ACQUISITION AGREEMENT
Acquisition Agreement,
made this 26th day of August 2002 among:
PIPELINE DATA INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
a Delaware corporation
(the "Buyer")
and
NORTHERN MERCHANT SERVICES, INC.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
a New York corporation
(the "Company")
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(together the "Sellers")
WHEREAS;
A. Company operates a call center and is a registered member service
provider which provides credit card services to banks and buisness's.
B. Buyer has developed a system to provide authorization routing and data
capture transfer in connection with transactions involving credit cards,
proprietary electronic database shopping cart technologies and Internet gateway
solutions, Web hosting and Web design products in accordance with certain
specifications and standards adopted by Company.
C. The parties hereto deem it to be in the best interest of each of them
that Buyer purchase 100 percent of the issued and outstanding capital stock of
the Company, and succeed to the business of the Company, all pursuant to such
terms, provisions and conditions as the parties hereto shall agree.
NOW, THEREFORE, WITNESSETH, that for and in consideration of the premises
and of the mutual promises and covenants hereinafter set forth, the parties
hereto agree as follows:
A. PURCHASE AND PAYMENT
1. PURCHASE AND SALE OF STOCK.
1.1 Buyer agrees to purchase from Sellers and Sellers agrees to sell,
assign, transfer and deliver to Buyer 100 percent of the issued and outstanding
stock of the Sellers owned by Sellers as described in Schedule A annexed hereto
and made a part hereof (collectively, the "Stock"). An integral part of the
purchase made by Buyer pursuant to this Agreement is the assets of that certain
sole proprietorship operated by the Sellers. The Sellers represent and warrant
that they operate a sole proprietorship that they agree to wholly roll into the
Company. Upon the closing of the transaction contemplated by this agreement, the
Buyer shall de facto and de jure purchase the assets of this sole proprietorship
through the acquisition of Sellers' stock in the Company
1.2 The purchase and payment for the Stock by Buyer shall take place at the
time and in the manner hereinafter provided, and the sale, assignment, transfer
and delivery of the Stock by Sellers, shall take place on the Closing Date at
the Closing as those terms are hereinafter defined, subject to the fulfillment
of the conditions hereinafter provided.
2. PURCHASE PRICE.
2.1 The aggregate purchase price of the Stock (the "Purchase Price"), shall
be (i) five thousand shares of Series A Preferred Convertible Stock (the
"Preferred Shares"), each Preferred Share is convertible into one thousand
(1,000) shares of common stock of the Buyer (the "Common Shares") at the
conversion price of $0.50 per Common Share and (i) one million shares of common
stock of the Company. 2.2 During the 36-month period from the date (the
"36-month Period") of this Agreement, the Buyer agrees that it shall not
transfer or suffer any encumbrance on the merchant portfolios sold by the
Sellers pursuant to this Agreement, except to facilitate Seller loans or payment
of the $2,500,000 repurchase price (as discussed herein). The Buyer agrees that
during the 36-month Period, it shall offer to repurchase the Preferred Shares
from the Sellers for $2,500,000. In the event that the Buyer fails to do this,
the merchant portfolio shall revert back to the Sellers. The Sellers have the
option of refusing this offer of repurchase or accepting it in whole or in part.
If the Sellers refuse the Buyer's offer, the Buyer is under no further
obligation to repurchase the Preferred Shares. The Sellers have the option to
exercise their Preferred Shares at any time in whole or in part. The amount
recouped by the Sellers upon the conversion and sale of the Preferred Shares or
conversion of the Preferred Shares into free trading Shares shall reduced the
repurchase commitment of the Buyer on a pro-rata basis.
2.3 Each time the Company attains 5,000 merchant accounts, the Buyer shall
issue to the Sellers one million (1,000,000) Common Shares, up to an aggregate
of 3,000,000 Common Shares. This earn- in restriction shall expire on the fourth
anniversary of the date of this Agreement. Notwithstanding the foregoing, in
order to earn the aforementioned additional stock allocation, the attainment of
merchant accounts shall not be by merger, acquisition or other business
combination.
2.4 It is acknowledged and agreed by the parties that a portion of the
purchase price is the execution of an employment agreement with lending
provisions in the form of Exhibit D hereto. 2.4.1 Pursuant to the employment
agreement with ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ shall be: 2.4.1.1 paid a salary of
$200,000 per annum,
2.4.1.2 appointed a director of the Buyer,
2.4.1.3 appointed president of the Company as subsidiary of the Buyer,
2.4.1.4 afforded the opportunity to borrow an amount when added to the
amount borrowable by ▇▇▇▇▇ ▇▇▇▇▇▇ shall equal up to an aggregate of
$200,000.
2.4.2 Pursuant to the employment agreement with ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇.
▇▇▇▇▇▇ shall be:
2.4.2.1 paid a salary of $150,000 per annum,
2.4.2.2 appointed vice-president of the Company as subsidiary of the
Buyer,
2.4.3.4 afforded the opportunity to borrow an amount when added to the
amount borrowable by ▇▇▇▇▇ ▇▇▇▇▇▇ shall equal up to an aggregate of
$200,000.
B. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby warrants and represents to Sellers and the Company that, as of
the date hereof, the following statements are true and correct.
1. CORPORATE STATUS.
The Buyer is (a) duly organized, validly existing and in good standing
under the laws of the State of Delaware; (b) has full corporate power to own all
of its properties and carry on its business as it is now being conducted; and
(c) is qualified to do business as a foreign corporation in each of the
jurisdictions in which it operates and the character of the properties owned by
the Buyer or the nature of the business transacted by the Buyer does not make
qualification necessary in any other jurisdiction or jurisdictions.
2. AUTHORITY TO BUYER.
Buyer has full right, power and authority to issue and deliver its common
shares to the Sellers in accordance with the terms of this Agreement, and
otherwise to consummate and close the transaction provided for in this Agreement
in the manner and upon the terms herein specified.
3. FINANCIAL STATEMENTS.
The Buyer has made available through public record its public financial
filings on form 10K and 10Q through March 31, 2002. The Buyer shall make
available to the Company and the Sellers its form 10Q for the period ended June
30, 2002 promptly upon its completion.
4. PERIOD SINCE MOST RECENT FINANCIALS.
From the date of the most recent reviewed quarterly report, the Buyer has:
4.1 Not suffered any material adverse change in its financial
condition, assets, liabilities or business.
4.2 Not affirmatively waived, canceled or compromised any of its
rights, debts or claims of substantial value.
4.3 Not made any distribution to its shareholders, as shareholders, of
any assets, by way of dividends, purchase of shares or otherwise, except as
disclosed hereto.
4.4 Not mortgaged, pledged or granted a lien or encumbrance on any of
its properties or assets.
4.5 Not sold or transferred any of its assets, tangible or intangible
except inventory and other assets sold or disposed of in the ordinary and
usual course of business.
4.6 Not incurred any extraordinary losses, within the meaning of
generally accepted accounting principles, and/or incurred or become liable
for any obligations or liabilities except current liabilities, within the
meaning of generally accepted accounting principles, incurred in the
ordinary and usual course of business, or made any extraordinary
expenditures, within the meaning of generally accepted accounting
principles.
4.7 Other than option issuances as discussed in paragraph 5 below, not
increased the rate of compensation for any of its officers or directors nor
for any executive employees, except as may be in accord with past practices
and in the usual and ordinary course of business of the Buyer.
4.8 Not experienced any material adverse effect on its business,
properties and assets as the result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike, embargo, confiscation of vital
equipment, material or inventory, cancellation of contracts by any domestic
or foreign government, or any agency thereof, or customer whose business
with seller represents 5% or more of sellers gross revenue, riot,
activities of armed forces, or acts of God or the public enemy.
4.9 To the best knowledge of Buyer, it has not incurred any
liabilities, contingent or otherwise, except those stated in the balance
sheet of the Buyer as of March 31, 2002, and current liabilities incurred
in the ordinary and usual course of business since the date of the report.
5. CAPITAL STRUCTURE.
The Buyer (a) is authorized by its charter and applicable law to issue
capital stock of the type and having par values as set forth in its registration
statement, exhibits and subsequent reports, which are publicly available; (b)
has 11,387,000 issued and outstanding shares of its capital stock, all of which
such shares are fully paid and non-assessable; (c) has allocated or has the
right to allocate, in the sole discretion of the Board of Directors, up to
3,000,000 options pursuant to the Buyers option plan to be registered on the
Buyer's Form S-8 after the acquisition; (d) has all voting rights vested
exclusively in the presently issued and outstanding capital stock.
The Buyer acknowledges and agrees to the prompt filing of Form 8-A and to
the future use of the Buyer's option plan to reward the Sellers and members of
the Buyer for the valuable services they have agreed to provide the Buyer. The
parties to this agreement acknowledge and agree that the Form S-8 registering
all holders' options and underlying common stock shall be filed within a
reasonable period of time after the effective date of the acquisition, as
determined by the Buyer's Board of Directors.
6. TITLE TO ASSETS, CONTRACTUAL RIGHTS.
The Buyer has good and marketable title to all of its assets, including its
intellectual property and trade secrets.
7. PEACEABLE POSSESSION OF ASSETS.
The ownership and possession of all of the assets of the Buyer have been
peaceable and undisturbed and the title thereto has never been disputed or
questioned to the knowledge of the Buyer; nor does the Buyer know of any facts
by reason of which the possession or title thereof by the Buyer might be
disturbed or questioned or by reason of which any claim to its assets might
arise or be set up adverse to the Buyer.
8. REGULATORY GOOD STANDING.
The Buyer has all material rights, certificates, authorities, permits,
licenses, franchises and other authorizations necessary to and has complied in
material respects with all laws applicable to, the conduct of its business in
the manner and in the areas in which such business is presently being conducted
and all such certificates, authorities, rights, permits, licenses, franchises
and authorizations are valid, in good standing, in full force and effect, under
no orders of suspension or restraints, and subject to no disciplinary,
probationary or other orders. To the best of its knowledge, the Buyer has
engaged in no activity whatever which would cause or lead to proceedings
involving revocation, suspension, restraint, disciplinary action or any other
action whereby any of such certificates, authorities, rights, permits, licenses,
franchises or authorizations, or any part thereof, might be canceled,
terminated, suspended, impaired, lost or otherwise adversely affected, and no
action or proceeding looking to or contemplating any of the foregoing is pending
or to the Buyer's knowledge threatened. The foregoing shall not be deemed to
constitute a warranty or representation that the Buyer has not heretofore or
shall not hereafter suffer to be committed minor and unintentional violations of
any governmental regulations of such nature as not to cause either suspension or
revocation of the Buyer's operating authority.
9. LITIGATION.
Other than that certain class action suit involving ▇▇▇▇▇▇▇▇▇.▇▇▇, a
subsidiary of the Buyer as previously disclosed to the Company and Sellers, the
Buyer is not a party to any pending or to its knowledge threatened suit, action,
proceeding, prosecution or litigation which might materially adversely affect
the financial condition, business, assets, properties, certificates, rights,
authorities, franchises or authorizations of the Buyer, or materially interfere
therewith, nor to the knowledge of the Buyer is there any threatened or pending
governmental investigation involving the Buyer or any of its operations,
including inquiries, citations or complaints by any federal, state or local
administration or agency, which would materially adversely affect the financial
condition, business, assets or properties of the Buyer; and there are no
outstanding, existing or pending judgments, orders, decrees, rulings,
directives, stipulations or other mandates of any court or any public or
quasi-public agency, body or official which have been in any way violated as
they relate to or affect the Buyer or any of the Buyer's properties, businesses,
operations, affairs or activities.
10. DEFAULTS.
There are no material defaults on the part of the Buyer under any contract,
lease, mortgage, pledge, credit agreement, title retention agreement, security
agreement, lien, encumbrance or any other commitment, contract, agreement or
undertaking to which the Buyer is a party.
11. TAX RETURNS.
All returns for federal, state and other governmental income taxes,
surtaxes, excess profits taxes, franchise taxes, sales and use taxes, real and
personal property taxes and any and all other taxes to which the Buyer, or its
assets, operations or income may be subject, due as of the date hereof, have
been duly prepared and filed in good faith and all taxes shown thereon have been
paid or are accrued on the books of the Buyer.
12. COMPLIANCE WITH LAW.
All of the properties, assets and business operations of the Buyer conform
in material respects with all applicable ordinances, regulations, laws and
statutes, including but not limited to building, zoning, safety, highway and
other such laws, rules, regulations and ordinances.
13. INFRINGEMENTS.
The Buyer has never been charged with infringement or violation of any
adversely held patent, trademark, trade name, or copyright, with claims reading
on operations of the Buyer or on apparatus or methods employed by the Buyer in
effecting the same, which would materially adversely affect any operation of the
Buyer, nor is the Buyer using or in any way making use of any confidential
information or trade secrets, of any former employer or any present or past
employee of the Buyer except as a result of the acquisition of the business of
such former employer.
14. TRUTH OF REPRESENTATION.
No representation by the Buyer made in this Agreement and no statement made
in any certificate or schedule furnished in connection with the transaction
herein contemplated contains or will contain any knowingly untrue statement of a
material fact or knowingly omits or will omit to state any material fact
reasonably necessary to make any such representation or any such statement not
misleading to a prospective purchaser of its common shares.
C. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
Sellers and the Company hereby warrant and represent to Buyer that, as of
the date hereof, the following statements are true and correct.
1. CORPORATE STATUS.
The Company is (a) duly organized, validly existing and in good standing
under the laws of the State of New York; (b) owns all properties material to its
business and this transaction as negotiated in the name of the corporation and
not in the name of the Sellers, including and not limited to that certain sole
proprietorship operated by the Sellers which is material to the business of the
Company and integral to the transaction contemplated hereby; (c) has full
corporate power to own all of its properties and carry on its business as it is
now being conducted; and (d) is qualified to do business as a foreign
corporation in each of the jurisdictions in which it operates and the character
of the properties owned by the Company or the nature of the business transacted
by the Company does not make qualification necessary in any other jurisdiction
or jurisdictions.
2. AUTHORITY TO SELL.
Sellers have full right, power and authority to sell, transfer and deliver
the Stock owned by such Seller to Buyer in accordance with the terms of this
Agreement, and otherwise to consummate and close the transaction provided for in
this Agreement in the manner and upon the terms herein specified.
3. FINANCIAL STATEMENTS.
At or prior to the date of this Agreement, the Company has delivered to
Buyer internal financial statements as of June 30, 2002, and said internal
financial statements, including the related notes and explanatory notes, present
fairly the financial position of the Company at the date thereof and the results
of its operations for the periods therein indicated, in conformity with
generally accepted accounting principals applied on a basis consistent in each
case with that of the preceding year. The Sellers and Company warrant and agree
that promptly upon execution of this Agreement, they shall provide the Buyer
with audited financial statements as of December 31, 2001 and prepared reports
as of June 30, 2002.
4. PERIOD SINCE MOST RECENT FINANCIALS.
From the date of the most recent reviewed internal balance sheet
included in the Company's Financials, the Company has:
4.1 Not suffered any material adverse change in its financial
condition, assets, liabilities or business.
4.2 Not affirmatively waived, canceled or compromised any of its
rights, debts or claims of substantial value.
4.3 Not issued any additional shares of stock, rights or options to
purchase or convert into such stock, or other securities.
4.4 Not made any distribution to its shareholders, as shareholders, of
any assets, by way of dividends, purchase of shares or otherwise, except as
disclosed hereto.
4.5 Not mortgaged, pledged or granted a lien or encumbrance on any of
its properties or assets, except with respect to equipment purchased by the
Company during such period.
4.6 Not sold or transferred any of its assets, tangible or intangible
except inventory and other assets sold or disposed of in the ordinary and
usual course of business.
4.7 Not incurred any extraordinary losses, within the meaning of
generally accepted accounting principles, and/or incurred or become liable
for any obligations or liabilities except current liabilities, within the
meaning of generally accepted accounting principles, incurred in the
ordinary and usual course of business, or made any extraordinary
expenditures, within the meaning of generally accepted accounting
principles, and for additions and betterments to existing plant, equipment
and facilities.
4.8 Not increased the rate of compensation for any of its officers or
directors nor for any executive employees, except as may be in accord with
past practices and in the usual and ordinary course of business of the
Company.
4.9 Not experienced any material adverse effect on its business,
properties and assets as the result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike, embargo, confiscation of vital
equipment, material or inventory, cancellation of contracts by any domestic
or foreign government, or any agency thereof, or customer whose business
with seller represents 5% or more of sellers gross revenue, riot,
activities of armed forces, or acts of God or the public enemy.
4.10 To the best knowledge of Seller, it not incurred any liabilities,
contingent or otherwise, except those stated in the balance sheet of the
Company as of June 30, 2002, and current liabilities incurred in the
ordinary and usual course of business since the date of the said balance
sheet.
5. CAPITAL STRUCTURE.
The Company (a) is authorized by its charter and applicable law to issue
capital stock of the type and having par values as set forth in Schedule A
hereto; (b) has no issued and outstanding shares of its capital stock whatever,
except as specifically indicated in Schedule A hereto, all of which such shares
are fully paid and non-assessable; (c) does not have authorized, issued or
outstanding any subscription, option, warrant, conversion or other rights to the
issuance or receipt of shares of its capital stock except as set forth in
Schedule A hereto; (d) has all voting rights vested exclusively in the presently
issued and outstanding capital stock; and (e) has outstanding no bonds,
debentures or other similar evidences of indebtedness except as specifically
disclosed in its balance sheet as of June 30, 2002, (and related notes thereto).
The Buyer acknowledges and agrees to the prompt filing of Form 8-A and to
the future use of the Buyer's option plan to reward the Sellers and members of
the Buyer for the valuable services they have agreed to provide the Buyer. The
parties acknowledge and agree that the Form S-8 registering all holders' options
and underlying common stock shall be filed within a reasonable period of time
after the effective date of the acquisition, as determined by the Buyer's
Chairman of the Board, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
6. OWNERSHIP OF STOCK.
All of the issued and outstanding shares of capital stock of the Company
are owned by ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇. It is understood and agreed that each of
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ own and control the voting rights over 50% of the
capital stock of the Company, respectively. Sellers own beneficially and of
record the number of shares set forth in Schedule A hereto opposite Seller's
name. Sellers hold such stock free and clear of all liens, claims, debts,
encumbrances and assessments, and any and all restrictions as to sale,
assignment or transferability thereof. Sellers have full right, power and
authority to sell, transfer and deliver all of the shares of Stock owned by said
Seller and the certificates therefor, sold hereunder, to Buyer in accordance
with the terms of this Agreement, and otherwise to consummate and close the
transaction provided for in this Agreement in the manner and upon the terms
herein specified.
7. TITLE TO ASSETS, CONTRACTUAL RIGHTS.
The Company has good and marketable title to all of its assets, including
its intellectual property, trade secrets and the rights evidenced by those
contracts listed on Schedule C hereto. The Company and the Sellers represent and
warrant that the Company and not the Sellers own and control all material assets
of it business, including its intellectual property, trade secrets and the
rights evidenced by those contracts listed on Schedule C hereto.
8. PEACEABLE POSSESSION OF ASSETS.
The ownership and possession of all of the assets of the Company have been
peaceable and undisturbed and the title thereto has never been disputed or
questioned to the knowledge of the Company; nor does the Company know of any
facts by reason of which the possession or title thereof by the Company might be
disturbed or questioned or by reason of which any claim to its assets might
arise or be set up adverse to the Company.
9. REGULATORY GOOD STANDING.
The Company has all material rights, certificates, authorities, permits,
licenses, franchises and other authorizations necessary to and has complied in
material respects with all laws applicable to, the conduct of its business in
the manner and in the areas in which such business is presently being conducted
and all such certificates, authorities, rights, permits, licenses, franchises
and authorizations are valid, in good standing, in full force and effect, under
no orders of suspension or restraints, and subject to no disciplinary,
probationary or other orders. To the best of its knowledge, the Company has
engaged in no activity whatever which would cause or lead to proceedings
involving revocation, suspension, restraint, disciplinary action or any other
action whereby any of such certificates, authorities, rights, permits, licenses,
franchises or authorizations, or any part thereof, might be canceled,
terminated, suspended, impaired, lost or otherwise adversely affected, and no
action or proceeding looking to or contemplating any of the foregoing is pending
or to the Company's knowledge threatened. The foregoing shall not be deemed to
constitute a warranty or representation that the Company has not heretofore or
shall not hereafter suffer to be committed minor and unintentional violations of
any governmental regulations of such nature as not to cause either suspension or
revocation of the Company's operating authority.
10. LITIGATION.
Neither the Company nor the Sellers is a party to any pending or to its
knowledge threatened suit, action, proceeding, prosecution or litigation which
might materially adversely affect the financial condition, business, assets,
properties, certificates, rights, authorities, franchises or authorizations of
the Company, or materially interfere therewith, nor to the knowledge of the
Company is there any threatened or pending governmental investigation involving
the Company or any of its operations, including inquiries, citations or
complaints by any federal, state or local administration or agency, which would
materially adversely affect the financial condition, business, assets or
properties of the Company; and there are no outstanding, existing or pending
judgments, orders, decrees, rulings, directives, stipulations or other mandates
of any court or any public or quasi-public agency, body or official which have
been in any way violated as they relate to or affect the Company or any of the
Company's properties, businesses, operations, affairs or activities.
11. DEFAULTS.
There are no material defaults on the part of the Company under any
contract, lease, mortgage, pledge, credit agreement, title retention agreement,
security agreement, lien, encumbrance or any other commitment, contract,
agreement or undertaking to which the Company is a party.
12. TAX RETURNS.
All returns for federal, state and other governmental income taxes,
surtaxes, excess profits taxes, franchise taxes, sales and use taxes, real and
personal property taxes and any and all other taxes to which the Company, or its
assets, operations or income may be subject, due as of the date hereof, have
been duly prepared and filed in good faith and all taxes shown thereon have been
paid or are accrued on the books of the Company.
13. COMPLIANCE WITH LAW.
All of the properties, assets and business operations of the Company
conform in material respects with all applicable ordinances, regulations, laws
and statutes, including but not limited to building, zoning, safety, highway and
other such laws, rules, regulations and ordinances.
14. INFRINGEMENTS.
The Company has never been charged with infringement or violation of any
adversely held patent, trademark, trade name, or copyright, with claims reading
on operations of the Company or on apparatus or methods employed by the Company
in effecting the same, which would materially adversely affect any operation of
the Company, nor is the Company using or in any way making use of any
confidential information or trade secrets, of any former employer or any present
or past employee of the Company except as a result of the acquisition of the
business of such former employer.
15. TRUTH OF REPRESENTATION.
No representation by the Company made in this Agreement and no statement
made in any certificate or schedule furnished in connection with the transaction
herein contemplated contains or will contain any knowingly untrue statement of a
material fact or knowingly omits or will omit to state any material fact
reasonably necessary to make any such representation or any such statement not
misleading to a prospective purchaser of the Stock.
16. UTILIZATION OF WORKING CAPITAL.
The Company and the Sellers represent, warrant and agree that it shall
utilize all working capital toward the establishment of the business of the
Company, and in accordance with this Agreement, their employment agreements and
borrowing rights and not otherwise towards personal fees or expenses of the
Sellers. Such fees and expenses shall be drawn from revenues earned.
D. COVENANTS OF THE SELLERS AND THE COMPANY
Sellers hereby covenant and agrees as follows:
1. INSPECTION OF RECORDS.
During the period from the date hereof through the Closing Date as that
term is hereinafter defined (the "Contract Period"), the Buyer shall have the
right and opportunity at its own expense to make such examination and
investigation of the Company's business, properties and affairs as the Buyer may
deem reasonably necessary or desirable for all purposes relating to this
Agreement and to that end, throughout the Contract Period, the Company will
allow and grant the Buyer, its officers, counsel, accountants, auditors and
executive employees full, free and continuous access, during normal business
hours and without interference with the conduct of the Company's business, to
all of the premises, properties, contracts, commitments, leases, books, papers,
documents, instruments, books of account, minutes and other records of the
Company and will furnish and provide the Buyer with all such financial and other
statements and all such additional information and particulars in respect of the
business, properties and affairs of the Company as the Buyer may, from time to
time during the Contract Period, reasonably request or require.
2. CONDUCT OF BUSINESS.
During the period from the date hereof to the Closing Date as that term is
hereinafter defined, the Company shall:
2.1 Conduct its business and operations solely in the usual, normal
and ordinary course;
2.2 Issue no additional shares of stock, options, calls or other
rights to purchase such stock, or any other securities of any kind
whatever;
2.3 Make no distributions to its shareholders, as shareholders, of any
of its assets or properties by way of dividends, purchase of shares,
redemption or otherwise.
2.4 Not transfer to any person, firm or corporation any customers,
customer lists or customer accounts of the Company;
2.5 Make no increase of any kind in any salary, wages, bonus or
compensation of any officer, employee, representative or agent of the
Company or pay any extra compensation of any kind whatever to any of such
persons, except with respect to such increases in or additions to
compensation as may be required to be paid in accordance with existing firm
and binding contracts and commitments of the Company and except as may be
in accordance with past practices and in the usual and ordinary course of
business of the Company;
2.6 Not sell, transfer or dispose of any of the Stock;
2.7 Not sell, transfer or dispose of any of its business, properties
or assets, tangible or intangible, except for a full and fair consideration
in the usual and ordinary course of business;
2.8 Make no purchases or acquisitions of any real or personal property
nor increase or decrease inventory, except in the usual and ordinary course
of its business;
2.9 Not subject any of its business, property or assets whatever,
tangible or intangible, to any mortgage, lien, pledge, hypothecation or
encumbrance in any manner except for a full and fair consideration in the
usual and ordinary course of business;
2.10 Not borrow any money, make any unusual or extraordinary
expenditures or incur or become liable for any obligations or liabilities
except current liabilities in the usual and ordinary course of its
business;
2.11 Not make any loans or advances or extend any credit except in the
usual and ordinary course of its business;
2.12 Take all acts necessary and appropriate to secure that any assets
material to the Company and the transaction contemplated hereby that are
currently held by the Sellers in a sole proprietorship are transferred to
the Company for onward transfer to the Buyer through the sale of Sellers'
stock.
3. PUBLICITY.
All notices to third parties other than Sellers and all other publicity
concerning the transactions contemplated by this Agreement shall be planned and
coordinated jointly by Buyer and by the Company.
4. WARRANTIES AND REPRESENTATIONS.
The Company will promptly furnish to Buyer (but no later than October 1,
2002) audited financial statements for the year ended December 31, 2001 as well
as copies of any and all financial statements of the Company prepared by or for
the Company subsequent to the date hereof, and will promptly furnish to and
advise the Buyer of any and all material information, details, facts and
circumstances concerning the Company's financial condition, or business arising
subsequent to the date of this Agreement by reason of which any changes,
modifications, amendments, additions or deletions from any Schedule annexed
hereto or any warranty, representation, covenant or condition recited herein
would be necessary to render the same true and correct in material respects and
not materially false or misleading, as of the date such information, details,
facts and circumstances are furnished to the Buyer.
E. CONDITIONS PRECEDENT TO CLOSING
All obligations of the Buyer under this Agreement are subject to the
fulfillment of each of the following conditions, in addition to the fulfillment
of any and all other conditions set forth in this Agreement:
1. EFFECTIVENESS OF WARRANTIES.
Each and every one of the warranties and representations of Sellers and the
Company as hereinbefore set forth in Paragraph C hereof, shall be true at and as
of the Closing Date as though such representations were made at and as of such
time.
2. PERFORMANCE OF COVENANTS.
Each and every covenant herein made by Sellers and the Company, as set
forth in Paragraph D, which are to be performed at or prior to the Closing Date,
shall have been duly performed by such times.
3. NON-COMPETE AGREEMENTS.
The Sellers will sign a non-competition agreement, which shall bind
themselves and their affiliates, satisfactory to the Buyer.
4. CORPORATE ACTION.
Prior to the Closing Date, the Board of Directors of the Company shall have
duly adopted resolutions to the same effect with respect to the aforesaid
matters.
5. TERMINATION.
In the event any of the foregoing conditions shall not be fulfilled prior
to the Closing, unless caused by any action or failure to act on the part of
Buyer, Buyer shall have the right to terminate the Agreement by notice thereof
in writing to the Company, and the parties hereto shall be restored as far as
possible to status quo, whereupon the parties hereto shall have no further
obligations or liabilities hereunder, one against the other, except for the
obligation of Buyer under Section H hereof which shall survive a termination of
this Agreement.
F. LOCK-UP AGREEMENTS
The Sellers shall execute lock-up agreements restricting any sales of their
shares to the following volume limitations during the stated time periods
commencing from the Closing Date.
Until 90 days after the Closing Date - 0%
Upon 90 days after the Closing Date - 15%
Upon 180 days after the Closing Date - 25%
For each of the 6 months commencing on the 361st day after the Closing
Date - 10% per month.
G. BOARD COMPOSITION
The parties to this Agreement agree to appoint ▇▇▇▇▇ ▇▇▇▇▇▇ director of the
Company after the Closing Date. The parties to this Agreement agree that ▇▇.
▇▇▇▇▇▇ shall be voted on to the board of directors of Pipeline and the Company,
subject to his right of resignation and his employment agreement, for a period
not less than 24 months from the Closing Date. The board shall obtain directors'
and officers' liability insurance as soon as it is fiscally responsible to do
so.
H. OFFICERS
The parties to this Agreement ▇▇▇▇▇ ▇▇▇▇▇▇ shall be President of the
Company and ▇▇▇▇▇ ▇▇▇▇▇▇ shall be its Vice President.
I. INVESTMENT BANKERS
It is agreed that the chairman of the board shall appoint as underwriters
and/ or solicitation agents as he deems necessary and appropriate.
J. INDEMNIFICATION
1. Buyer shall be indemnified by Sellers and the Company as follows:
Sellers and the Company shall indemnify and hold harmless the Buyer from
and against any losses, damages or expenses which may be suffered or incurred by
Buyer arising from or by reason of the inaccuracy of any statement,
representation or warranty of Sellers or the Company made herein or, in any
schedule hereto or certificate delivered in connection herewith, or the failure
of Sellers or the Company to perform any agreement made by them herein. Buyer
shall give Seller prior written notice of any claim, demand, suit or action with
respect to which indemnity may be sought pursuant to this Section. Sellers, in
every such case, shall have the right at his sole expense and cost to
participate in contesting the validity or the amount of any such claim, demand,
suit or action. Notwithstanding anything herein to the contrary, Sellers shall
have no liability under this Section for any loss, damage, expense or amount
suffered or incurred by Buyer or the Company which is covered by insurance
maintained by the Company on the Closing Date.
2. Seller and the Company shall be indemnified by the Buyer as follows:
The Buyer shall indemnify the Company and Sellers and shall hold the
Company and Sellers harmless, on demand, from and against any losses, damages or
expenses which may be suffered or incurred by the Company or Seller arising from
or by reason of the inaccuracy of any statement, representation or warranty of
the Buyer made herein or in any document or instrument delivered by Buyer to
Sellers or the Company in connection with the transactions herein contemplated,
or the failure of Buyer to perform any agreement or covenant made by it herein
or in any document or instrument delivered by Buyer to Sellers or the Company in
connection with the transactions herein contemplated.
K. PIGGY-BACK REGISTRATION
Sellers shall be entitled to "piggy-back" registration rights on
registrations of the Buyer, subject to the right of the Buyer and its
underwriters to reduce in view of market conditions the number of shares of the
Sellers proposed to be registered to not less than one-third of the total number
of shares in the offering. A registration rights agreement shall be executed by
the parties at Closing.
L. CLOSING
1. TIME AND PLACE.
The closing under this Agreement (the "Closing") and all deliveries
hereunder shall take place at the office of the Buyer on August __, 2002 or such
other date as shall be agreed upon by all the parties ("the Closing date").
2. DELIVERY OF DOCUMENTS.
At the Closing, the Company will deliver to the Buyer the following
documents:
2.1 Such additional copies or duplicate originals of the above
described documents and such other documents, undertakings and assurances
as Buyer shall reasonably require, all of which documents, undertakings and
assurances shall be delivered to Buyer sufficiently in advance of the
Closing Date, as Buyer shall reasonably require, so as to permit adequate
inspection and examination thereof, all of which documents, undertakings
and assurances shall be in form satisfactory to counsel to Buyer.
M. CONFIDENTIALITY
All information and documentation provided or to be provided by the Company
or Sellers to Buyer in connection with this Agreement and the transactions
contemplated hereby has been and shall be provided in the strictest confidence.
Pending the Closing, Buyer covenants and agrees not to use any of such
information or documentation in or for the benefit of any business engaged in
directly or indirectly by Buyer and not to furnish or disclose any of such
information or documentation to any person or company. If the transactions
contemplated by this Agreement are not consummated, Buyer covenants and agrees
to return all such information and documentation to the Company and not retain
any copies thereof, and Buyer further covenants and agrees to maintain the
confidentiality of such information and documentation and to neither use any of
it in or for the benefit of any business engaged in directly or indirectly by
the Buyer nor furnish or disclose any of it to any person or company.
N. GENERAL PROVISIONS
1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Unless otherwise expressly provided herein, the
representations, warranties, covenants, indemnities and other agreements herein
contained shall be deemed to be continuing and shall survive the consummation of
the transactions contemplated by this Agreement.
2. DILIGENCE.
The parties hereto agree that each shall with reasonable
diligence proceed to take all action which may be reasonably required to
consummate the transaction herein contemplated.
3. WAIVERS.
Each party hereto may:
3.1 Extend the time for performance of any of the obligations of
the other party;
3.2 Waive in writing any inaccuracies in representations and
warranties made to it contained in this Agreement or any schedule
hereto or any certificate or certificates delivered by any of the
other parties pursuant to this Agreement; and
3.3 Waive in writing the failure of performance of any of the
agreements, covenants, obligations or conditions of the other parties
herein set forth, or alternatively terminate this Agreement for such
failure.
4. NON-WAIVER.
The waiver by any party hereto of any breach, default, inaccuracy or
failure by another party with respect to any provision in this Agreement or any
schedule hereto shall not operate or be construed as a waiver of any other
provision thereof or of any subsequent breach thereof.
5. FURTHER ASSURANCES.
Each party hereto agrees to execute such further documents or instruments,
requested by the other party, as may be reasonably necessary or desirable to
effect the purposes of this Agreement and to carry out its provisions, at the
expense of the party requesting the same.
6. ENTIRE AGREEMENT.
This Agreement constitutes a complete statement of all the arrangements,
understandings and agreements between the parties, and all prior memoranda and
oral understandings with respect thereto are merged in this Agreement. There are
no representations, warranties, covenants, conditions or other agreements among
the parties except as herein specifically set forth, and none of the parties
hereto shall rely on any statement by or on behalf of the other parties which is
not contained in this Agreement.
7. GOVERNING LAW.
Irrespective of the place of execution or performance of this Agreement, it
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed in the State of New
York, and cannot be changed, modified, amended or terminated except in writing,
signed by the parties hereto.
8. BENEFIT AND ASSIGNABILITY.
This Agreement shall bind and inure to the benefit of the parties hereto
and their respective legal representatives, successors and assigns, provided,
however, that this Agreement cannot be assigned by any party except by or with
the written consent of the others. Nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any person, firm or
corporation other than the parties hereto and their respective legal
representatives, successors and assigns any rights or benefits under or by
reason of this Agreement.
9. APPROVAL OF COUNSEL.
The form of all legal proceedings and of all papers and documents used or
delivered hereunder, shall be subject to the approval of counsels to Buyer and
Sellers.
10. COSTS.
The Buyer shall bear its own costs and expenses of the transaction. The
costs and expenses of Sellers in connection with this Agreement and the
transactions contemplated hereby shall be borne and paid by the Seller.
11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same Agreement.
12. NOTICES.
Any notices and other communications under this Agreement shall be in
writing and shall be considered given if delivered personally or mailed by
certified mail to the party, for whom such notice is intended, at the address
indicated at the outset hereof (or at such other address as such party may
specify by notice to the other parties hereto).
13. HEADINGS.
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
14. FURTHER ACTION.
Any further action required or permitted to be taken under this Agreement,
including giving notices, executing documents, waiving conditions, and agreeing
to amendments or modifications, may be taken on behalf of a party by its Board
of Directors, its President or any other person designated by its Board of
Directors, and when so taken shall be deemed the action of such party.
IN WITNESS WHEREOF, the parties hereto have respectively executed this
Agreement the day and year first above written.
BUYER
PIPELINE DATA INC.
By:/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chief Executive Officer
SELLERS
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
THE COMPANY
NORTHERN MERCHANT SERVICES, INC.
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇
Its: President
SCHEDULE A
Paragraph C5 and 6
CAPITAL STRUCTURE and OWNERSHIP OF STOCK
NORTHERN MERCHANT SERVICES, INC., a Delaware corporation, has an xxxxxxxx
shares of authorized and issued common stock , and the Shareholders own shares
of the Company's Common Stock as follows:
Buyer's Shares
to be received
Name at closing
▇▇▇▇▇ ▇▇▇▇▇▇ 500,000
▇▇▇▇▇ ▇▇▇▇▇▇ 500,000
SCHEDULE B
Lock Up Agreement
SCHEDULE C
Material Contracts
SCHEDULE D
Employment Contracts
SCHEDULE E
Registration Rights Agreements
