are being or have been treated, stored or disposed of on any real property
Seller currently owns or leases for the Business other than in material
compliance with applicable Environmental Laws; (e) Seller has not undertaken or
completed any investigation or assessment or remedial or response action
relating to any release, discharge or disposal of or contamination with
Hazardous Materials at any site, location or operation of Seller, either
voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law; and (f) there have been no actions,
suits, demands, demand letters, claims, liens, notices of non-compliance or
violation, notices of liability or potential liability, investigations,
proceedings, consent orders or consent agreements relating in any way to
Environmental Laws, any Environmental Permits or any Hazardous Materials (the
"Environmental Claims") against Seller that remain outstanding or unresolved.
5.16. Taxes. Except as set forth on Schedule 5.16 hereto:
(a) Neither Globe nor Seller nor any member of a Relevant Group has
failed to file any Tax return required to be filed, which failure could result
in the imposition of any Encumbrance (other than Permitted Encumbrances) on or
against the Acquired Assets, the Business or the Buyer or in any liability to
the Buyer, as transferee or otherwise. All Taxes imposed on the Seller or any
member of a Relevant Group, the non-payment of which could result in an
Encumbrance (other than Permitted Encumbrances) on or against the Acquired
Assets, the Business or the Buyer or in any liability to the Buyer, as
transferee or otherwise, have been or will prior to the Closing Date be paid by
the Seller. All deposits required to be made by the Seller or any member of a
Relevant Group in respect of any material Tax, including, without limitation,
withholding taxes, have been or will be made in a timely fashion. There are no
material Tax deficiencies or claims asserted against Seller or any member of a
Relevant Group the non payment of which could result in any Encumbrances (other
than a Permitted Encumbrance) on or against the Acquired Assets or in any
liability to Buyer, as transferee or otherwise, nor is there any basis for any
such deficiency or claim;
18
(b) Neither Globe nor Seller is not party to any Tax allocation or
sharing agreement or understanding that could, under any circumstances, require
any payment by Buyer, any of its subsidiaries or any affiliate thereof after the
Closing Date;
(c) No waiver of any statute of limitations relating to Taxes has
been executed or given by Seller. There are no Encumbrances with respect to
Taxes upon any of the Acquired Assets or the Business. All required Tax returns
relating to the Business, including amendments to date, have been prepared in
good faith without negligence or willful misrepresentation and are complete and
accurate in all material respects; and
(d) No Tax return of either Globe or Seller is currently under audit
by the IRS or by any other taxing authority. Neither the IRS nor any other
taxing authority is now asserting or, to the knowledge of Globe, threatening to
assert against either Globe or Seller any deficiency or claim for additional
Taxes or interest thereon or penalties in connection therewith or any adjustment
that would have a Material Adverse Effect.
5.17. Insurance. Schedule 5.17 lists all insurance Policies and binders of
liability, theft, fidelity, life, fire, product liability, health, unemployment,
workers' and workmen's compensation, errors and omissions and other types of
insurance, self insurance practices and performance bonds covering Seller
(collectively, the "Policies"). Seller maintains such policies of insurance with
financially sound and reputable insurance companies, funds, or underwriters, of
the kinds required to cover such risks and are in such amounts and with such
deductibles and exclusions as are consistent with prudent business practice of a
comparable business. Seller warrants that all such Policies (a) are valid,
enforceable and in full force and effect, (b) are sufficient for compliance by
Seller with all requirements of Law and all Contracts to which it is a party and
(c) provide that they will remain in full force and effect and will not in any
way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. All premiums with respect to such Policies are
currently paid, and no basis exists for early termination thereof on the part of
the insurer. Seller is not in default with respect to its obligations under any
of such Policies, nor has Seller received any notification or other indication
from any insurer or agent of any intent to cancel or not to renew or increase
the premiums on any such Policies. To Seller's knowledge no facts or
circumstances exist which would relieve the insurer under any Policy of its
obligation to satisfy in full any valid claim of the Seller thereunder. Seller
has not, during the last 5 fiscal years, been denied or had revoked or rescinded
any policy of insurance.
5.18. Suppliers and Customers. Schedule 5.18 identifies each contractor,
subcontractor, customer and supplier of Seller that in each case is material to
the Business. Schedule 5.18 lists the products and services supplied by Seller
to such customer. Except as set forth on Exhibit 5.18, there are (i) no
customers of Seller accounting for more than 10% of the gross revenues of its
business for the last twelve-month period, and (ii) no sole-source suppliers of
significant goods or services (other than electricity, gas, telephone or water)
to Seller, with respect to which alternative sources of supply are not readily
available on comparable terms and conditions. No material supplier or material
customer of the business of Seller has, during the past 12 months, cancelled or
otherwise terminated its services or supplies to Seller or its use or purchase
of the products or services of Seller, or has communicated any threat in writing
to Seller to do so. Neither Seller nor Globe has any knowledge that any such
supplier or customer intends to cancel, reduce or otherwise terminate its
relationship with Seller or the usage or purchase of the products of Seller, or
that the transactions contemplated by this Agreement will result in any such
cancellation, reduction or termination.
19
5.19. Subsidiaries. Seller has no subsidiaries or equity investments in
any other corporation, association, partnership, joint venture or other entity.
5.20. Certain Line Items and Related Items.
(a) Accounts Receivable. To Seller's knowledge, all Receivables of
Seller received in connection with the Business have arisen only from bona fide
transactions entered into in the Ordinary Course, are the legal and binding
claims of Seller, free and clear of all Encumbrances (other than Permitted
Encumbrances), have been recorded in accordance with GAAP and are not and shall
not be subject to any counterclaim, set-off or defense (except to the extent
reserved against). Since the Balance Sheet Date, no customer has notified
Seller, orally or in writing, that they intend to assert any material right to a
discount, allowance or chargeback with respect to any products or services. The
Receivables are current as of the date hereof. Seller has delivered to the Buyer
a complete and accurate aging list of all Receivables as of a date not more than
5 days prior to the Closing Date.
(b) Accounts Payable. The accounts payable related to Seller, as
reflected on the Financial Statements or thereafter and recorded by Seller, have
arisen only from bona fide transactions entered into in the Ordinary Course. All
payment terms in connection therewith are consistent with past practices of
Seller.
5.21. Potential Conflicts of Interest. Except for compensation to regular
employees of Seller, and as set forth on Schedule 5.21, neither Seller nor any
officer, director or stockholder of the Seller, nor any Affiliate, (a) owns,
directly or indirectly, any interest in (excepting not more than 1% stock
holdings for investment purposes in securities of publicly held and traded
companies) or is an officer, director, employee or consultant of any Person that
is a competitor, lessor, lessee, customer or supplier of Seller; (b) owns,
directly or indirectly, in whole or in part, any tangible or intangible property
which the Seller is using with respect to the Business; (c) is a party to any
transaction with Seller providing for the furnishing of services by, or rental
or real or personal property from, or otherwise requiring payments to, any such
director, officer, employee or shareholder or such Affiliate; or (d) has any
cause of action or other claim whatsoever related to Seller against, or owes any
amount related to Seller to, Seller, except for claims in the Ordinary Course,
such as for accrued vacation pay, accrued benefits under employee benefit plans
and similar matters and agreements.
5.22. Broker. Except as set forth in Schedule 5.23, neither Seller nor
Globe has not retained, utilized or been represented by any broker, agent,
finder or other intermediary in connection with the negotiation or consummation
of this Agreement or the Transaction Documents or the transactions contemplated
by this Agreement.
20
5.23. Delaware Reincorporation. Seller and Globe have been provided with
information regarding the planned Reincorporation Merger (as defined below) and
consent thereto.
5.24. Seller Acquisition Agreements. Globe has not asserted any claim
against the "Company" or any "Company Shareholder", as such terms are defined in
that certain Agreement and Plan of Merger by and among xxxxxxxx.xxx, inc,
Seller, Inc., and Seller Acquisition, Inc. dated August 30, 2004 (the "Globe
Agreement"), for breach of any of the representations, warranties, or covenants
in the Globe Agreement and, to the knowledge of Globe, Globe has no basis to
assert any such claim.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller as follows:
6.1. Organization of the Buyer; Authority. The Buyer is corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada. The Buyer has all requisite corporate power and authority to execute
and deliver this Agreement, the other Transaction Documents to which it is a
party (the "Buyer Transaction Documents") and any related agreements to which it
is a party and to perform the Contemplated Transactions.
6.2. Corporate Approval; Binding Effect. The Buyer has obtained all
necessary corporate action, authorizations and approvals required for the
execution and delivery of the Buyer Transaction Documents and the consummation
of the transactions contemplated hereby and thereby. This Agreement and each of
such Buyer Transaction Documents have been duly executed and delivered by the
Buyer and constitutes the legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers and subject to the limitations imposed by
general equitable principles (regardless whether such enforceability is
considered in a proceeding at law or in equity).
6.3. Non-Contravention. The execution and delivery by the Buyer of the
Buyer Transaction Documents and the consummation by the Buyer of the
transactions contemplated hereby and thereby will not (a) violate or conflict
with any provisions of the charter or bylaws of the Buyer, each as amended to
date; (b) conflict with or result in the breach or termination of (or constitute
a default for any event which, with notice or lapse of time or both would
constitute a default) under, or accelerate the performance required by, any
contract, lease, agreement, commitment or other instrument or restriction of any
kind to which the Seller is a party, or result in a violation of any Law of any
Governmental Authority applicable to the Buyer, or (ii) on the ability of the
Buyer to perform its obligations hereunder or under the Transaction Documents.
6.4. Governmental Consents. Except as set forth in Schedule 6.4 hereto, no
consent, approval or authorization of, or registration, qualification or filing
with, any Governmental Authority is required for the execution and delivery by
the Buyer of this Agreement and the Buyer Transaction Documents to which it is a
party or for the consummation by the Buyer of the transactions contemplated
hereby or thereby.
21
6.5. Broker. Except as set froth in Schedule 6.5, the Buyer has not
retained, utilized or been represented by any broker, agent, finder or other
intermediary in connection with the negotiation or consummation of this
Agreement or of the transactions contemplated by this Agreement.
6.6. Litigation, etc. Except as set forth on Schedule 6.6 hereto, no
claim, action, suit, proceeding or investigation whether civil or criminal, in
law or equity, before any arbitration or Governmental Authority is pending or
threatened in writing: (i) against Buyer, (ii) relating to or affecting the
ability of Buyer to execute this Agreement or the Buyer's Transaction Documents
or consummate the transactions contemplated herein or therein, or (iii) which
questions the validity of this Agreement or any of the Buyer's Transaction
Documents or challenges any of the transactions contemplated hereby or thereby,
nor to Buyer's knowledge is there any basis for any such action, suit,
proceeding or investigation. None of the matters set forth in Schedule 6.6
hereto, either individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
6.7. Financing. Buyer has received financing commitments in an amount of
at least $30,000,000.
6.8. Reincorporation Merger. Buyer has approved a reincorporation of Buyer
to the State of Delaware by virtue of a merger of Buyer with and into its
wholly-owned Delaware subsidiary named RelationServe, Inc. (the "Reincorporation
Merger"). The Reincorporation Merger has been approved by the Board of Directors
and the stockholders of Buyer, and will be effective upon the filing of
certificates of merger with the Delaware and Nevada Secretary of State. The
Reincorporation Merger is expected to occur following the date of execution of
this Agreement and prior to the Closing Date. Upon effectiveness of the
Reincorporation Merger, the representations and warranties, covenants and
conditions of Buyer made herein, and to be made at Closing, and the term
"Buyer," as used in this Agreement, will, for all purposes, mean RelationServe,
Inc., as Buyer, and as public parent holding company of the businesses owned and
operated by Buyer. Following the effective time of the Reincorporation Merger,
RelationServe, Inc. shall change its name to RelationServe Media, Inc. and each
of the representations and warranties contained herein shall continue to be true
and correct, except that references to the Nevada incorporation of Buyer shall
be replaced with Delaware and the Delaware corporation shall be bound by all the
covenants and conditions of Buyer as stated herein.
ARTICLE 7. COVENANTS
7.1. Operations Prior to the Closing Date. Except as set forth on Schedule
7.1 and except as otherwise permitted by the prior written consent of Buyer,
during the period from the date of this Agreement to the Closing Date: (i) the
business of Seller shall be conducted only in, and neither Globe nor the Seller
shall take any action except in, the Ordinary Course; and (ii) Globe and Seller
shall use their reasonable best efforts to preserve the business of Seller
substantially intact, to preserve the value of the assets and properties,
wherever located, that are material to Seller in existence on the date hereof,
to comply with all Laws and requirements of any Governmental Authority
applicable to Seller and to preserve the present relationships of Seller with
customers, suppliers and other persons with which Seller has business relations.
By way of amplification and not limitation, except as contemplated by this
Agreement, Seller shall not, between the date of this Agreement and the Closing
Date, directly or indirectly, do, or propose or agree to do, any of the
following, except as set forth on Schedule 7.1 hereto and except as permitted by
the prior written consent of Buyer:
22
(a) either (i) split, combine or reclassify any of its Capital Stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its Capital Stock, or (ii) purchase,
redeem or otherwise acquire any shares of Capital Stock or the Capital Stock of
any of its subsidiaries or any other securities thereof or any rights, warrants,
or options to acquire any such shares or other securities. Buyer understands and
agrees that Globe relies upon Seller to meet Globe's liquidity needs and that,
prior to Closing, Globe will continue to cause Seller to distribute funds to
Globe;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its Capital Stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities;
(c) amend its charter or bylaws or other comparable organizational
documents, as applicable;
(d) agree to acquire (i) by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, limited liability company, partnership, joint
venture or other entity or division thereof or (y) any assets that individually
or in the aggregate are material to Seller, except for purchases of inventory in
the Ordinary Course;
(e) either (i) incur any Indebtedness or guarantee any Indebtedness
of another person, issue or sell any debt securities or warrants or other rights
to acquire any debt securities, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the Ordinary Course consistent with the Ordinary Course, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other person, other than Seller or any direct or indirect subsidiary of Seller
or to officers and employees of Seller or any of its subsidiaries for travel,
business or relocation expenses in the Ordinary Course;
(f) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise,
other than the payment discharge, settlement or satisfaction in the Ordinary
Course of liabilities reflected or reserved against in, or contemplated by, the
Financial Statements, incurred since the date of such Financial Statements in
the Ordinary Course, or which do not in the aggregate have a Material Adverse
Effect;
(g) either (i) amend (other than as required by Laws) any benefit
plan of Seller in any material respect, (ii) increase the compensation or bonus
opportunity of any employee of Seller, except for any increases in the Ordinary
Course, or (iii) grant any additional equity based compensation to any employee
of Seller, except for grants in the Ordinary Course;
23
(h) make or agree to make any new capital expenditure or capital
expenditures which individually is in excess of $10,000 or in the aggregate are
in excess of $25,000;
(i) make any change to its accounting methods, principles or
practices, except as may be required by GAAP;
(j) make any tax election with respect to Seller;
(k) sell (except in the Ordinary Course), assign, pledge, dispose of
or encumber any of the assets or properties of Seller;
(l) fail to defend or initiate any matter or proceed with any matter
before any governmental, regulatory or administrative authorities that is
necessary to protect Seller;
(m) fail to (i) maintain the assets or properties of Seller in
customary repair, order and condition in all respects, (ii) maintain insurance
for Seller reasonably comparable in all material respects to that in effect on
the date of this Agreement or (iii) in the event of a casualty, loss or damage
to any of the assets or properties of Seller prior to the Closing Date for which
the Seller are insured, either repair or replace such damaged assets or, at the
option of the Buyer, transfer the proceeds of such insurance to the Buyer;
(n) fail to comply with all Laws and all material contractual
obligations applicable to Seller;
(o) terminate, replace, settle any dispute under, amend or otherwise
modify any material Contract or waive any of the obligations of the parties
(other than the Seller's) to such material Contracts or the Seller's rights
under any of such agreements relating to the Business; or
(p) enter into or agree to any contract, commitment, arrangement or
understanding in relation to the Business which, if entered into on the date
hereof, would be required to be disclosed on a Schedule to this Agreement,
unless disclosed to Buyer.
7.2. Preserve Accuracy of Representations and Warranties. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Articles 5 or 6 of this Agreement
inaccurate as of the Closing Date. Each party hereto shall promptly notify the
other of any proceeding that shall be instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality of the
Contemplated Transactions. Globe and Seller shall promptly notify the Buyer of
(a) any proceeding that may be threatened, brought, asserted or commenced
against it which if such proceeding had arisen prior to the date hereof would
have been required to be disclosed to Buyer hereunder; (b) any fact which, if
known on the date of this Agreement, would have been required to be set forth or
disclosed pursuant to this Agreement; and (c) any actual, impending or
threatened breach of any of the representations and warranties contained in this
Agreement and with respect to the latter, shall use their best efforts to remedy
such actual, impending or threatened breach.
24
7.3. Notification by the Seller of Certain Matters. During the period
prior to the Closing Date, the Seller will promptly advise the Buyer in writing
of (a) any adverse change in the Business, (b) any written notice or other
formal communication from any third Person alleging that the consent of such
third Person is or may be required in connection with the Contemplated
Transactions and (c) any material default under any Contract or event of which,
with notice or lapse of time or both, would become such a default on or prior to
the Closing Date.
7.4. Access to Information. From and after the date hereof, the Seller
shall give, or cause to be given, to Buyer and its representatives, employees
and financing sources, timely access to all of its the titles, contracts, books,
records, files, documents, and personnel as the Buyer shall reasonably request,
furnish to the Buyer all such information concerning its business and affairs as
the Buyer reasonably may request and cause its independent public accountants to
permit Buyer and its representatives to examine all records and working papers
in order to permit an independent accounting firm selected by the Buyer to
conduct an audit of the Business's financial statements in a diligent manner.
7.5. No Negotiation. (a) Except as specifically set forth in this Section
7.5 hereof, until the earlier of the Closing or the termination of this
Agreement pursuant to Article 12 hereof (the "Exclusivity Period"), neither
Globe nor Seller shall, directly or indirectly, individually or through any of
their respective officers, directors, stockholders, employees, representatives,
agents, affiliates, or otherwise (collectively, the "Representatives") initiate,
solicit or encourage, or respond to (other than to say that they are
contractually obligated not to respond, and referring such party to public
disclosure regarding this Agreement, but shall not otherwise respond, including,
without limitation, by way of furnishing non-public information or assistance)
any proposals, inquiries or offers from any person or entity, including, but not
limited to, any stockholder of Globe or Seller ("Third-Party"), or enter into
any confidentiality agreement, due diligence agreement, letter of intent,
purchase agreement, merger agreement or other arrangement, regarding any
proposed sale of all or any portion of the Acquired Assets or control thereof,
whether by means of a sale or exchange of shares, sale of assets, whether in
whole or in part, merger, recapitalization, liquidation or otherwise
("Third-Party Acquisition"). Except as specifically set forth in this Section
7.5, during the Exclusivity Period, neither Globe nor Seller shall have, and
shall take reasonable efforts to cause their Representatives not to have, any
discussions, conversations, negotiations or other communications relating to any
Third-Party Acquisition with any Third-Party expressing interest therein, and
shall immediately discontinue negotiations with any Third-Party with which it
heretofore has engaged in negotiations or discussions regarding any Third-Party
Acquisition (an "Existing Potential Acquiror"). During the Exclusivity Period,
Globe and Seller immediately shall notify Buyer of all terms of any written
inquiry, contact, communication, or proposal by any Third-Party with respect to
any Third-Party Acquisition that is received by either of them or any of their
Representatives (including the response thereto), and promptly (within 72 hours
of receipt) shall provide Buyer with a copy of any such written inquiry,
contact, communication or proposal. With respect to any oral inquiry, contact,
communication or proposal, Globe and Seller shall document the same in writing
(including the response thereto) and reasonably promptly provide Buyer with a
copy of the same. Seller agrees that: if this Agreement is terminated by Seller
as a result of its acceptance of a Superior Proposal, then upon the earlier of
such termination or acceptance, Globe and Seller immediately shall become
obligated to pay and shall pay to Buyer by wire transfer (in immediately
available funds) liquidated damages in the amount of One Million Dollars
($1,000,000) (the "Fee"), which Globe and Seller acknowledge is reasonable under
the circumstances and designed to compensate Buyer for the lost opportunity to
consummate the Contemplated Transactions. This Fee will serve as the exclusive
remedy to Buyer hereunder in the event of payment required as a result of the
arrangements set forth herein, including, but not limited to, Buyer's damages
relative to its efforts, expenses and costs incurred in evaluating the
Contemplated Transactions. The parties acknowledge that the foregoing provisions
do not necessarily require Globe or Seller to provide Buyer a written summary of
on-going discussions with a third party, nor shall Seller be required to
document to Buyer any oral inquiry, contact, communication or proposal that does
not materially change any inquiry, contact, communication or proposal previously
provided by Buyer.
25
(b) The parties acknowledge that prior to the Closing, in response
to a bona fide unsolicited written proposal for a Third-Party Acquisition that
did not result from the breach of this Section 7.5 (a "Third-Party Proposal")
and following delivery to Buyer of notice and a copy of the Third-Party Proposal
in compliance with its obligations under Section 7.5 hereof, Globe and Seller
may participate in discussions or negotiations with or furnish information
(pursuant to a confidentiality agreement with customary terms comparable to
those in place with Buyer or already in place with regard to Existing Potential
Acquirors) to any Third-Party which makes a bona fide written Third-Party
Proposal if, and only if, prior to taking such action: (A) a majority of Globe's
Board of Directors determines in good faith (after consultation with its
financial advisors) that the transactions contemplated by such Third-Party
Proposal are capable of being completed and that such Third-Party Proposal is or
is reasonably expected to result in a Superior Transaction (as defined herein)
and (B) a majority of Globe's Board of Directors determines in good faith (after
receiving the advice of outside legal counsel) that the failure to pursue such
Superior Proposal would likely result in a reasonable possibility of a breach of
their fiduciary duties as directors under applicable law and (C) Sellers comply
in all material respects with the information and notice obligations set forth
in this Section 7.5.
(c) For purposes of this Agreement, "Superior Proposal" means a bona
fide Third-Party Proposal to purchase at least a majority of the outstanding
equity securities of either Globe or Seller pursuant to a stock purchase
agreement, tender offer or exchange offer or to effect any merger,
consolidation, business combination or sale of all or substantially all of the
Acquired Assets, recapitalization or similar transaction involving the Seller,
on terms which a majority of Globe's Board of Directors determines in good faith
(after consultation with its financial advisors) to be superior to Globe and its
shareholders (in their capacity as shareholders) from a financial point of view
(taking into account, among other things, all legal, financial, regulatory and
other aspects of the proposal and identity of the offeror) as compared to (i)
the transactions contemplated hereby and (ii) any alternative proposed by Buyer
in accordance with Section 7.5(d) (taking into account the same factors,
including whether it is reasonably capable of being consummated) (any such
transaction being referred to herein as a "Superior Transaction").
26
(d) Seller and Buyer agree that, notwithstanding anything to the
contrary herein, prior to the Closing, Globe and Seller, and/or their Board of
Directors, may take the actions otherwise prohibited by Section 7.5(a), subject
to the conditions of and as limited by Section 7.5(b)
(e) Buyer agrees that nothing contained in this Section 7.5 shall
prohibit Globe from taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 and Rule 14e-2 promulgated under the Securities
Exchange Act of 1934, as amended, with respect to any tender offer or from
making any disclosure to Globe shareholders which the Board of Directors
determines, on the advice of counsel, that it is required to disclose under
applicable law.
(f) If at any time prior to the Closing, a Superior Proposal is
received by the Seller and the Board of Directors of Globe determines in good
faith (after receiving the advice of outside legal counsel) that it is necessary
to withhold or withdraw its recommendation of the Contemplated Transaction (as
defined herein) and to enter into an agreement to effect the Superior Proposal
in order to comply with its fiduciary duties to its shareholders under
applicable law, then the Globe Board of Directors may withhold or withdraw its
recommendation of this Transaction; provided that the Globe Board of Directors
may not withdraw its recommendation pursuant to this Section 7.5(f) unless and
until (i) four (4) Business Days have elapsed following delivery to Buyer of a
written notice of such determination by the Board of Directors of Globe, and
during such four (4) Business Day period Globe has fully cooperated with Buyer,
including, without limitation, informing Buyer of the terms and conditions of
such Superior Proposal and the identity of the Third-Party making such Superior
Proposal and providing to Buyer copies of all documents required by Section
7.5(a), with the intent of enabling the parties hereto the opportunity to Buyer
to negotiate and attempt to agree to a modification of the terms and conditions
of this Agreement to provide at least equivalent value to the Seller as
determined in the reasonable and good faith exercise of the discretion of the
Board of Directors of Globe, so that the transactions contemplated hereby may be
effected; and (ii) at the end of such four (4) Business Day period the
Third-Party Proposal continues in the good faith judgment of the Board of
Directors of Globe to constitute a Superior Proposal compared to the
Contemplated Transaction or any other offer made by Buyer and the Board of
Directors of Globe confirms its determination (after receiving the advice of
outside legal counsel) that it is necessary to withhold or withdraw its
recommendation of the Transaction and enter into an agreement to effect the
Superior Proposal to comply with its fiduciary duties to its shareholders under
applicable law.
(g) Notwithstanding anything herein to the contrary, this Section
7.5 shall survive the termination of this Agreement.
7.6. Best Efforts. Each party shall use its best efforts timely to satisfy
each of the conditions to be satisfied by it as provided in Articles 8 and 9 of
this Agreement.
7.7. Escrowed Funds. On the date hereof, the Buyer shall place the Escrow
Amount into escrow pursuant to the Escrow Agreement. Prior to Closing, the
Escrow Amount shall only be payable to Seller pursuant to Section 12.2 hereof.
27
7.8. Confidentiality. Prior to, on and after the Closing Date and for a
period of two (2) years thereafter, Globe, Seller and Buyer agree to (and shall
cause their respective Affiliates and representatives to) maintain the
confidentiality of all confidential or proprietary information of Seller and
Buyer, and agree not to, directly or indirectly, disclose any such confidential
or proprietary information except to the extent that disclosure of any portion
thereof is required by law or determined to be necessary to comply with any
legal or regulatory order, regulation or requirement or to the extent the
information becomes generally available to the public other than as a result of
a disclosure by Seller or Buyer.
7.9. Expenses. Except as otherwise set forth herein, Buyer on the one
hand, and Globe and Seller on the other hand, shall each bear their own
respective expenses incurred in connection with the preparation, execution,
delivery and performance of this Agreement and the Transaction Documents and in
connection with all obligations required to be performed by each of them under
this Agreement and the Transaction Documents, whether or not the transactions
contemplated hereby and thereby are consummated.
7.10. Public Announcements. Globe, Seller and Buyer shall consult with
each other before issuing any press release, public announcement or other public
statement concerning the contemplated Transactions or any transaction
contemplated by this Agreement or any of the Transaction Documents, and shall
not issue any such public announcement, press release or public statement prior
to such consultation, except as may be required by law. Copies of any such
announcement or filings shall be delivered to the other parties hereto prior to
release.
7.11. Information Statement.
(a) As promptly as reasonably practicable following the date of this
Agreement, Globe shall, with the assistance of Buyer, prepare and mail the
information statement to be sent to the stockholders of Globe in connection with
obtaining stockholder approval of the Contemplated Transactions (as amended or
supplement, the "Information Statement"). Buyer and Globe will cooperate with
each other in the preparation of the Information Statement. Without limiting the
generality of the foregoing, (i) Globe will provide Buyer with a reasonable
opportunity to review and comment on the Information Statement and (ii) Buyer
will furnish to Globe true and correct information relating to it and its
arrangements with Seller Management required by applicable securities laws to be
set forth in the Information Statement.
(b) Globe agrees that none of the information supplied or to be
supplied by Globe for inclusion or incorporated by reference in the Information
statement will, at the date it is first mailed to the stockholders of Globe,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statement
therein, in the light of the circumstances under which they are made, not
misleading.
(c) Globe shall use its reasonable best efforts, after consultation
with buyer, to resolve all SEC comments with respect to the Information
Statement as promptly as practicable after receipt thereof. Each of Buyer and
Globe agree to correct any information provided by it for use in the Information
Statement which shall have become false or misleading. Globe shall as soon as
reasonably practicable notify Buyer of the receipt of any comments from or other
correspondence with the SEC staff with respect to the Information Statement and
any request by the SEC for any amendment to the Information Statement or for
additional information (and promptly deliver a copy of such comments,
correspondence or request to Buyer). Globe shall use its reasonable best efforts
to cause the Information Statement to be mailed to Globe's stockholders as
promptly as practicable after the Information Statement is cleared by the SEC.
28
7.12. Stockholder Approval. Glove shall obtain stockholder approval of the
Contemplated Transactions by written consent within seven (7) days following the
date hereof.
7.13. Operational Representations. Globe shall use its reasonable best
efforts (but shall not be required to incur any separate payment therefore) to
secure the Operational Representations as to which Globe and Seller (and/or
Buyer for the purpose of any of the rights of Buyer under any of the Management
Agreements, including, without limitation, any escrowed property provided by
Seller Management) shall be beneficiaries. The foregoing shall not require the
Seller or Globe to procure the agreement of Seller Management that their
Operational Representations may be relied upon by Buyer.
7.14. Availability of Financing. Buyer shall use its reasonable best
efforts to provide that there shall have been funded into one or more escrow
accounts within thirty (30) days of the date of this Agreement not less than
$30,000,000 which shall be available to Buyer for the purposes of the Purchase
Price payable at the Closing pursuant to this Agreement, without condition other
than as relate to closing of the Contemplated Transactions, execution and
delivery by Buyer of definitive securities purchase and related agreements
(including, without limitation, perfection of any security interest in and to
any Acquired Assets), and issuance of securities to the purchasers thereof. In
the event that within such thirty (30) day period, Seller shall not have been
provided evidence that such funds have been received in escrow, Seller and Globe
may, at any time thereafter, (i) terminate this Agreement and receive the
Termination Fee (as defined herein); (ii) terminate Section 7.5 hereof and seek
an alternative transaction which Seller and Globe shall have the right to close
such transaction without any liability to Buyer for payment of a Fee under
Section 7.5; and/or (iii) take no action.
ARTICLE 8. POST-CLOSING COVENANTS.
8.1. Transferred Employees.
(a) Offer of Employment. Subject to and in accordance with the
provisions of this Section 8.1, Buyer shall, effective upon the Closing, offer
full-time employment to each of the Seller employees employed by Seller as of
the Closing Date that Buyer, in its sole discretion, elects to offer employment,
as listed on Schedule 5.16 hereof, on terms and conditions substantially
equivalent to the terms and conditions of employment and benefits for current
employees of Buyer in similar job classifications and grades. Buyer shall hire
all of the Seller employees who accept such offer. Buyer will deliver to Seller
a list of all of the Seller employees who have accepted an offer of employment
from Buyer promptly after the Closing. Each of the Seller employees who actually
becomes a full-time employee of Buyer upon the Closing is hereinafter referred
to as a "Transferred Employee."
29
(b) Transition. The employment of each Transferred Employee by
Seller shall end effective as of the close of business on the day before the
Closing Date and the employment of the Transferred Employees by Buyer shall
commence at or after 12:01 a.m. on the Closing Date.
(c) Retention of Employees Prior to Closing. Seller shall expend its
reasonable efforts to assist Buyer in securing the employment on the Closing
Date of the Seller employees; provided, however, that Seller shall not be
required to incur any financial obligation beyond continuing to pay for current
employee compensation and benefits prior to the Closing in connection with the
foregoing unless otherwise required by this Agreement.
(d) Compensation and Benefits of Transferred Employees. Coverage for
Transferred Employees under Buyer's benefit plans and programs shall commence as
of 12:01 a.m. on the Closing Date. Buyer shall give each Transferred Employee
credit for such Transferred Employee's years of most recent continuous service
(including time during approved leaves of absences of less than 26 weeks) with
Seller for purpose of determining participation and benefit levels under all of
Buyer's vacation policies and benefit plans and programs, unless otherwise
prohibited by law or the terms of any of Buyer's benefit plans and programs, and
shall give each Transferred Employee credit for any accrued vacation time to
which each Transferred Employee would be entitled immediately prior to Closing
under Seller's current vacation policy. Seller shall retain responsibility for
any claims under their health insurance policies made by Transferred Employees
arising out of insurable losses incurred or claims accrued on or prior to the
Closing Date.
(e) Employees Other than Transferred Employees. Seller shall retain
responsibility for Employees that are neither offered nor accepted employment
with Buyer and for employees of the Business listed on Schedule 8.1(e).
(f) All liabilities or obligations to any Seller Employee resulting
from Buyer's failure to offer employment to any Seller Employee shall be and
remain the sole responsibility and liability of the Seller.
8.2. Access.
(a) After the Closing Date, Globe and Seller agree to make available
to the Buyer for inspection and copying at the Buyer's expense, at reasonable
times upon request, any records and documents relating to the Business which
were not delivered to the Buyer at Closing and were retained by Globe or Seller
which, at the time of such request, are in the possession or control of the
Seller and all Tax returns. In addition, Globe and Seller agree to provide
reasonable assistance in the collection of information or documents and make
available to Buyer any financial data and other information retained by Seller
relating to Seller, and will make available such former employees of the
Business that at the time shall be employed by Globe or Seller, as Buyer shall
from time to time reasonably request, in connection with claims or actions
brought by or against third parties based on events or circumstances concerning
Seller and to permit Buyer to prepare any Tax returns and in connection with any
examination by any Governmental Authority of Tax returns relating to the
Business or Seller, as applicable, for periods from and after the Closing Date.
Seller's reasonable expenses in connection therewith shall be reimbursed by
Buyer. Seller and its principals shall cooperate with Buyer and its accountants
in the preparation of all financial statements contemplated by this Agreement or
required to be filed by Buyer under applicable Law. Such cooperation shall
include, but not be limited to, issuing representation letters to the Buyer's
accountants with respect to all financial statements of Globe and Seller
covering dates or periods on or prior to the Closing Date.
30
(b) Subsequent to the Closing Date, Buyer shall provide Globe and
Seller with such assistance (including provision of records) as may reasonably
be requested by Globe and Seller in connection with the preparation of any Tax
Return, the response to any audit or other examination by any Governmental
Authority, or an judicial or administrative proceedings relating to any
liability for Taxes.
8.3. Covenant Not to Compete.
(a) Seller and Globe acknowledge and recognize the highly
competitive nature of the industry in which Seller and the Business operate.
Accordingly, in consideration of the premises contained herein and the
consideration to be received hereunder, neither Globe nor Seller shall, during
the Non-Competition Period (as defined below), anywhere in North America: (i)
directly or indirectly engage, whether or not such engagement shall be as a
member, partner, stockholder, affiliate or other participant, in any Competitive
Business (as defined herein), or represent in any way any Competitive Business,
whether or not such engagement or representation shall be for profit, (ii)
knowingly or intentionally interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between Buyer and any other person or
entity, including, without limitation, any customer, supplier, employee or
consultant of Buyer with respect to the Business, (iii) induce any employee of
Buyer to terminate his or her employment with Buyer or to engage in any
Competitive Business in any manner described in the foregoing clause (i) or (iv)
affirmatively assist or induce any other person or entity to engage in any
Competitive Business in any manner described in the foregoing clause (i).
Anything contained in this Section 8.3 to the contrary notwithstanding, an
investment by Globe or Seller in any publicly traded company in which either
Globe or Seller and their affiliates exercise no operational or strategic
control and which, collectively, constitutes less than 5% of the capital of such
entity shall not constitute a breach of this Section 8.3.
(b) As used herein, "Non Competition Period" shall mean the period
commencing on the Closing Date hereof and terminating 5 years from the Closing
Date.
(c) "Competitive Business" shall mean any business engaged in the
development, sales and support of online and offline direct-response marketing
services or that is substantially similar to the services and products offered
by the Seller as of the date hereof.
(d) Seller and Seller understand that the foregoing restrictions may
limit their ability to earn income in a business similar to that of the Buyer,
following Closing but they nevertheless acknowledge that they have received and
will receive sufficient consideration and other benefits provided hereunder to
clearly justify such restrictions.
31
(e) Globe, Seller and Buyer recognize and acknowledge that the
restrictions set forth herein are reasonable as to form and scope.
Notwithstanding the foregoing, it is the desire and intent of the parties that
the provisions of this Section 8.3 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Section 8.3 shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to (i) delete therefrom the portion thus adjudicated to
be invalid or unenforceable, such deletion to apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made or (ii) otherwise to render it enforceable in such
jurisdiction.
(f) Each of Buyer, Globe and Seller acknowledges and understands
that the provisions of this Section 8.3 are of a special and unique nature, the
loss of which cannot be adequately compensated for in damages by an action at
law, and that the breach or threatened breach of the provisions of this Section
8.3 would cause the Buyer irreparable harm. In the event of a breach or
threatened breach by Globe or Seller of the provisions of this Agreement, the
Buyer shall be entitled to an injunction restraining Globe and Seller from such
breach without requirement to post bond or otherwise prove damage. Nothing
contained in this Section 8.3 shall be construed as prohibiting the Buyer from
or limiting the Buyer in pursuing any other remedies available for any breach or
threatened breach of this Agreement.
8.4. Nondisparagement. After the Closing Date, none of the parties will
disparage any other party hereto or any of such party's managers, directors,
officers, employees, representatives or agents, successors or assigns.
8.5. Forwarding of Inquiries. After the Closing Date, Globe and Seller
shall forward, in a reasonable and prompt manner, all inquiries relating to the
Business to such persons, offices or locations as the Buyer shall designate in
writing.
8.6. Name Change. From and after the Closing Date Seller shall not use for
any commercial purposes a name containing "Seller" or any derivative thereof, in
any manner and for any purpose whatsoever.
8.7. Further Assurances. At any time and from time to time after the
Closing Date, each party shall, without further consideration, execute and
deliver to the other such other instruments of transfer and assumption and shall
take such other action as the other may reasonably request to carry out the
transactions contemplated by this Agreement. Globe and Seller agree to perform
all acts that are reasonably within their purview, authority and/or ability and
deliver all documents reasonably requested by Buyer to perfect and confirm
Buyer's rights to the Acquired Assets, including, without limitation, the
Intellectual Property being transferred to Buyer hereunder, including documents
for filing with the U.S. Patent and Trademark Office, the U.S. Copyright Office,
Network Solutions, Inc., and other administering parties or offices concerning
intellectual property.
8.8. Taxes; Tax Treatment. All sales Taxes and transfer Taxes incurred in
connection with the Contemplated Transactions shall be borne by Seller.
32
8.9. Collection of Accounts Receivable. After the Closing Date, Seller
shall use commercially reasonable efforts to collect any Accounts Receivable
that were generated in connection with the Business prior to the Closing Date
which shall be retained by Buyer for its own accounting, Globe and Seller shall
promptly remit to Buyer (within 2 business days) any payments on Accounts
Receivable received by Seller or Globe after the Closing Date. After the Closing
Date, Buyer shall have the right to notify any customers who owe Seller any
amounts properly payable to Buyer to send their payments directly to Buyer.
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of
the Buyer to consummate the Closing and to make all payments of the Purchase
Price shall be subject to the satisfaction at or prior to the Closing of each of
the following the parties shall have (A) to meet our obligations to deliver, (B)
sign our management conditions (to the extent noncompliance is not waived in
writing by the Buyer):
9.1. Representations and Warranties True at Closing; Compliance with
Covenants; Corporate Approvals.
(a) The representations and warranties made by Globe and Seller in
or pursuant to this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date with the same effect as though
such representations and warranties had been made or given at and as of the
Closing Date (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such specific date);
(b) Globe and Seller shall each have performed and complied in all
material respects with all of their covenants, obligations and conditions under
this Agreement to be performed or complied with by each of them on or prior to
the Closing;
(c) all corporate approvals necessary to authorize the Contemplated
Transactions shall have been obtained by Globe and Seller.
The Buyer shall have received a certificate, executed by an executive officer of
each or Globe and Seller and dated as of the Closing Date, to the foregoing
effect and certifying to (x) the adoption and copies of resolutions of the Board
of Directors and shareholders, each Seller approving the Contemplated
Transactions; (y) the incumbency of officers of each of Globe and Seller who are
executing this Agreement or any of the Seller's Transaction Documents or
certificates contemplated hereunder; and (z) attached copies of Seller's charter
and bylaws.
(d) Globe and Seller shall deliver to Buyer (i) a certificate of
good standing of Globe and Seller, as of the most recent practicable date, from
the Secretary of State of the states of incorporation of each of Globe and
Seller; and (ii) certificates from the Secretary of State of the appropriate
official in each state in which such Globe and Seller is qualified to do
business to the effect that Globe and Seller are in good standing in such state;
in each case, dated as of a date not more than 5 Business Days prior to the
Closing Date.
9.2. Consents. Globe, Seller and Buyer shall have obtained all necessary
consents of third parties to the Contemplated Transactions, including, without
limitation, any consents required by the Contracts and any required consents of
any creditors, lessors, suppliers and Governmental Authorities, including,
without limitation, those set forth in Schedules 5.9(a) and 5.9(b), copies of
which shall have been delivered to Buyer;
33
9.3. No Litigation. No restraining order or injunction shall prevent the
transactions contemplated by this Agreement and no action, suit or proceeding
shall be pending or threatened before any court or administrative body: (a) in
which it will be or is sought to restrain or prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby or (b) in connection with any claim for damages in excess of
$5,000 against the Seller.
9.4. Release of Encumbrances. All Encumbrances (other than Permitted
Encumbrances) shall have been released on or prior to Closing.
9.5. Governmental Permits and Approvals. The parties shall have received
all necessary Permits and approvals from any Governmental Authority.
9.6. Opinion of Counsel. Proskauer Rose LLP, counsel to Seller, and
Delaware counsel to Seller, shall have delivered to the Buyer a written opinion,
addressed to the Buyer and dated the Closing Date, substantially in the form of
Exhibit C hereto (the "Seller's Opinions").
9.7. Documents of Transfer. The Seller shall have delivered to Buyer all
documents of transfer representing all of the Acquired Assets, duly endorsed in
blank or with duly executed powers attached, in proper form for transfer and
with required transfer stamps, if any, affixed.
9.8. Records. Seller shall have delivered to Buyer all of the minute
books, stock ledgers and similar records of Seller.
9.9. Holdback Escrow Agreement. Seller and Escrow Agent shall have
delivered a duly executed copy of the Holdback Escrow Agreement to Buyer.
9.10. Management Agreements. Each of the individuals listed on Schedule
9.11 hereto shall have delivered to Buyer a duly executed copy of that certain:
(a) Representation Certification substantially in the form annexed hereto as
Exhibit D hereto; (b) Employment Agreement, substantially in the form annexed
hereto as Exhibit E hereto; and (c) Stock Agreement, substantially in the form
annexed hereto as Exhibit F hereto; and (d) Escrow Agreement, substantially in
the form of Exhibit G hereto, between each of the individuals listed on Schedule
9.11, and Buyer, dated as of the date hereof, (the "Management Agreements").
9.11. Seller Management. Xxxx Xxxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxx
Xxxxxx, Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxx, and Xxxxx Xxxxx (collectively, "Seller
Management") shall have executed and delivered to Globe a Securities Redemption
Agreement providing for, among other things, the repurchase of certain shares of
the common stock of Globe held by Seller Management on terms acceptable to Globe
(the "Redemption Agreement").
9.12. Termination Agreement. Seller Management shall have executed and
delivered to Globe a Termination Agreement providing for, among other things,
the cancellation of certain options and warrants on terms acceptable to Globe
(the "Termination Agreement").
34
9.13. No Material Adverse Change. There shall not have occurred a Material
Adverse Effect since the date hereof.
9.14. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Buyer in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Buyer and its counsel and the Buyer shall have
received the originals or certified or other copies of all such records and
documents as the Buyer may reasonably request.
9.15. Operational Representations. Globe shall have received the
Operational Representations from Seller Management (but shall not be required to
incur any separate payment therefore) in form and substance satisfactory to
Globe on which Buyer shall be able to rely for the purpose of any of the rights
of Buyer under any of the Management Agreements, including, without limitation,
against any escrowed property provided by Seller Management. The foregoing shall
not require the Seller or Globe to procure the agreement of Seller Management
that their Operational Representations may be relied upon by Buyer.
9.16. Fairness Opinion. Globe shall have received a favorable fairness
opinion from Xxxxxx Xxxxxx Partners.
ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATIONS OF GLOBE AND SELLER. The
obligation of Globe and Seller to consummate the Closing shall be subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(to the extent noncompliance is not waived in writing by Globe and Seller):
10.1. Representations and Warranties True at Closing; Compliance with
Covenants; Corporate Approvals. (a) The representations and warranties made by
Buyer in this Agreement shall be true and correct in all material respects as of
the date hereof and as of the Closing Date with the same effect as though such
representations and warranties had been made or given at and as of the Closing
Date (except for representations and warranties that speak as of a specific
date, which shall be true and correct as of such specific date);
(b) Buyer shall have performed and complied with all of its
covenants, obligations and conditions under this Agreement that are to be
performed or complied with by it at or prior to the Closing;
(c) all corporate approvals necessary to authorize the Contemplated
Transactions shall have been obtained by Buyer; and
(d) Buyer shall have delivered a certificate of good standing of
Buyer, as of the most recent practicable date, from the Secretary of State of
the state of incorporation of Buyer.
Seller shall have received a certificate, executed by an executive officer of
Buyer and dated as of the Closing Date, to the foregoing effect and certifying
to: (a) the adoption and copies of resolutions of the Board of Directors of
Buyer approving the Contemplated Transactions; (y) the incumbency of officers of
Buyer who are executing this Agreement or any of the Buyer Transaction Documents
or certificates contemplated hereunder; and (z) attached copies of the Buyer's
charter and bylaws.
35
10.2. Consents. Globe, Seller and Buyer shall have obtained any necessary
consents of third parties to the Contemplated Transactions including, without
limitation, any consents required by the Contracts and any required consents of
any creditors, suppliers and Governmental Authorities, including, without
limitation, those set forth in Schedules 5.9(a) and 5.9(b).
10.3. No Litigation. No restraining order or injunction shall prevent the
transactions contemplated by this Agreement and no action, suit or proceeding
shall be pending or threatened before any court or administrative body in which
it will be or is sought to restrain or prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
10.4. Governmental Permits and Approvals. The parties shall have received
all necessary approvals from any Governmental Authority.
10.5. Purchase Price. Buyer shall have delivered to Seller the Closing
Amount to Seller and delivered to the Escrow Agent the Holdback Amount.
10.6. Escrow Agreement. Buyer and Escrow Agent shall have delivered a duly
executed copy of the Holdback Escrow Agreement to Buyer and deposited the
Holdback Amount with the escrow agent therefore.
10.7. Seller Management. Seller Management shall have executed and
delivered to Globe the Redemption Agreement and the Termination Agreement, each
on terms acceptable to Globe.
10.8. Options and Warrants. Certain Persons (as designated by Globe) whose
options and/or warrants to purchase Globe common stock shall have agreed to the
termination of such options and/or warrants on terms reasonably satisfactory to
Globe
10.9. Opinion of Counsel. Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx, LLP,
counsel to Buyer, shall have delivered to the Seller and Globe a written
opinion, addressed to the Seller and Globe, and dated the Closing Date,
substantially in the form of Exhibit H hereto (the "Buyer's Opinion").
36
10.10. Proceedings and Documents Satisfactory. All proceedings in
connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to Seller in connection with the
transactions contemplated by this Agreement (including expiration of the
applicable waiting period after distribution of the Information Statement to
Globe's stockholders) shall be satisfactory in all reasonable respects to Seller
and their counsel, and Seller shall have received the originals or certified or
other copies of all such records and documents as the Seller may reasonably
request.
10.11. Operational Representations. Globe shall have received the
Operational Representations from Seller Management in form and substance
satisfactory to Globe.
10.12. Fairness Opinion. Globe shall have received a favorable fairness
opinion from Xxxxxx Xxxxxx Partners.
ARTICLE 11. INDEMNIFICATION.
11.1. Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement, the Transaction
Documents or otherwise made in writing in connection with the Contemplated
Transactions (in each case except as affected by the transactions contemplated
by this Agreement) shall be deemed material and, notwithstanding any pre-Closing
investigations, examinations, or prior knowledge of Buyer or any due diligence
conducted by Buyer, shall be deemed to have been relied on by the Buyer and
shall survive the consummation of the transactions contemplated hereby and the
payment of the Purchase Price until 5:00 p.m. EST on the date that is one year
and forty-five days following the Closing Date (such period, the
"Indemnification Period"), and thereafter until resolved if a claim in respect
thereof has been made prior to such date), except that (i) any representation of
Globe or Seller with respect to Tax matters, environmental matters and employee
benefit matters shall survive until expiration of the statute of limitations
applicable to claims with respect to such matters, and (ii) any representation
of Globe or Seller with respect to title matters shall survive for five years.
Each representation and warranty made by Globe or Seller or the Buyer in this
Agreement shall expire on the last day, if any, that Claims (as defined herein)
for breaches of such representation or warranty may be made pursuant to this
Article 11, except that any such representation or warranty that has been made
the subject of a Claim prior to such expiration date shall survive with respect
to such Claim until the final resolution of such Claim pursuant to this Article
11.
11.2. Indemnity by Globe and Seller. Regardless of any pre-Closing
investigations, examinations or prior knowledge of the Buyer or any due
diligence conducted by Buyer, each of Globe and Seller, severally and not
jointly, agrees to indemnify and hold Buyer and its Affiliates and their
respective officers, directors, stockholder, employees and agents (collectively,
Ithe "Buyer Indemnified Group") harmless from and with respect to any and all
losses, assessments, liabilities, claims, damages, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' and accountants'
fees and disbursements ("Losses") related to, or arising directly or indirectly
out of:
(a) any failure to perform or breach by either Globe or Seller of
any representation or warranty (other than an Operational Representation, which
is addressed in clause (d) below), covenant, obligation or undertaking made by
either Globe or Seller in any Transaction Document (including the Schedules and
Exhibits hereto or thereto), or in any other statement, certificate or other
instrument delivered pursuant hereto or thereto, or any misrepresentation
contained therein;
(b) the ownership or operation of the Business prior to the Closing
Date other than Assumed Liabilities;
(c) the Excluded Assets and all liabilities other than Assumed
Liabilities; and
37
(d) any breach of an Operational Representation made by Globe or
Seller, but only to the extent that such breach of an Operational Representation
is not also a breach of the corresponding Operational Representation made by
Seller Management in the Redemption Agreement (or other agreement that contains
Operational Representations by Seller Management).
11.3. Indemnity by the Buyer. The Buyer agrees to indemnify and hold
Seller harmless from and with respect to any and all Losses related to, or
arising directly or indirectly out of, any failure to perform or breach by the
Buyer of any representation or warranty, covenant, obligation or undertaking
made by the Buyer in any Transaction Document (including the Schedules and
Exhibits hereto and thereto), or in any other statement, certificate or other
instrument delivered pursuant hereto and as a result of Buyer's ownership and
operation of the Business following Closing.
11.4. Claims.
(a) Notice. Any party seeking indemnification hereunder (the
"Indemnified Party") shall promptly notify the other party hereto (the
"Indemnifying Party") of any action, suit, proceeding, claim, demand,
assessment, judgment, cost, expense or breach (a "Claim") with respect to which
the Indemnified Party claims indemnification hereunder, by delivering a written
notice thereof together with a statement setting forth such information with
respect to such Claim as the Indemnified Party shall then have (an
"Indemnification Notice") provided that failure of the Indemnified Party to give
an Indemnification Notice shall not relieve the Indemnifying Party of its
obligations under this Section 11.4 except to the extent, if at all, that such
Indemnifying Party shall have been prejudiced thereby in its ability to defend
the suit, action, claim, proceeding or investigation for which such
indemnification is sought by reason of such failure.
(b) Third-Party Claims. If such Claim relates to any action, suit,
proceeding or demand instituted against the Indemnified Party by a third party
(a "Third-Party Claim"), the Indemnifying Party shall be entitled to participate
in the defense of such Third-Party Claim after receipt of the Indemnification
Notice from the Indemnified Party, as follows. Within 30 days after receipt of
the Indemnification Notice of a particular matter from the Indemnified Party,
the Indemnifying Party may assume the defense of such Third-Party Claim, in
which case the Indemnifying Party shall have the authority to negotiate,
compromise and settle such Third-Party Claim, if and only if the following
conditions are satisfied:
(i) the Indemnifying Party shall have confirmed in writing
that it is obligated hereunder to indemnify the Indemnified Party with respect
to such Third-Party Claim;
(ii) the Indemnifying Party retains counsel that is acceptable
to the Indemnified Party, which acceptance shall not be unreasonably withheld or
delayed; and
(iii) the Indemnified Party is kept reasonably informed of
such action, suit or proceeding at all stages thereof whether or not it is
represented by separate counsel.
38
However, notwithstanding the preceding sentence, if (a) the Indemnifying
Party fails or refuses to defend the Claim then Indemnified Party may defend
and/or settle such Claim, after giving notice of proposed settlement to the
Indemnifying Party, on such terms as the Indemnified Party may reasonably deem
appropriate and no such action taken by the Indemnified Party in defending or
settling such Claim will release the Indemnifying Party of any obligation
hereunder. Except under the circumstances described in the preceding sentence,
the Indemnified Party will not enter into any settlement agreement without the
consent of the Indemnifying Party which consent shall not be unreasonably
withheld or delayed. The Indemnifying Party will not, without the prior written
consent of the Indemnified Party (which will not be unreasonably withheld),
enter into any settlement of a Claim, if pursuant to or as a result of such
settlement, injunctive or other equitable relief will be imposed against the
Indemnified Party or if such settlement does not expressly unconditionally
release the Indemnified Party from all liabilities or obligations with respect
to such Claim, with prejudice. The Indemnified Party and the Indemnifying Party
will cooperate with the each other in the defense, compromise or settlement of
any Claim for which indemnification is sought.
(c) Limitation on Indemnity. Other than any amounts that are payable
pursuant to Section 3.3 or Section 3.4 hereof which amounts shall be payable in
full, an Indemnifying Party shall be liable under Section 11.4(a) hereof for
Claims only if the aggregate amount of all Claims against Globe and Seller,
collectively, on the one hand, or against Buyer, on the other hand, exceed
$175,000, and in such case, such the Indemnifying Party shall be liable only for
Indemnification of an amount that is in excess of $75,000 (for the absence of
doubt, and by way of example, a $200,000 Claim shall be entitled to $125,000 in
indemnification payments).
11.5. Cooperation. If requested by the Indemnifying Party, the Indemnified
Party shall cooperate to the extend reasonably requested in the defense or
prosecution of any suit, action, demand, assessment, judgment, claim, proceeding
or investigation for which such Indemnifying Party is being called upon to
indemnify the Indemnified Party pursuant to this Article 11, and the Indemnified
Party shall furnish such records, information and testimony and attend all such
conferences, discovery proceedings, hearing, trials and appeals as may be
reasonably requested in connection therewith and, if appropriate, the
Indemnified Party shall make any counterclaim against the party asserting such
suit, action, demand, assessment, judgment, claim, proceeding or investigation
or any cross-complaint against any person in connection therewith and the
Indemnified Party further agrees to take such other actions as reasonably may be
requested by an Indemnifying Party to reduce or eliminate any Loss for which the
Indemnifying Party would have responsibility, but the Indemnifying Party will
reimburse the Indemnified Party for any fees or expenses incurred by it in so
cooperating or acting at the request of the Indemnifying Party.
11.6. Buyer's Right of Offset; Sole Recourse Against Seller/Globe.
Notwithstanding anything to the contrary contained in this Agreement or the
other Transaction Documents, Buyer and each other member of the Buyer
Indemnified Group shall have, as their sole and exclusive recourse for Losses
against Seller and Globe, the right to (i) offset Losses against the Holdback
Cash and the Escrowed Shares pursuant to the Holdback Escrow Agreement; (ii) to
require payment of the Share Value Deficit as provided in Section 3.2(d); and
(iii) to require payment arising in connection with any adjustment under Section
3.3 or Section 3.4 hereof. The foregoing shall not constitute a limitation on or
prevent Buyer from exercising any rights as against any Seller Management or for
intentional fraud.
39
11.7. Remedies Exclusive. The remedies provided in this Article 11 shall
be the sole and exclusive remedies, and shall preclude assertion by an
Indemnified Person of any and all other remedies against an Indemnified Party.
11.8. Insurance. The amount of any indemnification under this Article 11
shall be reduced by any amount recovered by the Indemnified Party (net of
reasonable expenses incurred in obtaining such recovery) under any insurance
policy or from any Third Party (which recovery the Indemnified Party shall use
it reasonably commercial efforts to pursue, but shall not be obligated to
commence litigation) and by the amount of any direct and immediate income tax
benefit, related to the indemnified Loss obtained by the Indemnified Party. If,
after an indemnification payment has been made with respect to a Loss, the
Indemnified Party has any recovery, or obtains any income Tax benefit, with
respect to that Loss, the Indemnified Party shall promptly pay to the
Indemnifying Party the amount of that recovery or income Tax benefit, net of
reasonably expenses incurred in obtaining recovery.
11.9. Adjustment. Any payment of indemnification amount under this Article
11 shall be accounted for as an adjustment to the Purchase Price.
ARTICLE 12. TERMINATION
12.1. Termination. (a) Anything contained in the Transaction Documents to
the contrary notwithstanding, this Agreement may be terminated at any time prior
to the Closing Date:
(i) by the mutual consent of Buyer, Globe and Seller; or
(ii) by Buyer or Seller (the "Terminating Party") if the
Closing shall not have occurred on or before 11:59 p.m. on October 31, 2005 (or
such later date as may be mutually agreed to by Buyer and the Seller); provided
that if the Closing shall not have occurred as a result of the willful act or
omission of one of the parties, then such Terminating Party may not terminate
this Agreement pursuant to this Section 12.1(a).
(b) Globe and Seller may, on or prior to the Closing Date, terminate
this Agreement without liability if:
(i) there shall have been a material breach of any
representations or warranties set forth in this Agreement on the part of Buyer
or if any representations or warranties of Buyer shall have become untrue,
provided that neither Globe nor Seller have materially breached any of their
obligations hereunder;
(ii) there shall have been a material breach by Buyer of any
of its covenants of agreements hereunder and such breach would materially and
adversely affect the ability Buyer or Seller to consummate the transactions
contemplated by this Agreement, and Buyer has not cured such breach within 10
Business Days after notice by Seller thereof setting forth in reasonable detail
the nature of such breach; provided that neither Globe nor Seller has materially
breached any of their obligations hereunder; or
40
(iii) any condition to Closing set forth in Article 10 shall
not have been fulfilled by Buyer or waived by Seller by the Closing Date.
(c) Buyer may, on or prior to the Closing Date, terminate this
Agreement without liability if:
(i) there shall have been a material breach of any
representations or warranties set forth in this Agreement on the part of either
Globe or Seller or if any representations or warranties of either Globe or
Seller shall have become untrue to the extent it would have a Material Adverse
Effect provided that Buyer has not materially breached any of its obligations
hereunder;
(ii) there shall have been a material breach by Seller or
Globe of one or more of their respective covenants or agreements hereunder
having a Material Adverse Effect on Seller or the Business or materially
adversely affecting (or materially delaying) the ability of Seller and Buyer to
consummate transactions contemplated by this Agreement, and neither Globe nor
Seller has cured such breach within 10 Business Days after notice by Buyer
thereof setting forth in reasonable detail the nature of such breach, provided
that Buyer has not materially breached any of its obligations hereunder;
(iii) any condition to Closing set forth in Article 9 shall
not have been fulfilled or waived by Buyer by the Closing Date.
12.2. Certain Termination Rights.
(a) Notwithstanding anything to the contrary contained herein, in
the event that: (A) none of the events in 12.1(c)(i)-(iii) has occurred and
Seller terminates this Agreement pursuant to Section 12.1(b); or (B) in the
event that Seller terminates this Agreement pursuant to Section 7.14, Buyer
shall immediately pay to Seller the Escrow Amount (the "Termination Fee") which
Buyer and Globe acknowledge is reasonable under the circumstances and designed
to compensate Seller and Globe for the lost opportunity to consummate the
Contemplated Transactions. The termination Fee will serve as the exclusive
remedy to Globe, Seller and any Affiliates hereunder in the event of a breach by
Buyer, including, but not limited to, damages relative to their efforts,
expenses and costs incurred in evaluating the Contemplated Transactions.
(b) This Agreement may be terminated by Globe or Seller pursuant to
Section 7.5 and as provided therein.
12.3. Notice of Termination. Any party desiring to terminate this
Agreement pursuant to Section 12.(a)(ii), 12.1(b) or 12.2 shall give written
notice of such termination to the other party to this Agreement specifying the
reason for such termination.
41
12.4. Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 12.1, each party shall pay all expenses incurred
by it in connection with this Agreement, and no party shall have any further
obligations or liability for any damages or expenses under this Agreement. In
the event of any termination, all further obligations of the parties under this
Agreement (other than those set forth in Sections 7.10, 7.11 and provisions
which by their terms are intended to survive termination, including, without
limitation, this Article 12) shall be terminated without further liability of
any party to the other; provided, however, that nothing contained herein shall
be construed to prevent any parties hereto from pursuing any remedy available at
law or in equity for any breach, violation, default or other failure of
performance of any other party hereto prior to Closing.
ARTICLE 13. GENERAL.
13.1. Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid, or if sent by overnight courier, or sent by
written telecommunication, as follows:
If to the Seller:
xxxxxxxx.xxx, inc.
000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xx. Xxxxxxxxxx, XX 00000
with copies to:
Proskauer Rose LLP
0000 Xxxxxx Xxxx
Xxxxx 000X
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx X. "Rocky" Xxxxxxxx II, Esq.
Fax: 000-000-0000
If to the Buyer, to:
RelationServe Media, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xx. Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx Xxxxx
Fax: 000-000-0000
with copies to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
42
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
five (5) days after being mailed as described above, and (d) if sent by written
telecommunication, when dispatched; provided that notice is sent simultaneously
via another permitted method.
13.2. Entire Agreement. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating to
the subject matter hereof and shall not be amended except by a written
instrument hereafter signed by all of the parties hereto.
13.3. Expenses, Taxes. Except as otherwise specifically set forth herein,
each party shall pay its own fees and expenses incident to the preparation and
carrying out of this Agreement, whether or not the Contemplated Transactions are
consummated (other than any excise, sales, use or transfer Taxes or any other
such Taxes which are payable or arise as a result of execution of this Agreement
or the transfer of the Acquired Assets to the Buyer pursuant to this Agreement,
which shall be paid by Seller).
13.4. Partial Invalidity. If any term or provision of this Agreement or
the application hereof to any person, property or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons, property or circumstances
other than those as to which it is invalid or unenforceable shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforced to the fullest extent permitted by law.
13.5. Amendment, Modification and Waiver. This Agreement shall not be
altered or otherwise amended except pursuant to an instrument in writing signed
by each of the parties hereto. The waiver by one party of the performance of any
covenant, condition or promise shall not invalidate this Agreement, nor shall it
be considered a waiver by such party of any other covenant, condition or
promise. The delay in pursuing any remedy or in insisting upon full performance
for any breach or failure of any covenant, condition or promise shall not
prevent a party from later pursuing any remedies or insisting upon full
performance for the same or any similar breach or failure.
13.6. Headings. The various section headings in this Agreement are
inserted for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
13.7. Construction. This Agreement shall be construed according to its
fair meaning and neither for nor against any party hereto irrespective of which
party caused the same to be drafted. Each of the parties acknowledges that it
has been represented by an attorney in connection with the preparation and
execution of this Agreement.
43
13.8. Governing Law. The validity and construction of this Agreement shall
be governed by the internal laws of the State of Delaware, without giving effect
to the principles of conflicts of laws thereof.
13.9. Arbitration of Disputes.
(a) Any controversy or claim arising out of, relating to, or in
connection with, this Agreement or the Seller Transaction Documents, or the
breach, termination or validity thereof, shall be settled by arbitration in
accordance with the Center for Public Resources for Non-Administered Arbitration
by a sole arbitrator. The Parties expressly waive any right to punitive,
exemplary or similar damages and the arbitrator is expressly prohibited from
awarding any such damages. Judgment upon the award rendered by the Arbitrator
shall be entered by an court having jurisdiction thereof. The seat of the
arbitration shall be Broward County, Florida.
(b) In order to facilitate the comprehensive resolution of related
disputes, and upon request of any party to the arbitration proceeding, the
arbitrator may, within 90 days of his or her appointment, consolidate the
arbitration proceeding involving any of the parties relating to this Agreement
or any Seller Transaction Documents. The arbitration shall not consolidate such
arbitrations unless he or she determines that (i) there are issues of fact or
law common to the two proceedings so that a consolidated proceeding would be
more efficient than separate proceedings, and (ii) on party would be prejudiced
as a result of such consolidation through undue delay or otherwise. In the case
of a consolidated proceeding, the arbitration shall be conducted in the manner
provided in subparagraph (a) of this paragraph.
13.10. Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
13.11. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This agreement shall be fully assignable by Buyer to any
majority-owned subsidiary of Buyer formed for the purpose of acquiring the
Business and the Acquired Assets from Seller. Except as provided herein, neither
this Agreement nor the obligations of any party hereunder shall be assignable or
transferable by such party without the prior written consent of the other party
hereto.
13.12. Severability. In the event that any covenant, condition, or other
provision herein contained is held to be invalid, void, or illegal by any court
of competent jurisdiction, the same shall be deemed to be severable from the
remainder of this Agreement and shall in no way affect, impair, or invalidate
any other covenant, condition, or other provision contained herein.
13.13. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Seller and the Buyer and their respective shareholders, any rights or
remedies under or by reason of this Agreement.
13.14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
44
ARTICLE 14. CERTAIN DEFINITIONS. As used herein the following terms not
otherwise defined have the following respective meanings:
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the specified
Person and shall include (a) any Person who is a director or beneficial holder
of at least 10% of any class of the then-outstanding capital stock (or other
shares of beneficial interest) of such Person and family members of any such
Person, (b) any Person of which such Person or an Affiliate of such Person under
clause (a) hereof shall, directly or indirectly, either beneficially own at
least 10% of any class of the then outstanding capital stock (or other shares of
beneficial interest) or constitute at least a 10% equity participant, and (c) in
the case of a specified Person who is an individual, family members of such
Person.
"Business Day" shall mean any day excluding Saturday, Sunday and any day
on which banks in New York City are authorized by law or other governmental
action to close.
"Environmental Claim" shall mean any written claim, action, demand, order,
or notice by or on behalf of, any Governmental Authority or person alleging
potential liability arising out of, based on or resulting from the violation of
any applicable Environmental Law or Environmental Permit or relating to any
Hazardous Materials.
"Environmental Laws" shall mean all Laws that are applicable to Seller
relating to Releases or threatened Releases of Hazardous Materials or otherwise
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to (A) the
Releases or threatened releases of Hazardous Materials or materials containing
Hazardous Materials or (B) the manufacture, generation, handling, treatment,
storage, transport, disposal or handling of Hazardous Materials or materials
containing Hazardous Materials.
14.1. "Fair Market Value" shall mean the average for the ten (10) trading
days immediately preceding the date of determination of the daily high and low
prices of publicly traded shares of Globe common stock, rounded to the nearest
cent, on the principal national securities exchange on which shares of Globe
common stock are listed (if the shares of Globe common stock are so listed), or
on the Nasdaq Stock Market (if the shares of Globe common stock are regularly
quoted on the Nasdaq Stock Market), or, if not so listed or regularly quoted,
the mean between the closing bid and asked prices of publicly traded shares of
Globe common stock in the over-the-counter market, or, if such bid and asked
prices shall not be available, as reported by any nationally recognized
quotation service selected by Buyer. If none of the foregoing is applicable,
then "Fair Market Value" shall be determined by an independent appraiser
selected by mutual agreement of the Buyer and Globe.
14.2. "Governmental Authority" shall mean any domestic or foreign federal,
state or local agency, authority, board, bureau, court, instrumentality or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers, in each case, to the extent having jurisdiction over the
Seller or Globe, as applicable.
45
"Hazardous Materials" shall mean all substances, matters and other
particles defined or listed as "hazardous" or "toxic" under Environmental Laws
or that are otherwise regulated by Environmental Laws.
"Indebtedness" shall mean as applied to any Person, (a) all indebtedness
of such Person for borrowed money, whether current or funded, or secured or
unsecured, (b) all indebtedness of such Person for the deferred purchase price
of property or services represented by a note, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the sellers or lender under such agreement in the event
of default are limited to repossession or sale of such property), (d) all
indebtedness of such Person secured by a purchase money mortgage or other lien
to secure all or part of the purchase price of property subject to such mortgage
or lien, (e) all obligations under leases which shall have been or must be, in
accordance with generally accepted accounting principles, recorded as capital
leases in respect of which such Person is liable as lessee, (f) any liability of
such Person in respect of banker's acceptances or letters of credit, (g) all
interest, fees and other expenses owed with respect to indebtedness described in
the foregoing clause (a), (b), (c), (d), (e) or (f) above, and (h) all
indebtedness referred to in clause (a), (b), (c), (d), (e), (f) or (g) above
which is directly or indirectly guaranteed by such Person or which such Person
has agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.
"Intellectual Property" shall mean all intangible assets used in or
necessary to the conduct of the business of Seller, including, without
limitation: the name "Seller" and all derivations thereof, all trade names,
domain names, websites, service marks names, trade dress, logos, trade secrets,
copyrights and registrations and applications therefore, designs, technical
information, know-how, processes and techniques, research and development
information, and supplies, plans, proposals, technical data, computer software,
financial, marketing and business data, pricing and cost information, and
business and marketing plans, formulas, devices, software or compilations of
information; patents, license rights and sublicense rights to all patents and
trademarks, and other intangible assets registered in the name of Seller or any
of its Affiliates and currently used by Seller in connection with, or necessary
for the conduct of the business of Seller, all applications therefore and all
licenses (as licensee or licensor) and other agreements related thereto as
described on Schedule 5.12(a) hereto, and all of Seller's rights to use or allow
others to use such names, all registrations and applications for registration
and all claims for infringement of any intellectual property and intangible
rights relating thereto.
"IRS" shall man the United States Internal Revenue Service.
"Laws" shall mean any federal, state, local, municipal, foreign,
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, rule, regulation, statute or treaty or any
order of any Governmental Authority, or any license, franchise, consent,
approval, permit or similar right granted under any of the foregoing including,
without limitation, all federal, state and local privacy laws, rules and
regulations, and all other applicable laws of similar tenor and effect, all laws
relating to occupational health and safety, equal employment opportunities, fair
employment practices and discrimination, privacy, security and exchange of
information, the Sarbanes Oxley Act of 2002, the Digital Millennium Copyright
Act, the CAN-SPAM Act of 2003, the Children's Online Protection Act, the
Children's Online Privacy Protection Act, the Protection of Children from Sexual
Predators Act, rules and regulations promulgated by the Federal Trade Commission
and the Federal Communications Commission, and other laws, rules, and
regulations, applicable to the Business or any of its properties or assets.
46
"Material Adverse Effect" shall mean circumstance, change in, or effect on
the Business, or the Seller that, individually or in the aggregate: (a) is, or
would reasonably be expected to be, materially adverse to the business,
operations, assets or liabilities, employee relationships, customer or supplier
relationships, results of operations or the financial condition or prospects of
the Business or (b) would materially and adversely affect the ability to operate
or conduct the Business in the Ordinary Course.
"Net Working Capital" shall mean the current assets minus the current
liabilities, in each case acquired by the Buyer, less intercompany transactions.
"Permits" shall mean all franchises, licenses, permits, consents,
authorizations, approvals and certificates, or any waiver of the foregoing,
required by any person or organization including any Governmental Authority (as
defined herein), and held, used or otherwise possessed by Seller in connection
with and/or necessary to the operation of the business of Seller, to the extent
transferable to Buyer under applicable Laws as listed on Schedule 4.13.
"Permitted Encumbrances" means (i) liens for Taxes not yet due and payable
or being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been established; (ii) rights reserved to any
Governmental Authority to regulate the affected property; (iii) statutory liens
of banks and rights of set-off; (iv) as to leased assets, interests of the
lessors and sublessors thereof and liens affecting the interests of the lessors
and sublessors thereof; (v) inchoate materialmen's, mechanics', workmen's,
repairmen's or other like liens arising in the Ordinary Course; (vi) liens
incurred or deposits made in the Ordinary Course in connection with workers'
compensation and other types of social security; (vii) licenses of trademarks or
other intellectual property rights granted by the Seller in the Ordinary Course
and not interfering in any material respect with the Ordinary Course of the
Business of Seller; and (viii) as to real property, any encumbrance, adverse
interest, constructive or other trust, claim, attachment, exception to or defect
in title or other ownership interest (including, but not limited to,
reservations, rights of entry, rights of first refusal, possibilities of
reverter, encroachments, easement, rights of way, restrictive covenants, leases,
and licenses) of any kind, which otherwise constitutes an interest in or claim
against property, whether arising pursuant to any Laws, under any contract or
otherwise, that do not, individually or in the aggregate, have a Material
Adverse Effect on Seller's use thereof as currently used in the Ordinary Course.
"Person" shall mean a corporation, an association, a partnership, an
organization, a business, an individual, a limited liability company, a
government or political subdivision thereof or a governmental agency (including
without limitation, any federal, state, local or municipal regulatory or
administrative body).
47
"Pre-Closing Tax Period" shall mean all taxable periods ending on or
before the Closing Date and the portion ending on the Closing Date of any
taxable period that includes (but does not end on) the Closing Date.
"Release" shall mean any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment, including the movement of Hazardous Materials through the air,
soil, surface water or groundwater.
"Relevant Group" shall mean any combined, consolidated, affiliated,
unitary or similar group of which either Seller is or was a member.
"Tax" shall mean any federal, state, local, foreign and other income,
profits, franchise, capital, withholding, unemployment insurance, social
security, occupational, production, severance, gross receipts, value added,
sales, use, excise, real and personal property, ad valorem, occupancy, transfer,
employment, disability, workers' compensation or other similar tax, duty or
other governmental charge (including all interest and penalties thereon and
additions thereto).
"Transaction Documents" shall mean this Agreement, the Xxxx of Sale and
other documents and agreements of even date herewith or delivered at Closing.
[Remainder of page intentionally left blank]
48
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Asset Purchase Agreement to be duly executed and
delivered as a sealed instrument as of the 10th day of August, 2005.
SELLERS:
xxxxxxxx.xxx, inc.
By:
---------------------------------------------
Title:
SENDTEC, INC.
By:
---------------------------------------------
Title:
BUYER:
RELATIONSERVE MEDIA, INC.
By:
---------------------------------------------
Title:
49
