ASSET PURCHASE AGREEMENT
between
K2 DESIGN, INC.,
Seller
and
24/7 MEDIA, INC.,
Purchaser
Dated as of June 1, 1998
EXECUTION COPY
ASSET PURCHASE AGREEMENT (this "Agreement") dated as of June
1, 1998, among K2 DESIGN, INC., a Delaware corporation ("Seller"),
and 24/7 MEDIA, INC., a Delaware corporation ("Purchaser").
This Agreement sets forth the terms and conditions upon which Seller is
selling and Purchaser is purchasing all of the assets (other than Excluded
Assets, as defined below) and certain liabilities of Seller's CLIQNOW! division.
Accordingly, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following definitions shall apply for purposes of this Agreement
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
1.1 "Business" means (i) media selling across web site advertising
networks; and (ii) the provision of promotion, marketing and sales services and
other ancillary activities relating to and provided in connection with the
foregoing.
1.2 "Certificate of Designations" means the certificate of designations
with respect to Series B Convertible Redeemable Preferred Stock of Purchaser in
the form attached hereto as Exhibit 1.2.
1.3 "Contracts" means those agreements listed on Schedule 1.3.
1.4 "Deferred Purchase Price" means $150,000.
1.5 "Encumbrances" means, to the extent applicable, all claims, liens
(including liens for taxes), mortgages, security interests, leases, options,
rights of first refusal or first offer, easements or other similar encumbrances.
1.6 "Intellectual Property" means the trade names listed on Schedule
1.6, and all registered trademarks and goodwill associated therewith.
1.7 "Knowledge", "to Seller's Knowledge" and variations thereof shall
mean that which is actually known by an executive officer of Seller and with no
requirement of due inquiry or that
such officers "should have known."
1.8 "Leased Premises" shall mean that portion of office space located at
00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx presently utilized by the Transferred
Employees.
1.9 "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to Seller or Purchaser, as the case may be, any change or
effect that is or, so far as can be reasonably determined, is likely to be
materially adverse to the assets, properties, condition (financial or
otherwise), business (including, without limitation, the Business) or results of
operations of Seller or Purchaser, as the case may be, taken as a whole.
1.10 "Permitted Encumbrances" means Encumbrances that (a) are liens for
taxes not yet due and payable, (b) do not, individually or in the aggregate,
materially detract from the value of the assets to which they attach, (c) are
mechanics', carriers', materialmen's, landlords', workers' or other similar
liens incurred in the ordinary course of business or (d) relate to assets owned
by customers or third parties that are used by the Company in its operations.
1.11 "Post-Closing Financial Statements" means (i) audited financial
statements (balance sheets, statements of income and statements of cash flows)
for the Business for the year ended December 31, 1997, prepared by Seller's
regular independent auditors, and accompanied by an unqualified opinion of such
auditors, and (ii) unaudited balance sheet as of March 31, 1998 and unaudited
statement of income for the three months ended March 31, 1998.
1.12 "Registration Rights Agreement" means the registration rights
agreement dated the date hereof and in the form attached hereto as Exhibit 1.12.
1.13 "Royalty Rights" means all of Seller's right, title and interest in
and to any revenue derived from or arising out of the Business, including
royalties and similar payments, whether or not earned or payable on the date
hereof.
1.14 "Seller's Accounts Estimate" means $295,267, as adjusted pursuant to
Sections 1.15 and 1.16 hereof.
1.15 "Seller's Accounts Payable" means the accounts payable of Seller
relating to the Business as of the date hereof, as listed on Schedule 1.15,
which Schedule may be amended within 30 days from the date hereof (with
corresponding adjustments being made to the Seller's Accounts Estimate).
1.16 "Seller's Accounts Receivable" means the accounts receivable of
Seller relating to the Business as of the date hereof as listed on Schedule
1.16, which Schedule may be amended within 30 days from the date hereof (with
corresponding adjustments being made to the Seller's Accounts Estimate).
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1.17 "Transaction Documents" means, collectively, this Agreement, the
Certificate of Designations, the Employment Agreements and the Registration
Rights Agreement.
1.18 "Transferred Employees" means the individuals listed on Schedule
1.18.
ARTICLE II
THE ASSET PURCHASE
2.1 The Asset Purchase. (a) Upon the terms and subject to the
conditions of this Agreement, Seller hereby sells, conveys, assigns, transfers
and delivers to Purchaser free and clear of all Encumbrances (other than
Permitted Encumbrances and except as expressly provided herein), and Purchaser
hereby purchases from Seller, the Business and all the assets, properties and
rights owned or leased by Seller and constituting the Business (the "Purchased
Assets"), including without limitation:
(i) all of Seller's right, title and interest in and to the
Contracts, to the extent assignable;
(ii) Seller's Accounts Receivable;
(iii) all customer lists, sales data, brochures, catalogs,
mailing lists, art work, photographs and advertising
material that are used in the Business, whether in
electronic form or otherwise;
(iv) all of Seller's interest in governmental permits,
licenses, registrations, certificates, consents, orders
and approvals necessary for the continued operation of
the Business;
(v) all trade secrets, Royalty Rights, work notes, market
studies, consultant's reports and similar property,
tangible or intangible, used in the Business;
(vi) copies of all records of Seller material to the
operation of the Business, including property, tax and
marketing records and copies of personnel records of
Transferred Employees;
(vii) all right, title and interest in and to the goodwill
incident to the Business;
(viii) all prepaid expenses of, or for the benefit of, the
Business;
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(ix) subject to any license agreements regarding such
software, all software resident on computers used in
the Business (other than any software not useful in the
Business);
(x) all computers used in the Business, including all
laptop computers currently used by a Transferred
Employee; and
(xi) all other assets material to the operation of the
Business (including without limitation all causes of
action, contract rights and warranty and product
liability claims, whether or not in litigation on the
date hereof).
(b) The following assets (collectively, the "Excluded Assets")
shall be excluded from this Agreement, and shall not be assigned or transferred
to Purchaser:
(i) any right, title or interest in the names "K2" and "K2
Design" and any variants thereof containing "K2" and
any related logos, trademarks, trade names or service
marks incorporating such names, except as otherwise
specifically transferred to Purchaser by Seller;
(ii) cash and cash equivalents and similar type investments;
(iii) leases and contracts, other than those set forth on
Schedule 1.3 or otherwise specifically transferred
pursuant to the terms hereof;
(iv) assets constituting any pension funds or segregated
funds for the benefit of Transferred Employees;
(v) corporate minute books and stock books;
(vi) except as otherwise provided herein, all of Seller's
assets not associated with the Business;
(vii) trade show booths; and
(viii) all other furniture, fixtures and equipment.
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2.2 Purchase Price.
(a) In consideration of the transfer to Purchaser of the Assets
and of the assignment of the Intellectual Property, Purchaser agrees to deliver
to Seller or its designees the following: (i) $850,000 on the date hereof, by
wire transfer of immediately available funds, (ii) the Deferred Purchase Price
(subject to the terms of Section 2.2(b)), (iii) 3,000 shares of the Purchaser's
Series B Convertible Redeemable Preferred Stock, par value $.01 per share (the
"Shares"), and (iv) the Seller's Accounts Estimate, on the date hereof. The
amount of cash and Shares set forth in items (i) through (iv), above, as
adjusted pursuant to the terms hereof, is referred to herein as the "Purchase
Price".
(b) If the Post-Closing Financial Statements are delivered to
Purchaser within forty-five days after the date hereof, then Purchaser shall pay
to Seller the Deferred Purchase Price within three days after the date of such
delivery. Seller acknowledges that the Deferred Purchase Price shall not be
payable if the Post-Closing Financial Statements are not delivered on or before
such date.
2.3 Purchase Price Adjustments
(a) Schedule 2.3 sets forth a list of Seller's customers relating
to the Business as of April 30, 1998 (the "Existing Customers") together with a
true and complete list of the gross revenues of Seller derived from the Business
from the Existing Customers and booked on the accounts of Seller during the four
month period ended April 30, 1998 (in the aggregate and on a customer by
customer basis). In addition, Schedule 2.3 (as amended through June 30, 1998)
sets forth a list of customers ("New Customers") that have entered or will enter
into contracts with Seller and/or Purchaser relating to the Business in May or
June, 1998 (excluding renewals).
(b) On or before November 1, 1998 Purchaser shall deliver to
Seller a notice (the "Customer Notice") which shall include (i) a list of
Existing Customers that were parties to website agreements with Purchaser as of
September 1, 1998 and had not as of such date provided written notice of intent
to terminate such website agreement, (the "Retained Customers") and (ii) the
gross revenue generated from New Customers during the four months ending
September 30, 1998 (the "New Customer Revenue").
(c) The Customer Notice shall include the following calculations:
(i) the sum of the revenue percentages set forth on Schedule
2.3 for Retained Customers;
(ii) the New Customer Revenue, expressed as a percentage of
Seller's gross revenue attributable to the Business for
the four months ended April 30, 1998; and
(iii) the sum of the percentages determined pursuant to (i)
and (ii), above (such percentage, the "Retained Customer
Factor").
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(d) The Purchase Price shall be reduced (the "Purchase Price
Reduction") if at all, according to the following chart:
Retained Customer Factor Purchase Price Reduction
------------------------ ------------------------
greater than 70% 0
greater than 60% and less than
or equal to 70% $200,000
greater than 50% and less than
original or equal to 60% $400,000
50% $600,000
less than 50% $600,000 plus $40,000 times the
number of percentage points by
which 50% exceeds the Retained
Customer Factor
(e) Notwithstanding anything to the contrary in this Section 2.3,
if Purchaser's gross revenue from Existing Customers and New Customers exceeds
$500,000 for the three months ended September 30, 1998, the Purchase Price
Reduction shall be zero. Purchaser agrees to use its best efforts to retain
Existing Customers and New Customers through September 30, 1998 and to keep all
website and advertising relationships intact through September 30, 1998 and
thereby avoid a Purchase Price Reduction.
(f) The Purchase Price Reduction shall be payable in cash or in
shares of Purchaser's capital stock, at the option of Seller. If all or a
portion of the Purchase Price Reduction is payable in Shares prior to the
Purchaser's initial public offering, the Shares shall be valued at $1,000 per
share. If all or a portion of the Purchase Price Reduction is payable after the
Purchaser's initial public offering, the Purchaser's common stock shall be
valued at the higher of (i) the price to the underwriters of the common stock in
the initial public offering or (ii) the average of the closing price per share
on the Nasdaq National Market for the five trading days immediately preceding
October 1, 1998.
(g) Purchaser agrees to use commercially reasonable efforts to
collect Seller's Accounts Receivable prior to November 1, 1998. On or before
November 1, 1998, Purchaser shall prepare and deliver to Seller a notice (the
"Accounts Notice" and, together with the Customer Notice, a "Notice") setting
forth the amount of Seller's Accounts Receivable collected by Purchaser between
the date hereof and November 1, 1998 (such amount, the "Post-Closing
Collections"). If the Post-Closing Collections are less than Seller's Accounts
Estimate, Seller shall, within 15 days after receipt of the Accounts Notice or
resolution of any dispute pursuant to Section 2.3(h), pay to Purchaser an amount
equal to such shortfall.
(h) During the 30-day period following Seller's receipt of a
Notice, Seller and its
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independent auditors will be permitted to review Purchaser's documentation
relating to such Notice (and Purchaser and its representatives will provide
reasonable cooperation in such review). Such Notice shall become final and
binding upon the parties on the thirtieth day following receipt thereof by
Seller unless Seller gives written notice of any disagreement ("Notice of
Disagreement") to Purchaser prior to such date. The Notice of Disagreement (if
any) shall specify in reasonable and sufficient detail the nature of any
disagreement so asserted. If a Notice of Disagreement is received by Purchaser
in a timely manner, then the Notice (as revised in accordance with clause (x) or
(y) below) shall become final and binding upon the parties on the earlier of (x)
the date the parties hereto resolve in writing any differences they have with
respect to any matter specified in the Notice of Disagreement or (y) the date
any disputed matters are finally resolved in writing by the Arbitrator (as
defined below). During the 30-day period following the delivery of a Notice of
Disagreement, Seller and Purchaser shall seek in good faith to resolve in
writing any differences which they may have with respect to any matter specified
in the Notice of Disagreement. If, at the end of such 30- day period, Seller and
Purchaser have not reached agreement on such matters, the matters which remain
in dispute shall be submitted to an arbitrator jointly selected by the parties
(the "Arbitrator") for review and resolution in accordance with the commercial
arbitration rules of the American Arbitration Association in New York City. The
Arbitrator shall render a decision resolving the matters in dispute within 30
days following their submission to the Arbitrator. The fees of the Arbitrator
shall be borne by the non-prevailing party.
2.4 Assumption of Liabilities; Employee Matters (a) General
Limitation on Assumption of Liabilities. Except for Permitted Encumbrances and
as otherwise provided in this Section 2.4, Seller shall transfer the Purchased
Assets to Purchaser free and clear of all Encumbrances, and Purchaser shall not,
by virtue of its purchase of the Purchased Assets, assume or become responsible
for any liabilities or obligations of Seller.
(b) Assumed Liabilities and Obligations. Purchaser hereby acquires
the Purchased Assets subject only to, and shall undertake, assume, perform and
otherwise pay, satisfy and discharge, and hold Seller harmless from, the
liabilities and obligations set forth therein or relating thereto and, in either
case, arising after the date hereof.
(c) Offer of Employment. Purchaser shall offer employment as of
the date hereof to all of the Transferred Employees. Purchaser shall keep on its
payroll all Transferred Employees who accept Purchaser's offer of employment
except for those Transferred Employees who may resign or be terminated for
cause, for at least 90 days after the Closing Date.
(d) Vacation Liability. Purchaser shall assume liability as of the
date hereof for the vacation entitlement that each Transferred Employee who
becomes an employee of Purchaser has accrued and is listed in Schedule 2.4.
Purchaser shall pay each Transferred Employee's wages or salary during such
vacation entitlement from Purchaser, when taken.
(e) Other Employee Benefits. Seller agrees that, with respect to
claims for workers' compensation arising out of events occurring prior to the
date hereof and all claims under
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Seller's employee benefit programs by, or in respect of, persons employed by
Seller arising out of events occurring prior to the date hereof, regardless of
whether such employment had terminated and regardless of whether such employee
is employed by Purchaser, whether reported or unreported as of the date hereof,
and whether insured or uninsured (including, but not limited to, workers'
compensation, life insurance, medical and disability programs), Seller shall, at
its own expense, honor, or cause its insurance carriers, if any, to honor, such
claims in accordance with the terms and conditions of such programs or
applicable workers' compensation statutes, including any construction of such
terms or conditions ultimately made by any court or administrative body having
jurisdiction thereover. Without limiting the scope of the preceding sentence,
Seller and its affiliates shall be responsible for any and all claims and
liabilities arising out of or relating to (i) Seller's employment of the
Transferred Employees or any former employees of Seller, (ii) the termination by
Seller of the employment of any such Transferred Employee, former employee,
consultant or other agent of Seller, and (iii) the provision by Seller of any
employee benefits to such Transferred Employees, former employees, retirees,
disabled employees, or agents of Seller (and their beneficiaries and eligible
dependents) attributable to their employment with, or their participation in any
plans or programs maintained or contributed to by, Seller or any of its
affiliates. Purchaser shall assume liability for all workers' compensation
claims for industrial injuries and illnesses, and any and all claims and
liabilities, occurring after the Closing Date in respect to the Transferred
Employees. Each Transferred Employee shall be eligible to participate in
Purchaser's benefit plans, subject to any limits or exclusions imposed by the
applicable insurance company, such as exclusions for pre-existing conditions.
2.5 Intellectual Property. Seller hereby assigns to Purchaser the
Intellectual Property and agrees to execute any additional forms or agreements
necessary to effect the foregoing.
2.6 Escrow of Shares. Seller hereby directs Purchaser to deliver
the Shares to Proskauer Rose LLP, as escrow agent, to be held and disbursed in
accordance with the terms of an escrow agreement to be agreed by such firm and
the parties hereto.
2.7 Further Assurances. From and after the date here of, upon
written request from Purchaser, Seller shall execute, acknowledge and deliver
all such further acts, assurances, deeds, assignments, transfers, conveyances
and other instruments and papers as may reasonably be required to sell, assign,
transfer, vest, convey and deliver full right, title and interest in, and
possession of, the Purchased Assets to Purchaser and to otherwise consummate the
transactions contemplated hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
3.2. Authority. Seller has the full corporate power and authority
to execute and deliver the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. All corporate acts
and other proceedings required to be taken by or on the part of Seller to
authorize such execution, delivery and consummation have been duly and properly
taken. The Transaction Documents have been duly executed and delivered by Seller
and constitute legal, valid and binding obligations of Seller enforceable
against Seller in accordance with their respective terms. The execution and
delivery by Seller of the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not violate any applicable
law, or conflict with, result in any breach of, constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or result in the creation of an Encumbrance on any of the properties or assets
of Seller pursuant to, the corporate charter or by-laws of Seller or any
indenture, mortgage, lease, agreement or other instrument to which Seller is a
party or by which its properties or assets are bound. No material approval,
authorization, consent or other order or action of or filing with any person,
entity or court, administrative agency or other governmental body in the United
States of America is required for the execution and delivery by Seller of the
Transaction Documents to which it is a party or the consummation by Seller of
the transactions contemplated hereby or thereby.
3.3. Financial Statements. To its Knowledge, Seller does not have
any contingent or undisclosed obligations or liabilities relating to the
Business which would be required in accordance with GAAP to be reflected in a
currently prepared balance sheet, other than obligations or liabilities (i) that
are disclosed in this Agreement or the Schedules hereto, or(ii) that are not
material to the financial condition of the Business.
3.4. Retention of Customers. Except as set forth on Schedule 3.4,
to its Knowledge, Seller does not know of anything that might reasonably
indicate that any of the entities listed on Schedule 2.3 intends to cease
dealing with (or decline to deal with) the Purchaser, nor has any information
been brought to the attention of the Seller that might reasonably lead it to
believe any such customer intends to materially alter the amount of such
purchases or the extent of dealings with Purchaser (as compared to purchases and
dealings with Seller as of the date hereof).
3.5. Intangible Property Rights. Schedule 3.5 lists all the
trademarks, trade names, trade secrets and other intangible property rights,
including all registered trademarks and goodwill associated therewith, used in
connection with the Business (the "Intangible Property Rights").
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Except as otherwise disclosed in Schedule 3.5, (i) the Seller, to its Knowledge,
validly owns the Intangible Property Rights free and clear of all Encumbrances
other than Permitted Encumbrances and (ii) no action, claim, suit or proceeding
has been brought against the Seller or, to the Knowledge of Seller, has been
threatened against the Seller with respect to any material Intangible Property
Rights.
3.6. Litigation. Except as disclosed in Schedule 3.6, Seller is not
subject to any judgment, order, writ, injunction or decree of any court or any
Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any arbitrator that
materially affects the operation of the Business.
3.7. Contracts. To Seller's Knowledge, Schedule 1.3 sets forth a
list of all executory contracts of the Business. Except as disclosed in Schedule
1.3, to Seller's Knowledge, each of the Contracts listed in Schedule 1.3 is
valid and in full force and effect, each party to each such Contract has
performed all material obligations required to be performed by it thereunder,
and no other party to any such Contract has taken the position that such
Contract is not enforceable against any such other parties by Seller.
3.8. Benefit Plans. Purchaser shall not have liability under any
Benefit Plans, with respect to any employees of Seller or their beneficiaries.
"Benefit Plans" shall mean all material "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), "employee welfare benefit plans" (as defined in Section
3(1) of ERISA), and any other material employee fringe benefit plans maintained,
or contributed to, by the Company.
3.9. Accuracy. To Seller's Knowledge, the required disclosures made
in this Agreement and the schedules attached hereto are complete and accurate in
all material respects, and the scheduled disclosures do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements or facts contained therein, in light of the circumstances
under which they were made, not misleading.
3.10. Securities Act of 1933. The Shares purchased by Seller
pursuant to this Agreement are being acquired for investment only and not with a
view to any public distribution thereof, and Seller will not offer to sell or
otherwise dispose of the Shares so acquired by it in violation of the Securities
Act of 1933.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization.
4.2. Authority. Purchaser has the full corporate power and
authority to execute and deliver the Transaction Documents and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of Purchaser to authorize
such execution, delivery and consummation have been duly and properly taken. The
Transaction Documents have been duly executed and delivered by Purchaser and
constitute legal, valid and binding obligations of Purchaser enforceable against
Purchaser in accordance with their respective terms. The execution and delivery
by Purchaser of the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not violate any law, or
conflict with, result in any breach of, constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or result in
the creation of an Encumbrance on any of the properties or assets of Purchaser
pursuant to, the corporate charter or by-laws of Purchaser or any indenture,
mortgage, lease, agreement or other instrument to which Purchaser is a party or
by which its properties or assets are bound. No material approval,
authorization, consent or other order or action of or filing with any person,
entity or court, administrative agency or other governmental body in the United
States of America is required for the execution and delivery by Purchaser of the
Transaction Documents or the consummation by Purchaser of the transactions
contemplated hereby or thereby.
4.3 Capital Stock of the Company. The authorized capital stock of
the Company consists of (i) 100,000,000 shares of Common Stock, par value $.01
per share (the "Common Stock"), and (ii) 30,000,000 shares of preferred stock,
par value $.01 per share, of which 13,621,507 have been designated as Series A
Convertible Voting Preferred Stock (the "Series A Preferred Stock") and, after
giving effect to the Certificate of Designations, 3,000 of which have been
designated Series B Convertible Redeemable Preferred Stock (the "Series B
Preferred Stock"). On the date hereof, 31,301,804 shares of Common Stock are
outstanding, 13,621,507 shares of the Series A Preferred Stock are outstanding
and 3,000 shares of the Series B Preferred Stock will be outstanding pursuant to
this Agreement. In addition, on the date hereof, there are outstanding
6,344,224, 6,344,224 and 3,121,212 Class A, Class B and Class C Warrants,
respectively, to purchase Common Stock of the Company. All of the outstanding
shares are duly authorized, validly issued and outstanding, fully paid and
non-assessable. The Shares have not been and will not be issued in violation of,
and are not subject to, any preemptive or subscription rights, other than such
rights that have been waived by the holders thereof.
4.4. No Legal Proceedings. Except as disclosed in Schedule 4.4,
there is no action,
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suit, investigation, order, judgment or proceeding pending or, to the knowledge
of Purchaser, threatened against or affecting Purchaser that, individually or
when aggregated with one or more other actions, suits, orders, judgments or
proceedings, has or might reasonably be expected to have a material adverse
effect on Purchaser's ability to perform any of its obligations hereunder or
under any of the Transaction Documents.
4.5 Certificate of Designations. The Certificate of Designations
has been duly filed with the Secretary of State of the State of Delaware. The
certificate of incorporation of Purchaser has been duly amended by the filing of
the Certificate of Designations.
4.6 Brokers. No broker, investment banker or other person is
entitled to any broker's, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser.
4.7 Accuracy. To Purchaser's knowledge, the required disclosures
made in this Agreement and the schedules attached hereto are complete and
accurate in all material respects, and the scheduled disclosures do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements or facts contained therein, in light of the
circumstances under which they were made, not misleading.
4.8 Registration Statement. Purchaser's draft S-1 registration
statement dated June 2, 1998, a copy of which has been delivered to Seller,
complies as to form in all material respects with the requirements of the
Securities Act of 1933 and all applicable rules and regulations thereunder, and
does not contain any false or misleading statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein not misleading.
ARTICLE V
FURTHER COVENANTS AND AGREEMENTS
5.1. Security Arrangements. To secure Seller's obligations under
Sections 2.3(d) and (f) hereof until the Purchase Price Reduction is paid in
full or is finally determined to be zero, Seller shall (i) not dispose of its
Shares of Series B Preferred Stock or (ii) retain the proceeds from the sale of
such Shares in escrow pursuant to an escrow agreement acceptable to Purchaser.
5.2. Access; Information; Confidentiality. (a) Each party,
covenants and agrees, and shall cause each of its officers, employees,
attorneys, accountants and other authorized representatives, to treat all
information obtained or developed by them concerning the other party in strict
confidence. Each party also covenants and agrees to comply with all other
confidentiality undertakings heretofore agreed to between Purchaser and Seller
or their representatives relating to the parties or the transactions
contemplated by this Agreement.
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(b) If at any time it is necessary that a party be furnished
with additional information, documents or records relating to the Purchased
Assets or the Business in order properly to prepare or support its tax returns
or other documents or reports required to be filed with governmental authorities
or any securities exchanges or otherwise for any purpose in connection with the
performance or discharge by the parties of their obligations hereunder, and such
information, documents or records are in the possession or control of the other
party, such other party agrees to use all reasonable efforts to furnish or make
available such information, documents or records (or copies thereof).
5.3. Financial Statements. Seller covenants and agrees to prepare
and deliver the Post-Closing Financial Statements.
5.4. Fees and Expenses. Each party shall bear its own expenses
incurred in connection with the transactions contemplated hereby, except that
Purchaser shall reimburse Seller for up to $45,000 of Seller's reasonable fees
and expenses incurred in connection with the transactions contemplated hereby
and the preparation of the Post-Closing Financial Statements within 30 days
after receipt of the Post-Closing Financial Statements.
5.5. Accounts Receivable. Seller agrees to promptly remit to
Purchaser the amount of any payments received by Seller relating to Seller's
Accounts Receivable.
5.6. Indemnification. (a) Each of Seller and Purchaser shall
indemnify and hold the other harmless against and in respect of all actions,
suits, demands, judgments, costs and expenses (including reasonable attorneys'
fees) (collectively, "Damages") relating to any misrepresentation, breach of any
representation or warranty or non-fulfillment of any agreement on the part of
such party in any Transaction Document.
(b) Purchaser shall indemnify and hold Seller harmless in
respect of Damages relating to the Transferred Employees and the Business, in
each case arising on or after the date hereof. Seller shall indemnify and hold
Purchaser harmless in respect of Damages relating to the Transferred Employees
and the Business, in each case arising prior to the date hereof.
(c) The indemnification provided for in this Section 5.6
shall terminate and be of no further force and effect one year from the date
hereof, except as to any representation or warranty as to which a written notice
of claim for indemnification has been given to the indemnifying party prior to
the expiration of such one-year period. Neither party shall be liable pursuant
to this Section for any amounts which in the aggregate exceed the Purchase
Price.
5.7. Public Announcements. Unless otherwise required by law or the
rules and regulations of the Securities and Exchange Commission, none of the
parties shall issue any press release or make any public statement with respect
to this Agreement and the transaction contemplated hereby except for the agreed
upon press release to be issued by the parties on the date
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hereof.
5.8. Sales and Transfer Taxes. Seller shall pay all sales, use,
excise and/or transfer taxes due with respect to the Business, provided that any
property taxes relating to the Leased Premises shall be prorated between the
parties based on their respective periods of occupancy during the applicable
taxing period.
5.9. Noncompetition Agreement of Seller. For a period of five years
following the date hereof, Seller shall not, directly or indirectly, as
principal, investor, or in any similar capacity (i) engage in the Business
anywhere in the world, (ii) own, manage, operate or control, or participate in
the ownership, management, operation or control of, any business which directly
or indirectly competes with the Business anywhere in the world, or (iii) with
respect to the Business interfere with, disrupt or attempt to disrupt any
present or prospective relationship, contractual or otherwise, between Purchaser
and any of its licensors, licensees, clients, customers, suppliers, employees or
other related parties, or employ, solicit or induce for hire any Transferred
Employee, or any of the employees, agents, consultants or advisors of Purchaser
or any employee who has left the employment of Purchaser within six months of
the termination of said employee's employment with Purchaser, provided that
nothing herein shall preclude Seller from beneficially owning less than five
percent of the stock of any publicly traded company or merging with any other
entity.
5.10. Non-Solicitation Agreement of Purchaser. For a period of five
years following the date hereof, Purchaser shall not employ, solicit or induce
for employment, directly or indirectly, any employees of Seller or any
individual who has left the employment of Seller during the preceding six
months.
5.11. Cross-Referrals. (a) Purchaser agrees to direct to Seller any
inquiries received by Purchaser within two years after the date hereof regarding
web site development services. In addition, Purchaser will provide Seller with
the opportunity to bid for the enhancement of Purchaser's web site, provided
that Purchaser retains the right in its sole discretion to select any party (or
no party) to perform such services.
(b) Seller agrees to direct to Purchaser any inquiries received by
Seller within two years after the date hereof regarding the Business.
5.12. Use of Leased Premises. Seller agrees to permit Purchaser to
use the Leased Premises for a period not to exceed four (4) months, commencing
on the date hereof. Purchaser agrees to reimburse Seller at the rate of $10,000
per month during the period of Purchaser's occupancy thereof, such amount to be
deemed to include rent, taxes and insurance (which Seller agrees to maintain at
its current levels).
5.13. Post-Closing Financial Statements. When delivered, the
Post-Closing Financial Statements will have been prepared in accordance with
generally accepted accounting principles, consistently applied ("GAAP"), and
will constitute fair and reasonable presentations of
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the financial position and results of operations of the Business, in all
material respects, as of the dates and for the periods set forth therein.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, sent by
overnight courier or telecopied (with a confirmatory copy sent by overnight
courier) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) If to Purchaser, to:
24/7 Media, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxxx & Kotel,
a professional corporation
Tower 49
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: L. Xxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(b) If to Seller:
K2 Design, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Title: Chief Operating Officer
Facsimile: (000) 000-0000
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Telephone: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
6.2 Interpretation. When a reference is made in this Agreement of
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
6.3 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
6.4 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, including the documents and instruments referred to herein, (i)
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties any rights or remedies hereunder.
6.5 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
6.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the befit of, and be
enforceable by, the parties and their respective successors and assigns.
6.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid,
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illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions be consummated as originally contemplated to the fullest extent
possible.
6.8 Enforcement of this Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
6.9 Consent to Jurisdiction. In the event that any legal
proceedings are commenced in any court with respect to any matter arising under
this Agreement, the parties hereto specifically consent and agree that the
courts of the State of New York and/or the Federal Courts located in the State
of New York shall have jurisdiction over each of the parties hereto and over the
subject matter of any such proceedings, and the venue of any such action shall
be in New York County, New York and/or the U.S. District Court for the Southern
District of New York.
IN WITNESS WHEREOF, Purchaser and Seller have executed this
Agreement as of the date first written above.
K2 DESIGN, INC.
By:
--------------------------------
Name:
Title:
24/7 MEDIA, INC.
By:
--------------------------------
Name:
Title:
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