Exhibit 10.5
This Contribution Agreement (this “Agreement”) is dated
July 14, 2004, between Riverbend Telecom, Inc., a Nevada
corporation (“Riverbend”), Riverbend Holdings, Inc., a
Colorado corporation that is a subsidiary of Riverbend
(“RiverbendSpin”), Leon Nowalsky, an individual
(“Nowalsky”) and solely for purposes of his obligations
under Section 4 and Section 13(b) hereof, and all of the equity
owners (the “United Members”) of United Check Services,
L.L.C., a Louisiana limited liability company
(“United”).
WHEREAS, Riverbend desires to acquire control of United by having
the United Members contribute their membership interests in United
to Riverbend (the “Contribution”); and
WHEREAS, in order to induce the United Members to make the
Contribution, Riverbend has agreed to issue to the United Members
common stock of Riverbend (“Common Stock”) that, in
aggregate, will equal approximately 88.2116% of the issued and
outstanding shares of capital stock of Riverbend immediately after
the Contribution and, in conjunction therewith, the parties have
agreed to indemnify each other against certain liabilities.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Transfer of Membership Interests
. On the date of the Contribution Closing (as defined below),
the United Members will convey, assign, transfer and contribute to
Riverbend any and all right, title and interest in any and all
equity interests in United held by the United Members (the
“Membership Interests”). The Membership Interests
shall include those described in Exhibit A .
2. Distribution of United Stock . On
the date of the Contribution Closing and upon the consummation and
completion of the Contribution, Riverbend will issue to the United
Members an aggregate of 15,315,000 shares of Common Stock, or such
other number of shares of Common Stock such that immediately after
the Contribution the United Members hold 88.2116% of all
outstanding shares of Common Stock of Riverbend (the
“Contribution Consideration”); provided, that the
shares of Common Stock constituting the Contribution Consideration
shall be subject to federal and state securities law
restrictions. Accordingly, all shares of Common Stock
constituting the Contribution Consideration will be
“restricted” shares and may only be sold pursuant to
Rule 144 of the Securities Act of 1933 (the “Act”) or
other available exemption from registration or pursuant to an
effective registration statement.
3. Closing . The closing of the
Contribution (the “Contribution Closing”) will be at
10:00 A.M. on the sooner of July 30, 2004 or the approval of this
Agreement by the Riverbend shareholders as is provided under
Section 9(d) (the “Closing Date”) at the offices of
Riverbend or such other time and place mutually agreed to by the
parties hereto. The Contribution shall be effective as 11:59 P.M.
on the Closing Date (the “Effective Time”). At
the Contribution Closing, the following deliveries shall take
place:
(a) The United Members will deliver to Riverbend a
Bill of Sale and Assignment assigning the Membership Interests to
Riverbend.
(b) The United Members will deliver to Riverbend
any certificates, if any, that evidence the ownership of the
Membership Interests, which certificates shall be properly endorsed
for transfer, and any other documents that Riverbend reasonably
deems necessary to effect the transfer of the Membership Interests
to Riverbend.
(c) Riverbend shall deliver to each of the United
Members a stock certificate that evidences the issuance to such
United Member of the number of shares of Common Stock set forth
opposite of such United Member’s name on Exhibit B
. The number of shares of Common Stock set forth opposite of
a United Member’s name shall be an amount equal to such
United Member’s proportionate share of the Common Stock to be
issued as a result of the Contribution, with each such
proportionate share to be determined by and among the United
Members. The obligation of Riverbend to issue such Common
Stock to the United Members shall be conditioned upon receipt by
Riverbend of a written confirmation and agreement of the United
Members to the proportionate shares of the Common Stock to be
issued to each such United Member as evidenced and set forth on
Exhibit B .
4. Representations and Warranties of Nowalsky,
Riverbend and RiverbendSpin . Nowalsky, Riverbend and
RiverbendSpin, jointly and severally, hereby represent and warrant
to the United Members as of the date of this Agreement and as of
the Effective Time of the Contribution Closing, as follows.
(a) Corporate Status . Riverbend is
duly incorporated under the laws of the State of Nevada and is in
good standing under the laws of such state. Riverbend has taken all
requisite corporation action to authorize the transactions provided
for herein. RiverbendSpin is duly incorporated under the laws
of the State of Colorado and is in good standing under the laws of
such state. RiverbendSpin has taken all requisite corporation
action to authorize the transactions provided for herein.
(b) Capitalization . Immediately
prior to the Contribution, Riverbend will have an authorized
capitalization of 75,000,000 shares of Common Stock, of which
2,046,667 shares will be outstanding immediately prior to the
Contribution. No other shares of capital stock of Riverbend
will be authorized, issued or outstanding at such time. All
of the outstanding shares of Common Stock will be duly authorized,
validly issued, fully paid and non-assessable.
(c) Enforceability . This Agreement
and all other agreements entered into pursuant hereto shall be
fully enforceable against Riverbend and RiverbendSpin subject to
the availability of equitable remedies.
(d) Assets and Liabilities .
Immediately prior to the Contribution, Riverbend will have no
assets or liabilities other than its corporate charter.
2
(e) Securities Filings . Riverbend
has timely (or within approved extensions) filed all reports
required with the Securities and Exchange Commission under the
Securities and Exchange Act of 1934 and has made all such reports
available to United.
(f) Absence of Undisclosed Liabilities
. Riverbend has no known liabilities or obligations and, to
the knowledge of Riverbend, there is no reasonable basis for any
assertion against Riverbend of any such liability or
obligation. For the purposes of this Agreement, the phrase
“liabilities or obligations” shall include any direct
or indirect indebtedness, claim, loss, damage, deficiency, cost,
expense, obligation, guarantee, or responsibility, whether accrued,
absolute or contingent, or known or unknown.
(g) Taxes . Riverbend has timely
filed (or requests for extensions have been timely filed and any
such extensions either are pending or have been granted and have
not expired) all federal, state and local (and, if applicable,
foreign) tax and informational returns required by applicable law
to be filed by it (including, without limitation, estimated tax
returns, income tax returns, information returns, and withholding
and employment tax returns) and Riverbend and/or RiverbendSpin
(whichever is appropriate) has paid, or where payment is not
required to have been made, has set up an adequate reserve or
accrual for the payment of, all taxes required to be paid by it in
respect of the periods covered by such returns and, as of the
Effective Time, will have paid, or where payment is not required to
have been made, will have set up an adequate reserve or accrual for
the payment of, all taxes required to be paid by it for any
subsequent periods ending on or prior to the Effective Time.
All federal, state and local (and, if applicable, foreign) tax and
informational returns filed by Riverbend are complete and
accurate. Riverbend is not delinquent in the payment of any
tax, assessment or governmental charge. No deficiencies for
any tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or otherwise) against Riverbend
that have not been settled and paid. There are currently no
agreements in effect with respect to Riverbend to extend the period
of limitations for the assessment or collection of any tax.
No audit examination or deficiency or refund litigation with
respect to such returns is pending. Riverbend is in
compliance with, and its records contain all information and
documents (including properly completed IRS Forms W-9) necessary to
comply with, all applicable information reporting and tax
withholding requirements under federal, state, and local tax laws,
and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue Code
of 1986, as amended (the “Code”). Except as set forth on the Disclosure
Schedule, Riverbend has not: (i) been a partner in a
partnership or an owner of an interest in an entity treated as a
partnership for federal income tax purposes; (ii) executed or filed
with the Internal Revenue Service any consent to have the
provisions of Code Section 341(f) apply to it; (iii) been subject
to Code Section 999; or (iv) been a party to any agreement relating
to the sharing, allocation or payment of, or indemnity for,
taxes. Riverbend has furnished or otherwise made
available to the United Members true and complete copies of all tax
returns and all written communications relating to any such tax
returns or to any deficiency or claim proposed and/or asserted,
irrespective of the outcome of such matter, but only to the extent
such items relate to tax years (i) which are subject to an audit,
investigation, examination or other proceeding, or (ii) with
respect to which the statute of limitations has not expired.
3
(h) Environmental Matters .
Riverbend has, at all times, been in compliance with all
Environmental Laws. Riverbend has not received any
communication alleging that Riverbend is not in such compliance
and, to the knowledge of Riverbend, there are no present
circumstances that would prevent or interfere with the continuation
of such compliance. There are no pending Environmental
Claims, Riverbend has not received notice of any pending
Environmental Claims and, to the knowledge of Riverbend, there are
no conditions or facts existing that might reasonably be expected
to result in legal, administrative, arbitral or other proceedings
asserting Environmental Claims or other claims, causes of action or
governmental investigations of any nature seeking to impose, or
that could result in the imposition of, any liability arising under
any Environmental Laws upon: (A) Riverbend; or (B) any person or
entity whose liability for any Environmental Claim Riverbend has or
may have retained or assumed, either contractually or by operation
of law. Riverbend is not subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any liability
under any Environmental Laws. There are no past or present
actions, activities, circumstances, conditions, events or incidents
that could reasonably form the basis of any claim or action or
governmental investigation that could result in the imposition of
any liability arising under any Environmental Laws, against
Riverbend or against any person or entity whose liability for any
such claim Riverbend has or may have retained or assumed, either
contractually or by operation of law.
(i) Employee Benefit Plans .
Riverbend does not contribute to, maintain or sponsor any Plan, as
defined below. For purposes of this Agreement, the term
“Plan” shall mean a plan, arrangement, agreement or
program that is: (A) a profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting,
retirement, severance, welfare or incentive plan, agreement or
arrangement, whether or not funded and whether or not terminated;
(B) an employment agreement; (C) a personnel policy or fringe
benefit plan, policy, program or arrangement providing for benefits
or perquisites to current or former employees, officers, directors
or agents, whether or not funded, and whether or not terminated,
including, without limitation, benefits relating to automobiles,
clubs, vacation, child care, parenting, sabbatical, sick leave,
severance, medical, dental, hospitalization, life insurance and
other types of insurance; or (D) any other employee benefit plan as
defined in Section 3(3) of Employee Retirement Income Security Act
of 1974 (“ERISA”), whether or not funded and whether or
not terminated. Riverbend does not contribute to, nor does it
have an obligation to contribute to or otherwise have any liability
or potential liability with respect to: (A) any multi-employer plan
as defined in ERISA Section 3(37); (B) any plan of the type
described in ERISA Sections 4063 and 4064 or in Code Section 413
(and regulations promulgated thereunder); or (C) any plan that
provides health, life insurance, accident or other
“welfare-type” benefits to current or future retirees
or former employees or directors, their spouses or dependents,
other than in accordance with Code Section 4980B or applicable
state continuation coverage law. No underfunded
“defined benefit plan” (as such term is defined in
ERISA Section 3(35)) has been, during the five years preceding the
Closing Date, transferred out of the controlled group of
corporations (within the meaning of Code Sections 414(b), (c), (m)
and (o)) of which Riverbend is a member or was a member during such
five-year period.
(j) Certain Contracts . Other than
this Agreement, Riverbend is not a party to, is bound or affected
by, or receives benefits under any agreement, arrangement or
commitment,
4
written or oral, the default of which would have a Material
Adverse Effect (as defined in Section 9(f)) or that cannot be
terminated within less than 30 days after the Closing Date by
Riverbend (without payment of any penalty or cost).
(k) Legal Proceedings . There are no
actions, suits, claims, governmental investigations or proceedings
instituted, pending or, to the knowledge of Riverbend, threatened
against Riverbend or against any asset, interest, Plan or right of
Riverbend. There are no actions, suits or proceedings
instituted, pending or, to the knowledge of Riverbend, threatened
against any present or former director or officer of Riverbend that
would reasonably be expected to give rise to a claim against
Riverbend for indemnification. There are no actual or, to the
knowledge of Riverbend, threatened actions, suits or proceedings
that present a claim to restrain or prohibit the transactions
contemplated herein. There are no obligations or liabilities
of any nature, whether or not accrued, contingent or otherwise,
including without limitation those relating to environmental and
occupational safety and health matters, or any other facts or
circumstances that could, to the knowledge of Riverbend, result in
any claims against, or obligations or liabilities of,
Riverbend. Riverbend has no off-balance sheet liability or
obligation, fixed or contingent.
(l) Compliance with Laws; Filings .
Riverbend is in compliance with all statutes and regulations, and,
when it actively conducted a business, it obtained and
maintained and was in compliance with all permits, licenses,
deposits, and registrations applicable to the conduct of such
business, and Riverbend has not received notification that has not
lapsed, been withdrawn or abandoned by any agency or department of
federal, state or local government: (A) asserting a violation or
possible violation of any such statute or regulation; (B)
threatening to revoke any permit, license, registration, or other
government authorization; or (C) restricting or in any way limiting
its operations. Riverbend is not subject to any regulatory or
supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, and has not received any
communication requesting that it enter into any of the
foregoing.
(m) Brokers and Finders . Neither
Riverbend nor any of its officers, managers, directors or
employees, has employed any broker, finder or financial advisor or
incurred any liability for any fees or commissions in connection
with the transactions contemplated herein, except for any
obligation for investment banking services, the nature and extent
of which has been disclosed, and except for usual and customary
fees to accountants and lawyers.
(n) Minute Books . The minute books
and/or record books of Riverbend contain accurate records of all
meetings and other corporate actions of their respective
shareholders and directors, and the signatures contained therein
are the true signatures of the persons whose signatures they
purport to be.
(o) Related Party Transactions .
Riverbend has disclosed all existing transactions existing as of
the date of the Contribution Closing, to which Riverbend is a party
with any director or executive officer of Riverbend or any person,
corporation, or enterprise controlling, controlled by or under
common control with any of the foregoing. All such
transactions, investments and loans are on terms no less favorable
to Riverbend than could be obtained from unrelated parties.
Riverbend has not, directly or indirectly, extended or
5
maintained credit, arranged for the extension of credit or
renewed an extension of credit in the form of a personal loan to or
for any director or executive officer (or equivalent thereof) of
Riverbend in violation of Section 402 of the Sarbanes-Oxley Act of
2002.
(p) Labor Relations . Riverbend is
not the subject of any claim or allegation that it has committed an
unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel it to
bargain with any labor organization as to wages or conditions of
employment, nor is Riverbend a party to any collective bargaining
agreement. There is no strike or other labor dispute
involving Riverbend, pending or threatened, or to the best
knowledge of Riverbend, is there any activity involving any
employees of Riverbend seeking to certify a collective bargaining
unit or engaging in any other organization activity.
5. Representations and Warranties of the
United Members . Except as specifically and expressly set
forth in a disclosure memorandum (the “United Disclosure
Memorandum”) to be provided by the United Members to
Riverbend no less than 10 days prior to the Effective Time of the
Contribution, each of the United Members, jointly and severally,
represents and warrants to Riverbend and RiverbendSpin, as of the
date of this Agreement and as of the Effective Time of the
Contribution, as follows.
(a) Entity Status . United is a
limited liability company duly formed and existing in good standing
under the laws of the State of Louisiana. United is required to be
qualified to do business in only those states of the United States
and foreign jurisdictions disclosed in the United Disclosure
Memorandum, and the United Disclosure Memorandum identifies whether
United is qualified in each such jurisdiction.
(b) Membership Interests . The
outstanding equity interests in United consist of only the
Membership Interests listed on Exhibit A . No other
equity interests in United have been issued and there are no
rights, options or other agreements to purchase or acquire equity
interests in United.
(c) Ownership of Subsidiaries .
United
has no subsidiaries.
(d) Authorized and Effective Agreement
. This Agreement constitutes the legal, valid and binding
obligation of the United Members, and is enforceable against the
United Members in accordance with its terms, subject to: (A)
bankruptcy, fraudulent transfer, insolvency, moratorium,
reorganization, conservatorship, receivership, or other similar
laws from time to time in effect relating to or affecting the
enforcement of the rights of creditors generally; and (B) general
principles of equity (whether applied i
n a
court of law or in equity).
(e) Assets and Liabilities . The
assets and liabilities of United are as set forth on Exhibit
C and Exhibit D , respectively. United has no
other assets or liabilities.
(f) Financial Statements . The
Financial Statements (as defined below) of United are attached as
Exhibit E . The “Financial Statements”
means the audited balance sheet of United as of December 31, 2003,
the audited statement of income, members’ equity and cash
6
flows for the fiscal years ending December 31, 2003, the
unaudited balance sheet of United as of March 31, 2004, and the
unaudited statement of income, members’ equity and cash flows
for the fiscal periods ending March 31, 2004, including all notes
thereto, collectively. The Financial Statements fairly
present or will fairly present, as applicable, in all material
respects, the financial position of United as of the dates
indicated and the statements of income and changes in
members’ equity and statements of cash flows for the periods
then ended in conformity with GAAP applied on a consistent
basis. No statement, certificate, instrument or other writing
furnished or to be furnished hereunder by United to Riverbend
contains or will contain any untrue statement of a material fact or
will omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(g) Minute Books . The minute books
and/or record books of United contain accurate records of all
meetings and other corporate actions of their respective members
and managers, and the signatures contained therein are the true
signatures of the persons whose signatures they purport to be.
(h) Adverse Change . Since March 31,
2004, United has not incurred any liability, whether accrued,
absolute or contingent, except as disclosed in the most recent
Financial Statements, or entered into any transactions with
affiliates, in each case other than in the ordinary course of
business consistent with past practices, nor has there been any
event or circumstance that caused or is reasonably likely to cause
an adverse change in the assets, business, operations, business
prospects or financial or other condition of United.
(i) Absence of Undisclosed Liabilities
. All liabilities (including without limitation contingent
liabilities and any off-balance sheet loans, financings,
liabilities or indebtedness) of United that are disclosed in the
most recent Financial Statements of United are normally recurring
business obligations incurred in the ordinary course of its
business since the date of the most recent Financial Statements.
(j) Leases, Etc . All leases,
permits and licenses pursuant to which United, as lessee or
licensee, leases or licenses rights to real or personal property
are valid and enforceable in accordance with their respective
terms, and United is not in default under any of the terms thereof,
nor to the knowledge of the United Members has any event occurred
which, with the passage of time or giving of notice, or both, would
constitute such a default.
(k) Equipment, Etc . All operating
equipment of United is in good operating condition, ordinary wear
and tear excepted, is suitable for immediate use in the ordinary
course of the respective business of United, is free from defects
(latent and patent), is merchantable and is of a quality and
quantity presently usable in the ordinary course of the business of
Un ited.
(l) Environmental Matters . United
has, at all times, been in compliance with all Environmental
Laws. United has not received any communication alleging that
United is not in such compliance and, to the knowledge of the
United Members, there are no present circumstances that would
prevent or interfere with the continuation of such
compliance. There are no pending Environmental Claims, United
has not received notice of any pending Environmental Claims and, to
the knowledge of the United Members, there are no conditions or
7
facts existing that might reasonably be expected to result in
legal, administrative, arbitral or other proceedings asserting
Environmental Claims or other claims, causes of action or
governmental investigations of any nature seeking to impose, or
that could result in the imposition of, any liability arising under
any Environmental Laws upon: (A) United or the United Members; (B)
any person or entity whose liability for any Environmental Claim
United has or may have retained or assumed, either contractually or
by operation of law; (C) any real or personal property owned or
leased by United, or any real or personal property which United has
or is judged to have managed or supervised or participated in the
management of; or (D) any real or personal property in which United
holds a security interest securing a loan recorded on the books of
United. United is not subject to any agreement, order,
judgment, decree or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any liability
under any Environmental Laws. There are no past or present
actions, activities, circumstances, conditions, events or incidents
that could reasonably form the basis of any claim or action or
governmental investigation that could result in the imposition of
any liability arising under any Environmental Laws, against United
or against any person or entity whose liability for any such claim
United has or may have retained or assumed, either contractually or
by operation of law.
(m) Insurance . The United
Disclosure Memorandum contains a true and complete list of all
policies of insurance to which United is a party or under which
United, or any director or officer of United, is or has been
covered at any time within the three years preceding the date of
this Agreement. All such policies of insurance listed or
described in the United Disclosure Memorandum: (A) are valid,
outstanding and enforceable; (B) are issued by an insurer that is
financially sound and reputable; (C) taken together, provide
adequate insurance coverage for the assets and the operations of
United for all risk to which United is normally exposed; (D) are
sufficient for compliance with all leases and contracts; (E) will
continue in full force and effect following consummation of the
transactions contemplated by this Agreement; and (F) do not provide
for any retrospective premium adjustment or other experienced-based
liability on the part of United. United has paid all premiums
due and has otherwise performed all obligations under each policy
to which United is a party or that provides coverage to United or
to a director or officer of United, and United has given notice to
the insurers of all claims that may be insured under each policy to
which United is a party or that provides coverage to United or
a
director or officer of United.
(n) Tax Matters . United has timely
filed (or requests for extensions have been timely filed and any
such extensions either are pending or have been granted and have
not expired) all federal, state and local (and, if applicable,
foreign) tax and informational returns required by applicable law
to be filed by them (including, without limitation, estimated tax
returns, income tax returns, information returns, and withholding
and employment tax returns) and United and/or the United Members
(whichever is appropriate) have paid, or where payment is not
required to have been made, have set up an adequate reserve or
accrual for the payment of, all taxes required to be paid by them
as a result of the business operations of United for the periods
covered by such returns and, as of the Effective Time, will have
paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all taxes
required to be paid by them as a result of the business operations
of United for any subsequent periods ending on or prior to the
Effective Time. All federal, state and local (and, if
applicable, foreign) tax and informational returns filed by United
are complete and
8
accurate. Neither United nor any United Member is
delinquent in the payment of any tax, assessment or governmental
charge. No deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against United or any United Member that
have not been settled and paid. There are currently no
agreements in effect with respect to United or any United Member to
extend the period of limitations for the assessment or collection
of any tax. No audit examination or deficiency or refund
litigation with respect to such returns is pending. United is
in compliance with, and its records contain all information and
documents (including properly completed IRS Forms W-9) necessary to
comply with, all applicable information reporting and tax
withholding requirements under federal, state, and local tax laws,
and such records identify with specificity all accounts subject to
backup withholding under Code Section 3406. United has not
made any payments, is not obligated to make any payments, and is
not a party to any contract that could obligate it to make any
payments that would be disallowed as a deduction under Code Section
280G or Code Section 162(m).
(o) Compensation . The United
Members have disclosed a complete and correct list of the name,
age, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or fringe or other benefits,
whether payable in cash or in kind, of each director, officer or
member of United and each other person (in each case other than as
an employee) to whom United pays or provides, or has an obligation,
agreement (written or unwritten), policy or practice of paying or
providing, retirement, health, welfare or other benefits of any
kind or description whatsoever.
(p) Employee Benefit Plans . The
United Members have disclosed an accurate and complete list of all
Plans, as defined below, contributed to, maintained
