EXHIBIT 99.1
STOCK PURCHASE AND SALE AGREEMENT
BY AND AMONG
24/7 REAL MEDIA, INC.,
IMAKE SOFTWARE & SERVICES, INC.,
AND
SCHASZBERGER CORPORATION
DATED AS OF JANUARY 14, 2002
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made as of
January 14, 2002 by and among 24/7 Real Media, Inc., a Delaware corporation (the
"SELLER"), IMAKE Software & Services, Inc., a Maryland corporation (the
"COMPANY"), and Schaszberger Corporation, a Delaware corporation (the
"PURCHASER").
Seller owns all of the issued and outstanding shares of capital stock in
the Company. Seller desires, immediately after the redemption by the Company of
78 shares of its shares of common stock, par value $1.00 per share, held by the
Seller (the "REDEMPTION SHARES"), to sell all of the capital stock of the
Company that remains issued and outstanding after the foregoing redemption (the
"SHARES"), and the Purchaser desires to purchase the Shares, on the terms set
forth in this Agreement.
THEREFORE, in consideration of the mutual promises made herein, and
subject to the conditions hereinafter set forth, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.01 PURCHASE AND SALE OF THE SHARES. Upon the terms and subject
to the conditions of this Agreement and in exchange for payment of the Purchase
Price (as hereinafter defined), at the Closing, (i) the Seller will sell,
assign, convey, transfer and deliver to the Company free and clear of all liens,
pledges, security interests, options, encumbrances, charges, agreements or
claims of any kind whatsoever (collectively, "Liens"), and the Company will
redeem and accept , the Redemption Shares, and (ii) the Seller will sell assign,
convey, transfer and deliver to the Purchaser free and clear of all Liens, and
the Purchaser will purchase and accept, the Shares.
SECTION 1.02 PURCHASE PRICE.
The total consideration (the "PURCHASE PRICE") to be paid by the Company
to the Seller for the Redemption Shares, and by the Purchaser to the Seller for
the Shares shall consist of the following:
(a) SHARE CONSIDERATION. Delivery to the Seller on the Closing Date (as
defined below) of 995,000 shares of the Series A Convertible Preferred Stock,
par value $0.01 per shares, having the terms and conditions set forth in the
Amended and Restated Certificate of Incorporation attached hereto as EXHIBIT A
(the "RESTATED CERTIFICATE"), of the Purchaser (the "PREFERRED STOCK"), which
shall on the Closing Date represent 19.9% of the total issued and outstanding
common stock of the Purchaser, on an as-converted basis.
(b) NOTE CONSIDERATION. Delivery to the Seller on the Closing Date of a
secured note in the form attached as EXHIBIT B hereto (the "PURCHASER NOTE"),
which shall be in a face amount equal to $2,000,000 in consideration of the
Redemption Shares. Principal, along with interest thereon, which shall accrue at
a rate equal to 6% per annum, shall be due on January 11, 2006.
(c) NET REIMBURSEMENT OF PAYROLL ADVANCE. Delivery to the Seller on the
Closing Date of a cash payment in the amount of $479,295.46 (the "CASH
ADJUSTMENT"), representing the reimbursement by Purchaser of payroll expenses
advanced by Seller.
(d) EARN OUT. Payment of the Earn Out as provided in Section 2.01.
SECTION 1.03 CLOSING. The consummation of the transactions contemplated by
this Agreement (the "CLOSING") shall be held at the offices of Proskauer Rose
LLP, 0000 Xxxxxxxx, Xxx Xxxx, XX 00000 at 10:00 A.M., New York City time, on
January 11, 2002 following the satisfaction or waiver by the applicable party of
the conditions to Closing set forth in Article V, or at such other time, date
and place as may be mutually agreed to in writing by the parties. The date on
which the Closing actually occurs is referred to herein as the "CLOSING DATE."
SECTION 1.04 DELIVERY AT CLOSING. Upon the terms and subject to the
conditions of this Agreement, at the Closing, (i) the Seller will assign,
transfer and deliver the Shares to the Purchaser free and clear of all Liens,
(ii) the Seller will assign, transfer and deliver the Redemption Shares to the
Company free and clear of all Liens, (iii) the Seller will deliver to the
Purchaser the certificates, documents, agreements and instruments referred to in
Section 6.01, (iv) the Purchaser will deliver to the Seller stock certificates
reflecting the Preferred Stock, (v) the Purchaser will deliver to the Seller a
duly executed Purchaser Note, and (vi) the Purchaser will deliver to the Seller
the various certificates, documents, and instruments referred to in Section
6.02.
ARTICLE II
OTHER PAYMENTS AND/OR CONSIDERATION
SECTION 2.01 EARN OUT.
(a) The Company shall pay the following monthly payments (which shall be
deemed to include any offsets permitted under this Agreement) to the Seller (the
"EARN OUT") within 30 days of the last day of each month from January 2002
through December 2004, in each case with respect to the previous month (the
"EARN OUT PERIOD"):
(i) for each month from January 2002 through December 2002, 5% of
the monthly Gross Revenue (as defined below); and
(ii) for each month from January 2003 through December 2004, 10% of
the monthly Gross Revenue.
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For the purposes of this Section 2.01, "GROSS REVENUE" for each calendar
month shall mean the gross revenue earned by the Company during such month, as
accounted for utilizing generally accepted accounting principles ("GAAP"), less
any increases in gross revenue directly attributable to acquisitions or other
similar transactions by the Company. The parties agree that any adjustment to
Gross Revenue based on contributions from other entities acquired by the Company
shall be limited to the historical run rate of any such acquired entity, and no
adjustment shall be made as a result of increases in such entity's revenue run
rate after the date of acquisition. In the event of any such transactions
requiring any such adjustments, the parties agree to cooperate in a commercially
reasonable manner and in good faith to determine the appropriate amount of the
foregoing adjustments for purposes of calculating the proper amount of Gross
Revenue in respect of which Earn Out payments shall be due.
(b) All Earn Out payments are due within 30 days following the end of the
calendar month in which they are earned. The first Earn Out payment is due
within 30 days of January 31, 2002.
(c) Notwithstanding any provision in this Agreement to the contrary, in no
event shall the aggregate Earn Out payments to the Seller exceed $4,000,000 (the
"MAXIMUM EARN OUT").
(d) The Company shall deliver to the Seller during the Earn Out Period (i)
within 60 days after the close of each calendar year, audited financial
statements of the Company prepared by an accounting firm reasonably acceptable
to the Purchaser and the Seller, (ii) within 30 days of the end of each calendar
quarter, the unaudited balance sheet and income statement of the Company and
(iii) within 30 days of the end of each calendar month, a revenue statement,
including the Gross Revenue, for such calendar month. At the end of each
calendar year, an accounting of the Earn Out payments shall be made based on the
aggregate Gross Revenue reported in the audited financial statements for such
calendar year. Within 30 days after completion of the audited financial
statements for each calendar year, (x) any additional Earn Out payments
determined to be due to the Seller shall be paid in cash by the Company to the
Seller, and (y) any Earn Out overpayments determined to be made by the Company
to the Seller shall be paid in cash by the Seller to the Company; provided,
however, that the Purchaser shall be entitled to offset such overpayments
against any (i) future Earn Out payments that may become due, or (ii) other
obligations payable by the Purchaser to the Seller.
(e) The Purchaser shall have the right to buy out the Earn Out payments
(the "BUY OUT OPTION"), at any time, at a price equal to the difference between
the Maximum Earn Out and the aggregate Earn Out payments previously made to the
Seller. If the Purchaser exercises the Buy Out Option, the right of Seller to
receive the Flip Fee (as defined in Section 2.02 below) and the Warrants (as
defined in Section 2.03 below) shall automatically terminate.
(f) The Seller shall be entitled to engage an independent auditor once per
year at its sole cost and expense to inspect and audit Company's records to
verify the accuracy
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of the Earn Out payments made to the Seller pursuant to this Article II. The
auditor shall issue a report of findings to each of the Company, Purchaser and
Seller. Audits shall be performed at reasonable times, upon reasonable notice
and without causing any unreasonable disturbance of the Company's operations. In
the event of any discrepancy or disagreement between the findings of the auditor
engaged by the Seller and the findings of the certified public accounting firm
retained by the Company, the parties shall cooperate in a commercially
reasonable manner and in good faith to resolve any such discrepancy or
disagreement.
(g) The Purchaser covenants that it shall not sell, assign or otherwise
transfer all of any part of the business of the Company that is subject to the
Earn Out payments unless such sale, assignment or transfer is pursuant to a bona
fide transaction with a third party unrelated to the Company or Xxxx X.
Xxxxxxxxxxx ("MLS") at fair market value and such third party agrees to take
such part of the business subject to the Earn Out payments required to be made
to the Seller hereunder. The Purchaser covenants that it shall not take any
action in which the primary purpose is to subvert Seller's ability to receive
Earn Out payments.
SECTION 2.02 FLIP FEE. In the event the Purchaser shall sell (a) to any
single entity (including any affiliates) more than a 50% ownership interest in
the Company, or (b) a majority of the assets of the Company or the Purchaser, in
each case within 12 months of the Closing Date, then the Purchaser shall pay to
the Seller, in addition to any payments to Seller as holder of Preferred Stock
and prior to any distributions to any other person, the sum of (i) an amount
equal to the difference between $3,000,000 and the aggregate Earn Out payments
previously made to the Seller, and (ii) 5% of any proceeds received by the
Purchaser above $3,000,000 (the sum of clauses (i) through (ii) shall be
referred to as the "FLIP FEE"). Upon the payment of the Flip Fee to the Seller,
any rights of Seller to receive any further Earn Out payments under Section 2.01
and Warrants under Section 2.03 shall automatically terminate.
SECTION 2.03 WARRANT.
(a) The Purchaser shall issue to the Seller a Warrant, in the form of
EXHIBIT C hereto (the "WARRANT").
SECTION 2.04 LICENSE.
(a) Subject to Sections 2.04(b), 2.04(c) and 2.04(d), the Seller shall
grant to the Purchaser a perpetual, worldwide, royalty-free, nonexclusive and
non-transferable license to use Seller's patent for targeted advertising (Patent
#6,026,368) (the "LICENSE"). The License shall not require the payment of any
royalties or other payments by Purchaser to Seller, other than as set forth in
this Agreement.
(b) In the event of a Change in Control Event (as defined below) of
Purchaser, the License shall terminate, unless the Purchaser agrees to pay a
commercially reasonable fee for the renewal of the License and the parties reach
agreement as to other mutually agreed terms and conditions of a new license. For
the purposes of this Section, a
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"CHANGE IN CONTROL EVENT" shall be an event in which a single entity (including
any affiliates) acquires more than a 50% ownership interest in a company or its
parent entity.
(c) In the event of a Change in Control Event of Seller, or if Seller
ceases to exist or commences a case or other proceeding under any federal
bankruptcy, insolvency, liquidation or similar law, the License shall
automatically become perpetual to the Company and cannot be transferred to any
party, including any affiliates.
(d) The License shall not include the right to grant sublicenses and shall
be limited to use by the Company solely in connection with the business of the
Company.
(e) For tax purposes, the parties hereto agree that $50,000 of the
purchase price is allocable to the License and that the Purchaser, the Seller
and the Company shall prepare and file all of their respective Tax Returns
consistent with this allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Purchaser that:
(a) ORGANIZATION AND GOOD STANDING.
(i) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and it has all
requisite corporate power and authority to own and lease the properties and
assets it currently owns and leases and to carry on its business as such
business is currently conducted.
(ii) The Company is a close corporation duly incorporated and
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the State of Maryland Department of Assessments and Taxation, and
has the requisite corporate power and corporate authority to own, lease and
operate its assets and properties and to conduct its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business, and is in good standing under the laws of those jurisdictions
listed on SCHEDULE 3.01(a)(ii) hereto, constituting each jurisdiction in which
the conduct of its business or the ownership, leasing or operation of its assets
and properties requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, results of operations or financial condition of the
Company, taken as a whole, or on the ability of the parties to consummate the
transactions contemplated by this Agreement (a "COMPANY MATERIAL ADVERSE
EFFECT"). The Seller has heretofore furnished to the Purchaser a complete and
correct copy of the Company's charter (certified by the Secretary of State of
the State of Maryland) (the "CHARTER") and By-Laws, each as amended to date.
Such Charter and By-Laws are in full force and effect. The Company is not in
violation of any of the provisions of its Charter or By-Laws.
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(b) OWNERSHIP AND DELIVERY OF THE SHARES. The Seller is, and immediately
prior to the Closing will be, the record and beneficial owner of all the issued
and outstanding Shares, free and clear of any and all Liens. On the Closing
Date, the Seller will have the full right, power and authority to assign,
transfer and deliver the Shares as provided in this Agreement, and such delivery
will convey to the Purchaser lawful, valid and marketable title to such Shares,
free and clear of any and all Liens. Upon consummation of the transactions
contemplated by this Agreement, the Shares will be fully paid and nonassessable.
(c) AUTHORITY RELATIVE TO THIS AGREEMENT.
(i) The Seller has all corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, as well as all other
agreements, certificates and documents executed or delivered, or to be executed
or delivered, by the Seller in connection herewith (collectively, with this
Agreement, the "SELLER DOCUMENTS"). The execution and delivery of this Agreement
and the consummation by the Seller of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of the Seller, and no other corporate proceedings are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. Each of
the Seller Documents to which the Seller is, or will be, a party has been, or
will be, duly and validly executed and delivered by the Seller, and, assuming
the due authorization, execution and delivery of the Seller Documents by the
other parties, are (or when executed and delivered will be) legal, valid and
binding obligations of the Seller, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the enforcement of creditors' rights generally and (ii)
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law.
(ii) The Company has all corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, as well as all other
agreements, certificates and documents executed or delivered, or to be executed
or delivered, by the Company in connection herewith (collectively, with this
Agreement, the "COMPANY DOCUMENTS"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (except as set forth in clause (i) above). Each of the
Company Documents to which the Company is, or will be, a party has been, or will
be, duly and validly executed and delivered by the Company, and, assuming the
due authorization, execution and delivery of the Company Documents by the other
parties, are (or when executed and delivered will be) legal, valid and binding
obligations of the Company, except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law.
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(d) NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.
(i) The execution, delivery and performance by the Seller of this
Agreement do not, and the performance of this Agreement by the Seller will not,
(A) conflict with or violate the certificate of incorporation or by-laws of the
Seller; (B) conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to the Seller or by which any of its properties is bound or
affected; or (c) result in any material breach of or constitute a material
default (or event which with notice or lapse of time, or both, would become a
default) under, or impair the Seller's rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any of the properties or assets of the Seller pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Seller is a party or by which the
Seller or any of its properties is bound or affected, except where such conflict
or violation would not have a material adverse effect on the ability of the
parties to consummate the transactions contemplated by this Agreement (a "SELLER
MATERIAL ADVERSE EFFECT").
(ii) Except as set forth in SCHEDULE 3.01(d)(ii), the execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (A) conflict with or violate the Charter or
By-Laws of the Company; (B) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or by which any of its
properties is bound or affected; or (C) result in any material breach of or
constitute a material default (or an event which with notice or lapse of time or
both would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company is a
party or by which the Company or any of its properties is bound or affected
except where such conflict, violation, breach, default or rights of termination
would not have a Company Material Adverse Effect.
(iii) The execution, delivery and performance of this Agreement by
the Seller and by the Company will not require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the transactions contemplated hereby
or otherwise prevent either of the Seller or the Company from performing its
obligations under this Agreement.
(e) CAPITALIZATION. Immediately prior to the Closing, the authorized
capital stock of the Company will consist of 5,000 shares of common stock, par
value $1.00 per share, of which 196 shares will be issued and outstanding. There
is no outstanding right, subscription, warrant, call, option or other agreement
or arrangement of any kind to purchase or otherwise to receive from the Company
any Shares or any other security of the Company; there is no outstanding
security of any kind convertible into or
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exchangeable for any such Shares; and there is no voting trust or other
agreement or understanding to which the Company is a party or is bound with
respect to the voting of the Shares. All of the Shares are duly authorized,
validly issued and outstanding, fully paid and non-assessable.
(f) SUBSIDIARIES AND AFFILIATES. The Company has no direct or indirect
subsidiaries, whether or not wholly owned, and has no equity interest in any
corporation, partnership, joint venture or other entity.
(g) NO LITIGATION.
(i) No action is pending or, to the knowledge of the Seller,
threatened against the Seller which (A) questions or involves the legality,
validity or enforceability of any of the Seller's obligations under any Seller
Documents or the consummation of the transactions contemplated by this Agreement
or thereby or (B) seeks to prevent, delay or otherwise adversely affect the
consummation by the Seller of the sale of the Shares.
(ii) Except as disclosed on SCHEDULE 3.01(g), there are no actions,
suits, proceedings, claims or investigations pending or, to the knowledge of the
Seller, threatened against either the Company or its assets before any court,
arbitrator or governmental entity that (A) questions or involves the legality,
validity or enforceability of any of the Company's obligations under any Company
Documents or the consummation of the transactions contemplated by this Agreement
or thereby; (B) seeks to prevent, delay or otherwise adversely affect the
consummation by the Company of the sale of the Shares; or (C) is reasonably
likely to have a Company Material Adverse Effect.
(h) CHANGES. Except as disclosed on SCHEDULE 3.01(h), to the best of
Seller's knowledge, (i) since December 1, 2001, the Seller has not (A) collected
any accounts receivables owed to the Company, (B) removed any cash from the
Company, and/or (C) materially changed the assets, liabilities or financial
condition of the Company, and (ii) during the period from the date the Seller
acquired the stock of the Company through the Closing, neither the Seller nor
any of Seller's employees or authorized representatives has (A) granted or
consented to the grant of any Lien against the Company's properties or assets or
otherwise encumbered any such property, or (B) created any material liability of
the Company without the Company's knowledge.
(i) TAXES.
(i) From the date the Seller acquired the stock of the Company, the
Company has filed, or been included in, all Tax Returns required to be filed
through the date hereof with respect to the Seller's period of ownership of the
Company and will file, or be included in, any such Tax Returns required to be
filed on or prior to the Closing Date. All such Tax Returns were, or will be,
filed in a timely manner (subject to any applicable extensions) and all such Tax
Returns are correct and complete in all material respects.
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(ii) From the date Seller acquired the stock of the Company, the
Company has not been a member of any affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which is
the Seller). The Company has no liability for the Taxes of any other person
as defined in Section 7701(a)(1) of the Code under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise that accrued during the
period, or are allocable to the period, beginning on the date the Seller
acquired the stock of the Company;
(iii) There are no liens or encumbrances related to Taxes on any of
the assets of the Company (other than for current Taxes not yet due and payable)
with respect to the Seller's period of ownership of the Company that accrued
during the period, or are allocable to the period, beginning on the date the
Seller acquired the stock of the Company; and
(iv) No Tax is required to be withheld pursuant to Section 1445 of
the Code as a result of any transaction contemplated in this Agreement.
For purposes of this Agreement (i) "TAX" or "TAXES" means any federal,
state, local or foreign net or gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, personal property, real property, capital
stock, profits, social security (or similar), unemployment, disability,
registration, value added, estimated, alternative or add-on minimum taxes,
customs duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, whether as a primary
obligor or as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or a member of
an affiliated, consolidated, unitary or combined group and (ii) "TAX RETURN"
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
(j) AGREEMENTS AFFECTING THE SHARES. The Seller is not a party to any
agreement (i) governing its right to vote or transfer the Shares, or (ii)
purporting to grant any party any preemptive right, right of first refusal or
registration rights with respect to the Shares.
(k) BROKERAGE OR FINDERS FEES. Neither the Seller nor any of its
affiliates is a party to any agreement, understanding, or arrangement, and has
not committed any act which might give rise to any valid claim against the
Purchaser, the Company or any of their respective affiliates, for any fee,
commission or other payment.
(l) SECURITIES LAW MATTERS.
(i) The Seller has such knowledge and experience in financial and
business matters that the Seller is capable of evaluating the merits and risks
of an
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investment in the Preferred Stock. The Seller is an "accredited investor" as
such term is defined in Rule 502(a) of Regulation D promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT")
(ii) The Seller has or has been furnished with such information as
the Seller has requested of the Purchaser regarding the Purchaser, the Preferred
Stock and the shares of common stock of the Purchaser into which the Preferred
Stock is convertible (the "CONVERSION SHARES") and has had an opportunity to
discuss with the management of the Purchaser and to become informed about the
objectives of the Purchaser and its business plan, consolidated financial
condition and results of operations.
(iii) The Seller is acquiring the Preferred Stock for the Seller's
own account, and not as a nominee or agent for any other persons or entities,
and for investment and not with a view to distribution or resale thereof. The
Seller has been advised and understands and agrees that neither the Preferred
Stock nor the Conversion Shares will be registered under the Securities Act, nor
qualified under any state securities laws, on the basis, among others, that no
distribution or public offering of the Preferred Stock or of the Conversion
Shares is to be effected in connection with the transactions contemplated
herein.
(iv) The Seller acknowledges that it has been informed and
understands that no public market for the Preferred Stock or the Conversion
Shares currently exists and that there is no assurance that any such market will
develop or exist in the future. Even if such a public market does develop,
neither the Preferred Stock nor the Conversion Shares may be sold or transferred
except in compliance with the Securities Act or an exemption thereunder. There
is no assurance that any exemption from registration will become available to
permit resale of the Preferred Stock or the Conversion Shares.
(v) The Seller acknowledges and agrees that the certificate or
certificates representing the Preferred Stock (and, upon the conversion thereof,
the Conversion Shares) shall contain restrictive legends in the form set forth
in Rule 502(d)(3) of Regulation D promulgated under the Securities Act or
restrictive legends that are substantially similar thereto. The Seller
acknowledges and agrees that, unless and until the Preferred Stock or the
Conversion Shares become eligible for resale under the Act, any proposed sale or
other transfer or disposition of any of the Preferred Stock or the Conversion
Shares, other than pursuant to an effective registration statement under the
Securities Act, may not be made unless and until the Seller has furnished to the
Purchaser an opinion of counsel, reasonably acceptable to the Purchaser and its
counsel, to the effect that the proposed sale or other transfer or disposition
is exempt from registration under the Securities Act.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby represents and warrants to the Seller that:
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(a) ORGANIZATION AND QUALIFICATION; ORGANIZATIONAL DOCUMENTS.
(i) The Purchaser has no direct or indirect subsidiaries other than
those listed in SCHEDULE 3.02(a). Except as disclosed in SCHEDULE 3.02(a), the
Purchaser owns, directly or indirectly, all of the capital stock of each
subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.
(ii) The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite corporate power and corporate authority to own, lease and operate its
assets and properties and to conduct its business as it is now being conducted.
The Purchaser is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the conduct of
its business or the ownership, leasing or operation of its assets and properties
requires such qualification, except for such failures to be so duly qualified or
licensed and in good standing that would not have a material adverse effect on
the business, results of operations or financial condition of the Purchaser,
taken as a whole, or on the ability of the parties to consummate the
transactions contemplated by this Agreement (a "PURCHASER MATERIAL ADVERSE
EFFECT").
(iii) The Purchaser has heretofore furnished to the Seller a
complete and correct copy of the Purchaser's certificate of incorporation
(certified by the Secretary of State of the State of Delaware) and of the
Purchaser's by-laws, each as amended to date. Such certificates of incorporation
and by-laws are in full force and effect. The Purchaser is not in violation of
any of the provisions of its certificate of incorporation or any of the
provisions of its by-laws.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT.
The Purchaser has all necessary rights, power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, as well as all other
agreements, certificates and documents executed or delivered, or to be executed
or delivered, by the Purchaser in connection herewith (collectively, with this
Agreement, the "PURCHASER DOCUMENTS"). The execution and delivery of this
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Purchaser, and no other corporate
proceedings on the part of the Purchaser are necessary to authorize this
Agreement or to consummate the transactions so contemplated hereby. Each of the
Purchaser Documents to which the Purchaser is, or will be, a party has been, or
will be duly and validly executed and delivered by the Purchaser, and, assuming
the due authorization, execution and delivery of the Purchaser Documents by the
other parties, are (or when executed and delivered will be) legal, valid and
binding obligations of the Purchaser, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the enforcement of creditors' rights generally and (ii)
11
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law.
(c) NO CONFLICT, REQUIRED FILINGS AND CONSENTS.
(i) The execution and delivery of this Agreement by the Purchaser do
not, and the performance of this Agreement by the Purchaser will not, (A)
conflict with or violate the certificate of incorporation or by-laws of the
Purchaser; (B) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Purchaser or by which any of the
Purchaser's properties is bound or affected; or (C) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or impair the Purchaser's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Purchaser is a
party or by which the Purchaser or any of its properties is bound or affected,
except in any such case for any such breaches, defaults or other occurrences
that would not have a the Purchaser Material Adverse Effect.
(ii) The execution, delivery and performance of this Agreement by
the Purchaser will not require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
except where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications would not have a Purchaser
Material Adverse Effect.
(d) ISSUANCE OF THE PREFERRED STOCK. The Preferred Stock is duly
authorized and, when issued in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassesable, free and clear of all Liens and
shall not be subject to preemptive rights or similar rights of stockholders. The
Purchaser has reserved from its duly authorized capital stock a number of shares
of common stock for issuance of the Preferred Stock and the Warrants pursuant to
Section 2.03.
(e) CAPITALIZATION. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Purchaser (whether or not presently convertible or exchangeable for shares of
capital stock of the Purchaser) is set forth in SCHEDULE 3.02(e). All
outstanding shares of capital stock of the Purchaser are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. Except as disclosed in SCHEDULE 3.02(e),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire, any shares of common stock, or contracts,
commitments, understandings or arrangements by which the Purchaser or any
subsidiary is or may become bound to issue additional shares of common stock, or
securities or rights convertible or exchangeable into shares of common stock.
Except for the Preferred Stock and the Warrants, there are no anti-dilution or
price adjustment provisions contained in any security issued by the
12
Purchaser (or in any agreement providing rights to security holders) and the
issuance and sale of the Preferred Stock (including the Warrants) will not
obligate the Purchaser to issue shares of common stock or other securities to
any person (other than the Seller) and will not result in a right of any holder
of Purchaser securities to adjust the exercise, conversion, exchange or reset
price under such securities.
(f) LITIGATION. Except as disclosed on SCHEDULE 3.02(f), there are no
actions, suits, proceedings, claims or investigations pending or, to the
knowledge of the Purchaser, threatened against either the Purchaser or any of
their respective assets before any court, arbitrator or governmental entity that
is reasonably likely to have a Purchaser Material Adverse Effect. There are no
actions, suits or proceedings pending or, to the knowledge of the Purchaser,
threatened against the Purchaser that seek to prevent or challenge, or seek
damages in connection with, the transactions contemplated by any of the
Purchaser Documents or otherwise arising out of or in any way related to any of
the Purchaser Documents.
(g) OPERATING HISTORY. Purchaser was formed on February 22, 2001. Except
as listed on SCHEDULE 3.02(g), the Purchaser has no assets or liabilities as of
the Closing Date, other than funding provided in respect of the Closing.
(h) BROKER'S FEES. Except for the fees described on SCHEDULE 3.02(h), no
brokerage or finder's fees or commissions are or will be payable by the
Purchaser to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other person with respect to the transactions
contemplated by this Agreement, and the Purchaser has not taken any action that
would cause any Seller to be liable for any such fees or commissions.
(i) PRIVATE PLACEMENT. Neither the Purchaser nor any person acting on the
Purchaser's behalf has sold or offered to sell or solicited any offer to buy the
Preferred Stock by means of any form of general solicitation or advertising.
Neither the Purchaser nor any of its affiliates nor any person acting on the
Purchaser's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the Securities Act
in connection with the offer and sale of the Preferred Stock as contemplated
hereby or (ii) cause the offering of the Purchase Shares pursuant to this
Agreement to be integrated with prior offerings by the Purchaser for purposes of
any applicable law, regulation or shareholder approval provisions. The Purchaser
is not, and is not an affiliate of, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. The Purchaser is not a United
States real property holding corporation within the meaning of the Foreign
Investment in Real Property Tax Act of 1980.
(j) REGISTRATION RIGHTS. Except as described on SCHEDULE 3.02(j), the
Purchaser has not granted or agreed to grant to any person (other than the
Seller) any rights (including "piggy-back" registration rights) to have any
securities of the Purchaser
13
registered with the Securities and Exchange Commission or any other governmental
authority that have not been satisfied.
(k) APPLICATION OF TAKEOVER PROTECTIONS. Except as disclosed on SCHEDULE
3.02(k), there is no control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Purchaser's certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Seller as a result of the Seller and the
Purchaser fulfilling their obligations or exercising their rights under the
Purchaser Documents, the Seller Documents and the Company Documents
(collectively, the "TRANSACTION DOCUMENTS"), including without limitation the
Purchaser's issuance of the Preferred Stock and the Seller's ownership of the
Securities.
(l) SENIORITY. As of the date of this Agreement, no indebtedness of the
Purchaser is senior to the Purchaser Note in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise, other than
indebtedness secured by purchase money security interests (which is senior only
as to underlying assets covered thereby) and capital lease obligations (which is
senior only as to the property covered thereby).
ARTICLE IV
COVENANTS
SECTION 4.01 COVENANTS OF THE SELLER AND THE COMPANY. Each of the Seller
and the Company covenants and agrees that between the date hereof and the
Closing:
(a) ACTIONS. Neither the Seller nor the Company will take any action that
would cause any of their respective representations and warranties in any Seller
Documents or Company Documents, as the case may be, not to be true and correct
in all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on and as of the
Closing Date.
(b) ACCESS BY THE PURCHASER. The Purchaser and its representatives and
advisors shall, upon prior written notice to the Company, have reasonable access
during normal business hours to the Company's assets, premises, books and
records, key employees and accountants, including the work papers of the
Company's accountants, and the Seller shall furnish the Purchaser with such
information and copies of such documents as the Purchaser may reasonably
request.
(c) CONDUCT OF BUSINESS. The business of the Company shall be conducted in
all material respects in the ordinary course, consistent with the present
conduct of its business, and the Company shall use commercially reasonable
efforts to maintain, preserve and protect the assets and goodwill of the
Company. Without limiting the generality of the foregoing, the Company shall
not, without the prior written consent of the Purchaser, take or commit to take
any of following actions except as disclosed on SCHEDULE 4.01(c):
14
(i) amend its bylaws or charter;
(ii) issue any additional shares of stock, or issue, sell or grant
any option or right to acquire or otherwise dispose of any of its authorized but
unissued stock or other equity or debt securities;
(iii) declare or pay any dividends or make any other distribution in
cash, property or securities on its stock;
(iv) repurchase or redeem any shares of its stock;
(v) incur, or perform, pay or otherwise discharge, any material
obligation or liability (absolute or contingent), except for obligations and
liabilities incurred in the ordinary course of business consistent with past
practice;
(vi) enter into any employment agreement with or increase the
compensation or benefits of any of its officers or employees, or grant any
severance pay or termination or establish, adopt or enter into any Plan;
(vii) sell, lease, transfer or otherwise dispose of, or acquire, any
material properties or assets, tangible or intangible, other than in the
ordinary course of business;
(viii) make any material changes in its customary method of
operations, including marketing, selling and pricing policies and maintenance of
business premises, fixtures, furniture and equipment;
(ix) change any of the accounting principles or practices used by
it, except to come into compliance with, or as required by, GAAP.
(d) FURTHER ACTION. Upon the terms and subject to the conditions hereof,
the Seller shall use all commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement and to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings.
(e) PUBLIC ANNOUNCEMENTS. The Seller shall consult with the Purchaser
before issuing any press release or otherwise making any public statement with
respect to the acquisition of the Shares by the Purchaser and shall not issue
any such press release or make any such public statement, except as may be
required by law, without the prior written consent of the Purchaser, which may
not be unreasonably withheld or delayed.
(f) CONFIDENTIALITY. The Company and the Seller shall not use or divulge
any trade secrets, customer or supplier lists, pricing information, marketing
arrangements or strategies, business plans, internal performance statistics,
training manuals or other information concerning the Company or Purchaser or its
affiliates that is competitively sensitive or confidential; provided, however,
that this prohibition shall not apply to any information that (A) is publicly
available as of the date hereof, (B) becomes publicly
15
available other than as a result of prohibited disclosure by the Company or the
Seller, (C) is disclosed to the Company or the Seller, as applicable, by any
person or entity that is not subject to any confidentiality restriction imposed
by the Purchaser, (D) that the Company or the Seller, as applicable, develops
independently or (E) the Company or the Seller is required to disclose by law or
by order of any court of competent jurisdiction, but, in the case of (E), the
Company or the Seller shall first give the Purchaser notice of such law or court
order and an opportunity to object, if permitted by such law or court order.
Because the breach or attempted or threatened breach of this restrictive
covenant will result in immediate and irreparable injury to the Purchaser for
which the Purchaser will not have an adequate remedy at law, the Purchaser shall
be entitled, in addition to all other remedies, to a decree of specific
performance of this covenant and to a temporary and permanent injunction
enjoining such breach, without posting bond or furnishing similar security. The
provisions of this Section 4.01(f) are in addition to and independent of any
agreements or covenants contained in any employment, consulting or other
agreement between the Purchaser or the Company and the Seller.
SECTION 4.02 COVENANTS OF THE PURCHASER. The Purchaser covenants and
agrees that between the date hereof and the Closing:
(a) ACTIONS. The Purchaser will not take any action that would cause any
of the representations and warranties made by it in any of the Purchaser
Documents not to be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
(b) FURTHER ACTION. Upon the terms and subject to the conditions hereof,
the Purchaser shall use all commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings.
(c) PUBLIC ANNOUNCEMENTS. The Purchaser shall consult with the Seller
before issuing any press release or otherwise making any public statement with
respect to the acquisition of the Shares by the Purchaser and shall not issue
any such press release or make any such public statement, except as may be
required by law, without the prior written consent of the Seller, which may not
be unreasonably withheld or delayed.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to consummate the transactions contemplated by the
Purchaser Documents are subject to the fulfillment, at or before the Closing, of
each of the following conditions, any of which may be waived by the Purchaser in
writing, and
16
each of the Seller and the Company shall use commercially reasonable efforts to
cause such conditions to be fulfilled:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Seller and the Company in the Seller Documents and the Company
Documents, as the case may be, shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of the Closing Date,
except to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such date.
(b) PERFORMANCE BY THE SELLER AND THE COMPANY. Each of the Seller and the
Company shall have performed and complied in all material respects with all
agreements, covenants and conditions required by the Seller Documents and the
Company Documents, as the case may be, to be performed or complied with by the
Seller or the Company, as the case may be, at or before the Closing.
(c) CERTIFICATE. The Purchaser shall have received a certificate executed
by each of the Seller and the Company, dated the Closing Date, certifying, in
such detail as the Purchaser may reasonably request, as to the fulfillment of
the conditions set forth in Sections 5.01(a) and 5.01(b).
(d) CONSENTS. Each of the Seller and the Company shall have obtained, or
to the reasonable satisfaction of the Purchaser obviated the need to obtain, all
consents, approvals and waivers from governmental and regulatory authorities and
third parties necessary for the execution, delivery and performance of the
Seller Documents and the Company Documents and the transactions contemplated
thereby, without any material cost or adverse consequences to the Seller or the
Company.
(e) LITIGATION. No action or proceeding shall be pending or threatened
before any court, tribunal or governmental entity, and no claim or demand shall
have been made against the Purchaser, the Seller or the Company, seeking to
restrain or prohibit or to obtain damages or other relief in connection with the
consummation of the transactions contemplated by any of the Company Documents or
the Seller Documents, or which might have a Company Material Adverse Effect or
Seller Material Adverse Effect, which in the reasonably exercised opinion of the
Purchaser makes it inadvisable to consummate such transactions.
(f) PROCEEDINGS. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated hereby or incidental hereto
and all other related legal matters shall have been reasonably satisfactory to
and approved by counsel for the Purchaser and such counsel shall have been
furnished with such certificates, instruments and documents as it shall have
reasonably requested, including, but not limited to, a certificate of each of
the Company and Seller, dated the Closing Date, signed by the respective
Secretary of the Company and Seller, with respect to the Company's and Seller's
charter, by-laws and, in the case of the Seller, resolutions relating to the
transactions contemplated hereby and the incumbency and signatures of each of
the
17
officers of the Company and Seller who shall execute on behalf of the Company
any Company Document and on behalf of the Seller any Seller Document delivered
on the Closing Date.
(g) NO VIOLATION. There shall not have been any action taken, or any
statute, rule, regulation or order enacted, promulgated, issued or deemed
applicable to the acquisition of the Company by the Purchaser by any federal or
state government or governmental or regulatory authority or court, which would:
(i) prohibit the Purchaser's ownership or operation of all or a material portion
of the Company's business or assets, or compel the Purchaser to dispose of or
hold separate all or a material portion of the Company's business or assets, as
a result of the acquisition of the Shares by the Purchaser; (ii) render any
party hereto unable to consummate the acquisition of the Shares by the
Purchaser; (iii) make such consummation illegal; or (iv) impose or confirm
material limitations on the ability of the Purchaser effectively to exercise
full rights of ownership of the Shares, and no such action shall have been taken
or any such statute, rule, regulation or order enacted, promulgated, issued or
deemed applicable to the acquisition of the Shares by the Purchaser which is
reasonably likely to produce such result.
(h) ASSIGNMENT OF LEASE. The Seller and the Company shall have entered
into an assignment of lease relating to the 1st floor office in Bethesda,
Maryland (the "ASSIGNMENT OF LEASE") in the form of EXHIBIT D.
(i) ACCELERATED VESTING. The Seller shall have caused the shares of
restricted stock of the Seller owned by employees of the Company prior to
January 13, 2000 to be vested in full as of the Closing Date.
(j) SECURITY AGREEMENT. The Seller, Company and Purchaser shall have
entered into a security agreement in which Company shall grant Seller a security
interest in certain technology assets of the Purchaser described therein (the
"SECURITY AGREEMENT") in the form of EXHIBIT E.
(k) STOCKHOLDER'S AGREEMENT. The Seller and the Purchaser shall have
entered into a Stockholders' Agreement (the "Stockholders Agreement") in the
form of EXHIBIT F.
(l) LEGAL OPINION. At the Closing, the Purchaser shall have received the
legal opinion of the counsel for the Seller, in the form of EXHIBIT G.
(m) MLS LETTER AGREEMENT. The Seller and MLS shall have entered into a
letter agreement in the form of EXHIBIT H (the "MLS LETTER AGREEMENT").
SECTION 5.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The
obligations of the Seller to consummate the transactions contemplated by the
Seller Documents are subject to the fulfillment, at or before the Closing, of
each of the following conditions, any of which may be waived by the Seller in
writing, and the Purchaser shall use commercially reasonable efforts to cause
such conditions to be fulfilled:
18
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Purchaser in the Purchaser Documents shall be true and correct
in all material respects on and as of the Closing as if made on and as of the
Closing, except to the extent that any such representation or warranty is made
as of a specified date, in which case such representation or warranty shall have
been true and correct in all material respects as of such date.
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have performed and
complied in all material respects with all agreements, covenants and conditions
required by the Purchaser Documents to be performed or complied with by the
Purchaser at or before the Closing.
(c) CERTIFICATE. The Seller shall have received a certificate executed by
the Purchaser, dated the Closing Date, certifying, in such detail as the Seller
may reasonably request, as to the fulfillment of the conditions set forth in
Sections 5.02(a) and 5.02(b).
(d) LITIGATION. No action or proceeding shall be pending or threatened
before any court, tribunal or governmental entity, and no claim or demand shall
have been made against the Purchaser, the Seller or the Company, seeking to
restrain or prohibit or to obtain damages or other relief in connection with the
consummation of the transactions contemplated by any of the Purchaser Documents,
or which might materially adversely affect the business of the Purchaser, which
in the reasonably exercised opinion of the Seller makes it inadvisable to
consummate such transactions.
(e) CONSENTS. The Purchaser shall have obtained, or to the reasonable
satisfaction of the Seller obviated the need to obtain, all consents, approvals
and waivers from governmental and regulatory authorities and third parties
necessary for the execution, delivery and performance of the Purchaser Documents
and the transactions contemplated thereby, without any material cost or adverse
consequence to the Purchaser.
(f) PROCEEDINGS. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated hereby or incidental hereto
and all other related legal matters shall have been reasonably satisfactory to
and approved by counsel for the Seller and such counsel shall have been
furnished with such certificates, instruments and documents as it shall have
reasonably requested, including, but not limited to, a certificate of the
Purchaser, dated the Closing Date, signed by the Secretary of the Purchaser,
with respect to the Purchaser's charter, by-laws and resolutions relating to the
transactions contemplated hereby and the incumbency and signatures of each of
the officers of the Purchaser who shall execute on behalf of the Purchaser any
Purchaser Document delivered on the Closing Date.
(g) NO VIOLATION. There shall not have been any action taken, or any
statute, rule, regulation or order enacted, promulgated, issued or deemed
applicable to the acquisition of the Preferred Stock by the Seller by any
federal or state governmental or regulatory authority or court, which would: (i)
render any party hereto unable to consummate the acquisition of the Preferred
Stock by the Seller; (ii) make such consummation illegal; or (iii) impose or
confirm material limitations on the ability of the
19
Seller effectively to exercise full rights of ownership of the Preferred Stock,
and no such action shall have been taken or any such statute, rule, regulation
or order enacted, promulgated, issued or deemed applicable to the acquisition of
the Preferred Stock by the Seller which is reasonably likely to produce such
result.
(h) MLS LETTER AGREEMENT. The Seller and MLS shall have entered into the
MLS Letter Agreement.
(i) ASSIGNMENT OF LEASE. The Purchaser and the Company shall have entered
into the Assignment of Lease.
(j) SECURITY AGREEMENT. The Purchaser, Company and Seller shall have
entered into the Security Agreement.
(k) STOCKHOLDERS' AGREEMENT. The Purchaser and Seller shall have entered
into the Stockholder's Agreement.
(l) PURCHASER NOTE. The Company shall have executed the Purchaser Note.
(m) RESTATED CERTIFICATE. The Purchaser shall have caused the filing of
the Restated Certificate.
(n) LEGAL OPINION. At the Closing, the Seller shall have received the
legal opinion of the counsel for the Purchaser, in the form of EXHIBIT I.
(o) TERMINATION OF EMPLOYMENT AGREEMENTS. The employment of each of the
employees of the Company listed on SCHEDULE 5.01(o) hereto (collectively, the
"EMPLOYMENT AGREEMENTS") shall have been terminated or shall automatically
terminate upon the Closing subject to executed termination agreements signed in
respect of each of the Employment Agreements.
ARTICLE VI
CLOSING DELIVERIES
SECTION 6.01 DELIVERIES OF THE SELLER. At the Closing, the Seller shall
deliver, or shall cause to be delivered, to the Purchaser the following:
(a) Certificates representing the Shares, together with properly executed
stock powers and any required stock transfer tax stamps affixed thereto and all
taxes on such transfer, if any, paid in full, all at the expense of the holder
of such Shares;
(b) The certificate referred to in Section 5.01(c), duly executed;
(c) The minute books of the Company;
(d) Duly executed resignations of all directors of the Company;
20
(e) The Assignment of Lease;
(f) The Security Agreement;
(g) The Stockholders' Agreement;
(h) The MLS Letter Agreement; and
(i) The legal opinion of the counsel for the Seller.
SECTION 6.02 PURCHASER DELIVERIES. At the Closing, the Purchaser shall
deliver, or shall cause to be delivered, to the Seller the following:
(a) The Cash Adjustment;
(b) Certificates representing the Preferred Stock registered in the name
of the Seller;
(c) The Purchaser Note;
(d) The certificate referred to in Section 5.02(c) hereof, duly executed;
(e) MLS Letter Agreement;
(f) The Assignment of Lease;
(g) The Security Agreement;
(h) Evidence that the Restated Certificate has been filed on or prior to
the Closing Date with the Secretary of State of Delaware;
(i) The Stockholders' Agreement;
(j) The legal opinion of the counsel for the Purchaser; and
(k) Evidence of termination of the Employment Agreements.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 INDEMNIFICATION BY THE SELLER. The Seller shall indemnify,
defend and hold harmless the Purchaser, promptly upon demand at any time and
from time to time, against any and all losses, liabilities, claims, actions,
damages and expenses (including without limitation, reasonable attorneys' fees
and disbursements) (collectively, "LOSSES"), arising out of or in connection
with any of the following: (i) any misrepresentation or breach of any warranty
made by the Seller in Section 3.01 or any of the Seller Documents; (ii) any
breach or nonfulfillment of any covenant or agreement
21
made by the Seller in any of the Seller Documents; (iii) the claims of any
broker or finder engaged by the Seller; (iv) any Tax liability of the Seller;
(v) any Tax liability of the Company relating to any period from date the Seller
acquired the stock of the Company that (A) ends on the Closing Date or (B)
includes the Closing Date, to the extent the amount of such Tax liability is
attributable to the portion of such period ending on the Closing Date
(determined as if the period ended on that date); (vi) 50% of any employment
claims asserted by former employees of the Company whose employment with the
Company was terminated during September 2001 or December 2001; and/or (vii) any
and all claims against the Company in connection with any account payable
identified on Schedule 8.04 with respect to which the Company (or the Purchaser
on behalf thereof) has, with the thirty (30) day period after the Closing Date,
either (A) paid the principal balance of such account payable as stated on such
Schedule 8.04, or (B) arranged with the holder of such account payable for a
compromise payment plan or similar type of settlement with respect thereto. With
respect to clause (i) in this Section 7.01, in no event shall Seller indemnify
Purchaser for a breach of any representation or warranty of the Seller in
respect of the Company to the extent that MLS knew or should have known that
such representation or warranty was inaccurate on the Closing Date; provided ,
however, that the foregoing limitation shall not apply to any of the
representations or warranties of the Seller in respect of the Seller itself.
With respect to clause (v) in this Section 7.01 and without limitation thereof,
the Seller acknowledges and agrees that (A) the Seller shall indemnify the
Company for Losses arising out of or in connection with any liability relating
to personal property Tax payable by the Company with respect to fiscal year 2000
and fiscal year 2001, including without limitation all accounting fees and
expenses related thereto, and (B) in the event that the Seller fails to pay such
amounts to the Company within 30 days of the payment thereof by the Company (or
by the Purchaser on behalf of the Company), then Purchaser shall have the right
to offset against its Earn Out payments to the Seller such amounts owed by the
Seller to the Company.
SECTION 7.02 INDEMNIFICATION BY THE PURCHASER. The Purchaser, shall
indemnify, defend and hold harmless the Seller, promptly upon demand at any time
and from time to time, against any and all Losses arising out of or in
connection with any of the following: (i) any misrepresentation or breach of any
warranty made by the Purchaser in the Purchaser Documents; (ii) any breach or
nonfulfillment of any covenant or agreement made by the Purchaser in the
Purchaser Documents; (iii) the claims of any broker or finder engaged by the
Purchaser; (iv) any claims by Xxxxxx & Xxxxxxx for fees payable in consideration
of services rendered to the Company; (v) all employment claims from former or
current employees of the Company, except those covered by the Seller under
Section 7.01(vi); (vi) all claims from former or current employees of the
Company relating to any commissions owed; (vii) any Tax liability of the Company
from any transaction entered into by the Company, other than this Agreement, on
the Closing Date; (viii) any claims regarding legal fees payable to Xxxxxx &
Xxxxxxx that are attributable to the formerly proposed transaction involving the
Company and Stellar One Corporation or (ix) any other claims relating to the
business of the Company arising out of any transaction, occurrence or
circumstance occurring or alleged to have occurred after the Closing Date.
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SECTION 7.03 FURTHER PROVISIONS REGARDING INDEMNIFICATION.
(a) SURVIVAL.
(i) All representations and warranties made by the Seller in the
Seller Documents, or by the Purchaser in the Purchaser Documents, shall survive
the Closing until the first anniversary of the Closing Date, notwithstanding any
examination or investigation made by or for any party; PROVIDED, HOWEVER that
(A) the representations and warranties contained in Section 3.01(i) (with
respect to taxes) shall remain in full force and effect until 90 days after the
expiration of the applicable statute of limitations; and (B) the representations
and warranties contained in Sections 3.01(a), 3.01(b), 3.01(c), 3.01(d),
3.02(a), 3.02(b), 3.02(c) and 3.02(d) shall remain in full force and effect
indefinitely.
(b) LIMITATIONS. Notwithstanding the foregoing,
(i) the indemnification in Sections 7.01 and 7.02, as the case may
be, shall be the exclusive remedy of the Seller, the Purchaser, and their
respective affiliates with respect to claims for Losses;
(ii) the indemnification provided for in Section 7.01(i) and Section
7.02(i) above shall not be required unless and until, at the time of any such
determination, the total amount of Losses otherwise subject to indemnification
under Section 7.01(i) or Section 7.02(i), as applicable, exceeds $100,000, in
which event the indemnified party or parties will be entitled to indemnification
for the amount of their Losses arising under Section 7.01(i) or Section 7.02(i),
as applicable, in excess of such amount, PROVIDED that the aggregate amount of
actual payments for indemnification of Losses under Section 7.01(i) and Section
7.02(i) that either the Purchaser or the Seller shall be entitled to receive
from the other party shall in no event exceed $250,000.
(iii) neither the Seller or the Company, on the one hand, nor the
Purchaser or any of its respective affiliates, on the other, shall be entitled
to indemnification for Losses arising out of matters referred to in Section
7.01(i) or 7.02(i), as applicable, unless it shall have given written notice to
the indemnifying party, setting forth its claim for indemnification in
reasonable detail, within the period from the Closing Date until the applicable
period of survival as set forth in Section 7.03(a) hereof;
(iv) an indemnified party shall promptly give written notice to the
indemnifying party after the indemnified party has knowledge that any legal
proceeding has been instituted or any claim has been asserted in respect of
which indemnification may be sought under the provisions of Section 7.01 or
7.02. If the indemnifying party, within 30 days after the indemnified party has
given such notice (or within such shorter period of time as an answer or other
responsive motion may be required), shall have acknowledged in writing his or
its obligation to indemnify, then the indemnifying party shall have the right to
control the defense of such claim or proceeding, and the indemnifying party
shall not settle or compromise such claim or proceeding without the written
consent of the indemnified party. The indemnified party may in any event
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participate in any such defense with his or its own counsel and at his or its
own expense; and
(v) the indemnified party shall be kept fully informed by the
indemnifying party of such action, suit or proceeding at all stages thereof,
whether or not he or it is represented by counsel. The indemnifying party shall,
at the indemnifying party's expense, make available to the indemnified party and
its attorneys and accountants all books and records of the indemnifying party
relating to such action, suit or proceeding, and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
(c) DELIVERY OF NOTICE. The Purchaser and the Seller agree to promptly
deliver a written notice to the other upon any determination that a claim for
Losses under Section 7.01 or 7.02 is reasonably likely to exist.
SECTION 7.04 TAX TREATMENT OF INDEMNITY PAYMENTS. All amounts paid with
respect to indemnity claims under this Agreement shall be treated by the parties
hereto for all Tax purposes as adjustments to the Purchase Price, unless
otherwise required by law. If amounts paid with respect to indemnity claims
under this Agreement are subsequently determined to be required to be treated as
income to the recipient of such payment, then the amount required to be paid
under this Article VII shall be paid on a net after-tax basis. Any amounts paid
with respect to indemnity claims under this Agreement shall be reduced by the
Tax benefit actually realized by such indemnity claims.
ARTICLE VIII
OTHER AGREEMENTS
SECTION 8.01 LIABILITY FOR STELLAR ONE ATTORNEY'S FEES. The Purchaser
hereby assumes the obligation to pay legal fees of $81,624.09 attributable to
the formerly proposed transaction involving the Company and Stellar One
Corporation.
SECTION 8.02 CORPORATE SERVICES. To assist in the transfer, corporate
services listed on SCHEDULE 8.02 that are performed for the Company by the
Seller after the Closing Date (the "CORPORATE SERVICES") shall continue to be
provided by the Seller, but in no event longer than 60 days after the Closing
Date, or such later date as mutually agreed upon. The Purchaser shall reimburse
the Seller for any reasonable out-of-pocket costs associated with the Corporate
Services. With respect to any Corporate Services actually provided by Seller,
the Seller shall send an invoice to the Company with an itemized listing of
reimbursable expenses. The Company shall immediately pay the amount set forth on
the such invoice to the Seller. In no event shall the Seller be required to make
any payment on behalf of the Company after the Closing unless the Company shall
first have advanced to the Seller funds sufficient to cover such payment.
SECTION 8.03 RESERVATION OF SECURITIES. The Purchaser shall maintain a
reserve from its duly authorized shares of common stock for issuance pursuant to
the Transaction
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Documents in such amount as may be required to fulfill its obligations in full
under the Transaction Documents.
SECTION 8.04 RECEIVABLES. Attached as Schedule 8.04 hereto is a list of
(i) certain accounts payable that are being assumed by the Seller, and (ii)
certain accounts receivables due to the Company as of December 31, 2001. The
Seller will promptly pay to the Company, net of any amounts owed by Purchaser or
the Company to Seller, the amount of any accounts receivable collected by the
Seller from business related to the Company (including, without limitation, any
amounts received from Stellar One Corporation).
SECTION 8.05 PREPARATION OF FINANCIAL STATEMENTS. Following the Closing
Date, the Purchaser shall (i) be responsible for mailing to vendors of the
Company any IRS Form 1099 or 1096 due to such vendor for the 2001 fiscal year,
(ii) provide Seller a list of all invoices generated by the Company during
December 2001, and (iii) cause the Company and its employees to assist the
Seller in the preparation of its 2001 tax returns and in the preparation of (a)
the balance sheet of the Company as of the Closing Date and closing statements
and (b) the financial statements of the Seller in the future for all periods in
which the Seller is required to account for its investment in the Purchaser
using the equity method of accounting, including providing customary
certifications, including management representation letters, to the Seller's
independent auditors, and shall provide the Seller and any accountants, counsel
or financial advisers retained by the Seller on-site access at reasonable times
to the personnel, properties, books, contracts, records, schedules, analyses and
working papers of the Company through the Closing Date for such purpose.
SECTION 8.06 TAX REFUNDS. Seller shall have the right to amend, or cause
the Company to amend, the Company's prior years Federal and State Tax Returns
and/or file a claim for refund, for any tax periods ending on or prior to the
Closing Date based on losses set forth on the Company's original or amended Tax
Returns for periods ending on or prior to the Closing Date (including without
limitations carrybacks of those losses or credits, but excluding any losses or
other tax benefit arising after the Closing Date), provided (x) that such
amendment or claim for refund does not cause a Federal or State Tax Return to be
prepared in a manner that is not consistent with past practices and (y) that
Seller shall provide Purchaser (for Purchaser's comments, but not subject to
Purchaser's approval) with a copy of such amendment or claim for refund at least
ten (10) business days prior to its filing. Subject to Seller's rights set forth
in the immediately preceding sentence, Seller agrees that it shall not take any
other action that would have the effect of (x) increasing any Tax liability of
the Company, or (y) otherwise adversely affect any other item or Tax attribute
of the Company, in each case for any taxable period ending after the Closing
Date. Seller shall be entitled to any tax refunds received as a result of
filings that comply with the provisions of this Section 8.06 (any such refund a
"Seller Refund"). The Purchaser and the Company agree to promptly pay the Seller
any Seller Refunds received by, or credited to, the Purchaser or the Company.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01 NOTICES. All notices or other communications in connection
with this Agreement shall be in writing and shall be considered given when
personally delivered or three days after when mailed by registered or certified
mail, postage prepaid, return receipt requested, or by overnight courier as
follows:
If to the Seller:
24/7 Real Media, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Esq.
If to the Purchaser:
Schaszberger Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: President
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxx Xxxxxx X.X., Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxx
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, request, demand, claim or
other communication shall be deemed to have been duly given unless and until it
actually is delivered to the intended recipient. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other party notice in the manner set
forth in this Section 9.01.
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SECTION 9.02 TERMINATION. This Agreement may be terminated by any party if
the acquisition of the Shares by the Purchaser shall have not been consummated
by January 31, 2002.
SECTION 9.03 ENTIRE AGREEMENT. This Agreement (which includes the
schedules and exhibits hereto) sets forth the parties' final and entire
agreement with respect to its subject matter and supersedes any and all prior
and contemporaneous understandings, representations, warranties and agreements
(whether oral or written) with respect to the subject matter hereof. This
Agreement can be amended, supplemented or changed, and any provision hereof can
be waived, only by a written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any such amendment,
supplement, change or waiver is sought.
SECTION 9.04 SUCCESSORS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns;
provided, however, that neither this Agreement nor any right or obligation
hereunder may be assigned or transferred.
SECTION 9.05 PARAGRAPH HEADINGS. The paragraph and section headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.06 FEES AND EXPENSES. Each party hereto will pay its own fees
and expenses, including, without limitation, legal, accounting and other
professional fees and expenses, incurred in connection with the execution,
delivery and performance of this Agreement, whether or not the acquisition of
the Shares by the Purchaser is consummated.
SECTION 9.07 SEVERABILITY. If any provision of this Agreement shall be
held by any court of competent jurisdiction to be illegal, invalid or
unenforceable, such provision shall be construed and enforced as if it had been
more narrowly drawn so as not to be illegal, invalid or unenforceable, and such
illegality, invalidity or unenforceability shall have no effect upon and shall
not impair the enforceability of any other provision of this Agreement.
SECTION 9.08 GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed and interpreted in accordance with the
internal laws of the State of New York. The state courts of the State of New
York in New York County and, if the jurisdictional prerequisites exist at the
time, the United States District Court for the Southern District of New York,
shall have sole and exclusive jurisdiction to hear and determine any dispute or
controversy arising under or concerning this Agreement. In any action or
proceeding concerning such dispute or controversy, the parties consent to such
jurisdiction and waive personal service of any summons, complaint or other
process; a summons or complaint in any such action or proceeding may be served
by mail in accordance with Section 9.01.
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SECTION 9.09 COUNTERPARTS. This Agreement may be executed by facsimile and
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
SECTION 9.10 DEFINITION OF KNOWLEDGE. As used herein, the words "KNOW",
"KNOWLEDGE" or "KNOWN" shall, (i) with respect to the Company or Company
management, mean the actual knowledge of MLS, in each case after such person has
made due and diligent inquiry as to the matters which are the subject of the
statements which are "KNOWN" by the Company or made to the "KNOWLEDGE" of the
Company; (ii) with respect to the Seller or Seller management, mean the actual
knowledge of Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxxxx Xxxxxxx and/or Xxx Xxxxxxx, in
each case after such individuals have made due and diligent inquiry as to the
matters which are the subject of the statements which are "KNOWN" by the Seller
or made to the "KNOWLEDGE" of the Seller, and (iii) with respect to the
Purchaser or the Purchaser's management, mean the actual knowledge of the
corporate executive officers of the Purchaser, in each case after such
individuals have made due and diligent inquiry as to the matters which are the
subject of the statements which are "KNOWN" by the Purchaser or made to the
"KNOWLEDGE" of the Purchaser.
SECTION 9.11 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person or entity other than the parties and
their respective successors and permitted assigns; provided, however, that the
provisions in Section 7.03(d) above concerning indemnification are intended for
the benefit of the individuals specified therein.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
24/7 REAL MEDIA, INC.
By: ________________________
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
IMAKE SOFTWARE & SERVICES, INC.
By: ________________________
Name:
Title:
SCHASZBERGER CORPORATION
By: ________________________
Name:
Title:
[SIGNATURE PAGE TO STOCK PURCHASE AND SALE AGREEMENT]
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