Exhibit 2.3
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as
of May 12, 2005 by and among RELATIONSERVE ACCESS, INC., a Delaware corporation
("Relationserve") and wholly-owned subsidiary of RELATIONSERVE, INC. ("Parent");
OMNI POINT MARKETING, LLC, a Florida limited liability company (the "Company");
and the Members of the Company listed on the execution page of this Agreement
(collectively, the "Members"). Certain other capitalized terms used herein are
defined in Article XI and throughout this Agreement.
RECITALS
The Company is in the business of providing internet media and
online and offline marketing programs, including permission based e-mail
advertising, e-mail database append services, online surveys, ad serving
networks and internet compiled direct mail lists (the "Business"). Relationserve
desires to purchase and the Company desires to sell, certain of its assets,
properties and business to Relationserve which constitute the Business as now
being conducted (the "Acquisition"), which sale does not represent all or
substantially all of the assets of Company, as more fully described on the
Schedules and Exhibits annexed hereto, on the terms and subject to the
conditions set forth in this Agreement.
TERMS OF AGREEMENT
In consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE I
1.1 PURCHASED ASSETS. Upon the terms and subject to the conditions
of this Agreement, at the Closing (as defined in Article III), the Company will
sell, convey, transfer, assign and deliver to Relationserve (or one or more of
its assignees) all of the right, title and interest in and to the assets,
properties, business and rights of every kind and description, whether real,
personal or mixed, tangible or intangible, wherever located (except those assets
of the Company which are specifically excluded as provided in Section 1.2
hereof) as they shall exist on the Closing Date (as defined in Article III) that
constitute the Business and such other assets, properties, business and rights,
whether or not appearing on the Current Balance Sheet (as defined in Section
5.7) or the books or records of the Company appearing on any Schedule hereto as
Purchased Assets (collectively, the "Purchased Assets"), free and clear of any
Lien (as defined in Section 11.1) other than as permitted herein. Without
limiting the generality of the foregoing, the Purchased Assets shall include,
but not be limited to, the following:
(a) Database. All information contained in the databases maintained
by the Company (the "Database").
(b) Other Tangible Personal Property. The machinery, computer
equipment, computer software, equipment, tools, supplies, leasehold
improvements, construction in progress, furniture and fixtures, trucks,
automobiles, vehicles and any other fixed assets owned or leased by the Company,
as more particularly described on Schedule 1.1(b) attached hereto not related to
the Excluded Assets, and whether or not such appear on Schedule 1.1(b) if such
Other Tangible Personal Property is necessary or useful to the Business;
(c) Customer Accounts. All of the customer accounts and customer
account contracts (the "Customer Contracts") of the Company, as more
particularly described on Schedule 1.1(c) attached hereto as shall be made
available in written or electronic form, including as are recorded in any
accounting or other system or software, which shall also constitute Purchased
Assets hereunder;
(d) Assumed Contracts. All of the interest, rights and benefits
accruing to the Company under any dealer, sales or service agreements or any
other Contracts (as defined in Section 11.1) to which the Company is a party
which are set forth on Schedule 1.1(d) attached hereto (the "Assumed
Contracts");
(e) Prepayments. All prepaid and deferred items of the Company,
including without limitation, prepaid rentals, insurance, taxes, tax refunds and
unbilled charges and deposits relating to the operations of the Company;
(f) Receivables. All receivables of the Company (collectively,
"Receivables"), including without limitation all trade accounts receivables,
notes receivable, receivables arising as a result of contracts in transit and
receivables from manufacturers, insurance companies, service contract providers
and any other vendors or suppliers of the Company not related to the Excluded
Assets;
(g) Equipment Leases. All of the interest of and the rights and
benefits accruing to the Company as lessee under leases of machinery, vehicles,
equipment, tools, furniture and fixtures and other fixed assets ("Equipment
Leases"), as more particularly described on Schedule 1.1(h) attached hereto;
(h) Intangible Property. All of the proprietary rights of the
Company, including without limitation all Intellectual Property and other
similar intangible property and rights relating to the Business, and all
goodwill developed through the use of such property and rights, as more
particularly described on Schedule 1.1(i) attached hereto;
(i) Licenses and Permits. To the extent assignable, all permits,
licenses, certificates of authority, franchises, accreditations, registrations
and other authorizations issued or used in connection with the Business; and
(j) Books, Records and Other Assets. All operating data and records
of the Company, including without limitation, customer lists and records,
financial, accounting and credit records, correspondence, budgets and other
similar documents and records, and all of the Company's telephone and telecopier
numbers, and post office boxes, including, without limitation, all accounting,
bookkeeping, recordkeeping, financial, and similar software and systems, as are
presently maintained by Company, all vendor, customer, and account
identification information and numbers, files and records related thereto, and
the system as is presently operated by the Company, including all hardware,
software, licenses, records, workstations, manuals, guides, support, helpdesk
accounts and similar items known as "MAX 90" system and software.
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1.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary set
forth in Section 1.1, the Purchased Assets shall exclude the following assets of
the Company ("Excluded Assets"): (i) the Purchase Price (as defined in Section
2.1) and other rights of the Company under this Agreement; (ii) the
organizational records and ownership records of the Company; (iii) any assets,
properties, business and rights not related to the Business; (iv) any assets,
properties, business and rights related to any software known as "L-Soft"
wherever located and any assets, properties, business and rights related to the
L-Soft Software Claims (as described in Schedule 5.10 hereto); (v) any leased
premises of the Company and any claims or rights of Company as tenant against
any landlord thereunder, including the claim to refund of any security deposits
with respect to such leased premises or other Real Property or Real Property
Leases claims or rights; (vi) any claims or contract rights against Cenuco, Inc.
for damages or indemnification as a result of the Cenuco Purchase (as
hereinafter defined); and (vii) the stock of subsidiaries, if any.
1.3 ASSIGNMENT OF CONTRACTS. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an assignment of
any claim, contract, license, franchise, lease, commitment, sales order, sales
contract, supply contract, service agreement, purchase order or purchase
commitment if an attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of Relationserve thereunder. If such consent is not obtained, or if
any attempt at an assignment thereof would be ineffective or would affect the
rights of the Company thereunder so that Relationserve would not in fact receive
all such rights, the Company shall reasonably cooperate with Relationserve to
the extent necessary to provide for Relationserve the benefits under such claim,
contract, license, franchise, lease, commitment, sales order, sales contract,
supply contract, service agreement, purchase order or purchase commitment,
including subcontracting all rights and obligations thereunder to Relationserve
and enforcement for the benefit of Relationserve of any and all rights of the
Company against a third party thereto arising out of the breach or cancellation
by such third party or otherwise to the fullest extent permitted by law or
agreement.
ARTICLE II
PURCHASE PRICE; ASSUMED LIABILITIES
2.1 PURCHASE PRICE. (a) The total purchase price to be paid to the
Company for the Purchased Assets (the "Purchase Price") shall be paid as
follows:
(i) 3,500,000 shares (less the Deferred Amount described in
Section 2.2(b)), of common stock, par value $.0001 per share of
Parent (the "Relationserve Common Stock"); and
(ii) $400,000 by wire transfer of immediately available funds,
which shall be used by the Company at Closing to pay Indebtedness
(as defined in Article XI) in such amounts and to such payees as
shall be determined by Company, with the consent of Relationserve,
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which consent shall not be unreasonably withheld, provided no cash
amounts shall be utilized for payment to Members or their affiliates
without consent of Relationserve in its sole discretion.
(b) A total of 350,000 shares of Parent Common Stock (the "Deferred
Amount") (including any securities of any other issued received in exchange for
such shares) shall be held by Parent and subject to cancellation as provided by
Article X hereof.
(c) All certificates representing any shares of the capital stock of
the Parent (and any successor to parent) issuable under this Agreement shall
have endorsed thereon a legend substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR THE LAWS OR REGULATIONS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF ("TRANSFER")
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. TRANSFERS OF
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN
AGREEMENT BY AND BETWEEN THE HOLDER AND THE ISSUER THEREOF, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY"
2.2 ASSUMED LIABILITIES. As of the Closing, Relationserve shall
assume and agree to pay, discharge and perform when lawfully due (provided that
Relationserve reserves all rights to seek indemnification pursuant to Article X
hereof) all of the obligations, duties and liabilities of the Company with
respect to the following (the "Assumed Liabilities"): (a) Customer Contracts,
Assumed Contracts, and Equipment Leases; and (b) current liabilities of the
Company as reflected on the Current Balance Sheet (including Tax accruals for
sales, employee withholding and payroll taxes, limited to the amount of such
accrual and as accrued or incurred in the ordinary course of business consistent
with past practices), net of payments of such current liabilities that are paid
as directed by Company at Closing from the cash portion of the Purchase Price.
2.3 EXCLUDED LIABILITIES. Except for the Assumed Liabilities, the
parties expressly agree that Relationserve shall not assume or otherwise become
liable for any other obligations or liabilities of the Company including but not
limited to any of the following liabilities (the "Excluded Liabilities"): (a)
any liability or obligation relating to Indebtedness, other liabilities or Taxes
(as defined in Article XI) of the Company; (b) any Environmental Liability (as
defined in Article XI); (c) any liability or obligation relating to any default
under any of the Assumed Liabilities to the extent such default existed prior to
the Closing; (d) any liability or obligation (which is not an Assumed
Liability), whether in tort, contract or for violation of any law, statute, rule
or regulation of the Company or the Members or any officer, director, employee
or agent of the Company, that arises out of or results from any act, omission,
occurrence or state of facts prior to the Closing; (e) any liability or
obligation of the Company with respect to or arising out of any Employee Benefit
Plan (as defined in Section 5.16), collective bargaining agreements or any other
plans or arrangements for the benefit of any current or former employees, leased
employees, officers, Members or directors of the Company or any affiliated
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companies, which are maintained by the Company, any affiliated company or any
third party; (f) any liability or obligation of the Company or the Members with
respect to the Excluded Assets (including, without limitation, Relationserve
shall not assume any liability or obligation with respect to or related to
L-Soft Software or the L-Soft Software Claims); (g) any liability or obligation
of the Company to the Members or any of its or their Affiliates, whether by
contract, pursuant to law, or otherwise; (h) any liability under any Real
Property or Real Property Leases; and (i) any liability or obligation to Cenuco,
Inc. or in connection with any matter related to an Asset Purchase Agreement,
dated as of October 21, 2004 with Cenuco, Inc. (the "Cenuco Purchase") or the
termination thereof or any claims or agreements related thereto; and (j) any
obligations to Company employees not hired by Relationserve.
2.4 NO EXPANSION OF THIRD PARTY RIGHTS. The assumption by
Relationserve of the Assumed Liabilities, and the transfer thereof by the
Company, shall in no way expand the rights or remedies of any third party
against Relationserve or the Company as compared to the rights and remedies
which such third party would have had against the Company had Relationserve not
assumed such liabilities. Without limiting the generality of the preceding
sentence, the assumption by Relationserve of the Assumed Liabilities shall not
create any third party beneficiary rights.
2.5 TAX-FREE TREATMENT. The parties hereto intend that the
transactions contemplated by this Agreement (in conjunction with other transfers
contemplated by Relationserve) shall be treated as a tax-free contribution of
the Purchased Assets to Parent pursuant to Section 351 of the Code. In addition,
it is agreed that such treatment shall be consistently reflected by each party
on their respective federal income tax returns. The Company shall furnish
Relationserve/Parent with the respective tax bases of the Purchased Assets and
other tax information that Relationserve/Parent may reasonably request.
2.6 CLOSING AUDIT. (a) Within twenty-five (25) days after the
Closing Date, the Company's auditor shall deliver to Relationserve an audit of
the financial statements (statements of income and operations and balance
sheets) of the Company as at and for the period ended December 31, 2004 and 2003
and an unaudited financial statement for the quarter ended March 31, 2005 and
reviewed by such auditor in accordance with the rules of the Securities and
Exchange Commission (the "Financial Statements") in such form and meeting the
requirements for small business issuers under the rules and regulations of the
Securities and Exchange Commission ("SEC") for inclusion in a Form 8-K to be
filed by Parent or a successor to Parent, and all other financial information
(including notes to the year end financial statements), together with the
consent of the Company's auditors suitable for filing with the SEC. The audited
financial statements shall be prepared in accordance with GAAP and comply with
the requirement for be prepared for the purpose of inclusion of such report or
SEC filing. The fees and expenses of the audit shall be borne by the Company.
ARTICLE III
CLOSING
Subject to and after fulfillment or waiver of the conditions set
forth in Article VIII and Article IX of this Agreement, the Closing of the
purchase and sale of the Purchased Assets (the "Closing") shall take place on a
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date selected by Relationserve within three (3) business days after satisfaction
or waiver of such conditions, at the offices of Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx
& Xxxxxxx LLP, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 or such other time and
place as the parties may otherwise agree. The date on which the Closing occurs
shall be referred to herein as the "Closing Date".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RELATIONSERVE
As a material inducement to the Company and the Members to enter
into this Agreement and to consummate the transactions contemplated hereby,
Relationserve makes the following representations and warranties to the Company:
4.1 CORPORATE STATUS. Relationserve is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 CORPORATE POWER AND AUTHORITY. Relationserve has the corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Relationserve has taken all action necessary to authorize the execution and
delivery of this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby.
4.3 ENFORCEABILITY. This Agreement has been duly executed and when
delivered by Relationserve will constitute the legal, valid and binding
obligation of Relationserve, enforceable against Relationserve 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.
4.4 NO COMMISSIONS. Relationserve has not incurred any obligation
for any finder's or broker's or agent's fees or commissions or similar
compensation in connection with the transactions contemplated hereby.
4.5 PARENT COMMON STOCK. Upon consummation of the Acquisition and
the issuance and delivery of certificates representing Parent Common Stock
pursuant to Section 2.2(a), such Parent Common Stock will be duly authorized,
validly issued, fully paid and non assessable and free of any preemptive rights.
The authorized capital stock of Parent consists of 40,000,000 shares of Common
Stock, par value $0.0001 per share, and 1,000,000 shares of Preferred Stock, par
value $0.0001 per share, of which 5,266,000 shares of Common Stock were issued
and outstanding as of the Closing Date, and 6,632,500 warrants to purchase
Common Stock were issued, prior to giving effect to the transactions
contemplated hereunder, and prior to issuance of any additional shares
contemplated in connection with any further acquisitions that may be undertaken
by Parent whether or not presently contemplated.
4.6 NO VIOLATION. The execution and delivery of this Agreement by
Relationserve, the performance by Relationserve (and Parent) of its obligations
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hereunder and the consummation by Relationserve (and Parent) of the transactions
contemplated hereby will not (i) contravene any provision of the Certificate of
Incorporation or bylaws of Relationserve (or Parent), (ii) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or of any arbitration award
which is either applicable to, binding upon or enforceable against Relationserve
(or Parent), (iii) conflict with, result in any breach of, or constitute a
default (with or without the passage of time or the giving of notice or both)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any Contract which is applicable to, binding upon or enforceable
against Relationserve (or Parent), or (iv) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person.
4.7 RECENT ORGANIZATION. Relationserve was organized on May 29,
2005. Relationserve has not under taken any material business or activity other
than in contemplation of its organization and the acquisition of one or more
businesses engaged in Internet advertising and related activities, fund raising,
and start-up capital and has no liabilities other than incurred in the ordinary
course of its formation and business, and up to $240,000 original principal
amount of bridge loans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE MEMBERS
As a material inducement to Relationserve to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
and the Members, jointly and severally, make the following representations and
warranties to Relationserve and Parent:
5.1 CORPORATE STATUS. The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Florida, and has the requisite power and authority to own or lease its
properties and assets and to carry on its business as now being conducted. The
Company is qualified to transact business as a foreign limited liability company
in each jurisdiction in which the nature or character of its properties or
assets or the conduct of its business requires except in those jurisdictions
where the failure to so qualify would not have a Material Adverse Effect. The
Company has fully complied with all of the requirements of any statute governing
the use and registration of fictitious names, and has the legal right to use the
names under which it operates its business. There is no pending or threatened
proceeding for the dissolution, liquidation, insolvency or rehabilitation of the
Company.
5.2 POWER AND AUTHORITY. The Company has the power and authority to
execute and deliver of this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The Company has taken all
action necessary to authorize the execution and delivery this Agreement, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby. The Members have the requisite competence,
power and authority to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby.
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5.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Company and the Members, and this Agreement constitutes the
legal, valid and binding obligation of each of them, enforceable against each of
them 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.
5.4 CAPITALIZATION. Schedule 5.4 sets forth, with respect to the
Company, all outstanding membership interests, the name and address of each
holder of any such membership interests and percentage or amount of such
membership interests held by each Member as of the date hereof and the Closing
Date. There are no outstanding or authorized rights, options, warrants,
convertible securities, subscription rights, conversion rights, exchange rights
or other agreements or commitments of any kind that could require the Company to
issue or sell any membership interests (or securities convertible into or
exchangeable for membership interests). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Company. Other than as set forth herein and as set forth on
Schedule 5.4, there are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the membership
interests of the Company. Except as set forth on Schedule 5.4, the Company is
not obligated to redeem or otherwise acquire any of its outstanding membership
interests. The Members are the record and beneficial owners of all of such
membership interests and the Members owns such membership interests free and
clear of all Liens, restrictions and claims of any kind.
5.5 NO VIOLATION. Except as set forth on Schedule 5.5, the execution
and delivery of this Agreement by the Company and the Members, the performance
by the Company and the Members of their respective obligations hereunder and the
consummation by the Company and the Members of the transactions contemplated
hereunder will not (i) contravene any provision of the articles of organization
or operating agreement of the Company, (ii) violate or conflict with any law,
statute, ordinance, rule, regulation, decree, writ, injunction, judgment or
order of any Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against, the Company, the Members or
the Purchased Assets, (iii) conflict with, result in any breach of, or
constitute a default (with or without the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against, the Company, the Members or
the Purchased Assets, (iv) result in or require the creation or imposition of
any Lien upon or with respect to any of the Purchased Assets, or (v) require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person.
5.6 SUBSIDIARIES. Except as set forth on Schedule 5.6, the Company
does not own, directly or indirectly, any outstanding voting securities of or
other interests in, or control, any other corporation, partnership, joint
venture or other business entity.
5.7 FINANCIAL STATEMENTS. The Company and the Members have delivered
to Relationserve (or will following Closing which post-Closing deliveries shall
be included for the purposes of these representations and warranties and which
shall survive the Closing) true, correct and complete copies of the audited
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financial statements of the Company (i) as at, and for the year ending December
31, 2003 and December 31, 2004, and (ii) unaudited quarterly financial statement
for each of the calendar quarters from January 1, 2004 through and including
December 31, 2004, and as at, and for the three-month period ended March 31,
2005, including the notes thereto (in the case of annual financial statements
(the "Financial Statements"), copies of which are to be attached to Schedule 5.7
hereto. The balance sheet dated as of March 31, 2005 of the Company included in
the Financial Statements is also referred to herein as the "Current Balance
Sheet." The Financial Statements fairly present the financial condition of the
Company at each of the balance sheet dates and the results of operations as of
the last day of the period covered and for the period covered thereby, and have
been prepared in accordance with GAAP consistently applied throughout the
periods indicated, except as described on Schedule 5.7. The books and records of
the Company fully and fairly reflect all transactions, properties, assets and
liabilities of the Company. Except as set forth on Schedule 5.7 there are no
extraordinary or non-recurring items of income or expense during the periods
covered by the Financial Statements and the balance sheets included in the
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets, except as specifically disclosed in the notes thereto.
The Company did not have any liability (actual, contingent or accrued) not
reflected on such Financial Statements, other than potential contingent
liability which may arise under the L-Soft Software Claims (which liability is
an Excluded Liability), of which the Company and the Members represent and
warrant that no claim has as of the Closing date been asserted against the
Company in writing.. The Financial Statements reflect all adjustments necessary
for a fair presentation of the financial information contained therein. There
has been no change in any significant accounting policies, practices or
procedures of the Company in connection with the Business other than as may be
disclosed in the Notes to the Financial Statements.
5.8 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Since the date of
the Current Balance Sheet, the Company has operated in the ordinary course of
business and has not (i) issued any membership interests or other securities;
(ii) made any distribution of or with respect to its membership interests or
other securities or purchased or redeemed any of its membership interests or
securities; (iii) paid any bonus to or increased the rate of compensation of any
of its officers or employees or amended any other terms of employment of such
persons; (iv) sold, leased or transferred any of its properties or assets other
than in the ordinary course of business consistent with past practices; (v) made
or obligated itself to make capital expenditures out of the ordinary course of
business consistent with past practices; (vi) made any payment in respect of its
liabilities other than in the ordinary course of business consistent with past
practices; (vii) incurred any obligations or liabilities (including any
Indebtedness) or entered into any transaction or series of transactions
involving in excess of Ten Thousand Dollars ($10,000) in the aggregate out of
the ordinary course of business, consistent with past practices except for this
Agreement and the transactions contemplated hereby; (viii) suffered any theft,
damage, destruction or casualty loss, (whether or not covered by insurance) of
its assets; (ix) suffered any extraordinary losses (whether or not covered by
insurance); (x) waived, canceled, compromised or released any rights; (xi) made
or adopted any change in its accounting practice or policies; (xii) made any
adjustment to its books and records other than in respect of the conduct of its
business activities in the ordinary course consistent with past practices;
(xiii) entered into any transaction with any Affiliate; (xiv) entered into any
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employment agreement; (xv) entered into, terminated, amended or modified any
agreement; (xvi) imposed any security interest or other Lien on any of its
assets; (xvii) delayed paying any accounts payable which are due and payable
except to the extent being contested in good faith; (xviii) made or pledged any
charitable contribution; (xix) entered into any other transaction or been
subject to any event which has or may have a Material Adverse Effect on the
Company, the Business or the Purchased Assets; (xx) acquired any interest in any
corporation, partnership or other venture; (xxi) made any loans to any third
party or employee except in the ordinary course of business consistent with past
practices; or (xxii) agreed to do or authorized any of the foregoing.
5.9 LIABILITIES OF THE COMPANY; INDEBTEDNESS. The Company does not
have any liabilities or obligations, whether accrued, absolute, contingent or
otherwise, whether due or to become due, probable of assertion or not, except
(a) to the extent reflected or disclosed in the Current Balance Sheet, (b) set
forth on Schedule 5.9 or (c) retained by the Company. Schedule 5.9 is a true and
complete list of all Indebtedness of the Company, including the name of the
lender, payoff amount, per diem interest and any prepayment penalties or
premiums.
5.10 LITIGATION. Except as set forth on Schedule 5.10, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to the knowledge of the Company or the Members
threatened or contemplated, against, by or affecting, the Company, the Members,
the Business or the Purchased Assets (or the use, operation or value thereof),
or which questions the validity or enforceability of this Agreement, the
Company's ability to perform this Agreement or any aspect of the transactions
contemplated hereby, and there is no basis for any of the foregoing. Except as
set forth on Schedule 5.10, there has been no action, suit or other legal or
administrative proceeding or governmental investigation against, by or affecting
the Company, the Members, the Business or the Purchased Assets. There are no
outstanding orders, decrees, stipulations or agreements issued by any
Governmental Authority in any proceeding or agreed to by the Company or the
Members to which the Company or the Members are or were a party which have not
been complied with in full.
5.11 ENVIRONMENTAL MATTERS. The Company is and has at all times been
in full compliance with all Environmental Laws governing its business,
operations, properties and assets. The Company, in connection with the Business,
has not generated, used, transported, treated, stored, released or disposed of,
or has suffered or permitted anyone else to generate, use, transport, treat,
store, release or dispose of, any hazardous substance in violation of any
Environmental Law; (ii) to the best of the Company's knowledge, there has not
been any generation, use, transportation, treatment, storage, release or
disposal of any hazardous substance in connection with the conduct of the
Business or the use of any property or facility of the Company or to any nearby
or adjacent properties which has created or might reasonably be expected to
create any liability under any Environmental Law or which would require
reporting to or notification of any Governmental Authority; (iii) to the best of
the Company's knowledge, no asbestos or polychlorinated biphenyl or underground
storage tank is contained in or located at any facility occupied or used by the
Company; and (iv) any hazardous substance handled or dealt with in any way in
connection with the Business, whether before or during the Company's ownership,
has been and is being handled or dealt with in all respects in compliance with
all applicable Environmental Laws.
5.12 REAL ESTATE. The Company does not own any parcels of real
property.
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5.13 GOOD TITLE, ADEQUACY AND CONDITION OF PURCHASED ASSETS. The
Company has good and marketable title to the Purchased Assets, including, but
not limited to the Database, with full power to sell, convey, transfer, assign
and deliver the same, free and clear of any Liens, other than Liens for personal
property taxes not yet due and payable, to Relationserve in accordance with the
terms of this Agreement. The Purchased Assets constitute, in the aggregate, all
of the assets and properties necessary for the conduct of the Business in the
manner in which and to the extent to which such Business is currently being
conducted. The Purchased Assets are in good operating condition and repair,
normal wear and tear excepted, and have been maintained in accordance with all
applicable specifications and warranties and good industry practice.
5.14 COMPLIANCE WITH LAWS; LICENSES AND PERMITS.
(a) The Company has complied with all laws, regulations and orders
applicable to it, its Business and operations as presently or previously
conducted, 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 Digital Millennium Copyright Act, the CAN-SPAM
Act of 2003, 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. None
of the Fair Credit Reporting Act, the Consumer Credit Protection Act, the Truth
in Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity Act,
the Fair Debt Collections Practices Act, the Xxxxxx-Xxxxx-Xxxxxx Act, nor any
rules and regulations promulgated pursuant to these laws are applicable to the
operations of the Business. The Company has obtained all material federal,
state, local and foreign governmental Permits which are required for the conduct
of the Business presently or proposed to be conducted by Company, which Permits
are in full force and effect and no violations are outstanding or uncured with
respect to any such Permits and no proceeding is pending or, to the knowledge of
the Company, threatened to revoke or limit any such Permit. Schedule 5.14 lists
all Permits of Company which are required for, used in or relate to the Business
or the Purchased Assets. The Company has furnished to Relationserve true and
correct copies of all such Permits.
(b) Schedule 5.14 sets forth the consumer privacy policies that have
been adopted by the Company in connection with the Business and that are
currently in effect for the Company. The Company thereof has complied in all
material respects with all such consumer privacy policies and any applicable
privacy policies posted on its web sites. The Company has taken all commercially
reasonable steps to protect and maintain the confidential nature of the personal
information provided to the Company by Persons who do not consent to the
disclosure of such information. All personally identifiable information
collected by the Company has been used in accordance with the applicable privacy
policy.
(c) All information contained in the Databases maintained by Company
(the "Database Information") has been at all times (i) collected in compliance
with fair information collection practices (including but not limited to (a) the
guidelines promulgated by the Online Privacy Alliance; (b) the standards
11
promulgated by the Direct Marketing Association, and (c) all applicable laws,
rules and regulations, domestic and foreign, including but not limited to those
relating to the use or collection of information collected from or about
consumers) so that, at a minimum and prior to submitting any information to the
Company or its agents, Internet users received notice of how the information
will be used and a choice whether to submit such information; and (ii) stored,
maintained and used in accordance with such notices and all laws, rules and
regulations, domestic and foreign. The Company has the right to use and
commercially exploit the Database Information, free of consideration to any
Person. The Databases contain approximately Fifty Million (50,000,000) Valid and
Unique Records. For purposes of this Agreement, a "Valid and Unique Record" is
(i) a Record with an e-mail address that accepts delivery of email transmissions
(i.e., emails not rejected as "undeliverable"); (ii) the post office address of
the residence of the person with the applicable e-mail address; and (iii) a
subject Record is not duplicative of other Records contained in any of the
Databases. The Company has Fifty Million (50,000,000) records meeting the
criteria of (i) and (iii) of the definition of Valid and Unique Records. For
purposes of this Agreement, a "Record" is a set of information consisting of:
(i) one "opt-in" or "permission-based" e-mail address, and (ii) the first and
last name of the e-mail user that uses such e-mail address. In determining
whether there are Fifty Million (50,000,000) Valid and Unique Records, a
duplicative Record will be counted only once.
5.15 LABOR AND EMPLOYMENT MATTERS. Schedule 5.15 sets forth the
name, address and current rate of compensation and/or commission of each
employee of the Company. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
there has been no effort by any labor union during the twenty-four (24) months
prior to the date hereof to organize any employees of the Company into one or
more collective bargaining units. There is no pending, or to the knowledge of
the Company and the Members threatened, labor dispute, strike or work stoppage
which affects or which may affect the Company or the Business or which may
interfere with its continued operations. Neither the Company nor any agent,
representative or employee thereof has within the last twenty-four (24) months
committed any unfair labor practice as defined in the National Labor Relations
Act, as amended, and there is no pending, or to the knowledge of the Company and
the Members threatened, charge or complaint against the Company by or with the
National Labor Relations Board or any representative thereof. Neither the
Company nor the Members is aware that any employee has any plans to terminate
his employment with the Company and the Company has no plans to terminate any
employees. There has been no strike, walkout or work stoppage involving any of
the employees of the Company during the twenty-four (24) months prior to the
date hereof. Schedule 5.15 sets forth all commission and/or incentive
compensation plans and the terms of such plans. Except as set forth on Schedule
5.15, there are no employment, non-compete, consulting, severance,
indemnification or other Contracts between the Company and any of its officers,
directors, employees and Affiliates. The Members are not party to any Contract
with any employee or consultant of the Company or have any other arrangement to
pay any salary, bonus or other compensation to any such Person after the Closing
Date. The Company has complied in all respects with applicable laws, rules and
regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of 1964, the
Fair Labor Standards Act, the Americans with Disabilities Act, as amended and
the Immigration Reform and Control Act of 1986, as amended. Relationserve shall,
in its sole discretion, determine those employees of the Company, to whom
Relationserve may extend an offer of employment. Neither Relationserve nor its
12
assignee(s) shall have any obligation to employ or offer to employ any other
persons currently or formerly employed by the Company. All liabilities or
obligations to any employee of the Company resulting from Relationserve's
failure to offer employment to any employee shall be and remain the sole
responsibility and liability of the Company. The Company has paid to date all
accrued wages, salary, bonus, commissions, vacation and sick pay due to be paid
on or before the Closing Date for all of its employees, agents and
representatives, including payroll overheads, subject to normal payroll
practices. The Company shall indemnify, defend and hold harmless Relationserve,
its shareholders, directors, officers, employees, Affiliates, agents,
representatives and their respective successors and assigns from and against any
liability that may be incurred by reason of the Company having failed to make
such payments.
5.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.16 contains a true and complete list of each employee
benefit plan as defined in Section 3(2) of ERISA employee welfare benefits plan
as defined in Section 3(1) of ERISA, and each deferred compensation, stock
option, stock purchase, bonus, medical, welfare, disability, severance or
termination pay, insurance or incentive plan, and each other employee benefit
plan, program, agreement or arrangement, (whether funded or unfunded, written or
oral, qualified or nonqualified), sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated, that together with the Company would be deemed a
"single employer" within the meaning of Section 4001 of ERISA (a "Company ERISA
Affiliate"), for the benefit of any employee, terminated employee, leased
employee or former leased employee, director, officer, shareholder or
independent contractor of the Company or any Company ERISA Affiliate (the
"Employee Benefit Plans"). Schedule 5.16 identifies each plan that is an
"employee benefit plan," within the meaning of Section 3(3) of ERISA. The
Company has no liability with respect to any plan, arrangement or practice of
the type described in this Section 5.16 other than the Employee Benefit Plans
set forth on Schedule 5.16.
(b) The Company does not participate currently and has never
participated in and is not required currently and has never been required to
contribute to or otherwise participate in any "multi employer plan," as defined
in Sections 3(37)(A) and 4001(a)(3) of ERISA and Section 414(f) of the Code or
any "multiple employer plan" within the meaning of Section 210(a) of ERISA or
Section 413(c) of the Code.
(c) No Employee Benefit Plan is or at any time was a "defined
benefit plan" as defined in Section 3(35) of ERISA or a pension plan subject to
the funding standards of Section 302 of ERISA or Section 412 of the Code. The
Company does not participate currently and has never participated in and is not
required currently and has never been required to contribute to or otherwise
participate in any plan, program or arrangement subject to Title IV of ERISA.
(d) With respect to each Employee Benefit Plan of the Company: (i)
each has been administered in compliance with its terms and with all applicable
laws including, without limitation, ERISA and the Code; (ii) no actions, suits,
claims or disputes are pending or threatened against any such Plan, the trustee
or fiduciary of any such Plan, the Company or any assets of any such Plan; (iii)
no audits, proceedings, claims or demands are pending with any Governmental
Authority including, without limitation, the Internal Revenue Service and the
13
Department of Labor; (iv) all reports, returns and similar documents required to
be filed with any Governmental Authority or distributed to any such Plan
participant have been duly or timely filed or distributed; (v) no "prohibited
transaction", within the meaning of ERISA or the Code, or breach of any duty
imposed on "fiduciaries" pursuant to ERISA has occurred; (vi) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to or as
of the Closing shall have been made or properly accrued on the Current Balance
Sheet or will be properly accrued on the books and records of the Company as of
the Closing; (vii) no such plan has any unfunded liabilities which are not
reflected on the Current Balance Sheet or the books and records of the Company.
(e) The Company shall be solely liable for all contributions,
benefits and other obligations with respect to all Employee Benefit Plans of
which the Company is or ever has been a party or by which it is or ever has been
bound in connection with the Business, including without limitation, (i) any
profit-sharing, deferred compensation, bonus, stock option, phantom stock, stock
purchase, pension, retainer, consulting, retirement, severance, welfare or
incentive plan, agreement or arrangement (including, without limitation, all
employee benefit plans which are intended to be qualified under Section 401(a)
of Code (including any "multiemployer" plans within the meaning of Section 3(37)
of ERISA)), (ii) any plan, agreement or arrangement providing for "fringe
benefits" or perquisites to employees, officers, directors or agents, including,
but not limited to, benefits relating to automobiles, clubs, vacation, child
care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life
insurance and other types of insurance of the Business, (iii) any employment
agreement, or (iv) any other "employee benefit plan" within the meaning of
ERISA. The Company has no responsibility for and has not assumed any
pension-related liability of any predecessor business or Person. Relationserve
shall have no liability or obligations (as a successor or otherwise) with
respect to the Plans, except to the extent, if any, that liability is expressly
assumed by Relationserve.
(f) True and complete copies of each Employee Benefit Plan and a
copy of the Employee Handbook of the Company have been furnished to
Relationserve. In the case of any unwritten Employee Benefit Plan, a written
description of such plan has been furnished to Relationserve. All amendments
required to bring any Employee Benefit Plan into conformity with any applicable
provisions of ERISA and the Code have been duly adopted.
(g) With respect to each Employee Benefit Plan of the Company
intended to qualify under Code Section 401(a) or 403(a), (i) the Internal
Revenue Service has issued a favorable determination letter, which has not been
revoked, that any such plan is tax-qualified and each trust created thereunder
has been determined by the Internal Revenue Service to be exempt from federal
income tax under Code Section 501(a); (ii) nothing has occurred or will occur
through the Closing which would cause the loss of such qualification or
exemption or the imposition of any penalty or tax liability; (iii) no reportable
event (within the meaning of Section 4043 of ERISA) has occurred; and (iv) the
present value of all liabilities under any such plan will not exceed the current
fair market value of the assets of such plan (determined using the actuarial
assumption used for the most recent actuarial valuation for such plan).
(h) No Employee Benefit Plan obligates the Company to pay
separation, severance, termination or similar benefits as a result of any
transaction contemplated by this Agreement or solely as a result of a "change of
control" (as defined in Section 280G of the Code) and no individual shall accrue
14
or receive any additional benefits, service or accelerated rights to payments of
benefits under any Employee Benefit Plan as a result of the actions contemplated
by this Agreement.
(i) No Employee Benefit Plan provides medical or dental benefits for
any current or former employees of the Company or its predecessors after
termination of employment other than the rights that may be provided by law.
(j) The Company has complied with the notice and continuation of
coverage requirements of Section 4980B of the Code, and the regulations
thereunder, and Part 6 of Title I of ERISA ("COBRA") and has complied with the
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") with
respect to any group health plan within the meaning of Code Section 5000(b)(1).
The Company will be responsible for the continued compliance with COBRA and
HIPAA with respect to all of its current and former employees at the time of the
Closing.
(k) Relationserve will not suffer any loss, cost or liability as a
result of any claim that the Company or any entity that would be aggregated with
the Company under Code Section 414(b), (c), (m) or (o), has not complied with
the provisions of this Section 5.16 with respect to each Employee Benefit Plan
maintained by any such entity.
5.17 TAX MATTERS. All Tax Returns required to be filed on or prior
to the Closing Date with respect to the Company, the Business and the Purchased
Assets have been or will be timely filed, each such Tax Return has been prepared
in compliance with all applicable laws and regulations, and all such Tax Returns
are true and accurate in all respects. All liabilities for Taxes incurred but
unpaid whether or not a Tax Return was due or the Tax required to be paid by or
with respect to the Company, the Business and the Purchased Assets have been
paid or are accrued on the Current Balance Sheet. The Company has withheld and
paid all Taxes to the appropriate Governmental Authority required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other Person. With respect to
each taxable period of the Company: (i) no deficiency or proposed adjustment
which has not been settled or otherwise resolved for any amount of Taxes has
been asserted or assessed by any taxing authority against the Company; (ii) the
Company has not consented to extend the time in which any Taxes may be assessed
or collected by any taxing authority; (iii) the Company has not requested or
been granted an extension of the time for filing any Tax Return to a date later
than the Closing; (iv) there is no action, suit, taxing authority proceeding, or
audit or claim for refund now in progress, pending, or to the knowledge of the
Company and the Members threatened, against or with respect to the Company, the
Business or the Purchased Assets regarding Taxes; and (v) there are no Liens for
Taxes (other than for current Taxes not yet due and payable) upon the Company,
the Business or the Purchased Assets. No sales or use tax (other than sales tax
on motor vehicles), non-recurring intangible tax, documentary stamp tax or other
excise tax (or comparable tax imposed by any governmental entity) will be
payable by the Company or Relationserve by virtue of the transactions
contemplated in this Agreement.
5.18 INSURANCE. The Company is, and at all times since its
inception, and the Business has been, covered by valid, outstanding and
enforceable policies of insurance from reputable insurers covering all risks
15
involving the Business normally insured against by companies in the same or
similar lines of business and in coverage amounts typically carried by such
companies (the "Insurance Policies"). Such Insurance Policies and all bonds
maintained by the Company are in full force and effect, and all premiums due
thereon have been paid. The Company has complied with the provisions of such
Insurance Policies in all material respects. Schedule 5.18 contains a complete
and correct list of all Insurance Policies and all amendments and riders thereto
(copies of which have been provided to Relationserve), and identifies the
insurer, type of coverage and policy period for each policy. During the three
year period prior to the Closing Date, the Company has not made any claims under
any of the Insurance Policies, and has suffered no losses that would give rise
to any such claims, for an amount in excess of Ten Thousand Dollars ($10,000)
except as set forth on Schedule 5.18. The Company has not failed to give, in a
timely manner, any notice required under any of the Insurance Policies to
preserve its rights thereunder. The Company has not received any notice or other
indication from any insurer or agent of any intent to cancel or not to renew any
of such Insurance Policies. There are no outstanding requirements or
recommendations by any insurer that issued a policy with respect to the Business
or the Purchased Assets.
5.19 RECEIVABLES. All Receivables being transferred to Relationserve
hereunder are valid and legally binding, represent bona fide transactions and
arose in the ordinary course of business of the Company. All of the Receivables
are good and collectible receivables, and will be collected in full in
accordance with the terms of such Receivables (and in any event within nine (9)
months following the Closing), without dispute, setoff or counterclaims, subject
to the allowance for doubtful accounts, if any, set forth on the Current Balance
Sheet and calculated in accordance with GAAP and further subject to the
occurrence of events outside the reasonable control of Company causing any such
receivable to be uncollectible. Schedule 5.19 is a true, complete and correct
list of all Receivables as of the date hereof. The Company will deliver to
Relationserve a true, complete and correct list of all Receivables of the
Business as of a date not more than five (5) days prior to the Closing Date.
5.20 INTELLECTUAL PROPERTY.
(a) Schedule 5.20 sets forth, the Intellectual Property (as defined
in Article XI) owned by the Company, 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.
(b) All registered Intellectual Property of the Company is currently
in compliance with all legal requirements (including timely filings, proofs and
payments of fees), is valid and enforceable, and is not subject to any filings,
fees or other actions falling due within 90 days after the Closing Date. No
registered Intellectual Property of the Company has been or is now involved in
any cancellation, dispute or litigation, and, to the knowledge of the Company or
the Members, no such action is threatened. Except as set forth in Schedule 5.20,
no patent of the Company has been or is now involved in any interference,
reissue, re-examination or opposition proceeding.
16
(c) Schedule 5.20 sets forth a complete and accurate list of all
licenses, sublicenses, consent, royalty or other agreements concerning
Intellectual Property to which the Company is a party or by which any of its
assets are 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) (collectively, "License Agreements"). All of the
Company's License Agreements are valid and binding obligations of Company that
are parties thereto, 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 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 the Company under any such License Agreement.
(d) The Company owns (and Relationserve shall following Closing own)
or has the valid right to use all of the Intellectual Property necessary for the
conduct of the Business as currently conducted or contemplated to be conducted
and for the ownership, maintenance and operation of the Company's Business and
assets. No royalties, honoraria or other fees are payable by the Company to any
Person for the use of or right to use any Intellectual Property, except as set
forth in Schedule 5.20.
(e) All Intellectual Property owned by the Company is described in
Schedule 5.20. The Company exclusively owns, free and clear of all Liens or
obligations to license all such owned Intellectual Property, and the Company has
executed all necessary agreements and performed all necessary due diligence to
make the foregoing statement. The Intellectual Property of the Business is fully
assignable free and clear of any Liens. The Company has a valid, enforceable
and, subject to obtaining required consents set forth in Schedule 5.20,
transferable right to use all licensed Intellectual Property. Except as
disclosed in Schedule 5.20, the Company has the right to use all of its owned
and licensed Intellectual Property in all jurisdictions in which it conducts or
proposes to conduct its businesses.
(f) The Company has taken all commercially reasonable steps to
maintain, police and protect the Intellectual Property which it owns, including
the proper policing activities and the execution of appropriate confidentiality
agreements and intellectual property and work product assignments and releases.
Except as disclosed in Schedule 5.20, (i) to the knowledge of the Company or the
Members, the conduct of the Company's businesses as currently conducted or
planned to be conducted does not infringe or otherwise impair or conflict with
("Infringe") any Intellectual Property rights of any Person, and the
Intellectual Property rights of the Company is not being Infringed by any
Person; and (ii) there is no litigation or order pending or outstanding, or to
the knowledge of the Company or the Members, threatened or imminent, that seeks
to limit or challenge or that concerns the ownership, use, validity or
enforceability of any Intellectual Property of the Company and the Company's use
of any Intellectual Property owned by a third party, and, to the knowledge of
the Company or the Members, there is no valid basis for the same.
(g) Schedule 5.20 lists all software (i) (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) which are
17
owned, licensed to or by the Company, leased to or by the Company or otherwise
used by the Company, and identifies which software is owned, licensed, leased or
otherwise used, as the case may be; and (ii) which are sold, licensed, leased or
otherwise distributed by the Company to any third party, and identifies which
software is sold, licensed, leased, or otherwise distributed, as the case may
be. All software owned by the Company, and all software licensed from third
parties by the Company, (i) to the knowledge of the Company, is free from any
material defect, bug, virus, or programming, design or documentation error; (ii)
operates and runs in a reasonable and efficient business manner; and (iii) to
the knowledge of the Company, conforms in all material respects to the
specifications and purposes thereof. The Company has taken all reasonable steps
to protect the Company's rights in its confidential information and trade
secrets. Except as disclosed in the Schedule 5.20, each employee, consultant and
contractor who has had access to proprietary Intellectual Property has executed
an agreement to maintain the confidentiality of such Intellectual Property has
executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof (true and complete copies of which have been
delivered to Relationserve). Except under confidentiality obligations, there has
been no material disclosure of any of the Company's confidential information or
trade secrets to any third party.
(h) For the purposes of the representations and warranties provided
in this Section 5.20, the Company's "Max 90" system shall be deemed
"Intellectual Property" and software therefore shall be deemed "software" with
respect to which the foregoing representations and warranties contained in
Section 5.20 (a) through 5.20 (g) shall be true and correct. Such
representations and warranties shall not be the exclusive representations and
warranties with respect to the Max 90 system.
5.21 CONTRACTS. Schedule 5.21 sets forth a list of each Contract to
which the Company is a party or by which it or its properties and assets are
bound and which is material to its business, assets, properties or prospects
(the "Material Contracts"), true, correct and complete copies (in the case of
written Contracts) and summaries (in the case of oral Contracts) of which have
been provided to Relationserve, excluding standard customer contracts entered
into in the ordinary course of business, without material modification from the
preprinted forms used by the Company in the ordinary course of business, copies
of which have been supplied to Relationserve. Each Material Contract is a legal,
valid and binding obligation of the Company, and to the knowledge of the
Company, the other parties thereto, enforceable against the Company, and to the
knowledge of the Company, the other parties thereto in accordance with their
respective 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.
5.22 The copy of each written Material Contract or summary of each
oral Material Contract furnished to Relationserve is a true and complete copy of
the document it purports to represent or summary, as the case may be, and
reflects all amendments thereto made through the Closing Date. The Company has
not violated any of the terms or conditions of any Material Contract or any term
or condition which would permit termination or modification of any Material
Contract, and to the knowledge of the Company and the Members all of the
covenants to be performed by any other party thereto have been fully performed,
and there are no claims for breach or indemnification or notice of default or
18
termination under any Material Contract. No event has occurred which
constitutes, or after notice or the passage of time, or both, would constitute,
a default by the Company under any Material Contract, and to the knowledge of
the Company and the Members, no such event has occurred which constitutes or
would constitute a default by any other party. The Company is not subject to any
liability or payment resulting from renegotiation of amounts paid under any
Material Contract. As used in this Section 5.21, Material Contracts shall
include, without limitation: (a) loan agreements, indentures, mortgages,
pledges, hypothecations, deeds of trust, conditional sale or title retention
agreements, security agreements, letters of credit, commitment letters,
equipment financing obligations or guaranties, or other sources of contingent
liability in respect of any Indebtedness; (b) contracts obligating the Company
to provide or purchase products or services for a period of one year or more;
(c) leases of real property and leases of personal property not cancelable
without penalty on notice of sixty (60) days or less or calling for payment of
an annual gross rental exceeding Ten Thousand Dollars ($10,000); (d)
distribution, sales agency or franchise or similar agreements, or agreements
providing for an independent contractor's services, or letters of intent with
respect to same; (e) employment agreements, management service agreements,
consulting agreements, confidentiality agreements, non-competition agreements,
employee handbooks, policy statements and any other agreements relating to any
employee, officer or director of the Company; (f) licenses, assignments or
transfers of trademarks, trade names, service marks, patents, copyrights, trade
secrets or know how, or other agreements regarding proprietary rights or
intellectual property; (g) any Contract relating to pending capital expenditures
by the Company; (h) any non-competition agreements restricting the Company in
any manner; and (i) other material Contracts or understandings, irrespective of
subject matter and whether or not in writing, not entered into in the ordinary
course of business by the Company and not otherwise disclosed on the Schedules.
Consummation of the transactions contemplated by this Agreement will not (and
will not give any Person a right to) terminate or modify any rights of or
accelerate or augment any obligation of, the Company under any Contract.
5.23 ACCURACY OF INFORMATION FURNISHED BY THE COMPANY AND THE
MEMBERS. No statement or information made or furnished by or on behalf of the
Company or the Members to Relationserve or any of Relationserve'
representatives, including those contained in this Agreement the Schedules
attached hereto and in any related agreements and the other information and
statements referred to herein and previously furnished by or on behalf of the
Company or the Members, contains or shall contain any untrue statement of fact
or omits or shall omit any fact necessary to make the information contained
therein not misleading in any material manner. The Company and the Members have
provided Relationserve with true, accurate and complete copies of all documents
listed or described in the various Schedules attached hereto. There is no fact
or information known to the Company or the Members that has or is likely to have
a Material Adverse Effect on the Business or the Purchased Assets or the ability
of the Company to perform under this Agreement, and the Company has not received
notice of any deficiencies in the condition or operation of any of the Purchased
Assets and, after making due inquiry of its employees, the Company is not aware
of any notice having been given with respect to the foregoing, whether or not in
writing.
5.24 CUSTOMERS. Schedule 5.24 provides a customer list which
identifies the contact person for each customer and identifies the top
twenty-five customers of the Company as measured by annual revenue for the last
twelve (12) months. True, correct and complete copies of the form of the
Company's standard customer contracts have been furnished by the Company to
19
Relationserve. The Company has not violated in any material manner any of the
terms or conditions of any of its customer contracts, and to the knowledge of
the Company and the Members all of the material covenants to be performed by any
other Person thereto have been fully performed and there are no claims for
breach or indemnification or notice of default or termination thereunder. The
Company is providing services to such customers on a direct xxxx basis and
reasonably believes that such customers have the financial capability to pay for
such services. There are (i) no customers of the Company accounting for more
than 10% of the gross revenues of the 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 the Company in connection with the
Business, with respect to which alternative sources of supply are not readily
available on comparable terms and conditions. Nether the Company nor the Members
have received in the last twelve-month period any written or oral communications
from any customer to the effect that such customer intends to discontinue or
reduce the amount of business conducted with the Company or seeks to adjust
downward the price of services and products supplied by the Company to such
customer.
5.25 NAMES; PRIOR ACQUISITIONS. All names under which the Company
does business as of the date hereof are specified on Schedule 5.25. The Company
has not changed its name or used any assumed or fictitious name, or been the
surviving entity in a merger, acquired any business or changed its principal
place of business or chief executive office, within the past three (3) years.
5.26 NO COMMISSIONS. Except as set forth on Schedule 5.26, neither
the Company nor the Members has incurred any obligation for any finder's or
broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
5.27 PRODUCT WARRANTIES AND REBATES. The Company does not make and
has not made any express or implied product warranties or altered, amended,
varied or expanded any manufacturers' product warranty in connection with the
sale or lease of any products. Schedule 5.26 contains a true and complete list
and description of any and all customer rebates, discounts or reimbursement
programs or special terms or conditions (including, without limitation, products
supplied to customers on a demonstration basis) which have been or will be
offered by the Company in connection with the Business at any time prior to the
Closing and pursuant to which any obligations or liabilities of the Company, of
any nature whatsoever and whether matured or unmatured, remain outstanding.
5.28 RELATED PARTY TRANSACTIONS. None of the Company, the Members
and any Person with an interest in Members, nor any entity in which Members or a
Person with an interest in Members owns any beneficial interest, have any direct
or indirect interest in any customer, supplier or competitor of the Company or
in any Person from whom or to whom the Company leases real or personal property.
No Affiliate of the Company or its Members, has any interest in any of the
Purchased Assets or any property used in or pertaining to the Business. Except
as set forth on Schedule 5.27, no officer, director or the Members of the
Company, no Person with an interest in the Members, nor any entity in which any
such Person owns any beneficial interest, is a party to any Contract or
transaction with the Company or has any interest in any property used by the
Company.
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5.29 POWERS OF ATTORNEY. The Company has not given any power of
attorney (irrevocable or otherwise) to any Person for any purpose relating to
the Business or the Purchased Assets, other than powers of attorney given to
regulatory authorities in connection with routine qualifications to do business.
5.30 BOOKS AND RECORDS. The books of account and other financial and
corporate records (including, without limitation, general ledgers, sales
invoices, registers and ledgers, duplicate check vouchers and supporting
documents, payroll registers, check registers, bank statements, cost accounting
records, inspection reports and warranty and quality control records) of the
Company are in all material respects complete and correct, are maintained in
accordance with good business practices and have been accurately reflected in
the Current Balance Sheet. The minute books of the Company contain accurate
records of all meetings and accurately reflect all other company actions of the
Members.
5.31 PAYMENT OF INDEBTEDNESS. The Company will pay or make adequate
provision for payment of all amounts of Indebtedness required to be paid for the
ongoing nature of the Business that are recurring or similar charges unpaid as
of the Closing Date with the cash portion of the Purchase Price, on the Closing
Date.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE CLOSING. The
Company and the Members covenant and agree that, except with the prior written
consent of Relationserve, between the date of this Agreement and the Closing
Date, the Business shall be conducted only in, and the Company shall not take
any action except in, the ordinary course of business consistent with past
practice. The Company shall use its reasonable best efforts to preserve intact
its business organization, to keep available the services of its current
officers, employees and consultants, and to preserve its present relationships
with customers, suppliers and other persons with which it has business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement, the Company and the Members 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 without the prior written consent of Relationserve:
(a) amend or otherwise change its articles of organization or operating
agreement; (b) issue or authorize the issuance of, any membership interests, or
any options, warrants, convertible securities or other rights of any kind to
acquire any membership interests or other ownership interest of the Company; (c)
declare, set aside, make or pay any dividend or other distribution, payable in
cash, stock, property or otherwise, with respect to any of its membership
interests; (d) transfer any of the outstanding membership interests of the
Company; (e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its membership interests; (f)
acquire (including, without limitation, for cash, or shares of stock, property
or services, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof; (g) incur any additional Indebtedness other than in the
ordinary course of business consistent with past practices; (h) create Liens on
any currently existing assets; (i) make (or commit to make) any capital
expenditures except in the ordinary course of business; (j) make any loans or
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advances to any Person or guarantee the indebtedness of any Person; (k) sell or
dispose of any of its assets, other than in the ordinary course of business,
consistent with past practice; (l) enter into, modify or terminate, any
Contract, other than in the ordinary course of business consistent with past
practice; (m) pay any bonus to or increase the compensation or benefits payable
or to become payable to its employees, independent contractors or consultants;
(n) pay, discharge or satisfy any existing claims, liabilities, obligations or
Indebtedness other than in the ordinary course of business consistent with past
practice; (o) increase or decrease prices charged to its customers, except for
previously announced price changes, or take any other action which might
reasonably result in any increase in the loss of customers; or (p) agree, in
writing or otherwise, to take or authorize any of the foregoing actions or any
other action which would make any representation or warranty in Article V untrue
or incorrect. The Company shall give written notice to Relationserve promptly
following the occurrence of any event which has had (or which is likely to have)
a Material Adverse Effect upon its assets, business, operations, prospects,
properties or condition (financial or otherwise).
ARTICLE VII
CERTAIN AGREEMENTS AND COVENANTS OF THE PARTIES
7.1 FURTHER ASSURANCES; COMPLIANCE WITH COVENANTS. Each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby and to satisfy the conditions set forth in
Article VIII and Article IX. The Members and the Company shall, and shall cause
the Company's accountants to cooperate with Relationserve' accountants from time
to time in connection with any audit of the assets, property and business of the
Company including the execution and delivery by the Members and the Company of
customary audit representation letters. The Members shall cause the Company to
comply with all of the covenants of the Company under this Agreement. At the
Closing, the Company and the Members covenant and agree to deliver to
Relationserve the certificates and other documents required to be delivered to
Relationserve pursuant to Article VIII, and Relationserve covenants and agrees
to deliver to the Company and the Members the certificates and other documents
required to be delivered to the Company and the Members pursuant to Article IX.
7.2 OTHER ACTIONS. The Company shall take all appropriate actions,
and do, or cause to be done, all things necessary, proper or advisable under any
applicable laws, regulations and Contracts to consummate and make effective the
transactions contemplated herein, including, without limitation, filing any
notice, statement or other communication, obtaining and providing to
Relationserve all Permits of any Governmental Authority and parties to Contracts
with the Company as are necessary for the consummation of the transactions
contemplated hereby and do all such other acts and things, all as may be
reasonably requested by Relationserve to assure to Relationserve all the rights
and interests granted or intended to be granted under this Agreement. The
Company shall take or cause to be taken such other reasonable actions as
Relationserve may require to more effectively transfer, convey and assign to,
and vest in, Relationserve, and put Relationserve in possession of, the
Purchased Assets as contemplated by this Agreement.
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7.3 NOTIFICATION OF CERTAIN MATTERS. The Company and the Members
shall give prompt notice to Relationserve of the occurrence or non-occurrence of
any event which would likely cause any representation or warranty contained
herein to be untrue or inaccurate, or any covenant, condition, or agreement
contained herein not to be complied with or satisfied.
7.4 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or
as otherwise permitted or expressly contemplated herein, no party hereto or
their respective Affiliates, employees, agents or representatives shall disclose
to any third party this Agreement or the subject matter or terms hereof without
the prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by the Company or the Member on one hand or Relationserve on the
other hand without the prior approval of the other.
7.5 NO OTHER DISCUSSIONS. So long as this Agreement is in force and
effect, the Company, the Members, and their respective Affiliates, employees,
agents and representatives will not (i) initiate or encourage the initiation by
others of, discussions or negotiations with third parties or respond to
solicitations by third persons relating to any merger, sale or other disposition
of any substantial part of the assets, business or properties of the Company
(whether by merger, consolidation, sale of stock or otherwise) or (ii) enter
into any agreement or commitment (whether or not binding) with respect to any of
the foregoing transactions. For so long as this Agreement is in force and
effect, the Company and the Members will immediately notify Relationserve if any
third party attempts to initiate any solicitation, discussion or negotiation
with respect to any of the foregoing transactions.
7.6 RESTRICTIVE COVENANTS. The Company and the Members each agree
that after the Closing Relationserve shall be entitled to the goodwill and going
concern value of the Business and to protect and preserve the same to the
maximum extent permitted by law. The Company and the Members each also
acknowledge that its management contributions to the Business have been uniquely
valuable and involve proprietary information that would be competitively unfair
to use or to make available to any competitor of the Business. For these and
other reasons and, as an inducement to Relationserve to enter into this
Agreement, and in order to assure that Relationserve will realize the benefits
of the transactions contemplated hereby, the Company and each of the Members
agree that they will not:
(a) for a period of five (5) years following the Closing Date (the
"Noncompete Period"), directly or indirectly, alone or as a partner, joint
venturer, officer, director, member, manager, employee, consultant, agent,
independent contractor, lender or security holder, of any company or business,
through an Affiliate, for its own benefit or as an agent for another, engage in
any activities, carry on or participate in the ownership, management or control
of, or allow its name or reputation to be used in or by, any other present or
future business enterprise that competes with Relationserve in the activities of
or is substantially similar to the Business; provided, however, that the
beneficial ownership of less than one percent (1%) of outstanding shares or
interests of any entity actively traded on a national securities exchange or
recognized over-the-counter market shall not be deemed, in and of itself, to
violate the prohibitions of this Section 7.6;
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(b) during the Noncompete Period, directly or indirectly, either for
itself or any other Person, (i) induce or attempt to induce any employee of
Relationserve or any of its Affiliates (collectively, the "Relationserve
Companies") to leave the employ of the Relationserve Companies, (ii) in any way
interfere with the relationship between the Relationserve Companies and any
employee of the Relationserve Companies, (iii) employ or otherwise engage, or
offer to employ or otherwise engage, any Person who is then (or was at any time
within six months before the time of such employment, engagement or offer
thereof) an employee, sales representative or agent of the Company (or of the
Relationserve Companies as successor to the Business), or (iv) induce or attempt
to induce any customer, supplier, licensee, or business relation of the
Relationserve Companies to cease its relationship with the Relationserve
Companies;
(c) during the Noncompete Period, directly or indirectly, employ or
enter into any arrangement to pay salary, bonus or other compensation to any
person who was employed by the Relationserve Companies during the previous six
(6) months, or in any manner seek to induce any employee of the Relationserve
Companies to leave his or her employment; and
(d) at any time following the Closing Date, directly or indirectly,
in any way utilize, disclose, copy, reproduce or retain in their possession any
of the Relationserve Companies' proprietary or confidential rights, records or
information acquired hereunder, including, but not limited to, any customer
lists.
The Company and the Members agree and acknowledge that the restrictions
contained in this Section 7.6 are reasonable in scope and duration, and are
necessary to protect the Relationserve Companies. The Company and the Members
agree and acknowledge that any breach of this Section 7.6 will cause irreparable
injury to the Relationserve Companies and upon any breach or threatened breach
of any provision of this Section 7.6, the Relationserve Companies shall be
entitled to injunctive relief, specific performance or other equitable relief,
without the necessity of posting bond; provided, however, that this shall in no
way limit any other remedies which the Relationserve Companies may have as a
result of such breach, including the right to seek monetary damages. The parties
hereto agree that Relationserve may assign, without limitation, the foregoing
restrictive covenants to any successor to the Business. The provisions of this
Section 7.6 shall be construed as an agreement on the part of the Company and
the Members independent of any other part of this Agreement or any other
agreement, and the existence of any claim or cause of action of the Company or
any of the Members against Relationserve or the Relationserve Companies, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Relationserve of the provisions of this Section 7.6.
In addition, all Persons with an interest in a Member and those
Persons listed on Schedule 7.6 shall execute a non-compete agreement containing
the provisions of this Section 7.6 (the "Noncompete Agreements")
7.7 CONSENTS. Prior to the Closing, the Company shall use its best
efforts to obtain and receive consents to the transactions contemplated hereby
and waivers of rights to terminate or modify any rights or obligations of the
Company from any Person(s) from whom such consent or waiver is required under
any Contract to which the Company or the Purchased Assets are bound (including
the Customer Contracts, the Assumed Contracts, the Equipment Leases and the Real
24
Property Leases), or who, as a result of the transactions contemplated hereby,
would have the right to terminate or modify such Contracts, either by the terms
thereof or as a matter of law.
7.8 PAYOFF AND ESTOPPEL LETTERS. Prior to the Closing, the Company
shall request and deliver to Relationserve payoff and estoppel letters from all
holders of any Indebtedness of the Company to be paid off on or prior to the
Closing, which letters shall contain payoff amounts, per diem interest, wire
transfer instructions and an agreement to deliver to Relationserve, upon full
payment of any such Indebtedness, UCC-3 termination statements, satisfactions of
mortgage or other appropriate releases and any original promissory notes or
other evidences of indebtedness marked canceled. At Closing, the Company shall
deliver to Relationserve appropriately completed UCC-3 Termination Statements
ready for execution by each creditor that is named in a financing statement on
file against any of the Company's assets and shall have caused to be filed UCC-3
Termination Statements for financing statements on file against the Company's
assets pertaining to inactive or previously terminated financings.
7.9 RECEIVABLES. At or prior to the Closing Date, the Company shall
deliver to Relationserve a true, complete and correct list of all Receivables to
be transferred to Relationserve pursuant to Section 1.1(g). From and after the
Closing, the Company shall cooperate with Relationserve upon Relationserve's
request to notify each payor of any Receivables of such transfer to
Relationserve. The Company and the Members hereby agree and acknowledge that any
and all payments in respect of such Receivables that are received by the Company
or any Members after the Closing shall be held in trust for the benefit of
Relationserve and delivered to Relationserve as soon as practicable.
7.10 POST-CLOSING ACTIONS OF THE COMPANY. At Closing, the Company
shall change its name to a name that does not include the words Omni Point or
any derivation thereof and shall immediately discontinue and no longer use the
name Omni Point or any deviation thereof. At the request of Relationserve, the
Company will notify vendors, customers, banks, and others of the assignment of
accounts receivables and other transfers pursuant to this Agreement and shall
authorize and advise all such persons that the Business has been acquired by
Relationserve which shall be authorized to take all actions with respect to the
Business on and following Closing.
7.11 EXECUTION OF FURTHER DOCUMENTS. From and after the Closing,
upon the reasonable request of Relationserve, the Company shall execute,
acknowledge and deliver all such further deeds, bills of sale, assignments,
transfers, conveyances, powers of attorney and assurance as may be required or
appropriate to convey and transfer to and vest in Relationserve and protect its
right, title and interest in all of the Purchased Assets and to carry out the
transactions contemplated by this Agreement.
7.12 TRANSACTION DOCUMENTS. At Closing, the Company shall enter into
the Xxxx of Sale, Assignment and Assumption Agreement, in the form attached as
Exhibit A, the Noncompete Agreements in the form attached as Exhibit B, and such
other closing documents requested by Relationserve.
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7.13 PASSAGE OF TITLE AND RISK OF LOSS. Legal title, equitable title
and risk of loss with respect to the property and rights to be transferred
hereunder shall not pass to Relationserve until the property or right is
transferred at the Closing and possession thereof is delivered to Relationserve.
7.14 EXPENSES AND TAXES. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense. Any transfer, documentary, sales, use,
registration, value added and other similar Taxes applicable to the conveyance
and transfer from the Company to Relationserve of the Purchased Assets and
related fees (including any penalties, interest and additions to Tax) shall be
paid by the Company.
7.15 ACCESS TO INFORMATION AND COOPERATION. The Company shall
provide to Relationserve and its counsel, accountants, consultants and other
representatives, full access, during normal business hours, to all of its
properties, books, accounts, tax returns, contracts, commitments and records,
furnish to Relationserve all such information concerning its business and
affairs as Relationserve reasonably may request and cause its independent public
accountants to permit Relationserve and its representatives to examine all
records and working papers in order to permit an independent accounting firm
selected by Relationserve to conduct an audit of the Business's financial
statements in a diligent manner. Such cooperation shall include, but not be
limited to, issuing representation letters to Relationserve's accountants with
respect to all financial statements of Seller covering dates or periods on or
prior to the Closing Date.
7.16 TRANSITION INSURANCE. If requested by Relationserve prior to
the Closing Date, and to the extent permissible under the subject insurance
policies, the Company shall maintain in effect for a period of sixty (60) days
following the Closing Date the Company's insurance policies covering the
Purchased Assets at the same level of coverage as in effect prior to and on the
Closing Date. Buyer shall reimburse the Company for the out-of-pocket cost of
maintaining such coverage after the Closing Date.
7.17 WARN. The Company hereby represents and warrants that for
purposes of the Worker Adjustment and Retraining Notification Act ("WARN") and
with respect to employees performing services for the Business (i) in the
previous thirty (30) days there has been no employment loss at a single site of
fifty (50) or more employees, (ii) no single site of employment of the Business
has, or during the past ninety (90) days has had, fifty (50) or more employees.
Company shall be responsible for WARN Act compliance, and cost thereof, with
respect to the transactions contemplated by this Agreement.
7.18 COOPERATION. Company and each Member will cooperate with
Relationserve, and Company and each Member will use its best efforts to have the
officers, directors and other employees of Company cooperate with Relationserve,
at Relationserve's request and expense, on and after the date hereof, in
endeavoring to effect the collection of accounts and notes receivable owing to
Company at the Closing Date and in furnishing information, evidence, testimony
and other assistance in connection with any actions, proceedings, arrangements
or disputes involving the Company and/or Relationserve and based upon contracts,
arrangements, commitments or acts of Company which were in effect or occurred on
or prior to the date hereof.
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7.19 AUTHORIZATION; MAIL. Company agrees that Relationserve shall
have the right and authority to collect for the account of Company all
receivables and other items which shall be transferred to Relationserve as
provided herein, and to endorse with the name of Company any checks received on
account of any such receivables or other items. Company agrees that it will
promptly transfer and deliver to Relationserve any cash or other property that
Company may receive in respect of any such receivables or other items. Company
authorizes and empowers Relationserve from and after the date hereof (i) to
receive and open mail addressed to Company and (ii) to deal with the contents
thereof in any manner Relationserve sees fit, providing such mail and the
contents thereof relate to the Purchased Assets or otherwise to the business of
Company, as conducted by Relationserve or to any of the liabilities or
obligations assumed by Relationserve hereunder. Company agrees to deliver to
Relationserve promptly upon receipt any mail, checks or other documents received
by them pertaining to the Purchased Assets or the Business, as conducted by
Relationserve, or any of the liabilities or obligations assumed by Relationserve
hereunder. Relationserve agrees to deliver to Company any mail which it receives
to which it is not entitled by reason of this Agreement or otherwise and to
which Company is entitled.
7.20 EMPLOYEES. From and after the Closing Date, the Company will
use its best efforts to keep available to Relationserve the services of the
present employees of Company and, from and after the date hereof, agree to use
its best efforts to cause each employee of Company to become and remain an
employee of Relationserve from and after the Closing Date.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF RELATIONSERVE
The obligation of Relationserve and Parent to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by Relationserve:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company and the Members
contained in this Agreement shall be true and correct at and as of the Closing
Date with the same force and effect as though made at and as of that time except
(i) for matters specifically permitted by or disclosed on any Schedule to this
Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. The Company and the Members shall have performed and complied with all of
their respective obligations required by this Agreement to be performed or
complied with at or prior to the Closing Date. The Company and the Members shall
have delivered to Relationserve a certificate, dated as of the Closing Date,
duly signed (in the case of the Company, by its President), certifying that such
representations and warranties are true and correct and that all such
obligations have been complied with and performed.
8.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between
the date hereof and the Closing Date, (i) there shall have been no Material
Adverse Change in the Purchased Assets or the Business, (ii) there shall have
been no adverse federal, state or local legislative or regulatory change
affecting in any material respect the Purchased Assets or the Business, and
27
(iii) none of the Purchased Assets shall have been damaged by fire, flood,
casualty, act of God or the public enemy or other cause (regardless of insurance
coverage for such damage) and there shall have been delivered to Relationserve a
certificate to that effect, dated the Closing Date and signed by or on behalf of
the Company and the Members.
8.3 CORPORATE CERTIFICATE. The Company shall have delivered to
Relationserve (i) copies of its Articles or Organization and Operating Agreement
of the Company as in effect immediately prior to the Closing Date, (ii) copies
of resolutions adopted by the Board of Directors and the Members of the Company
authorizing and approving the execution and delivery of this Agreement and the
performance of the transactions contemplated by this Agreement, (iii) a
certificate of incumbency, dated as of the Closing, of the Members, directors
and officers executing this Agreement or any related agreements, instruments or
certifications for Closing, (iv) a certificate of good standing of the Company
issued by the Secretary of State of the State of Florida as of a date not more
than five (5) days prior to the Closing Date, certified in the case of
subsections (i) and (ii) of this Section as of the Closing Date by the Secretary
of the Company as being true, correct and complete.
8.4 DELIVERY OF PURCHASED ASSETS. (a) At the Closing, the Company
shall duly execute and deliver to Relationserve (or its assignee) Bills of Sale
and Assignment and Assumption Agreements in the form attached hereto as Exhibit
A and such other instruments of transfer of title as are necessary to transfer
to Relationserve (or its assignee) good and marketable title to the Purchased
Assets (including endorsed titles for unencumbered vehicles transferred
hereunder) free and clear of any Liens other than the Assumed Liabilities, and
shall deliver to Relationserve (or its assignee) immediate possession of the
Purchased Assets.
8.5 CONSENTS. The Company shall have received and shall deliver
evidence of all necessary Permits, to the transactions contemplated hereby and
waivers of rights to terminate or modify any rights or obligations of the
Company from any Person from whom such consent or waiver is required under any
Contract to which the Company or the Purchased Assets are bound (including the
Customer Contracts, the Assumed Contracts, the Equipment Leases and the Real
Property Leases) as of a date not more than ten (10) days prior to the Closing
Date, or who, as a result of the transactions contemplated hereby, would have
such rights to terminate or modify such Contracts, either by the terms thereof
or as a matter of law.
8.6 NO ADVERSE LITIGATION. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the transactions contemplated hereby, and which, in the judgment of
Relationserve, makes it inadvisable to proceed with the transactions
contemplated hereby.
8.7 BOARD AND SHAREHOLDER APPROVAL. The Board of Directors of
Relationserve shall have authorized and approved this Agreement and the
transactions contemplated hereby.
8.8 GOVERNMENTAL CONSENTS. Relationserve shall have received all
necessary approvals, consents, reviews, and/or waivers from all applicable
Governmental Authorities.
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8.9 CLOSING DOCUMENTS. The Company and Members and the other
applicable parties shall have executed and delivered the documents required by
this Agreement to have been executed and delivered by them.
8.10 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
Relationserve the Financial Statements.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY AND THE MEMBERS
The obligations of the Company and the Members to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by the Company and the Members:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Relationserve contained in
this Agreement shall be true and correct as of the Closing Date with the same
force and effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Relationserve
shall have performed and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Closing.
Relationserve shall have delivered to the Company and the Members a certificate,
dated as of the Closing Date, and signed by an officer, certifying that such
representations and warranties are true and correct and that all such
obligations have been complied with and performed in all material respects.
9.2 PURCHASE PRICE. At the Closing, Relationserve shall pay to the
Company the Purchase Price (other than the Deferred Amount) in accordance with
Section 2.1, execute the Xxxx of Sale, Assignment and Assumption Agreement and
assume the Assumed Liabilities.
9.3 NO ORDER OR INJUNCTION. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body an
order or injunction restraining or prohibiting the transactions contemplated
hereby.
9.4 CLOSING DOCUMENTS. Relationserve shall have executed and
delivered the documents required by this Agreement to have been executed and
delivered by it.
ARTICLE X
INDEMNIFICATION
10.1 (a) The Company and the Members, jointly and severally, agree
to indemnify and hold Relationserve and each of its shareholders, officers,
directors, employees, Affiliates, agents, representatives, successors and
assigns (collectively, the "Relationserve Indemnitees") harmless from and
against any action, cost, damage, disbursement, claim, expense, liability, loss,
29
deficiency, diminution in value, obligation, penalty, fine, award, judgment,
sanction, charge, demand, payment, assessment or settlement of any kind or
nature, whether foreseeable or unforeseeable, including, but not limited to,
interest or other carrying costs, penalties, reasonable legal, accounting and
other professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims, actual or threatened, inquiries, hearings or
other legal or administrative proceedings, and amounts paid in settlement of any
claim, lawsuit or arbitration (each a "Loss"), that may be imposed on or
otherwise incurred or suffered by Relationserve arising out of or resulting from
(i) any inaccuracy in or breach or non-performance of any representation,
warranty, covenant, certification or agreement made by the Company or the
Members in or pursuant to this Agreement, (ii) the failure of the Company or the
Members to perform fully any covenant, provision or agreement to be performed or
observed by it pursuant to this Agreement, (iii) any other matter as to which
the Company or the Members in other provisions of this Agreement have agreed to
indemnify Relationserve, (iv) any liability or obligation of the Company
(whether absolute or contingent, liquidated or unliquidated, or due or to become
due), other than the Assumed Liabilities, resulting from the Company's ownership
or operation of the Purchased Assets or the Business prior to Closing including,
without limitation, the Excluded Liabilities or related to the Excluded Assets,
(v) any Environmental Liability, (vi) any failure to have obtained all Permits
required in connection with this Agreement, (vii) any liability to any employee
of the Business resulting from Relationserve's failure to offer employment to
such employee (collectively, "Relationserve Indemnifiable Damages").
Notwithstanding the foregoing, Relationserve shall not be entitled
to any Indemnifiable Damages for breaches of the representations and warranties
unless the aggregate of all Indemnifiable Damages for breaches of the
representations and warranties exceeds $100,000 (the "Indemnification
Threshold"), in which case Relationserve shall be entitled to the full amount of
such Indemnifiable Damages in excess of the Indemnification Threshold.
Notwithstanding anything herein to the contrary, the maximum amount of
indemnification hereunder shall not exceed the Purchase Price.
(b) Relationserve agrees to indemnify and hold the Company and the
Members and each of their shareholders, officers, directors, employees,
Affiliates, agents, representatives, heirs, successors and assigns
(collectively, the "Company Indemnitees") harmless from and against any Loss,
that may be imposed on or otherwise incurred or suffered by the Company and the
Members arising out of or resulting from (i) any inaccuracy in or breach or
non-performance of any representation, warranty, covenant, certification or
agreement made by Relationserve in or pursuant to this Agreement, (ii) the
failure of Relationserve to perform fully any covenant, provision or agreement
to be performed or observed by it pursuant to this Agreement, (iii) any other
matter as to which Relationserve in other provisions of this Agreement has
agreed to indemnify the Company and the Members (collectively, "Company
Indemnifiable Damages" and together with Relationserve Indemnifiable Damages,
the "Indemnifiable Damages").
10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in or made pursuant to this Agreement shall survive for
a period of one (1) year after the Closing Date except: (i) as to any matter as
to which a claim has been submitted in writing to the other party before such
date and identified as a claim for indemnification pursuant to Article X, (ii)
as to any matter which is based successfully upon fraud with respect to which
the cause of action shall expire only upon expiration of the applicable statute
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of limitations, (iii) those representations and warranties contained in Section
5.11 (Environmental Matters); (iv) those representations and warranties
contained in Section 5.13 (Good Title, Adequacy and Condition of Purchased
Assets); (v) those representations and warranties contained in Section 5.16
(Employee Benefit Plans) which shall remain in full force and effect
indefinitely, and (vi) the representations and warranties contained in Section
5.17 (Tax Matters) shall continue through the expiration of the applicable
statute of limitation (or, if a claim has been asserted prior to such
expiration, until 24 months after the date of its final resolution).
Notwithstanding any knowledge of facts determined or determinable by any party
by investigation, each party shall have the right to fully rely on the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or papers delivered in
connection herewith. Each representation, warranty, covenant and agreement of
the parties contained in this Agreement is independent of each other
representation, warranty, covenant and agreement.
10.3 THIRD PARTY ACTIONS. Promptly after receipt by a party of
notice of commencement of any action by a third party which could give rise to
Indemnifiable Damages (an "Indemnified Party") the Indemnified Party will, if a
claim thereof is to be made against the other parties hereto (an "Indemnifying
Party"), notify the Indemnifying Party of the commencement thereof; provided,
however, that the omission to so notify the Indemnifying Party will not relieve
them from any liability which they may have hereunder unless the Indemnifying
Party have been materially prejudiced thereby. The parties agree that with
respect to any such third party action the Indemnified Party shall (i) assume
the defense thereof with its own legal counsel, (ii) provide the Indemnifying
Party with all information that they reasonably request relating to the handling
of such claim, (iii) confer with the Indemnifying Party as to the most
cost-effective manner in which to handle such claim, and (iv) use its reasonable
efforts to minimize the cost of handling such claim.
With respect to any action commenced by a third party which could
give rise to Indemnifiable Damages and which seeks recovery solely of money
damages, the Indemnifying Party shall have the right to participate in, and, to
the extent that they may wish, jointly or individually, to assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party; provided,
that prior to the assumption of such defense the Indemnifying Party assuming
such defense must acknowledge in writing to the Indemnified Party that they
shall be fully responsible (with no reservation of rights) for all Indemnifiable
Damages relating to such claim; provided, further, if the defendants in any
action include both the Indemnified Party and any of the Indemnifying Parties
and there is a conflict of interest which would prevent such counsel from also
representing the Indemnified Party, then the Indemnified Party shall have the
right to select separate counsel to participate in the defense of such action on
behalf of the Indemnified Party. After notice from the Indemnifying Party to the
Indemnified Party of their election to so assume the defense thereof, the
Indemnifying Party, as applicable, will not be liable to the Indemnified Party
pursuant to the provisions of Section 10.1 for the related counsel fees and
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation, unless (i) the
Indemnified Party shall have employed counsel in accordance with the provisions
of the preceding sentence; (ii) the Indemnifying Party shall not have employed
counsel satisfactory to the Indemnified Party to represent it within a
reasonable time after notice of the commencement of the action, or (iii) the
Indemnifying Party shall not have authorized the employment of counsel for the
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Indemnified Party at the expense of the Indemnifying Party, as applicable.
Notwithstanding anything to the contrary in this Section 10.3, the Indemnifying
Party shall have the right to settle or compromise any action for which it has
assumed the defense if the settlement or compromise provides for any injunctive
or other equitable relief against the Indemnified Party or otherwise provides
for any continuing obligations of any nature against the Indemnified Party or
loss of rights of the Indemnified Party, and nothing stated in this Section 10.3
shall otherwise affect the Indemnifying Party's obligation to pay the
Indemnified Party all Indemnifiable Damages pursuant to Section 10.1. With
respect to any such third party action assumed by the Indemnifying Party, as
applicable, the parties agree to provide each other with all information that
they reasonably request relating to the handling of such matter.
10.4 SET OFF. Relationserve may set off against the Deferred Amount
and/or Indemnifiable Damages for which the Company or the Members may be
responsible pursuant to this Agreement, subject, however, to the following terms
and conditions:
(a) Relationserve shall give written notice to the Company and the
Members of any claim for Indemnifiable Damages or any other damages hereunder,
which notice shall set forth (i) the amount of Indemnifiable Damages or other
loss, damage, cost or expense which Relationserve claims to have sustained by
reason thereof, and (ii) the basis of the claim therefore.
(b) Such set off shall be effected on the later to occur of the
expiration of ten (10) days from the date of such notice (the "Notice of Contest
Period") or, if such claim is contested, the date the dispute is resolved.
(c) If, prior to the expiration of the Notice of Contest Period, the
Company or the Members shall notify Relationserve in writing of an intention to
dispute the claim and if such dispute is not resolved within thirty (30) days
after expiration of such period, then Relationserve may take any action or
exercise any remedy available to it by appropriate legal proceedings to collect
the Indemnifiable Damages.
(d) All set offs and payments of Indemnifiable Damages pursuant to
this Section 10.4 shall be treated as adjustments to the Purchase Price.
(e) The Deferred Amount shall constitute a deferred payment
obligation of Relationserve to the Company, which amount shall be (i) paid to
the Company in accordance with Section 10.5 hereof, and (ii) subject to set off
as provided in this Section 10.4.
10.5 DELIVERY OF DEFERRED AMOUNT. Relationserve agrees to deliver to
the Members no later than three (3) business days following the one-year
anniversary of the Closing Date any Deferred Amount then held by it unless there
then remains unresolved any claim for Indemnifiable Damages or other damages
hereunder as to which notice has been given, in which event that portion of the
Deferred Amount subject to an ongoing claim shall continue to be held and the
remaining portion of the Deferred Amount not subject to a claim shall be
released. Any Deferred Amount remaining on deposit after such claim shall have
been satisfied shall be returned to the Company promptly after the time of
satisfaction.
10.6 NO BAR. If the Deferred Amount is insufficient to set off any
claim for Indemnifiable Damages made hereunder (or has been delivered to the
32
Company prior to the making or resolution of such claim), then Relationserve may
take any action or exercise any remedy available to it by appropriate legal
proceedings to collect the Indemnifiable Damages.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall have
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, as in effect on the date hereof.
"Assignment and Assumption Agreement" shall mean the Xxxx of Sale,
Assignment and Assumption Agreement, the form of which is attached as EXHIBIT B
hereto.
"Code" means the Internal Revenue Code of 1986, as amended, and
treasury regulations promulgated thereunder.
"Contract" means any agreement, contract, commitment, undertaking,
obligation, understanding or arrangement whether written or oral, express or
implied.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances or judicial or administrative interpretations
thereof, or similar laws of foreign jurisdictions, whether currently in
existence or hereafter enacted or promulgated, any of which govern (or purport
to govern) or relate to pollution, protection of the environment, public health
and safety, air emissions, water discharges, hazardous or toxic substances,
solid or hazardous waste or occupational health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings and changes or ordinances, or
judicial or administrative interpretations thereof.
"Environmental Liability" means any and all liabilities and
obligations relating to or arising out of environmental matters or claims
relating to or arising from events or occurrences taking place or conditions
existing (whether known or unknown) prior to the Closing Date or relating to or
arising from events or occurrences taking place or conditions existing (whether
known or unknown) on or after the Closing Date to the extent such matters relate
to or arise from the Company's actions on any premises on which the Business was
conducted, including, without limitation, (i) any violation or alleged violation
of any Environmental Laws including the obligations thereunder to investigate or
remediate or otherwise undertake removal of hazardous substances or (ii) any
actual or alleged handling or discharging of hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder and published
interpretations related thereto.
33
"GAAP" means generally accepted accounting principles as in effect
in the United States from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Indebtedness" means all obligations of the Company (i) which in
accordance with GAAP should be classified upon a balance sheet of the Company as
indebtedness, (ii) for borrowed money or purchase money financing which has been
incurred in connection with the acquisition of property or services, guaranties,
letters of credit, or deferred purchase price, (iii) secured by any lien or
other charge upon property or assets owned by the Company, even though the
Company has not assumed or become liable for the payment of such obligations,
(iv) created or arising under any conditional sale or other title retention
agreement with respect to property acquired by the Company, whether or not the
rights and remedies of the lender or lessor under such agreement in the event of
default are limited to repossession or sale of the property, or (v) for
remaining payments under any leases (including, but not limited to, equipment
leases, operating leases and capital leases), or rental purchase options, in
each case including, without limitation, accrued and unpaid interest, and
prepayment or early termination payments or penalties associated with any of the
foregoing items (i) through (v) whether mandatory or optional.
"Intellectual Property" means all United States and foreign
intellectual property, including all worldwide trademarks, service marks, trade
names, URLs and Internet domain names, designs, slogans, logos, and trade dress,
together with all goodwill related to the foregoing; patents, copyrights,
processes, operating rights, computer software, technology, trade secrets and
other confidential information, customer and supplier lists and data, know-how,
processes, techniques, formulae, algorithms, models, user interfaces,
inventions, plans, proposals, advertising and promotional materials, and all
registrations, applications, recordings, renewals, continuations,
continuations-in-part, divisions, reissues, reexaminations, foreign
counterparts, and other legal protections and rights related to the foregoing.
"Lien" means any mortgage, option, pledge, right, claim, charge,
security interest, encumbrance, easement, lease, covenant, lien, adverse claim
or preferential arrangement of any kind (whether on sale, transfer, disposition
or otherwise), whether imposed by agreement, understanding, law, equity or
otherwise.
"Material Adverse Change (or Effect)" means a change (or effect), in
the condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"Permit" means any license, permit, agreement, consent, approval,
franchise, certificate of authority, authorization, qualification or order, or
any waiver of the foregoing, required by any Person in connection with, and
necessary to the operation of, the Business or the use or ownership of the
Purchase Assets.
34
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association, joint
venture, Governmental Authority or other entity, of whatever nature.
"Tax Return" means any report, return, filing or other information
required to be filed in connection with or with respect to any Taxes.
"Taxes" means all taxes, fees, charges or other assessments,
including, but not limited to, income, excise, property, sales, franchise,
intangible, transfer, gross receipt, capital stock, production, business,
occupation, disability, employment, payroll, severance, withholding, social
security and unemployment taxes imposed by any Government Authority, and any
interest or penalties (civil or criminal) related thereto or to the non-payment,
late payment or underpayment thereof, and any Loss or liability in connection
with the determination, settlement or litigation of any Tax liability.
11.2 OTHER DEFINITIONAL PROVISIONS. All terms defined in this
Agreement shall have the defined meanings when used in any certificates, reports
or other documents made or delivered pursuant hereto or thereto, unless the
context otherwise requires. Terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa. All matters of an
accounting nature in connection with this Agreement and the transactions
contemplated hereby shall be determined in accordance with GAAP applied on a
basis consistent with prior periods, where applicable. As used herein, the
neuter gender shall also denote the masculine and feminine, and the masculine
gender shall also denote the neuter and feminine, where the context so permits.
ARTICLE XII
SECURITIES LAW MATTERS
In addition to the other representations, warranties and covenants
set forth herein, as a material inducement to Relationserve to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
and the Members make the following representations, warranties and covenants, as
applicable.
12.1 INVESTMENT INTENT. Each Member is acquiring the Relationserve
Common Stock hereunder for his/her/its own account and with no present intention
of distributing or selling such shares and further agrees not to transfer such
shares in violation of the Securities Act or any applicable state securities
law, and no one other than the Members have any beneficial interest in the
shares. The Member agrees that he/she/it will not sell or otherwise dispose of
any of the Relationserve Common Stock unless such sale or other disposition has
been registered under the Securities Act or, in the opinion of counsel
acceptable to Relationserve, is exempt from registration under the Securities
Act and has been registered or qualified or, in the opinion of such counsel
acceptable to the Relationserve, is exempt from registration or qualification
under applicable state securities laws. Each Member understands that the offer
and sale by the Relationserve of the Relationserve Common Stock being acquired
by each Member hereunder has not been registered under the Securities Act by
reason of their contemplated issuance in transactions exempt from the
registration and prospectus delivery requirements of the Securities Act pursuant
35
to Section 4(2) thereof, and that the reliance of Relationserve on such
exemption from registration is predicated in part on these representations and
warranties of each of the Members.
12.2 ACCREDITED MEMBER. Each Member is an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act,
and has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the investment to be made by it
hereunder. Notwithstanding the foregoing, the Company may transfer shares of
Relationserve Common Stock (or any securities received in exchange therefore) to
the Company's Members upon such Members' execution of standard investment
letters and other documentation deemed reasonably acceptable to Relationserve's
counsel with regard to an exemption from registration under what is referred to
as Section 4(1 1/2) of the Securities Act and applicable state securities laws,
with such additional restrictions on transfer that are applicable to shares of
Relationserve Common Stock held by Company prior to such transfer.
12.3 ADEQUATE INFORMATION. Each Member has received from
Relationserve, and has reviewed, such information which such Member considers
necessary or appropriate to evaluate the risks and merits of an investment in
the Relationserve Common Stock.
12.4 OPPORTUNITY TO QUESTION. Each Member has had the opportunity to
question, and has questioned, to the extent deemed necessary or appropriate,
representatives of Relationserve so as to receive answers and verify information
obtained in the Member's examination of Relationserve, including the information
that the Member has received and reviewed in relation to his/her/its investment
in the Relationserve Common Stock.
12.5 NO OTHER REPRESENTATIONS. No oral or written representations
have been made to any Member in connection with the Member's acquisition of the
Relationserve Common Stock which were in any way inconsistent with the
information reviewed by the Member. The Member acknowledges that no
representations or warranties of any type or description have been made to it by
any Person with regard to Relationserve, any of its subsidiaries, any of their
respective businesses, properties or prospects or the investment contemplated
herein, other than the representations and warranties set forth in Article IV
hereof.
12.6 KNOWLEDGE AND EXPERIENCE. Each Member has such knowledge and
experience in financial, tax and business matters, including substantial
experience in evaluating and investing in common stock and other securities
(including the common stock and other securities of speculative companies), so
as to enable the Member to utilize the information made available by
Relationserve to such Member in order to evaluate the merits and risks of an
investment in the Relationserve Common Stock and to make an informed investment
decision with respect thereto.
12.7 INDEPENDENT DECISION. Each Member is not relying on
Relationserve or on any legal or other opinion in the materials reviewed by the
Member with respect to the financial or tax considerations of the Member
relating to its investment in the Relationserve Common Stock. Each Member has
relied solely on the representations and warranties, covenants and agreements of
Relationserve in this Agreement (including the Exhibits hereto) and on its
examination and independent investigation in making its decision to acquire the
Parent Common Stock.
36
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and facsimile numbers
(or to such other addresses or facsimile numbers which such party shall
designate in writing to the other party):
(a) IF TO RELATIONSERVE OR Relationserve Access, Inc.
PARENT TO: 0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attn: President
Telephone: 000-000-0000
Facsimile: 000-000-0000
WITH A COPY TO: Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx &
Wolosky LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 212-451-2222
(b) IF TO THE COMPANY OR Omni Point Marketing, LLC THE
MEMBERS TO: 0000 X. Xxxxxxx Xxxxxx, 0xx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxx
Telephone: 000-000-0000
Facsimile: _____________
WITH A COPY TO: Xxxxxx Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx Xxxx.,
Xxxxx 000
Xxxx Xxxx Xxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
37
or to such other address as any of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be evidence of successful facsimile delivery. Time shall
be counted from the date of transmission.
Notice shall be deemed given on the date sent if sent by facsimile
transmission and on the date delivered (or the date of refusal of delivery) if
sent by overnight delivery or certified or registered mail.
13.2 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the Exhibits and Schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contains the entire understanding of
the parties in respect of its subject matter herein and supersedes all prior
agreements and understandings (oral or written) between the parties with respect
to such subject matter. The parties agree that prior drafts of this Agreement
shall not be deemed to provide any evidence as to the meaning of any provision
hereof or the intent of the parties with respect thereto. The Exhibits and
Schedules constitute a part hereof as though set forth in full above. Except for
the Relationserve Affiliates and other persons expressly stated herein to be
indemnitees, this Agreement is not intended to confer upon any Person, other
than the parties hereto, any rights or remedies hereunder.
13.3 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
13.4 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. The rights and obligations of any party under
this Agreement may not be assigned without the prior written consent of the
other parties hereto except that Relationserve may assign its rights to any
entity that controls, is controlled by or is under common control with
Relationserve or to any entity which acquires substantially all of the assets of
Relationserve or survives any merger with Relationserve.
13.5 COUNTERPARTS. This Agreement or any other agreement (or
document) delivered pursuant hereto may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A facsimile signature of any party shall
be considered to have the same binding legal effect as an original signature.
38
13.6 INTERPRETATION. When a reference is made in this Agreement to
an article, section, paragraph, clause, schedule or exhibit, such reference
shall be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the Schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
Schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
13.7 CONSTRUCTION. The parties agree and acknowledge that they have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. If any party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant. The mere listing (or
inclusion of copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty relates solely to the existence of the document or
other items itself).
13.8 GOVERNING LAW; SEVERABILITY. This Agreement shall be construed
in accordance with and governed for all purposes by the internal laws of the
State of Delaware without reference to principles of conflicts of laws. If any
word, phrase, sentence, clause, section, subsection or provision of this
Agreement as applied to any party or to any circumstance is adjudged by a court
to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of any other word, phrase,
sentence, clause, section, subsection or provision of this Agreement. If any
provision of this Agreement, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power to
reduce the duration and/or area of such provision, and/or to delete specific
words or phrases, and in its reduced form, such provision shall then be
enforceable and shall be enforced.
13.9 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
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13.10 RIGHT OF FIRST REFUSAL.
(a) For a period commencing on the Closing Date and continuing
through a date that is the thirty (30) months anniversary following such date
following the Closing Date as Parent shall, by merger, become a wholly-owned
subsidiary of a company who maintains a class of securities that may be traded
on any securities exchange or whose shares are quoted on the regulated
over-the-counter bulletin board market maintained by the National Association of
Securities Dealers, Inc. (the "Restricted Period"), each of the Company, each
Member, and any transferee from Company or any Member ("Seller") agrees that it
or they will not sell, transfer, grant any lien upon or security interest in, or
otherwise convey ("Transfer") any Relationserve Common Stock, including any
shares of any other company received in any merger, consolidation or otherwise
on account of any Relationserve Common Stock, that such person holds, except in
accordance with the provisions of this Section 13.10.
(b) If a Seller desires to Transfer any of its Relationserve Common
Stock during the Restricted Period it shall provide written notice thereof (a
"Transfer Notice") to JH Associates, Inc., or its assignee, of the rights
provided herein ("Purchaser"). The Transfer Notice shall set forth the aggregate
number of Relationserve Common Stock that such Seller desires to Transfer and
shall be deemed an irrevocable offer, expiring at 5:00 pm Eastern Standard Time,
on the fifth (5th) day following the date such Transfer Notice is received, to
sell to Purchaser the total number of Relationserve Common Stock covered in such
Transfer Notice at a price per share equal to fifty (50%) percent of the closing
price on the last trading day immediately preceding the date of the Transfer
Notice.
(c) If Purchaser desires to accept an offer in a Transfer Notice,
such Purchaser shall provide written notice thereof to the Seller (an
"Acceptance Notice"). Such notice shall set forth the number of Relationserve
Common Stock Purchaser desires to purchase. Promptly following acceptance of the
offer contained in the Transfer Notice (but in no event later than two days
following the date of delivery of an Acceptance Notice), Purchaser shall pay to
the Seller the aggregate purchase price for the Relationserve Common Stock that
such Purchaser agrees to purchase and Seller will deliver to such Purchaser the
Relationserve Common Stock to be purchased by such Purchaser. The parties hereto
acknowledge that any Purchaser may assign to any other party its rights to
purchase Relationserve Common Stock pursuant to an offer contained in a Transfer
Notice.
(d) To the extent the offer contained in a Transfer Notice expires
unexercised, then the Seller shall, for a period of forty-eight (48) hours after
expiration of such offer, be permitted to sell the number of Relationserve
Common Stock set forth in such Transfer Notice as to which such offer has
expired unexercised to a third party. If such Shares are not sold within such
forty-eight (48) hour period, they shall again become subject to the provisions
of this Section 13.10.
(e) Subject to satisfaction of the rights of Purchaser and
procedures set forth in Section 13.10(b)-(d), Sellers agree that they shall not
Transfer the Relationserve Common Stock prior to the five (5) year anniversary
of this Agreement, PROVIDED, HOWEVER, Seller(s) may Transfer, collectively
(giving effect to all transfers by any other Seller during the applicable
period) up to 175,000 shares of Relationserve Common Stock, in each of the
40
twelve full consecutive calendar months immediately following the end of the
calendar month following commencement of the Restricted Period. Each of the
Members shall be responsible to each of the other Members and to the Company to
allocate such limitations and any sales in excess of such amount, or request for
sales, may be rejected by JH Associates, Inc. and appropriate stop transfer
instructions provided to any transfer agent.
13.11 PIGGY-BACK REGISTRATION. The Company intends that shares of
any other company received in any merger, consolidation or otherwise on account
of any Relationserve Common Stock following the Closing Date that are quoted for
sale on the regulated quotation service of the National Association of
Securities Dealers, Inc. known as the over-the-counter bulleting board, or that
are listed on any exchange, shall have available unlimited and customary
"piggyback" registration rights with respect to such shares of Common Stock as
are received by the Company as Purchase Price hereunder or following any
registration of the securities of the Parent under the Securities Act of 1933
(the "Act") or upon the Parent's merger with a company (or subsidiary thereof)
that is a publicly reporting company under the Act (the "Trigger Date").
Relationserve covenants and agrees that should the Parent or Relationserve
undertake a merger under which shares in the Parent will be exchanged for shares
of any successor or other company, the terms of such merger will include an
undertaking that should such company seek to file any registration statement
under the Act following the Trigger Date, that it will provide to Company
advance notice of its intention to file such registration under the Act and
provide Company the opportunity to include in such registration all shares of
capital stock represented by the Purchase Price (other than shares which may
then be sold pursuant to Rule 144). Such piggyback registration rights may be
subject to cutback or lockup provisions but only to the same proportional extent
as such provisions affect the capital stock of the senior executives of the
Parent, or its public successor.
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
RELATIONSERVE ACCESS, INC.
By: /s/ Xxxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxxx Xxxxx
Title: President
OMNI POINT MARKETING, LLC
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: CEO
MEMBERS:
COBALT HOLDINGS, LLC
By: /s/ Xxxxxxx Xxxx
--------------------------------
Xxxxxxx Xxxx, Manager
XXXXXX AND ESTES ADVERTISING, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
------------------------------------
Xxxxx Xxxxxx, individually, as to the
representations and warranties
contained in Article V hereof
applicable to Members, subject to the
limitations set forth in Section 10.1
(a), and for the purpose of
acknowledging to be bound by the
provisions of Section 13.10 as a
Seller and in the event such person
owns or controls, directly or
indirectly, any person who owns or
controls any securities as to which
the restrictions of Section 13.10
apply.
------------------------------------
Xxxxxxx Xxxx, individually solely for
the purpose of acknowledging to be
bound by the provisions of Section
13.10 as a Seller and in the event
such person owns or controls,
directly or indirectly, any person
who owns or controls any securities
as to which the restrictions of
Section 13.10 apply.
42
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A Form of Xxxx of Sale, Assignment and Assumption Agreements
Schedule 1.1(b) Other Tangible Personal Property
Schedule 1.1(c) Customer Accounts
Schedule 1.1(d) Assumed Contracts
Schedule 1.1(h) Equipment Leases
Schedule 1.1(i) Intangible Property
Schedule 5.4 Capitalization
Schedule 5.5 Required Consents
Schedule 5.6 Subsidiaries
Schedule 5.7 Financial Statements
Schedule 5.9 Liabilities of the Company, Indebtedness
Schedule 5.10 Litigation
Schedule 5.14 Permits; Policies
Schedule 5.15 Employees
Schedule 5.16 Employee Benefit Plans
Schedule 5.18 Insurance Policies
Schedule 5.19 Receivables
Schedule 5.20 Intellectual Property
Schedule 5.21 Material Contracts
Schedule 5.24 Customers
Schedule 5.25 Names
Schedule 5.26 Commissions
Schedule 5.27 Product Rebates and Discounts
Schedule 5.28 Related Party Transactions
Schedule 7.6 Interested Persons
