AGREEMENT AND PLAN OF MERGER
By and Among
24/7 Media, Inc.,
Killer-App Holding Corp.
Sabela Media, Inc.
and
James Green, Freshwater Consulting Ltd. and Galmos Holdings Ltd.
Dated as of January 9, 2000
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AGREEMENT AND PLAN OF MERGER, dated as of January 9, 2000 (this
"Agreement"), by and among 24/7 Media, Inc., a Delaware corporation ("24/7"),
Killer-App Holding Corp., a Delaware corporation and a wholly-owned subsidiary
of 24/7 (the "Subsidiary"), Sabela Media, Inc., a Delaware corporation (the
"Company"), James Green ("Green"), Freshwater Consulting Ltd. ("Freshwater") and
Galmos Holdings Ltd. ("Galmos," and Green, Freshwater and Galmos are referred to
collectively as the "Stockholders").
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), 24/7, Subsidiary and the Company intend to enter into
a business combination transaction;
WHEREAS, the Board of Directors of the Company (i) has determined that the
Merger (as defined below) is fair to, and in the best interest of, the Company
and its stockholders, and (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement;
WHEREAS, the holders of a majority of the outstanding shares of the capital
stock of the Company have authorized, approved and adopted this Agreement, the
Merger and the other transactions contemplated by this Agreement;
WHEREAS, the Boards of Directors of 24/7 and the Subsidiary (i) have
determined that the Merger is fair to, and in the best interest of, 24/7, the
Subsidiary and their stockholders, and (ii) have approved this Agreement, the
Merger and the other transactions contemplated by this Agreement;
WHEREAS, each Stockholder is the owner of such number of shares of capital
stock (the "Shares") of the Company as is set forth in Schedule 1 hereto (the
"Ownership Table");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, 24/7,
the Subsidiary and the Company hereby agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2(a))
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, the Subsidiary shall be merged with and
into the Company (the "Merger"), 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."
1.2 Effective Time; Closing.
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(a) As promptly as practicable after the Closing (as defined in
Section 1.2(b)), the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, Delaware Law (the "Certificate of Merger"). When used in
this Agreement, the term "Effective Time" shall mean the date and time at which
the Merger shall become effective under Delaware Law.
(b) 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, on the date hereof, or at another time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver, as the case may be, of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the rights, privileges, powers, franchises
and property of the Subsidiary and the Company shall vest in the Surviving
Corporation, and all restrictions, disabilities, duties, debts and liabilities
of the Subsidiary and the Company shall become the restrictions, disabilities,
duties, debts and liabilities of the Surviving Corporation.
1.4 Certificate of Incorporation; By-Laws.
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(a) At the Effective Time, the Certificate of Incorporation of
the Subsidiary, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation, and shall
continue in full force and effect until thereafter amended; provided, however,
that at the Effective Time Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read: "The name of the corporation is
Sabela Media, Inc."
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(b) At the Effective Time, the Bylaws of the Subsidiary, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The directors and officers of the
Subsidiary shall be the directors and officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Subsidiary, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of common
stock, par value $0.001 per share, of the Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Time, other than any
shares of Company Common Stock to be canceled pursuant to Section 1.6(c), will
be canceled and extinguished and automatically converted (subject to Sections
1.6(e) and (f)) into the right to receive (the "Exchange Ratio") (i) 0.1104 of a
share of validly issued, fully paid and nonassessable common stock, par value
$0.01 per share, of 24/7 (the "24/7 Common Stock"), and (ii) U.S. $0.2051, upon
surrender of the certificates representing such shares of Company Common Stock.
(b) (i) The Company's obligations with respect to each
outstanding option, as set forth on Schedule 1.6(b) hereto (the "Assumed
Options") other than those options designated on such schedule as "non-assumed
options" (the "Non-assumed Options"), to purchase shares of common stock of the
Company issued pursuant to the Company's 1999 Stock Option/Stock Issuance Plan
(the "Company Option Plan"), whether vested or unvested, shall, by virtue of
this Agreement and without any further action of the Company, 24/7 or the holder
of any Assumed Option, be assumed by 24/7 under its 1998 Stock Incentive Plan.
Unless otherwise elected by 24/7 prior to the Effective Time, 24/7 shall make
such assumption in such manner that (i) 24/7 is a corporation "assuming a stock
option in a transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code or (ii) to the extent that Section 424 of the Code does
not apply to such Assumed Option, 24/7 would be such a corporation were Section
424 of the Code applicable to such Assumed Option; and, if not so otherwise
elected, after the Effective Time, all references to the Company Option Plan
shall be deemed to refer to 24/7's 1998 Stock Incentive Plan as of the Effective
Time by virtue of this Agreement and without any further action. In connection
therewith, the Company shall, and hereby does, assign to 24/7 effective at the
Closing any and all "repurchase rights" of the Company with respect to the
Assumed Options and Option Shares. "Option Shares" means shares of Company
Common Stock purchased upon exercise of options under the Company Option Plan
prior to vesting of such options.
(ii) Each Assumed Option so assumed by 24/7 under this
Agreement shall continue to have, and be subject to, similar terms and
conditions set forth in the Company Option Plan as in effect immediately prior
to the Effective Time, except that (i) such
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Assumed Option shall be governed by 24/7's 1998 Stock Incentive Plan, (ii) such
Assumed Option will be exercisable for that number of shares of 24/7 Common
Stock equal to the product of the number of shares of common stock of the
Company that were purchasable under such Assumed Option immediately prior to the
Effective Time multiplied by 0.1146 (the "Option Ratio"), rounded to the nearest
whole number of shares of 24/7 Common Stock, and (iii) the per share exercise
price for the shares of 24/7 Common Stock issuable upon exercise of such Assumed
Option will be equal to the exercise price per share of common stock of the
Company at which such Assumed Option was exercisable immediately prior to the
Effective Time divided by the Option Ratio, and rounding the resulting exercise
price up to the nearest whole cent.
(iii) As soon as reasonably practicable after the Effective
Time, the Company will deliver to Assumed Option holders appropriate notices
setting forth such holders' rights pursuant to 24/7's 1998 Stock Incentive Plan
and confirming that the Assumed Options have been assumed by 24/7 under its 1998
Stock Incentive Plan in accordance with the terms and conditions required by
this Section 1.6(b).
(iv) 24/7 shall not assume any obligations of the Company
with respect to the Non-assumed Options. Each holder of Non-assumed Options
shall be given the opportunity to exercise such Non-assumed Option effective
immediately prior to the Effective Time.
(c) Cancellation of Company-Owned Stock. Each share of Company
Common Stock held by the Company immediately prior to the Effective Time shall
be canceled and extinguished without any conversion thereof.
(d) Capital Stock of the Subsidiary. Each share of common stock,
par value $0.01 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
$0.01 per share, of the Surviving Corporation. Each stock certificate of the
Subsidiary evidencing ownership of any such shares shall evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) Fractional Shares. No fraction of a share of 24/7 Common
Stock shall be issued by virtue of the Merger, but in lieu thereof each holder
of a share of Company Common Stock who would otherwise be entitled to a fraction
of a share of 24/7 Common Stock (after aggregating all fractional shares of 24/7
Common Stock that otherwise would be received by such holder) shall receive from
24/7 an amount of cash (rounded to the nearest whole cent) equal to the product
of (i) such fraction, multiplied by (ii) the average closing price of one share
of 24/7 Common Stock for the ten (10) most recent days that 24/7 Common Stock
has traded ending on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market System ("Nasdaq").
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the appropriate effect of any stock split, reverse
stock split, stock
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dividend (including any dividend or distribution of securities convertible into
24/7 Common Stock), reorganization, recapitalization, reclassification or other
like change with respect to 24/7 Common Stock occurring on or after the date
hereof and prior to the Effective Time.
(g) All Other Capital Stock of the Company. All other capital
stock of the Company shall be canceled and retired and shall cease to exist, and
no consideration shall be issued or delivered in exchange therefor.
1.7 Surrender and Payment.
---------------------
(a) The Merger Consideration delivered upon the surrender for
exchange of the shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares, and after the Effective Time, there shall be no
further registration or transfers of shares of Company Common Stock outstanding
prior to the Closing Date. If after the Effective Time certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
(b) If certificates for shares of 24/7 Common Stock are to be
issued in the name of a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of the issuance
thereof that the Certificates so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
exchange shall have paid to 24/7 or any agent designated by it any transfer or
other taxes required by reason of the issuance of certificates for shares of
24/7 Common Stock in the name of a person other than the registered holder of
the Certificate surrendered or shall have established to the satisfaction of
24/7 or any agent designated by it that such tax either has been paid or is not
applicable.
1.8 Escrow Indemnity Account. Promptly after the Closing Date, 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 Indemnity Agreement"), a certificate representing 312,588 shares of
24/7 Common Stock otherwise deliverable to the Stockholders, to be held pursuant
to the provisions of the Escrow Indemnity Agreement to be held in an escrow
account (the "Escrow Indemnity Account") pursuant to the terms of the Escrow
Indemnity Agreement.
1.9 Dissenters' Rights. The holders of shares of Company Common Stock as
to which dissenters' rights shall have been duly demanded under applicable law
("Dissenting Shares"), if any, shall be entitled to payment by the Surviving
Corporation only of the fair value of such shares plus accrued interest to the
extent permitted by and in accordance with the provisions of applicable law;
provided, however, that (i) if any holder of the Dissenting Shares shall, under
the circumstances permitted by applicable law, subsequently deliver a written
withdrawal of such holder's demand or (ii) if any holder fails to establish such
holder's
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entitlement to rights to payment as provided under applicable law, such holder
or holders (as the case may be) shall forfeit such right to payment for such
shares and such shares shall thereupon be deemed to have been converted into
24/7 Common Stock as of the Effective Time.
1.10 Lost, Stolen or Destroyed Certificates. If any Certificates shall
have been lost, stolen or destroyed, 24/7 shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, the Merger Consideration; provided, however, that 24/7
may, in its discretion and as a condition precedent to the issuance and delivery
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against 24/7 or the Company with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and the Subsidiary, the officers and
directors of the Company and the Subsidiary are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action. 24/7 shall cause the Subsidiary to perform all of
its obligations relating to this Agreement and the transactions contemplated
hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in that section of the document of even date herewith
delivered by the Company to 24/7 prior to the execution and delivery of this
Agreement (the "Company Disclosure Schedule") corresponding to the section of
this Agreement to which any of the representations and warranties specifically
relate or as disclosed in another section of the Company Disclosure Schedule if
it is reasonably apparent on the face of the disclosure that it is applicable to
another section of this Agreement, the Company and the Stockholder represent and
warrant to 24/7 as follows:
2.1 Organization and Qualification; Subsidiaries. The Company and each
of its subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite power and authority to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted and as currently proposed to be conducted,
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not reasonably be expected to 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 ("Company Material
Adverse Effect"). The Company and each of its subsidiaries is duly qualified or
licensed
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as a foreign corporation or other legal entity to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not reasonably be expected
to have a Company Material Adverse Effect. A true and complete list of all of
the Company's subsidiaries, together with the jurisdiction of incorporation of
each subsidiary and the percentage of each subsidiary's outstanding capital
stock owned by the Company or another subsidiary, is set forth in Section 2.1 of
the Company Disclosure Schedule. Except as set forth in Section 2.1 of the
Company Disclosure Schedule, the Company does not, directly or indirectly, own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
2.2 Certificate of Incorporation and By-Laws. The Company has heretofore
furnished to 24/7 a complete and correct copy of its Certificate of
Incorporation (certified by the Secretary of State of the State of Delaware) and
By-Laws, as amended to date, and a complete and correct copy of the equivalent
organizational documents of each of its subsidiaries. Such Certificate of
Incorporation, By-Laws and equivalent organizational documents of the Company
and each of its subsidiaries are in full force and effect. Neither the Company
nor any of its subsidiaries is in violation of any of the provisions of its
respective Certificate of Incorporation or By-Laws or equivalent organizational
documents.
2.3 Company Capital Structure.
-------------------------
(a) The authorized capital stock of the Company consists of
96,000,000 shares of Company Common Stock, of which there were 10,335,233 shares
issued and outstanding as of date hereof. All of the outstanding shares of
Company Common Stock and preferred stock and all of the outstanding shares of
capital stock of each of the Company's subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive or
similar rights created by statue, the Certificate of Incorporation or Bylaws of
the Company or any of its subsidiaries or any agreement or document to which the
Company or any subsidiary is a party or by which any of them is bound. As of the
date of this Agreement there were no shares of Company Common Stock held in
treasury by the Company.
(b) Immediately prior to the execution of this Agreement
1,329,910 shares of Company Common Stock are issuable pursuant to outstanding
options (whether or not currently exercisable) to purchase Company Common Stock
granted under the Company stock option plans for an aggregate exercise price of
$1,329,901, all of which shares of Company Common Stock were reserved for
issuance pursuant to the Company Option Plan.
(c) As of the date of this Agreement 952,414 shares of Company
Common Stock are issuable pursuant to outstanding warrants (whether or not
currently exercisable) to purchase Company Common Stock for an aggregate
exercise price of $1,047,655.
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2.4 Obligations with Respect to Capital Stock. Except as set forth in
Section 2.3 of this Agreement, there are no equity securities, partnership
interests or similar ownership interests of any class of any Company equity
security, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except for securities which the
Company owns free and clear of all claims and Encumbrances (as defined below),
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class of
equity security of any subsidiary of the Company, or any security exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. For the purposes of this Agreement "Encumbrances" means any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset) but does not include liens imposed by law in respect of
obligations not yet due which are owed in respect of taxes or which otherwise
are owed to carriers, warehousepersons or laborers. Except as set forth in
Section 2.3 of this Agreement, there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
(contingent or otherwise) to which the Company or any of its subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
subsidiaries to (i) issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries; (ii)
grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement; or (iii)
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any subsidiary or any other entity other than
guarantees of bank obligations of subsidiaries entered in the ordinary course of
business. As of the date of this Agreement, there is no voting trust, proxy or
other agreement or understanding to which the Company is a party or by which it
is bound with respect to any equity security of any class of the Company or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
2.5 Authority Relative to this Agreement; Ownership.
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(a) The Company has all requisite 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
action on the part of
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the Company, and no other proceedings are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby, except for the filing of
the Certificate of Merger pursuant to Delaware Law. 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, enforceable against the
Company in accordance with their respective terms, 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.
(b) The Board of Directors of the Company (including any required
committee or subgroup of the Board of Directors of the Company) at a meeting
duly called at which all members were present has (a) unanimously declared that
this Agreement, the Merger and the other transactions contemplated hereby are
fair to, and in the best interests of, the Company and its stockholders; (B)
authorized, approved and adopted this Agreement, the Merger and the other
transactions contemplated hereby; and (C) as of the date hereof, determined to
recommend that the stockholders of the Company approve and adopt this Agreement
and approve the Merger. None of the aforesaid actions by the Board of Directors
of the Company has been amended, rescinded or modified.
(c) The holders of at least a majority of the outstanding shares
of the Company Common Stock 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 Delaware Law to
cause the Merger to be effective at the Effective Time. No other vote of the
holders of any class or series of the Company's capital stock is necessary to
authorize, approve and adopt this Agreement and the Merger.
(d) 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 the Ownership Table, 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.
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2.6 No Conflicts, Required Filings and Consents.
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(a) The execution and delivery of this Agreement by the Company
do not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws of the
Company or equivalent organizational documents of any of its subsidiaries; (ii)
subject to compliance with the requirements set forth in Section 2.6(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which the Company or
its subsidiaries or any of their respective properties is bound or affected; or
(iii) except as set forth in Section 2.6 of the Company Disclosure Schedule,
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or impair the Company's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any of the properties or assets of
the Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of the subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective properties is bound or affected, except, in the case of clauses (ii)
and (iii), for such breaches, violations or defaults that would not have a
Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or declaration, registration
or filing with or notification to, any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic (a "Governmental Entity") except (i) such consents, approvals, orders,
authorizations, registrations and declarations and filings as may be required
under applicable federal and state securities (or related) laws, and (ii) such
consents, approvals, authorizations, filings and registrations which if not
obtained or made, would not prevent or delay consummation of the Merger or
otherwise prevent the Company from performing its obligations under this
Agreement.
2.7 Financial Statements. The Company has delivered to 24/7 a
consolidated balance sheet as at June 30, 1999, and as at each month-end
thereafter through December 31, 1999, and consolidated statements of income and
cash flow for the period from inception through June 30, 1999 and for each month
thereafter through December 31, 1999 (the "Company Financial Statements"). The
Company Financial Statements are in accordance with the books and records of the
Company, and reflect accurately in all material respects the financial position,
results of operations and changes in financial position of the Company as at the
dates and for the periods indicated. The Company maintains and will continue to
maintain an adequate system of internal financial and accounting controls. 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) except
as is disclosed in Section 2.7 of the Company Disclosure Schedule, are good and
collectible in full
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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.
2.8 No Undisclosed Liabilities. Except as is disclosed in Section 2.8 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) of the type
that are required to be disclosed in financial statements, including the notes
thereto, prepared in accordance with GAAP which are, individually or in the
aggregate, material to the business, operations or financial condition of the
Company and its subsidiaries taken as a whole, except liabilities (i) adequately
provided for or referred to in the Company's balance sheet and the related notes
thereto as of June 30, 1999 included in the Company Financial Statements (the
"Company Balance Sheet"), (ii) incurred since the date of the Company Balance
Sheet in the ordinary course of business and consistent with past practice and
(iii) incurred in connection with the transactions contemplated by this
Agreement. 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 Financial Statements or the notes
thereto, in accordance with GAAP.
2.9 Absence of Certain Changes or Events. Except as se forth in Section
2.9 of the Company Disclosure Schedule, since June 30, 1999, the Company has
conducted its business in the ordinary course and there has not occurred: (i)
any Company Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of any of the Company's capital stock, or any purchase,
redemption or other acquisition by the Company of any of its capital stock or
any other securities of the Company, (iii) any split, combination or
reclassification of any of the Company's capital stock, (iv) any amendments or
changes in the Certificate of Incorporation or By-Laws of the Company or any of
its subsidiaries; (v) any change by the Company in its accounting methods,
principles or practices except as required by GAAP; (vi) any revaluation by the
Company of any of its assets, including, without limitation, writing down the
value of capitalized software or inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or (vii) any sale or
transfer of a material amount of assets of the Company or any subsidiary.
2.10 Absence of Litigation. Section 2.10 of the Company Disclosure
Schedule 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, any of its subsidiaries or any of their
respective assets or, in connection with the Company's business, any of the
Company's or its subsidiaries' officers, directors or employees before any
Governmental Entity. Except as set forth in Section 2.10 of the Company
Disclosure Schedule, neither the Company nor, in connection with the Company's
business, any of the Company's or its subsidiaries' officers, directors or
employees is subject or party to any judgment, order, decree or other direction
of, or stipulation with, any Governmental Entity. 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
12
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.
2.11 Employee Benefit Plans.
----------------------
(a) 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 Internal Revenue
Code (the "Code") or Section 4001 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") (an "ERISA Affiliate"), maintains, sponsors,
contributes to, or has or has had an obligation to, or otherwise participated in
or participates in, or in any way, directly or indirectly, has or has had any
liability with respect to, any "employee benefit plan," as defined in Section
3(3) of ERISA, or any other bonus, profit sharing, pension, deferred
compensation, incentive, stock option, fringe benefit, health, welfare, change
in control, 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). 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. Section 2.11(a) of the Company Disclosure Schedule
contains a list of all Plans. A copy of each such Plan has previously been
delivered by the Company to 24/7.
(b) With respect to each of the Plans listed in Section 2.11(a)
of the Company Disclosure Schedule:
(i) 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, 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;
(ii) 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,
13
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;
(iii) no claim, lawsuit, arbitration or other action has
been asserted or instituted, or to the knowledge of the Company, 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;
(iv) 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;
(v) to the knowledge of the Company, 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
(vi) no Plan is under audit or to the knowledge of the
Company, 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.
(c) Neither the Company nor any ERISA Affiliate maintains,
contributes to or in any way provides for any benefits of any kind whatsoever
(other than under Section 4980B of the Code, the Federal Social Security Act or
a plan qualified under Section 401(a) of the Code) to any current or future
retiree or terminee. Neither the Company nor any ERISA Affiliate has any
unfunded liabilities pursuant to any Plan that is not intended to be qualified
under Section 401(a) of the Code.
2.12 Labor Matters. Section 2.12 of the Company Disclosure Schedule
contains a list of the names, office locations, compensation and years of
credited service for severance, vacation and pension plan purposes of all full-
and part-time employees of the Company as at December 31, 1999. The Company is
not a party to a collective bargaining agreement and 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.
2.13 Taxes. Except as disclosed in Section 2.13 of the Company Disclosure
Schedule, (A) the Company has timely and properly filed all federal, foreign,
state, local and
14
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 the Company
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 not
at any time consented to have the provisions of Section 341(f)(2) of the Code
apply to it; (F) 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; (G) 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.
2.14 Intellectual Property. 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.
15
"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.
"Company Registered Intellectual Property" means all of the
Registered Intellectual Property owned by, or filed in the name of, the Company.
(a) A list and brief description of the Company Registered
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 in
Section 2.14(a) of the Company Disclosure Schedule.
(b) No Company Intellectual Property owned or developed by the
Company 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.
(c) 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.
(d) 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 currently 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.
16
(e) The Company owns, and has good title to, or has valid and
sufficient licenses for all copyrightable works currently used in its business.
(f) Except as set forth in Section 2.14(f) of the Company
Disclosure Schedule, to the extent that any Intellectual Property currently used
in the Company's business has been developed or created by a third party for the
Company, the Company (or subsidiaries) has a written agreement with such third
party with respect thereto and the Company (or subsidiaries) either (i) has
obtained ownership of, and is the exclusive owner of all such third party
Intellectual Property, or (ii) has obtained a license (sufficient for the
conduct of its business as currently conducted) to all such third parties'
Intellectual Property by operation of law or by valid assignment or license, to
the fullest extent it is legally possible to do so.
(g) The Company has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property currently used in
the Company's business that is or was the Company Intellectual Property, to any
third party.
(h) All contracts, licenses and agreements relating to the
Company Intellectual Property currently used in the Company's business are in
full force and effect. The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of 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.
(i) 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, to the knowledge of the Company, 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.
(j) Except as provided in Section 2.14(j) of the Company
Disclosure Schedule, the Company has not received actual 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.
17
(k) To the knowledge of the Company, no person has or is
infringing, diluting or misappropriating any Company Intellectual Property or
unfairly competing with the Company.
(l) Except for the failure to require employees to execute a
proprietary information/confidentiality agreement, 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. Except under confidentiality obligations, there has not been
disclosure by the Company of any such trade secrets or confidential information.
2.15 Compliance; Permits; Restrictions.
---------------------------------
(a) Neither the Company nor any of its subsidiaries is in
conflict with, or in default or in violation of (i) any law, rule, regulation,
order, judgement or decree applicable to the Company or any of its subsidiaries
or by which the Company or any of its subsidiaries or any of their respective
business or properties is, or the Company believes is reasonably likely to be,
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
is bound or affected, except for conflicts, violations and defaults that
(individually or in the aggregate) would not reasonably be expected to have a
Company Material Adverse Effect. No investigation or review by any Governmental
Entity is pending or, to the Company's knowledge, has been threatened in a
writing delivered to the Company, against the Company or any of its
subsidiaries, nor, to the Company's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of the Company or any of its
subsidiaries. There is no agreement, judgment, injunction, order or decree
binding upon the Company or any of its subsidiaries which has or could
reasonably be expected to have (after giving effect to the Merger) the effect of
prohibiting or impairing any current or future business practice of the Company
or any of its subsidiaries, any acquisition of property by the Company or any of
its subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted or as currently proposed to be conducted.
(b) The Company and its subsidiaries hold, to the extent legally
required, all permits, licenses, variances, exemptions, orders and approvals
from Government Entities that are required for the operation of the business of
the Company as currently conducted (collectively, the "Company Permits") except
for such permits, the failure of which to hold would not reasonably be expected
to have a Company Material Adverse Effect. The Company and its subsidiaries are
in compliance in all respects with the terms of the Company Permits, except
where the failure to be in compliance with the terms of the Company Permits
would not reasonably be expected to have a Company
Material Adverse Effect.
18
2.16 Agreements, Contracts and Commitments. Except as otherwise set forth
in Section 2.16 of the Company Disclosure Schedule, as of the date hereof
neither the Company nor any of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
the Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than 30 days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit the Company's or any of its subsidiaries'
ability to terminate employees at will;
(b) any agreement of indemnification outside the ordinary course
of the Company's business or any guaranty;
(c) any agreement, contract or commitment containing any covenant
limiting the right of the Company or any of its subsidiaries to engage in any
line of business or to compete with any person or granting any exclusive
distribution rights;
(d) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of assets not in the ordinary
course of business or pursuant to which the Company or any of its subsidiaries
has any material ownership interest in any corporation, partnership, joint
venture or other business enterprise other than the Company's subsidiaries;
(e) any agreement, contract or commitment currently in force to
provide source code to any third party for any product or technology; or
(f) any other agreement, contract or commitment currently in
effect that is expected to represent more than 10% of the Company's revenue for
the calendar year 2000 or that requires the Company to make payments of greater
than $500,000 per year or more than $1,500,000 in the aggregate.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below) is in breach,
violation or default under, and neither the Company nor any of its subsidiaries
has received written notice that it has breached, violated or defaulted under,
any of the material terms or conditions of any of the agreements, contracts or
commitments to which the Company or any of its subsidiaries is a party or by
which it is bound that are required to be disclosed in the Company Disclosure
Schedule pursuant to clauses (a) through (f) above or pursuant to Section 2.14
hereof (any such agreement, contract or commitment, a "Company Contract") in
such a manner as would permit any other party to cancel or terminate any such
Company Contract, or would permit any other party to seek damages or other
remedies which would have a Company Material Adverse Effect. The Company
Contracts are in full force and effect and the Company and its subsidiaries have
19
performed all of the material obligations required to be performed by them and
are entitled to all accrued benefits under all the Company Contracts.
2.17 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) The Company owns no real property interests. Section 2.17(a)
of the Company Disclosure Schedule lists all real property leases to which the
Company is a party and each amendment thereto that is in effect as of the date
of this Agreement. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
which with notice or the lapse of time, or both, would constitute a default)
that would give rise to a material claim.
(b) The Company and each of its subsidiaries has good and valid
title to, or in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any Encumbrances,
except as reflected in the Company Financials. The Company's equipment and
assets (whether owned or leased) are in good operating condition and repair,
subject to ordinary wear and tear. 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 or its
subsidiaries.
2.18 Environmental Matters.
---------------------
(a) To the knowledge of the Company, all of the current
operations of the Company and each of its subsidiaries and their respective
assets, businesses and real property, including any operations at or from any
real property presently or formerly owned, used, leased, occupied, managed or
operated by the Company or any of its subsidiaries (collectively, the "Real
Property"), comply in all material respects and have at all times complied in
all material respects with all applicable Environmental Laws.
(b) To the knowledge of the Company, none of the assets of the
Company or any of its subsidiaries, nor any of the Real Property, contains any
Hazardous Substances in, on, over, under or at it, in concentrations which would
violate in any material respect any applicable Environmental Laws or reasonably
would be likely to result in the imposition of material liability or obligations
on the Company or any of its subsidiaries under any applicable Environmental
Laws, including any material liability or obligations for the investigation,
corrective action, remediation or monitoring of Hazardous Substances in, on,
over, under or at the Real Property. Neither the Company nor any of its
subsidiaries has received any written notice from any Governmental Entity or
third party of any actual or threatened Environmental Liabilities.
20
(c) To the knowledge of the Company, each of the Company and its
subsidiaries has all the permits, licenses, authorizations and approvals
necessary for the conduct of their businesses and for the operations on, in or
at the Real Property which are required under applicable Environmental Laws (the
"Environmental Permits") and they are in compliance in all material respects
with the terms and conditions of all such Environmental Permits. To the
knowledge of the Company, no reason exists why the Company would not be capable
of continued operation of its business in compliance in all material respects
with the Environmental Permits and the applicable Environmental Laws.
(d) To the knowledge of the Company, neither the Company nor any
of its subsidiaries has contractually, by operation of law, by the Environmental
Laws, by common law or otherwise assumed or succeeded to any Environmental
Liabilities of any predecessors or any other person or entity.
2.19 Insurance. The Company and its subsidiaries have, as of January 1,
2000, policies of insurance and bonds of the type and in amounts customarily
carried by persons conducting businesses or owning assets similar to those of
the Company and its subsidiaries. There is no material claim pending under any
of such policies or bonds as to which coverage had been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
subsidiaries are otherwise in compliance with the terms of such policies and
bonds. The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policies.
2.20 Change of Control Payments. Section 2.20 of the Company Disclosure
Schedule sets forth each plan or agreement pursuant to which any amounts may
become payable (whether currently or in the future) to current or former
officers and directors of the Company as a result of the Merger.
2.21 Interested Party Transactions. Except as provided in Section 2.21 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
are indebted to any director, officer, employee or agent of the Company or any
of its subsidiaries (except for amounts due as normal salaries and bonuses and
in reimbursement of ordinary expenses), and no such person is indebted to the
Company and its subsidiaries.
2.22 Books and Records. The minute books and records of the Company and
its subsidiaries made available to 24/7 have been maintained in accordance with
good business practices, contain a complete and accurate summary of all meetings
of the directors or actions by written consent since the time of organization of
the Company and its subsidiaries, and reflect all transactions referred to in
such minutes accurately in all material respects.
2.23 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
21
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.
2.24 Year 2000.
---------
(a) 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), except to the extent that such Computer Systems
receive data from third party computer systems that are not Year 2000 Compliant.
(b) The Company's supply of services through its Computer Systems
has not been and shall not be interrupted, delayed, decreased or otherwise
affected in any material respect by the failure of its Computer Systems to be
Year 2000 Compliant.
(c) To the knowledge of the Company, the Company's Computer
Systems 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.
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 an abnormal
ending or a termination of such function resulting from 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 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.
2.25 Disclosure. No representation, warranty or other written statement
by the Company herein contains or will contain an untrue statement of a material
fact or omits or will
22
omit to state a material fact necessary to make the statements contained herein
or therein not misleading.
2.26 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 its 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 Closing, and the Company has conducted, and continues to
conduct, its business only through the Company.
2.27 Hart-Scott Rodino. The Company has no other ultimate parent entity
and does 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 (the "Act"), and the regulations promulgated thereunder, and no filing
under such Act is required in connection with the transactions contemplated by
this Agreement.
2.28 Brokers. No broker, finder or investment banker, other than
Prudential Securities and Erland & Company, Inc., is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
2.29 Section 203 of the Delaware Law. The Board of Directors of the
Company has taken all actions so that the restrictions contained in Section 203
of the Delaware Law applicable to a "business combination" (as defined in such
Section 203) will not apply to the execution, delivery or performance of this
Agreement or to the consummation of the Merger or the other transactions
contemplated by this Agreement.
2.30 Expenses. The Company's expenses in connection with the negotiation
of this Agreement and the transactions contemplated hereby, including any fees
to Prudential Securities, shall not exceed $2.5 million, in the aggregate, and
an estimate thereof is set forth in Section 2.30 of the Company Disclosure
Schedule.
23
2.31 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 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF 24/7 AND THE SUBSIDIARY
24/7 and the Subsidiary hereby represent and warrant to the Company subject
to the exceptions specifically disclosed in writing in the disclosure letter
delivered by 24/7 to the Company dated as of the date hereof and certified by a
duly authorized officer of 24/7 (the "24/7 Disclosure Schedule"), as follows:
3.1 Organization and Qualification; Organizational Documents.
--------------------------------------------------------
(a) Each of 24/7 and the Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power and authority would not reasonably be
expected to have a material adverse effect on the business, results of
operations or financial condition of 24/7, taken as a whole, or on the ability
of the parties to consummate the transactions contemplated by this Agreement
("24/7 Material Adverse Effect"). Each of 24/7 and the Subsidiary is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not reasonably be expected
to have a 24/7 Material Adverse Effect.
(b) 24/7 has made available to the Company a complete and correct
copy of 24/7's and the Subsidiary's Certificate of Incorporation (certified by
the Secretary of State of the State of Delaware) and By-Laws, each as amended to
date. Such Certificates of Incorporation and By-Laws are in full force and
effect. Neither 24/7 nor the Subsidiary is in violation of any of the provisions
of its respective Certificate of Incorporation or By-Laws.
24
3.2 Capitalization.
--------------
(a) The authorized capital stock of 24/7 as of December 31, 1999
consisted of: (i) 70,000,000 shares of 24/7 Common Stock, of which 22,421,516
shares were issued and outstanding; and (ii) 10,000,000 shares of preferred
stock, par value $.01 per share, none of which were issued and outstanding,
subject to the issuance of capital stock in connection with the acquisition of
IMAKE Software & Services, Inc. All of the outstanding shares of 24/7 Common
Stock are duly authorized, validly issued and are fully paid and nonassessable
and are not subject to preemptive or similar rights created by statute, the
Certificate of Incorporation or By-Laws of 24/7 or any agreement or document to
which 24/7 is a party or by which it is bound. As of December 31, 1999, there
were options outstanding to purchase an aggregate of 3,235,538 shares of 24/7
Common Stock under 24/7's stock option plans. 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.
The Subsidiary was formed for the purpose of consummating the Merger and has no
material assets or liabilities except as necessary for such purpose.
(b) 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 nonassessable
3.3 Authority Relative to this Agreement.
------------------------------------
(a) Each of 24/7 and the Subsidiary has all necessary 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 24/7 and/or the Subsidiary in connection
herewith (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, except for the filing of the
Certificate of Merger pursuant to Delaware Law. Each of the 24/7 Documents to
which 24/7 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 are (or when executed and delivered will be) legal, valid and
binding obligations of 24/7 and/or the Subsidiary, enforceable against 24/7
and/or the Subsidiary in accordance with their respective terms, except as
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the enforcement of creditors' rights
generally and (ii) general principles of equity, regardless of whether asserted
in a proceeding in equity or at law.
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(b) The Board of Directors of 24/7 (and the Board of Directors of
the Subsidiary, as necessary) at a meeting duly called at which all members were
present has (i) unanimously declared that this Agreement, the Merger and the
other transactions contemplated hereby are fair to and in the best interests of
24/7 and its stockholders; and (ii) authorized, approved and adopted this
Agreement, the Merger and the other transactions contemplated hereby. None of
the aforesaid actions by the Board of Directors of 24/7 has been amended,
rescinded or modified.
3.4 No Conflict, Required Filings and Consents.
------------------------------------------
(a) 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, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of 24/7 or the Subsidiary; (ii) subject to compliance
with the requirements of Section 3.4(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 (iii) 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 an Encumbrance on
any of the properties or assets of 24/7 or the Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which 24/7 or the Subsidiary is a
party or by which 24/7 or the Subsidiary or any of their respective properties
is bound or affected, except in any such case for any such breaches, violations
or defaults that would not have a 24/7 Material Adverse Effect.
(b) The execution and delivery of this Agreement by 24/7 and the
Subsidiary does not, and the performance of this Agreement by 24/7 and the
Subsidiary will not, require any consent, approval, authorization or permit of,
or declaration, registration or filing with or notification to, any Governmental
Entity, (i) such consents, approvals, orders, authorizations, registrations and
declarations and filings as may be required under applicable federal and state
securities (or related) laws; and (ii) such consents, approvals, authorizations,
filings and registrations which if not obtained or made, would not prevent or
delay consummation of the Merger or otherwise prevent 24/7 from performing its
obligations under this Agreement.
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3.5 SEC Filings, 24/7 Financial Statements.
--------------------------------------
(a) 24/7 has filed all forms, reports and documents required to
be filed by it with the SEC since December 31, 1998 and has delivered or made
available to the Company, in the form filed with the SEC, such forms, reports
and documents. All such required forms, reports and documents (including those
that 24/7 may file subsequent to the date hereof), as amended, are referred to
herein as the "24/7 SEC Reports." The 24/7 SEC Reports (including any financial
statements or schedules included therein) (i) were prepared in accordance with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such 24/7 SEC
Reports, and (ii) 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. None of 24/7's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the 24/7 SEC Reports (the
"24/7 Financials"), including each 24/7 SEC Report filed after the date hereof
until Closing: (i) complied (or will comply) as to form in all material respects
with the rules and regulations of the SEC with respect thereto, (ii) was (or
will be) prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated therein or in the
notes thereto or, in the case of unaudited interim financial statements, as may
be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented (or will fairly present) in all material respects the consolidated
financial position of 24/7 and its consolidated 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.
(c) 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.
3.6 No Undisclosed Liabilities. Except as is disclosed in Section 3.6
of the 24/7 Disclosure Schedule or in the 24/7 Financials, neither 24/7 nor any
of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) of the type that are required to be disclosed in financial
statements, including the notes thereto, prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, operations or
financial condition of 24/7 and its subsidiaries taken as a whole, except
liabilities (i) adequately provided for or referred to in the Company's balance
sheet and the related notes thereto as of September 30, 1999 included in 24/7's
Form 10-Q for the quarter ended September 30, 1999 (which is part of the 24/7
SEC Reports) (the "24/7 Balance Sheet"), (ii) incurred since the date of
27
the 24/7 Balance Sheet in the ordinary course of business and consistent with
past practice and (iii) incurred in connection with the transactions
contemplated by this Agreement.
3.7 No Adverse Change. Since the date of the 24/7 Balance Sheet, 24/7
has conducted its business in the ordinary course and there has not occurred any
material adverse change in the business, properties, assets, liabilities,
commitments, earnings or financial condition of 24/7 and its subsidiaries, taken
as a whole.
3.8 Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of 24/7, threatened relating to or affecting 24/7
or any of its subsidiaries before any Governmental Entity that seek to restrain
or enjoin the consummation of the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE COMPANY
The Company covenants and agrees that between the date hereof and the
Effective Time:
4.1 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.
4.2 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 Unaudited Financials, and the Company shall furnish
24/7 with such information and copies of such documents as 24/7 may reasonably
request. The Company shall promptly furnish to 24/7 all financial statements of
the Company that are prepared in the ordinary course of business, including,
without limitation, monthly reports of sales, revenue and cash flow and balance
sheets, if any are prepared.
4.3 Conduct of Business. The business of the Company shall be conducted
in all material respects in the ordinary course, consistent with the present
conduct of its business, and the Company shall use commercially reasonable
efforts to maintain, preserve and protect the assets and goodwill of the
Company. Without limiting the generality of the foregoing, the Company shall
not, without the prior written consent of 24/7, take or commit to take any of
following actions:
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(a) amend its By-Laws or Certificate of Incorporation;
(b) issue any additional shares of capital stock, or issue,
sell or grant any option or right to acquire or otherwise dispose of any of its
authorized but unissued capital stock or other equity or debt securities;
(c) declare or pay any dividends or make any other
distribution in cash, property or securities on its capital stock;
(d) repurchase or redeem any shares of its capital stock;
(e) 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;
(f) 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;
(g) 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;
(h) 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;
(i) 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;
(j) make any material investments other than in certificates of
deposit or short-term commercial paper; or
(k) change any of the accounting principles or practices used by
it, except to come into compliance with, or as required by GAAP.
4.4 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
29
of any notice pursuant to this Section 4.4 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
4.5 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.
4.6 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.
4.7 Government Compliance. The Company agrees promptly to effect all
necessary registrations, filings, applications and submissions of information
required or requested by governmental authorities.
ARTICLE V
COVENANTS OF 24/7 AND THE SUBSIDIARY.
24/7 and the Subsidiary covenant and agree that between the date hereof
and the Effective Time:
5.1 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.
5.2 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 5.2 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.3 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
30
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.
5.4 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.
5.5 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.
ARTICLE VI
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:
6.1 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.
6.2 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.
6.3 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 6.1 and 6.2.
6.4 Employment Agreement. James Green, David Turner and Gour Lentell
shall have each entered into an Employment Agreement with 24/7 in the form
attached hereto
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as Exhibit B and a Non-Competition and Non-Disclosure Agreement with 24/7 in the
form attached hereto as Exhibit C (collectively, the "Employment Agreements").
6.5 Registration Rights Agreement. The Company and the Stockholders
shall have entered into a Registration Rights Agreement with 24/7 in the form
attached hereto as Exhibit D (the "Registration Rights Agreements").
6.6 Opinion of Counsel to the Company. The Company shall have delivered
to 24/7 an opinion of Brobeck, Phleger & Harrison LLP, counsel to the Company,
dated the Closing Date, covering, in substance, the legal matters described in
Sections 2.1 (as relates to Company only), 2.5 (a), (b), (c) and (d), and 2.6
(a) (i) and (ii) and (b).
6.7 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.
6.8 Litigation. No action or proceeding shall be pending 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 the consummation of the transactions contemplated by any of
the Company Documents, which in the reasonably exercised opinion of 24/7 makes
it inadvisable to consummate such transactions.
6.9 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.
32
ARTICLE VII
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:
7.1 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.
7.2 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.
7.3 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 7.1 and 7.2.
7.4 Employment Agreement. 24/7 shall have entered into the Employment
Agreements and the Non-Disclosure Agreements.
7.5 Registration Rights Agreement. 24/7 shall have entered into the
Registration Rights Agreement.
7.6 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, covering, in
substance, the legal matters described in Sections 3.1(a), 3.2(b), 3.3(a),
3.4(a)(i) and (ii) and (b).
7.7 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.
ARTICLE VIII
CLOSING DELIVERIES
8.1 Deliveries of the Company. At the Closing (or as provided below),
the Company and the Stockholders shall deliver, or shall cause to be delivered,
to 24/7 and the Subsidiary the following:
(a) Certificates representing the Shares, together with properly
executed stock powers and any required stock transfer tax stamps affixed thereto
and all taxes on such transfer, if any, paid in full, all at the expense of the
holders of such Shares;
(b) The Employment Agreements;
(c) The Registration Rights Agreement;
(d) The opinion of Brobeck, Phleger & Harrison LLP, counsel to
the Company;
(e) The certificate referred to in Section 6.3, duly executed;
(f) The Escrow Indemnity Agreement;
(g) The minute books of the Company; and
(h) Duly executed resignations of all directors, officers and
fiduciaries of the Company.
8.2 24/7 and Subsidiary Deliveries. At the Closing (or as provided
below), 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:
(a) As promptly as practicable after the Closing, in accordance
with instructions received from the Company and the Stockholders, the
Merger Consideration, including 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 1.8;
(b) The Employment Agreements;
(c) The Registration Rights Agreement;
(d) The opinion of Proskauer Rose LLP, counsel to 24/7 and the
Subsidiary;
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(e) The Escrow Indemnity Agreement; and
(f) The certificate referred to in Section 7.3 hereof, duly
executed.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Sabela and the Stockholders. Subject to the
limitations set forth in Article X below, Sabela 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 2.5(d), 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 the
Ownership Table; (ii) any breach or nonfulfillment of any covenant or agreement
made by the Company or the Stockholders in any of the Company Documents; or
(iii) the claims of any broker or finder engaged by the Company other than
Prudential Securities and Erland & Company, Inc.
9.2 Indemnification by 24/7. 24/7 shall indemnify, defend and hold
harmless the Stockholders and Sabela, 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.
ARTICLE X
FURTHER PROVISIONS REGARDING INDEMNIFICATION
10.1 Survival. 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 April 30, 2001, notwithstanding any
examination or investigation made by or for any party.
35
10.2 Limitations. Notwithstanding the foregoing,
(a) The indemnification in Sections 9.1 and 9.2, as the case
may be, shall be the exclusive remedy of the Stockholders, Sabela and of 24/7
and its affiliates with respect to claims for Losses;
(b) The indemnification provided for in Section 9.1(i) or 9.2(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 such section exceeds $500,000, in which event the indemnified party or
parties will be entitled to indemnification for the full amount of their Losses;
(c) The total amount of indemnification provided by the
Stockholders pursuant to Section 9.1(i) shall in no event exceed an aggregate
amount equal to $15,100,000;
(d) 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 9.1(i)
or 9.2(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 April 30, 2001;
(e) An indemnified party shall promptly give written notice to
the indemnifying party after the indemnified party has knowledge that any legal
proceeding has been instituted or any claim has been asserted in respect of
which indemnification may be sought under the provisions of Sections 9.1 or 9.2.
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
(f) 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.
10.3 Exclusive Remedy. In accordance with the provisions of the Escrow
Indemnity Agreement, 24/7 shall be entitled, from time to time, to receive from
the Escrow Agent the number of shares of 24/7 Common Stock having a value equal
to the Losses of 24/7 as
36
to which 24/7 is entitled to be indemnified pursuant to 9.1 above, subject to
the provisions of Section 10.2(c). For purposes of this Section 10.3 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. The right to receive such shares in
accordance with the provisions of this Article X shall be 24/7's sole remedy for
Losses that it is entitled to recover under Section 9.1.
10.4 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 9.1 or 9.3 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 9.1 or 9.2 is reasonably likely to exist.
10.5 Indemnification of Directors and Officers of the Company. 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.
ARTICLE XI
MISCELLANEOUS
11.1 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 or the Stockholders:
Sabela Media, Inc.
73 Spring Street, Suite 205
New York, NY 10012
Attn: James Green
37
with a copy to:
Brobeck Phleger & Harrison LLP
550 South Hope Street
Los Angeles, CA 90071-2604
Attn: Kenneth R. Bender, Esq.
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 personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other party notice in
the manner set forth in this Section 11.1.
11.2 Termination. This Agreement shall terminate if the Merger shall
have not been declared effective and consummated by March 31, 2000.
11.3 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. 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.
11.4 Successors. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, personal
38
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.
11.5 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.
11.6 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.
11.7 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.
11.8 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.
11.9 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 11.1.
39
11.10 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.
11.11 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 executive officers of the Company,
(ii) with respect to 24/7 or 24/7 management, mean the actual knowledge of the
executive officers 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.
11.12 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 Sections 9.1 and 9.2 above concerning indemnification are intended
for the benefit of the individuals specified therein and their respective legal
representatives.
[Signature pages follow]
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[SIGNATURE PAGE TO MERGER AGREEMENT]
IN WITNESS WHEREOF, each of the parties has caused this Merger Agreement to
be executed by a duly authorized officer as of the day and year first written
above.
SABELA MEDIA, INC. 24/7 MEDIA, INC.
By: /s/ James Green By: /s/ David J. Moore
--------------- --------------------
Name: James Green Name: David J. Moore
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer
STOCKHOLDERS: KILLER-APP HOLDING CORP.
By: /s/ James Green By: /s/ David J. More
--------------- -------------------
Name: James Green Name: David J. Moore
Title: President and Chief
FRESHWATER CONSULTING LTD.
By: /s/ David Turner
----------------
Name: David Turner
GALMOS HOLDINGS LTD.
By: /s/ Gour Lentell
----------------
Name: Gour Lentell
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Agreement and Plan of Merger - 24/7 Media Inc., Sabela Media Inc., James Green, Freshwater Consulting Ltd. and Galmos Holdings Ltd.
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