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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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24/7 MEDIA, INC.
(Exact name of Registrant as specified in its Charter)
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DELAWARE 13-3995672
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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1250 BROADWAY, 28TH FLOOR
NEW YORK, NEW YORK 10001
(212) 231-7100
(Address, including zip code, and telephone number,
Including Area Code, Of Registrant's Principal Executive Offices)
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DAVID J. MOORE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
24/7 MEDIA, INC.
1250 BROADWAY, 28TH FLOOR
NEW YORK, NEW YORK 10010
(212) 231-7100
FAX (212) 760-2811
(Name, address, including zip code, and telephone
number, including area code, of agent for service of process)
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COPIES TO:
MARK E. MORAN, GENERAL COUNSEL
24/7 MEDIA, INC.
1250 BROADWAY, 28TH FLOOR
NEW YORK, NEW YORK 10010
(212) 231-7100
FAX (212) 760-2811
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable on or after this Registration Statement is declared effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH AMOUNT OFFERING MAXIMUM AGGREGATE
CLASS OF TO BE PRICE PER AGGREGATE REGISTRATION
SECURITIES REGISTERED SHARE PRICE FEE
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Common stock, par value $.01 per share....... 2,490,000 $43.00 $107,070,000 $28,267
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based
on the average of the high and low prices of the common stock as reported on
the Nasdaq National Market on March 29, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED APRIL 4, 2000
PROSPECTUS
24/7 MEDIA, INC.
2,433,641 SHARES
OF COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 2,433,641 shares of our common stock that are held by the
stockholders listed on pages 13 and 14. The stockholders may offer their shares
of common stock through public or private transactions, on or off the Nasdaq
National Market, at prevailing market prices, or at privately negotiated prices.
We will not receive any of the proceeds from the sale of the shares.
Our common stock is listed on the Nasdaq National Market, under the symbol
"TFSM." On March 31, 2000, the last reported sale price for the common stock was
$39.50 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2000
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TABLE OF CONTENTS
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24/7 Media.................................................. 1
Risk Factors................................................ 3
Forward Looking Information................................. 12
Use of Proceeds............................................. 12
Selling Stockholders........................................ 13
Plan of Distribution........................................ 15
Incorporation by Reference.................................. 16
Where You Can Find More Information......................... 17
Legal Matters............................................... 17
Experts..................................................... 17
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24/7 MEDIA
We are a leading global provider of end-to-end advertising and marketing
solutions for Web publishers, online advertisers, advertising agencies,
e-marketers and e-commerce merchants. We provide a comprehensive suite of media
and technology products and services that enable such Web publishers, online
advertisers, advertising agencies and e-marketers to attract and retain
customers worldwide, and to reap the benefits of the Internet and other
electronic media.
Our solutions include advertising and direct marketing sales, ad serving,
promotions, email list management, email list brokerage, email delivery, data
analysis, loyalty marketing and convergence solutions, all delivered from our
industry-leading data and technology platforms. Our 24/7 Connect ad serving
technology solutions are designed specifically for the demands and needs of
advertisers and agencies, Web publishers and e-commerce merchants.
Commencing in 2000, our business will be organized into three principal
lines of business:
- 24/7 Network
- 24/7 Mail
- 24/7 Technology Solutions.
THE 24/7 NETWORK
The 24/7 Network is a global online advertising network. The 24/7 Network
aggregates the advertising inventory of hundreds of Web sites that are
attractive to advertisers, generate a high number of ad impressions and
contribute a variety of online content to the network. Web publishers seeking to
join the network must meet our affiliation criteria, including high quality
content, brand name recognition, significant existing and projected page views,
attractive user demographics, and sponsorship opportunities. For Web sites on
the 24/7 Network, we sell Web site-specific advertising campaigns and also
bundle advertisements for sale in content channels or across the entire network.
For our flagship Web sites on the network, we actively solicit sponsorships and
integrate sales efforts with the Web site's management. We deliver advertising
on our network using our 24/7 Connect technology, which enables us to offer
advertisers the ability to target Internet users based on a variety of criteria
including on a geo-targeted basis.
Our Internet advertising network is organized as follows:
- In the U.S., the network consists of over 400 high profile Web sites to
which we delivered an aggregate of more than 3.3 billion advertisements in
December 1999;
- In Europe, the network consists of over 250 Web sites to which we
delivered an aggregate of more than 550 million advertisements in
December 1999. We developed our European operations in 1999 after
acquiring InterAd Holdings Ltd. (renamed 24/7 Media Europe) in a two-step
transaction through which we acquired a majority interest in January 1999
and the remainder in January 2000;
- In Canada, the network consists of over 80 high profile Web sites to which
we delivered an aggregate of more than 45 million advertisements in
December 1999. We developed our Canadian operations in 1999 after
acquiring Clickthrough Interactive Services, Inc. in July 1999;
- In Latin America, the network consists of over 30 Web sites to which we
delivered an aggregate of more than 5 million advertisements in
December 1999;
- In Asia, through our partner chinadotcom corporation, we support the
operation of the network, that consists of more than 500 high profile Web
sites. This network covers Greater China, the ASEAN nations, Australia,
South Korea and Japan; and
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- The 24/7 Network also includes The ContentZone, which consists of over
3,500 small to medium-sized Web sites to which we delivered an aggregate
of more than 100 million advertisements in December 1999.
Through the 24/7 Network we also offer network-related value-added solutions
to advertisers, marketers and Web publishers. For example, our AwardTrack
subsidiary offers a private label, loyalty customer relationship management
program that enables Web retailers and content sites to issue points to Web
users as a reward for making purchases, completing surveys or investigating
promotions. We also offer our creative design services, sponsorship
opportunities and syndication services.
24/7 MAIL
Our 24/7 Mail business was developed through the integration of our
acquisitions of Sift, Inc. in March 1999 and ConsumerNet, Inc. in August 1999
and subsequent growth. 24/7 Mail provides opt-in email direct marketing
services.
Our permission-based email-marketing database of more than 20 million email
addresses is the largest such database in the world and enables direct marketers
to target promotional campaigns to consumers who choose to receive commercial
messages. The users can opt out, or stop receiving these messages, at any time.
Currently, 24/7 Mail has U.S. operations that serve as list manager for
permission-based email lists that collectively contained more than 20 million
email addresses as of March 2000, and European operations that were recently
launched in the UK, and currently serve as list manager for permission-based
email lists that collectively contained more than two million email addresses as
of March 2000.
24/7 TECHNOLOGY SOLUTIONS
24/7 Technology Solutions is comprised of comprehensive service and software
solutions designed specifically for the needs of three targeted customer
segments: advertisers and agencies, Web publishers and e-commerce merchants. Our
technical service team of over 150 employees provides consulting services and
around-the-clock support for our ad-serving clients.
Products within 24/7 Technology Solutions include:
- 24/7 Connect, a next generation Internet ad serving system that is
available on two platforms: 24/7 Connect for Networks, that will initially
serve the 24/7 Network in the United States, and 24/7 Connect for
Advertisers and Publishers, our third-party ad serving solution. We expect
to combine the two platforms into a single solution later this year. We
acquired 24/7 Connect for Advertisers and Publishers through our
acquisition of Sabela Media, Inc. in January 2000; and
- e.merge, a fully integrated, customizable suite of business applications
designed to manage marketing campaigns across multiple forms of electronic
media including broadband, set-top boxes and wireless (WAP) applications.
We acquired e.merge through our acquisition of IMAKE Software and
Services, Inc. in January 2000.
We also operate Profilz, a database of Web user profiles that aids in
delivering targeted advertising and marketing messages based on demographic
profiles.
Our senior management team includes several individuals with over fifteen
years of experience in advertising sales in the television and proprietary
online network industries. Other members of senior management contribute
extensive knowledge of the technology that causes advertisements to be delivered
to Web sites, or ad serving technology, and data base targeting. We leverage our
media sales and technology expertise to maximize the value of ad campaigns for
both advertisers, direct marketers and Web sites.
Our principal executive offices are located at 1250 Broadway, 28th Floor,
New York, New York 10001. Our telephone number is (212) 231-7100. We currently
have offices in 50 cities in 27 countries. Our company's main Web site address
is WWW.247MEDIA.COM. Information contained on our Web site is not part of this
prospectus.
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RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO BUY OUR COMMON
STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITIONS OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN THIS CASE, THE PRICE
OF OUR SECURITIES COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR
INVESTMENT.
WE HAVE A LIMITED OPERATING HISTORY ON WHICH AN INVESTOR CAN EVALUATE OUR
BUSINESS.
We were formed as a result of three companies in February 1998. None of the
companies nor any company that we have since acquired had an operating history
of more than four years prior to acquisition or merger. We, therefore, have an
extremely limited operating history. You must consider the risks, expenses and
difficulties typically encountered by companies with limited operating
histories, particularly companies in new and rapidly expanding markets such as
Internet advertising.
These risks include our ability to:
- develop new relationships and maintain existing relationships with our Web
sites, advertisers, and other third parties;
- further develop and upgrade our technology;
- respond to competitive developments;
- implement and improve operational, financial and management information
systems; and
- attract, retain and motivate qualified employees.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE THE COMPANIES THAT WE HAVE ACQUIRED.
We were formed in February 1998 to consolidate three Internet advertising
companies and have since acquired or agreed to acquire eleven more companies. In
combining these entities, we have faced risks and continue to face risks of
integrating and improving our financial and management controls, ad serving
technology, reporting systems and procedures, and expanding, training and
managing our work force. This process of integration may take a significant
period of time and will require the dedication of management and other
resources, which may distract management's attention from our other operations.
We intend to continue pursuing selective acquisitions of businesses,
technologies and product lines as a key component of our growth strategy. Any
future acquisition or investment may result in the use of significant amounts of
cash, potentially dilutive issuances of equity securities, incurrence of debt
and amortization expenses related to goodwill and other intangible assets.
In addition, acquisitions involve numerous risks, including:
- the difficulties in the integration and assimilation of the operations,
technologies, products and personnel of an acquired business;
- the diversion of management's attention from other business concerns;
- the availability of favorable acquisition financing for future
acquisitions; and
- the potential loss of key employees of any acquired business.
Our inability to successfully integrate any acquired company could adversely
affect our business.
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WE ANTICIPATE CONTINUED LOSSES AND WE MAY NEVER BE PROFITABLE.
We incurred net losses attributable to common stockholders of $39.1 million
and $25.4 million for the years ended December 31, 1999 and 1998, respectively.
Each of our predecessors had net losses in every year of their operation. We
anticipate that we will incur operating losses for the foreseeable future due to
a high level of planned operating and capital expenditures. Although our revenue
has grown rapidly in recent periods, such growth may not continue and may not
lead to profitability. Even if we do achieve profitability, we cannot assure you
that we can sustain or increase profitability on a quarterly or annual basis in
the future.
OUR FUTURE REVENUES AND RESULTS OF OPERATIONS MAY BE DIFFICULT TO FORECAST.
Our results of operations may fluctuate significantly in the future as a
result of a variety of factors, many of which are beyond our control. These
factors include:
- the addition of new or loss of existing clients;
- changes in fees paid by advertisers and direct marketers;
- changes in service fees payable by us to owners of Web sites or email
lists, or ad serving fees payable by us to third parties;
- the introduction of new Internet marketing services by us or our
competitors;
- variations in the levels of capital or operating expenditures and other
costs relating to the maintenance or expansion of our operations,
including personnel costs; and
- general economic conditions.
Our future revenues and results of operations may be difficult to forecast
due to the above factors. In addition, our expense levels are based in large
part on our investment plans and estimates of future revenues. Any increased
expenses may precede or may not be followed by increased revenues, as we may be
unable to, or may elect not to, adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. As a result, we believe that
period-to-period comparisons of our results of operations may not be meaningful.
You should not rely on past periods as indicators of future performance. In
future periods, our results of operations may fall below the expectations of
securities analysts and investors, which could adversely affect the trading
price of our common stock.
OUR REVENUES ARE SUBJECT TO SEASONAL FLUCTUATIONS.
We believe that our revenues are subject to seasonal fluctuations because
advertisers generally place fewer advertisements during the first and third
calendar quarters of each year and direct marketers mail substantially more
marketing materials in the third quarter each year. Expenditures by advertisers
and direct marketers tend to vary in cycles that reflect overall economic
conditions as well as budgeting and buying patterns. Our revenue could be
materially reduced by a decline in the economic prospects of advertisers, direct
marketers or the economy in general, which could alter current or prospective
advertisers' spending priorities or budget cycles or extend our sales cycle.
OUR BUSINESS MAY NOT GROW IF THE INTERNET ADVERTISING MARKET DOES NOT CONTINUE
TO DEVELOP.
The Internet as a marketing medium has not been in existence for a
sufficient period of time to demonstrate its effectiveness. Our business would
be adversely affected if the Internet advertising market fails to continue to
develop. There are currently no widely accepted standards to measure the
effectiveness of Internet marketing other than clickthrough rates, which
generally have been declining. We cannot be certain that such standards will
develop to sufficiently support Internet marketing as a significant advertising
medium. Actual or perceived ineffectiveness of online marketing in general, or
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inaccurate measurements or database information in particular, could limit the
long-term growth of online advertising and cause our revenue levels to decline.
BANNER ADVERTISING, FROM WHICH WE CURRENTLY DERIVE MOST OF OUR REVENUES, MAY NOT
BE AN EFFECTIVE ADVERTISING METHOD IN THE FUTURE.
The majority of our revenues are derived from the delivery of banner
advertisements. If advertisers determine that banner advertising is an
ineffective or unattractive advertising medium, we cannot assure you that we
will be able to effectively make the transition to any other form of Internet
advertising. Also, there are "filter" software programs that limit or prevent
advertising from being delivered to a user's computer. The commercial viability
of Internet advertising, and our business, results of operations and financial
condition, would be materially and adversely affected by Web users' widespread
adoption of such software.
GROWTH OF OUR BUSINESS DEPENDS ON THE DEVELOPMENT OF ONLINE DIRECT MARKETING.
Adoption of online direct marketing, particularly by those entities that
have historically relied upon traditional means of direct marketing, such as
telemarketing and direct mail, is an important part of our business model.
Intensive marketing and sales efforts may be necessary to educate prospective
advertisers regarding the uses and benefits of our products and services to
generate demand for our direct marketing services. Enterprises may be reluctant
or slow to adopt a new approach that may replace, limit, or compete with their
existing direct marketing systems. In addition, since online direct marketing is
emerging as a new and distinct market apart from online advertising, potential
adopters of online direct marketing services will increasingly demand
functionality tailored to their specific requirements. We may be unable to meet
the demands of our clients.
OUR DEVELOPMENT OF A NEXT GENERATION AD SERVING TECHNOLOGY MAY NOT BE SUCCESSFUL
AND MAY CAUSE BUSINESS DISRUPTION.
24/7 Connect is our proprietary next generation ad serving technology that
is intended to serve as our sole ad serving solution. We recently launched 24/7
Connect, and to successfully complete the rollout of 24/7 Connect, we must,
among other things, ensure that this technology will function efficiently at
high volumes, interact properly with our Profilz database, offer the
functionality demanded by our customers and assimilate our sales and reporting
functions. This development effort could fail technologically or could take more
time than expected. Even if we successfully address all these challenges, we
must then work with our Web sites, advertisers and direct marketing clients to
transition them to our new system, which would also create a risk of business
disruption and loss of any of our clients.
LOSS OF FAILURE OF OUR THIRD PARTY AD SERVING TECHNOLOGY COULD DISRUPT OUR
BUSINESS.
Unless and until the complete rollout and transition to 24/7 Connect is
complete, we will be partially dependent on AdForce, Inc. to deliver ads to our
networks and Web sites. If such service becomes unavailable or fails to serve
our ads properly or fails to produce the frequent operational reports required,
our business would be adversely affected. Additionally, our use of multiple
systems to serve ads requires us to employ significant effort to prepare
information for billing, client statements and financial reporting. We are
upgrading our systems to integrate a new accounting system with our ad serving
technologies to improve our accounting, control and reporting methods. Our
inability to upgrade our existing reporting systems and streamline our
procedures may cause delays in the timely reporting of financial information.
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LOSS OF OUR MAJOR WEB SITES WOULD SIGNIFICANTLY REDUCE OUR REVENUES.
The 24/7 Network generates substantially all of our revenues and it consists
of a limited number of our Web sites that have contracted for our services under
agreements cancelable generally upon a short notice period. For the twelve-month
periods ended December 31, 1999 and 1998, approximately 32% and 47%,
respectively, of our total revenues were derived from advertisements on our top
ten Web sites. For the twelve month period ended December 31, 1999, the top ten
Web sites included AT&T WorldNet Service, Mapquest.com, Havas Interactive,
Netscape Communications, Earthlink Network, Goto.com, Small World Sports,
AllAdvantage.com, Multi-Player Games Network and World Gaming Corp. We
experience turnover from time to time among our Web sites, and we cannot be
certain that the Web sites named above remain or will remain associated with us.
Our business, results of operations and financial condition would be materially
adversely affected by the loss of one or more of the Web sites that account for
a significant portion of our revenue from the 24/7 Network.
LOSS OF OUR ADVERTISERS OR AD AGENCIES WOULD REDUCE OUR REVENUES.
We generate our revenues from a limited number of advertisers and ad
agencies that purchase space on our Web sites. We expect that a limited number
of these entities may continue to account for a significant percentage of our
revenues for the foreseeable future. For the twelve-month period ended
December 31, 1999, our top ten advertisers and ad agencies accounted for
approximately 26% of our total revenues.
ADVERTISERS AND AD AGENCIES TYPICALLY PURCHASE ADVERTISING UNDER PURCHASE ORDER
AGREEMENTS THAT RUN FOR A LIMITED TIME.
Typically, we enter into short-term contracts with advertisers and ad
agencies. Since these contracts are short-term, we will have to negotiate new
contracts or renewals in the future that may have terms that are not as
favorable to us as the terms of existing contracts. We cannot be certain that
current advertisers and ad agencies will continue to purchase advertising from
us or that we will be able to attract additional advertisers and ad agencies
successfully, or that agencies and advertisers will make timely payment of
amounts due to us. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products or services to address
the needs of our prospective clients.
OUR FAILURE TO SUCCESSFULLY COMPLETE MAY HINDER OUR GROWTH.
The markets for Internet advertising and related products and services are
intensely competitive and such competition is expected to increase. Our failure
to successfully compete may hinder our growth. We believe that our ability to
compete depends upon many factors both within and beyond our control, including:
- the timing and market acceptance of new products and enhancements of
existing services developed by us and our competitors;
- changing demands regarding customer service and support;
- shifts in sales and marketing efforts by us and our competitors; and
- the ease of use, performance, price and reliability of our services and
products.
Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than ours. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products or
services to address
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the needs of our prospective clients. We cannot be certain that we will be able
to successfully compete against current or future competitors.
In addition, the Internet must compete for a share of advertisers' total
budgets with traditional advertising media, such as television, radio, cable and
print, as well as content aggregation companies and other companies that
facilitate Internet advertising. To the extent that the Internet is perceived to
be a limited or ineffective advertising or direct marketing medium, advertisers
and direct marketers may be reluctant to devote a significant portion of their
advertising budgets to Internet marketing, which could limit the growth of
Internet marketing.
WE MAY BE UNABLE TO CONTINUE TO SUCCESSFULLY MANAGE RAPID GROWTH.
We continue to increase the scope of our operations both domestically and
internationally, in both sales and marketing as well as technological
development. We expect that we will need to continue to improve our financial
and managerial controls, reporting procedures and systems. We have experienced
rapid growth and expansion in operations that have placed a significant strain
on our managerial, operational and financial resources. We expect the number of
employees to increase in the future.
To successfully compete in the evolving Internet industry, we must:
- continue to improve our financial and management controls;
- enhance our reporting systems and procedures;
- continue to scale our ad serving systems and upgrade their functional
capabilities; and
- expand, train, retain and manage our work force.
We cannot be certain that our systems, procedures or controls will be
adequate to support our expanding operations, or that management will be able to
respond effectively to such growth. Our future results of operations also depend
on the expansion of our sales, marketing and customer support departments.
OUR INTERNATIONAL EXPANSION MAY POSE LEGAL AND CULTURAL CHALLENGES.
We have operations in a number of international markets, including Canada,
Europe, Asia, Australia and Latin America. We intend to continue to expand our
international operations and international sales and marketing efforts. To date,
we have limited experience in marketing, selling and distributing our solutions
internationally.
International operations are subject to other risks, including:
- changes in regulatory requirements;
- reduced protection for intellectual property rights in some countries;
- potentially adverse tax consequences;
- general import/export restrictions relating to encryption technology
and/or privacy;
- difficulties and costs of staffing and managing foreign operations;
- political and economic instability;
- fluctuations in currency exchange rates; and
- seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world.
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In addition to these factors, due to our minority stake in the 24/7 Network
in Asia, we are relying on chinadotcom corporation to conduct operations, build
the network, aggregate Web publishers and coordinate sales and marketing
efforts. The success of the 24/7 Network in Asia is directly dependent on the
success of chinadotcom corporation and its dedication of sufficient resources to
our relationship.
IF WE LOSE OUR CEO OR OTHER SENIOR MANAGERS WE MAY NOT BE ABLE TO GROW.
Our success depends upon our senior management and key sales and technical
personnel, particularly David J. Moore, Chief Executive Officer. The loss of the
services of one or more of these persons could materially adversely affect our
ability to develop our business. Our success also depends on our ability to
attract and retain qualified technical, sales and marketing, customer support,
financial and accounting, and managerial personnel. Competition for such
personnel in the Internet industry is intense, and we cannot be certain that we
will be able to retain our key personnel or that we can attract, integrate or
retain other highly qualified personnel in the future.
We have experienced in the past, and may continue to experience in the
future, difficulty in hiring and retaining candidates with appropriate
qualifications, especially in sales and marketing positions. Although we have
not experienced any material impact from the difficulty in hiring and retaining
qualified employees, we may be materially impacted in the future from such
hiring difficulties.
DEPENDENCE ON PROPRIETARY RIGHTS AND RISK OF INFRINGEMENT.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we protect through a
combination of patent, copyright, trade secret and trademark law. We have
received two patents in the United States, and have filed and intend to file
additional patent applications in the United States. In addition, we apply to
register our trademarks in the United States and internationally. We cannot
assure you that any of our patent applications or trademark applications will be
approved. Even if they are approved, such patents or trademarks may be
successfully challenged by others or invalidated. If our trademark registrations
are not approved because third parties own such trademarks, our use of such
trademarks will be restricted unless we enter into arrangements with such third
parties that may be unavailable on commercially reasonable terms.
We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. We cannot assure you that the steps we have taken
will prevent misappropriation of our solutions or technologies, particularly in
foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States.
We have licensed, and we may license in the future, elements of our
trademarks, trade dress and similar proprietary rights to third parties. While
we attempt to ensure that the quality of our brand is maintained by these
business partners, such partners may take actions that could materially and
adversely affect the value of our proprietary rights or our reputation. We
cannot assure you that any of our proprietary rights will be viable or of value
in the future since the validity, enforceability and scope of protection of
certain proprietary rights in Internet-related industries is uncertain and still
evolving.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD HINDER OUR ABILITY TO DELIVER
ADVERTISEMENTS OVER THE INTERNET.
We may be subject to claims of alleged infringement of the trademarks and
other intellectual property rights of third parties by us or the Web publishers
with Web sites in the 24/7 Network. Such claims and any resultant litigation
could subject us to significant liability for damages and could result
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in the invalidation of our proprietary rights. In addition, even if we prevail,
such litigation could be time-consuming and expensive to defend, and could
result in the diversion of our time and attention, any of which could materially
and adversely affect our business, results of operations and financial
condition. Any claims or litigation from third parties may also result in
limitations on our ability to use the trademarks and other intellectual property
subject to such claims or litigation unless we enter into arrangements with the
third parties responsible for such claims or litigation which may be unavailable
on commercially reasonable terms.
In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit
against our subsidiary, Sabela Media, Inc. in the United States District Court
for the Southern District of New York. The suit alleges that Sabela is
infringing, and inducing and contributing to the infringement by third parties
of, a patent held by DoubleClick entitled "Method for Delivery, Targeting and
Measuring Advertising Over Networks". DoubleClick is seeking treble damages in
an unspecified amount, a preliminary and permanent injunction from further
alleged infringement and attorneys' fees and costs. This litigation can be
expected to result in significant expenses to us and the diversion of management
time and other resources, the extent of which cannot be quantified with any
reasonable accuracy given the early stage of this litigation.
In addition, some of our contracts with Web publishers require us to
indemnify the Web publishers for losses they incur arising from any infringement
by our ad serving technology of a third party's intellectual property rights. If
DoubleClick is successful in its claims against Sabela or files a similar suit
against us, we may be hindered or even prevented from competing in the Internet
advertising market and our operations could be severely harmed. The DoubleClick
suit could result in limitations on how we implement our 24/7 Connect for
Advertisers and Publishers product, delays and costs associated with redesigning
our 24/7 Connect for Advertisers and Publishers product and payments of license
fees and other monies. An injunction obtained by DoubleClick could eliminate our
ability to deliver advertisements over the Internet through our 24/7 Connect for
Advertisers and Publishers product. If DoubleClick is successful in its claims
against Sabela, we cannot assure you that we would be able to enter into a
licensing agreement with DoubleClick on commercially reasonable terms, if at all
for our 24/7 Connect for Advertisers and Publishers product. In that case, we
would be required to alter our technology in a way that would not infringe the
DoubleClick patent, and we cannot assure you that these alterations would be
successful.
INTELLECTUAL PROPERTY LIABILITY.
We may be liable for content available or posted on the Web sites of our
publishers. We may be liable to third parties for content in the advertising we
serve if the music, artwork, text or other content involved violates the
copyright, trademark or other intellectual property rights of such third parties
or if the content is defamatory. Any claims or counterclaims could be time
consuming, result in costly litigation or divert management's attention.
PRIVACY CONCERNS MAY PREVENT US FROM COLLECTING DEMOGRAPHIC OR OTHER CONSUMER
DATA.
Our 24/7 Connect technology targets advertising to users through the use of
identifying data, or "cookies" and other non-personally-identifying information.
24/7 Connect enables the use of cookies to deliver targeted advertising, to help
compile demographic information, and to limit the frequency with which an
advertisement is shown to the user. Any reduction or limitation in the use of
cookies could limit the effectiveness of our sales and marketing efforts and
impair our targeting capabilities. Due to privacy concerns, some Internet
commentators, advocates and governmental bodies have suggested that the use of
cookies be limited or eliminated. The effectiveness of our 24/7 Connect
technology to deliver targeted advertisements could be limited by any regulation
or limitation in the collection or use of information regarding Internet users.
Since many of the limitations are still in the proposal stage, we cannot yet
determine the full impact of these regulations on our business. In addition, we
are
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developing our Profilz database to collect data derived from user activity on
our networks and from other sources.
We collect and compile information in databases for the product offerings of
all our businesses. Individuals or entities may claim in the future, that our
collection of this information is illegal. Although we believe that we have the
right to use and compile the information in these databases, we cannot assure
you that our ability to do so will remain lawful, that any trade secret,
copyright or other intellectual property protection will be available for our
databases, or that statutory protection that is or becomes available for
databases will enhance our rights. In addition, others may claim rights to the
information in our databases. Further, pursuant to our contracts with Web
publishers using our solutions, we are obligated to keep certain information
regarding each Web publisher confidential and, therefore, may be restricted from
further using that information in our business.
CHANGES IN LAWS AND STANDARDS RELATING TO DATE COLLECTION AND USE PRACTICES AND
THE PRIVACY OF INTERNET USERS AND OTHER INDIVIDUALS COULD HARM OUR BUSINESS.
Growing public concern regarding privacy and the collection, distribution
and use of information about individuals has led to increased federal and state
scrutiny and legislative and regulatory activity. In addition, the high
technology and direct marketing industries are considering various new,
additional or different self-regulatory standards. This focus, and any
legislation, regulations or standards promulgated, impacts us. The U.S. federal
and various state governments have recently proposed limitations on the
collection and use of information regarding Internet users. In October 1998, the
European Union adopted a directive that may limit our collection and use of
information regarding Internet users in Europe.
Various technology and direct marketing industry groups have also been
addressing this issue. The Network Advertising Initiative, an industry
self-regulatory group comprised of third-party ad servers, including us, has
proposed a series of self-regulatory principles. We cannot assure you that the
Federal Trade Commission and the Department of Commerce will endorse these
principles, and the position that these agencies adopt may be more adverse to us
than those currently under discussion. Other trade associations are active as
well. The Online Privacy Alliance, a broad coalition of high-technology
companies, is examining fair information practices and may offer proposals for
industry acceptance. The Direct Marketing Association, or DMA, the leading trade
association of direct marketers, has adopted guidelines regarding the fair use
of information which it recommends that industry participants, including us,
follow. We are also subject to various federal and state regulations concerning
the collection and use of information regarding individuals. These laws include
the Children's Online Privacy Protection Act, and state laws which limit or
preclude the use of voter registration and drivers license information, as well
as other laws that govern the collection and use of consumer credit information.
Although our compliance with applicable federal and state laws, regulations
and industry guidelines has not had a material adverse effect on us,
governments, trade associations and industry self-regulatory groups may enact
more burdensome laws, regulations and guidelines, including antitrust and
consumer privacy laws, for us and our clients. These regulations and guidelines
could materially and adversely affect the business, financial condition and
results of operations of our business. Furthermore, computer users may also use
software designed to filter or prevent the delivery of advertising to their
computers. We cannot assure you that the number of computer users who employ
filtering software will not increase or that additional Web publishers will not
seek contractual provisions barring us from developing profiles of users of
their Web sites, either of which could materially and adversely affect our
business, results of operations and financial condition.
Also, as a consequence of governmental legislation or regulation or
enforcement efforts or evolving standards of fair information collection
practices, we may be required to make changes to our
10
<PAGE>
products or services in ways that could diminish the effectiveness of the
product or service or its attractiveness to potential customers, which could
materially and adversely affect our business, financial condition or results of
operations.
CHANGES IN GOVERNMENT REGULATION COULD DECREASE OUR REVENUES AND INCREASE OUR
COSTS.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent, and new laws and
regulations are under consideration by the United States Congress and state
legislatures. Any legislation enacted or restrictions arising from current or
future government investigations or policy could dampen the growth in use of the
Internet generally and decrease the acceptance of the Internet as a
communications, commercial and advertising medium.
The governments of other states or foreign countries might attempt to
regulate our transmissions or levy sales or other taxes relating to our
activities. The European Union has enacted its own privacy regulations that may
result in limits on the collection and use of certain user information. The laws
governing the Internet, however, remain largely unsettled, even in areas where
there has been some legislative action. It may take years to determine whether
and how existing laws such as those governing intellectual property privacy,
libel and taxation apply to the Internet and Internet advertising.
In addition, the growth and development of the market for Internet commerce
may prompt calls for more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet. Our business, results of operations and financial
condition could be materially and adversely affected by the adoption or
modification of laws or regulations relating to the Internet.
DEPENDENCE ON THE WEB INFRASTRUCTURE.
Our success will depend, in large part, upon the maintenance of the Web
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security, and timely development of enabling products such as
high speed modems, for providing reliable Web access and services and improved
content. We cannot assure you that the Web infrastructure will continue to
effectively support the demands placed on it as the Web continues to experience
increased numbers of users, frequency of use or increased bandwidth requirements
of users. Even if the necessary infrastructure or technologies are developed, we
may have to spend considerable amounts to adapt our solutions accordingly.
Furthermore, the Web has experienced a variety of outages and other delays due
to damage to portions of its infrastructure. Such outages and delays could
impact the clients using our solutions and the level of user traffic on Web
sites on our networks.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE.
The Internet and Internet advertising markets are characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions, and changing customer demands. Our future success will
depend on our ability to adapt to rapidly changing technologies and to enhance
existing solutions and develop and introduce a variety of new solutions to
address our customers' changing demands. We may experience difficulties that
could delay or prevent the successful design, development, introduction or
marketing of our solutions. In addition, our new solutions or enhancements must
meet the requirements of our current and prospective customers and must achieve
significant market acceptance. Material delays in introducing new solutions and
enhancements may cause customers to forego purchases of our solutions and
purchase those of our competitors.
POSSIBLE VOLATILITY OF STOCK PRICE.
The market price of our common stock has fluctuated in the past and is
likely to continue to be highly volatile and could be subject to wide
fluctuations. In addition, the stock market has experienced
11
<PAGE>
extreme price and volume fluctuations. The market prices of the securities of
Internet-related companies have been especially volatile. Investors may be
unable to resell their shares of our common stock at or above the purchase
price. In the past, companies that have experienced volatility in the market
price of their stock have been the objects of securities class action
litigation. If we were the object of securities class action litigation, it
could result in substantial costs and a diversion of management's attention and
resources.
INTEREST RATE RISK, MARKET RISK AND CURRENCY RATE FLUCTUATIONS.
24/7 Media's investments are classified as cash and cash equivalents with
original maturities of three months or less. Therefore, changes in the market's
interest rates do not affect the value of the investments as recorded by 24/7
Media. 24/7 Media's accounts receivables are subject, in the normal course of
business, to collection risks. 24/7 Media regularly assesses these risks and has
established policies and business practices to protect against the adverse
effects of collection risks. As a result, 24/7 Media does not anticipate any
material losses in this area. We transact business in various foreign countries.
Accordingly, we are subject to exposure from adverse movements in foreign
currency exchange rates. This exposure is primarily related to revenue and
operating expenses in the countries whose currency is the Euro. The effect of
foreign exchange rate fluctuations for 1999 was not material. 24/7 Media does
not use derivative financial instruments to limit its foreign currency risk
exposure.
FORWARD LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements. These forward-looking statements
are based on our current expectations, estimates and projections about our
industry, management's beliefs and certain assumptions made by us. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates"
and variations of these words or similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, our actual results could differ materially
from those expressed or forecasted in any forward-looking statements as a result
of a variety of factors, including those set forth in "Risk Factors" above and
elsewhere in, or incorporated by reference into, this prospectus. We undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
USE OF PROCEEDS
The selling stockholders are offering all of the shares of common stock
covered by this prospectus. We will not receive any proceeds from the sale of
these shares.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares owned by each of the
selling stockholders as of March 15, 2000. All information contained in the
table below is based upon information provided to us by the selling
stockholders, and we have not independently verified this information. We are
not able to estimate the amount of shares that will be held by the selling
stockholders after the completion of this offering because the selling
stockholders may offer all or some of their shares and because there currently
are no agreements, arrangements or understandings with respect to the sale of
any of their shares. The following table assumes that all of the shares being
registered will be sold. The selling stockholders are not making any
representation that any shares covered by the prospectus will be offered for
sale. The selling stockholders reserve the right to accept or reject, in whole
or in part, any proposed sale of shares.
<TABLE>
<CAPTION>
NUMBER NUMBER
OF SHARES OF SHARES
NAME OWNED REGISTERED
- ---- --------- ----------
<S> <C> <C>
Paul Conrad Chachko (1)..................................... 619,796 413,199
Troy Scheer (1)............................................. 45,421 20,411
Ravi P. Yadav (1)........................................... 413,197 275,466
Mezzanine Financial Fund, L.P. (1).......................... 11,583 7,723
John Mazzacco (1)........................................... 124,885 83,257
Robert M. Skoro (1)......................................... 124,885 83,257
James Green (2)............................................. 236,808 80,515
Freshwater Consulting Ltd. (2).............................. 236,808 80,515
Galmos Holdings, Ltd. (2)................................... 236,808 80,515
TOCAD Co., Ltd. (2)......................................... 37,636 18,818
TOCAD Networks, Co., Ltd. (2)............................... 8,364 4,182
Tocad Sunpak (Hong Kong) Ltd. (2)........................... 61,795 30,898
Sabela Media KAI. (2)....................................... 37,511 18,756
International Electronics Co., Ltd. (2)..................... 16,727 8,364
Ramport Trading Ltd. (2).................................... 65,159 32,580
Steven E. Blume (2)......................................... 20,700 10,350
Nicole M. Blume (Irrevocable Trust) (2)..................... 5,520 2,760
Jenna J. Blume (Irrevocable Trust) (2)...................... 5,520 2,760
Andrew J. Blume (Irrevocable Trust) (2)..................... 5,520 2,760
Livewire Labs LLC (2)....................................... 45,980 22,990
Distribution Finance, Ltd. (2).............................. 36,782 18,391
Bruce Edmiston (2).......................................... 21,929 21,929
Erland & Company (2)........................................ 28,560 14,280
Taro Fujikawa (2)........................................... 10,036 5,018
Takeshi Fujikawa (2)........................................ 12,545 6,273
Masaru Fujikawa (2)......................................... 10,873 5,437
David Spence (2)............................................ 18,390 9,195
Inanda Associates (2)....................................... 23,478 11,739
Golden Words Pty Limited (2)................................ 10,036 5,018
Wilcrow Pty Ltd. (2)........................................ 20,072 10,136
Arton No. 0001 Pty Ltd (2).................................. 12,865 6,433
Ricard d'Abo (2)............................................ 2,208 1,104
Keith Boesky (2)............................................ 1,000 500
Richard Stevens (2)......................................... 1,000 500
Thomas Kirch (2)............................................ 1,000 500
Louisa Ramsey (2)........................................... 938 469
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
OF SHARES OF SHARES
NAME OWNED REGISTERED
- ---- --------- ----------
<S> <C> <C>
Abhay Puri (2).............................................. 18,459 18,459
Hoo Lam Woon (2)............................................ 15,895 15,895
Harry Weber-Brown (2)....................................... 12,857 12,857
Simon Johnson (2)........................................... 12,857 12,857
Matthew Tombers (2)......................................... 9,184 9,184
Birathon Kasemsri (2)....................................... 12,398 12,398
Andrew Fawcett (2).......................................... 6,268 6,268
Brian Anderson (3).......................................... 174,419 58,134
Jeffrey Newhouse (3)........................................ 41,331 13,776
John Watson (3)............................................. 8,266 2,755
Gregory Hassett (3)......................................... 5,166 1,722
Randy Moore (3)............................................. 14,466 4,822
Jack Daley (3).............................................. 41,331 13,776
MemberWorks Incorporated (3)................................ 804,650 804,650
National Discount Brokers Group, Inc. (3)................... 39,715 39,715
C. Andrew Johns (4)......................................... 9,375 9,375
TOTAL................................................... 3,798,972 2,433,641
</TABLE>
- ------------------------
(1) Shares issued in the acquisition of Music Marketing Network, Inc.
(ConsumerNet),a New Jersey corporation, in August 1999.
(2) Shares issued in the acquisition of Sabela Media, Inc., a Delaware
Corporation, in January 2000.
(3) Shares issued in the acquisition of AwardTrack, Inc., a California
corporation, in February 2000.
(4) Class C Warrants beneficially owned by our Chief Financial Officer.
The above stockholders received their shares of common stock pursuant to one
of the acquisitions set forth in the footnotes above. The stockholders who
received their shares in connection with the acquisition of ConsumerNet are
parties to a registration rights agreement, dated August 17, 1999, pursuant to
which we agreed to file a registration statement on or prior to November 17,
1999 for certain holders named in the agreement and on or prior to February 17,
2000 for other holders named in the agreement, and in each case, to keep such
registration statement effective for a period of two years. The stockholders who
received their shares in connection with the acquisition of Sabela are parties
to an agreement and plan of merger, dated January 9, 2000, pursuant to which we
agreed to register their shares in registration statement on or prior to
April 1, 2000 and to keep such registration statement effective for a period of
at least twelve months. The stockholders who received their shares in connection
with the acquisition of AwardTrack are parties to a registration rights
agreement, dated February 11, 2000, pursuant to which we agreed to file a
registration statement on or prior to June 30, 2000, and to keep such
registration statement effective for a period of at least twelve months.
Several of the above stockholders currently hold positions with 24/7 Media
or its subsidiaries. James Green, David Turner, Gour Lentell, Brian Anderson and
Jack Daley are each employed by 24/7 Media, Inc. in positions of vice president
or above.
This prospectus also covers any additional shares of common stock that
become issuable in connection with the shares being registered by reason of any
stock dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an increase in
the number of our outstanding shares of common stock.
14
<PAGE>
PLAN OF DISTRIBUTION
We are registering the common stock on behalf of the above selling
stockholders. As used in this prospectus, the term "selling stockholders"
includes pledgees, transferees or other successors-in-interest selling shares
received from the selling stockholders as pledgors, borrowers or in connection
with other non-sale-related transfers after the date of this prospectus. This
prospectus may also be used by transferees of the selling stockholders,
including broker-dealers or other transferees who borrow or purchase the shares
to settle or close out short sales of shares of common stock. The selling
stockholders will act independently of us in making decisions with respect to
the timing, manner, and size of each sale or non-sale related transfer. We will
not receive any of the proceeds of this offering.
The selling stockholders are offering shares of common stock that they
received in connection the above acquisitions. This prospectus covers their
resale of up to 2,433,641 shares of common stock.
The selling stockholders may sell their shares of common stock directly to
purchasers from time to time. Alternatively, they may from time to time offer
the common stock to or through underwriters, broker/dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling stockholders or the purchasers of such securities
for whom they may act as agents. The selling stockholders and any underwriters,
broker/dealers or agents that participate in the distribution of common stock
may be deemed to be "underwriters" within the meaning of the Securities Act and
any profit on the sale of such securities and any discounts, commissions,
concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The common stock may be sold from time to time in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. The sale of the
common stock may be affected by means of one or more of the following
transactions (which may involve cross or block transactions):
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale,
- in the over-the-counter market,
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market or
- through the purchase and sale of over-the-counter options.
In connection with sales of the common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker/dealers, which may
in turn engage in short sales of the common stock in the course of hedging the
positions they assume. The selling stockholders may also sell common stock short
and deliver common stock to close out such short positions, or loan or pledge
common stock to broker/ dealers that in turn may sell such securities.
At the time a particular offering of the common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount common stock being offered and the terms of the offering, including the
name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the common stock will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers.
The selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the common stock by the
selling stockholders. The foregoing may affect the marketability of such
securities.
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Pursuant to the various registration rights agreements with the selling
stockholders who received their shares of common stock in connection with the
above acquisitions, all expenses of the registration of the common stock will be
paid by us, including, without limitation, SEC filing fees; provided, however,
that the selling stockholders will pay all underwriting discounts and selling
commissions, if any. The selling stockholders will be indemnified by us against
certain civil liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith. We will be
indemnified by the selling stockholders severally against certain civil
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.
In addition, any common stock covered by this prospectus that qualify for
sale pursuant to Rule 144, Rule 144A or any other available exemption from
registration under the Securities Act may be sold under Rule 144, Rule 144A or
such other available exemption rather than pursuant to this prospectus. There is
no assurance that any selling stockholder will sell any or all of the common
stock, and any selling stockholder may transfer, devise or gift such common
stock by other means not described herein.
We will be permitted to suspend the use of the prospectus which is a part of
the shelf registration statement for a period not to exceed 90 days in any
twelve-month period under certain circumstances relating to pending corporate
developments, public filings with the Commission and similar events.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
update and supersede this information. The prospectus incorporates by reference
the documents set forth below that we have previously filed with the SEC. The
documents contain important information about 24/7 Media and its finances. We
incorporate by reference our:
- Annual Report on Form 10-K for the year ended December 31, 1999 (SEC file
number 000-29767);
- Current Reports on Form 8-K dated September 1, 1999 (as amended on
Form 8-K/A dated October 29, 1999), January 25, 2000 (as amended on
Form 8-K/A dated March 24, 2000), January 27, 2000 (as amended on
Form 8-K/A dated March 28, 2000) and February 28, 2000 (SEC file numbers
000-29768); and
- The description of the 24/7 Media common stock contained in our
Registration Statement on Form 8-A dated July 28, 1998 registering the
24/7 Media common stock under Section 12(g) of the Exchange Act.
In addition, all of our filings with the SEC after the date of this
prospectus under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of the initial registration statement and prior to the effectiveness of the
registration statement shall be deemed to be incorporated by reference and to be
a part of this document until this offering is terminated or completed.
Any statement contained in the prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein (or in the any applicable prospectus supplement) or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's Web site at http://www.sec.gov.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
24/7 Media, Inc.
Megan M. Hurley
Vice President, Associate General Counsel
1250 Broadway, 28th Floor
New York, New York 10001
(212) 231-7100
This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC under the Securities Act. You should rely only on the
information incorporated by reference or provided in this prospectus or the
prospectus supplement. We have authorized no one to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus or the prospectus supplement is accurate as of any date other than on
the front of this document.
LEGAL MATTERS
The validity of the securities offered under this registration statement
will be passed upon for 24/7 Media by Proskauer Rose LLP, New York, New York.
EXPERTS
The consolidated financial statements of 24/7 Media, Inc. and subsidiaries
as of December 31, 1999 and 1998 and for each of the years in the three-year
period ended December 31, 1999, the consolidated financial statements of Sabela
Media, Inc. and subsidiaries as of December 31, 1999 and 1998 and for the years
ended December 31, 1999 and the period from June 29, 1998 (inception) to
December 31, 1998, and the combined financial statements of the media divisions
of IMAKE Software & Services, Inc. and IMAKE Consulting, Inc. as of
December 31, 1999 and 1998, and for the years then ended, have been incorporated
by reference herein and in the registration statement in reliance upon the
reports of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The financial statements incorporated by reference in this registration
statement for Music Marketing Network, Inc. (d/b/a ConsumerNet) as of
December 31, 1998 and 1997 and for the years then ended have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the expenses to be incurred by
24/7 Media, Inc. in connection with the issuance and distribution of the
securities being registered hereby. All such expenses will be borne by
24/7 Media, Inc.:
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC Registration Fee........................................ $30,000
Legal Fees and Expenses..................................... $ 5,000
Accounting Fees and Expenses................................ $10,000
Miscellaneous............................................... $10,000
-------
Total................................................. $55,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of the State of Delaware ("DGCL") permits the
Company and its stockholders to limit directors' exposure to liability for
certain breaches of the directors' fiduciary duty, either in a suit on behalf of
the Company or in an action by stockholders of the Company.
The Certificate of Incorporation of the Company (the "Charter") eliminates
the liability of directors to stockholders or the Company for monetary damages
arising out of the directors' breach of their fiduciary duty of care. The
Charter also authorizes the Company to indemnify its directors, officers,
incorporators, employees, and agents with respect to certain costs, expenses,
and amounts incurred in connection with an action, suit, or proceeding by reason
of the fact that such person was serving as a director, officer, incorporator,
employee, or agent of the Company. In addition, the Charter permits the Company
to provide additional indemnification rights to its officers and directors and
to indemnify them to the greatest extent possible under the DGCL. The Company
has entered into indemnification agreements with each of its officers and
directors and intends to enter into indemnification agreements with each of its
future officers and directors. Pursuant to such indemnification agreements, the
Company has agreed to indemnify its officers and directors against certain
liabilities, including liabilities arising out of the offering made by this
registration statement.
The Company maintains a standard form of officers' and directors' liability
insurance policy which provides coverage to the officers and directors of the
Company for certain liabilities, including certain liabilities which may arise
out of this registration statement.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Charter. The Registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
ITEM 16. EXHIBITS
The following is a list of Exhibits filed as part of the Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 of 24/7 Media,
Inc.'s Registration Statement on Form S-1 File No.
333-70857).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.2 Bylaws (incorporated by reference to Exhibit 3.5 of
24/7 Media, Inc.'s Registration Statement on Form S-1 File
No. 333-70857).
4.1 Registration Rights Agreement, dated as of August 17, 1999,
by and among 24/7 Media, Inc. and the holders named therein
(incorporated by reference to Exhibit 4.4 of 24/7 Media,
Inc.'s Registration Statement on Form S-3 File N.
333-89985).
4.2 Registration Rights Agreement, dated as of January 9, 2000,
by and among 24/7 Media, Inc. and the holders named therein.
4.3 Registration Rights Agreement, dated as of February 11,
2000, by and among 24/7 Media, Inc. and the holders named
therein.
5 Opinion of Proskauer Rose LLP.
23.1 Consent of Proskauer Rose LLP, included in Exhibit 5.
23.2 Consent of KPMG LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of KPMG LLP.
23.5 Consent of KPMG LLP.
24 Power of Attorney, included on the signature page of this
Registration Statement.
</TABLE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. If a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities offered hereby, a post-effective amendment to this
Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price
II-2
<PAGE>
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that the undertakings set forth in paragraphs (i) and
(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offer d therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 24(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
REQUEST FOR ACCELERATION OF EFFECTIVE DATE
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in The City of New York, State of New York, on this 31st day of
March, 2000.
<TABLE>
<S> <C> <C>
24/7 MEDIA, INC.
By: /s/ DAVID J. MOORE
-----------------------------------------
David J. Moore
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on March 31, 2000:
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ DAVID J. MOORE
------------------------------------------- Chief Executive Officer and Director
David J. Moore (Principal Executive Officer)
/s/ R. THEODORE AMMON
------------------------------------------- Chairman of the Board
R. Theodore Ammon
/s/ JACOB FRIESEL
------------------------------------------- Executive Vice President and Director
Jacob I. Friesel
/s/ JOHN F. BARRY III
------------------------------------------- Director
John F. Barry III
/s/ ARNIE SEMSKY
------------------------------------------- Director
Arnie Semsky
/s/ CHARLES W. STRYKER, PH.D.
------------------------------------------- Director
Charles W. Stryker, Ph.D.
/s/ C. ANDREW JOHNS Executive Vice President, Treasurer & Chief
------------------------------------------- Financial Officer (Principal Financial
C. Andrew Johns Officer)
/s/ STUART D. SHAW
------------------------------------------- Senior Vice President and Controller
Stuart D. Shaw (Principal Accounting Officer)
</TABLE>
II-4
<PAGE>
EXHIBIT ANNEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 of 24/7 Media,
Inc.'s Registration Statement on Form S-1 File No.
333-70857).
3.2 By laws (incorporated by reference to Exhibit 3.5 of
24/7 Media, Inc.'s Registration Statement on Form S-1 File
No. 333-70857).
4.1 Registration Rights Agreement, dated as of August 17, 1999,
by and among 24/7 Media, Inc. and the holders named therein
(incorporated by reference to Exhibit 4.4 of 24/7 Media,
Inc.'s Registration Statement on Form S-3 (File
N. 333-89985).
4.2 Registration Rights Agreement, dated as of January 9, 2000,
by and among 24/7 Media, Inc. and the holders named therein.
4.3 Registration Rights Agreement, dated as of February 11,
2000, by and among 24/7 Media, Inc. and the holders named
therein.
5 Opinion of Proskauer Rose LLP.
23.1 Consent of Proskauer Rose LLP, included in Exhibit 5.
23.2 Consent of KPMG LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of KPMG LLP.
23.5 Consent of KPMG LLP.
24 Power of Attorney, included on the signature page of this
Registration Statement.
</TABLE>
<PAGE>
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made as of this 9th day of January, 2000,
by and among 24/7 Media, Inc., a Delaware corporation (the "Company"), Sabela
Media, Inc., a Delaware corporation, and the persons set forth on Exhibit A
hereto (each a "Management Holder," and the Management Holders, the Other
Holders and the Non-Management Holders shall collectively be referred to as the
"Sellers").
RECITALS:
WHEREAS, certain of the parties hereto have entered into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), in connection with
which the Sellers and Erland & Company ("Erland") acquired certain shares of the
Company's common stock, par value $.01 per share (the "Shares");
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Common Stock" means the common stock, par value $.01 per share, of
the Company.
(b) "Dispose of" means to (x) offer, sell, pledge, hypothecate or
otherwise dispose of Shares or (y) establish or increase any "put equivalent
position" (as defined in Rule 16a-1(h) under the Exchange Act) with respect to
Shares; PROVIDED, HOWEVER, such term shall not include transfers of Shares due
to (i) the death of a Holder; (ii) the merger, consolidation or sale of the
Company; (iii) the transfer of Shares to any wholly-owned subsidiary or parent
of a Holder; or (iv) any transfer to a trust of which there are no beneficiaries
other than the parents, spouse or children of such Holder.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(d) "Form S-3" means such form under the Securities Act as in effect on
the date hereof or any registration form under the Securities Act subsequently
adopted by the SEC, which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(e) "Holder" means any Person owning or having the right to acquire
Registrable Securities, or any assignee thereof in accordance with Section 8.
(f) "Management Holders" means the persons set forth on Exhibit A
hereto, or any assignee thereof in accordance with Section 8.
(g) "Non-Management Holders" means the persons set forth on Exhibit B
hereto, or any assignee thereof in accordance with Section 8.
(h) "Other Holders" means the persons set forth on Exhibit C hereto or
any assignee thereof in accordance with Section 8.
<PAGE>
(i) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, association, trust or any other entity or
organization.
(j) "Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(k) "Registrable Securities" means any unregistered shares of Common
Stock held by, issuable to, or subsequently acquired by, the Sellers and any
shares of Common Stock issued or issuable with respect to any such shares of
Common Stock by way of stock dividend or stock split, or in connection with a
combination of shares, recapitalization, merger, consolidation, or other
reorganization or otherwise and; PROVIDED, HOWEVER, that any such securities
shall cease to be Registrable Securities when (i) such securities are sold by a
Holder in a transaction in which such Holder's rights under this Agreement are
not assigned pursuant to Section 8 below, or (ii) such lsecurities shall be
salable within a three-month period pursuant to Rule 144 (or any similar
successor rule that may be promulgated by the SEC).
(l) "SEC" means the Securities and Exchange Commission.
ml) "Securities Act" means the Securities Act of 1933, as amended.
(n) "Violation" means any of the following statements, omissions or
violations: (i) any untrue statement or alleged untrue statement of a material
fact contained in a registration statement under this Agreement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto or any documents filed under state securities or "blue
sky" laws in connection therewith, (ii) the omission or alleged omission to
state in any of the foregoing a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
other federal, state or common law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities law.
2. REGISTRATION.
(a) The Company shall prepare, and, on or prior to April 1, 2000, file
with the SEC one or more Registration Statements on Form S-3 (or, if Form S-3 is
not then available, on such form of Registration Statement as is then available
to effect a registration of the Registrable Securities) pursuant to Rule 415
covering the resale from time to time of (i) 34% of the Registrable Securities
held by Management Holders, (ii) 50% of the Registrable Securities held by Other
Holders, (iii) 100% of the Registrable Securities held by Erland and (iv) 100%
of the Registrable Securities held by Non-Management Holders.
(b) Notwithstanding Section 2(a) or 2(e), if the Company shall furnish
to Holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for any such registration statement to be filed by reason of a material pending
transaction and it is therefore essential to defer the filing of any such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days; PROVIDED, HOWEVER, that the
Company during such deferment may not file a registration statement for
securities to be issued and sold for its own account or that of other
stockholders and; PROVIDED, FURTHER, the Company may not utilize this right more
than once in any 12-month period.
2
<PAGE>
(c) If (but without any obligation to do so) at any time the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock or other
securities under the Securities Act in connection with the public offering
(whether for the account of the Company or for selling stockholders) of such
securities (other than a registration on Form S-8 relating solely to the sale of
securities to participants in the Company's 1998 Stock Incentive Plan or other
Company stock plan or to other compensatory arrangements to the extent
includible on Form S-8, or a registration on Form S-4), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within ten (10) days after receipt by
such Holder of such notice by the Company in accordance with Section 15, the
Company shall, subject to Section 2(d), use its best efforts to cause to be
registered under the Securities Act all of the Registrable Securities that are
not, on the date of filing by the Company of such Registration Statement,
subject to the Resale Restrictions imposed by Section 9 hereof, that each such
Holder has requested to be registered. The Company shall have no obligation
under this Section 2(c) to make any offering of its securities, or to complete
an offering of its securities that it proposes to make, and shall incur no
liability to any Holder for its failure to do so. No registration effected under
this Section 2(c) shall relieve the Company of any of its obligations to effect
registrations under Section 2(a).
(d) In connection with any offering involving an underwriting of shares
being issued by the Company, the Company shall not be required under Section
2(c) to include any Holder's securities in such underwriting unless such Holder
accepts the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company, and then only in such quantity as will
not, in the opinion of the underwriters, jeopardize the success of the offering
by the Company; provided, however, that (i) no Holder participating in such
underwriting shall be required to make any representations, warranties or
indemnities except as they relate to such Holder's ownership of shares and
authority to enter into the underwriting agreement and such Holder's intended
method of distribution, and (ii) the liability of such Holder shall be limited
to an amount equal to the net proceeds from the offering received by such
Holder. If the total amount of securities, including Registrable Securities,
requested by shareholders to be included in any offering referred to in Section
2(c) exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering. The securities so
included shall be apportioned pro rata among the selling shareholders subject to
any priority of registration rights heretofore granted to existing stockholders
under the April 9 Agreement (as hereinafter defined). The Sellers acknowledge
that existing shareholders of the Company owning a substantial number of
unregistered shares have registration rights that are senior to those being
granted hereunder and that such rights will not impact the Sellers' rights under
Section 2(a) hereof.
(e) At any time after the first anniversary of the date hereof the
Management Holders and the Other Holders who collectively own more than 50% of
aggregate amount of Registrable Securities held by such Holders as of such date
(a "Demand Request") may provide the Company with a written request that the
Company file with the SEC a Registration Statement on Form S-3 pursuant to Rule
415 covering the resale from time to time of such amount of Registrable
Securities as set forth in such Demand Request. The Company shall be obligated
to effect only two (2) registrations pursuant to a Demand Request and not more
than one (1) per quarter.
3. OBLIGATIONS OF THE COMPANY. Whenever required under this Agreement to effect
the registration of any Registrable Securities, the Company shall at its sole
cost:
3
<PAGE>
(a) Promptly prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective expeditiously, and, upon the
request of the Holders of a majority of the Registrable Securities being
registered thereunder, keep such registration statement effective for at least
12 months or until the Holders have completed the distribution referred to in
such registration statement, whichever occurs first (but in any event for at
least any period required under the Securities Act); provided that before filing
such registration statement or any amendments thereto, the Company will furnish
to the Holders copies of all such documents proposed to be filed.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish (at no cost) to the Holders such number of copies of such
registration statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and any
summary prospectus) and, one copy of the signed registration statement and any
post-effective amendment thereto, any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents incorporated by reference in the registration
statement and such other documents as Holders may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or "blue sky" laws of
such states or U.S. jurisdictions as shall be reasonably requested by the
Holders and do any and all other acts and things which may be reasonably
necessary to enable each participating Holder to consummate the disposition of
the Registrable Securities owned by it in such jurisdiction; provided that the
Company shall not be required in connection therewith or as a condition thereto
(i) to qualify to do business in any state or jurisdiction where it would not
otherwise be required to qualify but for the requirements of this clause (d), or
(ii) to file a general consent to service of process in any such state or
jurisdiction.
(e) Use its best efforts to cause all Registrable Securities covered by
such registration statement to be, and remain during the period provided in
Section 3(a), registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the Company's business or
operations to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities.
(f) Immediately notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and if it is necessary to amend or supplement such prospectus to comply
with law, and at the request of any other Holder, prepare and furnish, at no
cost, to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Shares of Common Stock, such prospectus shall not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances then existing, not misleading and so that such
prospectus, as amended or supplemented, will comply with law.
4
<PAGE>
(g) Immediately notify each Holder of Registrable Securities covered by
such registration statement and confirm such advice in writing: (i) when the
registration statement has become effective, (ii) when any post-effective
amendment to the registration statement becomes effective and (iii) of any
request by the SEC for any amendment or supplement to the registration statement
or prospectus or for additional information.
(h) Notify each Holder of Registrable Securities if at any time the SEC
or any state securities commission or other regulatory authority should
institute or threaten to institute any proceedings for the purpose of issuing,
or should issue, a stop order suspending the effectiveness of the Registration
Statement. Upon the occurrence of any of the events mentioned in the preceding
sentence, the Company will use its best efforts to prevent the issuance of any
such stop order or to obtain the withdrawal thereof as soon as possible. The
Company will advise each Holder of Registrable Securities promptly of any order
or communication of any public board or body addressed to the Company suspending
or threatening to suspend the qualification of any Registrable Securities for
sale in any jurisdiction.
(i) As soon as practicable after the effective date of the registration
statement, and in any event within sixteen (16) months thereafter, have "made
generally available to its security holders" (within the meaning of Rule 158
under the Securities Act) an earning statement (which need not be audited)
covering a period of at least twelve (12) months beginning after the effective
date of the registration statement and otherwise complying with Section 11(a) of
the Securities Act.
(j) Cause all Registrable Securities registered pursuant hereto on a
Registration Statement for resale by a Holder to be listed on each securities
exchange or included for trading in such automated quotation system on or in
which the Shares of Common Stock of the Company are then listed or included.
(k) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereto on a Registration Statement for resale by
a Holder, and a CUSIP number for the Shares of Common Stock, in each case not
later than the effective date of such Registration Statement.
(l) Otherwise use its best efforts in its performance of its
obligations hereunder to comply with all applicable rules and regulations of the
SEC and of state securities commissions and any stock exchange or automated
quotation system.
(m) Deliver promptly, upon request, to any Holder participating in the
offering copies of all correspondence between the SEC and the Company, its
counsel or independent public accountants and all memoranda relating to
discussions with the SEC or its staff with respect to the registration
statement; permit each Holder, counsel and independent public accountants for
each Holder, to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto; and give each Holder, and counsel and independent
public accountants for each Holder, access to the Company's books, records,
documents and properties and such opportunities to discuss the business of the
Company with its officers or directors and independent public accountants as
shall be necessary, in the opinion of each Holder and their respective counsel
and independent public accountants, to conduct a reasonable investigation within
the meaning of the Securities Act.
(n) In the event of an underwritten offering (or a shelf offering in
which the items listed in clauses (i) and (ii) below are delivered to any other
selling stockholder), furnish (at no cost), at the request of any Holder
requesting registration of Registrable Securities pursuant to this Agreement,
5
<PAGE>
to each Holder participating in the offering and to each underwriter, (i) on
the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Agreement, an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to the
underwriters and to the Holders participating in such offering and (ii) on
the date that the registration statement with respect to such securities
becomes effective, a "comfort" letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters and to the
Holders participating in such offering, and a reaffirmation of such letter on
the date that such Registrable Securities are delivered to the underwriters
for sale.
(o) Solely in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
4. HOLDER SHALL FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
5. EXPENSES OF REGISTRATION. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registration of Registrable
Securities, including without limitation all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto, and reasonable fees and expenses of one counsel to the selling
stockholders (selected by the Holders of a majority of the Registrable
Securities being registered), but excluding underwriting discounts and
commissions relating to Registrable Securities.
6. INDEMNIFICATION. In the event any Registrable Securities are included in a
registration statement under this Agreement:
(a) The Company will indemnify and hold harmless each Holder, its
heirs, personal representatives and assigns, and each of such Holder's partners,
members, stockholders, managers, agents, officers, directors, employees,
affiliates, any underwriter (as defined in the Securities Act) for such Holder
and each Person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon a Violation; and the Company
will pay to each such indemnified party, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage or liability; provided, however, that the
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage or liability if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable in any
such case to a particular indemnified party for any such loss, claim, damage or
liability to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such indemnified
party.
6
<PAGE>
(b) Each selling Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each Person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling Person of any such underwriter or
other Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing Persons may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by or on behalf of such Holder expressly for use
in connection with such registration; and each such Holder will pay to each such
indemnified party, as incurred, any legal or other expenses reasonably incurred
by them, in connection with investigating or defending any such loss, claim,
damage or liability; PROVIDED, HOWEVER, that the indemnity agreement contained
in this Section 6(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage or liability if such settlement is effected without the
consent of the Holder (which consent shall not be unreasonably withheld or
delayed); and PROVIDED, FURTHER, that, in no event shall the liability of any
Holder under this Section 6(b) exceed the net proceeds from the offering
received by such Holder; and PROVIDED, FURTHER, that the indemnity agreement
contained in this paragraph shall not apply in the case of a sale directly by
the Company of its securities (including a sale of such securities through any
lead institution or underwriter retained by the Company to engage in a
distribution solely on behalf of the Company) in which an untrue statement or
omission or alleged untrue state or omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company or
such lead institution or underwriter failed to deliver a copy of the final or
amended prospectus at or prior to the sale of the Registrable Securities.
(c) Each Holder shall severally, and not jointly, indemnify, defend and
hold harmless the Company and its affiliates, 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), arising out of or in connection with any misrepresentation
or breach of any warranty made by such Holder herein.
(d) Promptly after receipt by an indemnified party under this Section 6
of written notice of the commencement of any action (including any governmental
action) involving a claim referred to in Section 6(a), 6(b) or 6(c) of this
Agreement, such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section 6 except if, and only to
the extent that, the indemnifying party is actually prejudiced thereby; and such
failure to deliver written notice to the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than under
this Section 6. The indemnifying party will not, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any
7
<PAGE>
Person who controls such indemnified party is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent includes an
unconditional release of such indemnified party from all liability arising out
of such claim, action suit, or proceeding and such settlement, compromise or
consent involves only the payment of money and such money is actually paid by
the indemnifying party. Whether or not the defense of any claim or action is
assumed by the indemnifying party, such indemnifying party will not be subject
to any liability for any settlement made without its consent, which consent will
not be unreasonably withheld or delayed.
(d) The obligations of the Company and Holders under this Section 6
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
(e) Any indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution which any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made or omitted by or on behalf
of any indemnified party.
(f) With respect to the indemnity in Section 6(a) and 6(b), if for any
reason such indemnity is unavailable, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages, liabilities or expenses (i) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law or
provides a lesser sum to the indemnified party than the amount hereinafter
calculated, in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by or on behalf of the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything to the contrary in this Section 6, no Holder shall be
required, pursuant to this Section 6, to contribute any amount in excess of the
net proceeds received by such indemnifying party from the sale of Shares of
Common Stock in the offering to which the losses, claims, damages, liabilities
or expenses of the indemnified party relate, nor shall any Holder be required to
contribute any amounts in excess of the amount such Holder would have been
required to pay to an indemnified party if the indemnity under Section 6(b) of
this Agreement were available.
7. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Holders the benefits of Rule 144 under the Securities Act, as such rule may from
time to time be amended, and any other rule or regulation now or hereafter
adopted by the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration
statement, the Company agrees at its sole cost to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
8
<PAGE>
(b) take such action as is necessary to enable the Holders to utilize a
registration statement for the resale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 under the Securities
Act (at any time after the effective date of the first registration statement
filed by the Company) and the Securities Act and Exchange Act (at any time after
it has become subject to such reporting requirements) or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time it
so qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
8. ASSIGNMENT OF REGISTRATION RIGHTS. The rights contained herein may be
assigned in whole or in part by a Holder to one or more of its partners,
employees or affiliates or to one or more transferees or assignees of
Registrable Securities (or securities exchangeable into Registrable Securities)
acquired by the Holder, provided that such transferee or assignee delivers to
the Company a written instrument by which such transferee or assignee agrees to
be bound by the obligations imposed on Holders under this Agreement to the same
extent as if such transferee or assignee was a party hereto.
9. RESALE RESTRICTIONS.
(a) During the period of twelve (12) months from the date of this
Agreement, each Management Holder severally agrees that it will not Dispose of
any Shares (whether registered or unregistered), commencing on any date
specified by the Company (the "Commencement Date") following the filing by the
Company of a preliminary registration statement for a registered public offering
managed by nationally recognized underwriters and ending (x) 30 days after the
Commencement Date if the registration statement is not declared effective by the
SEC on or prior to such 30th day, or (y) if the registration statement is
declared effective by the SEC on, or within thirty days after the Commencement
Date, a period not to exceed 90 days following the effective date of the
registration statement, if required by the underwriters of the public offering
and all directors and executive officers of the Company have been prohibited
from Disposing the Company's common stock held by them for a period of at least
90 days following the effective date of the registration statement and provided
that the restriction set forth in this Section 9(a) shall not apply to any
Disposition of Shares pursuant to the subject registered public offering if such
shares are registered pursuant to Section 2(c) hereof.
(b) In addition to the restriction in Section 9(a), each Management
Holder agrees not to Dispose of any Shares except in accordance with the
following schedule:
<TABLE>
<CAPTION>
------------------------------------------ --------------------------------------------
Max. % of original number of Shares of
# of Months After the Date Hereof each Holder that may be Disposed of Prior
to End of Month
------------------------------------------ --------------------------------------------
<S> <C> <C>
12 months 34%
------------------------------------------ --------------------------------------------
18 months 56%
------------------------------------------ --------------------------------------------
24 months 78%
------------------------------------------ --------------------------------------------
</TABLE>
9
<PAGE>
(c) In the event of a Change of Control (as defined below) of the
Company, the provisions of Section 9(b) shall no longer be of any force and
effect. As used herein, the term "Change of Control" means the occurrence of any
of the following events:
(i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation) of all or substantially all of
the Company's assets;
(ii) the adoption of a plan for the liquidation or dissolution of the
Company; or
(iii) a merger or consolidation as a result of which (x) the holders of
outstanding Common Stock on the date immediately preceding the merger
or consolidation own less than 33% of the combined entity as a result
of such merger or consolidation, or (y) the senior management of the
Company as of the date hereof do not continue to retain a substantive
high level decision making role in the management of the combined
entity following the merger or consolidation.
10. AMENDMENT; WAIVER. Any provision of this Agreement may be amended only with
the written consent of the Company and each of the Holders and the observance of
any provision of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the party to be charged, provided that the Holders of 60% of
the Registrable Securities then outstanding may act on behalf of all such
Holders of Registrable Securities; PROVIDED, HOWEVER, that no amendment or
waiver shall affect the rights of a Holder under Section 2 or the obligations of
a Holder under Section 6(c) or Section 9 or the representations or warranties of
a Holder under Section 26 without the consent of such Holder. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Holder of Registrable Securities at the time outstanding, each future Holder of
all such securities, and the Company.
11. CHANGES IN REGISTRABLE SECURITIES. If, and as often as, there are any
changes in the Registrable Securities, by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions of this Agreement, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the Registrable Securities as so changed. Without limiting the
generality of the foregoing, the Company will require any successor by merger or
consolidation to assume and agree to be bound by the terms of this Agreement, as
a condition to any such merger or consolidation, provided, however, that the
restrictions in Section 9 hereof shall no longer be applicable upon such a
merger or consolidation of the Company.
12. ENTIRE AGREEMENT EFFECTIVENESS OF AGREEMENT. This Agreement (together with
the Merger Agreement) constitutes the full and entire understanding and
agreement among the parties with regard to the subject matter hereof. Nothing in
this Agreement, express or implied, is intended to confer upon any Person, other
than the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
10
<PAGE>
13. GOVERNING LAW. This Agreement shall be governed in all respects by the laws
of the State of New York as such laws are applied to agreements between New York
residents entered into and to be performed entirely within New York, whether or
not all parties hereto are residents of New York.
14. SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the benefit of,
and be binding upon, the successors, permitted assigns (as provided in Section
8), heirs, executors and administrators of the parties hereto.
15. NOTICES. All notices and other communications provided for herein shall be
dated and in writing and shall be deemed to have been duly given (i) on the date
of delivery, if delivered personally or by telecopier, receipt confirmed; (ii)
on the second following business day, if delivered by a recognized overnight
courier service; or (iii) seven days after mailing, if sent by registered or
certified mail, return receipt requested, postage prepaid, in each case, to the
party to whom it is directed at the following address (or at such other address
as any party hereto shall hereafter specify by notice in writing to the other
parties hereto):
(i) If to the Company, to it at the following address:
24/7 Media, Inc.
1250 Broadway, 28th fl
New York, NY 10001
Attn: General Counsel
Fax: (212) 760-2811
(ii) If to a Seller, to it at the address for such Seller set forth on
the signature pages hereto.
16. SEVERABILITY. Any invalidity, illegality or limitation on the enforceability
of this Agreement or any part thereof, by any party, whether arising by reason
of the law of the respective party's domicile or otherwise, shall in no way
affect or impair the validity, legality or enforceability of this Agreement with
respect to the other party. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
17. TITLES AND SUBTITLES. The titles of the Sections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
18. DELAYS OR OMISSIONS; REMEDIES CUMULATIVE. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to the parties, upon
any breach or default of the Company under this Agreement, shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach or default, or any acquiescence therein, or of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character by a party of any breach or default under this
Agreement, or any waiver by a party of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a party, shall be cumulative and
not alternative.
11
<PAGE>
19. ATTORNEYS' FEES. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
20. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
21. FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
22. REMEDIES. In the event of a breach by any party to this Agreement of its
obligations under this Agreement, any party injured by such breach, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages and costs (including reasonable attorneys' fees), will be entitled to
specific performance of its rights under this Agreement. The parties agree that
the provisions of this Agreement shall be specifically enforceable without the
posting of a bond or other security and without proof of actual damages, it
being agreed by the parties that the remedy at law, including monetary damages,
for breach of any such provision will be inadequate compensation for any loss
and that any defense in any action for specific performance that a remedy at law
would be adequate is waived.
23. RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this Agreement shall
apply, to the full extent set forth herein, to any and all shares of the Company
capital stock or any successor or assign of the Company (whether by merger,
consolidation, sale of assets, or otherwise, including shares issued by a parent
corporation in connection with a triangular merger) which may be issued in
respect of, in exchange for or in substitution of, shares of Common Stock, and
shall be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, reclassifications and the like occurring after the date hereof.
24. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Agreement enter into any (i) agreement with respect to its securities which
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or which otherwise conflicts with the provisions hereof or
(ii) agreement with respect to the registration and right to resell its
securities which is superior to the terms of this Agreement. It is acknowledged
and understood that the Company has granted demand registration rights and
piggyback registration rights to holders of a substantial number of shares of
Common Stock, pursuant to a registration rights agreement dated April 9, 1998
(the "April 9 Agreement") which has been publicly filed with the SEC, that the
Company is actively discussing other acquisitions and that in connection with
the Registration Statement to be filed pursuant to Section 2(a) hereof, the
Company may register the resale of its securities by a substantial number of
holders other than the Sellers.
25. EXPENSES AND TAXES. The Company will pay, and save each Holder harmless from
any and all liabilities (including interest and penalties) with respect to, or
resulting from, any delay or failure in paying, stamp and other taxes (other
than income taxes), if any, which may be payable or determined to be payable
upon the execution and delivery of this Agreement.
26. REPRESENTATIONS AND WARRANTIES OF HOLDERS. Each of the Holders severally,
and not jointly, represents and warrants to the Company as follows:
12
<PAGE>
1. LEGENDS.
(i) Such Holder understands that the certificates
evidencing the Shares will bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE SECURITIES ACT OR SUCH LAWS AND THE RULES AND
REGULATIONS THEREUNDER."
(ii) The certificates evidencing the Shares shall not
be required to bear such legend if an opinion of counsel reasonably satisfactory
to the Company is delivered to the Company to the effect that neither the legend
nor the restrictions on transfer contained in this Agreement or the Merger
Agreement are required to insure compliance with the Securities Act. The Company
will bear the reasonable costs and expenses in connection with such opinion
where such opinion relates to compliance with Rule 144 under the Securities Act.
Whenever, pursuant to the preceding sentence, any certificate is no longer
required to bear the foregoing legend, the Company may, and if requested by the
Holder thereof, shall, issue to the Holder, at the Company's expense, a new
certificate not bearing the foregoing legend; provided, however, a new
certificate not bearing the foregoing legend shall be issued to the Holders upon
the effectiveness of a registration statement covering the resale of the Shares.
2. BROKERS. Such Holder represents that he or it has had no
dealings with any broker or finder in connection with the transactions
contemplated by the Merger Agreement.
[END OF TEXT]
13
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date and year first above written.
24/7 MEDIA, INC.
By: /s DAVID E. MOORE
-----------------------------------
Name: David E. Moore
Title: President and Chief Executive Officer
SELLERS:
SABELA MEDIA, INC.
By: /s/ JAMES GREEN
-----------------------------------
Name: James Green
Title: President and Chief Executive Officer
FRESHWATER CONSULTING LTD.
By: /s/ DAVID TURNER
-----------------------------------
Name: David Turner
Title: Director
GALMOS HOLDINGS LTD.
By: /s/ GOUR LENTELL
-----------------------------------
Name: Gour Lentell
Title: Executive Chairman
/s/ JAMES GREEN
- --------------------------------------
James Green
<PAGE>
EXHIBIT A Management Holders
James Green
FRESHWATER CONSULTING LTD.
GALMOS HOLDINGS LTD.
15
<PAGE>
EXHIBIT B - Non-Management Holders
TOCAD SUNPAK (Hong Kong) Ltd. (Tocad)
Ramport Trading Ltd. (original shares)
SABELA MEDIA KAI. (Tocad)
Steve Blume
Nicole Blume (Irrevocable Trust)
Jenna Blume (Irrevocable Trust)
Andrew Blume (Irrevocable Trust)
TOCAD Co., Ltd.
Livewire Labs LLC
Distribution Finance, Ltd.
Quinag Consulting Ltd (Bruce Edminston)
International Electronics Co., Ltd. (Tocad)
Erland & Company
Ramport Trading Ltd. (2nd)
Inanda Associates Pty Limited
Takeshi Fujikawa (Tocad)
Masaru Fujikawa (Tocad)
David Spence
Golden Words Pty Limited
TOCAD Co., Ltd. (Bridge)
Wilcrow Pty Ltd
Taro Fujikawa (Tocad)
TOCAD NETWORKS Co., Ltd.
Arton No. 0001 Pty Ltd
Richard d'Abo
16
<PAGE>
EXHIBIT C -- Other Holders
Abhay Puri
Chafey Ltd (Hoo Lam Woon)
Harry Weber-Brown
Simon Johnson
Matthew Tombers
Birathon Kasemsri
Andrew Fawcett
Birathon Kasemsri (new)
Quinag Consulting Ltd (Bruce Edminston)
17
<PAGE>
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made as of this 11th day of February,
2000, by and among 24/7 Media, Inc., a Delaware corporation (the "Company"),
Sabela Media, Inc., a Delaware corporation, and the persons set forth on
Exhibit A hereto (each a "Management Holder," and the Management Holders, the
Other Holders and the Non-Management Holders shall collectively be referred
to as the "Sellers").
RECITALS:
WHEREAS, certain of the parties hereto have entered into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), in connection with
which the Sellers and Erland & Company ("Erland") acquired certain shares of the
Company's common stock, par value $.01 per share (the "Shares");
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Common Stock" means the common stock, par value $.01 per share, of
the Company.
(b) "Dispose of" means to (x) offer, sell, pledge, hypothecate or
otherwise dispose of Shares or (y) establish or increase any "put equivalent
position" (as defined in Rule 16a-1(h) under the Exchange Act) with respect to
Shares; PROVIDED, HOWEVER, such term shall not include transfers of Shares due
to (i) the death of a Holder; (ii) the merger, consolidation or sale of the
Company; (iii) the transfer of Shares to any wholly-owned subsidiary or parent
of a Holder; or (iv) any transfer to a trust of which there are no beneficiaries
other than the parents, spouse or children of such Holder.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(d) "Form S-3" means such form under the Securities Act as in effect on
the date hereof or any registration form under the Securities Act subsequently
adopted by the SEC, which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(e) "Holder" means any Person owning or having the right to acquire
Registrable Securities, or any assignee thereof in accordance with Section 8.
(f) "Other Holders" means the persons set forth on Exhibit A hereto,
or any assignee thereof in accordance with Section 8.
(g) "Corporate Holders" means MemberWorks and National Discount
Brokers.
(h) "Person" means any individual, partnership, limited liability
company, joint venture, corporation, association, trust or any other entity or
organization.
<PAGE>
(i) "Register," "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(j) "Registrable Securities" means any unregistered shares of Common
Stock held by, issuable to, or subsequently acquired by, the Sellers and any
shares of Common Stock issued or issuable with respect to any such shares of
Common Stock by way of stock dividend or stock split, or in connection with a
combination of shares, recapitalization, merger, consolidation, or other
reorganization or otherwise and; PROVIDED, HOWEVER, that any such securities
shall cease to be Registrable Securities when (i) such securities are sold by a
Holder in a transaction in which such Holder's rights under this Agreement are
not assigned pursuant to Section 8 below, or (ii) such lsecurities shall be
salable within a three-month period pursuant to Rule 144 (or any similar
successor rule that may be promulgated by the SEC).
(k) "SEC" means the Securities and Exchange Commission.
(l) "Securities Act" means the Securities Act of 1933, as amended.
(m) "Violation" means any of the following statements, omissions or
violations: (i) any untrue statement or alleged untrue statement of a material
fact contained in a registration statement under this Agreement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto or any documents filed under state securities or "blue
sky" laws in connection therewith, (ii) the omission or alleged omission to
state in any of the foregoing a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
other federal, state or common law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities law.
2. REGISTRATION.
(a) The Company shall use commercial reasonable efforts to prepare,
and, on or prior to June 30, 2000, file with the SEC one or more Registration
Statements on Form S-3 (or, if Form S-3 is not then available, on such form
of Registration Statement as is then available to effect a registration of
the Registrable Securities) pursuant to Rule 415 covering the resale from
time to time of (i) 100% of the Registrable Securities held by the Corporate
Holders and (ii) 33 1/3% of the Registrable Securities held by the Other
Holders.
(b) Notwithstanding Section 2(a) or 2(e), if the Company shall furnish
to Holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for any such registration statement to be filed by reason of a material pending
transaction and it is therefore essential to defer the filing of any such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days; PROVIDED, HOWEVER, that the
Company during such deferment may not file a registration statement for
securities to be issued and sold for its own account or that of other
stockholders and; PROVIDED, FURTHER, the Company may not utilize this right more
than once in any 12-month period.
(c) If (but without any obligation to do so) at any time the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock or other
securities under the Securities Act in connection with the public
2
<PAGE>
offering (whether for the account of the Company or for selling stockholders)
of such securities (other than a registration on Form S-8 relating solely to
the sale of securities to participants in the Company's 1998 Stock Incentive
Plan or other Company stock plan or to other compensatory arrangements to the
extent includible on Form S-8, or a registration on Form S-4), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within ten (10)
days after receipt by such Holder of such notice by the Company in accordance
with Section 15, the Company shall, subject to Section 2(d), use its best
efforts to cause to be registered under the Securities Act all of the
Registrable Securities that are not, on the date of filing by the Company of
such Registration Statement, subject to the Resale Restrictions imposed by
Section 9 hereof, that each such Holder has requested to be registered. The
Company shall have no obligation under this Section 2(c) to make any offering
of its securities, or to complete an offering of its securities that it
proposes to make, and shall incur no liability to any Holder for its failure
to do so. No registration effected under this Section 2(c) shall relieve the
Company of any of its obligations to effect registrations under Section 2(a).
(d) In connection with any offering involving an underwriting of shares
being issued by the Company, the Company shall not be required under Section
2(c) to include any Holder's securities in such underwriting unless such Holder
accepts the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company, and then only in such quantity as will
not, in the opinion of the underwriters, jeopardize the success of the offering
by the Company; provided, however, that (i) no Holder participating in such
underwriting shall be required to make any representations, warranties or
indemnities except as they relate to such Holder's ownership of shares and
authority to enter into the underwriting agreement and such Holder's intended
method of distribution, and (ii) the liability of such Holder shall be limited
to an amount equal to the net proceeds from the offering received by such
Holder. If the total amount of securities, including Registrable Securities,
requested by shareholders to be included in any offering referred to in Section
2(c) exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering. The securities so
included shall be apportioned pro rata among the selling shareholders subject to
any priority of registration rights heretofore granted to existing stockholders
under the April 9 Agreement (as hereinafter defined). The Sellers acknowledge
that existing shareholders of the Company owning a substantial number of
unregistered shares have registration rights that are senior to those being
granted hereunder and that such rights will not impact the Sellers' rights under
Section 2(a) hereof.
3. OBLIGATIONS OF THE COMPANY. Whenever required under this Agreement to effect
the registration of any Registrable Securities, the Company shall at its sole
cost:
(a) Promptly prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective expeditiously, and, upon the
request of the Holders of a majority of the Registrable Securities being
registered thereunder, keep such registration statement effective for at least
12 months or until the Holders have completed the distribution referred to in
such registration statement, whichever occurs first (but in any event for at
least any period required under the Securities Act); provided that before filing
such registration statement or any amendments thereto, the Company will furnish
to the Holders copies of all such documents proposed to be filed.
3
<PAGE>
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish (at no cost) to the Holders such number of copies of such
registration statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and any
summary prospectus) and, one copy of the signed registration statement and any
post-effective amendment thereto, any other prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents incorporated by reference in the registration
statement and such other documents as Holders may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or "blue sky" laws of
such states or U.S. jurisdictions as shall be reasonably requested by the
Holders and do any and all other acts and things which may be reasonably
necessary to enable each participating Holder to consummate the disposition of
the Registrable Securities owned by it in such jurisdiction; provided that the
Company shall not be required in connection therewith or as a condition thereto
(i) to qualify to do business in any state or jurisdiction where it would not
otherwise be required to qualify but for the requirements of this clause (d), or
(ii) to file a general consent to service of process in any such state or
jurisdiction.
(e) Use its best efforts to cause all Registrable Securities covered by
such registration statement to be, and remain during the period provided in
Section 3(a), registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the Company's business or
operations to enable the seller or sellers thereof to consummate the disposition
of such Registrable Securities.
(f) Immediately notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and if it is necessary to amend or supplement such prospectus to comply
with law, and at the request of any other Holder, prepare and furnish, at no
cost, to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Shares of Common Stock, such prospectus shall not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances then existing, not misleading and so that such
prospectus, as amended or supplemented, will comply with law.
(g) Immediately notify each Holder of Registrable Securities covered by
such registration statement and confirm such advice in writing: (i) when the
registration statement has become effective, (ii) when any post-effective
amendment to the registration statement becomes effective and (iii) of any
request by the SEC for any amendment or supplement to the registration statement
or prospectus or for additional information.
4
<PAGE>
(h) Notify each Holder of Registrable Securities if at any time the SEC
or any state securities commission or other regulatory authority should
institute or threaten to institute any proceedings for the purpose of issuing,
or should issue, a stop order suspending the effectiveness of the Registration
Statement. Upon the occurrence of any of the events mentioned in the preceding
sentence, the Company will use its best efforts to prevent the issuance of any
such stop order or to obtain the withdrawal thereof as soon as possible. The
Company will advise each Holder of Registrable Securities promptly of any order
or communication of any public board or body addressed to the Company suspending
or threatening to suspend the qualification of any Registrable Securities for
sale in any jurisdiction.
(i) As soon as practicable after the effective date of the registration
statement, and in any event within sixteen (16) months thereafter, have "made
generally available to its security holders" (within the meaning of Rule 158
under the Securities Act) an earning statement (which need not be audited)
covering a period of at least twelve (12) months beginning after the effective
date of the registration statement and otherwise complying with Section 11(a) of
the Securities Act.
(j) Cause all Registrable Securities registered pursuant hereto on a
Registration Statement for resale by a Holder to be listed on each securities
exchange or included for trading in such automated quotation system on or in
which the Shares of Common Stock of the Company are then listed or included.
(k) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereto on a Registration Statement for resale by
a Holder, and a CUSIP number for the Shares of Common Stock, in each case not
later than the effective date of such Registration Statement.
(l) Otherwise use its best efforts in its performance of its
obligations hereunder to comply with all applicable rules and regulations of the
SEC and of state securities commissions and any stock exchange or automated
quotation system.
(m) Deliver promptly, upon request, to any Holder participating in the
offering copies of all correspondence between the SEC and the Company, its
counsel or independent public accountants and all memoranda relating to
discussions with the SEC or its staff with respect to the registration
statement; permit each Holder, counsel and independent public accountants for
each Holder, to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto; and give each Holder, and counsel and independent
public accountants for each Holder, access to the Company's books, records,
documents and properties and such opportunities to discuss the business of the
Company with its officers or directors and independent public accountants as
shall be necessary, in the opinion of each Holder and their respective counsel
and independent public accountants, to conduct a reasonable investigation within
the meaning of the Securities Act.
(n) In the event of an underwritten offering (or a shelf offering in
which the items listed in clauses (i) and (ii) below are delivered to any
other selling stockholder), furnish (at no cost), at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Agreement, to each Holder participating in the offering and to each
underwriter, (i) on the date that such Registrable Securities are delivered
to the underwriters for sale in connection with a registration pursuant to
this Agreement, an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering,
addressed to the underwriters and to the Holders participating in such
offering and (ii) on the date that the registration statement with respect to
such securities
5
<PAGE>
becomes effective, a "comfort" letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters and to the
Holders participating in such offering, and a reaffirmation of such letter on
the date that such Registrable Securities are delivered to the underwriters
for sale.
(o) Solely in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering.
4. HOLDER SHALL FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
5. EXPENSES OF REGISTRATION. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registration of Registrable
Securities, including without limitation all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto, and reasonable fees and expenses of one counsel to the selling
stockholders (selected by the Holders of a majority of the Registrable
Securities being registered), but excluding underwriting discounts and
commissions relating to Registrable Securities.
6. INDEMNIFICATION. In the event any Registrable Securities are included in a
registration statement under this Agreement:
(a) The Company will indemnify and hold harmless each Holder, its
heirs, personal representatives and assigns, and each of such Holder's
partners, members, stockholders, managers, agents, officers, directors,
employees, affiliates, any underwriter (as defined in the Securities Act) for
such Holder and each Person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act against any
losses, claims, damages or liabilities (joint or several) to which any of the
foregoing persons may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon a
Violation; and the Company will pay to each such indemnified party, as
incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage or
liability; provided, however, that the indemnity agreement contained in this
Section 6(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage or liability if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld or delayed),
nor shall the Company be liable in any such case to a particular indemnified
party for any such loss, claim, damage or liability to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in
connection with such registration by such indemnified party.
(b) Each selling Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each Person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling Person of any such underwriter or
other Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the
6
<PAGE>
foregoing Persons may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by or on behalf of such Holder expressly for use in connection with
such registration; and each such Holder will pay to each such indemnified
party, as incurred, any legal or other expenses reasonably incurred by them,
in connection with investigating or defending any such loss, claim, damage or
liability; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage or liability if such settlement is effected without the consent
of the Holder (which consent shall not be unreasonably withheld or delayed);
and PROVIDED, FURTHER, that, in no event shall the liability of any Holder
under this Section 6(b) exceed the net proceeds from the offering received by
such Holder; and PROVIDED, FURTHER, that the indemnity agreement contained in
this paragraph shall not apply in the case of a sale directly by the Company
of its securities (including a sale of such securities through any lead
institution or underwriter retained by the Company to engage in a
distribution solely on behalf of the Company) in which an untrue statement or
omission or alleged untrue state or omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company or
such lead institution or underwriter failed to deliver a copy of the final or
amended prospectus at or prior to the sale of the Registrable Securities.
(c) Each Holder shall severally, and not jointly, indemnify, defend and
hold harmless the Company and its affiliates, 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), arising out of or in connection with any misrepresentation
or breach of any warranty made by such Holder herein.
(d) Promptly after receipt by an indemnified party under this
Section 6 of written notice of the commencement of any action (including any
governmental action) involving a claim referred to in Section 6(a), 6(b) or
6(c) of this Agreement, such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such counsel in
such proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall
not relieve such indemnifying party of any liability to the indemnified party
under this Section 6 except if, and only to the extent that, the indemnifying
party is actually prejudiced thereby; and such failure to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 6. The
indemnifying party will not, without the prior written consent of each
indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any Person who controls such indemnified party is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability arising out of such claim, action suit, or
proceeding and such settlement, compromise or consent involves only the
payment of money and such money is actually paid by the indemnifying party.
7
<PAGE>
Whether or not the defense of any claim or action is assumed by the
indemnifying party, such indemnifying party will not be subject to any
liability for any settlement made without its consent, which consent will not
be unreasonably withheld or delayed.
(d) The obligations of the Company and Holders under this Section 6
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement, and otherwise.
(e) Any indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution which any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made or omitted by or on behalf
of any indemnified party.
(f) With respect to the indemnity in Section 6(a) and 6(b), if for any
reason such indemnity is unavailable, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages, liabilities or expenses (i) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law or
provides a lesser sum to the indemnified party than the amount hereinafter
calculated, in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by or on behalf of the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Notwithstanding anything to the contrary in this Section 6, no Holder shall be
required, pursuant to this Section 6, to contribute any amount in excess of the
net proceeds received by such indemnifying party from the sale of Shares of
Common Stock in the offering to which the losses, claims, damages, liabilities
or expenses of the indemnified party relate, nor shall any Holder be required to
contribute any amounts in excess of the amount such Holder would have been
required to pay to an indemnified party if the indemnity under Section 6(b) of
this Agreement were available.
7. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Holders the benefits of Rule 144 under the Securities Act, as such rule may from
time to time be amended, and any other rule or regulation now or hereafter
adopted by the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration
statement, the Company agrees at its sole cost to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
(b) take such action as is necessary to enable the Holders to utilize a
registration statement for the resale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
8
<PAGE>
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 under the Securities
Act (at any time after the effective date of the first registration statement
filed by the Company) and the Securities Act and Exchange Act (at any time after
it has become subject to such reporting requirements) or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time it
so qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
8. ASSIGNMENT OF REGISTRATION RIGHTS. The rights contained herein may be
assigned in whole or in part by a Holder to one or more of its partners,
employees or affiliates or to one or more transferees or assignees of
Registrable Securities (or securities exchangeable into Registrable Securities)
acquired by the Holder, provided that such transferee or assignee delivers to
the Company a written instrument by which such transferee or assignee agrees to
be bound by the obligations imposed on Holders under this Agreement to the same
extent as if such transferee or assignee was a party hereto.
9. RESALE RESTRICTIONS.
(a) During the period of twelve (12) months from the date of this
Agreement, each Management Holder severally agrees that it will not Dispose of
any Shares (whether registered or unregistered), commencing on any date
specified by the Company (the "Commencement Date") following the filing by the
Company of a preliminary registration statement for a registered public offering
managed by nationally recognized underwriters and ending (x) 30 days after the
Commencement Date if the registration statement is not declared effective by the
SEC on or prior to such 30th day, or (y) if the registration statement is
declared effective by the SEC on, or within thirty days after the Commencement
Date, a period not to exceed 90 days following the effective date of the
registration statement, if required by the underwriters of the public offering
and all directors and executive officers of the Company have been prohibited
from Disposing the Company's common stock held by them for a period of at least
90 days following the effective date of the registration statement and provided
that the restriction set forth in this Section 9(a) shall not apply to any
Disposition of Shares pursuant to the subject registered public offering if such
shares are registered pursuant to Section 2(c) hereof.
(b) In addition to the restriction in Section 9(a), each Management
Holder agrees not to Dispose of any Shares except in accordance with the
following schedule:
<TABLE>
<CAPTION>
------------------------------------------ --------------------------------------------
Max. % of original number of Shares of
# of Months After the Date Hereof each Holder that may be Disposed of Prior
to End of Month
------------------------------------------ --------------------------------------------
<S> <C> <C>
Before 12 months 33 1/3%
------------------------------------------ --------------------------------------------
At and after 12 months 66 2/3%
------------------------------------------ --------------------------------------------
After 18 months 100%
------------------------------------------ --------------------------------------------
</TABLE>
(c) In addition to the restriction in Section 9(a), the Corporate
Holders agree not to Dispose of more than 50,000 Shares in any week and not
to Dispose of more than 150,000 Shares in any four-week period.
9
<PAGE>
10. AMENDMENT; WAIVER. Any provision of this Agreement may be amended only with
the written consent of the Company and each of the Holders and the observance of
any provision of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the party to be charged, provided that the Holders of 60% of
the Registrable Securities then outstanding may act on behalf of all such
Holders of Registrable Securities; PROVIDED, HOWEVER, that no amendment or
waiver shall affect the rights of a Holder under Section 2 or the obligations of
a Holder under Section 6(c) or Section 9 or the representations or warranties of
a Holder under Section 26 without the consent of such Holder. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Holder of Registrable Securities at the time outstanding, each future Holder of
all such securities, and the Company.
11. CHANGES IN REGISTRABLE SECURITIES. If, and as often as, there are any
changes in the Registrable Securities, by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions of this Agreement, as may be
required, so that the rights and privileges granted hereby shall continue with
respect to the Registrable Securities as so changed. Without limiting the
generality of the foregoing, the Company will require any successor by merger or
consolidation to assume and agree to be bound by the terms of this Agreement, as
a condition to any such merger or consolidation, provided, however, that the
restrictions in Section 9 hereof shall no longer be applicable upon such a
merger or consolidation of the Company.
12. ENTIRE AGREEMENT EFFECTIVENESS OF AGREEMENT. This Agreement (together with
the Merger Agreement) constitutes the full and entire understanding and
agreement among the parties with regard to the subject matter hereof. Nothing in
this Agreement, express or implied, is intended to confer upon any Person, other
than the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
13. GOVERNING LAW. This Agreement shall be governed in all respects by the laws
of the State of New York as such laws are applied to agreements between New York
residents entered into and to be performed entirely within New York, whether or
not all parties hereto are residents of New York.
14. SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the benefit of,
and be binding upon, the successors, permitted assigns (as provided in Section
8), heirs, executors and administrators of the parties hereto.
15. NOTICES. All notices and other communications provided for herein shall be
dated and in writing and shall be deemed to have been duly given (i) on the date
of delivery, if delivered personally or by telecopier, receipt confirmed; (ii)
on the second following business day, if delivered by a recognized overnight
courier service; or (iii) seven days after mailing, if sent by registered or
certified mail, return receipt requested, postage prepaid, in each case, to the
party to whom it is directed at the following address (or at such other address
as any party hereto shall hereafter specify by notice in writing to the other
parties hereto):
(i) If to the Company, to it at the following address:
24/7 Media, Inc.
10
<PAGE>
1250 Broadway, 28th fl
New York, NY 10001
Attn: General Counsel
Fax: (212) 760-2811
(ii) If to a Seller, to it at the address for such Seller set forth on
the signature pages hereto.
16. SEVERABILITY. Any invalidity, illegality or limitation on the enforceability
of this Agreement or any part thereof, by any party, whether arising by reason
of the law of the respective party's domicile or otherwise, shall in no way
affect or impair the validity, legality or enforceability of this Agreement with
respect to the other party. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
17. TITLES AND SUBTITLES. The titles of the Sections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
18. DELAYS OR OMISSIONS; REMEDIES CUMULATIVE. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to the parties, upon
any breach or default of the Company under this Agreement, shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach or default, or any acquiescence therein, or of any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. It is further agreed that any waiver, permit, consent or
approval of any kind or character by a party of any breach or default under this
Agreement, or any waiver by a party of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a party, shall be cumulative and
not alternative.
19. ATTORNEYS' FEES. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
20. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
21. FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
22. REMEDIES. In the event of a breach by any party to this Agreement of its
obligations under this Agreement, any party injured by such breach, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages and costs (including reasonable attorneys' fees), will be entitled to
specific performance of its rights under this Agreement. The parties agree that
the provisions of this Agreement shall be specifically enforceable without the
posting of a bond or other security and without proof of actual damages, it
being agreed by the parties that the remedy at law, including monetary damages,
for breach of any such provision will be inadequate compensation for
11
<PAGE>
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
23. RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this Agreement shall
apply, to the full extent set forth herein, to any and all shares of the Company
capital stock or any successor or assign of the Company (whether by merger,
consolidation, sale of assets, or otherwise, including shares issued by a parent
corporation in connection with a triangular merger) which may be issued in
respect of, in exchange for or in substitution of, shares of Common Stock, and
shall be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, reclassifications and the like occurring after the date hereof.
24. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Agreement enter into any (i) agreement with respect to its securities which
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or which otherwise conflicts with the provisions hereof or
(ii) agreement with respect to the registration and right to resell its
securities which is superior to the terms of this Agreement. It is acknowledged
and understood that the Company has granted demand registration rights and
piggyback registration rights to holders of a substantial number of shares of
Common Stock, pursuant to a registration rights agreement dated April 9, 1998
(the "April 9 Agreement") which has been publicly filed with the SEC, that the
Company is actively discussing other acquisitions and that in connection with
the Registration Statement to be filed pursuant to Section 2(a) hereof, the
Company may register the resale of its securities by a substantial number of
holders other than the Sellers.
25. EXPENSES AND TAXES. The Company will pay, and save each Holder harmless from
any and all liabilities (including interest and penalties) with respect to, or
resulting from, any delay or failure in paying, stamp and other taxes (other
than income taxes), if any, which may be payable or determined to be payable
upon the execution and delivery of this Agreement.
26. REPRESENTATIONS AND WARRANTIES OF HOLDERS. Each of the Holders severally,
and not jointly, represents and warrants to the Company as follows:
1. LEGENDS.
(i) Such Holder understands that the certificates
evidencing the Shares will bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE SECURITIES ACT OR SUCH LAWS AND THE RULES AND
REGULATIONS THEREUNDER."
(ii) The certificates evidencing the Shares shall not
be required to bear such legend if an opinion of counsel reasonably satisfactory
to the Company is delivered to the Company to the effect that neither the legend
nor the restrictions on transfer contained in this Agreement or the Merger
Agreement are required to insure compliance with the Securities Act. The Company
will bear the reasonable costs and expenses in connection with such opinion
where such opinion relates to compliance with Rule 144 under the Securities Act.
Whenever, pursuant to the
12
<PAGE>
preceding sentence, any certificate is no longer required to bear the
foregoing legend, the Company may, and if requested by the Holder thereof,
shall, issue to the Holder, at the Company's expense, a new certificate not
bearing the foregoing legend; provided, however, a new certificate not
bearing the foregoing legend shall be issued to the Holders upon the
effectiveness of a registration statement covering the resale of the Shares.
[END OF TEXT]
13
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date and year first above written.
24/7 MEDIA, INC.
By: /s/ DAVID E. MOORE
-----------------------------------
Name: David E. Moore
Title: President and Chief Executive Officer
HOLDERS:
MEMBERWORKS INCORPORATED NATIONAL DISCOUNT BROKERS GROUP, INC.
By: Frank E. Lawatsch, Jr.
By: /s/ James B. Duffy ----------------------------------
-------------------------------- Name: Frank E. Lawatsch, Jr.
Name: James B. Duffy Title: EVP
Title: EVP and CPO
/s/ Brian Anderson /s/ Jeffrey Newhouse
-------------------------------- ----------------------------------
Brian Anderson Jeffrey Newhouse
/s/ John Watson /s/ Gregory Hassett
-------------------------------- ----------------------------------
John Watson Gregory Hassett
/s/ Randy Moore /s/ Jack Daley
-------------------------------- ----------------------------------
Randy Moore Jack Daley
<PAGE>
EXHIBIT A Management Holders
James Green
FRESHWATER CONSULTING LTD.
GALMOS HOLDINGS LTD.
15
<PAGE>
EXHIBIT B - Non-Management Holders
TOCAD SUNPAK (Hong Kong) Ltd. (Tocad)
Ramport Trading Ltd. (original shares)
SABELA MEDIA KAI. (Tocad)
Steve Blume
Nicole Blume (Irrevocable Trust)
Jenna Blume (Irrevocable Trust)
Andrew Blume (Irrevocable Trust)
TOCAD Co., Ltd.
Livewire Labs LLC
Distribution Finance, Ltd.
Quinag Consulting Ltd (Bruce Edminston)
International Electronics Co., Ltd. (Tocad)
Erland & Company
Ramport Trading Ltd. (2nd)
Inanda Associates Pty Limited
Takeshi Fujikawa (Tocad)
Masaru Fujikawa (Tocad)
David Spence
Golden Words Pty Limited
TOCAD Co., Ltd. (Bridge)
Wilcrow Pty Ltd
Taro Fujikawa (Tocad)
TOCAD NETWORKS Co., Ltd.
Arton No. 0001 Pty Ltd
Richard d'Abo
16
<PAGE>
EXHIBIT C -- Other Holders
Abhay Puri
Chafey Ltd (Hoo Lam Woon)
Harry Weber-Brown
Simon Johnson
Matthew Tombers
Birathon Kasemsri
Andrew Fawcett
Birathon Kasemsri (new)
Quinag Consulting Ltd (Bruce Edminston)
17
<PAGE>
EXHIBIT 5
[LETTERHEAD OF PROSKAUER ROSE LLP]
April 3, 2000
24/7 Media, Inc.
1250 Broadway
New York, New York 10001
Ladies and Gentlemen:
You have requested our opinion in connection with the filing by
24/7 Media, Inc., a Delaware corporation (the "Company"), with the Securities
and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to 2,490,000 shares of common stock, par value $.01 per
share, of the Company (the "Shares").
We have examined such records, documents and other instruments as we have
deemed relevant and necessary as a basis for the opinions hereinafter set forth.
We have also assumed without investigation the authenticity of any document
submitted to us as an original, the conformity to originals of any document
submitted to us as a copy, the authenticity of the originals of such latter
documents, the genuineness of all signatures and the legal capacity of natural
persons signing such documents.
Based on the foregoing, and in reliance thereon, we are of the opinion that
the Shares have been duly authorized, have been issued, and are fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement. In so doing,
we do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ PROSKAUER ROSE LLP
--------------------------------------
Proskauer Rose LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
24/7 Media, Inc.:
We consent to the incorporation by reference in the registration statement
on Form S-3 of 24/7 Media, Inc. of our report dated March 8, 2000, relating to
the consolidated balance sheets of 24/7 Media, Inc. and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity (deficit) and comprehensive income and cash
flows for each of the three-year period ended December 31, 1999, and to the
reference to our firm under the heading "Experts" in the registration statement.
/s/KPMG LLP
KPMG LLP
New York, New York
April 4, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated September 9, 1999 on the Music Marketing Network, Inc. financial
statements and to all references to our Firm included in or made part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 4, 2000
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITIORS
The Board of Directors
24/7 Media, Inc.:
We consent to the incorporation by reference in the registration statement
on Form S-3 of 24/7 Media, Inc., filed on or about April 3, 2000, of our report
dated March 10, 2000 relating to the consolidated balance sheets of Sabela
Media, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations and comprehensive income, stockholders'
equity and cash flows for the year ended December 31, 1999 and the period from
June 29, 1998 (inception) to December 31, 1998, which report appears in the
Current Report on Form 8-KA of 24/7 Media, Inc. dated March 24, 2000.
/s/ KPMG LLP
KPMG LLP
Los Angeles, California
April 3, 2000
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
24/7 Media, Inc.:
We consent to the incorporation by reference in the registration statement
on Form S-3 of 24/7 Media, Inc. of our report dated March 14, 2000, relating to
the combined balance sheets of the media divisions of IMAKE Software & Services,
Inc. and IMAKE Consulting, Inc. as of December 31, 1999 and 1998, and the
related combined statements of operations, division equity (deficit) and cash
flows for the years then ended, and to the reference to our firm under the
heading "Experts" in the registration statement.
/s/KPMG LLP
KPMG LLP
McLean, Virginia
April 4, 2000
