Exhibit (ii)
Asset Purchase Agreement
5
ASSET PURCHASE AGREEMENT
between
K2 DESIGN, INC.,
Seller
and
24/7 MEDIA, INC.,
Purchaser
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Dated as of June 1, 1998
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EXECUTION COPY
ASSET PURCHASE AGREEMENT (this "Agreement") dated as of June 1, 1998,
among K2 DESIGN, INC., a Delaware corporation ("Seller"), and 24/7 MEDIA, INC.,
a Delaware corporation ("Purchaser").
This Agreement sets forth the terms and conditions upon which Seller
is selling and Purchaser is purchasing all of the assets (other than Excluded
Assets, as defined below) and certain liabilities of Seller's CLIQNOW! division.
Accordingly, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
The following definitions shall apply for purposes of this
Agreement (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
1.1 "Business" means (i) media selling across web site advertising
networks; and (ii) the provision of promotion, marketing and sales services and
other ancillary activities relating to and provided in connection with the
foregoing.
1.2 "Certificate of Designations" means the certificate of
designations with respect to Series B Convertible Redeemable Preferred Stock of
Purchaser in the form attached hereto as Exhibit 1.2.
1.3 "Contracts" means those agreements listed on Schedule 1.3.
1.4 "Deferred Purchase Price" means $150,000.
1.5 "Encumbrances" means, to the extent applicable, all claims,
liens (including liens for taxes), mortgages, security interests, leases,
options, rights of first refusal or first offer, easements or other similar
encumbrances.
1.6 "Intellectual Property" means the trade names listed on
Schedule 1.6, and all registered trademarks and goodwill associated therewith.
1.7 "Knowledge", "to Seller's Knowledge" and variations thereof shall
mean that which is actually known by an executive officer of Seller and with
no requirement of due inquiry or that such officers "should have known."
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1.8 "Leased Premises" shall mean that portion of office space located
at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ presently utilized by the Transferred
Employees.
1.9 "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to Seller or Purchaser, as the case may be, any change or
effect that is or, so far as can be reasonably determined, is likely to be
materially adverse to the assets, properties, condition (financial or
otherwise), business (including, without limitation, the Business) or results
of operations of Seller or Purchaser, as the case may be, taken as a whole.
1.10 "Permittted Encumbrances" means Encumbrances that (a) are liens
for taxes not yet due and payable, (b) do not, individually or in the aggregate,
materially detract from the value of the assets to which they attach, (c) are
mechanics', carriers', materialmen's, landlords', workers' or other similar
liens incurred in the ordinary course of business or (d) relate to assets owned
by customers or third parties that are used by the Company in its operations.
1.11 "Post-Closing Financial Statements" means (i) audited financial
statements (balance sheets, statements of income and statements of cash flows)
for the Business for the year ended December 31, 1997, prepared by Seller's
regular independent auditors, and accompanied by an unqualified opinion of such
auditors, and (ii) unaudited balance sheets as of March 31, 1998 and unaudited
statement of income for the three months ended March 31, 1998.
1.12 "Registration Rights Agreement" means the registration rights
agreement dated the date hereof and in the form attached hereto as Exhibit 1.12.
1.13 "Royalty Rights" means all of Seller's right, title and interest
in and to any revenue derived from or arising out of the Business, including
royalties and similar payments, whether or not earned or payable on the date
hereof.
1.14 "Seller's Accounts Estimate" means $295,267, as adjusted pursuant
to Sections 1.15 and 1.16 hereof.
1.15 "Seller's Accounts Payable" means the accounts payable of Seller
relating to the Business as of the date hereof, as listed on Schedule 1.15,
which Schedule may be amended within 30 days from the date hereof (with
corresponding adjustments being made to the Seller's Accounts Estimate).
1.16 "Seller's Accounts Receivable" means the accounts receivable of
Seller relating to the Business as of the date hereof as listed on Schedule
1.16, which Schedule may be amended within 30 days from the date hereof (with
corresponding adjustments being made to the Seller's Accounts Estimate).
1.17 "Transaction Documents" means, collectively, this Agreement,
the Certificate of Designations, the Employment Agreements and the Registration
Rights Agreement.
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1.18 "Transferred Employees" means the individuals listed on
Schedule 1.18.
ARTICLE II
THE ASSET PURCHASE
2.1 The Asset Purchase. (a) Upon the terms and subject to the
conditions of this Agreement, Seller hereby sells, conveys, assigns, transfers
and delivers to Purchaser free and clear of all Encumbrances (other than
Permitted Encumbrances and except as expressly provided herein), and Purchaser
hereby purchases from Seller, the Business and all the assets, properties and
rights owned or leased by Seller and constituting the Business (the "Purchased
Assets"), including without limitation:
(i) all of Seller's right, title and interest in and to the
Contracts, to the extent assignable;
(ii) Seller's Accounts Receivable;
(iii) all customer lists, sales data, brochures, catalogs,
mailing lists, art work, photographs and advertising
material that are used in the Business, whether in
electronic form or otherwise;
(iv) all of Seller's interest in governmental permits, licenses,
registrations, certificates, consents, orders and approvals
necessary for the continued operation of the Business;
(v) all trade secrets, Royalty Rights, work notes, market
studies, consultant's reports and similar property,
tangible or intangible, used in the Business;
(vi) copies of all records of Seller material to the operation
of the Business, including property, tax and marketing
records and copies of personnel records of Transferred
Employees;
(vii) all right, title and interest in and to the goodwill
incident to the Business;
(viii) all prepaid expenses of, or for the benefit of, the
Business;
(ix) subject to any license agreements regarding such software,
all software resident on computers used in the Business
(other than any software not useful in the Business);
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(x) all computers used in the Business, including all laptop
computers currently used by a Transferred Employee; and
(xi) all other assets material to the operation of the Business
(including without limitation all causes of action,
contract rights and warranty and product liability claims,
whether or not in litigation on the date hereof).
(b) The following assets (collectively, the "Excluded Assets") shall
be excluded from this Agreement, and shall not be assigned or transferred to
Purchaser:
(i) any right, title or interest in the names "K2" and "K2
Design" and any variants thereof containing "K2" and any
related logos, trademarks, trade names or service marks
incorporating such names, except as otherwise specifically
transferred to Purchaser by Seller;
(ii) cash and cash equivalents and similar type investments;
(iii) leases and contracts, other than those set forth on
Schedule 1.3 or otherwise specifically transferred
pursuant to the terms hereof;
(iv) assets constituting any pension funds or segregated funds
for the benefit of Transferred Employees;
(v) corporate minute books and stock books;
(vi) except as otherwise provided herein, all of Seller's
assets not associated with the Business;
(vii) trade show booths; and
(viii) all other furniture, fixtures and equipment.
2.2 Purchase Price.
(a) In consideration of the transfer to Purchaser of the Assets and
of the assignment of the Intellectual Property, Purchaser agrees to deliver to
Seller or its designees the following: (i) $850,000 on the date hereof, by
wire transfer of immediately available funds, (ii) the Deferred Purchase Price
(subject to the terms of Section 2.2(b)), (iii) 3,000 shares of the
Purchaser's Series B Convertible Redeemable Preferred Stock, par value $.01
per share (the "Shares"), and (iv) the Seller's Accounts Estimate, on the date
hereof. The amount of cash and
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Shares set forth in items (i) through (iv), above, as adjusted pursuant to the
terms hereof, is referred to herein as the "Purchase Price".
(b) If the Post-Closing Financial Statements are delivered to
Purchaser within forty-five days after the date hereof, then Purchaser shall
pay to Seller the Deferred Purchase Price within three days after the date of
such delivery. Seller acknowledges that the Deferred Purchase Price shall not
be payable if the Post-Closing Financial Statements are not delivered on or
before such date.
2.3 Purchase Price Adjustments
(a) Schedule 2.3 sets forth a list of Seller's customers relating to
the Business as of April 30, 1998 (the "Existing Customers") together with a
true and complete list of the gross revenues of Seller derived from the
Business from the Existing Customers and booked on the accounts of Seller
during the four month period ended April 30, 1998 (in the aggregate and on a
customer by customer basis). In addition, Schedule 2.3 (as amended through
June 30, 1998) sets forth a list of customers ("New Customers") that have
entered or will enter into contracts with Seller and/or Purchaser relating to
the Business in May or June, 1998 (excluding renewals).
(b) On or before November 1, 1998 Purchaser shall deliver to Seller a
notice (the "Customer Notice") which shall include (i) a list of Existing
Customers that were parties to website agreements with Purchaser as of
September 1, 1998 and had not as of such date provided written notice of
intent to terminate such website agreement, (the "Retained Customers") and
(ii) the gross revenue generated from New Customers during the four months
ending September 30, 1998 (the "New Customer Revenue").
(c) The Customer Notice shall include the following calculations:
(i) the sum of the revenue percentages set forth on Schedule
2.3 for Retained Customers;
(ii) the New Customer Revenue, expressed as a percentage of
Seller's gross revenue attributable to the Business for
the four months ended April 30, 1998; and
(iii) the sum of the percentages determined pursuant to (i) and
(ii), above (such percentage, the "Retained Customer
Factor").
(d) The Purchase Price shall be reduced (the "Purchase Price
Reduction") if at all, according to the following chart:
Retained Customer Factor Purchase Price Reduction
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greater than 70% 0
greater than 60% and less than
or equal to 70% $200,000
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greater than 50% and less than original
or equal to 60% $400,000
50% $600,000
less than 50% $600,000 plus $40,000 times the
number of percentage points by
which 50% exceeds the Retained
Customer Factor
(e) Notwithstanding anything to the contrary in this Section 2.3, if
Purchaser's gross revenue from Existing Customers and New Customers exceeds
$500,000 for the three months ended September 30, 1998, the Purchase Price
Reduction shall be zero. Purchaser agrees to use its best efforts to retain
Existing Customers and New Customers through September 30, 1998 and to keep
all website and advertising relationships intact through September 30, 1998
and thereby avoid a Purchase Price Reduction.
(f) The Purchase Price Reduction shall be payable in cash or in
shares of Purchaser's capital stock, at the option of Seller. If all or a
portion of the Purchase Price Reduction is payable in Shares prior to the
Purchaser's initial public offering, the Shares shall be valued at $1,000
per share. If all or a portion of the Purchase Price Reduction is payable
after the Purchaser's initial public offering, the Purchaser's common stock
shall be valued at the higher of (i) the price to the underwriters of the
common stock in the initial public offering or (ii) the average of the closing
price per share on the Nasdaq National Market for the five trading days
immediately preceding October 1, 1998.
(g) Purchaser agrees to use commercially reasonable efforts to
collect Seller's Accounts Receivable prior to November 1, 1998. On or before
November 1, 1998, Purchaser shall prepare and deliver to Seller a notice (the
"Accounts Notice" and, together with the Customer Notice, a "Notice") setting
forth the amount of Seller's Accounts Receivable collected by Purchaser between
the date hereof and November 1, 1998 (such amount, the "Post-Closing
Collections"). If the Post-Closing Collections are less than Seller's Accounts
Estimate, Seller shall, within 15 days after receipt of the Accounts Notice or
resolution of any dispute pursuant to Section 2.3(h), pay to Purchaser an
amount equal to such shortfall.
(h) During the 30-day period following Seller's receipt of a Notice,
Seller and its independent auditors will be permitted to review Purchaser's
documentation relating to such Notice (and Purchaser and its representatives
will provide reasonable cooperation in such review). Such Notice shall become
final and binding upon the parties on the thirtieth day following receipt
thereof by Seller unless Seller gives written notice of any disagreement
("Notice of Disagreement") to Purchaser prior to such date. The Notice of
Disagreement (if any) shall specify in reasonable and sufficient detail the
nature of any disagreement so asserted. If a Notice of Disagreement is
received by Purchaser in a timely manner, then the Notice (as revised in
accordance with clause (x) or (y) below) shall become final and binding upon
the parties on the earlier of (x) the date the parties hereto resolve in
writing any differences they have with respect to any matter specified in the
Notice of Disagreement or (y) the date any disputed matters
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are finally resolved in writing by the Arbitrator (as defined below). During
the 30-day period following the delivery of a Notice of Disagreement, Seller
and Purchaser shall seek in good faith to resolve in writing any differences
which they may have with respect to any matter specified in the Notice of
Disagreement. If, at the end of such 30-day period, Seller and Purchaser have
not reached agreement on such matters, the matters which remain in dispute shall
be submitted to an arbitrator jointly selected by the parties (the "Arbitrator")
for review and resolution in accordance with the commercial arbitration rules
of the American Arbitration Association in New York City. The Arbitrator shall
render a decision resolving the matters in dispute within 30 days following
their submission to the Arbitrator. The fees of the Arbitrator shall be borne by
the non-prevailing party.
2.4 Assumption of Liabilities: Employee Matters (a) General Limitation
on Assumption of Liabilities. Except for Permitted Encumbrances and as
otherwise provided in this Section 2.4, Seller shall transfer the Purchased
Assets to Purchaser free and clear of all Encumbrances, and Purchaser shall
not, by virtue of its purchase of the Purchased Assets, assume or become
responsible for any liabilities or obligations of Seller.
(b) Assumed Liabilities and Obligations. Purchaser hereby acquires
the Purchased Assets subject only to, and shall undertake, assume, perform and
otherwise pay, satisfy and discharge, and hold Seller harmless from, the
liabilities and obligations set forth therein or relating thereto and, in
either case, arising after the date hereof.
(c) Offer of Employment. Purchaser shall offer employment as of the
date hereof to all of the Transferred Employees. Purchaser shall keep on its
payroll all Transferred Employees who accept Purchaser's offer of employment
except for those Transferred Employees who may resign or be terminated for
cause, for at least 90 days after the Closing Date.
(d) Vacation Liability. Purchaser shall assume liability as of the
date hereof for the vacation entitlement that each Transferred Employee who
becomes an employee of Purchaser has accrued and is listed in Schedule 2.4.
Purchaser shall pay each Transferred Employee's wages or salary during such
vacation entitlement from Purchaser, when taken.
(e) Other Employee Benefits. Seller agrees that, with respect to
claims for workers' compensation arising out of events occurring prior to the
date hereof and all claims under Seller's employee benefit programs by, or in
respect of, persons employed by Seller arising out of events occurring prior
to the date hereof, regardless of whether such employment had terminated and
regardless of whether such employee is employed by Purchaser, whether reported
or unreported as of the date hereof, and whether insured or uninsured
(including, but not limited to, workers' compensation, life insurance, medical
and disability programs), Seller shall, at its own expense, honor, or cause
its insurance carriers, if any, to honor, such claims in accordance with the
terms and conditions of such programs or applicable workers' compensation
statutes, including any construction of such terms or conditions ultimately
made by any court or administrative body having jurisdiction thereover.
Without limiting the scope of the preceding sentence, Seller and its
affilites shall be responsible for any and all claims and liabilities arising
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out of or relating to (i) Seller's employment of the Transferred Employees or
any former employees of Seller, (ii) the termination by Seller of the
employment of any such Transferred Employee, former employee, consultant or
other agent of Seller, and (iii) the provision by Seller of any employee
benefits to such Transferred Employees, former employees, retirees, disabled
employees, or agents of Seller (and their beneficiaries and eligible
dependents) attributable to their employment with, or their participation in any
plans or programs maintained or contributed to by, Seller or any of its
affiliates. Purchaser shall assume liability for all workers' compensation
claims for industrial injuries and illnesses, and any and all claims and
liabilities, occurring after the Closing Date in respect to the Transferred
Employees. Each Transferred Employee shall be eligible to participate in
Purchaser's benefit plans, subject to any limits or exclusions imposed by the
applicable insurance company, such as exclusions for pre-existing conditions.
2.5 Intellectual Property. Seller hereby assigns to Purchaser the
Intellectual Property and agrees to execute any additional forms or agreements
necessary to effect the foregoing.
2.6 Escrow of Shares. Seller hereby directs Purchaser to deliver the
Shares to Proskauer Rose LLP, as escrow agent, to be held and disbursed in
accordance with the terms of an escrow agreement to be agreed by such firm and
the parties hereto.
2.7 Further Assurances. From and after the date hereof, upon written
request from Purchaser, Seller shall execute, acknowledge and deliver all such
further acts, assurances, deeds, assignments, transfers, conveyances and other
instruments and papers as may reasonably be required to sell, assign,
transfer, vest, convey and deliver full right, title and interest in, and
possession of, the Purchased Assets to Purchaser and to otherwise consummate
the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
3.2. Authority. Seller has the full corporate power and authority to
execute and deliver the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. All corporate
acts and other proceedings required to be taken by or on the part of Seller to
authorize such execution, delivery and consummation have been duly and
properly taken. The Transaction Documents have been duly executed and
delivered by Seller and constitute legal, valid and binding obligations of
Seller enforceable against Seller in
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accordance with their respective terms. The execution and delivery by Seller
of the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not violate any applicable law, or
conflict with, result in any breach of, constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or result
in the creation of an Encumbrance on any of the properties or assets of Seller
pursuant to, the corporate charter or by-laws of Seller or any indenture,
mortgage, lease, agreement or other instrument to which Seller is a party or by
which its properties or assets are bound. No material approval, authorization,
consent or other order or action of or filing with any person, entity or court,
administrative agency or other governmental body in the United States of
America is required for the execution and delivery by Seller of the Transaction
Documents to which it is a party or the consummation by Seller of the
transactions contemplated hereby or thereby.
3.3. Financial Statements. To its Knowledge, Seller does not have any
contingent or undisclosed obligations or liabilities relating to the Business
which would be required in accordance with GAAP to be reflected in a currently
prepared balance sheet, other than obligations or liabilities (i) that are
disclosed in this Agreement or the Schedules hereto, or (ii) that are not
material to the financial condition of the Business.
3.4. Retention of Customers. Except as set forth on Schedule 3.4, to
its Knowledge, Seller does not know of anything that might reasonably indicate
that any of the entities listed on Schedule 2.3 intends to cease dealing with
(or decline to deal with) the Purchaser, nor has any information been brought
to the attention of the Seller that might reasonably lead it to believe any
such customer intends to materially alter the amount of such purchases or the
extent of dealings with Purchaser (as compared to purchases and dealings with
Seller as of the date hereof).
3.5. Intangible Property Rights. Schedule 3.5 lists all the
trademarks, trade names, trade secrets and other intangible property rights,
including all registered trademarks and goodwill associated therewith, used in
connection with the Business (the "Intangible Property Rights"). Except as
otherwise disclosed in Schedule 3.5, (i) the Seller, to its Knowledge, validly
owns the Intangible Property Rights free and clear of all Encumbrances other
than Permitted Encumbrances and (ii) no action, claim, suit or proceeding has
been brought against the Seller or, to the Knowledge of Seller, has been
threatened against the Seller with respect to any material Intangible Property
Rights.
3.6. Litigation. Except as disclosed in Schedule 3.6, Seller is not
subject to any judgment, order, writ, injunction or decree of any court or any
Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any arbitrator that
materially affects the operation of the Business.
3.7. Contracts. To Seller's Knowledge, Schedule 1.3 sets forth a list
of all executory contracts of the Business. Except as disclosed in Schedule
1.3, to Seller's Knowledge, each of the Contracts listed in Schedule 1.3 is
valid and in full force and effect, each party to each such Contract has
performed all material obligations required to be performed by it
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thereunder, and no other party to any such Contract has taken the position that
such Contract is not enforceable against any such other parties by Seller.
3.8. Benefit Plans. Purchaser shall not have liability under any
Benefit Plans, with respect to any employees of Seller or their beneficiaries.
"Benefit Plans" shall mean all material "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), "employee welfare benefit plans" (as defined in Section
3(1) of ERISA), and any other material employee fringe benefit plans
maintained, or contributed to, by the Company.
3.9. Accuracy. To Seller's Knowledge, the required disclosures made
in this Agreement and the schedules attached hereto are complete and accurate
in all material respects, and the scheduled disclosures do not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements or facts contained therein, in light of the
circumstances under which they were made, not misleading.
3.10. Securities Act of 1933. The Shares purchased by Seller pursuant
to this Agreement are being acquired for investment only and not with a view
to any public distribution thereof, and Seller will not offer to sell or
otherwise dispose of the Shares so acquired by it in violation of the
Securities Act of 1933.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1. Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
4.2. Authority. Purchaser has the full corporate power and authority to
execute and deliver the Transaction Documents and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of Purchaser to authorize
such execution, delivery and consummation have been duly and properly taken.
The Transaction Documents have been duly executed and delivered by Purchaser
and constitute legal, valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their respective terms. The execution and
delivery by Purchaser of the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby will not violate any law, or
conflict with, result in any breach of, constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or result
in the creation of an Encumbrance on any of the properties or assets of
Purchaser pursuant to, the corporate charter or by-laws of Purchaser or any
indenture, mortgage, lease, agreement or other instrument to which Purchaser
is a party or by which its properties or assets are bound. No
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material approval, authorization, consent or other order or action of or filing
with any person, entity or court, administrative agency or other governmental
body in the United States of America is required for the execution and delivery
by Purchaser of the Transaction Documents or the consummation by Purchaser of
the transactions contemplated hereby or thereby.
4.3 Capital Stock of the Company. The authorized capital stock of the
Company consists of (i) 100,000,000 shares of Common Stock, par value $.01 per
share (the "Common Stock"), and (ii) 30,000,000 shares of preferred stock, par
value $.01 per share, of which 13,621,507 have been designated as Series A
Convertible Voting Preferred Stock (the "Series A Preferred Stock") and, after
giving effect to the Certificate of Designations, 3,000 of which have been
designated Series B Convertible Redeemable Preferred Stock (the "Series B
Preferred Stock"). On the date hereof, 31,301,804 shares of Common Stock are
outstanding, 13,621,507 shares of the Series A Preferred Stock are outstanding
and 3,000 shares of the Series B Preferred Stock will be outstanding pursuant
to this Agreement. In addition, on the date hereof, there are outstanding
6,344,224, 6,344,224 and 3,121,212 Class A, Class B and Class C Warrants,
respectively, to purchase Common Stock of the Company. All of the outstanding
shares are duly authorized, validly issued and outstanding, fully paid and
non-assessable. The Shares have not been and will not be issued in violation
of, and are not subject to, any preemptive or subscription rights, other than
such rights that have been waived by the holders thereof.
4.4. No Legal Proceedings. Except as disclosed in Schedule 4.4, there
is no action, suit, investigation, order, judgment or proceeding pending or,
to the knowledge of Purchaser, threatened against or affecting Purchaser that,
individually or when aggregated with one or more other actions, suits, orders,
judgments or proceedings, has or might reasonably be expected to have a
material adverse effect on Purchaser's ability to perform any of its
obligations hereunder or under any of the Transaction Documents.
4.5 Certificate of Designations. The Certificate of Designations has
been duly filed with the Secretary of State of the State of Delaware. The
certificate of incorporation of Purchaser has been duly amended by the filing
of the Certificate of Designations.
4.6 Brokers. No broker, investment banker or other person is entitled
to any broker's, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser.
4.7 Accuracy. To Purchaser's knowledge, the required disclosures made
in this Agreement and the schedules attached hereto are complete and accurate
in all material respects, and the scheduled disclosures do not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements or facts contained therein, in light of the
circumstances under which they were made, not misleading.
4.8 Registration Statement. Purchaser's draft S-1 registration
statement dated June 2, 1998, a copy of which has been delivered to Seller,
complies as to form in all material
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respects with the requirements of the Securities Act of 1933 and all applicable
rules and regulations thereunder, and does not contain any false or misleading
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein not
misleading.
ARTICLE V
FURTHER COVENANTS AND AGREEMENTS
5.1. Security Arrangements. To secure Seller's obligations under
Sections 2.3(d) and (f) hereof until the Purchase Price Reduction is paid in
full or is finally determined to be zero, Seller shall (i) not dispose of its
Shares of Series B Preferred Stock or (ii) retain the proceeds from the sale
of such Shares in escrow pursuant to an escrow agreement acceptable to
Purchaser.
5.2. Access; Information; Confidentiality. (a) Each party, covenants
and agrees, and shall cause each of its officers, employees, attorneys,
accountants and other authorized representatives, to treat all information
obtained or developed by them concerning the other party in strict confidence.
Each party also covenants and agrees to comply with all other confidentiality
undertakings heretofore agreed to between Purchaser and Seller or their
representatives relating to the parties or the transactions contemplated by
this Agreement.
(b) if at any time it is necessary that a party be furnished with
additional information, documents or records relating to the Purchased Assets
or the Business in order properly to prepare or support its tax returns or
other documents or reports required to be filed with governmental authorities
or any securities exchanges or otherwise for any purpose in connection with
the performance or discharge by the parties of their obligations hereunder,
and such information, documents or records are in the possession or control of
the other party, such other party agrees to use all reasonable efforts to
furnish or make available such information, documents or records (or copies
thereof).
5.3. Financial Statements. Seller covenants and agrees to prepare and
deliver the Post-Closing Financial Statements.
5.4. Fees and Expenses. Each party shall bear its own expenses
incurred in connection with the transactions contemplated hereby, except that
Purchaser shall reimburse Seller for up to $45,000 of Seller's reasonable fees
and expenses incurred in connection with the transactions contemplated hereby
and the preparation of the Post-Closing Financial Statements within 30 days
after receipt of the Post-Closing Financial Statements.
5.5. Accounts Receivable. Seller agrees to promptly remit to
Purchaser the amount of any payments received by Seller relating to Seller's
Accounts Receivable.
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5.6. Indemnification. (a) Each of Seller and Purchaser shall indemnify
and hold the other harmless against and in respect of all actions, suits,
demands, judgments, costs and expenses (including reasonable attorneys' fees)
(collectively, "Damages") relating to any misrepresentation, breach of any
representation or warranty or non-fulfillment of any agreement on the part of
such party in any Transaction Document.
(b) Purchaser shall indemnify and hold Seller harmless in respect of
Damages relating to the Transferred Employees and the Business, in each case
arising on or after the date hereof. Seller shall indemnify and hold Purchaser
harmless in respect of Damages relating to the Transferred Employees and the
Business, in each case arising prior to the date hereof.
(c) The indemnification provided for in this Section 5.6 shall
terminate and be of no further force and effect one year from the date hereof,
except as to any representation or warranty as to which a written notice of
claim for indemnification has been given to the indemnifying party prior to
the expiration of such one-year period. Neither party shall be liable
pursuant to this Section for any amounts which in the aggregate exceed the
Purchase Price.
5.7. Public Announcements. Unless otherwise required by law or the
rules and regulations of the Securities and Exchange Commission, none of the
parties shall issue any press release or make any public statement with
respect to this Agreement and the transaction contemplated hereby except for
the agreed upon press release to be issued by the parties on the date hereof.
5.8. Sales and Transfer Taxes. Seller shall pay all sales, use,
excise and/or transfer taxes due with respect to the Business, provided that
any property taxes relating to the Leased Premises shall be prorated between
the parties based on their respective periods of occupancy during the
applicable taxing period.
5.9. Noncompetition Agreement of Seller. For a period of five years
following the date hereof, Seller shall not, directly or indirectly, as
principal, investor, or in any similar capacity (i) engage in the Business
anywhere in the world, (ii) own, manage, operate or control, or participate in
the ownership, management, operation or control of, any business which
directly or indirectly competes with the Business anywhere in the world, or
(iii) with respect to the Business interfere with, disrupt or attempt to
disrupt any present or prospective relationship, contractual or otherwise,
between Purchaser and any of its licensors, licensees, clients, customers,
suppliers, employees or other related parties, or employ, solicit or induce
for hire any Transferred Employee, or any of the employees, agents,
consultants or advisors of Purchaser or any employee who has left the
employment of Purchaser within six months of the termination of said
employee's employment with Purchaser, provided that nothing herein shall
preclude Seller from beneficially owning less than five percent of the stock
of any publicly traded company or merging with any other entity.
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5.10. Non-Solicitation Agreement of Purchaser. For a period of five
years following the date hereof, Purchaser shall not employ, solicit or induce
for employment, directly or indirectly, any employees of Seller or any
individual who has left the employment of Seller during the preceding six
months.
5.11. Cross-Referrals. (a) Purchaser agrees to direct to Seller any
inquiries received by Purchaser within two years after the date hereof
regarding web site development services. In addition, Purchaser will provide
Seller with the opportunity to bid for the enhancement of Purchaser's web site,
provided that Purchaser retains the right in its sole discretion to select any
party (or no party) to perform such services.
(b) Seller agrees to direct to Purchaser any inquiries received by
Seller within two years after the date hereof regarding the Business.
5.12. Use of Leased Premises. Seller agrees to permit Purchaser to
use the Leased Premises for a period not to exceed four (4) months, commencing
on the date hereof. Purchaser agrees to reimburse Seller at the rate of
$10,000 per month during the period of Purchaser's occupancy thereof, such
amount to be deemed to include rent, taxes and insurance (which Seller agrees
to maintain at its current levels).
5.13. Post-Closing Financial Statements. When delivered, the
Post-Closing Financial Statements will have been prepared in accordance with
generally accepted accounting principles, consistently applied ("GAAP"), and
will constitute fair and reasonable presentations of the financial position
and results of operations of the Business, in all material respects, as of the
dates and for the periods set forth therein.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by overnight
courier or telecopied (with a confimmatory copy sent by overnight courier) to
the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to Purchaser, to:
24/7 Media, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Kotel,
a professional corporation
Tower 49
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: L. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Seller:
K2 Design, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Operating Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
6.2 Interpretation. When a reference is made in this Agreement of a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table
of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
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6.3 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
6.4 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
including the documents and instruments referred to herein, (i)
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties any rights or remedies hereunder.
6.5 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
6.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the befit
of and be enforceable by, the parties and their respective successors and
assigns.
6.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
6.8 Enforcement of this Agreement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
the United States or any state having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
6.9 Consent to Jurisdiction. In the event that any legal proceedings
are commenced in any court with respect to any matter arising under this
Agreement, the parties hereto specifically consent and agree that the courts
of the State of New York and/or the Federal Courts located in the State of New
York shall have jurisdiction over each of the parties hereto and over the
subject matter of any such proceedings, and the venue of any such action shall
be in New York County, New York and/or the U.S. District Court for the
Southern District of New York.
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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement
as of the date first written above.
K2 DESIGN, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
By:---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Operating Officer
24/7 MEDIA, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
By:---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President and
General Counsel