AGREEMENT AND PLAN OF MERGER
By and Among
24/7 Media, Inc.,
Interactions Acquisition Corp.
and
Intelligent Interactions Corporation
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 9, 1998 (this
"Agreement"), among 24/7 Media, Inc., a Delaware corporation ("24/7"),
Interactions Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of 24/7 (the "Subsidiary"), and Intelligent Interactions Corporation
("the Company"), a Delaware corporation, and each of the stockholders of the
Company set forth on the signature pages hereto (each, a "Seller").
WHEREAS, the Boards of Directors of 24/7, the Subsidiary, and the
Company have each approved the merger (the "Merger") of the Subsidiary with and
into the Company, in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law") and upon the terms and subject to the conditions set
forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger, as defined herein, shall qualify as a reorganization within the meaning
of Section 368(c) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, each Seller is the owner of such number and class(es) of
shares of capital stock (the "Shares") of the Company as is set forth on the
Ownership Table following the signatures pages hereto ("Ownership Table"), such
Shares collectively constituting all of the issued and outstanding shares of
capital stock of the Company; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, 24/7, the Subsidiary, the Company and the Sellers hereby agree as
follows:
1. The Merger.
(a) The Merger At the Effective Time (as defined in subparagraph
1(b) and subject to and upon the terms and conditions of this Agreement and
Delaware Law, the Subsidiary shall be merged with and into the Company, the
separate corporate existence of the Subsidiary shall cease, and the Company
shall continue as the surviving corporation. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
(b) Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII and after the
Closing referred to in subparagraph 1(g), the parties hereto shall cause the
Merger to be consummated by delivering a Certificate of Merger (the "Certificate
of Merger") to the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with the relevant provisions of,
Delaware Law, for filing by the Secretary of State (the time of such filing
being the "Effective Time").
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(c) Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the rights, privileges, powers, franchises, and property of
the Subsidiary shall vest in the Surviving Corporation, and all restrictions,
disabilities, duties, debts, and liabilities of the Subsidiary shall become the
restrictions, disabilities, duties, debts, and liabilities of the Surviving
Corporation.
(d) Certificate of Incorporation; By-Laws. At the Effective Time,
the Certificate of Incorporation and By-Laws of the Subsidiary shall be the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
thereafter amended.
(e) Directors and Officers. The directors of the Subsidiary
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
(f) Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of 24/7, the Subsidiary or the
Company, or the Sellers, each share of capital stock of the Company shall be
exchanged for shares of capital stock of 24/7 (the "Merger Consideration") as
follows:
(i) For each share of common stock, par value $.01 per
share, of the Company owned by a Seller and delivered to 24/7, 24/7 shall issue
to such Seller 16.253539 shares of common stock, par value $.01 per share,
2.303962 Class A Warrants, 2.303962 Class B Warrants and 1.18654 Class C
Warrants of 24/7;
(ii) for each share of Preferred Stock, Series A Preferred
Stock, Series AA Preferred Stock or Series AAA Preferred Stock of the Company
owned by a Seller, 24/7 shall issue to such Seller 18.0644 shares of Series A
Convertible Voting Preferred Stock, par value $.01 per share (the "Series A
Stock"), which Series A Stock shall have the terms and provisions as are set
forth in 24/7's Certificate of Incorporation, as amended, a copy of which has
been provided to Seller, and 2.68891 Class A Warrants, 2.68891 Class B Warrants
and 1.384778 Class C Warrants of 24/7; provided, however, that the Sellers agree
to contribute a pro-rata portion of such Class A, B and C Warrants to
Interactive Capital Partners LLC as more fully described in Section 10 hereof,
with the result that Sellers shall receive the number of shares and warrants
indicated by the Ownership Table; and
(iii) In addition, each option to purchase shares of Common
Stock of the Company issued pursuant to the Company's 1996 Equity Incentive Plan
shall be converted into an option to purchase 16.4964 shares of common stock of
24/7, under the terms and pursuant to the conditions of the 24/7 Media, Inc.
1998 Stock Incentive Plan, the exercise price per share of
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such options shall be proportionately decreased, and all such options shall vest
in accordance with their existing vesting schedules.
(iv) The shares of common stock, par value $.01 per share of
the Subsidiary issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become at the Effective Time 100 shares of common
stock, par value $.01 per share, of the Company.
(g) Surrender and Payment.
(i) Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender at Closing of a
certificate or certificates representing such shares, together with properly
executed stock powers and stock transfer stamps covering such shares, will be
entitled to receive the Merger Consideration payable in respect of such shares,
which Merger Consideration shall be delivered at Closing.
(ii) After the Effective Time, there shall be no further
registration or transfers of Shares outstanding prior to the Effective Time. All
certificates representing Shares outstanding prior to the Effective Time shall
be presented to 24/7 at the Closing and shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Agreement.
(iii) No fractional shares of 24/7 capital stock or
fractional warrants shall be issued upon conversion of Shares. In lieu of any
fractional share of 24/7 capital stock or fractional warrant to which the holder
of Shares would otherwise be entitled, 24/7 shall round to the nearest whole
share of 24/7 capital stock or nearest whole warrant.
(h) Closing. The Closing of the transactions contemplated by this
Agreement (the "Closing"), shall be held at the offices of Proskauer Rose LLP,
0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 11:00 A.M., New York time, on a date
designated by 24/7 upon two business days' prior notice (the "Closing Date"),
but in no event later than April 15, 1998, unless the parties shall agree upon a
later date.
2. Representations and Warranties of the Company and the Sellers. The
Company and each Seller severally and not jointly represents, warrants and
agrees (as to itself only with respect to such Seller's ownership of the Shares
and its authority to enter into this Agreement) that:
(a) Ownership and Delivery of the Shares and Execution and Effect
of Agreement. Each Seller is, and immediately prior to the Closing will be, the
record and beneficial owner of the number and class(es) of Shares set forth
below such Seller's name on the signature pages hereto, free and clear of any
and all liens, pledges, security interests, options, encumbrances, charges,
agreements or claims of any kind whatsoever ("claims"), other than those
agreements described in subparagraph 4(d) hereof, which agreements each Seller
agrees to cause
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to be terminated upon consummation of the Closing. Each of the Company and the
Seller has the full right, power and authority to enter into and to perform this
Agreement and all other agreements, certificates and documents executed or
delivered, or to be executed or delivered, by the Company and such Seller in
connection herewith including the Stockholders' Agreement and the Registration
Rights Agreement (each defined in subparagraph 7(h) hereof) (collectively, with
this Agreement, the "Company Documents"). Neither the authorization, execution,
delivery nor performance of any of the Company's Documents will violate,
conflict with, result in a breach of, constitute a default under, or require any
notice, consent, approval or order under the Company's organizational documents,
or, if Seller is an entity, under such Seller's organizational documents. On the
Closing Date, each Seller will have the full right, power and authority to
assign, transfer and deliver such Seller's Shares as provided in this Agreement,
and such delivery will convey to 24/7 lawful, valid and marketable title to such
Shares, free and clear of any and all claims. This Agreement has been duly
authorized, executed and delivered by the Company and the Seller, and the
Company's Documents are (or when executed and delivered will be) legal, valid
and binding obligations of the Company and the Seller, enforceable in accordance
with their respective terms, subject to equitable considerations which may be
applicable to specific performance.
(b) Organization, Good Standing, Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full power and authority to own and lease its
assets and properties and to conduct its business as it is now being conducted.
The Company is duly qualified or licensed to do business and is in good standing
as a foreign corporation under the laws of those jurisdictions listed on
Schedule 1 hereto, constituting each jurisdiction in which the conduct of its
business or the ownership or leasing of its assets requires such qualification
except for jurisdictions in which the failure to so qualify would not have a
material adverse effect on the business and operations of the Company taken as a
whole. The copies of the Company's Certificate of Incorporation, as amended
(certified by the Secretary of State of Delaware), and By-Laws (certified by the
Secretary of the Company) which have been previously delivered to 24/7 are
correct and complete.
(c) Capitalization. Immediately prior to the Closing, the
authorized capital stock of the Company will consist of the following:
(i) Common Stock: 930,000 shares of common stock, $.01 par
value, of which 230,170 shares will be issued and outstanding.
(ii) Preferred Stock: a total of 408,648 shares of Preferred
Stock, $0.01 par value per share, of which 71,870 shares have been designated
Series A Preferred Stock, 71,870 shares have been designated Series A-1
Preferred Stock, 54,150 shares have been designated Series AA Preferred Stock,
54,150 shares have been designated Series AA-1 Preferred Stock, 78,304 shares
have been designated Series AAA Stock and 78,304 shares have been designated
Series AAA-1 Preferred Stock. Of all of the authorized shares of Preferred Stock
listed above, only 71,870 shares of Series A Preferred Stock, 54,142 shares of
Series AA Preferred Stock, and 71,210 shares of Series AAA Preferred Stock are
issued and outstanding.
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All of the outstanding shares of capital stock of the Company are duly
authorized, validly issued and outstanding, fully paid and nonassessable. Except
as set forth in this Subparagraph 2(c), there are no outstanding shares of
capital stock or other equity or debt securities of the Company.
(iii) Options, Warrants, Reserved Shares. Options to
purchase 51,600 shares of common stock of the Company, all issued to employees
of the Company pursuant to the Company's 1996 Equity Incentive Plan, are
outstanding. All convertible promissory notes of the Company issued in December
1997 have been converted to Series AAA Preferred Stock, the shares issuable upon
such conversion are reflected in the share numbers set forth above, and all
stock purchase warrants issued in connection with such convertible promissory
notes have been canceled. Except as set forth in this Subparagraph 2(c) and in
Schedule 1, as of the Closing Date there will be no existing option, warrant,
call, commitment or other agreement requiring the issuance or sale of any
additional shares of stock or other equity or debt securities of the Company and
no shares of stock or other equity or debt securities of the Company are
reserved for issuance for any purpose, and there will be no agreements,
commitments or restrictions relating to ownership or voting of any shares of
stock or other securities of the Company, other than those agreements addressed
in Subparagraph 4(d).
(d) Subsidiaries and Affiliates. The term "affiliate" shall mean
any entity which the Company owns or controls. The Company has no subsidiaries
or affiliates and has no equity interest in any corporation, partnership, joint
venture or other entity. The Company has conducted its business only through the
Company.
(e) Financial Statements.
(i) The Company has previously delivered to 24/7 (x) the
balance sheets of the Company as at December 31, 1995 and December 31, 1996, and
the related audited statements of operations and retained earnings and changes
in financial position for the fiscal years then ended, as examined by Xxxxxx
Xxxxxxxx LLP; the Company's balance sheet as at December 31, 1996 is hereinafter
referred to as the "Audited Balance Sheet" and, together with the related
statements of operations and retained earnings and changes in financial position
for the fiscal year then ended, the "Audited Financials") and (y) the unaudited
balance sheet of the Company as at February 28, 1998 (the "Unaudited Balance
Sheet"), and the related unaudited statements of operations and retained
earnings for the fourteen months then ended (together with the Unaudited Balance
Sheet, the "Unaudited Financials"). Each of the foregoing financial state ments
is complete and correct, is in accordance with the Company's books and records,
has been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and presents fairly the financial position,
results of operations and changes in financial position of the Company as at the
dates and for the fiscal years indicated, subject, in the case of the Unaudited
Balance Sheet, to year-end adjustments and notes required by generally accepted
accounting principles.
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(ii) 24/7 and its accountants shall be entitled to review
the Company's preparation of the Unaudited Financials, including the related
work papers of the Company's accountants, at all reasonable times in advance of
and after the delivery thereof to 24/7.
(f) Liabilities. All liabilities of the Company (whether accrued,
unmatured, contingent, or otherwise and whether due or to become due, but not
including the Company's obligations to perform under contracts other than by the
payment of money) are set forth or ade quately reserved against on the face of
the Audited Balance Sheet and the Unaudited Balance Sheet, in each case in
accordance with generally accepted accounting principles consistently applied,
except for liabilities incurred since December 31, 1996 (with respect to the
Audited Balance Sheet), or since February 28, 1998 (with respect to the
Unaudited Balance Sheet) in the ordinary course of business as theretofore
conducted, which are not materially adverse to the operations or prospects of
the Company's business. Neither the Company nor any Seller knows of any basis
for the assertion against the Company of any other liability or loss
contingency.
(g) No Adverse Change. To Seller's best knowledge, since December
31, 1996, the Company has operated its business consistent with ordinary
commercial business practices and only in the ordinary course of business as
theretofore conducted, and consistent with a development stage company, there
has been no: (i) material adverse change in the business, properties, assets,
liabilities, commitments, earnings, financial condition or prospects of the
Company; (ii) property damage or destruction resulting in a loss or cost to the
Company of more than $50,000 in the aggregate, whether or not covered by
insurance; or (iii) act or omission which, if taken or omitted after the date of
this Agreement and before the Closing would conflict with Subparagraph 6(b)
below.
(h) Taxes. To Seller's best knowledge, the Company has properly
filed all fed eral, foreign, state, local and other tax returns and reports
which are required to be filed by it, all of the foregoing are true, correct and
complete, and all taxes, interest and penalties due and payable as shown on such
returns or claimed to be due by any taxing authority have been timely paid. All
unpaid federal, foreign, state, local and other taxes, fees, assessments, duties
and other similar governmental charges payable by the Company or which will,
with the passage of time, become payable by the Company (including interest and
penalties) whether or not disputed (x) with respect to any period prior to
December 31, 1996, have been adequately reserved against in accordance with
generally accepted accounting principles on the face of the Audited Balance
Sheet, and (y) with respect to any period prior to February 28, 1998, have been
adequately reserved against in accordance with generally accepted accounting
principles on the face of the Unaudited Balance Sheet. There are no outstanding
waivers or extensions of time with respect to the assessment or audit of any tax
or tax return of the Company, or claims now pending or matters under discussion
with any taxing authority in respect of any tax of the Company. The Company has
furnished to 24/7 true copies of the federal, foreign, state and local tax
returns of the Company for the fiscal years ended on December 31 for the years
1995 through 1996. Such federal, foreign, state and local income tax returns
have been examined by the relevant taxing authorities for the fiscal years ended
on for the years 1995 and 1996, respectively. The Company has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
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(i) Title to Properties; Absence of Encumbrances. The Company has
good and marketable title to or, in the case of leases and licenses, valid and
subsisting leasehold interests or licenses in, all of its properties and assets
of whatever kind (whether real or personal, tangible or intangible), including,
without limitation, all properties and assets that are shown on the Audited
Balance Sheet or the Unaudited Balance Sheet (except for assets sold in the
ordinary course of business since December 31, 1996, and February 28, 1998,
respectively) and to properties and assets that are shown on any schedule
hereto, in each case free and clear of any and all liens, mortgages, pledges,
security interests, restrictions, prior assignments, claims and encum brances of
any kind whatsoever, except as may be set forth in Schedule 2 hereto and except
for liens for current taxes and assessments not yet due and payable (which the
Company will promptly pay when due if due prior to the Closing Date). All
assets, properties and rights relating to the Company's business are held by,
and all agreements, obligations and transactions relating to the Company's
business have been entered into, incurred and conducted by, the Company.
(j) Real and Personal Property. Schedule 3 hereto contains a
complete and correct list of all real property (including buildings and
structures) owned or leased by the Company and all interests therein (including
a brief description of the property, the record title holder, the location and
the improvements thereon). To the Company and the Seller's best knowledge, all
such real property, buildings and structures, and the equipment therein, and the
operations and maintenance thereof, comply with any applicable agreements and
restrictive covenants and conform to all applicable legal requirements including
those relating to the environment, health and safety, land use and zoning, and
all work required to be done by the Company as landlord or tenant has been duly
performed. No condemnation or other proceeding is pending or, to the knowledge
of any Seller, after due investigation, threatened, which would affect the use
of any such property by the Company. Schedule 3 hereto contains a complete and
correct list and brief description of all equipment, machinery, computers,
furniture, leasehold improvements, vehicles and other personal property owned or
leased by the Company and all interests therein. The Company's buildings and
other structures, equipment and other assets (whether leased or owned) are in
good operating condition and repair, subject to ordinary wear and tear.
(k) Patents, Trademarks and Copyrights. A list and brief
description of all trademarks, service marks, trade names, brands, copyrights
and patents which are presently being used or have since December 31, 1995, been
used in the Company's business, all applications for registration and
registrations for such trademarks, copyrights, patents, patent applications,
moral rights, mask works, trade secrets, confidential and proprietary
information, compositions of matter, formulas, designs, proprietary rights,
know-how and processes (all of the foregoing collectively hereinafter referred
to as the "Proprietary Assets") and all licenses, contracts, rights and
arrangements with respect to the foregoing, are set forth in Schedule 4 hereto.
The Company has furnished to 24/7 true and complete copies of each of the
foregoing. Except as set forth in Schedule 4, the Company owns the entire,
unencumbered right, title and interest to all such properties free and clear of
all claims, and, except as set forth in Schedule 4, no rights or licenses to
others have been granted with respect to any of such properties. Except as set
forth in Schedule 4, all filings and other action necessary to perfect the full
legal right of the Company in
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the United States to the foregoing have been effected. Except as set forth in
Schedule 4, the Company owns or possesses the right to use all the trademarks,
service marks, trade names, brands, copyrights, patents, franchises, permits and
licenses, and rights with respect to the foregoing, necessary for the conduct of
its business as now conducted, without any conflict with or infringement of the
rights of others. Except as set forth in Schedule 4, the Company has not
received notice of any claimed conflict with respect to any of the foregoing.
Neither the Company nor any Seller has any knowledge of any default or alleged
default or state of facts which with notice or lapse of time or both would
constitute a default on the part of any party in the perform ance of any
obligation to be performed or paid by any party under any licenses, contracts,
agreements or arrangements referred to in or submitted as a part of Schedule 4,
the Company has taken, and until the Closing Date, the Company will use its best
efforts to take, all steps reasonably necessary to preserve its legal rights in,
and the secrecy of, all its Proprietary Assets, except those for which
disclosure is required for legitimate business or legal reasons. All
intellectual property rights to all processes, systems and techniques used by
the Company which were developed by any employee of the Company engaged in
research or product development while such employee was employed by the Company
have, by virtue of an invention assignment agreement, been assigned to the
Company. In addition, all intellectual property rights to all processes, systems
and techniques used by the Company or which the Company intends to use in its
proposed business which were developed by Yale Xxxxx, Xxxxxxx Xxxxxx, Xxxx
Xxxxxxxx and Xxxxxx Xxxxxxxx at any time have been assigned by them to the
Company.
(l) Contracts, Leases and Commitments. The Company has furnished
to 24/7 true copies of the material contracts, leases and commitments listed in
Schedule 5 hereto, includ ing summaries of the terms of any unwritten
commitments. Except as set forth in that Schedule: (1) the Company (and to the
best knowledge of the Company and each Seller, the other parties thereto) have
complied in all material respects with such contracts, leases and commitments,
all of which are valid and enforceable; (2) such contracts, leases and
commitments are in full force and effect and there exists no event or condition
which with or without notice or lapse of time would be a default thereunder,
give rise to a right to accelerate or terminate any provision thereof or give
rise to any lien, claim, encumbrance or restriction on any of the assets or
properties of the Company; and (3) all of such contracts, leases and commitments
have been entered into on an arm's-length basis, and none is materially
burdensome to the Company's business. The Company is not a party, nor is any of
its assets or business subject, to any contract, lease or commitment not listed
in such Schedule (including without limitation purchase or sales commitments,
financing or security agreements or guaranties, repurchase agreements, agency
agreements, manufacturers representative agreements, commission agreements,
employment or collective bargaining agree ments, pension, bonus or
profit-sharing agreements, group insurance, medical or other fringe benefit
plans, and leases of real or personal property), other than contracts terminable
without penalty on not more than 30 days' notice that do not involve,
individually or in the aggregate, the receipt or expenditure of more than
$50,000 in any one year. The Company is engaged in no material disputes with
customers or suppliers. To the best knowledge of the Company and each Seller, no
customer or supplier is considering termination, non-renewal or any adverse
modification of its arrangements with the Company, and the transactions
contemplated by this
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Agreement will not have a material adverse effect on the Company's relationship
with any of its suppliers or customers.
(m) Permits; Compliance with Laws. The Company holds the
governmental licenses, permits and authorizations listed in Schedule 6 hereto
which, except as set forth in that Schedule, are valid and unimpaired, will be
unaffected by a transfer of all of the shares of the Company to 24/7, and
constitute all of the licenses, permits and authorizations required for the
ownership or occupancy of its properties and assets and the operation of its
business. The Company's business is and has been operated in compliance
therewith and all laws and regulations (federal, state, local and foreign)
applicable to it, and all required reports and filings with govern mental
authorities have been properly made. The consummation of the transactions
contemplated by this Agreement will not give rise to any liability of the
Company for severance pay or term ination pay.
(n) Employees. Schedule 7 hereto contains a list of the names,
office locations, compensation and years of credited service for severance,
vacation and pension plan purposes of all full- and part-time employees of the
Company as at March 31, 1998; a list of all pension, re tirement,
profit-sharing, deferred compensation, option, bonus, medical, insurance and
other benefit or incentive plans covering such employees; a description of all
employee "perks" or other benefit practices not set forth in such plans or in
agreements; and a description of the Company's severance pay policy. Neither the
Company nor any Seller knows of any efforts within the last three years to
attempt to organize the Company's employees, and no strike or labor dispute
involving the Company has occurred during the last three years or, to the best
knowledge of the Company and each Seller, is threatened. No key employee of the
Company has indicated that he is considering terminating his employment. The
Company has complied with applicable wage and hour, equal employment, safety and
other legal requirements relating to its employees. Neither the Company nor any
member of any affiliated group of which the Company was at any time a member,
has ever maintained or currently maintains any "employee benefit plan" subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Neither the Company nor its predecessors has ever contributed to or otherwise
participated in or has been required to contribute to or otherwise participate
in any "multi-employer plan", as defined in Section 4001(a)(3) of ERISA. The
Company has not withdrawn from any such employee benefit plan or multi-employer
plan prior to the date hereof.
(o) Employee Benefit Plans. The Company is not, and never has
been, subject to any pension, profit sharing or other similar plan which is
subject to ERISA, or, to the extent the Company is or has been subject to any of
the requirements of ERISA, it has fully complied with all such requirements.
(p) Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed and liability insurance providing coverage in
such amounts as is customary in the industry for a similar company.
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(q) Litigation. Schedule 8 hereto contains a complete and correct
list of all actions, suits, proceedings, claims or governmental investigations
pending or, to the best knowledge of the Company and each Seller, threatened
against, the Company or any of its assets, or, in connection with the Company's
business, any Seller or any of the Company's officers, directors or employees.
Except as set forth on Schedule 8 hereto, neither the Company nor, in connection
with the Company's business, any Seller or any of the Company's officers,
directors or employees is subject or party to any judgment, order, or other
direction of or stipulation with any court or other governmental authority or
tribunal, or in violation of any other legal require ments (as defined below),
and neither the Company nor any Seller knows of any reasonable basis for a claim
that such a violation exists. Neither the Company nor any Seller is aware of any
proposed legal requirement that might adversely affect in any material respect
the operation or prospects of the Company's business.
(r) Environmental Matters. The Company's business, assets and
properties are and have been operated and maintained in compliance with all
applicable federal, state and local environmental protection laws and
regulations (the "Environmental Laws"). No event has occurred which, with or
without the passage of time or the giving of notice, or both, would constitute a
non-compliance by the Company with, or a violation by the Company of, the
Environmental Laws. To the Company's and the Seller's best knowledge, no real
property owned, leased, occupied or used by the Company contains any underground
storage tanks, asbestos, polychlorinated biphenyls, solid wastes or other
hazardous substances, as such terms are defined in the Environmental Laws. To
the Company's and the Seller's best knowledge, neither the Company nor any of
its predecessor companies has caused or permitted to exist, as a result of an
intentional or unintentional act or omission, a disposal, discharge or release
of solid wastes, pollutants or hazardous substances, as such terms are defined
in the Environmental Laws, on or from any site which currently is or formerly
was owned, leased, occupied or used by the Company or any predecessor company,
except where such disposal, discharge or release was pursuant to and in
compliance with the conditions of a permit issued by the appropriate federal,
state and/or local governmental agency.
(s) Restrictions. The authorization, execution, delivery and
performance of the Company's Documents and the consummation of the transactions
contemplated hereby and thereby do not and will not violate, conflict with,
result in a breach of or constitute a default under, require any notice or
consent under, give rise to a right of termination of, or accelerate the
performance required by, any terms or provisions of any agreement, instrument or
writing of any nature to which the Company or such Seller is a party or is
bound, or any of their assets or business is subject.
(t) Transactions with Affiliates. Except as set forth in Schedule
9 hereto and except for ordinary dealings with its employees, since December 31,
1996, the Company has had no direct or indirect dealings with any Seller or with
any other key employee of the Company or with any of their affiliates,
associates or relatives. Except as set forth in Schedule 9 and except for
employment arrangements with its employees, the Company has no obligation to or
claim against any Seller or any other key employee of the Company, or any of
their affiliates, associates
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or relatives, and no such person or entity has any obligation to or claim
against the Company. Schedule 9 reasonably describes the nature and extent of
any products, services or benefits pro vided to the Company by any such person
or entity without a corresponding charge equal to the fair market value of such
products, services or benefits. Neither of Sellers, any other key employee of
the Company, nor any of their affiliates, associates or relatives has any direct
or in direct interest of any kind in any business or entity which is competitive
with the Company.
(u) Books and Records. The books and records of the Company are
complete and correct in all material respects and have been maintained in
accordance with good business practices. The minute books of the Company, as
previously made available to 24/7, contain com plete and accurate records of all
meetings and accurately reflect all other corporate action of the shareholders
and board of directors of the Company.
(v) Improper Payments. The Company and its officers and agents
have not made any illegal or improper payments to, or provided any illegal or
improper benefit or inducement for, any governmental official, supplier,
customer or other person, in an attempt to influence any such person to take or
to refrain from taking any action relating to the Company. The Company's
employees may from time to time have made customary holiday gifts of nominal
value to suppliers or customers.
(w) Officers and Directors; Bank Accounts, etc. Schedule 10
hereto lists all officers, directors and fiduciaries of the Company; all bank
accounts and safe deposit boxes maintained by the Company and all authorized
signatories therefor, specifying their respective authority; and all credit
cards under which employees of the Company may incur liability, and the persons
holding such cards. No person or entity holds any general or special power of at
xxxxxx from the Company.
(x) Disclosure. No representation, warranty or other statement by
the Company or Seller herein or in any other of the Company's Documents or made
in connection with the Company's Documents, contains or will contain an untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
Neither the Company nor any Seller is aware of any matter that could reasonably
be expected to have a materially adverse effect on the Company's business or
prospects that has not been disclosed in writing to 24/7.
(y) Legends.
(i) Each Seller understands that the certificates evidencing
the Merger Consideration will bear the following legends:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE TRANSFERRED IN THE ABSENCE OF
11
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH LAWS
AND THE RULES AND REGULATIONS THEREUNDER."
"TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY AN AGREEMENT, DATED APRIL _, 1998, A COPY OF WHICH IS ON
FILE AT THE OFFICE OF THE CORPORATION. ANY PURPORTED TRANSFER IN
VIOLATION OF THIS AGREEMENT IS VOID AND WILL NOT BE RECOGNIZED BY THE
CORPORATION OR ITS TRANSFER AGENT."
(ii) The certificates shall not be required to bear such
legends if an opinion of counsel reasonably satisfactory to 24/7 is delivered to
24/7 to the effect that neither the legends nor the restrictions on transfer
contained in this Agreement are required to insure compliance with the Act.
Whenever, pursuant to the preceding sentence, any certificate for any of the
Securities is no longer required to bear the foregoing legend, 24/7 may, and if
requested by the holder thereof, shall, issue to the holder, at 24/7's expense,
a new certificate not bearing the foregoing legends.
(c) Any and all shares of Common Stock issued prior to
January 31, 1999 or which 24/7 is obligated to issue as a result of events
occurring prior to such date, in each case upon conversion of Series A Stock as
a result of accrued dividends with respect to such Series A Stock shall be
canceled and cease to exist without further action by 24/7 or any other person
upon the closing of a Qualified Public Offering prior to January 31, 1999, and
shall bear a legend to such effect.
3. Representations and Warranties of 24/7. 24/7 represents,
warrants and agrees that:
(a) Capitalization. Immediately prior to the Closing, the capital
stock of 24/7, as authorized by its Certificate of Incorporation, as amended,
will consist of: (i) 100,000,000 shares of Common Stock, of which 27,481,201
shares will be issued and outstanding, 10,567,229 shares will be reserved for
issuance upon conversion of issued and outstanding Shares, 5,283,615 shares will
be reserved for issuance upon exercise of issued and outstanding Class A
Warrants, 5,283,615 shares will be reserved for issuance upon exercise of issued
and outstanding Class B Warrants, 2,575,000 will be reserved for issuance upon
exercise of issued and outstanding Class C Warrants, 142,421 will be reserved
for issuance upon exercise of issued and outstanding unclassified warrants,
approximately 275,000 (subject to adjustment) will be reserved for issuance upon
exercise of issued and outstanding convertible debentures, and 5,750,000 shares
will be reserved for issuance to key employees, officers and directors of, and
consultants to, 24/7 under stock incentives that have been granted or are
available for grant by 24/7 pursuant to 24/7's 1998 Stock Incentive Plan; and
(ii) 30,000,000 preferred shares, of which 10,060,002 will be outstanding and
have been designated as Series A Convertible Voting Preferred Stock ("Series A
Stock"). The rights, privileges and preferences of the Common Stock and Series A
Stock are as stated in the Certificate of Incorporation of 24/7. Except for the
Stock Incentives specified above, the conversion rights of issued and
outstanding Series A Stock, the conversion rights of
12
outstanding convertible debentures specified above, and the exercise rights of
issued and outstanding Class A, Class B, Class C Warrants and unclassified
warrants specified above, as of the Closing, 24/7 will not (i) have outstanding
any capital stock or other securities convertible into or exchangeable for any
shares of its capital stock and, except for the preemptive rights contained in
this Agreement, no person will have any right to subscribe for or to purchase
(including conversion or preemptive rights), or any Options for the purchase of,
or any agreements providing for the issuance (contingent or otherwise) of, any
calls, commitments or other claims of any character relating to, any capital
stock or any stock or securities convertible into or exchangeable for any
capital stock of 24/7; (ii) have any capital stock, equity interests or other
securities reserved for issuance for any purpose; or (iii) be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any convertible securities, rights or
options of the type described in the preceding clause (i). "Option" with respect
to any person means any security, right, subscription, warrant, option,
"phantom" stock right or other Contract that gives the right directly or
indirectly to (i) purchase or otherwise receive or be issued any shares of
capital stock of such person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such person or
(ii) receive or exercise any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock of such person, including
any rights to participate in the equity or income of such person or to
participate in or direct the election of any directors or officers of such
person or the manner in which any shares of capital stock of such person are
voted. Neither this Agreement nor the transactions contemplated hereby or by the
Merger will cause any anti-dilution adjustment or accelerated vesting of any
Options. All issued and outstanding shares of Common Stock are duly and validly
issued and are fully paid and nonassessable and were issued in accordance with
the registration or qualification provisions of the Securities Act and any
applicable state securities laws or pursuant to valid exemptions therefrom, and
all shares of Common Stock, when issued as contemplated hereby, will be duly and
validly issued and fully paid and nonassessable and issued in accordance with
the registration or qualification provisions of the Securities Act and any
applicable state securities laws or pursuant to valid exemptions therefrom. All
of the issued and outstanding Series A Stock (and shares of Common Stock
issuable upon conversion thereof), are validly issued and fully paid and
nonassessable and were issued in accordance with the registration or
qualification provisions of the Securities Act and any applicable state
securities laws or pursuant to valid exemptions therefrom, and all of the Series
A Stock (and shares of Common Stock issuable upon conversion thereof), when
issued as contemplated hereby and pursuant to the terms of the Certificate of
Incorporation, will be validly issued and fully paid and nonassessable and will
be issued in accordance with the registration or qualification provisions of the
Securities Act and any applicable state securities laws or pursuant to valid
exemptions therefrom. The delivery of a certificate or certificates at the
Closing representing the Shares and the Warrants will transfer to each Seller
good and valid title to the Shares and the Warrants, respectively, free and
clear of all liens, pledges, assessments, leases, security interests, claims,
encumbrances, or other restrictions of any kind (collectively, "Liens"). To the
best knowledge of 24/7, there are no agreements among 24/7's shareholders with
respect to the voting or transfer of 24/7's capital stock, other than the
agreements relating to transfer contained in the Stockholders' Agreement and the
Registration Rights Agreement. The authorized capital stock of the Subsidiary
consists of 10,000 shares of common stock, par value $.01 per
13
share, of which 100 are outstanding as of the date hereof, and 1,000 shares of
preferred stock, par value $.01 per share, none of which are outstanding as of
the date hereof. 24/7 owns, beneficially and of record, all of the issued and
outstanding shares of capital stock of the Subsidiary, free and clear of all
Liens. All of the issued and outstanding shares of capital stock of the
Subsidiary have been duly and validly issued and are fully paid and
nonassessable and were issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state securities
laws or pursuant to valid exemptions therefrom. There are no outstanding Options
with respect to the Subsidiary.
(b) Organization, Good Standing, Authority. Each of 24/7 and the
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full power and
authority to own and lease its assets and properties and to conduct its business
as it is now being conducted. Each of 24/7 and the Subsidiary is duly qualified
or licensed to do business and is in good standing as a foreign corporation
under the laws of each jurisdiction in which the conduct of its business or the
ownership or leasing of its assets requires such qualification. The Subsidiary
is newly-formed and has not conducted any business or owned any assets prior to
the date hereof. The copies of 24/7's Certificate of Incorporation, as amended
(certified by the Secretary of State of Delaware), and By-Laws, as amended
(certified by the Secretary of 24/7) which have been previously delivered to the
Company are correct and complete. The copies of the Subsidiary's Certificate of
Incorporation, as amended (certified by the Secretary of State of Delaware), and
By-Laws, as amended (certified by the Secretary of the Subsidiary) which have
been previously delivered to the Company are correct and complete.
(c) Subsidiaries and Affiliates. The term "affiliate" shall mean
any entity which 24/7 owns or controls. Other than the Subsidiary, 24/7 has no
subsidiaries or affiliates and has no equity interest in any corporation,
partnership, joint venture or other entity. 24/7 has conducted its business only
through 24/7.
(d) Unaudited Pro Forma Balance Sheet.
(i) 24/7 has previously delivered to the Company an
unaudited pro forma balance sheet (the "Balance Sheet") of 24/7 as at December
31, 1997. The Balance Sheet is in accordance with the Company's books and
records and has been prepared in good faith. All liabilities of the Company
(whether accrued, unmatured, contingent, or otherwise and whether due or to
become due) are set forth or adequately reserved against on the face of the
Balance Sheet except for liabilities incurred since December 31, 1997 in the
ordinary course of business as theretofore conducted, which are not materially
adverse to the operations or prospects of 24/7's business. 24/7 does not know of
any basis for the assertion against 24/7 of any other liability or loss
contingency. Since December 31, 1997, 24/7 has operated its business consistent
with ordinary commercial business practices and only in the ordinary course of
business as theretofore conducted, and there has been no: (i) material adverse
change in the business, properties, assets, liabilities, commitments, earnings,
financial condition or prospects of the Company; or (ii) prop erty damage or
destruction resulting in a loss or cost to the Company of more than $50,000 in
the aggregate, whether or not covered by insurance.
14
(e) Taxes. 24/7 has properly filed all federal, foreign, state,
local and other tax returns and reports which are required to be filed by it,
all of the foregoing are true, correct and complete, and all taxes, interest and
penalties due and payable as shown on such returns or claimed to be due by any
taxing authority have been timely paid. 24/7 has not at any time consented to
have the provisions of Section 341(f)(2) of the Code apply to it.
(f) Title to Properties; Absence of Encumbrances. 24/7 has good
and marketable title to or, in the case of leases and licenses, valid and
subsisting leasehold interests or licenses in, all of its properties and assets
of whatever kind (whether real or personal, tangible or intangible), free and
clear of any and all liens, mortgages, pledges, security interests, restric
tions, prior assignments, claims and encumbrances of any kind whatsoever, except
for liens for current taxes and assessments not yet due and payable. All assets,
properties and rights relating to 24/7's business are held by, and all
agreements, obligations and transactions relating to 24/7's business have been
entered into, incurred and conducted by, 24/7 rather than any of its affiliates.
(g) Real and Personal Property. All real property (including
buildings and structures) owned or leased by 24/7 and all interests therein and
the equipment therein, and the operations and maintenance thereof, comply with
any applicable agreements and restrictive covenants and conform to all
applicable legal requirements including those relating to the environment,
health and safety, land use and zoning, and all work required to be done by 24/7
as landlord or tenant has been duly performed. No condemnation or other
proceeding is pending or, to the knowledge of any Seller, after due
investigation, threatened, which would affect the use of any such property by
24/7. 24/7's buildings and other structures, equipment and other assets (whether
leased or owned) are in good operating condition and repair, subject to ordinary
wear and tear.
(h) Patents, Trademarks and Copyrights. 24/7 owns the entire,
unencumbered right, title and interest to all trademarks, service marks, trade
names, brands, copyrights and patents which are presently being used or have
since December 31, 1995, been used in 24/7's business, all applications for
registration and registrations for such trademarks, copyrights, patents, patent
applications, moral rights, mask works, trade secrets, confidential and
proprietary information, compositions of matter, formulas, designs, proprietary
rights, know-how and processes (all of the foregoing collectively hereinafter
referred to as the "Proprietary Assets") and all licenses, contracts, rights and
arrangements with respect to the foregoing, free and clear of all claims, and no
rights or licenses to others have been granted with respect to any of such prop
erties. All filings and other action necessary to perfect the full legal right
of 24/7 in the United States to the foregoing have been effected. 24/7 owns or
possesses the right to use all the trademarks, service marks, trade names,
brands, copyrights, patents, franchises, permits and licenses, and rights with
respect to the foregoing, necessary for the conduct of its business as now
conducted, without any conflict with or infringement of the rights of others.
24/7 has not received notice of any claimed conflict with respect to any of the
foregoing. 24/7 has no knowledge of any default or alleged default or state of
facts which with notice or lapse of time or both would con stitute a default on
the part of any party in the performance of any obligation to be performed or
paid by any party under any licenses, contracts, agreements or arrangements
referred to above.
15
24/7 has taken, and in the future 24/7 will use its best efforts to take, all
steps reasonably necessary to preserve its legal rights in, and the secrecy of,
all its Proprietary Assets, except those for which disclosure is required for
legitimate business or legal reasons. All intellectual property rights to all
processes, systems and techniques used by 24/7 which were developed by any
employee of 24/7 engaged in research or product development while such employee
was employed by 24/7 have, by virtue of an invention assignment agreement, been
assigned to 24/7. In addition, all intellectual property rights to all
processes, systems and techniques used by 24/7 or which 24/7 intends to use in
its proposed business which were developed by its employees at any time have
been assigned by them to 24/7.
(i) Contracts, Leases and Commitments. 24/7 and the other parties
thereto have complied in all material respects with all material contracts,
leases and commitments of 24/7, all of which are valid and enforceable; (2) all
material contracts, leases and commitments of 24/7 are in full force and effect
and there exists no event or condition which with or without notice or lapse of
time would be a default thereunder, give rise to a right to accelerate or
terminate any provision thereof or give rise to any lien, claim, encumbrance or
restriction on any of the assets or properties of 24/7; and (3) all material
contracts, leases and commitments of 24/7 have been entered into on an
arm's-length basis, and none is materially burdensome to 24/7's business. 24/7
is engaged in no material disputes with customers or suppliers. To the best
knowledge of 24/7, no customer or supplier is considering termination,
non-renewal or any adverse modification of its arrangements with 24/7, and the
transactions contemplated by this Agreement will not have a material adverse
effect on 24/7's relationship with any of its suppliers or customers.
(j) Permits; Compliance with Laws. The governmental licenses,
permits and authorizations held by 24/7 are valid and unimpaired, will be
unaffected by a transfer of all of the shares of 24/7 to 24/7, and constitute
all of the licenses, permits and authorizations required for the ownership or
occupancy of its properties and assets and the operation of its business. 24/7's
business is and has been operated in compliance therewith and all laws and
regulations (federal, state, local and foreign) applicable to it, and all
required reports and filings with governmental authorities have been properly
made. The consummation of the transactions contemplated by this Agreement will
not give rise to any liability of 24/7 for severance pay or termination pay.
(k) Employees. 24/7 knows of any efforts within the last three
years to attempt to organize 24/7's employees, and no strike or labor dispute
involving 24/7 has occurred during the last three years or, to the best
knowledge of 24/7, is threatened. No key employee of 24/7 has indicated that he
is considering terminating his employment. 24/7 has complied with applic able
wage and hour, equal employment, safety and other legal requirements relating to
its employ ees. Neither 24/7 nor any member of any affiliated group of which
24/7 was at any time a member, has ever maintained or currently maintains any
"employee benefit plan" subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Neither 24/7 nor its predecessors has ever
contributed to or otherwise participated in or has been required to contribute
to or otherwise participate in any "multi-employer plan", as defined in Section
4001(a)(3) of ERISA. 24/7 has not withdrawn from any such employee benefit plan
or multi-employer plan prior to the date hereof.
16
(l) Employee Benefit Plans. 24/7 is not, and never has been,
subject to any pension, profit sharing or other similar plan which is subject to
ERISA, or, to the extent 24/7 is or has been subject to any of the requirements
of ERISA, it has fully complied with all such requirements.
(m) Insurance. 24/7 has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed and liability insurance providing coverage in
such amounts as is customary in the industry for a similar company.
(n) Litigation. Neither 24/7 nor, in connection with 24/7's
business, any of 24/7's officers, directors or employees is subject or party to
any judgment, order, or other direction of or stipulation with any court or
other governmental authority or tribunal, or in violation of any other legal
requirements, and 24/7 knows of no reasonable basis for a claim that such a
violation exists. 24/7 is not aware of any proposed legal requirement that might
adversely affect in any material respect the operation or prospects of 24/7's
business.
(o) Environmental Matters. 24/7's business, assets and properties
are and have been operated and maintained in compliance with all applicable
federal, state and local environmental protection laws and regulations (the
"Environmental Laws"). No event has occurred which, with or without the passage
of time or the giving of notice, or both, would constitute a non-compliance by
24/7 with, or a violation by 24/7 of, the Environmental Laws. No real property
owned, leased, occupied or used by 24/7 contains any underground storage tanks,
asbestos, polychlorinated biphenyls, solid wastes or other hazardous substances,
as such terms are defined in the Environmental Laws. Neither 24/7 nor any of its
predecessor companies has caused or permitted to exist, as a result of an
intentional or unintentional act or omission, a disposal, discharge or release
of solid wastes, pollutants or hazardous substances, as such terms are defined
in the Environmental Laws, on or from any site which currently is or formerly
was owned, leased, occupied or used by 24/7 or any predecessor company, except
where such disposal, discharge or release was pursuant to and in compliance with
the conditions of a permit issued by the appropriate federal, state and/or local
governmental agency.
(p) Restrictions. The authorization, execution, delivery and
performance of 24/7's Documents and the consummation of the transactions
contemplated hereby and thereby do not and will not violate, conflict with,
result in a breach of or constitute a default under, require any notice or
consent under, give rise to a right of termination of, or accelerate the
performance required by, any terms or provisions of any agreement, instrument or
writing of any nature to which 24/7 is a party or is bound, or any of their
assets or business is subject.
(q) Transactions with Affiliates. 24/7 has not had any direct or
indirect dealings with any principal owner of 24/7 or with any of its
affiliates, associates or relatives (or affiliates thereof) nor does 24/7
beneficially own, directly or indirectly, any investment assets of any such
current or former principal owner of 24/7 or any of their respective Affiliates,
associates or relatives (or Affiliates thereof). 24/7 does not have any
obligation to or claim against any
17
principal owner of 24/7, or any of his or its affiliates, associates or
relatives, and no such person has any obligation to or claim against 24/7. All
products, services or benefits provided to 24/7 by any such person, or provided
by 24/7 to any such person, are provided at a charge equal to the fair market
value of such products, services or benefits. To the best knowledge of 24/7, no
principal owner of 24/7, nor any of its affiliates, associates or relatives, has
any direct or indirect interest of any kind in any business or entity which is
competitive with 24/7 or with which 24/7 has a business relationship.
(r) Books and Records. The books and records of 24/7 are complete
and correct in all material respects and have been maintained in accordance with
good business practices. The minute books of 24/7 contain complete and accurate
records of all meetings and accurately reflect all other corporate action of the
shareholders and board of directors of 24/7.
(s) Improper Payments. 24/7 and its officers and agents have not
made any illegal or improper payments to, or provided any illegal or improper
benefit or inducement for, any governmental official, supplier, customer or
other person, in an attempt to influence any such person to take or to refrain
from taking any action relating to 24/7. 24/7's employees may from time to time
have made customary holiday gifts of nominal value to suppliers or customers.
(t) Disclosure. No representation, warranty or other statement by
24/7 or the Subsidiary herein or in any other of 24/7's Documents or made in
connection with 24/7's Documents, contains or will contain an untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading. 24/7 is not
aware of any matter that could reasonably be expected to have a materi ally
adverse effect on 24/7's business or prospects that has not been disclosed in
writing to the Company.
4. Covenants of the Company and the Sellers. The Company and the
Sellers severally and not jointly covenant and agree as to itself and only as to
the covenants affecting itself) that between the date hereof and the Closing:
(a) Actions. The Company and Sellers will not voluntarily take
any action which would cause any of the representations and warranties made by
it in the Company's 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) Access by 24/7. 24/7 and its representatives and advisers
shall have free and full access during normal business hours to the Company's
assets, premises, books and records, key employees and accountants, including
the audit work papers of Xxxxxx Xxxxxxxx LLP and the work papers of the
Company's accountants relating to the Audited Financials and the Unaudited
Financials, respectively, and the Company and Sellers shall furnish 24/7 with
such information and copies of such documents as 24/7 may reasonably request.
Sellers shall promptly furnish to 24/7 all financial statements of the Company
that are prepared in the ordinary course
18
of business, including without limitation monthly reports of sales, revenue and
cash flow and quarterly balance sheets.
(c) Conduct of Business. The business of the Company shall be
conducted only in the ordinary course, consistent with the present conduct of
its business, and the Company and Sellers shall use commercially reasonable
efforts to maintain, preserve and protect the assets and goodwill of the
Company. The Company shall not, without the prior written consent of 24/7, take
or commit to take any of following actions: (i) amend its By-Laws or Certificate
of Incorporation, (ii) issue any additional shares of capital stock or issue,
sell or grant any option or right to acquire or otherwise dispose of any of its
authorized but unissued capital stock or other corporate securities, (iii)
declare or pay any dividends or make any other distribution in cash or property
on its capital stock, (iv) repurchase or redeem any shares of its capital stock,
(v) incur, or perform, pay or otherwise discharge, any obligation or liability
(absolute or contingent), except for current obligations and liabilities
incurred in the ordinary course of business consistent with past practice, (vi)
enter into any employment agreement with, or become liable for any bonus,
profit-sharing or incentive payment to, or increase the compensation or benefits
of, any of its officers, directors or employees, except pursuant to presently
existing plans, arrangements or agreements disclosed herein or in a schedule
hereto, (vii) sell, transfer or acquire any 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) modify, amend or cancel any of its existing leases
or enter into any contracts, agreements, leases or understandings other than in
the ordinary course of business or enter into any loan agreements, (x) make any
investments other than in certificates of deposit or short-term commercial
paper, (xi) make any payments or incur any liability in connection with expenses
incident to the negotiation or preparation of the Company's Documents, or (xii)
take any other action which would cause any of the representations and
warranties made by any Seller in the Company's 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.
(d) Supplements. If any representation, warranty or statement of
any Seller, or any schedule delivered to 24/7, shall be or become incorrect,
Sellers shall deliver to 24/7 a supplement in order that said representation,
warranty, statement, or schedule, as so supple mented, shall be true and
correct. It is understood and agreed that the delivery of such a supple ment to
24/7 shall not in any manner constitute a waiver by 24/7 of any of its rights
under this Agreement.
(e) Termination of Agreements. Sellers shall cause all provisions
of all purchase agreements, stockholder agreements, registration rights
agreements, investors' rights agreements, co-sale agreements, rights of first
refusal, and similar agreements between Sellers and the Company to terminate and
be of no further force and effect upon consummation of the Closing.
19
(f) "Market-Stand Off" Agreement. Each Seller hereby agrees that
it shall not, to the extent requested by 24/7 or an underwriter of securities of
24/7, sell or otherwise transfer or dispose of any Registrable Securities or
other shares of stock of 24/7 then owned by such Seller (other than to donees or
partners of the Seller who agree to be similarly bound) for up to ninety (90)
days following the effective date of a registration statement of 24/7 filed
under the Securities Act; provided, however, that all executive officers and
directors and employees of 24/7 then holding Common Stock of 24/7 and all other
persons or entities holding at least five percent (5%) of the outstanding Common
Stock of 24/7 enter into similar agreements. In order to enforce the foregoing
covenant, 24/7 shall have the right to place restrictive legends on the
certificates representing the shares subject to this Subparagraph and to impose
stop transfer instructions with respect to such shares(and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
(g) Further Action. Upon the terms and subject to the conditions
hereof, and subject to the exercise by the Boards of Directors of the Company of
their fiduciary obligations, each of the Sellers and the Company hereto shall
use all 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, including, but not limited to: (i) reasonable efforts to lift or
rescind any injunction or restraining order or other order which may be entered;
(ii) cooperation in reasonable tax planning measures in light of the
transactions contemplated hereby so long as no action shall be required to be
taken which would result in adverse tax consequences to the stockholders of the
Company or, if the Merger does not occur, to the Company; and (iii) reasonable
cooperation in respect of any filings to be made in connection with the Merger
and the transactions contemplated hereby.
(h) Public Announcements. The Company and the Sellers shall
consult with 24/7 before issuing any further press release or otherwise making
any public statements with respect to the Merger and neither shall issue any
such press release or make any such public state ment, except as may be required
by law, without the prior consent of 24/7.
(i) Government Compliance. The Company and the Sellers agree
promptly to effect all necessary registrations, filings, applications, and
submissions of information requested by governmental authorities.
5. Covenants of 24/7.
(a) Actions. 24/7 each covenants and agrees that between the date
hereof and the Closing 24/7 will not take any action which would cause any of
the representations and warranties made by it in 24/7's Documents not to be true
and correct in all material respects on
20
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) Supplements. If any representation, warranty or statement of
24/7 or any schedule delivered by 24/7, shall be or become incorrect, 24/7 shall
deliver to the Company a supplement in order that said representation, warranty,
statement, or schedule, as so supple mented, shall be true and correct. It is
understood and agreed that the delivery of such a supple ment to the Company
shall not in any manner constitute a waiver by the Company of any of its rights
under this Agreement.
(c) Further Action. Upon the terms and subject to the conditions
hereof, and subject to the exercise by the Boards of Directors of 24/7 of their
fiduciary obligations, 24/7 shall use all 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, including, but not limited to: (i)
reasonable efforts to lift or rescind any injunction or restraining order or
other order which may be entered; (ii) cooperation in reasonable tax planning
measures in light of the transactions contemplated hereby so long as no action
shall be required to be taken which would result in adverse tax consequences to
the stockholders of 24/7 or, if the Merger does not occur, to 24/7; and (iii)
reasonable cooperation in respect of any filings to be made in connection with
the Merger and the transactions contemplated hereby.
(d) Public Announcements. 24/7 shall consult with the Company
before issuing any further press release or otherwise making any public
statements with respect to the Merger and neither shall issue any such press
release or make any such public statement, except as may be required by law,
without the prior consent of the Company.
(e) Government Compliance. 24/7 agrees promptly to effect all
necessary registrations, filings, applications, and submissions of information
requested by governmental authorities.
(f) Information Rights
(i) Monthly and Quarterly Statements. 24/7 shall deliver to
each Seller, as soon as practicable, and in any event within 30 days after the
close of each month of each fiscal year of 24/7 in the case of monthly
statements and 45 days after the close of each of the first three fiscal
quarters of each fiscal year of 24/7 in the case of quarterly statements, true
and complete copies of the consolidated balance sheets, and the related
consolidated statements of income, stockholders' equity and cash flows of 24/7
and its subsidiaries (which shall include all affiliates controlled by 24/7
directly or indirectly through one or more intermediaries including, without
limitation, any person in which 24/7, directly or indirectly, through a
subsidiary or otherwise, beneficially owns more than fifty percent (50%) of
either the equity interest in, or the voting control of such persons, whether or
not existing on the date hereof) as at the close of such month or quarter
21
and covering operations for such month or quarter, as the case may be, and the
portion of 24/7's fiscal year ending on the last day of such month or quarter,
setting forth in each case in comparative form the figures for the comparable
period of the previous fiscal year and accompanied by a narrative description of
24/7's business and results of operations for such month or quarter. All such
financial statements shall be prepared in accordance with GAAP (except for the
omission of normal year-end adjustments and footnote disclosures) consistently
applied throughout the periods involved, shall be true and correct in all
material respects and shall fairly present the financial condition, income,
changes in stockholders' equity and cash flow of 24/7 on a consolidated basis,
as applicable, as of the respective dates thereof and for the respective periods
covered thereby. Each financial statement delivered by 24/7 shall be certified
by 24/7's chief executive officer, president, treasurer or chief financial
officer.
(ii) Annual Statements. 24/7 shall deliver to each Seller,
as soon as practicable after the end of each fiscal year of 24/7, and in any
event within 90 days thereafter, true and complete copies of the consolidated
and consolidating balance sheets of 24/7 and its Subsidiary at the end of such
year and the consolidated and consolidating statements of income, stockholders'
equity and cash flows of 24/7 and its Subsidiary for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by an opinion thereon of a firm of independent
certified public accountants of recognized national standing selected by 24/7
and reasonably acceptable to the Sellers, which opinion shall state that such
financial statements fairly present the financial condition, income, changes in
stockholders' equity and cash flow of 24/7 and its Subsidiary on a consolidated
basis, as applicable, and have been prepared in accordance with GAAP and that
the examination of such accountants in connection with such financial statements
has been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances. Each
financial statement delivered by 24/7 shall be certified by 24/7's chief
executive officer, president, treasurer or chief financial officer.
(iii) Audit Reports. 24/7 shall deliver to each Seller,
promptly upon receipt thereof, one copy of each other financial report and
internal control letter submitted to 24/7 by independent accountants in
connection with any annual, interim or special audit made by them of the books
of 24/7 and its Subsidiary, as applicable, as well as any responses of 24/7
thereto.
(iv) Other Reports. 24/7 shall deliver to each Seller,
promptly upon their becoming available, one copy of each financial statement,
report, notice or proxy statement sent by 24/7 to stockholders generally, of
each financial statement, report, notice or proxy statement sent by 24/7 or any
of its Subsidiaries to the SEC or any successor agency, if applicable, of each
regular or periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed by 24/7
or any of its subsidiaries with, or received by such person in connection
therewith from, any securities exchange or the SEC or any successor agency, of
any press release issued by 24/7 or any of its subsidiaries, and of any material
of any nature whatsoever prepared by the SEC or any successor agency thereto or
any state blue sky or securities law commission which relates to or affects in
any way 24/7 or any of its subsidiaries.
22
(v) Requested Information. 24/7 shall deliver to each
Seller, with reasonable promptness, such other documents, reports, data and
information as from time to time may be reasonably requested by such Seller.
(vi) Access. 24/7 shall permit, and shall cause its
subsidiaries to permit, representatives designated by any Seller, upon
reasonable prior notice to 24/7 and at the such Seller's expense, to visit and
inspect each of 24/7's and its subsidiaries' properties, to examine their
respective corporate and financial records (and make copies thereof or extracts
therefrom), to discuss their respective affairs, finances and accounts with
24/7's and its subsidiaries' directors, officers, key employees and accountants,
all at such reasonable times as may be requested by such Seller.
(vii) Other Information. 24/7 shall provide, from time to
time, such additional information regarding 24/7 or its Subsidiaries as any
Seller reasonably may request, including without limitation, any information or
reports required by reason of reporting or regulatory requirements to which any
Seller, its general partner (if applicable), or any person having an interest in
such Seller is subject.
6. Conditions Precedent to Obligations of 24/7 and the
Subsidiary. The obligations of 24/7 and the Subsidiary to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Closing, of each of the following conditions, any of which may be
waived by 24/7 and the Subsidiary in writing, and the Company and Sellers shall
use commercially reasonable efforts to cause such conditions to be fulfilled:
(a) Representations and Warranties. Each of the representations
and warranties of the Company and the Sellers in the Company's Documents shall
be true and correct in all ma terial respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date.
(b) Termination of Agreements. The Company and the Sellers shall
have complied with their covenant set forth in Subparagraph 4(d) hereof.
(c) Execution of Stockholders' Agreement. All Sellers shall have
executed the Stockholders' Agreement substantially in the form attached hereto
as Exhibit A.
(d) Performance of the Company and the Sellers. The Company and
the Sellers shall have performed and complied in all material respects with all
agreements, covenants and conditions required by the Company's Documents to be
performed or complied with by any Seller at or before the Closing.
(e) Delivery of Shares. All of the issued and outstanding Shares
shall have been delivered to 24/7 for purchase by it on the Closing Date.
(f) Employment Agreements. Yale Xxxxx and Xxxxxxx Xxxxxx each
shall have entered into an employment agreement and Non-Competition and
Non-Disclosure Agreement (the
23
"Employment Agreements") with 24/7 in the form of Exhibit B hereto and each
other employee of the Company shall have entered into a Non-Disclosure and
Non-Competition Agreement in the form attached hereto as Exhibit C.
(g) Key Man Life Insurance. The Company and the Sellers shall
have delivered to 24/7 evidence reasonably satisfactory to 24/7 that there is in
force a key man life insurance policy, owned by the Company and under which the
Company (and any financial institution designated by 24/7) is the beneficiary,
insuring the life of Yale Xxxxx in the amount of $1,000,000.
(h) Opinion of Counsel to the Company and the Sellers. The
Company and the Sellers shall have delivered to 24/7 an opinion of Fenwick &
West LLP, counsel to the Company and the Sellers, dated the Closing Date, in the
form of Exhibit D hereto.
(i) Certificate. 24/7 shall have received a certificate executed
by the Company dated the Closing Date, certifying, in such detail as 24/7 may
reasonably request, as to the fulfillment of the conditions set forth in
subparagraphs (a), (b) and (d).
(j) Consents. The Company and the Sellers shall have obtained or,
to the reasonable satisfaction of 24/7 obviated the need to obtain, all
consents, approvals or waivers from regulatory authorities and third parties
necessary for the execution, delivery and performance of the Company's Documents
and the transactions contemplated thereby, all without cost or other adverse
consequences to the Company.
(k) Litigation. No action or proceeding shall be pending or
threatened before any court, tribunal or governmental body, and no claim or
demand shall have been made against 24/7, any 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 the Company's Documents or
24/7's Documents, or which might materially affect the business of the Company,
which in the reasonably exercised opinion of 24/7 makes it inadvisable to
consummate such transactions.
(l) Stockholder Approval. The stockholders of the Company shall
have approved and adopted this Agreement by the unanimous written consent in
accordance with its Certificate of Incorporation, By-laws and Delaware General
Corporation Law.
(m) 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 of 24/7 and such counsel shall have been
furnished with such certified copies of such corporate actions and proceedings
and such other instruments and documents as it shall have reasonably requested.
(n) No Violation. There shall not have been any action taken, or
any statute, rule, regulation, or order enacted, promulgated, or issued or
deemed applicable to the Merger by
24
any Federal or state government or governmental authority or court, which would
(i) prohibit the Surviving Corporation's ownership or operation of all or a
material portion the Subsidiary's business or assets, or compel the Surviving
Corporation or Subsidiary to dispose of or hold separate all or a material
portion of the Subsidiary's business or assets, as a result of the Merger; (ii)
render the Subsidiary unable to consummate the Merger; (iii) make such
consummation illegal; or (iv) impose or confirm material limitations on the
ability of 24/7 effectively to exercise full rights of ownership of shares of
the capital stock of the Surviving Corporation, including without limitation,
the right to vote any such shares on all matters properly presented to the
stockholders of the Surviving Corporation, and no such action shall have been
taken or any such statute, rule, regulation, or order enacted, promulgated,
issued, or deemed applicable to the Merger which in the reasonable judgment of
24/7 will produce such result.
(o) Certificate. 24/7 shall have received a certificate of the
Company, dated the Closing Date, signed by the Chief Executive Officer of the
Company, as to such other matters as may be reasonably requested by 24/7,
including, but not limited to, certificates with respect to the Company's
Certificate of Incorporation, By-laws, Board of Directors' resolutions relating
to the transactions contemplated hereby and the incumbency and signatures of
each of the officers of the Company who shall execute on behalf of the Company
any document delivered on the Closing Date.
(p) Escrow Agreement. Each Seller shall have entered into an
escrow agreement in substantially the form annexed hereto as Exhibit G and,
pursuant thereto, shall have delivered to the Escrow Agent thereunder, the
portion of the Merger Consideration referred to therein.
7. Conditions Precedent to Obligations of the Company and each
Seller . The obligations of the Company and each Seller to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Closing, of each of the following conditions, any of which may be
waived by the Company and the Sellers in writing, and 24/7 and the Subsidiary
shall use their best efforts to cause such conditions to be fulfilled:
(a) Representations and Warranties. The representations and
warranties of 24/7 and the Subsidiary in 24/7's Documents shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though the same had been made on and as of the Closing Date.
(b) Performance by 24/7 and the Subsidiary. 24/7 and the
Subsidiary shall have performed and complied in all material respects with the
agreements, covenants and conditions required by 24/7's Documents to be
performed or complied with by them at or before the Closing.
(c) Merger Consideration. The Merger Consideration shall have
been paid as provided in subparagraphs 1(g) and (f) above.
25
(d) Employment Agreements. 24/7 shall have entered into the
Employment Agreements.
(e) Opinion of 24/7's Counsel. 24/7 and the Subsidiary shall have
delivered to the Company and the Sellers an opinion of Proskauer Rose LLP,
counsel to 24/7 and the Subsidiary, dated the Closing Date, in the form of
Exhibit E hereto.
(f) Certificate. The Company and the Sellers shall have received
a certificate executed by 24/7, dated the Closing Date, certifying, in such
detail as the Company and the Sellers may reasonably request, as to the
fulfillment of the conditions set forth in subparagraphs (a) and (b).
(g) Litigation. No action or proceeding shall be pending or
threatened before any court, tribunal or governmental body, and no claim or
demand shall have been made against 24/7, the Subsidiary, the Sellers 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 24/7's
Documents or the Company's Documents which in the reasonably exercised opinion
of Sellers makes it inadvisable to consummate such transaction.
(h) Execution of Related Agreements. 24/7 and Seller shall have
entered into the Stockholders' Agreement and Registration Rights Agreement in
the form attached hereto as Exhibits A and F respectively.
8. Closing Deliveries.
(a) Deliveries of the Company and the Sellers. At the Closing,
the Company and the Sellers shall deliver, or shall cause to be delivered, to
24/7 and the Subsidiary the following:
(i) Certificates representing the Shares, as 24/7 may
designate, with any required stock transfer tax stamps affixed and canceled and
all taxes on such transfer, if any, paid in full, all at the expense of Sellers.
Such Shares shall be delivered to 24/7 free and clear of all claims;
(ii) Where a Seller is an entity: appropriate documentary
evidence establishing the capacity and authority of such Seller to sell, assign,
transfer and deliver the Shares hereunder and to enter into this Agreement;
(iii) The Employment Agreements;
(iv) The evidence as to Key Man Life Insurance;
(v) The opinion of Fenwick & West LLP, counsel to Sellers;
26
(vi) The certificate referred to in subparagraph 6(i)
hereof, duly executed by each Seller;
(vii) Copies of the consents, approvals or waivers referred
to in subparagraph 6(j) hereof;
(viii) duly executed resignations of such directors and
fiduciaries of the Company as 24/7 shall designate.
(b) 24/7 and Subsidiary Deliveries. At the Closing, 24/7 and the
Subsidiary shall deliver or cause to be delivered to the Company and the Sellers
the following:
(i) Certificates representing shares of capital stock of
24/7 and warrants in payment of the Merger Consideration.
(ii) The Employment Agreements;
(iii) The opinion of Proskauer Rose LLP, counsel to 24/7 and
the Subsidiary;
(iv) The certificate referred to in subparagraph 7(f)
hereof;
(v) The agreements referenced in Subparagraph 7(h) hereof.
9. Restrictive Covenant.
(a) Confidentiality. The Company and the Sellers shall never 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 24/7 or the Company
or its affiliates that is competitively sensitive or confidential. Because the
breach or attempted or threatened breach of this restrictive covenant will
result in immediate and irreparable injury to 24/7 for which 24/7 will not have
an adequate remedy at law, 24/7 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 paragraph 9 are in
addition to and in dependent of any agreements or covenants contained in any
employment, consulting or other agreement between 24/7 or the Company and any
Seller.
(b) Non-public Information. From and after the consummation of an
initial public offering, if any, of 24/7's securities, to the extent that any of
the information furnished pursuant to Section 5(f) hereof would constitute
material, nonpublic information for purposes of the Securities Exchange Act of
1934, as amended, each Seller covenants that it will not engage in any purchase
or sale of 24/7's securities while in possession of such information and prior
to the time that such information is made generally known to the public and that
each Seller shall
27
inform its agents and representatives, who have been given access to such
material, nonpublic information, of such requirements. The obligations in this
subparagraph 9(b) shall survive termination of this Agreement.
10. Brokers. Each party represents to the other that it has had
no dealings with any broker or finder in connection with the transactions
contemplated by this Agreement other than Interactive Capital Partners LLC. The
Company acknowledges and agrees that any commission or other fee that may be due
to Interactive Capital Partners LLC is its responsibility and shall be paid on
the Closing Date in accordance with the terms of a letter dated March 15, 1998
which has been furnished to 24/7. Should any other claim be made for a broker's,
finder's or similar fee, on account of any actions or dealings by a party or its
agents, such party shall indemnify and hold the other party harmless from and
against any and all liability and expenses, including reasonable attorneys' fees
incurred by reason of any claim made by such broker.
11. Indemnification by Sellers. Each Seller shall severally and
not jointly and only in proportion to such Seller's pro-rata share of ownership
of the Company immediately preceding the Closing Date indemnify, defend and hold
harmless 24/7 and its affiliates (including the Subsidiary and the Company),
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 exceeding in the
aggregate more than $50,000 (collectively, "Losses"), arising out of or in
connection with any of the following: (a) any material misrepresentation or
breach of any warranty made by such Seller in any of the Company's Documents;
(b) any material breach or nonfulfillment of any covenant or agreement made by
such Seller in any of the Company's Documents; (c) the claims of any broker or
finder engaged by any Seller other than Interactive Capital Partners LLC; (d)
any customer claims relating to services provided prior to the Closing, to the
extent not covered by insurance or reserved against in the Unaudited Balance
Sheet; and (e) without in any manner limiting the foregoing, any liabilities or
obligations of, or claims or causes of action against, the Company which arise
with respect to or relate to any period or periods on or prior to the Closing
Date, except for those which are set forth or reserved against in the Unaudited
Balance Sheet or are set forth in a schedule hereto, or were incurred subsequent
to February 28, 1998, in the ordinary course of business as theretofore
conducted and are not materially adverse to the operations or prospects of the
Company's business. In no event shall the total of any Seller's liability under
this paragraph 11 be greater than the portion of the Merger Consideration
deposited with the Escrow Agent pursuant to the Escrow Agreement, as provided by
subparagraph 13(d), and as shown on Exhibit A to the Escrow Agreement.
12. Indemnification By 24/7. 24/7 shall indemnify, defend and
hold harmless Sellers, 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: (a) any misrepresentation or breach of any warranty made by 24/7 in
any of 24/7's Documents; (b) any breach or nonfulfillment of any covenant or
agreement made by 24/7 in 24/7's Documents; and (c) the claims of any broker or
finder engaged by 24/7.
28
13. Further Provisions Regarding Indemnification.
(a) Survival. All representations, warranties, indemnities,
covenants and agreements made by the Company or the Sellers and 24/7 in the
Company's or 24/7's Documents shall survive the Closing, notwithstanding any
examination or investigation made by or for any party.
(b) Limitations. Notwithstanding the foregoing, neither the
Company nor any Seller, on the one hand, nor 24/7, on the other (Sellers, on the
one hand, and 24/7 on the other, each is sometimes hereinafter referred to in
this paragraph 13 as a "party") shall be entitled to indemnification for Losses
arising out of matters referred to in subparagraphs 11(a) or 12(a), as
applicable, unless it shall have given written notice to the other party,
setting forth its claim for indemnification in reasonable detail, within two
years after the Closing Date; provided, however, that the foregoing limitations
on each party's indemnification obligation shall not apply to Losses arising out
of or in connection with any material misrepresentation made in subparagraphs
2(a) and 2(c)and paragraph 10 .
(c) Defense. 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 paragraph
11 or 12. If the indemnifying party, within 10 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 and shall have furnished to the indemnified party
a bond, letter of credit, escrow or similar arrangement in an amount equal to
the total amount demanded in such claim or proceed ing, then the indemnifying
party shall have the right to control the defense of such claim or proceeding,
and the indemnified party shall not settle or compromise such claim or
proceeding without the written consent of the indemnifying party. The
indemnified party may in any event participate in any such defense with his or
its own counsel and at his or its own expense.
(d) Escrow of Shares of 24/7 Capital Stock. Upon receipt of the
Merger Consideration pursuant to Paragraph 2 of this Agreement, Sellers shall
deliver to the Escrow Agent, pursuant to the Escrow Agreement, a number of
shares of 24/7 capital stock and warrants equal to 30% of the Merger
Consideration, with each Seller to deliver its share of the Merger Consideration
specified in Exhibit A to the Escrow Agreement. The shares of 24/7 capital stock
and warrants together with any earnings on or accretions thereto shall be held
by the Escrow Agent pursuant to the terms of the Escrow Agreement. Except for
shares of 24/7 capital stock declared as dividends or distributions on the
escrowed shares in connection with a stock split or other reorganization of
24/7, all earnings on or accretions to the Merger Consideration held by the
Escrow Agent pursuant to the terms of the Escrow Agreement shall be for the
benefit of Seller. The Escrow Agreement shall provide the Sellerswith the power
to direct the sale of escrowed shares (but not the distribution or release of
the net monetary proceeds therefrom), to invest the net proceeds from such sales
in U.S. government securities or investment grade debt securities and to receive
monthly payments of the interest from such investments. All interest or other
income to such investments shall be for the
29
benefit of the Seller. 24/7 shall be entitled to delivery from the Escrow Agent
of such number of shares of 24/7 capital stock as shall have a value equal to
the amount due 24/7 pursuant to Paragraph 11 (or an equivalent amount in cash),
and the Sellers shall give the Escrow Agent all such notices as shall be
necessary to obtain such delivery from the Escrow Agent. Subject to any demand
hereunder that may be pending at such time, each Sellers shall be entitled to
delivery from the Escrow Agent of one-half of its share of the escrow fund as
set forth on Exhibit A to the Escrow Agreement (after giving effect to the
delivery, if any, of shares of 24/7 capital stock and earnings on and accretions
thereto pursuant to the preceding sentence) on the first anniversary of the
Effective Time and the balance of its share of the escrow fund upon the second
anniversary of the Effective Time.
14. Further Assurances. The parties shall cooperate and take such
actions, and execute such other documents, at the Closing or subsequently, as
either may reasonably request in order to carry out the provisions or purpose of
this Agreement.
15. Notices. All notices or other communications in connection
with this Agreement shall be in writing and shall be considered given when
personally delivered or when mailed by registered or certified mail, postage
prepaid, return receipt requested, or by overnight courier as follows:
If to a Seller at the address set forth with respect to such Seller on
the signature page hereto.
With a copy to:
Fenwick & West LLP
0000 X. Xxxxxx X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: X.X. Xxxxxxxxxxx, Esq.
If to 24/7:
24/7 Media, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Chief Executive Officer
With a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
30
16. 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
understandings and agreements. 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.
17. 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, except that 24/7 may assign this
Agreement and its rights hereunder to any direct or indirect wholly-owned
subsidiary of 24/7.
18. Paragraph Headings. The paragraph headings in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Other Discussions. Unless this Agreement shall have been
terminated, neither the Company nor any Seller shall consider or entertain any
other offers for, or hold discussions with any person regarding, the acquisition
of any assets or capital stock of the Company.
20. Legal Fees and Expenses. If the Closing occurs, up to $40,000
of legal costs, fees or expenses incurred by Sellers and the Company shall be
borne by 24/7.
21. 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 unenforce able, and such
illegality, invalidity or unenforceability shall have no effect upon and shall
not impair the enforceability of any other provision of this Agreement.
22. Governing Law and Consent to Jurisdiction. This Agreement
shall be gov erned by and construed and interpreted in accordance with the
internal law of the State of New York (without reference to its rules as to
conflicts of law). The state courts of the State of New York in the 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 jurisdictions 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 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 paragraph
15.
31
23. 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.
32
IN WITNESS WHEREOF, the parties have duly executed this Agreement
on the date first above written.
24/7 MEDIA, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
INTERACTIONS ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
INTELLIGENT INTERACTIONS CORPORATION
By: /s/ Yale X. Xxxxx
------------------------------
Name: Yale X. Xxxxx
Title: Chief Executive Officer
Sellers:
/s/ Yale X. Xxxxx /s/ Xxxx X. Xxxxxxxx
----------------------------------- -----------------------------------------
Yale Xxxxx Xxxx X. Xxxxxxxx
Address: 000 X. Xxxxx Xxxxxx Address: Versant Object Technology
Xxxxx 000 0000 Xxxxxx Xx., Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxx Xxxx, XX 00000
/s/ Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxx
----------------------------------- -----------------------------------------
Xxxxxx Xxxxxxxx Xxxxxx Xxxxx
Address: 000 X. Xxxxx Xxxxxx Address: 000 X. Xxxxx Xxxxxx
Xxxxx 000 Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
33
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxx Xxxxx
----------------------------------- -----------------------------------------
Xxxxxxx X. Xxxxxx Xxxxx Xxxxx
Address: 000 X. Xxxxx Xxxxxx Address: Versant Object Technology
Xxxxx 000 0000 Xxxxxx Xx., Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxx Xxxx, XX 00000
Trinity Ventures V, L.P.
A California Limited Partnership
By: Trinity TVL Partners V, L.P.
A California Limited Partnership, its General Partner
By: /s/ Trinity TVL Partners V, L.P.
--------------------------------
Name:
A General Partner
Address: 000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
Trinity V Side-By-Side Fund, L.P.
By: Trinity TVL Partners V, L.P.
A California Limited Partnership, its General Partner
By: /s/ Trinity TVL Partners V, L.P.
--------------------------------
Name:
A General Partner
Address: 000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
34
Zero Stage Capital V Limited Partnership
By: Zero Stage Capital Associates Limited Partnership, General Partner
By: /s/ Zero Stage Capital Associates Limited Partnership
-----------------------------------------------------
Name:
Address: 000 Xxxx Xxxxxx, 00xx fl
Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxx
F&W Investments 1996
A California Partnership
By: /s/ F&W Investments
------------------------------
A General Partner
Address: Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx
35
