AGREEMENT AND PLAN OF MERGER
By and Among
24/7 Media, Inc.,
Mercury Holding Company
IMAKE Software & Services, Inc.,
IMAKE Consulting, Inc.,
Mark L. Schaszberger
and
Trami Tran
As of December 31, 1999
AGREEMENT AND PLAN OF MERGER, dated as of December 31, 1999 (this
"Agreement"), by and among 24/7 Media, Inc., a Delaware corporation ("24/7"),
Mercury Holding Company, a Maryland corporation and a wholly-owned subsidiary of
24/7 (the "Subsidiary"), IMAKE Software & Services, Inc., a Maryland corporation
(the "Company"), IMAKE Consulting, Inc., a Maryland corporation ("IMAKE
Consulting"), and Mark L. Schaszberger ("MLS") and Trami Tran ("TT") ("MLS" and
"TT" are hereinafter referred to as the "Stockholders").
WHEREAS, the Boards of Directors of 24/7 and the Subsidiary, and the
Stockholders (as defined above), have each approved the merger (the "Merger") of
the Subsidiary with and into the Company, in accordance with the Maryland
General Corporation Law ("Maryland 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 of 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 stock
of the Company; and
WHEREAS, the Company and IMAKE Consulting are engaged in the business of
providing media a suite of digital media business solutions, targeted to the
digital entertainment and telecommunications industries, the primary offerings
of which are a suite of software components called "e.merge" which may be
customized to each customer, along with supporting integration services ) (the
"Media Business"); and
WHEREAS, the Company and IMAKE Consulting are engaged in the business of
providing historical data and analytical software to the financial services and
securities industries, the primary offerings of which are "Analytics-on-Demand"
and "@Investors Connection" software which may be customized to each customer,
along with supporting integration integration services (the "Financial
Business").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties 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 and Maryland 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."
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(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 an articles of merger, and any other required documents
(the "Articles of Merger"), with the State Department of Assessments and
Taxation of Maryland, in such forms as required by, and executed in accordance
with the relevant provisions of, Maryland Law. When used in this Agreement, the
term "Effective Time" shall mean the date and time at which the Merger shall
become effective under Maryland Law.
(ii) The closing of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of Proskauer Rose LLP, 1585
Broadway, New York, New York 10036, 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 March 31,
2000, 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 Maryland 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 become the restrictions, disabilities, duties, debts and liabilities
of the Surviving Corporation.
(d) Certificate of Incorporation; Bylaws. At the Effective Time, the
Articles of Incorporation and Bylaws of the Subsidiary shall be the Charter 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 stock of the Company (the "Capital Shares") then
issued and outstanding shall, subject to and in accordance with the terms of
this Agreement, be automatically canceled and extinguished and thereafter shall
represent, in the aggregate, the right to receive the consideration set forth in
the immediately following sentence, as adjusted to the extent, if any, required
pursuant to Section 1(f)(ii) below (as so adjusted, the "Merger Consideration").
The Merger Consideration shall be 1,280,000 shares of common stock, par value
$.01 per share, of 24/7 ("24/7 Common Stock").
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(ii) The Merger Consideration shall be payable to the Stockholders
in the proportion as set forth in Schedule 1 as follows:
(A) 400,000 shares of 24/7 Common Stock shall be distributed to
the Stockholders at the Closing.
(B) ______ Promptly after the Closing, 24/7 shall deliver to
the escrow agent (the "Escrow Agent") under the escrow agreement dated the
Closing Date, substantially in the form of Exhibit A hereto (the "Escrow
Agreement"), (i) certificates representing 880,000 shares of 24/7 Common Stock
(the "Stockholder Additional Shares") and (ii) certificates representing such
number of shares of 24/7 Common Stock as are listed in a letter dated as of
December 31, 1999 from the Company to 24/7 (the "Employee Additional Shares,"
together with the Stockholder Additional Shares, the "Additional Shares") , to
be held pursuant to the provisions of this Agreement and the Escrow Agreement in
an escrow account (the "Escrow Account").
(C) (1) On or prior to November 30, 2000 or, if later, promptly
after the final determination of the applicable amount pursuant to clause (3)
below, the Escrow Agent shall release to the Stockholders in accordance with the
allocation set forth on Schedule 1 hereto the number of shares of 24/7 Common
Stock equal to the First Installment Amount. For this purpose, the "First
Installment Amount" shall be equal to (A) 440,000 shares of 24/7 Common Stock
(the "Installment Cap") multiplied by (B) the amount determined by dividing the
cumulative revenues, as determined in accordance with GAAP (as hereinafter
defined), consistently applied, of the Surviving Corporation for the period from
January 1, 2000 to September 30, 2000, by $8,435,900 (the "First Installment
Target"); provided, that the First Installment Amount shall not exceed the
Installment Cap.
(2) On or prior to August 31, 2001 or, if later, promptly
after the final determination of the applicable amount pursuant to clause (3)
below, the Escrow Agent shall release to the Stockholders in accordance with the
allocation set forth on Schedule 1 hereto the number of shares of 24/7 Common
Stock equal to the Second Installment Amount. For this purpose, the "Second
Installment Amount" shall be equal to (A) the Installment Cap multiplied by (B)
the amount determined by dividing the cumulative revenues, as determined in
accordance with GAAP, of the Surviving Corporation for the period from October
1, 2000 to June 30, 2001, by $12,650,000 (the "Second Installment Target");
provided, that, the Second Installment Amount shall not exceed the Installment
Cap; provided, further, however, that if the First Installment Amount was less
than the Installment Cap then the Second Installment Amount shall not exceed the
Installment Cap plus the amount of such shortfall (i.e., the difference between
the Installment Cap and the First Installment Amount), but in no event shall the
Second Installment Amount exceed 512,000 shares of 24/7 Common Stock and in no
event shall the sum of the First Installment Amount and the Second Installment
Amount exceed 880,000 shares of 24/7 Common Stock.
(3) For purposes of this Section 1(f)(ii)(C), the revenues
of the Surviving Corporation shall be determined in accordance with GAAP,
consistently applied;
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provided, however, that the revenues of the Surviving Corporation shall include
(i) the "Total Revenue against Target Amount" as listed on Schedule
1(f)(ii)(C)(3) and (ii) all revenues generated by work hours performed by
employees of the Company on behalf of 24/7 or any of its affiliates in excess of
the 13,636 budgeted hours for the special projects listed on Schedule
1(f)(ii)(C)(3). As promptly as practicable after the end of the relevant period
in Sections 1(f)(ii)(C)(1)-(2) above, 24/7 shall deliver to the Stockholders a
statement setting forth the amount of cumulative revenues of the Surviving
Corporation for the relevant period (each, a "Revenue Statement"). If the
Stockholders do not object to the Revenue Statement within 10 business days
after receiving it, that Revenue Statement will be deemed accepted by the
Stockholders and will determine the deliveries of 24/7 Common Stock under this
Section 1(f)(ii)(C). If the Stockholders object to the Revenue Statement, then
the Stockholders will, within that 10 business day period, submit to 24/7 a
written notice of objection (an "Objection"), along with reasonably detailed
supporting data, to the extent available to the Stockholders, and calculations,
and, if the parties do not mutually agree on the Revenue Statement with the 10
business days following the submission of the Objection, either party can elect,
by notice to the other, to have the disputed items resolved by a nationally
recognized firm of independent accountants selected by the Parties (the
"Accounting Firm"). The Accounting Firm will make a final and binding
determination with respect to the disputed items and, based on that
determination, a final and binding determination of the Revenue Statement. The
fees and out-of-pocket expenses of the Accounting Firm will be borne by the
parties in the proportion that the aggregate amount of the disputed items
submitted to the Accounting Firm that is unsuccessfully disputed by each such
party (as finally determined by the Accounting Firm) bears to the total amount
of such remaining disputed items so submitted.
(4) If, prior to June 30, 2001, the business of the
Surviving Corporation is adversely changed through acquisition, divestiture,
reallocation of resources (e.g., marketing dollars or employees) or assets among
affiliates or business of 24/7 or similar events (each, a "Change in Business
Event") or an Executive Management Event (as defined below), then upon the
occurrence of each such Change in Business Event or Executive Management Event,
the First Installment Target and the Second Installment Target will be equitably
adjusted to give effect to and carry out the intent of the parties as expressed
herein, based on negotiations and determinations in good faith by MLS, Ronald
Johnson, Chief Information Officer, and C. Andrew Johns, Chief Financial
Officer, or the successor Chief Information Officer and Chief Financial Officer
of 24/7, respectively. "Executive Management Event" means a termination by MLS
of his employment agreement with 24/7 (the "MLS Employment Agreement") for "Good
Reason" as defined in the MLS Employment Agreement or a termination of MLS
employment arising out of a material breach of the MLS Employment Agreement by
24/7. In the event that following such good faith negotiations, there is no
agreement among MLS, Ronald Johnson and C. Andrew Johns as to the equitable
adjustment to the First Installment Target and/or the Second Installment Target,
then the parties shall refer to the matter to an independent, third-party
arbitrator, to be mutually agreed upon by the parties, who shall make a final
and binding determination as to the equitable adjustment to the First
Installment Target and/or Second Installment Target. In order to provide some
guidance to any future arbitrator in the event of such an arbitration, the
parties have agreed that the following guidelines regarding Change in Business
Events would be applied to the adjustments indicated below based upon the
reasonable expectations of the parties as of the date of execution of this
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Agreement about the likely state of events in the future; provided, however,
that any adjustment must be primarily based upon dollar amounts that MLS and/or
the successor president of the Surviving Corporation can demonstrate based on
prior revenue amounts generated or on past practice:
(a) (i) if the Change in Business Event results in the
Surviving Corporation's inability to participate in either the National
Association of Broadcasters Convention or the Western Cable Show in the fashion
in which it had participated prior to the Merger, a decrease in the revenue
target for the nine-month period in which such inability occurs of approximately
$2,000,000 for each show; and
(ii) if the Change in Business Event results in the
Surviving Corporation's inability to employ five full-time, exclusive marketing
personnel as of June 30, 2000, then for each such marketing person less than
five, the revenue target for the period in which such marketing personnel is
less than five shall be decreased by $83,333/month for each such marketing
personnel less than five; provided, if the number of marketing personnel by June
30, 2000 (the "Marketing Personnel Number") is less than five, then the
Marketing Personnel Number shall replace five for purposes of this Subsection.
(b) If the Change in Business Event concerns
reallocation of Surviving Corporation employees to 24/7 projects beyond the
agreed-upon baseline level of 13,636 employee hours (including hours dedicated
to the 24/7 Connect project), for every hour of Surviving Corporation employee
time reallocated to 24/7 projects beyond the agreed-upon baseline level, the
revenue target for the period in which such reallocation of employee time occurs
shall be decreased by $110 for each such employee hour.
(c) If the Change in Business Event concerns 24/7's
failure to support the Surviving Corporation's recruiting efforts necessary for
its then current needs, for every employee that the actual head count of the
Surviving Corporation falls below that indicated on Schedule 1(f)(ii)(C)(4) for
the relevant period, the revenue target for the period in which such failure
occurs shall be decreased, for each such employee, by the product of 167
hours/month multiplied by the number of months of such head count shortfall
multiplied by $110/hour multiplied by the actual utilization rate of Surviving
Corporation employees as determined at the end of the relevant period.
(5) Any shares of 24/7 Common Stock that are held in the
Escrow Account and are not required to be released to the Stockholders and the
employees as a result of this Section 1(f)(ii)(C) shall upon expiration of the
Escrow Account be released and returned to 24/7 and canceled.
(6) Any dividends or distributions with respect to the
Additional Shares will be paid or distributed to the Escrow Agent on the same
basis as such dividends or distributions are paid or distributed to all other
holders of 24/7 Common Stock. Such dividends and distributions shall be held by
the Escrow Agent and distributed as and when
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the Additional Shares are distributed in accordance with this Agreement and the
Escrow Agreement; provided, however, that any cash distributions with respect to
the Additional Shares will be paid to the Stockholders and employees, as
appropriate. The Stockholders and employees shall have the right to vote the
Additional Shares. The Additional Shares shall be shown as issued and
outstanding on the applicable consolidated financial statements of 24/7.
(7) In the event of any split, combination or
reclassification of any 24/7 Common Stock or any issuance or the authorization
of any issuance of any other securities in exchange or in substitution for
shares of 24/7 Common Stock at any time during the period from the date of this
Agreement to the date on which the Escrow Agent releases to the Stockholders and
employees all of the Additional Shares in the Escrow Account, 24/7 shall
promptly make such adjustment to the number of shares of 24/7 Common Stock
deposited by 24/7 into the Escrow Account as 24/7 and the Stockholders shall
mutually agree so as to preserve the economic benefits that the Stockholders
each reasonably expected on the date of this Agreement to receive as a result of
the consummation of the Merger and the other transactions contemplated by this
Agreement.
(8) In the event of a Change in Control (as defined below)
in 24/7, 50% of the Stockholder Additional Shares in the Escrow Account shall
automatically vest in full, and the Escrow Agent shall deliver all of such
vested Stockholder Additional Shares in the Escrow Account to the Stockholders,
and the remaining Stockholder Additional Shares in the Escrow Account shall be
subject to the vesting formula set forth in this Section 1(f)(ii). "Change in
Control" means a transaction in which (i) any person or group (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the
aggregate, of substantially all of the outstanding capital stock of 24/7 (after
giving effect to such transaction), or any person or group, directly or
indirectly, acquires beneficial ownership of substantially all of the
outstanding capital stock of 24/7 through consolidation, merger, purchase or
otherwise (after giving effect to such transaction).
(g) Surrender and Payment.
(i) 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 $1.00 per share, of the
Surviving Corporation. Each stock certificate of the Subsidiary evidencing
ownership of such shares shall evidence ownership of such shares of stock of the
Surviving Corporation.
(ii) Each holder of 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 with respect to such Capital Shares, will be
entitled to receive the Merger Consideration payable in respect of such Capital
Shares pursuant to Section 1(f) hereof.
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(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.
(h) Reorganization. Immediately prior to the Closing, the Company and
IMAKE Consulting shall complete the Reorganization as described in Exhibit B
(provided, that the failure of the Company and IMAKE Consulting to receive any
third party consent listed on Exhibit B shall not be deemed a breach of this
Section 1(h)) and the Company shall sell, convey, transfer, assign and deliver
to IMAKE Consulting substantially all of its assets, properties and business
constituting the Financial Business and IMAKE Consulting shall pay, honor,
perform and discharge, when due and owing, and will be exclusively liable with
respect thereto, all of the obligations, commitments, agreements and liabilities
of any kind or nature existing on the date of the Closing, fixed or contingent,
known or unknown, whether required to be performed before or after the date of
the Closing, of the Financial Business; and IMAKE Consulting shall deliver to
the Company all of its assets, properties and business constituting the Media
Business, and, subject to Section 14, the Company shall pay, honor, perform and
discharge, when due and owing, and will be exclusively liable with respect
thereto, all of the obligations, commitments, agreements and liabilities of any
kind or nature existing on the date of the Closing, fixed or contingent, known
or unknown, whether required to be performed before or after the date of the
Closing, of the Media Business (the "Reorganization"). The Company and IMAKE
Consulting shall execute such documents and instruments that are necessary to
assign to the Company the rights and benefits to collect all revenues and fees
under the contracts that require consents listed on Exhibit B.
2. Representations and Warranties of the Company and the
Stockholders. The Company and the Stockholders each hereby represents and
warrants to 24/7 that:
(a) Organization and Qualification; Organizational Documents.
(i) The Company is a close corporation duly incorporated and
existing under and by virtue of the laws of the State of Maryland and is in good
standing with the State of Maryland Department of Assessments and Taxation, and
has the requisite corporate power and corporate authority to own, lease and
operate its assets and properties and to conduct its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business, and is in good standing under the laws of those jurisdictions
listed on Schedule 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, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, results of operations or financial condition of the
Company, taken as a whole, or on the ability of the parties to consummate the
transactions contemplated by this Agreement (a "Company Material Adverse
Effect").
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(ii) The Company has heretofore furnished to 24/7 a complete and
correct copy of the Company's charter (certified by the Secretary of State of
the State of Maryland) (the "Charter") and By-Laws, each as amended to date.
Such Charter and By-Laws are in full force and effect. The Company is not in
violation of any of the provisions of its Charter or By-Laws.
(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 1 hereto, free and clear of
any and all liens, pledges, security interests, options, encumbrances, charges,
agreements or claims of any kind whatsoever. 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.
(ii) The Company has all corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, as well as all other
agreements, certificates and documents executed or delivered, or to be executed
or delivered, by the Company in connection herewith (collectively, with this
Agreement, the "Company Documents"). The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company, and no other corporate proceedings
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (except as set forth in clause (iii) 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 Stockholders have authorized, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby and have
authorized the taking of all appropriate action, pursuant to Maryland Law, to
cause the Merger to become effective at the Effective Time.
(c) No Conflicts, Required Filings and Consents.
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(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 Charter or By-Laws of
the Company; (B) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or by which any of its properties
is bound or affected; or (C) result in any material breach of or constitute a
material default (or an event which with notice or lapse of time or both would
become a default) under, or impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien 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 of 1934, as
amended (the "Exchange Act"), state blue sky laws and the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended; (B) for the filing of the
Articles 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: 5,000 shares of common stock, par value $1.00
per share, of which 196 shares will be issued and outstanding.
(ii) Options and Reserved Shares: Except for a proposed employee
stock option plan, (a) there is no outstanding right, subscription, warrant,
call, option or other agreement or arrangement of any kind to purchase or
otherwise to receive from the Company any Capital Shares or any other security
of the Company, (b) there is no outstanding security of any kind convertible
into or exchangeable for any such Capital Shares and (c) there is no voting
trust or other agreement or understanding to which the Company is a party or is
bound with respect to the voting of the Capital Shares. 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), 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,
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commitments or restrictions relating to the ownership or voting of any shares of
capital stock or other equity or debt securities of the Company.
(e) Subsidiaries and Affiliates. The Company has no direct or indirect
subsidiaries, whether or not wholly owned, and has no equity interest in any
corporation, partnership, joint venture or other entity.
(f) Financial Statements; Accounts Receivable. The Company has
previously delivered to 24/7: the compiled balance sheets and the notes thereto
of the media division of the Company and the media division of IMAKE Consulting
as at December 31, 1997 and December 31, 1998 and the related statements of
earnings, changes in stockholders' equity and cash flows and the notes thereto
for the years then ended, and the compiled balance sheet and the notes thereto
of the media division of the Company and the media division of IMAKE Consulting
as at September 30, 1999 (the "Compiled Balance Sheet") and the related compiled
statements of earnings, changes in stockholders' equity and cash flows and the
notes thereto for the nine months then ended, respectively (together with the
Compiled Balance Sheet, the "Compiled Financials"). Each of the foregoing
financial statements is in accordance with the Company's and IMAKE Consulting'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 Media Business as at the dates and for
the periods indicated, subject, in the case of the Compiled Financials, to
year-end adjustments and notes required by GAAP. The accounts receivable of the
Company (i) arose in the ordinary course of business for goods or services
delivered or rendered, (ii) constitute only valid, undisputed claims and are not
subject to counterclaims or setoffs, (iii) are good and collectible in full
within 90 days of the date they were created at the aggregate recorded amounts
thereof net of the reserve therefor and (iv) have not been extended or rolled
over in order to make them current.
(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 or disclosed in the notes
thereto of the Compiled Balance Sheet, in each case in accordance with GAAP,
except for liabilities incurred since September 30, 1999, 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 for which a reserve is required to be disclosed in the
Company's financial statements or the notes thereto, in accordance with 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,
except as set forth in Schedule 2(h) hereto, there has not occurred any:
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(i) amendments or changes to the Charter or Bylaws of the Company;
(ii) change in the Company's authorized or issued stock, grant of
any stock option or right to purchase stock of the Company; issuance of any
security convertible into such stock, purchase, redemption, retirement or other
acquisition by the Company of any stock, or declaration of payment in respect of
stock;
(iii) material adverse change in the business, operations,
properties, prospects, assets, liabilities, commitments, earnings or financial
condition of the Company or any of its divisions;
(iv) 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;
(v) material increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
ordinary course of business) employee or entry into any employment, severance,
or similar contract with any officer, or employee;
(vi) adoption of, or material increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(vii) sale (other than sales in the ordinary course of
business), lease, or other disposition of any material asset or property or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of the Company, including the sale, lease, or other
disposition of the Company Intellectual Property (as defined hereafter); or
(viii) act or omission by the Company, which, if taken or omitted
after the date of this Agreement and before the Closing, would constitute a
breach of Section 4(c).
(i) Taxes.
(a) Except as disclosed on Schedule 2(i): (A) the Company has timely
and properly filed all federal, foreign, state, local and other tax returns and
reports which are required to be filed by it; (B) all such tax returns were
true, correct and complete in all material respects, 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; (C) All unpaid federal, foreign, state,
local and other taxes, fees, assessments, duties and other similar governmental
charges payable by the Company or which will, with the passage of time, become
payable by the Company (including interest and penalties), whether or not
disputed, with respect to any period or a portion thereof ending at, on or prior
to and including September 30, 1999, have been adequately reserved against in
accordance with GAAP on the face of or disclosed in the notes
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thereto to the Compiled Balance Sheet; (D) 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;
(E) the Company has furnished to 24/7 true and complete copies of all federal,
foreign and state income tax returns and made available the 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; (F) the Company has not at any time consented to have the
provisions of Section 341(f)(2) of the Code apply to it; (G) 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; (H) 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. The Company
has not used any of the following methods of accounting: installment, completed
contract, or long-term contract. 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.
(b) The Company has not taken any action and does not have knowledge
of any fact or circumstance that would prevent the Merger from qualifying as a
"reorganization" under the Code.
(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 properties and assets of whatever kind (whether real or personal),
including, without limitation, all properties and assets that are shown on the
Compiled Balance Sheet (except for assets sold in the ordinary course of
business since September 30, 1999,) and all 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 will, at the Closing, be held by, and all agreements, obligations and
transactions relating to the Company's business will, at the Closing, be entered
into, incurred and conducted by, the Company.
(k) Real and Personal Property. The Company does not own any real
property. Schedule 2(k) hereto contains a complete and correct list of all real
property (including
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buildings and structures) occupied, leased or 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
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 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. ____ For the purposes of this
Agreement, the following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyright registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, URLs, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world (collectively, the "Trademarks");
(vi) all databases and data collections and all rights therein throughout the
world; (vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual
Property, including, without limitation, all Registered Intellectual Property,
that is owned by, or exclusively licensed to, the Company.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
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"Company Registered Intellectual Property" means all of the
Registered Intellectual Property owned by, or filed in the name of, the Company.
(i) A list and brief description of the Company Intellectual
Property, and all contracts, licenses and agreements to which the Company is a
party (i) with respect to Company Intellectual Property licensed or transferred
to any third party; or (ii) pursuant to which a third party has licensed or
transferred any Intellectual Property to the Company is set forth on Schedule
2(l)(i) hereto.
(ii) No Company Intellectual Property or product or service of
the Company is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation of any governmental entity restricting in any manner
the use, transfer, or licensing thereof by the Company, or which may affect the
validity, use or enforceability of such Company Intellectual Property.
(iii) Each item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Registered Intellectual Property have been
made and all necessary documents, recordations and certificates in connection
with such Company Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property.
(iv) The Company owns and has good and exclusive title to, or
has joint ownership or license (sufficient for the conduct of its business as
currently conducted) to, each item of Company Intellectual Property free and
clear of any encumbrance (excluding licenses and related restrictions); and the
Company is the exclusive owner of all Trademarks used in connection with the
operation or conduct of the business of the Company, including the sale of any
products or the provision of any services by the Company.
(v) The Company owns exclusively, and has good title to, all
copyrightable works that are Company products or which the Company otherwise
expressly purports to own. The Company owns, and has good title to, or has valid
and sufficient licenses for all copyrightable works used in its business.
(vi) Except as set forth in Schedule 2(l)(iv), to the extent
that any Intellectual Property has been developed or created by a third party
for the Company, the Company has a written agreement with such third party with
respect thereto and the Company either (i) has obtained ownership of, and is the
exclusive owner of such third party Intellectual Property, or (ii) has obtained
a license (sufficient for the conduct of its business as currently conducted) to
such third party's Intellectual Property by operation of law or by valid
assignment or license, to the fullest extent it is legally possible to do so.
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(vii) The Company has not transferred ownership of, or granted
any exclusive license with respect to, any Intellectual Property that is or was
the Company Intellectual Property, to any third party.
(viii) All contracts, licenses and agreements relating to the
Company Intellectual Property are in full force and effect. The consummation of
the transactions contemplated by this Agreement in accordance with its terms
will neither violate nor result in the breach, modification, cancellation,
termination, or suspension of any material term of any such contracts, licenses
and agreements. The Company is in compliance with, and has not breached any
material term of any such contracts, licenses and agreements and, to the
knowledge of the Company, all other parties to such contracts, licenses and
agreements are in compliance with, and have not breached any term of, such
contracts, licenses and agreements. Following the Closing Date, the Surviving
Corporation will be permitted to exercise all of the Company's rights under such
contracts, licenses and agreements to the same extent the Company would have
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise be
required to pay.
(ix) The operation of the business of the Company as such
business is currently conducted, including the Company's design, development,
marketing and sale of the products or services of the Company (including with
respect to products currently under development) and the Company's use of the
Company Intellectual Property has not, does not and will not infringe, dilute or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction; provided,
however, that the Company and the Stockholders do not make any representation or
warranty that the operation of the business of the Company before or after the
Effective Date has not, does not, and will not infringe the Doubleclick patent
or any patent, unknown as of the date of this Agreement to the Company or the
Stockholders, held by any third party.
(x) Except as provided in Schedule 2(l)(x), the Company has not
received notice from any third party and, to the knowledge of the Company, the
Company has not received any threat, that the operation of the business of the
Company or any act, product or service of the Company, infringes, dilutes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
(xi) To the knowledge of the Company, no person has or is
infringing, diluting or misappropriating any Company Intellectual Property or is
engaging in unfair competition with the Company.
(xii) The Company has taken reasonable steps to protect the
Company's rights in the Company's confidential information and trade secrets
that it wishes to protect or any trade secrets or confidential information of
third parties provided to the Company or its subsidiaries, and, without limiting
the foregoing, the Company has and enforces a policy requiring each employee and
contractor to execute a proprietary information/confidentiality
-15-
agreement substantially in the form provided to 24/7 and all current and former
employees and contractors of the Company and its subsidiaries have executed such
an agreement, except where the failure to do so is not reasonably expected to be
material to the Company. Except under confidentiality obligations, there has not
been disclosure by the Company of any such trade secrets or confidential
information.
(m) Contracts, Leases, Licenses and Commitments; Customers and
Suppliers. 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):
(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 material 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 material 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 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 Company Material
Adverse Effect or a material adverse effect on 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
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Company's properties and assets and the operation of its business. The Company's
business is and has been operated in compliance therewith in all material
respects and with all statutes, laws, ordinances, rules and regulations
(federal, state, local and foreign) applicable to it in all material respects,
and to the Company's knowledge, all required reports and filings with
governmental and regulatory authorities have been properly and timely made.
(o) Employees. The Company has provided to 24/7 in a letter dated as of
December 31, 1999, 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 December 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 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
material bonus, profit sharing, pension, deferred compensation, incentive, stock
option, fringe benefit, health, welfare, change in control, severance or other
similar plan, policy, 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). 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. Schedule 2(p) hereto contains a list of all Plans. A copy of each
such Plan has previously been delivered by the Company to 24/7.
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(ii) With respect to each of the Plans on Schedule 2(p):
(A) each Plan (or, if applicable, the underlying prototype plan
document) intended to qualify under Section 401(a) of the Code 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 to the knowledge of the Company and the Stockholders, 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;
(B) all payments required by any Plan 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
asserted or instituted, or to the knowledge of the Company and the Stockholders,
threatened 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) to the knowledge of the Company and the Stockholders, 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 for which no exemption exists under Section 408 of ERISA or Section 4975 of
the Code (and the consummation of the transactions contemplated by this
Agreement will not constitute or directly or indirectly result in such a
"prohibited transaction"); and
(F) no Plan is under audit or to the knowledge of the Company
and the Stockholders, 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 material tax or penalty.
(iii) Except as disclosed on Schedule 2(p)(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.
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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'sgeneral
liability, fire and casualty insurance policies and liability insurance. Such
policies are in full force and 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 or employees before any court, arbitrator or governmental entity.
Except as set forth in Schedule 2(r) hereto, to the knowledge of the Company,
neither the Company nor, in connection with the Company's business, any of the
Company's officers 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. 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. To the knowledge of the Company, the
Company's business, assets and properties are and have been operated and
maintained in compliance in all material respects with all applicable federal,
state and local environmental protection laws and regulations (the
"Environmental Laws"). 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 agreement, judgment, injunction, order or decree binding upon the
Company which has or
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could reasonably be expected to have the effect of prohibiting or impairing the
business of the Company as currently conducted.
(u) Transactions with Affiliates. Except as set forth in Schedule 2(u)
hereto and Exhibit B herein, and except for ordinary dealings with its employees
and its Stockholders, and except for advances made by the Stockholders to the
Company and fully repaid by the Company, 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, to the knowledge of the Company, with any of their
affiliates or relatives. Except as set forth in Schedule 2(u) and Exhibit B
herein, 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 to the knowledge of the Company, any of their affiliates or
relatives, and to the knowledge of the Company, 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 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), to the knowledge of the Company, none of the Stockholders, any
key employee of the Company or any of their affiliates or relatives has any
significant investment of any kind in any business or entity which is
competitive with the Company. For purposes of this Section 2(u), "affiliate"
means, with respect to any person or entity, any other person or entity that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such person or entity. For the
purposes of this definition, "control" means, as to any person or entity, the
possession, directly or indirectly, of the power to elect or appoint a majority
of directors (or other persons acting in similar capacities) of such person or
entity or otherwise to direct or cause the direction of the management and
policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise.
(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, accurately reflect all corporate action of the Stockholders
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, Bank Accounts, etc. Schedule 2(x) hereto lists all
officers 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.
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(y) Year 2000. Set forth on Schedule 2(y) hereto is a description of the
Company's remediation plan regarding year 2000 issues, including details on the
identification, assessment and testing of equipment and systems, the state of
readiness of third-party vendors, and the creation of a contingency plan in the
event of year 2000 failures.
(i) The computer systems of the Company (including, without
limitation, all software, hardware, workstations and related components,
automated devices, products consisting of or containing one or more thereof, and
any and all enhancements, upgrades, customizations, modifications or
maintenance, embedded chips and other date sensitive equipment such as security
systems, alarms, elevators and other systems) ("Computer Systems") are Year 2000
Compliant (as defined below) or will be Year 2000 Compliant by December 31,
1999.
(ii) The Company's supply of services through its Computer Systems
shall not be interrupted, delayed, decreased or otherwise affected in any
material respect by dates/times prior to, on, after or spanning January 1, 2000.
(iii) The Company's Computer Systems in all material respects have
the ability to properly interface and will continue to properly interface with
internal and external applications and systems of third parties with whom the
Company exchanges data electronically (including, without limitation, customers,
clients, suppliers, service providers, subcontractors, processors, converters,
shippers, warehousemen, outsourcers, data processors, regulatory agencies and
banks), whether or not their Computer Systems are Year 2000 Compliant.
(iv) To the knowledge of the Company, the Company has inquired of
all third parties the failure of whose Computer Systems to be Year 2000
Compliant would have a Company Material Adverse Effect.
For purposes of this Agreement, "Year 2000 Compliant" means that the Company's
Computer Systems (1) are capable of recognizing, processing, managing,
representing, interpreting and manipulating correctly date-related data for
dates earlier and later than January 1, 2000, including, but not limited to,
calculating, comparing, sorting, storing, tagging and sequencing, without
resulting in or causing logical or mathematical errors or inconsistencies in any
user-interface functionalities or otherwise, including data input and retrieval,
data storage, data fields, calculations, reports, processing or any other input
or output, (2) have the ability to provide date recognition for any data element
without limitation (including, but not limited to, date-related data represented
without a century designation, date-related data whose year is represented by
only two digits and date fields assigned special values), (3) have the ability
to automatically function into and beyond the year 2000 without human
intervention and without any change in operations associated with the advent of
the year 2000, (4) have the ability to correctly interpret data, dates and time
into and beyond the year 2000, (5) have the ability not to produce noncompliance
in existing information or otherwise corrupt such data into and beyond the year
2000, (6) have the ability to correctly process after January 1, 2000 data
containing dates before that date, (7) have the ability to recognize all "leap
years," including February 29, 2000.
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(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. 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 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) Condition and Sufficiency of Assets. The Company owns or has the
right to use without payment of royalty all the tangible and intangible assets
necessary for the conduct of the Media Business as conducted prior to the date
hereof. The buildings, plants, structures, and equipment of the Company are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put and are sufficient for the continued
conduct of the Company's businesses after the Closing in substantially the same
manner as conducted prior to the Reorganization, and the Company has conducted,
and continues to conduct, its business only through the Company, except as set
forth in Exhibit B.
(cc) Acquisition of Stock for Investment.
Each of the Stockholders that receives 24/7 Common Stock as part of the
Merger Consideration hereunder acknowledges that such shares of 24/7 Common
Stock may not be sold, transferred, offered for sale, pledged, hypothecated,
lent, or otherwise disposed of by him or it without registration under the
Securities Act, except pursuant to Regulation S under the Securities Act or
pursuant to another exemption from registration under the Securities Act, and
-22-
without compliance with applicable Blue Sky Laws. Each Stockholder is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Securities Act. Each Stockholder has received all requested documents and other
information from 24/7, and has had an opportunity to ask questions of and to
receive answers from the officers of 24/7 with respect to the business, results
of operations, financial conditions and prospects of 24/7.
(dd) Hart-Scott-Rodino.
The Stockholders and the ultimate parent entity of the Company do not
meet the "size-of-the-parties" jurisdiction test imposed by Section 201(a)(2) of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C.
ss. 18A(a)(2), and the regulations promulgated thereunder.
3. Representations and Warranties of 24/7 and the Subsidiary. 24/7 and the
Subsidiary each hereby represents and warrants to the Company that:
(a) Organization and Qualification; Organizational Documents.
(i) 24/7 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. 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 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").
(ii) The Subsidiary is a corporation duly incorporated and existing
under and by virtue of the laws of the State of Maryland and is in good standing
with the State of Maryland Department of Assessments and Taxation, and has the
requisite corporate power and corporate authority to own, lease and operate its
assets and properties and to conduct its business as it is now being conducted.
(iii) 24/7 has heretofore furnished to the Company a complete and
correct copy of 24/7's Certificate of Incorporation (certified by the Secretary
of State of the State of Delaware) and of and the Subsidiary's charter (the
"Subsidiary's Charter") (certified by the State of Maryland Department of
Assessments and Taxation) and of 24/7's and the Subsidiary's 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 the Subsidiary's Charter, as
the case may be, or any of the provisions of its By-Laws.
-23-
(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 7(d) 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.
(ii) The Board of Directors of 24/7 and the Board of Directors of
the Subsidiary, as necessary (A) have declared that this Agreement, the Merger
and the other transactions contemplated hereby are advisable and in the best
interests of the Subsidiary's stockholders; (B) have authorized, approved and
adopted this Agreement, the Merger and the other transactions contemplated
hereby; and (C) have taken appropriate action, pursuant to Delaware Law and
Maryland 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 Charter 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-
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 Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (B) for the filing of the Articles 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 December 31, 1999
consisted of: (1) 70,000,000 shares of common stock, par value $.01 per share,
of which 22,421,516 shares were issued and outstanding, 3,235,538 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 2,514,462
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
3,156,685 shares of common stock issuable upon exercise of outstanding warrants
at December 31, 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.
(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), and except for (i)
the issuance of year-end stock option grants to the employees of 24/7 and (ii)
common stock, restricted stock and stock options being granted to the
stockholders and employees of 24/7's subsidiary, 24/7 Media Europe N.V. in
connection with the acquisition of 100% of the outstanding capital stock of such
subsidiary, 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.
-25-
(e) SEC Filings, Financial Statements.
(i) 24/7 has filed all forms, reports and documents required to be
filed by it with the SEC. 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
September 30, 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.
(f) No Adverse Change. Since September 30, 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 $1,000,000 in the aggregate, whether or
not covered by insurance; or
-26-
(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) 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.
(h) 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.
(i) Taxes.
(i) Neither 24/7 nor any person related to 24/7, as defined in
Treas. Reg. ss.1.368-1(e)(3), has a plan or intention to redeem or otherwise
acquire any shares of 24/7 Common Stock that are issued in the Merger to the
Stockholders;
(ii) Following the Merger, the Surviving Corporation will continue
at least one significant historic business line of the Company, or use at least
a significant portion of the Company's historic business assets, in each case
within the meaning of Treas. Reg. ss. 1.368-1(d);
(iii) 24/7 has no plan or intention: (A) to liquidate the Surviving
Corporation, (B) to merge the Surviving Corporation with and into another
corporation (including 24/7 or an affiliate of 24/7) or (C) to sell or otherwise
dispose of the stock of the Surviving Corporation, except as provided for in
Treasury Regulation ss. 1.368-2(k)(2);
(iv) 24/7 will be in Control (as defined below) of Subsidiary
immediately prior to the Merger, and 24/7 has no plan or intention to cause the
Surviving Corporation to issue additional shares of capital stock after the
Merger, or take any other action,
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that would result in 24/7 losing Control of the Surviving Corporation. As used
herein "Control" shall have the meaning set forth in Section 368(c) of the Code;
and
(v) 24/7 has not taken any action and does not have any knowledge
(without taking into account the Reorganization) that would prevent the Merger
from qualifying as a "reorganization" under Section 368(a) of the Code.
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,
upon prior written notice to the Company, have reasonable access during normal
business hours to the Company's assets, premises, books and records, key
employees and accountants, including the work papers of the Company's
accountants relating to the Compiled 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 balance
sheets, if any are prepared.
(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, taking into account the Reorganization, 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
Charter;
(ii) issue any additional shares of stock, or issue, sell or grant
any option or right to acquire or otherwise dispose of any of its authorized but
unissued stock or other equity or debt securities;
(iii) declare or pay any dividends or make any other distribution in
cash, property or securities on its stock;
(iv) repurchase or redeem any shares of its stock;
-28-
(v) except as disclosed in Exhibit B, incur, or perform, pay or
otherwise discharge, any material obligation or liability (absolute or
contingent), except for obligations and liabilities incurred in the ordinary
course of business consistent with past practice;
(vi) enter into any employment agreement with or increase the
compensation or benefits of any of its officers or employees, or grant any
severance pay or termination or establish, adopt or enter into any Plan;
(vii) except as disclosed in Exhibit B, 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) except as disclosed in Exhibit B, 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) except as disclosed in Exhibit B, change any of the accounting
principles or practices used by it, except to come into compliance with, or 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 that is
qualified as to materiality to be untrue or inaccurate or any such
representation or warranty that is not so qualified to be untrue or inaccurate
in any material respect 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) 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.
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(f) 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 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.
(g) 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 and the Subsidiary. 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 and to use
commercially reasonable efforts to obtain any necessary approvals and early
termination of any applicable waiting period.
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(f) Employee Rights. As soon as practicable after the Effective Date,
24/7 will cause restricted stock awards to be made under its 1998 Stock
Incentive Plan to certain employees of the Company as provided to 24/7 in a
letter dated as of December 31, 1999.
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:
(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. 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. Mark Schaszberger and key employees identified
in a letter between 24/7 and Mark Schaszberger shall have each entered into an
Employment Agreement with 24/7 in substantially the form attached hereto as
Exhibit C and a Non-Competition and Non-Disclosure Agreement with 24/7 in
substantially the form attached hereto as Exhibit D (collectively, the
"Employment Agreements").
(e) Opinion of Counsel to the Company. The Company shall have delivered
to 24/7 an opinion of Latham & Watkins and of Ballard Spahr Andrews & Ingersoll
LLP, counsel to the Company, dated the Closing Date, substantially in the form
attached hereto as Exhibit E and Exhibit F, respectively.
(f) 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.
-31-
(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
Company Documents, or which might have a Company Material Adverse Effect, which
in the reasonably exercised opinion of 24/7 makes it inadvisable to consummate
such transactions.
(h) 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 Charter, By-Laws 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.
(i) 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 is
reasonably likely to produce such result.
(j) 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; provided, that any such change,
occurrence or circumstance in the business, results of operations or financial
condition of the Company that is the subject of the side letter referred to in
Section 6(d) shall not be considered a Company Material Adverse Effect for
purposes of this Section 6(j).
(k) 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 G (the "Release").
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(l) 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 consummation (with the exception of certain
consents listed in Exhibit B) of the Reorganization.
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.
(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
Agreements.
(e) 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 H.
(f) 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.
-33-
(g) 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.
(h) 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.
(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 the Company and such counsel shall have been
furnished with such certificates, instruments and documents as it shall have
reasonably requested.
(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 governmental or regulatory
authority or court, which would (i) render any party hereto unable to consummate
the Merger or (ii) make such consummation illegal.
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;
(iii) The opinion of Latham & Watkins, counsel to the Company;
(iv) The opinion of Ballard Spahr Andrews & Ingersoll LLP, counsel
to the Company;
(v) The certificates referred to in Sections 6(c) and 6(m), duly
executed;
(vi) The Release;
(vii) The Escrow Agreement;
-34-
(viii) The minute books of the Company;
(ix) Duly executed resignations of all officers and fiduciaries of
the Company;
(x) A capitalization table, adjusted to show the transactions
consummated at Closing;
(xi) The Reorganization documents; and
(xii) The closing balance sheet of the Company, adjusted to show the
Reorganization on a pro forma basis.
(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(f)(ii);
(ii) The Employment Agreements;
(iii) The opinion of Proskauer Rose LLP, counsel to 24/7 and the
Subsidiary;
(iv) The Escrow Agreement; and
(v) The certificate referred to in Section 7(c) hereof, duly
executed.
9. Restrictive Covenants: Confidentiality.
(i) Each of the Stockholders and IMAKE Consulting absolutely and
unconditionally agree that, for a period of three years from the date hereof
(the "Non-Competition Period"), he/she or it will not, (a) directly or
indirectly, either of his/her or its own account or for the benefit of any
person, firm or corporation, engage in as a director, employee or consultant for
any business that is in competition with the business of the Company immediately
prior to the Closing Date or 24/7's business of selling internet advertising on
behalf of affiliates web sites and offering email and related customer
management services (the "Business"); and (b) directly or indirectly, solicit
24/7's employees or independent agents so as to induce them to leave their
employment or relationship with 24/7.
(ii) During the Non-Competition Period, each of the Stockholders shall
not directly or indirectly own or be a stockholder, partner of, or otherwise
participate in any company
-35-
that is engaged in business activities that are competitive to the Business.
Notwithstanding the above, Executive may hold up to a one percent interest in
any such publicly held or traded company and shall have an unlimited right to
invest in any mutual fund which is publicly traded or managed by a major
financial institution.
(iii) 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.
(iv) 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.
11. Covenant Regarding Tax Free Reorganization Treatment. 24/7 agrees not
to take any action, or fail to take any action, prior to or after the Effective
Time that would cause the Merger to fail to qualify as a "reorganization" under
Section 368(a) of the Code. The Stockholders and 24/7 shall cause all tax
returns relating to the Company, the Subsidiary and 24/7 to be filed on the
basis of treating the Merger as a "reorganization" under Section 368(a) of the
Code. 24/7 shall not claim any tax deduction based on treatment of any portion
of the
-36-
Merger Consideration as either (A) imputed interest or (B) consideration for a
restrictive covenant. Notwithstanding anything to the contrary contained in this
Agreement, this Section 11 shall remain in full force and effect until 90 days
after the expiration of the applicable statute of limitations.
12. Covenant of IMAKE Consulting. IMAKE Consulting covenants and agrees
that any revenues it receives after the Closing Date, which revenues are
generated any agreement for which a consent to transfer was not received on or
prior to the Closing Date, as well as those assignments listed in the footnotes
to Schedule 1(f)(ii), shall be promptly assigned to the Surviving Corporation.
13. Covenant of 24/7. 24/7 covenants and agrees that any revenues received
by the Surviving Corporation after the Closing Date, which revenues are listed
in the footnotes to Schedule 1(f)(ii), shall be promptly assigned to IMAKE
Consulting.
14. Indemnification by the Stockholders and IMAKE Consulting. IMAKE
Consulting and the Stockholders shall jointly and severally, indemnify, defend
and hold harmless 24/7 and its affiliates (including, the Subsidiary and the
Surviving Corporation), 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 or the Stockholders 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 1 (a "Stockholder Breach"); (ii) any breach or
nonfulfillment of any covenant or agreement made by the Company or the
Stockholders in any of the Company Documents; (iii) the claims of any broker or
finder engaged by the Company; or (iv) the Reorganization, including, without
limitation, any taxes that are incurred by the Company as a result of the
Reorganization, or any failure to consummate the Reorganization (v) the
operations, liabilities, obligations of the Financial Business prior to, on, or
after the Closing Date, or (vi) any liabilities and obligations of the Company
or the Media Business arising prior to the Closing Date that do not appear on
the Compiled Balance Sheet, the Schedules attached hereto, or the compiled
balance sheet of the Company as of December 31, 1999, including, without
limitation, any liabilities arising out of the performance or nonperformance by
the Company prior to the Closing Date under any contracts entered into by the
Company prior to the Closing Date.
15. Indemnification by 24/7. 24/7 shall indemnify, defend and hold harmless
the Stockholders and IMAKE Consulting, 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.
-37-
16. Further Provisions Regarding Indemnification.
(a) Survival.
(i) All representations and warranties 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 June 30, 2001, notwithstanding any
examination or investigation made by or for any party; provided, however that
(A) the representations and warranties contained in Sections 2(i), 2(p) and 3(i)
shall remain in full force and effect until 90 days after the expiration of the
applicable statute of limitations; (B) the representations and warranties
contained in Sections 2(a), 2(b), 2(c) and 2(d) shall remain in full force and
effect indefinitely; and (C) the representations and warranties contained in
Section 2(l) shall remain in full force and effect until the fifth anniversary
following the Closing Date.
(b) Limitations. Notwithstanding the foregoing,
(i) the indemnification in Sections 14 and 15, as the case may be,
shall be the exclusive remedy of the Stockholders, IMAKE Consulting and of 24/7
and its affiliates with respect to claims for Losses;
(ii) the indemnification provided for in Section 14(i) above shall
not be required unless and until, at the time of any such determination, the
total amount of Losses otherwise subject to indemnification under Section 14
exceeds $500,000, in which event the indemnified party or parties will be
entitled to indemnification for the amount of their Losses arising under Section
14(i) in excess of such amount; 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 amount;
(iii) the total amount of indemnification provided by the
Stockholders pursuant to Section 14(i) shall in no event exceed an amount equal
to 75% of the number of shares of 24/7 Common Stock actually deliverable to the
Stockholders, multiplied by the average of the closing prices per share of the
24/7 Common Stock on the five trading days from the Effective Date;
(iv) 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 14(i)
or 15(i), as applicable, unless it shall have given written notice to the
indemnifying party, setting forth its claim for indemnification in reasonable
detail, within the period from the Closing Date until the applicable period of
survival as set forth in Section 16(a) hereof;
(v) 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
-38-
under the provisions of Sections 14 or 15. If the indemnifying party, within 30
days after the indemnified party has given such notice (or within such shorter
period of time as an answer or other responsive motion may be required), shall
have acknowledged in writing his or its obligation to indemnify, then the
indemnifying party shall have the right to control the defense of such claim or
proceeding, and the indemnifying party shall not settle or compromise such claim
or proceeding without the written consent of the indemnified party. The
indemnified party may in any event participate in any such defense with his or
its own counsel and at his or its own expense; and
(vi) 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) Offset Procedures. Without limiting any rights or remedies
available to 24/7, in accordance with the provisions of the Escrow Agreement,
24/7 shall be entitled, from time to time, to receive from the Escrow Agent or
to otherwise offset from any other shares deliverable hereunder, 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 14 above, all as
more fully set forth in the Escrow Agreement. For purposes of this Section 16(c)
and the Escrow 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 Agreement.
(d) 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
Agreement, and the releases of shares provided for in Sections 1(f) and 16(c)
shall be governed by the provisions of the Escrow Agreement. 24/7 and the
Company agree to promptly deliver a written notice to the Stockholders upon any
determination that a claim for Losses under Section 14 or 15 is reasonably
likely to exist.
(e) 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 Charter or Bylaws of the Company for the benefit of any
individual who served as officer of the Company at any 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.
-39-
17. Resale Restrictions.
(a) During the period of one year after the Effective Date, each
Stockholder will not sell, offer to sell, solicit an offer to buy, contract to
sell, pledge, hypothecate, lend, transfer, grant an option for the sale of, or
otherwise transfer or dispose of, or cause the transfer or disposition of, or
enter into any hedging or other derivative transaction for, any shares of 24/7
Common Stock, or any securities convertible into or exchangeable or exercisable
for any shares of 24/7 Common Stock (for purposes of this Section 17, "dispose
of"), in each case, whether held by the undersigned on the date hereof or
hereafter acquired, with respect to any shares of 24/7 Common Stock or any
securities convertible into or exchangeable or exercisable for any shares of
24/7 Common Stock. In accordance with the terms of this Section 17(a), the
Stockholders may dispose of the 400,000 shares of 24/7 Common Stock issued to
the Stockholders on the Closing Date and up to an additional 440,000 shares of
the 24/7 Common Stock issued to the Stockholders on or prior to November 30,
2000, one year after the Closing Date (the "Disposable Shares").
(b) In addition to the restriction in Section 17(a), during the period
commencing on the Closing Date and ending on June 30, 2001, the Stockholders may
not dispose of the remaining shares of 24/7 Common Stock , consisting of up to
440,000 shares of 24/7 Common Stock, to be received by such Stockholder during
such period; provided, that this Section 17(b) does not apply to the Disposable
Shares.
(c) If, at the expiration of the applicable restrictions in Sections
17(a) and 17(b), Rule 144 of the Securities Act does not permit the sale of such
shares, 24/7 will offer the Stockholders "piggyback" registration rights on
customary terms and conditions.
18. Notices. All notices or other communications in connection with this
Agreement shall be in writing and shall be considered given when personally
delivered or three days after when mailed by registered or certified mail,
postage prepaid, return receipt requested, or by overnight courier as follows:
If to the Company:
IMAKE Software & Services, Inc. \
6700 Rockledge Drive
Bethesda, MD 20817
Attn: President
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W., Suite 1300
Washington, D.C. 20004
Attn: James F. Rogers
-40-
If to 24/7 or the Subsidiary:
24/7 Media, Inc.
1250 Broadway, 28th Floor
New York, NY 10001
Attn: General Counsel
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attn: Ronald R. Papa, 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 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 18.
19. Termination. This Agreement shall terminate if the Merger shall have
not been declared effective and consummated by March 31, 2000.
20. Entire Agreement. This Agreement (which includes the schedules and
exhibits hereto), sets forth the parties' final and entire agreement with
respect to its subject matter and supersedes any and all prior and
contemporaneous understandings, representations, warranties and agreements
(whether oral or written) with respect to the subject matter herein, other than
the Non-Solicitation and Confidentiality Agreement between 24/7 and the Company.
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.
21. 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.
-41-
22. 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.
23. 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) 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.
24. 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.
25. 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.
26. Governing Law and Consent to Jurisdiction. This Agreement shall be
governed by and construed and interpreted in accordance with the internal laws
of the State of New York. The state courts of the State of New York in New York
County and, if the jurisdictional prerequisites exist at the time, the United
States District Court for the Southern District of New York, shall have sole and
exclusive jurisdiction to hear and determine any dispute or controversy arising
under or concerning this Agreement. In any action or proceeding concerning such
dispute or controversy, the parties consent to such jurisdiction and waive
personal service of any summons, complaint or other process; a summons or
complaint in any such action or proceeding may be served by mail in accordance
with Section 18.
27. 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.
-42-
28. 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 which are the subject of the statements which are "known" by the
Subsidiary or made to the "knowledge" or "knowledge" of the Subsidiary.
29. No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Section 16(e) above concerning indemnification are intended for
the benefit of the individuals specified therein and their respective legal
representatives.
[Signature pages to follow]
-43-
[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:
-------------------------------
Name: David J. Moore
Title: Chief Executive Officer
MERCURY HOLDING COMPANY
By:
----------------------------
Name: David J. Moore
Title: President
IMAKE SOFTWARE & SERVICES, INC.
By:
----------------------------
Name:
Title:
IMAKE CONSULTING, INC.
By:
----------------------------
Name:
Title:
-44-
INDIVIDUAL STOCKHOLDERS:
-------------------------------
Mark L. Schaszberger
-------------------------------
Trami Tran
-45-
SCHEDULES
Schedule 1 Ownership Table and Merger Consideration
Schedule 1(e) Directors and Officers
Schedule 1(f)(ii) Invoices and Budgeted Projects
Schedule 2(a) Organization and Qualification
Schedule 2(c) Conflicts, Required Filings and Consents
Schedule 2(d) Options and Reserved Shares
Schedule 2(g) Liabilities
Schedule 2(h) No Adverse Change
Schedule 2(i) Taxes
Schedule 2(j) Title to Properties; Absence of Encumbrances
Schedule 2(k) Real and Personal Property
Schedule 2(l)(i) Patents, Trademarks and Copyrights
Schedule 2(l)(iv) Third Party Intellectual Property
Schedule 2(l)(x) No Trade Violations
Schedule 2(m) Contracts, Leases, Licenses and Commitments; Customers
and Suppliers
Schedule 2(n) Permits; Compliance with Laws
Schedule 2(p) Employee Benefits Plans
Schedule 2(q) Insurance
Schedule 2(r) Litigation
Schedule 2(u) Transactions with Affiliates
Schedule 2(x) Officers and Directors, Bank Accounts, etc.
Schedule 2(y) Year 2000
Schedule 4(c) Conduct of Business
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Reorganization
Exhibit C Form of Employment Agreement
Exhibit D Form of Non-Competition and Non-Disclosure Agreement
Exhibit E Opinion of Latham & Watkins
Exhibit F Opinion of Ballard Spahr Andrews & Ingersoll
Exhibit G Release
Exhibit H Opinion of Proskauer Rose LLP
TABLE OF CONTENTS
Page
1. The Merger............................................................-1-
(a) The Merger.......................................................-1-
(b) Effective Time; Closing..........................................-2-
(c) Effect of the Merger.............................................-2-
(d) Certificate of Incorporation; Bylaws.............................-2-
(e) Directors and Officers...........................................-2-
(f) Consideration; Conversion of Securities..........................-2-
(g) Surrender and Payment............................................-6-
(h) Reorganization...................................................-7-
2. Representations and Warranties of the Company and the Stockholders....-7-
(a) Organization and Qualification; Organizational Documents.........-7-
(b) Ownership and Delivery of the Shares; Authority Relative to
this Agreement.................................................-8-
(c) No Conflicts, Required Filings and Consents......................-8-
(d) Capitalization...................................................-9-
(e) Subsidiaries and Affiliates.....................................-10-
(f) Financial Statements; Accounts Receivable.......................-10-
(g) Liabilities.....................................................-10-
(h) No Adverse Change...............................................-10-
(i) Taxes...........................................................-11-
(j) Title to Properties; Absence of Encumbrances....................-12-
(k) Real and Personal Property......................................-12-
(l) Patents, Trademarks and Copyrights..............................-13-
(m Contracts, Leases, Licenses and Commitments; Customers
and Suppliers.................................................-16-
(n) Permits; Compliance with Laws...................................-16-
(o) Employees.......................................................-17-
(p) Employee Benefit Plans..........................................-17-
(q) Insurance.......................................................-19-
(r) Litigation......................................................-19-
(s) Environmental Matters...........................................-19-
(t) Restrictions on Business Activities.............................-19-
(u) Transactions with Affiliates....................................-20-
(v) Books and Records...............................................-20-
(w) Improper Payments...............................................-20-
(x) Officers, Bank Accounts, etc....................................-20-
(y) Year 2000.......................................................-21-
(z) Disclosure......................................................-22-
(aa) Legends.........................................................-22-
(bb) Condition and Sufficiency of Assets.............................-22-
-i-
(cc) Acquisition of Stock for Investment.............................-22-
(dd) Hart-Scott-Rodino...............................................-23-
3. Representations and Warranties of 24/7 and the Subsidiary............-23-
(a) Organization and Qualification; Organizational Documents........-23-
(b) Authority Relative to this Agreement............................-24-
(c) No Conflict, Required Filings and Consents......................-24-
(d) Capitalization..................................................-25-
(e) SEC Filings, Financial Statements...............................-26-
(f) No Adverse Change...............................................-26-
(g) Litigation......................................................-27-
(h) Ownership of the Subsidiary; No Prior Activities................-27-
(i) Taxes...........................................................-27-
4. Covenants of the Company.............................................-28-
(a) Actions.........................................................-28-
(b) Access by 24/7..................................................-28-
(c) Conduct of Business.............................................-28-
(d) Notification of Certain Matters.................................-29-
(e) Further Action..................................................-29-
(f) Public Announcements............................................-30-
(g) Government Compliance...........................................-30-
5. Covenants of 24/7 and the Subsidiary.................................-30-
(a) Actions.........................................................-30-
(b) Notification of Certain Matters.................................-30-
(c) Further Action..................................................-30-
(d) Public Announcements............................................-30-
(e) Government Compliance...........................................-30-
(f) Employee Rights.................................................-31-
6. Conditions Precedent to Obligations of 24/7 and the Subsidiary.......-31-
(a) Representations and Warranties..................................-31-
(b) Performance by the Company......................................-31-
(c) Certificate.....................................................-31-
(d) Employment Agreement............................................-31-
(e) Opinion of Counsel to the Company...............................-31-
(f) Consents........................................................-31-
(g) Litigation......................................................-32-
(h) Proceedings.....................................................-32-
(i) No Violation....................................................-32-
(j) Material Adverse Change.........................................-32-
(k) Release.........................................................-32-
(l) Certificate.....................................................-33-
-ii-
7. Conditions Precedent to Obligations of the Company...................-33-
(a) Representations and Warranties..................................-33-
(b) Performance by 24/7 and the Subsidiary..........................-33-
(c) Certificate.....................................................-33-
(d) Employment Agreement............................................-33-
(e) Opinion of Counsel to 24/7 and the Subsidiary...................-33-
(f) Litigation......................................................-33-
(g) Material Adverse Change.........................................-34-
(h) Consents........................................................-34-
(i) Proceedings.....................................................-34-
(j) No Violation....................................................-34-
8. Closing Deliveries...................................................-34-
(a) Deliveries of the Company.......................................-34-
(b) 24/7 and Subsidiary Deliveries..................................-35-
9. Restrictive Covenants: Confidentiality...............................-35-
10. Brokers..............................................................-36-
11. Covenant Regarding Tax Free Reorganization Treatment.................-36-
12. Covenant of IMAKE Consulting.........................................-37-
13. Covenant of 24/7.....................................................-37-
14. Indemnification by the Stockholders and IMAKE Consulting.............-37-
15. Indemnification by 24/7..............................................-37-
16. Further Provisions Regarding Indemnification.........................-38-
(a) Survival........................................................-38-
(b) Limitations.....................................................-38-
(c) Offset Procedures...............................................-39-
(d) Delivery of Notice..............................................-39-
(e) Indemnification of Directors and Officers of the Company........-39-
17. Resale Restrictions..................................................-40-
18. Notices..............................................................-40-
19. Termination..........................................................-41-
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20. Entire Agreement.....................................................-41-
21. Successors...........................................................-41-
22. Paragraph Headings...................................................-42-
23. Other Discussions....................................................-42-
24. Fees and Expenses....................................................-42-
25. Severability.........................................................-42-
26. Governing Law and Consent to Jurisdiction............................-42-
27. Counterparts.........................................................-42-
28. Definition of Knowledge..............................................-43-
29. No Third-Party Beneficiaries.........................................-43-
-iv-
Agreement and Plan of Merger - 24/7 Media Inc., IMAKE Software & Services Inc., IMAKE Consulting Inc., Mark L. Schaszberger and Trami Tran
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