Exhibit 2.5
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "AGREEMENT") is made as of April
1, 2005 (the "CLOSING DATE") by and between Relationserve, Inc., a Delaware
corporation (the "Company"), and the persons or entities listed as investors and
set forth on Schedule 1, annexed hereto (the "HOLDERS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Holders, and
the Holders wish to purchase from the Company $240,000 of the Company's four
(4%) percent Notes (the "NOTES") due December 31, 2005 (the "MATURITY DATE")
having the rights and privileges set forth in the Form of Note of the Company
substantially as set forth on Exhibit A annexed hereto; and
WHEREAS, as additional consideration for the purchase of the Notes,
Company has agreed to issue and sell to the Holders 4,000,000 shares (the
"INVESTOR SHARES") of common stock, par value $0.0001 per share, of the Company
(the "COMMON STOCK"), and issue to the Holders ten-year warrants (the
"WARRANTS") to purchase 6,000,000 shares (the "WARRANT SHARES") of Common Stock
at $0.50 per share as set forth on Schedule 1 annexed hereto.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. THE FUNDS. On the Closing Date, the Holders shall deliver to the
Company $240,000 in cash (the "FUNDS") by delivery of a certified check payable
to the Company or by wire transfer to the account of the Company.
2. THE NOTE. On the Closing Date, the Company shall execute and
deliver to the Holders a promissory note, the form of which is annexed hereto as
Exhibit A.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Holders as follows:
(a) ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has the requisite
corporate power to own and operate its properties and assets, and to carry on
its business as presently conducted and as proposed to be conducted.
(b) NO CONFLICT. This Agreement does not: (i) conflict with any
provision of the Company's Certificate of Incorporation or Bylaws, both as
amended to date; or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company is a party; or (iii) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or by which any property or asset of the Company is bound or affected.
(c) AUTHORIZATION. The execution, delivery and performance of
this Agreement by the Company has been duly authorized by all requisite
corporate action, and constitutes the valid and binding obligations of the
Company enforceable in accordance with its terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization, or similar laws
relating to or affecting the enforcement of creditors' rights.
(d) CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, of which 1,000 shares of Common
Stock are issued and outstanding, and 1,000,000 shares of preferred stock, par
value $0.0001 per share.
(e) COMMON SHARES. The Investor Shares are, and the Warrant
Shares, when issued, will be, validly issued, fully-paid and non-assessable,
free and clear of any and all liens, claims and encumbrances. The Warrant Shares
will be reserved for issuance, based upon a conversion price of $0.50 per share.
(f) NO UNDISCLOSED LIABILITIES. The Company has no material
liabilities or obligations not disclosed to the Holders, other than those
liabilities incurred in the ordinary course of the Company's business since
March 29, 2005 its date of formation, incurred in connection with organization
activities and this Agreement.
(g) BROKERS. Neither the Holders nor the Company has taken any
action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by the Company or the Holders
relating to this Agreement or the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF THE HOLDERS. The Holders
represent and warrant to the Company as of the Closing Date as follows (the
Note, the Investor Shares and the Warrant Shares are collectively referred to as
the "SECURITIES"):
(a) All action on the part of the Holders for the authorization,
execution, delivery and performance by the Holders of this Agreement have been
taken, and this Agreement constitutes a valid and binding obligation of the
Holders, enforceable in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, or similar laws relating to
or affecting the enforcement of creditors' rights.
(b) The Holders are acquiring the Securities for investment for
their own account and not with a view to, or for resale in connection with, any
distribution. The Holders understand that the Securities to be acquired have not
been registered under the Act of 1933, as amended (the "ACT"), by reason of a
specific exemption from the registration provisions of the Act which depends
upon, among other things, the bona fide nature of the investment intent as
expressed herein.
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(c) The Holders represent that except as otherwise disclosed to
the Company, in writing, prior to the Holders' execution of this Agreement, the
Holders are each an Accredited Investor, as defined in Rule 501 promulgated
under the Act. The Holders also represent the Holders have not been organized
solely for the purpose of acquiring the Securities.
(d) The Holders are experienced in evaluating and investing in
securities of companies similarly situated to the Company, and acknowledge that
they are able to fend for themselves, can bear the economic risk of an
investment in the Securities, and have such knowledge and experience in
financial or business matters that they are capable of evaluating the merits and
risks of the investment in the Securities.
(e) The Holders believe they have received all the information
they consider necessary or appropriate for deciding whether to purchase the
Securities. The Holders further represent that such Holders have had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities and the business,
properties, prospects and financial condition of the Company.
(f) The Holders acknowledge that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from such registration is available. The Holders are aware of the provisions of
Rule 144 promulgated under the Act which permits limited resale of securities
purchased in a private placement subject to the satisfaction of certain
conditions, including, unless the Holders are an affiliate of the Company, among
other things, the availability of certain current public information about the
Company, the resale occurring not less than one year after a party has purchased
and paid for the securities to be sold, the sale being through a "broker's
transaction" or in transactions directly with a "market maker," and the number
of shares being sold during any three-month period not exceeding specified
limitations.
(g) The Holders hereby represent that the Holders have satisfied
themselves as to the full observance of the laws of the Holders' jurisdiction in
connection with any invitation to subscribe for the Securities or any use of
this Agreement, including: (i) the legal requirements within the Holders'
jurisdiction for the purchase of the Securities; (ii) any foreign exchange
restrictions applicable to such purchase; (iii) any governmental or other
consents that may need to be obtained; and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
conversion, sale, or transfer of the Securities. The Holders' subscription and
payment for, and the Holders' continued beneficial ownership of the Securities,
will not violate any applicable securities or other laws of the Holders'
jurisdiction. The Holders understand and agree that it (and not the Company)
shall be responsible for its own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement
5. LEGENDS. All certificates representing any shares of the capital
stock of the Company issuable upon conversion of the Note shall have endorsed
thereon a legend substantially as follows:
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"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
6. FILING OF REGISTRATION STATEMENT.
A. DEMAND. Upon demand by Holders given following
issuance by the Company of any amount in excess of $1,000,000 of additional
securities issued by the Company following the date of this Agreement, Company
shall prepare, and, as soon as practicable (a) file a registration statement
with respect to the resale by Holders (or any transferee or assignee from
Holders) of the Investor Shares and the Warrant Shares and shall include therein
such number of shares of Common Stock as are held by Holders (and Holder's
transferees or assignees) at the time of such registration (the "REGISTRABLE
SECURITIES") (the "REGISTRATION STATEMENT"). The Company agrees that it shall
file within thirty (30) days of demand and shall use its best efforts to cause
to be declared effective a Registration Statement for all Registrable Securities
by the Securities and Exchange Commission ("SEC") no later than one-hundred and
eighty (180) days from the filing date. In the event either of these periods
shall not be met, the Company shall pay a cash penalty of two (2%) percent per
month of the Original Note principal amount and issue additional Warrants in an
amount equal to the two (2%) percent per month of the number of Investor Shares
issued to Holders, for each month that the Registration Statement shall not be
declared effective, or filed.
B. COMPANY REGISTRATION. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Act, a registration in which the only stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered, or any registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within thirty (30)
days after mailing of such notice by the Company, the Company shall cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
C. REGISTRATION.
(a) REGISTRATION PROCEDURES. The Registration Statement required
under Section 6 A. or B. hereof shall be filed pursuant to the procedures set
forth below:
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(i) The Company shall use its best efforts to cause the
Registration Statement to be filed and to become effective as soon as possible
after it is filed, and remain continuously effective, until the earlier of (i)
all of the Registrable Securities covered by such Registration Statement have
been sold in accordance with the intended methods of disposition of the sellers
set forth in such Registration Statement and (ii) three hundred sixty five (365)
days after such Registration Statement has been declared effective provided,
that if for any portion of such period the Registration Statement is not
effective, then such requirement for maintaining the effectiveness of the
Registration Statement shall be extended by the length of such interruption(s),
and the Company shall prepare and file with the SEC such amendments to such
Registration Statement and supplements to the prospectus contained therein as
may be necessary to keep such Registration Statement effective and such
Registration Statement and prospectus accurate and complete during such period.
(ii) The Company shall notify the sellers participating in
such registration, promptly after it shall receive notice thereof, of the date
and time when such Registration Statement and each post-effective amendment
thereto has become effective or a supplement to any prospectus forming a part of
such Registration Statement has been filed;
(iii) The Company shall furnish to the sellers participating
in such registration such reasonable number of copies of the Registration
Statement and prospectus and such other documents as the sellers may reasonably
request in order to facilitate the public offering of the Registrable
Securities;
(iv) The Company shall use its best efforts to register or
qualify the Registrable Securities covered by such Registration Statement under
such state securities or blue sky laws of such jurisdictions as the sellers
participating in such registration may reasonably request, provided, however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation in any jurisdiction in which
it is not so qualified or to subject itself to taxation in connection with any
such registration or qualification of such securities;
(v) The Company shall notify the sellers participating in
such registration promptly of any request by the SEC for the amending or
supplementing of such Registration Statement or prospectus or for additional
information;
(vi) The Company shall prepare and file with the SEC,
promptly upon the request of any seller participating in such registration, the
Registration Statement and any amendments or supplements to such Registration
Statement or prospectus which, in the reasonable opinion of counsel for the
sellers is required under the Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Securities by the sellers or
to otherwise comply with the requirements of the Act and such rules and
regulations;
(vii) The Company shall prepare and promptly file with the
SEC and promptly notify the sellers participating in such registration of the
filing of such amendments or supplements to such Registration Statement or
prospectus as may be necessary to correct any statements or omissions if, at the
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time when a prospectus relating to the Registrable Securities is required to be
delivered under the Act, any event has occurred as the result of which any such
prospectus or any other prospectus then in effect may include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Company shall make available to the sellers and to the underwriters any such
supplement or amendment. The sellers participating in such registration agree
that, upon receipt of any notice from the Company of the occurrence of any event
of the kind described in this Section 6(a)(vii), the sellers will forthwith
discontinue the offer and sale of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until receipt by the
sellers and underwriters of the copies of such supplemented or amended
prospectus and, if so directed by the Company, the sellers will deliver to the
Company all copies, other than permanent file copies then in the sellers'
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event the Company shall give such
notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective as provided in Section 6.2(a) hereof by
the number of days during the period from and including the date of the giving
of such notice to the date when the Company shall make available to the sellers
such supplemented or amended prospectus;
(viii) The Company shall advise the sellers participating in
such registration, promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued;
(ix) The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make generally
available to the Company's security Holders' earnings statements satisfying the
provisions of Section 11(a) of the Act, no later than forty-five (45) days after
the end of any twelve (12) month period (or ninety (90) days, if such a period
is a fiscal year) beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration Statement;
(x) The Company shall not file any amendment or supplement to
the Registration Statement or prospectus to which a majority in interest of the
sellers participating in such registration has objected on the grounds that such
amendment or supplement does not comply in all material respects with the
requirements of the Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least three business days prior to the
filing thereof unless the Company shall have obtained an opinion of counsel that
such amendment is required under the Act or the rules or regulations adopted
thereunder in connection with the distribution of Registrable Securities by the
sellers.
(xi) The Company may, at its option, register additional
shares of Company common stock in the Registration Statement for sale by other
holders of its Common Stock or include the Registrable Securities in a
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registration in which shares of its Common Stock are sold to an underwriter for
reoffering to the public (an "UNDERWRITTEN OFFERING").
(b) EXPENSES OF REGISTRATION.
(i) All expenses of the Company incident to the Company's
performance of or compliance with the provisions of this Section 6 shall be
borne by the Company including without limitation:
(ii) All registration and filing fees;
(iii) Fees and expenses of compliance with all securities or
blue sky laws (including fees and disbursements of counsel for the Company in
connection with blue sky qualifications of the Registrable Securities; PROVIDED,
HOWEVER, that the Company shall not be required to consent to general service of
process in any such state);
(iv) Fees and disbursements of counsel for the Company, and
their independent auditors.
Nothing in this Section 6 shall be deemed to require the Company to
pay or bear any expenses of any seller's attorneys or accountants or any other
personal expenses or any underwriting discounts relating to the Registrable
Securities, selling commissions or similar fees attributable pro rata to the
Registrable Securities if such registration results in an Underwritten Offering
of all or any portion of the Registrable Securities.
(c) SELLERS' AGREEMENTS.
(i) The sellers participating in such registration shall
promptly provide all information concerning such sellers and/or the Seller
required to be included in the Registration Statement which is requested by the
Company.
(ii) In the event any of the Registrable Securities are
included in an Underwritten Offering, each seller participating in such
registration agrees to enter into with the managing underwriter of such
offering, and perform its obligations under: (i) an underwriting agreement, in
usual and customary form; and (ii) a lock-up agreement similar in form and
substance to lock-up agreements executed by other executive officers and
directors of the Company.
Notwithstanding anything to the contrary in Section 6(b), at any
time after the Registration Statement has been declared effective, the Company
may delay the disclosure of material, non-public information concerning the
Company the disclosure of which at the time is not, in the good faith opinion of
the Board of Directors of the Company and its counsel, in the best interest of
the Company and, in the opinion of counsel to the Company, otherwise required (a
"GRACE PERIOD"); provided, that the Company shall promptly (i) notify the
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sellers participating in such registration in writing of the existence of
material, non-public information giving rise to a Grace Period and the date on
which the Grace Period will begin, and (ii) notify the sellers in writing of the
date on which the Grace Period ends; and, provided further, that during any
consecutive three hundred and sixty-five (365) day period, there shall be only
three Grace Periods, any such Grace Period not to exceed seventy-five (75)
consecutive days in the aggregate and all Grace Periods combined not to exceed
one-hundred and eighty (180) days in the aggregate (an "ALLOWABLE GRACE
PERIOD"). For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the sellers receive the notice
referred to in clause (i) above and shall end on and include the date the
sellers receive the notice referred to in clause (ii) above.
(d) Exception to Filing of Registration Statement.
Notwithstanding the provisions of this Section 6, the Company shall have no
further obligation to file any Registration Statement hereunder or maintain the
effectiveness of any Registration Statement filed with respect to any seller in
the event all of the Registrable Securities owned by such Seller: (i) have been
distributed to the public pursuant to Rule 144 (or any similar provisions then
in force) under the Act: or (ii) are otherwise freely transferable without
restriction under the Act.
7. GENERAL PROVISIONS.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS BY THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAWS.
(b) NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be as set forth below until notice is
received that any such address or contract information has been changed:
IF TO THE COMPANY:
Relationserve, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, XX 00000
(000) 000-0000 (fax)
Att: Xxxxxxxx Xxxxx
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With a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (fax)
IF TO THE HOLDERS:
To such names and addresses as shall be set forth on Exhibit A hereto
With a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (fax)
Att: Xxxxxx X. Xxxxxx, Esq.
(c) ENTIRE AGREEMENT. Except as otherwise provided herein, this
Agreement, the Note and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof.
(d) AMENDMENT. This Agreement may only be amended, waived,
discharged or terminated by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
(e) SUCCESSORS AND ASSIGNS. This Agreement, the Notes, the
Investors Shares, the Common Stock, and the Warrant Shares held by Holders' may
be transferred or assigned by Holders in whole or in part, in such Holders' sole
and absolute discretion. Except as otherwise expressly provided in this
Agreement or the Note, the provisions of this Agreement and the Note shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
(f) SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
(g) TITLES AND SUBTITLES. The titles of the Sections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
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(h) EXPENSES. The Company and the Holders shall each bear their
own expenses incurred with respect to this transaction.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed by its officers thereunto duly authorized.
"COMPANY"
RELATIONSERVE, INC.
By: /s/ Xxxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxxx Xxxxx
Title: President
"HOLDERS"
JH ASSOCIATES, INC.
By: /s/ Xxxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxxx Xxxxx
Title: President
GRQ CONSULTANTS, INC.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Director
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