EXHIBIT 5.1
AGREEMENT AND PLAN OF MERGER
By and Among
24/7 Media, Inc.
Cloop Acquisition Corp.
and
Music Marketing Network Inc.
Dated as of August 10, 1999
AGREEMENT AND PLAN OF MERGER, dated as of August 10, 1999 (this
"Agreement"), by and among 24/7 Media, Inc., a Delaware corporation ("24/7"),
Cloop Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
24/7 (the "Subsidiary"), and Music Marketing Network Inc., a New Jersey
corporation (the "Company").
WHEREAS, the Boards of Directors of 24/7, the Subsidiary and the
Company, and the Stockholders, 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 the New Jersey
Business Corporation Act ("New Jersey 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 shall qualify as a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, each stockholder of the Company (collectively, the
"Stockholders") is the owner of such number and class(es) of shares of capital
stock (the "Shares") of the Company as is set forth in Schedule 1 hereto (the
"Ownership Table"), and, as of the date hereof, such Shares collectively
represent 100% of the issued and outstanding shares of capital stock of the
Company.
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 and the Company hereby agree as follows:
1. The Merger
(a) The Merger. At the Effective Time (as defined in Section 1(b)) and
subject to and upon the terms and conditions of this Agreement, Delaware Law and
New Jersey 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; Closing.
(i) As promptly as practicable after the Closing (as defined in
paragraph (ii) below), the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger, and any other required documents,
with each of the Secretary of State of the State of Delaware and the Secretary
of State of the State of New Jersey, in such forms as required by, and executed
in accordance with the relevant provisions of, Delaware Law and New Jersey Law
(collectively, the "Certificate of Merger"). When used in this Agreement, the
term "Effective Time" shall mean the date and time at which the Merger shall
become effective under Delaware Law and New Jersey Law.
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(ii) 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 1:00 P.M., New York time, on a date
designated by 24/7 and the Company upon two business days' prior written notice
of the satisfaction or waiver, as the case may be, of the conditions set forth
in Sections 6 and 7 (the "Closing Date"), but in no event later than August 17,
1999, unless the parties shall agree upon a later date.
(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 and New
Jersey 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 and the Company shall vest in the Surviving
Corporation, and all restrictions, disabilities, duties, debts and liabilities
of the Subsidiary and the Company 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 Company shall be the Certificate
of Incorporation and By-Laws of the Surviving Corporation, and shall continue in
full force and effect until thereafter amended.
(e) Directors and Officers. The directors and officers set forth on
Schedule 1(e) hereto shall be the directors and officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
(f) Consideration; Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of 24/7, the Subsidiary,
the Company or the Stockholders,
(i) each share of capital stock of the Company held in the
treasury of the Company shall be canceled and retired without payment of any
consideration therefor and cease to exist; and
(ii) each share of capital stock of the Company shall be exchanged
for and converted into the right to receive validly issued, fully paid and
non-assessable shares of common stock, par value $.01 per share, of 24/7 ("24/7
Common Stock") as follows (the "Merger Consideration"):
(A) each share of common stock, par value $.01 per share, of
the Company shall be exchanged for and converted into the right to receive
0.312174547 (the "Conversion Ratio") shares of 24/7 Common Stock; and
(B) each share of preferred stock, par value $.01 per share,
of the Company shall be exchanged for and converted into the right to receive
113.698333 shares of 24/7 Common Stock.
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(iii) each share of common stock, par value $.01 per share, of the
Subsidiary issued and outstanding immediately prior to the Effective Time shall
be exchanged for and converted into one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation. Each stock certificate of the Subsidiary evidencing ownership of
any such shares shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
(g) Outstanding Indebtedness; Employee Bonuses.
(i) The obligations set forth under "Debt" on Schedule 1(g) shall
be paid in full in cash, or, to the extent and in the manner set forth in
Schedule 1(g), otherwise satisfied through the issuance of shares of 24/7 Common
Stock, on the Closing Date, and the Company shall cause to be delivered to 24/7
appropriate evidence of the receipt of such repayment or satisfaction.
(ii) The obligations set forth under "Employee Bonuses" on
Schedule 1(g) will be satisfied in full through the issuance of shares of 24/7
Common Stock on the Closing Date as set forth in Schedule 1(g).
(h) Assumption of Options.
(i) The Company's obligations with respect to each outstanding
option, as set forth on Schedule 2(d) hereto, to purchase shares of common stock
of the Company issued pursuant to the Company's 1997 Stock Option Plan (the
"Options"), whether vested or unvested, shall, by virtue of this Agreement and
without any further action of the Company, 24/7 or the holder of any Option, be
assumed by 24/7 under its 1998 Stock Incentive Plan. Unless otherwise elected by
24/7 prior to the Effective Time, 24/7 shall make such assumption in such manner
that (i) 24/7 is a corporation "assuming a stock option in a transaction to
which Section 424(a) applies" within the meaning of Section 424 of the Code or
(ii) to the extent that Section 424 of the Code does not apply to such Option,
24/7 would be such a corporation were Section 424 of the Code applicable to such
Option; and, if not so otherwise elected, after the Effective Time, all
references to the Company's 1997 Stock Option Plan shall be deemed to refer to
24/7's 1998 Stock Incentive Plan as of the Effective Time by virtue of this
Agreement and without any further action.
(ii) Each Option so assumed by 24/7 under this Agreement shall
continue to have, and be subject to, similar terms and conditions set forth in
the Company's 1997 Stock Option Plan as in effect immediately prior to the
Effective Time, except that (i) such Option shall be governed by 24/7's 1998
Stock Incentive Plan, (ii) such Option will be exercisable for that number of
shares of 24/7 Common Stock equal to the product of the number of shares of
common stock of the Company that were purchasable under such Option immediately
prior to the Effective Time multiplied by the quotient determined by dividing
the fair market value of the common stock of the Company by the fair market
value of the 24/7 Common Stock, rounded to the nearest whole number of shares of
24/7 Common Stock, and (iii) the per share exercise price for the shares of 24/7
Common Stock issuable upon exercise of such assumed Option will be equal to the
exercise price per share of common stock of the Company at which such Option was
exercisable immediately prior to the Effective Time multiplied by the quotient
determined by dividing the fair market value of the
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24/7 Common Stock by the fair market value of the common stock of the Company,
and rounding the resulting exercise price up to the nearest whole cent. For
purposes of this Section 1(g)(ii), the fair market value of the 24/7 Common
Stock is based on the closing price per share on the trading day immediately
following (but not including) the Closing Date, as reported in The Wall Street
Journal, and the fair market value of the common stock of the Company is based
on the dollar value of the Company's common stock used to calculate the
Conversion Ratio pursuant to Section 1(f)(ii)(A).
(iii) As soon as reasonably practicable after the Effective Time,
the Company will deliver to Option holders appropriate notices setting forth
such holders' rights pursuant to 24/7's 1998 Stock Incentive Plan and confirming
that the Options have been assumed by 24/7 under its 1998 Stock Incentive Plan
in accordance with the terms and conditions required by this Section 1(h).
(i) Surrender and Payment.
(i) Each holder of shares of capital stock of the Company
("Capital Shares") that have been converted into the right to receive the Merger
Consideration, upon surrender at the Closing of a certificate or certificates
representing such Capital Shares, together with properly executed stock powers
and stock transfer stamps covering such Capital Shares, will be entitled to
receive the Merger Consideration payable in respect of such Capital Shares,
which Merger Consideration shall be delivered at the Closing.
(ii) All certificates representing Capital Shares outstanding
prior to the Closing Date shall continue to evidence ownership of Capital Shares
until such Capital Shares are surrendered and exchanged as provided herein. All
certificates representing Capital Shares outstanding prior to the Closing Date
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. The Merger Consideration delivered upon the
surrender for exchange of the Capital Shares in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Capital Shares and, after the Effective Time, there shall be
no further registration or transfers of Capital Shares outstanding prior to the
Closing Date.
(iii) No fractional shares of 24/7 Common Stock shall be issued
upon conversion of Capital Shares. In lieu of any fractional share of 24/7
Common Stock to which any holder of Capital Shares would otherwise be entitled,
24/7 shall round to the nearest whole share of 24/7 Common Stock.
(j) Escrow Indemnity Account. Promptly after the Closing Date, 24/7
shall deliver to the escrow agent (the "Escrow Agent") under the escrow
indemnification agreement dated the Closing Date, substantially in the form of
Exhibit A hereto (the "Escrow Indemnity Agreement"), certificates representing
an aggregate of 378,171 shares of 24/7 Common Stock that would have otherwise
been received by the Stockholders in the Merger, to be held pursuant to the
provisions of this Agreement and the Escrow Indemnity Agreement in an escrow
account (the "Escrow Indemnity Account").
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(k) Dissenters' Rights. The holders of Capital Shares as to which
dissenters' rights shall have been duly demanded under applicable law
("Dissenting Shares"), if any, shall be entitled to payment by the Surviving
Corporation only of the fair value of such Capital Shares plus accrued interest
to the extent permitted by and in accordance with the provisions of applicable
law; provided, however, that (i) if any holder of Dissenting Shares shall, under
the circumstances permitted by applicable law, subsequently deliver a written
withdrawal of such holder's demand or (ii) if any holder fails to establish such
holder's entitlement to rights to payment as provided under applicable law, such
holder or holders (as the case may be) shall forfeit such right to payment for
such Capital Shares and such Capital Shares shall thereupon be deemed to have
been converted into 24/7 Common Stock as of the Effective Time.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to 24/7 that:
(a) Organization and Qualification; Organizational Documents.
(i) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey and has the
requisite corporate power and corporate authority to own, lease and operate its
assets and properties and to conduct its business as it is now being conducted.
The Company is duly qualified or licensed as a foreign corporation to do
business, and is in good standing under the laws of those jurisdictions listed
on Schedule 2(a) hereto, constituting each jurisdiction in which the conduct of
its business or the ownership, leasing or operation of its assets and properties
requires such qualification.
(ii) The Company has heretofore furnished to 24/7 a complete and
correct copy of the Company's Certificate of Incorporation (certified by the
Secretary of State of the State of New Jersey) and By-Laws, each as amended to
date. Such Certificate of Incorporation and By-Laws are in full force and
effect. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or By-Laws.
(b) Ownership and Delivery of the Shares; Authority Relative to this
Agreement.
(i) Each Stockholder is, and immediately prior to the Closing will
be, the record and beneficial owner of the number and class(es) of Shares set
forth next to such Stockholder's name on Schedule 2(b) hereto, free and clear of
any and all liens, pledges, security interests, options, encumbrances, charges,
agreements or claims of any kind whatsoever, other than those agreements set
forth on Schedule 4(e) hereto, which agreements shall be terminated upon
consummation of the Closing. On the Closing Date, each Stockholder will have the
full right, power and authority to assign, transfer and deliver such
Stockholder'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 liens, pledges, security interests, options, encumbrances,
charges, agreements or claims of any kind whatsoever.
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(ii) The Company has all necessary rights, power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the transactions contemplated hereby, as well as all other
agreements, certificates and documents executed or delivered, or to be executed
or delivered, by the Company in connection herewith (collectively, with this
Agreement, the "Company Documents"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (except as set forth in clause (iv) below). Each of the
Company Documents to which the Company is, or will be, a party has been, or will
be, duly and validly executed and delivered by the Company, and, assuming the
due authorization, execution and delivery of the Company Documents by 24/7
and/or the Subsidiary, as applicable, are (or when executed and delivered will
be) legal, valid and binding obligations of the Company, except as limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the enforcement of creditors' rights generally
and (ii) general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
(iii) The Board of Directors of the Company (A) has declared that
this Agreement, the Merger and the other transactions contemplated hereby are
advisable and in the best interests of the Stockholders; (B) has authorized,
approved and adopted this Agreement, the Merger and the other transactions
contemplated hereby; and (C) has authorized the taking of all appropriate
action, pursuant to Delaware Law and New Jersey Law, to cause the Merger to
become effective at the Effective Time.
(iv) The Stockholders have authorized, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby.
(c) No Conflicts, Required Filings and Consents.
(i) Except as set forth in Schedule 2(c), the execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (A) conflict with or violate the Certificate
of Incorporation or By-Laws of the Company; (B) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or by
which any of its properties is bound or affected; or (C) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties is bound or
affected.
(ii) The execution, delivery and performance of this Agreement by
the Company will not require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
except (A) for applicable requirements, if any, of the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act
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of 1934, as amended (the "Exchange Act"), state blue sky laws and the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended; (B) for the
filing of the Certificate of Merger; and (C) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger or
otherwise prevent the Company from performing its obligations under this
Agreement.
(d) Capitalization. Immediately prior to the Closing, the authorized
capital stock of the Company will consist of the following:
(i) Common Stock: 10,000,000 shares of common stock, par value
$.01 per share, of which 4,244,308 shares will be issued and outstanding.
(ii) Preferred Stock: 3,000 shares of series C preferred stock,
par value $.01 per share, of which 3,000 shares will be issued and outstanding.
(iii) Options and Reserved Shares: as set forth on Schedule 2(d)
hereto, Options to purchase 284,577 shares of common stock of the Company, all
issued to employees, consultants or advisors of the Company pursuant to the
Company's 1997 Stock Option Plan, are outstanding. Schedule 2(d) sets forth the
exercise price, vesting dates, dates of grant and expiration dates of such
Options and whether such Options are nonqualified stock options or "incentive
stock options" within the meaning of Section 422(b) of the Code. No other shares
of restricted stock have been granted by the Company.
All of the outstanding shares of capital stock of the Company are duly
authorized, validly issued and outstanding, fully paid and non-assessable.
Except as set forth in this Section 2(d) or Schedule 1(g), there are no
outstanding shares of capital stock or other equity or debt securities of the
Company. Except as set forth in this Section 2(d) and in Schedule 2(d), as of
the Closing there will be no existing option, warrant, call, commitment or other
agreement requiring the issuance or sale of any additional shares of capital
stock or other equity or debt securities of the Company and no shares of capital
stock or other equity or debt securities of the Company will be reserved for
issuance for any purpose, and there will be no agreements, commitments or
restrictions relating to the ownership or voting of any shares of capital stock
or other equity or debt securities of the Company, other than those agreements
set forth in Schedule 4(e) hereto.
(e) Subsidiaries and Affiliates. The term "affiliate" shall mean any
person or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company. Except for RBNJ Corp., the Company has no direct or indirect
subsidiaries, whether or not wholly owned, and has no equity interest in any
corporation, partnership, joint venture or other entity. The Company has
conducted its business only through the Company.
(f) Financial Statements; Accounts Receivable. The Company has
previously delivered to 24/7: the unaudited balance sheets of the Company as at
December 31, 1997, December 31, 1998 and June 30, 1999 (the "Unaudited Balance
Sheets") and the related unaudited statements of operations and cash flows for
the years and the six months then ended, respectively
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(together with the Unaudited Balance Sheets, the "Unaudited Financials"). Except
as set forth on Schedule 2(f), each of the foregoing financial statements 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
("GAAP"), and presents fairly in all material respects the financial position,
results of operations and changes in financial position of the Company as at the
dates and for the periods indicated, subject, in the case of the Unaudited
Financials, to year-end adjustments and notes required by GAAP. The Company has
previously provided to 24/7 an aged list of the Company's accounts receivable as
at June 30, 1999. The accounts receivable of the Company arose in the ordinary
course of business for goods or services delivered or rendered and constitute
valid claims.
(g) Liabilities. Except as set forth on Schedule 2(g), all liabilities
of the Company (whether absolute, accrued, unmatured, fixed, 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 adequately reserved against on the face of the Unaudited Balance
Sheets, in each case in accordance with GAAP, except for liabilities incurred
since December 31, 1997, December 31, 1998 or June 30, 1999, as the case may be,
in the ordinary course of business as theretofore conducted, which liabilities
are not materially adverse to the operations of the Company's business. The
Company does not know of any basis for the assertion against the Company of any
other liability or loss contingency of a nature defined by GAAP.
(h) No Adverse Change. Since December 31, 1998, the Company has
conducted its business consistent with ordinary commercial business practices
and only in the ordinary course of business as theretofore conducted, and
consistent with that of a development stage company, and, except as set forth in
Schedule 2(h) hereto, there has not occurred any:
(i) amendments or changes to the Certificate of Incorporation or
By-Laws of the Company;
(ii) material adverse change in the business, properties, assets,
liabilities, commitments, earnings or financial condition of the Company;
(iii) damage or destruction to property or assets of the Company
resulting in a loss or cost to the Company of more than $50,000 in the
aggregate, whether or not covered by insurance; or
(iv) act or omission which, if taken or omitted after the date of
this Agreement and before the Closing, would cause the condition set forth in
Section 6(a) not to be fulfilled.
(i) Taxes. The Company has timely and properly filed all material
federal, foreign, state, local and other tax returns and reports which are
required to be filed by it. All such tax returns were 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 pay-
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able by the Company (including interest and penalties), whether or not disputed,
with respect to any period prior to December 31, 1997, December 31, 1998 or June
30, 1999, as the case may be, have been adequately reserved against in
accordance with GAAP on the face of the Unaudited Balance Sheets. Except as set
forth on Schedule 2(i), 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 audits, examinations 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 and complete copies of all federal, foreign, state and
local income and payroll tax returns of the Company for the years ended on
December 31 for the years 1995 through 1998, which tax returns have been filed
with the relevant taxing authorities. The Company has not at any time consented
to have the provisions of Section 341(f)(2) of the Code apply to it. To the
Company's knowledge, all taxes to be collected or withheld by the Company have
been duly collected or withheld and any such amounts that were required to be
remitted to any taxing authority have been duly remitted. To the Company's
knowledge, there are no tax rulings, requests for rulings, closing agreements or
changes of accounting method relating to the Company that could affect its tax
liability for any period after the Effective Time. To the Company's knowledge,
there will not be includible in the Company's gross income for any taxable
period after the Effective Time any amount attributable to a prior tax period as
a result of any of the following methods of accounting: installment, completed
contract, long-term contract, cash or as a result of the application of Section
481 of the Code or comparable provisions of state, local or foreign tax law. For
purposes of this Agreement, "tax" or "taxes" means taxes of any kind, levies or
other like assessments, customs, duties, imposts, charges and including, without
limitation, income, gross receipts, ad valorem, value added, excise, real and
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, occupation and other governmental taxes imposed
or payable to the United States, or any state, local or foreign government or
subdivision or agency thereof, and in each instance such term shall include any
interest, penalties or additions to tax attributable to any such tax.
(j) Title to Properties; Absence of Encumbrances. Except as set forth
in Schedule 2(j), 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 material properties and assets of whatever kind (whether real or
personal), including, without limitation, all properties and assets that are
shown on the Unaudited Balance Sheets (except for assets sold in the ordinary
course of business since December 31, 1997, December 31, 1998 or June 30, 1999,
as the case may be) and all material 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
encumbrances of any kind whatsoever, except as may be set forth in Schedule 2(j)
hereto, except for equipment liens incurred in the ordinary course of business,
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.
(k) Real and Personal Property. Schedule 2(k) hereto contains a
complete and correct list of all real property (including buildings and
structures) owned, occupied, leased or
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otherwise used 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's 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. No
condemnation or other proceeding is pending or, to the knowledge of the Company,
threatened, that would affect the use of any such property by the Company.
Schedule 2(k) 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.
(l) Patents, Trademarks and Copyrights. A list and brief description
of all trademarks, service marks, trade names, brands, copyrights and patents,
all applications for registration and registrations for such trademarks,
copyrights and patents, and all mask works, trade secrets, confidential and
proprietary information, compositions of matter, formulas, designs, proprietary
rights, know-how and processes owned by or licensed to or used by the Company
(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 2(l) hereto. The Company has furnished
to 24/7 true and complete copies of each of the foregoing and, to the Company's
knowledge, all Proprietary Assets are valid, enforceable and in full force and
effect. Except as set forth in Schedule 2(l), the Company owns, free and clear
of any and all liens, pledges, security interests, restrictions, prior
assignments, claims and encumbrances of any kind whatsoever, or is licensed to
use all the Proprietary Assets necessary for the conduct of its business as now
conducted. Except as set forth in Schedule 2(l), to the Company's knowledge, the
ownership, license or use of the Proprietary Assets by the Company has not
infringed, and does not infringe, upon the rights of any person or entity, and
the Company has not received notice from any person or entity that it does so
infringe. Except as set forth in Schedule 2(l), no rights or licenses to others
have been granted with respect to any Proprietary Assets. The Company does not
have any knowledge of any default or alleged default, or any state of facts
which with notice or lapse of time or both would constitute a default, on the
part of any party in the performance of any obligation to be performed or paid
by such party under any licenses, contracts, rights or arrangements referred to
in or submitted as a part of Schedule 2(l), or of any infringement by any person
or entity of any of the Proprietary Assets. The Company has taken, and until the
Closing Date, the Company will take all steps reasonably necessary to preserve
the Company's legal rights in, and the secrecy of, all its Proprietary Assets,
except those for which disclosure is required for legitimate business or legal
reasons. In addition, all intellectual property rights to all processes, systems
and techniques used by the Company, or which the Company currently intends to
use in its business, that were developed by any of its employees at any time
have been assigned by such employees to the Company.
(m) Contracts, Leases, Licenses and Commitments. The Company has
furnished to 24/7 true and complete copies of all of its material contracts,
leases, licenses and commitments, which are listed in Schedule 2(m) hereto,
including summaries of the terms of any unwritten commitments. Except as set
forth in Schedule 2(m):
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(i) the Company, and to the knowledge of the Company, the other
parties thereto, have complied in all material respects with such contracts,
leases, licenses and commitments, all of which are valid and enforceable;
(ii) such contracts, leases, licenses and commitments are in full
force and effect and there exists no violation or default by the Company or, to
the knowledge of the Company, any other party thereto, or any event or condition
which, with or without notice or lapse of time or both, would be a violation or
default by the Company or, to the knowledge of the Company, by any other party
thereto, 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
(iii) all of such contracts, leases, licenses and commitments have
been entered into on an arm's-length basis.
The Company is not a party, nor is its business or any of its assets subject, to
any contract, lease, license or commitment not listed in Schedule 2(m)
(including, without limitation, purchase or sales commitments, financing or
security agreements or guaranties, repurchase agreements, agency agreements,
commission agreements, employment or collective bargaining agreements, 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, the receipt or expenditure of more than $50,000 in any one year.
The Company is not engaged in any material disputes with customers or suppliers.
To the knowledge of the Company, no material customer or supplier is considering
termination or any adverse modification of its contract with the Company, and
the transactions contemplated by this Agreement will not have a material adverse
effect on the business, results of operations or financial condition of the
Company or on the ability of the parties to consummate the transactions
contemplated by this Agreement ("Company Material Adverse Effect"), or the
Company's relationship with any of its suppliers or customers.
(n) Permits; Compliance with Laws. The Company holds the governmental
material licenses, permits and authorizations listed in Schedule 2(n) hereto.
Except as set forth in Schedule 2(n), such licenses, permits and authorizations
are valid, in full force and effect and unimpaired, will be unaffected by a
transfer of all of the Capital Shares to 24/7, and constitute all of the
licenses, permits and authorizations required for the ownership or occupancy of
the Company's properties and assets and the operation of its business. The
Company's business is and has been operated in substantial compliance therewith
and with all statutes, laws, ordinances, rules and regulations (federal, state,
local and foreign) applicable to it, and all required reports and filings with
governmental and regulatory authorities have been properly and timely made.
(o) Employees. Schedule 2(o) 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 July 31, 1999. The Company does not know 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
12
years or, to the knowledge of the Company, is threatened. To the knowledge of
the Company, no key employee of the Company has indicated that he is considering
terminating his employment. The Company has complied with all material
applicable wage and hour, equal employment, safety and other legal requirements
relating to its employees.
(p) Employee Benefit Plans.
(i) Except as set forth in Schedule 2(p) hereto, neither the
Company nor any entity that would be deemed a "single employer" with the Company
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (an "ERISA
Affiliate"), maintains, sponsors, contributes to, or has or has had an
obligation to, or otherwise participated in or participates in, or in any way,
directly or indirectly, has or has had any liability with respect to, any
"employee benefit plan," as defined in Section 3(3) of ERISA, or any other
bonus, profit sharing, pension, deferred compensation, incentive, stock option,
fringe benefit, health, welfare, change in control or other plan, agreement,
policy, trust fund, or arrangement, whether written or unwritten, insured or
self-insured (each, a "Plan"). None of the Company, any ERISA Affiliate or any
of their respective predecessors has ever contributed to, contributes to, has
ever been required to contribute to, or otherwise participated in or
participates in, or in any way, directly or indirectly, has any liability with
respect to, any plan subject to Section 412 of the Code, Section 302 of ERISA or
Title IV of ERISA, including, without limitation, any "multiemployer plan"
(within the meaning of Sections (3)(37) or 4001(a)(3) of ERISA or Section 414(f)
of the Code) or any single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA). No amounts payable under the Company's 1997 Stock Option
Plan will fail to be deductible for federal income tax purposes by virtue of
Section 280G of the Code. Except as set forth in Schedule 2(p), the consummation
of the transactions contemplated by this Agreement will not give rise to any
liability of the Company for severance pay or termination pay or accelerate the
time of payment or vesting or increase the amount of compensation or benefits
due to any employee, director, Stockholder or beneficiary of the Company
(whether current, former or restricted) or their beneficiaries solely by reason
of such transactions or by reason of a termination of employment following such
transactions. No event, condition or circumstance exists that would prevent the
amendment or termination of any Plan, except as provided by law or pursuant to
the Company's 1997 Stock Option Plan. Schedule 2(p) hereto contains a list of
all Plans, benefits or perks of the Company and a description of the Company's
severance pay policy. A copy of each such Plan has previously been delivered by
the Company to 24/7.
(ii) With respect to each of the Plans on Schedule 2(p):
(A) each Plan intended to qualify under Section 401(a) of the
Code has been qualified since its inception and has received a determination
letter from the Internal Revenue Service ("IRS") to the effect that the Plan is
qualified under Section 401 of the Code, any trust maintained pursuant thereto
is exempt from federal income taxation under Section 501 of the Code and nothing
has occurred or is expected to occur through the Closing Date that caused or
could cause the loss of such qualification or exemption or the imposition of any
penalty or tax liability;
13
(B) all payments required by any Plan, any collective
bargaining agreement, or by law (including, without limitation, all
contributions, insurance premiums or intercompany charges) with respect to all
periods through the Closing Date shall have been made prior to the Closing (on a
pro rata basis where such payments are otherwise discretionary at year end) or
provided for by the Company, as applicable, by full accruals as if all targets
required by such Plan had been or will be met at maximum levels on its financial
statements;
(C) no claim, lawsuit, arbitration or other action has been
threatened, asserted, instituted or anticipated against the Plans (other than
non-material routine claims for benefits and appeals of such claims), any
trustee or fiduciaries thereof, the Company, any ERISA Affiliate, any director,
officer or employee thereof, or any of the assets of any trust of the Plans;
(D) each Plan complies in all material respects and has been
maintained and administered at all times in all material respects in accordance
with its terms and all applicable laws, rules and regulations, including,
without limitation, ERISA and the Code;
(E) no "prohibited transaction," within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred or is expected
to occur with respect to each Plan (and the consummation of the transactions
contemplated by this Agreement will not constitute or directly or indirectly
result in a "prohibited transaction");
(F) no Plan is or is expected to be under audit or
investigation by the IRS, Department of Labor or any other governmental
authority and no such completed audit, if any, has resulted in the imposition of
any tax or penalty; and
(G) with respect to each Plan that is funded mostly or
partially through an insurance policy, neither the Company nor any ERISA
Affiliate has any liability in the nature of retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring on or before the Closing.
(iii) Neither the Company nor any ERISA Affiliate maintains,
contributes to or in any way provides for any benefits of any kind whatsoever
(other than under Section 4980B of the Code, the Federal Social Security Act or
a plan qualified under Section 401(a) of the Code) to any current or future
retiree or terminee. Neither the Company nor any ERISA Affiliate has any
unfunded liabilities pursuant to any Plan that is not intended to be qualified
under Section 401(a) of the Code.
(q) Insurance. Schedule 2(q) hereto sets forth the Company's general
liability, fire and casualty insurance policies and liability insurance, all of
which provide coverage in such amounts as is customary in the industry for a
similar company. Such policies are in full force and
14
effect, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow the Company to replace any of its properties that might be
damaged or destroyed.
(r) Litigation. Schedule 2(r) hereto contains a complete and correct
list of all actions, suits, proceedings, claims or investigations pending or, to
the knowledge of the Company, threatened against the Company or any of its
assets or, in connection with the Company's business, any of the Company's
officers, directors or employees before any court, arbitrator or governmental
entity. Each item set forth in Schedule 2(r) represents an amount that has
resulted solely from a dispute with a vendor or customer of the Company over
nonpayment or late payment by the Company, and all can be settled within 45 days
following the Effective Time for the aggregate amount shown under "Claim
Balance" set forth in Schedule 2(r). Except as set forth in Schedule 2(r)
hereto, neither the Company nor, in connection with the Company's business, any
of the Company's officers, directors or employees is subject or party to any
judgment, order, decree or other direction of, or stipulation with, any court or
other governmental authority or tribunal, or in violation of any other legal
requirements, and the Company does not know of any reasonable basis for a claim
that such a violation exists. The Company is not aware of any proposed legal
requirement that might adversely affect in any material respect the operation or
prospects of the Company's business. As of the date hereof, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of the Stockholders that seek to prevent
or challenge, or seek damages in connection with, the transactions contemplated
by any of the Company Documents or otherwise arising out of or in any way
related to any of the Company Documents.
(s) 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"), except where the failure to comply with
the Environmental Laws would not reasonably be expected to have a Company
Material Adverse Effect. To the Company's knowledge, no event has occurred or
condition exists 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, any of the Environmental Laws. To the Company's
knowledge, no real property owned, leased, occupied or used by the Company
contains any underground storage tanks, asbestos, polychlorinated biphenyls,
hazardous wastes or other hazardous substances, as such terms are defined in the
Environmental Laws. To the Company's 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, hazardous 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 or otherwise in
compliance with the Environmental Laws.
(t) Restrictions on Business Activities. Other than this Agreement,
there is no material agreement, judgment, injunction, order or decree binding
upon the Company which has or could reasonably be expected to have the effect of
prohibiting or impairing the business of the Company as currently conducted.
15
(u) Transactions with Affiliates. Except as set forth in Schedule 2(u)
hereto and except for ordinary dealings with its employees and its Stockholders,
since December 31, 1998, the Company has had no direct or indirect dealings with
any Stockholder or with any key employee of the Company or with any of their
affiliates, associates or relatives. Except as set forth in Schedule 2(u) and
except for employment arrangements with its employees, the Company has no
obligation to or claim against any Stockholder or any key employee of the
Company or any of their affiliates, associates or relatives, and no such person
or entity has any obligation to or claim against the Company. Schedule 2(u)
reasonably describes the nature and extent of any material products, services or
benefits provided 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. Except as set forth in Schedule 2(u), none of the Stockholders, any
key employee of the Company or any of their affiliates, associates or relatives
has any material direct or indirect interest of any kind in any business or
entity which is competitive with the Company.
(v) 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 complete and accurate records of all
meetings and accurately reflect all other corporate action of the Stockholders
and Board of Directors of the Company.
(w) 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.
(x) Officers and Directors, Bank Accounts, etc. Schedule 2(x) 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 attorney from
the Company.
(y) Year 2000. The Company has (i) initiated a review and assessment of
all areas within its business and operations (including those affected by
suppliers, vendors and customers) that could be adversely affected by the "Year
2000 Problem" (that is, the risk that computer applications used by the Company
or any of the suppliers, vendors and customers of the Company may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999); (ii) developed a plan and
timeline (the "Y2K Plan") for addressing the Year 2000 Problem on a timely
basis, the cost of which plan, to the Company's knowledge, will not have a
Company Material Adverse Effect; and (iii) to date, implemented the Y2K Plan in
accordance with the related timetable. Based on the foregoing, the Company
represents that all computer applications used by the Company or (based upon the
lack of negative responses to the Company's inquiries received through July 31,
1999) any of the suppliers, vendors and customers of the Company that are
material to its business or operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before
16
and after January 1, 2000 (that is, to be "Year 2000 Compliant"), except to the
extent that a failure to do so could not reasonably be expected to have a
Company Material Adverse Effect. The Company has provided 24/7 with a copy of
such Y2K Plan, timetable and assessment.
(z) Disclosure. No representation, warranty or other written statement
by the Company herein or in any of the other Company 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.
(aa) Legends.
(i) The Company understands that the certificates evidencing the
Merger Consideration will bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OR
SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER."
(ii) The certificates evidencing the Merger Consideration shall
not be required to bear such legend if an opinion of counsel reasonably
satisfactory to 24/7 is delivered to 24/7 to the effect that neither the legend
nor the restrictions on transfer contained in this Agreement are required to
insure compliance with the Securities Act. 24/7 will bear the reasonable costs
and expenses in connection with such opinion where such opinion relates to
compliance with Rule 144 under the Securities Act. Whenever, pursuant to the
preceding sentence, any certificate 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 legend;
provided, however, a new certificate not bearing the foregoing legend shall be
issued to the holders upon the effectiveness of a registration statement
covering the resale of the 24/7 Common Stock.
(bb) Continuity of Business Enterprise.
The Company operates at least one significant historic business line,
or owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. ss. 1.368-1(d).
17
3. Representations and Warranties of 24/7. 24/7 and the Subsidiary each
hereby represents and warrants to the Company that:
(a) Organization and Qualification; Organizational Documents.
(i) 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 the requisite corporate power and corporate authority to own,
lease and operate its assets and properties and to conduct its business as it is
now being conducted, except where the failure to be so organized, existing and
in good standing or to have such power, authority and approvals would not have a
material adverse effect on the business, results of operations or financial
condition of 24/7 and its subsidiaries, taken as a whole, or on the ability of
the parties to consummate the transactions contemplated by this Agreement (a
"24/7 Material Adverse Effect"). Each of 24/7 and the Subsidiary is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction in which the conduct of its business or the
ownership, leasing or operation of its assets and properties requires such
qualification, except for such failures to be so duly qualified or licensed and
in good standing that would not have a 24/7 Material Adverse Effect.
(ii) 24/7 has heretofore furnished to the Company a complete and
correct copy of 24/7's and the Subsidiary's Certificate of Incorporation
(certified by the Secretary of State of the State of Delaware) and By-Laws, each
as amended to date. Such Certificates of Incorporation and By-Laws are in full
force and effect. Neither 24/7 nor the Subsidiary is in violation of any of the
provisions of its Certificate of Incorporation or By-Laws.
(b) Authority Relative to this Agreement.
(i) Each of 24/7 and the Subsidiary has all necessary rights,
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby, as
well as all other agreements, certificates and documents executed or delivered,
or to be executed or delivered, by 24/7 and/or the Subsidiary in connection
herewith, including the agreements listed in Sections 6(d) and 6(e) hereof
(collectively, with this Agreement, the "24/7 Documents"). The execution and
delivery of this Agreement by 24/7 and the Subsidiary and the consummation by
24/7 and the Subsidiary of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of 24/7 and
the Subsidiary, and no other corporate proceedings on the part of 24/7 or the
Subsidiary are necessary to authorize this Agreement or to consummate the
transactions so contemplated hereby. Each of the 24/7 Documents to which the
Company and/or the Subsidiary is, or will be, a party has been, or will be duly
and validly executed and delivered by 24/7 and/or the Subsidiary, and, assuming
the due authorization, execution and delivery of the 24/7 Documents by the
Company and/or the Stockholders, as applicable, are (or when executed and
delivered will be) legal, valid and binding obligations of 24/7 and/or the
Subsidiary, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether asserted in a proceeding in equity or at law.
18
(ii) The Board of Directors of 24/7 (and the Board of Directors of
the Subsidiary, as necessary) (A) has declared that this Agreement, the Merger
and the other transactions contemplated hereby are advisable and in the best
interests of the stockholders of 24/7; (B) has authorized, approved and adopted
this Agreement, the Merger and the other transactions contemplated hereby; and
(C) has taken appropriate action, pursuant to Delaware Law and New Jersey Law,
to cause the Merger to become effective at the Effective Time.
(c) No Conflict, Required Filings and Consents.
(i) The execution and delivery of this Agreement by 24/7 and the
Subsidiary do not, and the performance of this Agreement by 24/7 and the
Subsidiary will not, (A) conflict with or violate the Certificate of
Incorporation or By-Laws of 24/7 or the Certificate of Incorporation or By-Laws
of the Subsidiary; (B) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to 24/7 or the Subsidiary or by which any
of 24/7's or the Subsidiary's respective properties is bound or affected; or (C)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or impair 24/7's or the
Subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of 24/7 or the Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which 24/7 or the Subsidiary is a party or by
which 24/7 or the Subsidiary or any of their respective properties is bound or
affected, except in any such case for any such breaches, defaults or other
occurrences that would not have a 24/7 Material Adverse Effect.
(ii) The execution, delivery and performance of this Agreement by
24/7 and the Subsidiary will not require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (A) for applicable requirements, if any, of the Securities
Act, the Exchange Act, state blue sky laws and the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended; (B) for the filing of the Certificate of
Merger; and (C) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications would not
have a 24/7 Material Adverse Effect.
(d) Capitalization.
(i) The authorized capital stock of 24/7 as of June 30, 1999
consisted of: (1) 70,000,000 shares of common stock, par value $.01 per share,
of which 20,207,872 shares were issued and outstanding, 1,562,577 shares will be
issuable to employees, officers and directors of 24/7 under stock options that
have been granted pursuant to 24/7's 1998 Stock Incentive Plan, and 3,937,423
shares have been reserved for issuance pursuant to future grants under 24/7's
1998 Stock Incentive Plan; and (2) 10,000,000 shares of preferred stock, par
value $.01 per share, none of which were issued and outstanding. 24/7 also has
850,544 shares of common stock issuable upon exercise of outstanding warrants at
June 30, 1999. The authorized capital stock of the Subsidiary consists of 1,000
shares of common stock, par value $.01 per share, 100 shares of which are issued
and outstanding, and wholly owned by 24/7.
19
(ii) All of the outstanding shares of 24/7's and the Subsidiary's
respective capital stock have been duly authorized and validly issued and are
fully paid and non-assessable. The shares of 24/7 Common Stock to be issued in
the Merger have been duly authorized and, when so issued in accordance with the
terms hereof, such shares will be validly issued, fully paid and non-assessable.
(iii) Except as set forth in this Section 3(d), there are no
outstanding shares of capital stock or other equity or debt securities of 24/7.
Except as set forth in this Section 3(d) and except for those options granted
pursuant to 24/7's 1998 Stock Incentive Plan, there are no existing options,
warrants, calls, commitments or other agreements requiring the issuance or sale
of any additional shares of capital stock or other equity or debt securities of
24/7 and no shares of capital stock or other equity or debt securities of 24/7
are reserved for issuance for any purpose.
(e) SEC Filings, Financial Statements.
(i) 24/7 has filed all forms, reports and documents required to be
filed by it with the SEC since September 30, 1998. 24/7 has heretofore delivered
to the Company, in the form filed with the SEC, (A) its Annual Report on Form
10-K for the year ended December 31, 1998, (B) its Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999, (C) all proxy statements relating to
24/7's meetings of stockholders (whether annual or special) held since December
31, 1998, (D) all other reports or registration statements (other than Reports
on Form 10-Q and Reports on Form 3, 4 or 5 filed on behalf of affiliates of
24/7) filed by 24/7 with the SEC since September 30, 1998 and (E) all amendments
and supplements to all such reports and registration statements filed by 24/7
with the SEC (collectively, the "24/7 SEC Reports"). The 24/7 SEC Reports (1)
were prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (2) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(ii) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the 24/7 SEC Reports was
prepared in accordance with GAAP (except as may be indicated in the notes
thereto) and each fairly presents in all material respects the consolidated
financial position of 24/7 and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments and such statements
do not contain notes thereto.
(iii) 24/7 has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by 24/7 with the SEC pursuant
to the Securities Act or the Exchange Act.
20
(f) No Adverse Change. Since March 31, 1999, 24/7 has conducted its
business in the ordinary course and there has not occurred any:
(i) amendments or changes to the Certificate of Incorporation or
By-Laws of 24/7;
(ii) material adverse change in the business, properties, assets,
liabilities, commitments, earnings or financial condition of 24/7;
(iii) damage or destruction to property or assets of 24/7
resulting in a loss or cost to 24/7 of more than $50,000 in the aggregate,
whether or not covered by insurance; or
(iv) act or omission which, if taken or omitted after the date of
this Agreement and before the Closing, would cause the condition set forth in
Section 7(a) not to be fulfilled.
(g) Restrictions on Business Activities. Other than this Agreement,
there is no material agreement, judgment, injunction, order or decree binding
upon 24/7 or the Subsidiary which has or could reasonably be expected to have
the effect of prohibiting or impairing any material business of 24/7 or the
Subsidiary as currently conducted.
(h) Litigation. Except as disclosed in the 24/7 SEC Reports filed prior
to the date hereof, there are no actions, suits, proceedings, claims or
investigations pending or, to the knowledge of 24/7 and the Subsidiary,
threatened against 24/7 or the Subsidiary or any of their respective assets
before any court, arbitrator or governmental entity that is reasonably likely to
have a 24/7 Material Adverse Effect. There are no actions, suits or proceedings
pending or, to the knowledge of 24/7 and the Subsidiary, threatened against 24/7
or the Subsidiary that seek to prevent or challenge, or seek damages in
connection with, the transactions contemplated by any of the 24/7 Documents or
otherwise arising out of or in any way related to any of the 24/7 Documents.
(i) Disclosure. No representation, warranty or other written statement
by 24/7 and/or the Subsidiary herein or in any of the other 24/7 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
not misleading.
(j) Ownership of the Subsidiary; No Prior Activities. The Subsidiary is
a direct, wholly-owned subsidiary of 24/7 and was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement. Except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement and except for
this Agreement and any other agreements or arrangements contemplated by this
Agreement, the Subsidiary has not and will not have incurred, directly or
indirectly, through any subsidiary or affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person or entity which could
adversely affect the ability of 24/7 to consummate the transactions contemplated
hereby.
21
(k) Continuity of Business Enterprise.
It is the present intention of 24/7 to continue at least one
significant historic business line of the Company, or to use at least a
significant portion of the Company's historic business assets in a business, in
each case within the meaning of Reg. ss. 1.368-1(d).
4. Covenants of the Company. The Company covenants and agrees that
between the date hereof and the Effective Time:
(a) Actions. The Company will not take any action that would cause any
of the representations and warranties made by it in any of the Company 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 advisors 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 work
papers of the Company's accountants relating to the Unaudited Financials, and
the Company shall furnish 24/7 with such information and copies of such
documents as 24/7 may reasonably request. The Company shall promptly furnish to
24/7 all financial statements of the Company that are prepared in the ordinary
course 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
in all material respects in the ordinary course, consistent with the present
conduct of its business, and the Company shall use commercially reasonable
efforts to maintain, preserve and protect the assets and goodwill of the
Company. Without limiting the generality of the foregoing, the Company shall
not, without the prior written consent of 24/7, take or commit to take any of
following actions:
(i) except as disclosed on Schedule 4(c), amend its By-Laws or
Certificate of Incorporation;
(ii) issue any additional shares of capital stock, except in
connection with the exercise of outstanding stock options or warrants or the
conversion of outstanding securities 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 equity or debt securities;
(iii) declare or pay any dividends or make any other distribution
in cash, property or securities on its capital stock;
(iv) repurchase or redeem any shares of its capital stock;
(v) incur, or perform, pay or otherwise discharge, any material
obligation or liability (absolute or contingent), except for obligations and
liabilities incurred in the ordinary course of business consistent with past
practice;
22
(vi) enter into any employment agreement with or increase the
compensation or benefits of any of its officers, directors or employees, or
grant any severance pay or termination or establish, adopt or enter into any
Plan;
(vii) sell, lease, transfer or otherwise dispose of, or acquire,
any material properties or assets, tangible or intangible, other than in the
ordinary course of business;
(viii) make any material changes in its customary method of
operations, including marketing, selling and pricing policies and maintenance of
business premises, fixtures, furniture and equipment;
(ix) modify, amend or cancel any of its existing leases or enter
into any material contracts, agreements, leases or understandings other than in
the ordinary course of business or enter into any loan agreements;
(x) make any material investments other than in certificates of
deposit or short-term commercial paper; or
(xi) change any of the accounting principles or practices used by
it, except as required by GAAP.
(d) Notification of Certain Matters. The Company shall give prompt
notice to 24/7 of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in any of the Company Documents to be
untrue or inaccurate and (ii) any failure of the Company materially to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 4(d) shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
(e) Termination of Agreements. The Company 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 any Stockholder and the Company to
terminate and be of no further force and effect upon consummation of the
Closing. A list of such agreements is set forth on Schedule 4(e) hereto.
(f) Further Action. Upon the terms and subject to the conditions
hereof, the Company shall use all commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings.
(g) Public Announcements. The Company shall consult with 24/7 before
issuing any press release or otherwise making any public statement with respect
to the Merger and shall not
23
issue any such press release or make any such public statement, except as may be
required by law, without the prior written consent of 24/7, which may not be
unreasonably withheld or delayed.
(h) Government Compliance. The Company agrees promptly to effect all
necessary registrations, filings, applications and submissions of information
required or requested by governmental authorities.
5. Covenants of 24/7. 24/7 and the Subsidiary covenant and agree that
between the date hereof and the Effective Time:
(a) Actions. Neither 24/7 nor the Subsidiary will take any action that
would cause any of the representations and warranties made by it in any of the
24/7 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) Notification of Certain Matters. 24/7 shall give prompt notice to
the Company of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause any
representation or warranty contained in any of the 24/7 Documents to be untrue
or inaccurate and (ii) any failure of 24/7 or the Subsidiary materially to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5(b) shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
(c) Further Action. Upon the terms and subject to the conditions
hereof, 24/7 and the Subsidiary shall use all commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement and to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings.
(d) Public Announcements. 24/7 and the Subsidiary shall consult with
the Company before issuing any press release or otherwise making any public
statement with respect to the Merger and shall not issue any such press release
or make any such public statement, except as may be required by law, without the
prior written consent of the Company, which may not be unreasonably withheld or
delayed.
(e) Government Compliance. 24/7 and the Subsidiary agree promptly to
effect all necessary registrations, filings, applications and submissions of
information required or requested by governmental authorities.
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 the 24/7 Documents are subject to the fulfillment, at or before
the Effective Time, of each of the following conditions, any of which may be
waived by 24/7 and the Subsidiary in writing, and the Company shall use
commercially reasonable efforts to cause such conditions to be fulfilled:
24
(a) Representations and Warranties. Each of the representations and
warranties of the Company in the Company Documents shall be true and correct in
all material respects on and as of the Effective Time as if made on and as of
the Effective Time, except to the extent that any such representation or
warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct in all material respects as of such
date.
(b) Performance by the Company. Performance by the Company. The Company
shall have performed and complied in all material respects with all agreements,
covenants and conditions required by the Company Documents to be performed or
complied with by the Company at or before the Effective Time.
(c) 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
Sections 6(a) and 6(b).
(d) Employment Agreement. Xxxx Xxxxxxx and Xxxx Xxxxxx shall have each
entered into an Employment Agreement with 24/7 in the form attached hereto as
Exhibit B and a Non-Competition and Non-Disclosure Agreement with 24/7 in the
form attached hereto as Exhibit C (collectively, the "Employment Agreement") and
Hartley Singer shall have entered into a Non-Competition and Non-Disclosure
Agreement with 24/7 in the form attached hereto as Exhibit C (the
"Non-Disclosure Agreements").
(e) Registration Rights Agreement. Each of the Stockholders shall have
entered into a Registration Rights Agreement with 24/7 in the form attached
hereto as Exhibit D (the "Registration Rights Agreement").
(f) Opinion of Counsel to the Company. The Company shall have delivered
to 24/7 an opinion of Xxxxxx Xxxx & Xxxxxx LLP, counsel to the Company, dated
the Closing Date, substantially in the form attached hereto as Exhibit E.
(g) Consents. The Company shall have obtained, or to the reasonable
satisfaction of 24/7 obviated the need to obtain, all consents, approvals and
waivers from governmental and regulatory authorities and third parties necessary
for the execution, delivery and performance of the Company Documents and the
transactions contemplated thereby, without any material cost or adverse
consequences to the Company.
(h) Litigation. No action or proceeding shall be pending or threatened
before any court, tribunal or governmental entity, and no claim or demand shall
have been made against 24/7, the Subsidiary, any Stockholder or the Company,
seeking to restrain or prohibit or to obtain damages or other relief in
connection with the consummation of the transactions contemplated by any of the
Company Documents, or which might materially adversely affect the business of
the Company, which in the reasonably exercised opinion of 24/7 makes it
inadvisable to consummate such transactions.
25
(i) Proceedings. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated hereby or incidental hereto
and all other related legal matters shall have been reasonably satisfactory to
and approved by counsel for 24/7 and such counsel shall have been furnished with
such certificates, instruments and documents as it shall have reasonably
requested, including, but not limited to, a certificate of the Company, dated
the Closing Date, signed by the Chief Executive Officer of the Company, with
respect to the Company's Certificate of Incorporation, By-Laws, Board of
Directors' and Stockholders' 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 Company Document
delivered on the Closing Date.
(j) No Violation. There shall not have been any action taken, or any
statute, rule, regulation or order enacted, promulgated, issued or deemed
applicable to the Merger by any federal or state government or governmental or
regulatory authority or court, which would: (i) prohibit the Surviving
Corporation's ownership or operation of all or a material portion of the
Company's business or assets, or compel the Surviving Corporation to dispose of
or hold separate all or a material portion of the Company's business or assets,
as a result of the Merger; (ii) render any party hereto 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.
(k) Material Adverse Change. Since the date of this Agreement, there
shall have been no change, occurrence or circumstance in the business, results
of operations or financial condition of the Company having or reasonably likely
to have a Company Material Adverse Effect.
(l) Release. 24/7 shall have received a release signed by each of the
Stockholders of any and all claims (known or unknown, fixed or contingent, or
otherwise) against the Company in the form of Exhibit F (the "Release").
7. Conditions Precedent to Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated by the Company
Documents are subject to the fulfillment, at or before the Effective Time, of
each of the following conditions, any of which may be waived by the Company in
writing, and 24/7 and the Subsidiary shall use commercially reasonable efforts
to cause such conditions to be fulfilled:
(a) Representations and Warranties. Each of the representations and
warranties of 24/7 and/or the Subsidiary in the 24/7 Documents shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of the Effective Time, except to the extent that any such representation
or warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct in all material respects as of such
date.
26
(b) Performance by 24/7 and the Subsidiary. 24/7 and the Subsidiary
shall have performed and complied in all material respects with all agreements,
covenants and conditions required by the 24/7 Documents to be performed or
complied with by 24/7 and/or the Subsidiary at or before the Effective Time.
(c) Certificate. The Company shall have received a certificate executed
by 24/7, dated the Closing Date, certifying, in such detail as the Company may
reasonably request, as to the fulfillment of the conditions set forth in
Sections 7(a) and 7(b).
(d) Employment Agreement. 24/7 shall have entered into the Employment
Agreement and the Non-Disclosure Agreements.
(e) Registration Rights Agreement. 24/7 shall have entered into the
Registration Rights Agreement.
(f) Opinion of Counsel to 24/7 and the Subsidiary. 24/7 and the
Subsidiary shall have delivered to the Company an opinion of Proskauer Rose LLP,
counsel to 24/7 and the Subsidiary, dated the Closing Date, substantially in the
form attached hereto as Exhibit G.
(g) Litigation. No action or proceeding shall be pending or threatened
before any court, tribunal or governmental entity, and no claim or demand shall
have been made against 24/7, the Subsidiary, any Stockholder or the Company,
seeking to restrain or prohibit or to obtain damages or other relief in
connection with the consummation of the transactions contemplated by any of the
24/7 Documents, or which might materially adversely affect the business of 24/7,
which in the reasonably exercised opinion of the Company makes it inadvisable to
consummate such transactions.
(h) Material Adverse Change. Since the date of this Agreement, there
shall have been no change, occurrence or circumstance in the business, results
of operations or financial condition of 24/7 having or reasonably likely to have
a 24/7 Material Adverse Effect.
(i) Consents. 24/7 and/or the Subsidiary shall have obtained, or to the
reasonable satisfaction of the Company obviated the need to obtain, all
consents, approvals and waivers from governmental and regulatory authorities and
third parties necessary for the execution, delivery and performance of the 24/7
Documents and the transactions contemplated thereby, without any material cost
or adverse consequence to 24/7 or the Subsidiary.
(j) Proceedings. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated hereby or incidental hereto
and all other related legal matters shall have been reasonably satisfactory to
and approved by counsel for the Company and such counsel shall have been
furnished with such certificates, instruments and documents as it shall have
reasonably requested.
(k) No Violation. There shall not have been any action taken, or any
statute, rule, regulation or order enacted, promulgated, issued or deemed
applicable to the Merger by any federal
27
or state governmental or regulatory authority or court, which would (i) render
any party hereto unable to consummate the Merger or (ii) make such consummation
illegal.
(l) Tax Certificate. The Company shall have received a certificate from
24/7, dated the Closing Date, signed by the Chief Executive Officer of 24/7, as
to the treatment of the Merger as a tax-free reorganization qualifying under
Section 368(a)(1)(A) by virtue of Section 368(a)(2)(E) of the Code.
8. Closing Deliveries.
(a) Deliveries of the Company. At the Closing, the Company shall
deliver, or shall cause to be delivered, to 24/7 and the Subsidiary the
following:
(i) Certificates representing the Capital Shares, together with
properly executed stock powers and any required stock transfer tax stamps
affixed thereto and all taxes on such transfer, if any, paid in full, all at the
expense of the holders of such Capital Shares;
(ii) The Employment Agreements and the Non-Disclosure Agreements;
(iii) The Registration Rights Agreement;
(iv) The opinion of Xxxxxx Xxxx & Xxxxxx LLP, counsel to the
Company;
(v) The certificates referred to in Sections 6(c) and 6(i), duly
executed;
(vi) The Release;
(vii) The Escrow Indemnity Agreement;
(viii) The minute books of the Company;
(ix) Duly executed resignations of all directors, officers and
fiduciaries of the Company; and
(x) A capitalization table, adjusted to show the transactions
consummated at Closing.
(b) 24/7 and Subsidiary Deliveries. At the Closing, 24/7 and the
Subsidiary shall deliver, or shall cause to be delivered, to the Company and the
Stockholders, as the case may be, the following:
(i) Certificates representing shares of 24/7 Common Stock in
payment of the Merger Consideration, registered in the name of each of the
holders of Capital Shares, subject to Section 1(j);
28
(ii) The Employment Agreement and the Non-Disclosure Agreements;
(iii) The Registration Rights Agreement;
(iv) The opinion of Proskauer Rose LLP, counsel to 24/7 and the
Subsidiary;
(v) The Escrow Indemnity Agreement; and
(vi) The certificates referred to in Sections 7(c) and 7(l)
hereof, duly executed.
9. Restrictive Covenant; Confidentiality.
(i) The Company and the Stockholders shall not use or divulge any
trade secrets, customer or supplier lists, pricing information, marketing
arrangements or strategies, business plans, internal performance statistics,
training manuals or other information concerning 24/7 or its affiliates that is
competitively sensitive or confidential; provided, however, that this
prohibition shall not apply to any information that (A) is publicly available as
of the date hereof, (B) becomes publicly available other than as a result of
prohibited disclosure by the Company or any of the Stockholders, (C) is
disclosed to the Company or any of the Stockholders, as applicable, by any
person or entity that is not subject to any confidentiality restriction imposed
by 24/7, (D) that the Company or any of the Stockholders, as applicable,
develops independently or (E) the Company or any of the Stockholders is required
to disclose by law or by order of any court of competent jurisdiction, but, in
the case of (E), the Company or such Stockholder shall first give 24/7 notice of
such law or court order and an opportunity to object, if permitted by such law
or court order. Because the breach or attempted or threatened breach of this
restrictive covenant will result in immediate and irreparable injury to 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
Section 9 are in addition to and independent of any agreements or covenants
contained in any employment, consulting or other agreement between 24/7 or the
Company and any Stockholder.
(ii) To the extent that any of the information furnished to the
Company or any of the Stockholders would constitute material, nonpublic
information for purposes of the Exchange Act, the Company and the Stockholders
covenant that they 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 or until the next Exchange Act
filing that 24/7 makes with the SEC, and that the Company and the Stockholders
shall inform their respective agents and representatives, who have been given
access to such material, nonpublic information, of such requirements. The
obligations in this Section 9 shall survive termination of this Agreement.
10. Brokers. Each party represents to the others that it has had no
dealings with any broker or finder in connection with the transactions
contemplated by this Agreement.
29
11. Indemnification by the Stockholders of the Company. To the extent
solely of the shares of 24/7 Common Stock deposited in the Escrow Indemnity
Account, each Stockholder of the Company shall severally, and not jointly, and
only in proportion to such Stockholder's pro-rata share of the Merger
Consideration to be received by all of the Stockholders, 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) (collectively,
"Losses"), arising out of or in connection with any of the following: (i) any
misrepresentation or breach of any warranty made by the Company in any of the
Company Documents; provided, however, that with respect to the representations
and warranties in Section 2(b)(i), each Stockholder shall be solely and entirely
responsible for such misrepresentations or breaches that relate to such
Stockholder's ownership of his or its Shares as set forth in Schedule 2(b) (a
"Stockholder Breach"); (ii) any breach or nonfulfillment of any covenant or
agreement made by the Company in any of the Company Documents; or (iii) the
claims of any broker or finder engaged by the Company.
12. Indemnification by 24/7. 24/7 shall indemnify, defend and hold
harmless the Stockholders, promptly upon demand at any time and from time to
time, against any and all Losses arising out of or in connection with any of the
following: (i) any misrepresentation or breach of any warranty made by 24/7 or
the Subsidiary in this Agreement; (ii) any breach or nonfulfillment of any
covenant or agreement made by 24/7 or the Subsidiary in this Agreement; or (iii)
the claims of any broker or finder engaged by 24/7 or the Subsidiary.
13. Further Provisions Regarding Indemnification.
(a) Survival. All representations, warranties, indemnities, covenants
and agreements made by the Company or the Stockholders in the Company Documents
or by 24/7 or the Subsidiary in this Agreement shall survive the Closing until
April 30, 2001, notwithstanding any examination or investigation made by or for
any party.
(b) Limitations. Notwithstanding the foregoing,
(i) the indemnification provided for in Section 11 above shall be
paid solely out of the shares of 24/7 Common Stock held in the Escrow Indemnity
Account in accordance with the Escrow Indemnity Agreement and the
indemnification in Sections 11 and 12, as the case may be, shall be the
exclusive remedy of the Stockholders and of 24/7 and its affiliates with respect
to claims for Losses. Without limiting the foregoing, no claim may be made other
than under Section 11 against the Stockholders for a breach of their fiduciary
duties as a director or officer of the Company if such claim would constitute an
indemnifiable Loss under Section 11;
(ii) the indemnification provided for in Section 11 above shall
not be required unless and until, at the time of any such determination, the
total amount of Losses otherwise subject to indemnification under Section 11
exceeds 1% of the aggregate value of the 24/7 Common Stock to be received by the
Stockholders in the Merger (including the shares deposited in the Escrow
Indemnity Account), determined by reference to the average of the closing prices
of the 24/7
30
Common Stock on the five trading days preceding the date of any such
determination, in which event the indemnified party or parties will be entitled
to indemnification for the amount of their Losses in excess of such 1%;
provided, however, that all Losses arising out of or in connection with any
Stockholder Breach may be asserted without regard to, and shall not be applied
towards, such 1%;
(iii) neither any Stockholder of the Company, on the one hand, nor
24/7 or any of its affiliates, on the other, shall be entitled to
indemnification for Losses arising out of matters referred to in Section 11 or
12, as applicable, unless it shall have given written notice to the indemnifying
party, setting forth its claim for indemnification in reasonable detail, within
the period from the Closing Date until April 30, 2001;
(iv) an indemnified party shall promptly give written notice to
the indemnifying party after the indemnified party has knowledge that any legal
proceeding has been instituted or any claim has been asserted in respect of
which indemnification may be sought under the provisions of Sections 11 or 12.
If the indemnifying party, within 30 days after the indemnified party has given
such notice (or within such shorter period of time as an answer or other
responsive motion may be required), shall have acknowledged in writing his or
its obligation to indemnify, then the indemnifying party shall have the right to
control the defense of such claim or proceeding, and the 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; and
(v) the indemnified party shall be kept fully informed by the
indemnifying party of such action, suit or proceeding at all stages thereof,
whether or not he or it is represented by counsel. The indemnifying party shall,
at the indemnifying party's expense, make available to the indemnified party and
its attorneys and accountants all books and records of the indemnifying party
relating to such action, suit or proceeding, and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
(c) Escrow Indemnity Procedures. In accordance with the provisions of
the Escrow Indemnity Agreement, 24/7 shall be entitled, from time to time, to
receive from the Escrow Agent the number of shares of 24/7 Common Stock having a
value equal to the Losses of 24/7 as to which 24/7 is entitled to be indemnified
pursuant to Section 11 above, all as more fully set forth in the Escrow
Indemnity Agreement. For purposes of this Section 13(c) and the Escrow Indemnity
Agreement, the value of 24/7 Common Stock to be delivered to cover Losses shall
be the average of the closing prices of the 24/7 Common Stock on the five
trading days preceding the delivery of the shares to 24/7 in accordance with the
provisions of the Escrow Indemnity Agreement.
(i) Non-Management Stockholders' Indemnity Shares. Pursuant to the
Escrow Indemnity Agreement, at the Closing, 24/7 shall place in the Escrow
Indemnity Account, on behalf of each of 360 Capital Corporation, Xxxx Xxxxxxxx
and Xxxxxx Xxxxx (the "Non-Management Stockholders"), the number of shares of
24/7 Common Stock set forth below:
31
(1) 360 Capital Corporation 34,110 shares
(2) Xxxx Xxxxxxxx 12,489 shares
(3) Xxxxxx Xxxxx 12,489 shares
(ii) Management Stockholders' Indemnity Shares. Pursuant to the
Escrow Indemnity Agreement, at the Closing, 24/7 shall place in the Escrow
Indemnity Account, on behalf of each of Xxxx Xxxxxxx, Xxxx Xxxxxx and Xxxx Xxxxx
(the "Management Stockholders"), the number of shares of 24/7 Common Stock set
forth below:
(1) Xxxx Xxxxxxx 185,939 shares
(2) Xxxx Xxxxxx 9,185 shares
(3) Xxxx Xxxxx 123,959 shares
(iii) Release of Non-Management Stockholders' Indemnity Shares.
Subject to Section 13(c)(v) below and pursuant to the Escrow Indemnity
Agreement, all of the Non-Management Stockholders' shares held in the Escrow
Indemnity Account on the first anniversary of the Closing Date shall be released
to the Non-Management Stockholders from the Escrow Indemnity Account.
(iv) Release of Management Stockholders' Indemnity Shares. Subject
to Section 13(c)(v) below, the Management Stockholders' shares held in the
Escrow Indemnity Account shall be released from the Escrow Indemnity Account in
accordance with the Escrow Indemnity Agreement.
(v) Delivery of Notice. 24/7 shall deliver such written notices to
such parties and at such times as required by the provisions of the Escrow
Indemnity Agreement, and the releases of shares provided for in Sections
13(c)(iii) and (iv) shall be governed by the provisions of the Escrow Indemnity
Agreement. 24/7 and the Company agree to promptly deliver a written notice to
the Management Stockholders and the Non-Management Stockholders upon any
determination that a claim for Losses under Section 11 or 12 is reasonably
likely to exist.
(d) Indemnification of Directors and Officers of the Company. Except
with respect to the contemplated reincorporation of the Surviving Corporation in
the State of Delaware, 24/7 (A) will not take or knowingly permit to be taken
any action to alter or impair any exculpatory or indemnification provisions now
existing in the certificate of incorporation or bylaws of the Company for the
benefit of any individual who served as a director or officer of the Company at
any
32
time prior to the Effective Time, and (B) shall cause the Surviving Corporation
to honor and fulfill such provisions until the date which is two years from the
Effective Time; provided, however, in the event any claim is commenced within
such two-year period, such indemnification provisions shall continue in effect
until the final disposition thereof.
14. Exchange Option. If, at any time within three years after the
Closing Date, 24/7 determines to proceed with a public offering of securities of
a subsidiary of 24/7 that is then operating the business of the Company, 24/7
shall make a written offer to each of the Stockholders, a reasonable time prior
to the closing of such public offering, to exchange shares of 24/7 Common Stock
then owned by each such Stockholder for shares of such subsidiary. Such offer
shall be made only if 24/7 has made such offer to the then current executive
officers of such subsidiary, and any offer to the Stockholders shall be made on
the same terms and conditions contained in the offer to such executive officers.
Any such exchange of shares shall be expressly conditioned upon, and shall be
effected as of, the closing of such public offering.
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 the Company:
Music Marketing Network Inc.
The Galleria
0 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
Two Stamford Plaza
000 Xxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Esq.
If to 24/7 or the Subsidiary:
24/7 Media, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
33
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Esq.
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other party notice in
the manner set forth in this Section 15.
16. Termination. This Agreement shall terminate if the Merger shall
have not been declared effective and consummated by August 31, 1999.
17. Entire Agreement. This Agreement (which includes the schedules and
exhibits hereto), together with the Mutual Non-Disclosure Agreement, dated April
27, 1999, between the Company and 24/7, sets forth the parties' final and entire
agreement with respect to its subject matter and supersedes any and all prior
and contemporaneous understandings, representations, warranties and agreements
(whether oral or written) with respect to the subject matter herein. 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.
18. 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 or the Subsidiary may assign this
Agreement and its rights hereunder to any direct or indirect wholly-owned
subsidiary of 24/7.
19. Paragraph Headings. The paragraph and section headings in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
20. Other Discussions. Unless this Agreement shall have been
terminated, the Company (and any representatives of the Company) shall not,
directly or indirectly, initiate, solicit, encourage, consider, entertain or
otherwise consider any other offers for or inquiries about, or hold discussions
with any person regarding, the acquisition of any assets or capital stock of the
Company. The Company (and any representatives of the Company) will not, directly
or indirectly, engage in any negotiations concerning, provide any confidential
information or data to, or have any discussions with, any person relating to the
acquisition of any assets or capital stock of the Company, whether initiated
before or after this Agreement. The Company (and any representatives of the
Company)
34
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to the acquisition of any assets or capital stock of the Company. The Company
will notify 24/7 immediately of any inquiries or proposals received by the
Company and the name of such person and the material terms and conditions of any
proposals or offers.
21. Fees and Expenses. Each party hereto will pay its own fees and
expenses, including, without limitation, legal, accounting and other
professional fees and expenses, incurred in connection with the execution,
delivery and performance of this Agreement, whether or not the Merger is
consummated, provided, however, that the fees and expenses of Company counsel
solely for this transaction shall be borne by the Company and no portion of such
fees and expenses shall be borne by the Stockholders.
22. Severability. If any provision of this Agreement shall be held by
any court of competent jurisdiction to be illegal, invalid or unenforceable,
such provision shall be construed and enforced as if it had been more narrowly
drawn so as not to be illegal, invalid or unenforceable, and such illegality,
invalidity or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
23. Governing Law and Consent to Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the internal laws
of the State of New York (without reference to its rules as to conflicts of
law). The state courts of the State of New York in New York County and, if the
jurisdictional prerequisites exist at the time, the United States District Court
for the Southern District of New York, shall have sole and exclusive
jurisdiction to hear and determine any dispute or controversy arising under or
concerning this Agreement. In any action or proceeding concerning such dispute
or controversy, the parties consent to such jurisdiction and waive personal
service of any summons, complaint or other process; a summons or complaint in
any such action or proceeding may be served by mail in accordance with Section
15.
24. 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.
25. Definition of Knowledge. As used herein, the words "knowledge",
"knowledge" or "known" shall, (i) with respect to the Company or Company
management, mean the actual knowledge of the corporate executive officers of the
Company, in each case after such individuals have made due and diligent inquiry
as to the matters which are the subject of the statements which are "known" by
the Company or made to the "knowledge" or "knowledge" of the Company, (ii) with
respect to 24/7 or 24/7 management, mean the actual knowledge of the corporate
executive officers of 24/7, in each case after such individuals have made due
and diligent inquiry as to the matters which are the subject of the statements
which are "known" by 24/7 or made to the "knowledge" or "knowledge" of 24/7, and
(iii) with respect to the Subsidiary or the Subsidiary management, mean the
actual knowledge of the corporate executive officers of 24/7 or the Subsidiary,
in each case after such individuals have made due and diligent inquiry as to the
matters
35
which are the subject of the statements which are "known" by the Subsidiary or
made to the "knowledge" or "knowledge" of the Subsidiary.
26. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties and their
respective successors and permitted assigns; provided, however, that (i) the
provisions in Section 1 above (A) concerning payment of the Merger Consideration
are intended for the benefit of the holders of Capital Shares, (B) concerning
the conversion of the Options are intended for the benefit of the holders of
such Options and (C) concerning the satisfaction of outstanding indebtedness of
the Company and certain employee bonuses are intended for the benefit of such
debt holders and employees, respectively, and (ii) the provisions in Section
13(d) above concerning indemnification are intended for the benefit of the
individuals specified therein and their respective legal representatives.
[Signature pages to follow]
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[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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
By: /s/ Xxxx X. Xxxxx
Name: Xxxx X. Xxxxx
Title: Senior Vice President and Secretary
CLOOP ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
By: /s/ Xxxx X. Xxxxx
Name: Xxxx X. Xxxxx
Title: Senior Vice President and Secretary
MUSIC MARKETING NETWORK INC.
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
By: /s/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: President
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