Asset Sale/Purchase Agreement dated September 24, 2010 by and between MarketSmart Advertising, Inc., Rightstuff, Inc., Checkup Marketing, Inc. and The Finch Agency, Inc

 

 

(a)

All of the furniture, furnishings, equipment (including office equipment and computer hardware), supplies, inventory and other tangible personal property located in the Seller’s offices at 2530 Meridian Parkway, 2nd Floor, Durham, NC  (the "Business Office"), including, but not limited to, those items identified in Schedule 1.2(a).

 

(b)

all of Seller’s right, title and interest in, to and under contracts, agreements, licenses, arrangements and instruments, whether written or oral, to which Seller is a party and which relate to the Company Business including, without limitation, (i) Seller’s yet-to-be completed purchase orders and sales contracts with customers made and entered into in the ordinary course of the Company Business identified in Schedule 1.2(b) (the collectively, “Service Contracts”); and (ii) those purchase orders between Seller and its vendors made and entered into in the ordinary course of the Company Business;

 

(c)

all of Seller’s right to enforce all confidentially, non-solicitation, and non-competition provisions with the Transferred Employees (as defined below) and any other former employees of the Company Business;

 

(d)

all claims and rights with or against all persons and entities whomsoever relating to the Acquired Assets, whether such claim or right accrued prior to the Effective Date;

 

(e)

all intellectual property and related rights used in or relating to the Company Business (collectively, the “Intellectual Property”), including, but not limited to, those items listed on listed on Schedule 1.2(e) and all other assumed names, business names, trade names, trademarks and service marks, logos, and brand names (whether registered or unregistered); Internet domain names (including, without limitation, and all web pages linked to such web pages owned by Seller with respect to the Company Business); trade dress rights; patents; writings and other copyrightable works; trade secrets, know-how, and research and development information (whether or not patentable); all third party licenses  (including software licenses) granting any ri ght to Seller to use any intellectual

 

(f)

general intangibles, including all telephone numbers (toll free and main number),  email messages of certain Company employees identified on Schedule 4.2(m) (in an electronic format), facsimile numbers, supplier lists, databanks, designs, plans, proposals, concepts, methods, processes, formulae, strategies, techniques, technical data, business and marketing plans, confidential information and other proprietary or non-public business information;

 

(g)

all permits and licenses, approvals, and the like issued to Seller by any governmental entity in connection with the Company Business;

 

(h)

all customer lists, customer records and information, and all other books and records (other than those set forth in Sections 1.3(a) and (b)) relating to the Company  Business or the Acquired Assets;

 

(i)

all sales and promotional materials, tradeshow exhibit booths, catalogues and advertising literature relating to the Company  Business or the Acquired Assets;

 

(j)

all goodwill of the Company Business (the “Goodwill”);

 

(k)

all work-in-progress related to the Company Business for unbilled services completed prior to the Effective Date;

 

(l)

all prepaid deposits made by Seller relating to the Company Business; and

 

(m)

all accounts receivable as of the Effective Date, whether or not represented by invoice, bills or other billing statements, and including all substantially completed work for which invoices have not been generated, (the “Accounts Receivable”), including, but not limited to, those items listed in Schedule 1.2(m) and all prepaid expenses as of the Effective Date (“Pre-Paid Expenses”).

 

(a)

Seller’s minute books, income tax returns, tax and accounting records;

 

(b)

all insurance policies;

 

(c)

those contracts, leases, agreements, licenses and instruments set forth on Schedule 1.3(c);

 

(d)

all income tax instalments paid by Seller and the right to receive any refund of income taxes paid by Seller;

 

(e)

all cash, deposits, securities, including the proceeds of the Seller’s stock in Prudential Life Ins. Co., and cash equivalents; and

(f)

all records of Seller’s employees who are not Transferred Employees as defined in Section 2.2(a).

 

2.   ASSUMPTION OF LIABILITIES

 

(a)

all contractual obligations under the Service Contracts with respect to performance first due after the Effective Date (as defined below);

 

(b)

all trade accounts payable, accrued expenses and other trade debt and similar obligations incurred by Seller in the ordinary course of business as of the Effective Date as identified on Schedule 2.1(b) (the “Trade Accounts Payable”);

 

(d)

the Accrued Leave (as defined below);

 

(e)

all liabilities incurred in the operation of the Company Business first arising after the Effective Date; and

 

(f)

the lease of the Business Office as reflected in that Office Service Agreement dated July 13, 2009 with Regus Management Group, LLC (the “Business Office Lease”).

 

(a)

The parties acknowledge that Purchaser may offer employment effective as of the Effective Date to some or all of the employees of Seller listed on Schedule 4.2(s) (the employees being offered such employment also as indentified on that schedule being the “Transferred Employees”).

 

(b)

Seller shall, effective as of the Effective Date, terminate the employment of any of the Transferred Employees who have accepted an offer of employment from Purchaser to accept employment with Purchaser and inform them of the termination of all employee benefit plans and programs, and such disclosure and termination shall otherwise satisfy and comply with any and all applicable local, state, and federal laws and regulations.

 

(c)

In no event shall Purchaser be deemed to have assumed or become liable for the liabilities or obligations of Seller to any Transferred Employee hired by Purchaser under any employment contract, employee benefit plan or pension plan, bonus plan, or related agreement to which Seller was a party or was otherwise bound and such Seller shall remain liable for. Notwithstanding the preceding to the contrary, Purchaser shall assume liability for the accrued paid

 

3.   PURCHASE PRICE, PAYMENT, CLOSING AND CLOSING DOCUMENTS

 

(a)

Seller’s Deliveries. At the Closing, Seller shall execute (where appropriate) and deliver or cause to be delivered to Purchaser:

 

(i)

physical possession of all tangible Acquired Assets;

 

(ii)

a bill of sale in the form of Exhibit A (the “Bill of Sale”);

 

(iii)

originals of all Service Contracts, together with correspondence pertaining thereto not previously delivered to Purchaser, and an assignment transferring and assigning to Purchaser all of Seller’s right, title, interest in the Service Contracts in the form of Exhibit B (the “Contract Assignment”);

 

(iv)

consents to the assignment of all Service Contracts under which such consent is required, executed by all persons whose consent is required, in the form acceptable to Purchaser and its counsel;

 

(v)

copies of the Seller’s personnel files (who consent to the transfer of their personnel records) for the Transferred Employees, provided that such files may be delivered as soon as is practicable following the Closing Date;

(vi)

a certified copy of the resolutions by the directors of Seller authorizing the execution, delivery, and performance of this Agreement and the other documents and agreements contemplated by this Agreement; and

 

(b)

Purchaser’s Deliveries. At the Closing, Purchaser shall execute (where appropriate) and deliver or cause to be delivered to Seller:

 

(i)

a certified copy of the resolutions of the directors of Purchaser authorizing the execution, delivery and performance of this Agreement and the other documents and agreements contemplated by this Agreement;

 

(ii)

a list of all of the Transferred Employees whom Purchaser has elected to hire;

 

(iii)

the Bill of Sale and the Contract Assignment; and

 

(iv)

a wire of the Down Payment to Wachovia Bank, N.A. for Sellers’ or their parent’s account.

 

(c)

Other Deliveries.  At the Closing, each party shall also take such other actions, and execute and deliver such other documents and instruments, as are required or are reasonably requested by the other party (or its counsel), to effectuate the Closing in accordance with this Agreement. Each document and instrument delivered in accordance with this Section 3.4 shall be in form and substance reasonably satisfactory to the parties.

 

4.   REPRESENTATIONS AND WARRANTIES

 

(a)

Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina.  Purchaser has all the necessary power and authority to own and lease its assets and conduct its business as now conducted.

 

(b)

Purchaser has full power and authority to enter into and perform (i) this Agreement and (ii) all documents and instruments to be executed by Purchaser pursuant to this Agreement (collectively, “Purchaser’s Ancillary Documents”). This Agreement and Purchaser’s Ancillary Documents have been duly executed and delivered by duly authorized officers of Purchaser and are, or when so

 

(c)

No consent, authorization, order or approval of, or filing or registration with, any governmental authority or other person or entity is required for the execution and delivery by Purchaser of this Agreement or any of Purchaser’s Ancillary Documents, or the consummation by Purchaser of the Transaction, other than those which have been or will be obtained by Purchaser on or before the Closing Date.

 

(d)

Neither the execution and delivery of this Agreement and Purchaser’s Ancillary Documents by Purchaser, nor the consummation by Purchaser of the Transaction, will conflict with or result in a breach of any of the Purchaser’s Articles of Incorporation, bylaws, or any contract, agreement, any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or governmental authority or of any arbitration award binding upon Purchaser or its assets.

 

(e)

Purchaser is not a party to any unexpired, undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note, or other instrument under the terms of which performance by Purchaser according to the terms of this Agreement or Purchaser’s Ancillary Documents will be a default, or whereby timely performance by Purchaser according to the terms of this Agreement or Purchaser’s Ancillary Documents may be prohibited, prevented, or delayed.

 

(f)

To Purchaser’s knowledge, there is no litigation or proceeding pending, no investigation pending, or any such proceeding or investigation threatened in writing against Purchaser, before any court, governmental entity, arbitrator or other tribunal, or with respect to the consummation of the Transaction, or in the operation, use or ownership of Purchaser’s business.

 

(a)

Seller is a corporation duly organized, validly existing and in good standing, under the laws of the State of North Carolina.  Seller has all necessary power and authority to own and lease its assets and conduct the Company Business as now conducted.  Seller does not own, directly or indirectly, any equity interest in any other corporation, partnership or other entity or have the right, pursuant to a contract or otherwise, to acquire any capital stock, equity interest or other similar investment in any corporation, partnership or other entity.

 

(b)

Seller has full power and authority to enter into and perform (i) this Agreement and (ii) all documents and instruments to be executed by Seller pursuant to this Agreement (collectively, “Seller’s Ancillary Documents”). This Agreement has been, and Seller’s Ancillary Documents will be, duly executed and delivered by

 

(c)

No consent, authorization, order or approval of, or filing or registration with, any governmental authority or other person or entity is required for the execution and delivery by Seller of this Agreement and Seller’s Ancillary Documents or the consummation by Seller of the Transaction, other than those which have been or will be obtained by Seller on or before the Closing Date.

 

(d)

Neither the execution and delivery of this Agreement or any of Seller’s Ancillary Documents by Seller nor the consummation by Seller of the Transactions, will conflict with or result in a breach of any of the terms, conditions or provisions of their respective Articles of Incorporation, bylaws, or other charter documents, or to the Seller’s knowledge, of any contract, agreement, statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or any governmental authority or of any arbitration award binding upon Seller or the Acquired Assets.

 

(e)

To the Seller’s knowledge, Seller’s books, accounts and records are, and have been, maintained in Seller’s usual, regular and ordinary manner, and all material transactions relating to the Company Business or the Acquired Assets are accurately and properly reflected in all material respects therein. To Sellers’ knowledge, all financial statements maintained in the regular course of business fairly present in all material respects the financial condition and results of operations of Seller as at the respective dates thereof and for the periods therein referred to.

 

(f)

Seller shall, at Closing, convey and transfer to Purchaser good and valid title to the Acquired Assets, free and clear of any liens, security interests, claims, and encumbrances (except, those Acquired Assets which are subject to leases or licenses as identified in the applicable schedule, which are assigned to and assumed by Purchaser at the Closing under the terms of this Agreement and except that Seller makes no warranty against third party claims to the ownership or prior right to use the Intellectual Property of which Seller has no knowledge)

 

(g)

To the best of its knowledge, Schedule 1.2(b) correctly and completely lists all Service Contracts and all other material contracts, leases, agreements and instruments relating to the Company Business or the Acquired Assets (including all amendments, supplements and other modifications thereto). All contracts, leases, agreements, and other instruments referred to in this Section 4.2(h) are, to Seller’s knowledge, in full force.  No material default by Seller has occurred thereunder and, to Seller’s knowledge, no default by the other parties thereto has occurred thereunder. To Seller’s knowledge, no event, occurrence, or condition exists which, with the lapse of time, the giving of notice, or both, or the happening of any further event or condition, would become a default by Seller or, to Seller’s knowledge, any other party thereunder. All such contracts and agreements have, to Seller’s knowledge, been incurred in the ordinary course of business.

 

(h)

To Seller’s knowledge,  and except for certain loan facility with Wachovia Bank, N.A. (with respect to which consent shall be obtained by Seller on or before the Closing Date) and the lease of  the Business Office, Seller is a not a party to, or bound by, any unexpired, undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note or other instrument under the terms of which performance by Seller according to the terms of this Agreement will be a default or an event of acceleration, or whereby timely performance by Seller according to the terms of this Agreement may be prohibited, prevented or delayed.

 

(i)

To Seller’s knowledge, Seller has filed all required federal, state, provincial, municipal and local income, sales, employee, franchise and other tax returns and reports relating to the Company Business or the Acquired Assets, accurately reflecting any and all taxes owing, or any other government or subdivision thereof, or any other taxing authority, and has paid or properly accrued for all taxes shown on said returns or reports to be due and owing.

 

(j)

Except as identified on Schedule 4.2 (j), there is no claim, action, suit, inquiry, investigation, grievance, arbitration, litigation or judicial or administrative proceeding relating to or pending and, to Seller’s knowledge, threatened against Seller, the Company Business, or any of the Acquired Assets, before any court, governmental entity, arbitrator or other tribunal or with respect to the consummation of the Transaction or the operation, use or ownership of the Company Business or the Acquired Assets or Assumed Liabilities.

 

(k)

Seller is not a party to, or bound by, any judgment, decree, order or arbitration award (or agreement entered into in any administrative, judicial or arbitration proceeding with any governmental authority or arbitrator).

 

(l)

To Seller’s knowledge, neither Seller nor its assets or properties are in violation of, or delinquent in respect to, any law, statute or regulation of, or agreement with, or permit from, any governmental authority, including, without limitation, laws, statutes, and regulations relating to equal employment opportunities, fair employment practices, unfair labor practices, terms of employment, occupational health and safety, wages and hours and discrimination, and zoning ordinances and building codes.

 

(m)

Schedule 4.2(m) contains a true and complete list of all persons employed by Seller, including their (i) date of hire, (ii) current salary, (iii) bonus entitlements and terms of payment, (iv) other perquisites, and (v) vacation day entitlement and amounts used as of the Effective Date, and any other material compensation and other employment arrangements.

 

(n)

With respect to employees of Seller: (i) except as may be set forth on Schedule 4.2(n), there is no pending or, to the knowledge of Seller, threatened employee grievance charges. Seller shall indemnify Purchaser from any liabilities with respect to the claims listed on Schedule 4.2(n); (ii) and no employee is due any bonus or other compensation other than their regular salaries, which will have been paid to date as of the Effective Date; and (iii) there are no discrimination, human rights, disability, unfair labor practice claim, or any other claim or cause of action pending or, to Seller’s knowledge, threatened against Seller by any of

 

(o)

Intentionally Deleted.

 

(p)

Schedule 1.2(e) sets forth an accurate and complete list of all Intellectual Property owned by or licensed to Seller and is the only intellectual property (other than the Third Party Licenses) used in the operation of the Company Business. Seller has not received any written or oral notice or claim challenging Seller’s exclusive and sole ownership of the Intellectual Property or suggesting that any other person or entity has any claim of legal or beneficial ownership or other claim or interest with respect thereto (other than the licensors under the Third Party Licenses). Seller has not granted to any person any right, license, or permission to use any of the Intellectual Property. There are no agreements involving the grant to any person or entity of any right to distribute, develop, prepare derivative works based on, support or main tain or otherwise commercially exploit any of the Intellectual Property. To the Seller’s knowledge, the use or other exploitation of the Intellectual Property, as used in the Company Business, do not conflict with, infringe upon, violate, or result in a misappropriation of any intellectual property rights or other proprietary rights of any person or entity, nor is any of the foregoing subject to any outstanding order, judgment, decree, stipulation, or agreement restricting the use thereof or restricting the sale, transfer, assignment or licensing of such to Purchaser. To its knowledge, Seller has the exclusive right to bring actions against any person or entity that is infringing the Intellectual Property owned by Seller and to retain for itself any damages recovered in any such action. All Third Party Licenses are in full force and effect and are enforceable and Seller is not aware of any breach thereof or aware of any claim or information to the contrary. There are no outstanding and no threatened di sputes or disagreements with respect to any Third Party License.

 

(q)

To its knowledge, no royalties, fees, honoraria, volume-based, milestone, or other payments are payable by Seller to any person or entity by reason of the ownership, use, sale, licensing, distribution or other exploitation of any software, Owned Intellectual Property, or other Intellectual Property relating to the conduct or operation of the Company Business.

 

(r)

Seller is not nor has it been a party to any proceeding, nor has any proceeding been threatened, that involves or involved a claim of infringement, misappropriation or other wrongful use or exploitation, either by Seller or by any person or entity against Seller, of any Intellectual Property used or exploited by Seller in the conduct of the Company Business, nor, is there any reasonable basis for such.

 

(s)

There are no existing arrangements or proposed transactions between Seller and any officer or director or holder of any of the shares of Seller or any Affiliate or Associate of any of them (other than arrangements or transactions entered into in the ordinary course of business on terms no more favourable to such officer, director, holder, Affiliate or Associate than the terms on which such

 

(t)

To the best of its knowledge, the Seller has maintained all necessary insurance in connection with the Company Business, as well as insurance in connection with the employees employed in connection with the Company Business.  Seller shall have no obligation to maintain any insurance applicable to it or the operation of the Company Business prior to the Closing Date, and Purchaser shall be solely responsible to obtain and put into place effective as of the Closing Date all insurance which Purchaser deems necessary for the assets of and the Purchaser’s operation of the Company Business.

 

(a)

Hosting Services – At no cost to Seller, for a ninety (90) day period on and after the Closing Date, provide hosting services to the Company Business at Seller’s existing hosting facility at the same service levels and using the same Seller provided equipment (subject to replacement). Upon notice to the Seller, Purchaser shall be afforded reasonable access to the servers to conduct testing and other configuration requirements. Seller covenants to assist Purchaser at no cost to Seller in its efforts to transition to a new server environment.

 

(b)

Goodwill –Intentionally Deleted.

 

6.   Conditions to Closing. The obligations of the Seller and Purchaser to consummate the Closing are subject to the fulfillment of all of the following conditions on or prior to the Closing Date:

 

(a)

All obligations of Seller and Purchaser to be performed under the Agreement through and including the Closing Date shall have been performed.

 

(b)

Seller shall have procured all of the third party and governmental consents, authorizations, and approvals required to be obtained by it under this Agreement, including but not limited to, the consent and approval of Wachovia Bank, N.A.

 

(c)

No suit or proceeding shall have been commenced or threatened by any governmental authority or other person on any grounds to restrain, enjoin or hinder, or to seek material damages on account of, the consummation of the Transaction.

 

7.     POST-CLOSING AGREEMENTS AND COVENANTS

 

8.     INDEMNIFICATION

 

(a)

all covenants, representations and warranties relating to taxes, tax liability or other tax matters for any period ending prior to or on the Closing Date shall survive the closing of the transactions contemplated herein for any period during which any taxing authority may make any claim or assessment based on any return filed or failed to be filed plus a period of 30 days, after which period the party making such covenants, representations and warranties shall be released from their obligations and liabilities hereunder, except in respect of claims made in writing prior to the expiry of such period;

 

(b)

any claims based upon or with respect to the inaccuracy or non-performance or non-fulfilment or breach of any representation, warranty or covenant respecting taxes, tax liability or other tax matters set out herein may be brought at any time, if such claim is based upon any failure or omission to file a return or any misrepresentation made or fraud committed in filing a return or in supplying information under any legislation pursuant to which any taxes are imposed;

 

(c)

any claims based upon any misrepresentation, or breach or inaccuracy in any of the representations and warranties set out herein may be brought against such party at any time if such claim is based upon fraud in respect of or relating to

 

(d)

any claim based upon the representations and warranties contained in Section 4.2(f) shall survive  for the statute of limitations period under applicable law.

 

(a)

any material inaccuracy in or material breach of any representation or warranty made by Seller in this Agreement or in any document delivered to Purchaser in connection with this Agreement;

 

(b)

any breach by Seller, or failure by Seller to comply with, any of its material obligations or agreements under this Agreement (including, without limitation, its or his obligations and agreements under this Section 8 and under Section 9); or

 

(c)

the failure to discharge (and to indemnify and hold Purchaser harmless from) any liability or obligation of Seller, including without limitation pursuant to Section 2.2, other than the Assumed Liabilities, or any claim against any such indemnified party with respect to any such liability or obligation or alleged liability or obligation;

 

(d)

the failure to comply with the requirements of any transfer laws or fraudulent conveyance statute applicable to Seller or the Acquired Assets, which to any extent results in any claim against any such indemnified party with respect to any such liability or obligation or alleged liability or obligation resulting from any such failure; or

 

(e)

any Unassumed Liabilities.

 

(b)

any breach by Purchaser of, or failure by Purchaser to comply with, any of its obligations under this Agreement (including, without limitation, its obligations under this Section 8);

 

(c)

Purchaser’s failure to pay, discharge and perform when due any of the Assumed Liabilities or any claim against any such indemnified party with respect to any such liability or obligation or alleged liability or obligation; or

 

(d)

any Assumed Liabilities; and

 

(e)

any act or omission of the Purchaser occurring after the Effective Date which relates directly or indirectly to the operation or conduct of the Company Business or the use of the Acquired Assets.

 

(a)

Within fifteen (15) days after receipt by a party indemnified under this Section 8 of notice of the commencement of any legal proceeding against it by a third party, such indemnified party shall, if a claim is to be made against an indemnifying party under this Section 8, give notice to the indemnifying party of the commencement of such proceeding, which notice shall specify the nature of the claim in reasonable detail and contain copies of all correspondence and other documentation and agreements with respect to such claim.  However, the failure to notify the indemnifying party shall not relieve the indemnifying party of any liability that it may have to the indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is materially prejudiced by the indemnified party’s failure to give such notice.

 

(f)

If any proceeding referred to in Section 8.3(a) is brought against an indemnified party and it gives the required notice to the indemnifying party of the commencement of such proceeding, the indemnifying party shall be entitled to participate in such proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such proceeding and the counsel chosen by the indemnifying party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such proceeding and provide indemnification with respect to such proceeding), to assume the defense of such proceeding with counsel satisfactory to the indemnified party and, after notice from the indemnifying party to the indemn ified party of its election to assume the defense of such proceeding, the indemnifying party will not, as long as it diligently

 

(g)

Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such proceeding, at the indemnifying party’s expense, but the indemnifying party will not be bound by any determination of a proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld).

 

9.   NON-DISCLOSURE/NON-SOLICITATION

 

Marketsmart Advertising, Inc.

15550 Lightwave Drive, 3rd Floor

Clearwater, FL 33760

Attention:  Wallace Ruiz, CFO

Fax:            ###-###-####

Email: ***@***

 

The Finch Agency, Inc.

2227 Long Pine Lane

Raleigh, NC 27603

Email: ***@***

 

John D. Mullen

Phelps Dunbar, LLP

100 S. Ashley Street

Suite 1900

Tampa, FL 33617

Email: ***@***

Fax: (813) 472-7570

 

James M. Day

Burns, Day & Presnell, PA

2626 Glenwood Ave, Ste 560

Raleigh, NC 27608

Fax: (919) 782-2311

Email: ***@***