Exhibit 10.1

 

ASSET ACQUISITION AGREEMENT

 

among

 

TRAFFIX, INC.,

 

NEW SEND, INC.,

 

SENDTRAFFIC, INC.,

 

TRAFFICGROUP, LLC,

 

CRAIG HANDELMAN and

 

GREG BYRNES

 

FOR THE

 

ACQUISITION OF THE ASSETS OF SENDTRAFFIC, INC. AND TRAFFICGROUP LLC

 

--------------------------------------------------------------------------------

 

Table of Contents

 

1.

DEFINITIONS.

 

 

 

 

 

 

1.1

Acquired Assets.

 

 

 

 

 

 

1.2

Acquired Liabilities.

 

 

 

 

 

 

1.3

Affiliate.

 

 

 

 

 

 

1.4

Asserted Liability.

 

 

 

 

 

 

1.5

Balance Sheet Date.

 

 

 

 

 

 

1.6

Bill of Sale.

 

 

 

 

 

 

1.7

Blue Sky Laws.

 

 

 

 

 

 

1.8

Business Day.

 

 

 

 

 

 

1.9

Cash Component.

 

 

 

 

 

 

1.10

Claims.

 

 

 

 

 

 

1.11

Claims Notice.

 

 

 

 

 

 

1.12

Closing.

 

 

 

 

 

 

1.13

Closing Date.

 

 

 

 

 

 

1.14

Closing Share Price.

 

 

 

 

 

 

1.15

Code.

 

 

 

 

 

 

1.16

Commission.

 

 

 

 

 

 

1.17

Common Stock.

 

 

 

 

 

 

1.18

Contingent Payment.

 

 

 

 

 

 

1.19

Contingent Purchase Price.

 

 

 

 

 

 

1.20

Contracts.

 

 

 

 

 

 

1.21

Controlled Company.

 

 

 

 

 

 

1.22

Delivered Financial Statements.

 

 

 

 

 

 

1.23

Determining Accountant

 

 

 

 

 

 

1.24

Dollars or $.

 

 

 

 

 

 

1.25

Domain Names.

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

1.26

EBITDA.

 

 

 

 

 

 

1.27

Employment Agreements.

 

 

 

 

 

 

1.28

Environmental Claim.

 

 

 

 

 

 

1.29

Environmental Law.

 

 

 

 

 

 

1.30

ERISA.

 

 

 

 

 

 

1.31

Excluded Liabilities.

 

 

 

 

 

 

1.32

Fairness Opinion.

 

 

 

 

 

 

1.33

Final Financial Statements.

 

 

 

 

 

 

1.34

Financial Statements.

 

 

 

 

 

 

1.35

First Contingent Payment.

 

 

 

 

 

 

1.36

Fixed Purchase Price.

 

 

 

 

 

 

1.37

GAAP.

 

 

 

 

 

 

1.38

Governmental Authority.

 

 

 

 

 

 

1.39

Hazardous Materials.

 

 

 

 

 

 

1.40

Indemnifying Party.

 

 

 

 

 

 

1.41

Indemnitee.

 

 

 

 

 

 

1.42

Internet.

 

 

 

 

 

 

1.43

Knowledge.

 

 

 

 

 

 

1.44

Law.

 

 

 

 

 

 

1.45

Licenses.

 

 

 

 

 

 

1.46

Lien.

 

 

 

 

 

 

1.47

Machinery and Equipment.

 

 

 

 

 

 

1.48

Material Adverse Effect.

 

 

 

 

 

 

1.49

Minimum Working Capital

 

 

 

 

 

 

1.50

New Send EBITDA.

 

 

 

 

 

 

1.51

Notice of Disagreement.

 

 

 

 

 

 

2

--------------------------------------------------------------------------------

 

 

1.52

Order.

 

 

 

 

 

 

1.53

Other Documents.

 

 

 

 

 

 

1.54

Person.

 

 

 

 

 

 

1.55

Purchase Price.

 

 

 

 

 

 

1.56

Purchase Price Allocation.

 

 

 

 

 

 

1.57

Registrar.

 

 

 

 

 

 

1.58

Registration Rights Agreement.

 

 

 

 

 

 

1.59

Restrictive Agreement.

 

 

 

 

 

 

1.60

Second Contingent Payment.

 

 

 

 

 

 

1.61

Securities Act.

 

 

 

 

 

 

1.62

Seller Indemnified Parties.

 

 

 

 

 

 

1.63

Seller’s Accountants.

 

 

 

 

 

 

1.64

Seller’s Business.

 

 

 

 

 

 

1.65

Seller’s Shareholders.

 

 

 

 

 

 

1.66

Share Certificates.

 

 

 

 

 

 

1.67

Shares.

 

 

 

 

 

 

1.68

Specifications.

 

 

 

 

 

 

1.69

Statement.

 

 

 

 

 

 

1.70

Stub Period Financial Statement.

 

 

 

 

 

 

1.71

Tax.

 

 

 

 

 

 

1.72

Tax Return.

 

 

 

 

 

 

1.73

Third Contingent Payment

 

 

 

 

 

 

1.74

Trade Rights.

 

 

 

 

 

 

1.75

Traffix’s Accountants.

 

 

 

 

 

 

1.76

Traffix Indemnified Parties.

 

 

 

 

 

 

1.77

Year-End Financial Statements.

 

 

 

 

 

 

3

--------------------------------------------------------------------------------

 

2.

SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF ACQUIRED LIABILITIES.

 

 

 

 

 

 

2.1

Sale and Purchase of Acquired Assets.

 

 

 

 

 

 

2.2

Acquired Liabilities.

 

 

 

 

 

3.

PURCHASE PRICE.

 

 

 

 

 

 

3.1

Fixed Purchase Price.

 

 

 

 

 

 

3.2

Contingent Purchase Price.

 

 

 

 

 

4.

THE CLOSING.

 

 

 

 

 

 

4.1

Closing.

 

 

 

 

 

 

4.2

Delay in Closing and Termination Fee.

 

 

 

 

 

 

4.3

Deliveries by Seller at Closing.

 

 

 

 

 

 

4.4

Deliveries by Traffix and New Send at Closing.

 

 

 

 

 

 

4.5

Delivery of Employment Agreements at Closing.

 

 

 

 

 

 

4.6

Holdback of Portion of Purchase Price.

 

 

 

 

 

 

4.7

Conditions to Closing.

 

 

 

 

 

5. [a04-7611_5ex10d1.htm#RepresentationsAndWarrantiesOfSeller]

REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER’S SHAREHOLDERS.
[a04-7611_5ex10d1.htm#RepresentationsAndWarrantiesOfSeller]

 

 

 

 

 

 

5.1 [a04-7611_5ex10d1.htm#ExistenceAndGoodStanding_]

Existence and Good Standing. [a04-7611_5ex10d1.htm#ExistenceAndGoodStanding_]

 

 

 

 

 

 

5.2 [a04-7611_5ex10d1.htm#Shareholders_]

Shareholders. [a04-7611_5ex10d1.htm#Shareholders_]

 

 

 

 

 

 

5.3 [a04-7611_5ex10d1.htm#FinancialStatements5]

Financial Statements. [a04-7611_5ex10d1.htm#FinancialStatements5]

 

 

 

 

 

 

5.4 [a04-7611_5ex10d1.htm#BooksAndRecords_]

Books and Records. [a04-7611_5ex10d1.htm#BooksAndRecords_]

 

 

 

 

 

 

5.5 [a04-7611_5ex10d1.htm#RealPropertyPersonalPropertyMachin]

Real Property; Personal Property; Machinery and Equipment.
[a04-7611_5ex10d1.htm#RealPropertyPersonalPropertyMachin]

 

 

 

 

 

 

5.6 [a04-7611_5ex10d1.htm#Contracts5]

Contracts. [a04-7611_5ex10d1.htm#Contracts5]

 

 

 

 

 

 

5.7 [a04-7611_5ex10d1.htm#Litigation_]

Litigation. [a04-7611_5ex10d1.htm#Litigation_]

 

 

 

 

 

 

5.8 [a04-7611_5ex10d1.htm#Taxes_]

Taxes. [a04-7611_5ex10d1.htm#Taxes_]

 

 

 

 

 

 

5.9 [a04-7611_5ex10d1.htm#Liabilities_]

Liabilities. [a04-7611_5ex10d1.htm#Liabilities_]

 

 

 

 

 

 

5.10 [a04-7611_5ex10d1.htm#TradeRights5]

Trade Rights. [a04-7611_5ex10d1.htm#TradeRights5]

 

 

 

 

 

 

4

--------------------------------------------------------------------------------

 

 

5.11 [a04-7611_5ex10d1.htm#ComplianceWithLaws_]

Compliance with Laws. [a04-7611_5ex10d1.htm#ComplianceWithLaws_]

 

 

 

 

 

 

5.12 [a04-7611_5ex10d1.htm#Licenses5]

Licenses. [a04-7611_5ex10d1.htm#Licenses5]

 

 

 

 

 

 

5.13 [a04-7611_5ex10d1.htm#Insurance_]

Insurance. [a04-7611_5ex10d1.htm#Insurance_]

 

 

 

 

 

 

5.14 [a04-7611_5ex10d1.htm#SupplierAndCustomerRelations_]

Supplier and Customer Relations.
[a04-7611_5ex10d1.htm#SupplierAndCustomerRelations_]

 

 

 

 

 

 

5.15 [a04-7611_5ex10d1.htm#EmploymentRelations_]

Employment Relations. [a04-7611_5ex10d1.htm#EmploymentRelations_]

 

 

 

 

 

 

5.16 [a04-7611_5ex10d1.htm#PersonnelComplianceWithLegalRequire]

Personnel; Compliance with Legal Requirements for Employee Benefit Plans
[a04-7611_5ex10d1.htm#PersonnelComplianceWithLegalRequire]

 

 

 

 

 

 

5.17 [a04-7611_5ex10d1.htm#NoChangesSinceTheBalanceSheetDate_]

No Changes Since the Balance Sheet Date.
[a04-7611_5ex10d1.htm#NoChangesSinceTheBalanceSheetDate_]

 

 

 

 

 

 

5.18 [a04-7611_5ex10d1.htm#ValidAgreementsRestrictiveDocuments_]

Valid Agreements; Restrictive Documents.
[a04-7611_5ex10d1.htm#ValidAgreementsRestrictiveDocuments_]

 

 

 

 

 

 

5.19 [a04-7611_5ex10d1.htm#Requiredapprovalsnoticesandconsents]

Required Approvals, Notices and Consents.
[a04-7611_5ex10d1.htm#Requiredapprovalsnoticesandconsents]

 

 

 

 

 

 

5.20 [a04-7611_5ex10d1.htm#Disclosure_]

Disclosure. [a04-7611_5ex10d1.htm#Disclosure_]

 

 

 

 

 

 

5.21 [a04-7611_5ex10d1.htm#EnvironmentalConditions_]

Environmental Conditions. [a04-7611_5ex10d1.htm#EnvironmentalConditions_]

 

 

 

 

 

 

5.22 [a04-7611_5ex10d1.htm#HealthAndSafetyConditions_]

Health and Safety Conditions. [a04-7611_5ex10d1.htm#HealthAndSafetyConditions_]

 

 

 

 

 

 

5.23 [a04-7611_5ex10d1.htm#CopiesOfDocuments_]

Copies of Documents. [a04-7611_5ex10d1.htm#CopiesOfDocuments_]

 

 

 

 

 

 

5.24 [a04-7611_5ex10d1.htm#Brokers_]

Brokers. [a04-7611_5ex10d1.htm#Brokers_]

 

 

 

 

 

 

5.25 [a04-7611_5ex10d1.htm#DomainNames5]

Domain Names. [a04-7611_5ex10d1.htm#DomainNames5]

 

 

 

 

 

 

5.26 [a04-7611_5ex10d1.htm#PreclosingObligations_]

Pre-Closing Obligations. [a04-7611_5ex10d1.htm#PreclosingObligations_]

 

 

 

 

 

6. [a04-7611_5ex10d1.htm#RepresentationsOfTraffixAndPurchaser]

REPRESENTATIONS OF TRAFFIX AND PURCHASER.
[a04-7611_5ex10d1.htm#RepresentationsOfTraffixAndPurchaser]

 

 

 

 

 

 

6.1 [a04-7611_5ex10d1.htm#Existenceandgoodstanding6]

Existence and Good Standing. [a04-7611_5ex10d1.htm#Existenceandgoodstanding6]

 

 

 

 

 

 

6.2 [a04-7611_5ex10d1.htm#Shares6]

Shares. [a04-7611_5ex10d1.htm#Shares6]

 

 

 

 

 

 

6.3 [a04-7611_5ex10d1.htm#Validagreementsrestrictivedocuments6]

Valid Agreements; Restrictive Documents.
[a04-7611_5ex10d1.htm#Validagreementsrestrictivedocuments6]

 

 

 

 

 

 

6.4 [a04-7611_5ex10d1.htm#Requiredapprovalsnoticesandconsents6]

Required Approvals, Notices and Consents.
[a04-7611_5ex10d1.htm#Requiredapprovalsnoticesandconsents6]

 

 

 

 

 

 

6.5 [a04-7611_5ex10d1.htm#NoBrokers_]

No Brokers. [a04-7611_5ex10d1.htm#NoBrokers_]

 

 

 

 

 

 

6.6 [a04-7611_5ex10d1.htm#ExchangeActFilings_]

Exchange Act Filings. [a04-7611_5ex10d1.htm#ExchangeActFilings_]

 

 

 

 

 

7. [a04-7611_5ex10d1.htm#PostClosingCovenants_]

POST CLOSING COVENANTS. [a04-7611_5ex10d1.htm#PostClosingCovenants_]

 

 

 

 

 

 

7.1 [a04-7611_5ex10d1.htm#General_]

General. [a04-7611_5ex10d1.htm#General_]

 

 

 

 

 

 

7.2 [a04-7611_5ex10d1.htm#PostclosingAccess_]

Post-Closing Access. [a04-7611_5ex10d1.htm#PostclosingAccess_]

 

 

 

 

 

 

5

--------------------------------------------------------------------------------

 

 

7.3 [a04-7611_5ex10d1.htm#CooperationInPreparationOfSecurities]

Cooperation in Preparation of Securities Law Filings
[a04-7611_5ex10d1.htm#CooperationInPreparationOfSecurities]

 

 

 

 

 

 

7.4 [a04-7611_5ex10d1.htm#DeliveryOfTheFinalFinancialStatemen]

Delivery of the Final Financial Statements and Disbursement of the $250,000
Holdback. [a04-7611_5ex10d1.htm#DeliveryOfTheFinalFinancialStatemen]

 

 

 

 

 

 

7.5 [a04-7611_5ex10d1.htm#IntentionallyOmitted]

[Intentionally Omitted] [a04-7611_5ex10d1.htm#IntentionallyOmitted]

 

 

 

 

 

 

7.6 [a04-7611_5ex10d1.htm#AvailabilityOfMinimumWorkingCapital_]

Availability of Minimum Working Capital.
[a04-7611_5ex10d1.htm#AvailabilityOfMinimumWorkingCapital_]

 

 

 

 

 

 

7.7 [a04-7611_5ex10d1.htm#SurvivabilityOfPurchaser_]

Survivability of Purchaser. [a04-7611_5ex10d1.htm#SurvivabilityOfPurchaser_]

 

 

 

 

 

 

7.8 [a04-7611_5ex10d1.htm#RetentionOfPurchaserBusinessSubseque]

Retention of Purchaser Business Subsequent to Termination of Employment of ST
Shareholders. [a04-7611_5ex10d1.htm#RetentionOfPurchaserBusinessSubseque]

 

 

 

 

 

8. [a04-7611_5ex10d1.htm#SurvivalOfRepresentationsIndemnities]

SURVIVAL OF REPRESENTATIONS; INDEMNITIES.
[a04-7611_5ex10d1.htm#SurvivalOfRepresentationsIndemnities]

 

 

 

 

 

 

8.1 [a04-7611_5ex10d1.htm#SurvivalOfRepresentationsAndWarranti]

Survival of Representations and Warranties of Seller and the Seller’s
Shareholders. [a04-7611_5ex10d1.htm#SurvivalOfRepresentationsAndWarranti]

 

 

 

 

 

 

8.2 [a04-7611_5ex10d1.htm#ObligationsOfSellerAndTheSellersS]

Obligations of Seller and the Seller’s Shareholders to Indemnify.
[a04-7611_5ex10d1.htm#ObligationsOfSellerAndTheSellersS]

 

 

 

 

 

 

8.3 [a04-7611_5ex10d1.htm#Survivalofrepresentationsandwarranti8]

Survival of Representations and Warranties of Traffix and Purchaser.
[a04-7611_5ex10d1.htm#Survivalofrepresentationsandwarranti8]

 

 

 

 

 

 

8.4 [a04-7611_5ex10d1.htm#NoticeAndOpportunityToDefend_]

Notice and Opportunity to Defend.
[a04-7611_5ex10d1.htm#NoticeAndOpportunityToDefend_]

 

 

 

 

 

 

8.5 [a04-7611_5ex10d1.htm#Limitations_]

Limitations. [a04-7611_5ex10d1.htm#Limitations_]

 

 

 

 

 

9. [a04-7611_5ex10d1.htm#Miscellaneous_]

MISCELLANEOUS. [a04-7611_5ex10d1.htm#Miscellaneous_]

 

 

 

 

 

 

9.1 [a04-7611_5ex10d1.htm#Expenses_]

Expenses. [a04-7611_5ex10d1.htm#Expenses_]

 

 

 

 

 

 

9.2 [a04-7611_5ex10d1.htm#GoverningLawJurisdiction_]

Governing Law; Jurisdiction. [a04-7611_5ex10d1.htm#GoverningLawJurisdiction_]

 

 

 

 

 

 

9.3 [a04-7611_5ex10d1.htm#Intentionallyomitted9]

[Intentionally Omitted] [a04-7611_5ex10d1.htm#Intentionallyomitted9]

 

 

 

 

 

 

9.4 [a04-7611_5ex10d1.htm#Captions_]

Captions. [a04-7611_5ex10d1.htm#Captions_]

 

 

 

 

 

 

9.5 [a04-7611_5ex10d1.htm#Notices_]

Notices. [a04-7611_5ex10d1.htm#Notices_]

 

 

 

 

 

 

9.6 [a04-7611_5ex10d1.htm#PartiesInInterest_]

Parties in Interest. [a04-7611_5ex10d1.htm#PartiesInInterest_]

 

 

 

 

 

 

9.7 [a04-7611_5ex10d1.htm#Severability_]

Severability. [a04-7611_5ex10d1.htm#Severability_]

 

 

 

 

 

 

9.8 [a04-7611_5ex10d1.htm#Counterparts_]

Counterparts. [a04-7611_5ex10d1.htm#Counterparts_]

 

 

 

 

 

 

9.9 [a04-7611_5ex10d1.htm#EntireAgreementAmendments_]

Entire Agreement; Amendments. [a04-7611_5ex10d1.htm#EntireAgreementAmendments_]

 

 

6

--------------------------------------------------------------------------------

 

ASSET ACQUISITION AGREEMENT

 

AGREEMENT, dated as of June 9, 2004 (“Agreement”), by and among TRAFFIX, INC., a
Delaware corporation, having an address at One Blue Hill Plaza, Fifth Floor,
Pearl River, New York 10965, (hereafter referred to as “Traffix”); NEW SEND,
INC., a Delaware corporation, having an address at One Blue Hill Plaza, Fifth
Floor, Pearl River, New York 10965 (hereafter referred to as “New Send” or
“Purchaser”); SENDTRAFFIC, INC., a New York corporation, having an address at 16
Atlantic Avenue, 2nd Floor, Lynbrook, New York 11563 (hereafter referred to as
“ST”); TRAFFICGROUP, LLC, a New York limited liability company having an address
at 16 Atlantic Avenue, 2nd Floor, Lynbrook, New York 11563 (“TG”, and,
collectively with ST, the “Seller”); CRAIG HANDELMAN, an individual having an
address at 16 Atlantic Avenue, 2nd Floor, Lynbrook, New York 11563 (hereafter
referred to as “Craig”); and GREG BYRNES, an individual having an address at16
Atlantic Avenue, 2nd Floor, Lynbrook, New York 11563 (hereafter referred to as
“Greg”).

 

W I T N E S S E T H :

 

WHEREAS, New Send, a wholly owned subsidiary of Traffix, wishes to acquire and
Seller is willing to sell to New Send the Acquired Assets (as defined herein),
upon the terms and conditions hereof;

 

NOW, THEREFORE, in consideration of the agreements herein set forth and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             DEFINITIONS.

 

Capitalized terms used in this Agreement shall, unless the context otherwise
requires, have the meanings specified in this Section 1.  Certain additional
defined terms are set forth elsewhere in this Agreement.

 

1.1           Acquired Assets.

 

“Acquired Assets” means, except as set forth on Schedule 1.1, assets of every
kind, character and description, whether tangible or intangible, whether real,
personal or mixed, and wherever situated, employed or held in connection with
the business or operations of Seller, including, without limitation, the
following:

 

(1)           ALL CASH, CASH EQUIVALENTS, ACCOUNTS RECEIVABLE AND ALL PROCEEDS
THEREOF;

 

(2)           ALL INVENTORY, WORK IN PROCESS, PRODUCT OR SERVICE IDEAS OR
PROPOSALS, SUPPLIES, SPARE PARTS AND OTHER TANGIBLE ASSETS USED IN CONNECTION
WITH THE SELLER’S BUSINESS;

 

(3)           ALL TRADE RIGHTS AND SPECIFICATIONS;

 

(4)           THE DOMAIN NAMES, INCLUDING, WITHOUT LIMITATION, THOSE LISTED ON
SCHEDULE 1.25 HEREOF, TOGETHER WITH THE GOODWILL ASSOCIATED WITH AND SYMBOLIZED
BY ANY DOMAIN NAMES AND REGISTRATION THEREOF AND ALL INTELLECTUAL PROPERTY
RIGHTS ASSOCIATED THEREWITH, INCLUDING, WITHOUT LIMITATION, ALL TRADE NAMES,
TRADEMARKS, SERVICE MARKS, COPYRIGHTS, COMMON LAW RIGHTS AND OTHER INTELLECTUAL
PROPERTY RIGHTS WHATSOEVER OR ANY INTEREST THEREIN (WHETHER OR NOT REGISTRABLE
UNDER COPYRIGHT, TRADEMARK OR SIMILAR STATUTES OR SUBJECT TO ANALOGOUS
PROTECTION), TOGETHER WITH ALL CLAIMS FOR DAMAGES BY REASON OF PAST INFRINGEMENT
OF SAID DOMAIN NAMES, WITH THE RIGHT TO SUE FOR AND COLLECT THE SAME FOR
PURCHASER’S OWN USE AND FOR THE USE OF ITS SUCCESSORS, ASSIGNS OR OTHER LEGAL
REPRESENTATIVES;

 

--------------------------------------------------------------------------------

 

(5)           ALL OF THE FOLLOWING RELATING TO THE SELLER’S BUSINESS AND THE
TRADE RIGHTS: CUSTOMER LISTS, CUSTOMER INFORMATION AND IDENTIFICATIONS
(INCLUDING INTERNET ELECTRONIC MAIL ADDRESSES), DATABASES, ACCOUNT RECORDS,
PRICING INFORMATION, SALES LITERATURE, PROMOTIONAL LITERATURE AND ALL OTHER
BOOKS AND RECORDS, FILES, INVOICES, SUPPLIER LISTS, BLUEPRINTS, SPECIFICATIONS,
DESIGNS, DRAWINGS, PROTOTYPES, LETTERS OF CREDIT, PREPAID ITEMS AND DEPOSITS,
AND THE NAMES “SENDTRAFFIC” AND “TRAFFICGROUP” TOGETHER WITH ANY GOODWILL
ASSOCIATED THEREWITH;

 

(6)           ALL MACHINERY AND EQUIPMENT;

 

(7)           GOODWILL; AND

 

(8)           ALL CONTRACTS AND ALL WARRANTIES, CLAIMS AND CAUSES OF ACTION
AGAINST THIRD PARTIES RELATING TO ANY OF THE ACQUIRED ASSETS.

 

1.2           Acquired Liabilities.

 

“Acquired Liabilities” means only those liabilities of Seller listed on Schedule
1.2, but shall in any case exclude the Excluded Liabilities.

 

1.3           Affiliate.

 

“Affiliate” means, with respect to any Person, any other Person, directly or
indirectly controlling, controlled by or under common control with such Person.

 

1.4           Asserted Liability.

 

“Asserted Liability” has the meaning given in Section 8.4(a).

 

1.5           Balance Sheet Date.

 

“Balance Sheet Date” means March 31, 2004.

 

1.6           Bill of Sale.

 

“Bill of Sale” means the Bill of Sale in the form of Schedule 1.6.

 

1.7           Blue Sky Laws.

 

“Blue Sky Laws” means the laws of any state, the District of Columbia, or any
territory or other jurisdiction in the United States governing the purchase
and/or sale of securities in such jurisdiction.

 

1.8           Business Day.

 

“Business Day” means a day, other than Saturday, Sunday or a day on which banks
in New York City are required or permitted to be closed.

 

1.9           Cash Component.

 

“Cash Component” means $3,750,000, subject to increase as provided in Section
1.67.

 

2

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1.10         Claims.

 

“Claims” has the meaning given in Section 8.2.

 

1.11         Claims Notice.

 

“Claims Notice” has the meaning given in Section 8.4(a).

 

1.12         Closing.

 

“Closing” means the closing of the transactions described in this Agreement
pursuant to Section 4 of this Agreement.

 

1.13         Closing Date.

 

“Closing Date” means the date of the Closing under this Agreement.

 

1.14         Closing Share Price.

 

“Closing Share Price” means the average market closing price of the Common
Stock, as listed on Nasdaq (or the market or exchange upon which the Common
Stock is then listed), for the ten (10) trading days immediately preceding the
day Traffix publicly files a Current Report on Form 8-K or issues a press
release announcing the execution of this Agreement (whichever occurs first).

 

1.15         Code.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

1.16         Commission.

 

“Commission” means the United States Securities and Exchange Commission.

 

1.17         Common Stock.

 

“Common Stock” means the shares of common stock, par value $.001 per share, of
Traffix.

 

1.18         Contingent Payment.

 

“Contingent Payment” means any of the First Contingent Payment, Second
Contingent Payment or Third Contingent Payment.

 

1.19         Contingent Purchase Price.

 

“Contingent Purchase Price” has the meaning given in Section 3.2(a).

 

1.20         Contracts.

 

“Contracts” means all contracts, leases, licenses, commitments, sales orders,
invoices, purchase orders and other agreements relating to the Seller’s
Business, including the agreements listed on Schedule 5.6.

 

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1.21         Controlled Company.

 

“Controlled Company” means (i) any Affiliate of Seller and (ii) any Affiliate of
a Seller’s Shareholder that is engaged in a line of business that is similar to
or competes with the Seller’s Business or acts as a supplier or customer of
Seller.

 

1.22         Delivered Financial Statements.

 

“Delivered Financial Statements” has the meaning given in Section 5.3(a).

 

1.23         Determining Accountant

 

“Determining Accountant” shall mean an accountant that has no past or existing
relationship with Seller, Traffix or any of their respective Affiliates and that
is selected by Traffix’s Accountants and Seller’s Accountants in accordance with
this Agreement, or, in the event of such two accountants’ inability to select a
Determining Accountant, by a Judge of the Supreme Court of the State of New
York, County of New York, upon petition by either Traffix or Seller.

 

1.24         Dollars or $.

 

“Dollars” or “$” means United States dollars.

 

1.25         Domain Names.

 

Domain Names means any and all domain names owned by Seller other than those set
forth on Schedule 1.1, all of which are listed on Schedule 1.25, and which have
been registered with the Registrar.

 

1.26         EBITDA.

 

“EBITDA” means, with respect to any Person, an amount equal to a Person’s
earnings before interest, taxes, depreciation and amortization, as reported by
such Person in accordance with GAAP.

 

1.27         Employment Agreements.

 

“Employment Agreements” means the employment agreements between Purchaser and
each of Craig and Greg substantially in the form annexed hereto as Schedule
1.27.

 

1.28         Environmental Claim.

 

“Environmental Claim” means any written notice, claim, demand, action, suit,
complaint, proceeding or other written communication by any Person alleging
liability or potential liability (including, without limitation, liability or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of or relating to (i) the discharge, emission,
release or threatened release of any Hazardous Materials, at any  locations of
the Seller’s Business in violation of any Environmental Law, or (ii) the
violation or alleged violation by Seller or any of its Affiliates of any permit,
license, registration or other authorization required under applicable
Environmental Laws.

 

1.29         Environmental Law.

 

“Environmental Law” means any existing applicable federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, notification and reporting requirements of any

 

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Governmental Authority, or requirements of law (including, without limitation,
common law) relating in any manner to contamination, pollution, or the
conservation, preservation or protection of human health or the environment.

 

1.30         ERISA.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

1.31         Excluded Liabilities.

 

“Excluded Liabilities” means any and all liabilities or other obligations,
contingent or otherwise, of ST, TG, the Seller’s Shareholders or any Controlled
Company or any of their Affiliates that are not Acquired Liabilities.

 

1.32         Fairness Opinion.

 

“Fairness Opinion” means the opinion of ValueScope, Inc. or similar investment
banking institution or business valuation service retained by Traffix or
Purchaser as to whether or not the transactions contemplated by this Agreement
are fair to the stockholders of Traffix from a financial point of view.

 

1.33         Final Financial Statements.

 

“Final Financial Statements” has the meaning given in Section 7.4(a).

 

1.34         Financial Statements.

 

“Financial Statements” means the Year-End Financial Statements and the Stub
Period Financial Statements.

 

1.35         First Contingent Payment.

 

“First Contingent Payment” means, if the New Send EBITDA for the 12 month period
beginning on the first day of the calendar month immediately following the
Closing Date equals at least $500,000.00, the sum of (a) the amount, but not
more than $1,000,000.00, by which the New Send EBITDA exceeds $500,000.00 and
(b) 65% of the amount by which the New Send EBITDA for such period exceeds
$1,500,000.00, but in no event shall the First Contingent Payment be greater
than $2,500,000.00.

 

1.36         Fixed Purchase Price.

 

“Fixed Purchase Price” has the meaning given in Section 3.1.

 

1.37         GAAP.

 

“GAAP” means generally accepted accounting principles.

 

1.38         Governmental Authority.

 

“Governmental Authority” means any applicable court, tribunal, arbitrator or any
government or political subdivision thereof, whether federal, state, county or
local, or any agency, authority, official or instrumentality of any such
government or political subdivision.

 

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1.39         Hazardous Materials.

 

“Hazardous Materials” means any and all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants, polychlorinated biphenyls and any and all other materials and
substances regulated pursuant to any Environmental Laws.

 

1.40         Indemnifying Party.

 

“Indemnifying Party” has the meaning given in Section 8.4(a).

 

1.41         Indemnitee.

 

“Indemnitee” has the meaning given in Section 8.4(a).

 

1.42         Internet.

 

“Internet” means the worldwide global communication network commonly referred to
as the “internet.”

 

1.43         Knowledge.

 

“Knowledge” of any matter means, with respect to an individual, the actual
knowledge, or knowledge that would be obtained after due inquiry, but otherwise
not constructive or imputed knowledge, of such matter of such Person and, with
respect to any Person that is not an individual, such actual knowledge of each
individual that is a director, officer, or manager of such Person.

 

1.44         Law.

 

“Law” means any statute, rule, regulation or ordinance of any Governmental
Authority.

 

1.45         Licenses.

 

“Licenses” has the meaning given in Section 5.12.

 

1.46         Lien.

 

“Lien” means any security interest, conditional sale or other title retention
agreement, mortgage, pledge, lien, charge, encumbrance or other adverse claim or
interest.

 

1.47         Machinery and Equipment.

 

“Machinery and Equipment” means all vehicles, machinery and equipment (including
computer hardware and software) owned by Seller, subject to leases or subleases
thereby, or used or held in connection with the Seller’s Business.

 

1.48         Material Adverse Effect.

 

“Material Adverse Effect” means any change or changes or effect or effects that
individually or in the aggregate are or may reasonably be expected to be
materially adverse to the condition (financial or otherwise) of Seller  and/or
the Acquired Assets (taken as a whole).

 

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1.49         Minimum Working Capital

 

“Minimum Working Capital” means the working capital generated from the
operations of New Send from and after the Closing, as periodically determined by
Traffix in its reasonable discretion in accordance with GAAP.

 

1.50         New Send EBITDA.

 

“New Send EBITDA” means an amount determined in accordance with GAAP (subject to
adjustment, as set forth in Section 3.2(c) hereof), equal to EBITDA for New Send
for the applicable measurement, which determination shall be made no later than
ninety (90) days after the conclusion of the 12-month measurement period
required to determine the amount of the First Contingent Payment, Second
Contingent Payment and Third Contingent Payment, as the case may be.  Solely for
purposes of determining New Send EBITDA under this Agreement, the following
shall apply: (i) to the extent New Send uses the services of Infiknowledge, ULC
(Traffix’s technology development subsidiary), Infiknowledge, ULC will bill New
Send at the rate of its cost plus 7%; (ii) if New Send refers a client
(including a new or existing New Send client) to Traffix, and Traffix or its
other Affiliates generates revenue from such client (a) from Traffix’s
proprietary media properties, then Traffix will allocate 15% of the collected
revenue from such client to New Send, or (b) from Traffix’s third-party
affiliate media properties, then Traffix will allocate 33% of the gross profit
recognized from such client to New Send; (iii) if Traffix refers a client
(including a new or existing Traffix client) to New Send, and New Send generates
revenue from such client from traditional New Send revenue sources, then 65% of
the gross profit recognized from such client will be allocated to New Send; and
(iv) the following operating expenses shall be allocated to New Send (thereby
causing a reduction to New Send EBITDA):

 

(a)           for the 12-month period ending on the first day of the calendar
month following the one-year anniversary of the Closing Date,  operating
expenses of $150,000 shall be allocated to New Send;

 

(b)           for the 12-month period ending on the first day of the calendar
month following the two-year anniversary of the Closing Date, New Send shall
have operating expenses allocated to it in an amount equal to the product of (1)
$150,000, multiplied by (2) a fraction, the numerator of which shall be the
total operating expenses for New Send for the 12-month period ending on the
two-year anniversary of the Closing Date, and the denominator of which shall be
$1,400,000; and

 

(c)           for the 12-month period ending on the three-year anniversary of
the first day of the calendar month following the Closing Date, New Send shall
have operating expenses allocated to it in an amount equal to the product of (1)
$150,000, multiplied by (2) a fraction, the numerator of which shall be the
total operating expenses for New Send for the 12-month period ending on the
three-year anniversary of the Closing Date, and the denominator of which shall
be $1,400,000.

 

1.51         Notice of Disagreement.

 

“Notice of Disagreement” has the meaning given in Section 3.2(c) or Section
7.4(b), as the case may be.

 

1.52         Order.

 

“Order” means any judgment, writ, decree, injunction or similar order of any
Governmental Authority, in each case whether preliminary or final.

 

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1.53         Other Documents.

 

“Other Documents” means all Schedules and Exhibits to this Agreement and all
other instruments, agreements and documents executed or to be executed by any
party hereto in connection with the transactions contemplated hereby.

 

1.54         Person.

 

“Person” means and includes an individual, a partnership, a joint venture, a
joint stock company, a corporation, a limited liability company, a trust, an
unincorporated association or organization and a government or a department or
agency, authority, official or instrumentality thereof, or any group of the
foregoing acting in concert.

 

1.55         Purchase Price.

 

“Purchase Price” has the meaning set forth in Section 3.2.

 

1.56         Purchase Price Allocation.

 

“Purchase Price Allocation” has the meaning given in Section 3.4.

 

1.57         Registrar.

 

“Registrar” means either Godaddy.com, Bluegenesis.com, Directnic.com or
Networksolutions.com, as the case may be.

 

1.58         Registration Rights Agreement.

 

“Registration Rights Agreement” means the agreement annexed hereto as Schedule
1.58.

 

1.59         Restrictive Agreement.

 

“Restrictive Agreement” means an agreement that prohibits or limits Seller’s (or
its Affiliate’s) use of a Trade Right of another Person or prohibits Seller (or
its Affiliate) from engaging, or curtails or restricts the nature or scope of
Seller’s (or its Affiliate’s) activities, in any line of business or geographic
territory.

 

1.60         Second Contingent Payment.

 

“Second Contingent Payment” means the amount by which the New Send EBITDA for
the 12- month period beginning on the first day of the calendar month
immediately following the first anniversary of the Closing Date exceeds
$2,250,000.00, but in no event shall the Second Contingent Payment exceed
$2,500,000.00.

 

1.61         Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

1.62         Seller Indemnified Parties.

 

“Seller Indemnified Parties” has the meaning given in Section 8.3(b).

 

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1.63         Seller’s Accountants.

 

“Seller’s Accountants” means the CPA firm of Steven Boccio, CPA, or such other
firm selected by Seller upon prior written notice to Purchaser.

 

1.64         Seller’s Business.

 

“Seller’s Business” means the business and operations of ST and TG (and each of
their respective subsidiaries) all as reflected in the Financial Statements as
at and for the period ending on the Balance Sheet Date and as conducted by ST
and TG (and all of their respective subsidiaries) through the Closing Date,
including, without limitation, search engine marketing through increasing
customers’ exposure on search engines and portals.

 

1.65         Seller’s Shareholders.

 

“Seller’s Shareholders” means Craig and Greg.

 

1.66         Share Certificates.

 

“Share Certificates” means the certificates representing the Shares.

 

1.67         Shares.

 

“Shares” means the number of shares of Common Stock, equal to the number of
shares determined by dividing $1,682,500 by the Closing Share Price; provided,
however, that if such number of shares exceeds 19.99% of the total outstanding
shares of Common Stock on the Closing Date, Traffix shall be required to deliver
only that number of shares equal to 19.99% of the total outstanding shares of
Common Stock on the Closing Date, provided that the Cash Component shall be
increased by an amount equal to the product of (a) that number of shares so in
excess of 19.99%, multiplied by (b) the Closing Share Price.

 

1.68         Specifications.

 

“Specifications” means all software code, specifications, plans, and designs,
expressed in any tangible form or stored on any electronic storage device such
as a floppy disk or compact disc, and any computer software or hardware used in
order to interpret or apply the Specifications, owned by Seller and its
Affiliates or otherwise used in connection with the Seller’s Business.

 

1.69         Statement.

 

“Statement” has the meaning given in Section 3.2(c) or Section 7.4(b), as the
case may be.

 

1.70         Stub Period Financial Statement.

 

“Stub Period Financial Statement” means the income statement and balance sheet
of (i) ST; (ii) TG; and (iii) each subsidiary of ST and TG for the period
January 1, 2004 to March 31, 2004, prepared by Seller’s Accountants in
accordance with GAAP.

 

1.71         Tax.

 

“Tax” means all federal, state, local and foreign income, profits, franchise,
sales, use, occupancy, excise and payroll taxes or charges imposed by any
Governmental Authority, and any expenses incurred in connection with the
determination, settlement or litigation of any liability for such taxes,
includes any interest, penalty, or addition thereto, whether disputed or not.

 

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1.72         Tax Return.

 

“Tax Return” means any return, report, information return or other document
(including any related or supporting information) filed or required to be filed
with any federal, state, local or foreign Governmental Authority in connection
with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.

 

1.73         Third Contingent Payment

 

“Third Contingent Payment” means the amount by which the New Send EBITDA for the
12- month period beginning on the first day of the calendar month immediately
following the second anniversary of the Closing Date exceeds $3,250,000.00, but
in no event shall the Third Contingent Payment exceed $2,500,000.00.

 

1.74         Trade Rights.

 

“Trade Rights” means United States and foreign patents, patent applications,
patent licenses, software licenses and know-how licenses, inventions, trade
secrets, trade dress or design, or representation or any expression thereof,
trade names, trademarks, copyrights, service marks, trademark registrations and
applications (whether pending or abandoned), logos, service mark registrations
and applications, copyright registrations and applications (whether pending or
abandoned), job or shop rights, service mark applications  and registrations
(whether pending or abandoned), job or shop rights, all Internet domain names
used or controlled by Seller (including any Affiliates thereof), rights to
inventions and all other items of intellectual property or other intangible
property used in the Seller’s Business.

 

1.75         Traffix’s Accountants.

 

“Traffix’s Accountants” means the independent public accountants then regularly
retained by Traffix.

 

1.76         Traffix Indemnified Parties.

 

“Traffix Indemnified Parties” has the meaning given in Section 8.2.

 

1.77         Year-End Financial Statements.

 

“Year-End Financial Statements” means the income statement and balance sheet of
(i) ST; (ii) TG; and (iii) each subsidiary of ST and TG, all as at December 31,
2003, attached hereto as Schedule 1.77.

 

2.             SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF ACQUIRED
LIABILITIES.

 

2.1           Sale and Purchase of Acquired Assets.

 

Subject to the terms and conditions set forth in this Agreement, Seller hereby
agrees to sell to the Purchaser, and the Purchaser hereby agrees to purchase
from Seller, at the Closing all of the Acquired Assets, free and clear of any
liabilities, Liens, security interests, pledges, conditions or encumbrances,
other than the Acquired Liabilities.  Immediately after the Closing Date, none
of Seller, Seller’s Shareholders or any Controlled Company (or any of their
respective Affiliates) shall have or control any assets related to or necessary
in the conduct of the Seller’s Business except, in the case of Seller’s
Shareholders, in their capacities as executive officers of Purchaser.

 

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2.2           Acquired Liabilities.

 

Subject to the terms and conditions set forth in this Agreement, the Purchaser
agrees that, on the Closing Date, the Purchaser shall assume and thereafter pay,
perform and discharge when due all of the Acquired Liabilities (but none of the
Excluded Liabilities, notwithstanding the disclosure of a liability on any
Schedule hereto except for those specifically set forth on Schedule 1.2 hereof).

 

3.             PURCHASE PRICE.

 

3.1           Fixed Purchase Price.

 

The fixed portion of the Purchase Price (the “Fixed Purchase Price”) for the
Acquired Assets is $5,432,500.00 (except as may be increased post-Closing
pursuant to Section 7.4(c) hereof), payable as follows:

 

(1)           THE CASH COMPONENT PAYABLE AT THE CLOSING AS PROVIDED IN SECTION
4.4; AND

 

(2)           THE SHARES, WHICH SHALL BE DELIVERED AT THE CLOSING AS PROVIDED IN
SECTION 4.4.

 

3.2           Contingent Purchase Price.

 

(A)           THE CONTINGENT PORTION OF THE PURCHASE PRICE (THE “CONTINGENT
PURCHASE PRICE”, AND, WITH THE FIXED PURCHASE PRICE, THE “PURCHASE PRICE”) SHALL
BE PAYABLE AS FOLLOWS:

 

(1)           within ten (10) days after the earlier of (i) receipt by Traffix
of notice from Seller stating that the Statement (as defined below) is
acceptable or (ii) final determination in accordance with Section 3.2(c) of the
amount of the New Send EBITDA used to calculate the First Contingent Payment,
Purchaser shall deliver or cause to be delivered to Seller the First Contingent
Payment;

 

(2)           within ten (10) days after the earlier of (i) receipt by Traffix
of notice from Seller stating that the Statement is acceptable or (ii) final
determination in accordance with Section 3.2(c) of the amount of the New Send
EBITDA used to calculate the Second Contingent Payment, Purchaser shall deliver
or cause to be delivered to Seller the Second Contingent Payment;

 

(3)           within ten (10) days after the earlier of (i) receipt by Traffix
of notice from Seller stating that the Statement is acceptable or (ii) final
determination in accordance with Section 3.2(c) of the amount of the New Send
EBITDA used to calculate the Third Contingent Payment, Purchaser shall deliver
or cause to be delivered to Seller the Third Contingent Payment.

 

(B)           ONE-HALF (1/2) OF EACH CONTINGENT PAYMENT SHALL BE PAID IN CASH
AND THE REMAINING ONE-HALF (1/2) SHALL BE PAID, IN THE SOLE DISCRETION OF
TRAFFIX, IN ANY COMBINATION OF CASH AND RESTRICTED SHARES OF COMMON STOCK;
PROVIDED, HOWEVER, THAT A CONTINGENT PAYMENT MUST BE PAID ENTIRELY IN CASH IF,
AT THE TIME SUCH CONTINGENT PAYMENT BECOMES DUE, TRAFFIX HAS EITHER (I)
CONSUMMATED THE SALE OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS TO AN INDIVIDUAL
OR A PRIVATELY-HELD ENTITY; OR (II) MERGED WITH AND INTO A PRIVATELY-HELD
ENTITY, WHICH PRIVATELY-HELD ENTITY IS THE SURVIVING CORPORATION IN SUCH
MERGER.  EACH SHARE OF COMMON STOCK INCLUDED IN A CONTINGENT PAYMENT SHALL HAVE
A VALUE EQUAL TO THE AVERAGE MARKET CLOSING PRICE OF THE COMMON STOCK, AS LISTED
ON NASDAQ (OR THE MARKET OR EXCHANGE UPON WHICH THE COMMON STOCK IS THEN
LISTED), OVER THE TEN (10) TRADING DAYS IMMEDIATELY PRECEDING THE LAST

 

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day of the measurement period used to calculate the First Contingent Payment,
Second Contingent Payment or Third Contingent Payment, as the case may be.

 

(C)           NOT LATER THAN THIRTY (30) DAYS AFTER TRAFFIX HAS DELIVERED TO
SELLER ITS DETERMINATION OF THE NEW SEND EBITDA USED TO CALCULATE A CONTINGENT
PAYMENT (THE “STATEMENT”), SELLER SHALL NOTIFY TRAFFIX IN WRITING (THE “NOTICE
OF DISAGREEMENT”) IF SELLER DISAGREES WITH THE STATEMENT.  IF NO NOTICE OF
DISAGREEMENT IS RECEIVED BY TRAFFIX WITHIN SUCH 30-DAY PERIOD, THEN THE
STATEMENT SHALL BE DEEMED TO BE ACCEPTED AND AGREED TO BY SELLER.  THE NOTICE OF
DISAGREEMENT SHALL PROVIDE SPECIFIC REASONS FOR THE DISAGREEMENT.  IF SUCH
NOTICE OF DISAGREEMENT IS TIMELY GIVEN, THEN TRAFFIX AND SELLER SHALL USE
REASONABLE EFFORTS TO RESOLVE THE DISAGREEMENT REGARDING THE STATEMENT.  IF NO
AGREEMENT IS REACHED BETWEEN THEM WITHIN THIRTY (30) DAYS AFTER THE DATE ON
WHICH SELLER GIVES ITS NOTICE OF DISAGREEMENT, THEN THE DETERMINING ACCOUNTANT
SHALL BE APPOINTED BY TRAFFIX’S ACCOUNTANTS AND SELLER’S ACCOUNTANTS WITHIN TEN
(10) DAYS THEREAFTER WITH INSTRUCTIONS TO RESOLVE THE DISAGREEMENT AND PROVIDE A
REPORT OF ITS DETERMINATION OF THE AMOUNTS IN DISPUTE WITHIN THIRTY (30) DAYS OF
ITS APPOINTMENT.  THE DETERMINING ACCOUNTANT MAY EXAMINE ALL LEDGERS, BOOKS,
RECORDS AND WORK PAPERS UTILIZED IN CONNECTION WITH THE ACCOUNTING AND
PREPARATION OF THE STATEMENT.  THE DECISION OF THE DETERMINING ACCOUNTANT SHALL
BE DELIVERED IN A WRITTEN REPORT ADDRESSED TO TRAFFIX AND SELLER AND SHALL BE
BINDING AND CONCLUSIVE UPON THE PARTIES HERETO.  THE COSTS AND FEES OF THE
DETERMINING ACCOUNTANT SHALL BE BORNE ONE-HALF BY SELLER AND ONE-HALF BY
TRAFFIX; PROVIDED, HOWEVER, THAT IF THE AMOUNT OF THE NEW SEND EBITDA REFLECTED
IN THE STATEMENT IS MORE THAN $50,000 LESS THAN THE AMOUNT DETERMINED BY THE
DETERMINING ACCOUNTANT AND SUCH MISCALCULATION WAS NOT CAUSED BY THE ACT OR
OMISSION OF SELLER, CRAIG OR GREG OR ANY OF THEIR RESPECTIVE AFFILIATES, THEN
TRAFFIX SHALL BEAR ALL OF SUCH COSTS AND FEES.

 

3.3           PURCHASE PRICE ALLOCATION.

 

The Purchase Price shall be allocated (the “Purchase Price Allocation”) among
the Acquired Assets as set forth on Schedule 3.3, except that the parties hereto
agree to amend prior to Closing the amount allocated on such schedule to
“goodwill” in accordance with the recommendation of an independent valuation
service provider being retained for such purpose subsequent to the date hereof. 
Such Purchase Price Allocation is being made consistent with Section 1060 of the
Code.  Each of the parties hereto shall not, and shall not permit any of its
Affiliates to, take a position (except as required pursuant to any Order) on any
Tax Return or before any Governmental Authority charged with the collection of
any Tax, or in any judicial proceeding, that is in any way inconsistent with the
Purchase Price Allocation determined in accordance with this Section 3.3.  Any
state or local sales tax or other transfer tax due with respect to the transfer
of the Assets conveyed to the Purchaser shall be paid by Seller.

 

4.             THE CLOSING.

 

4.1           Closing.

 

The Closing is anticipated to take place on or about June 18, 2004 at the
offices of Traffix’s counsel, Feder, Kaszovitz, Isaacson, Weber, Skala, Bass &
Rhine LLP, 750 Lexington Avenue, New York, New York 10022-1200, or at such other
place as the parties hereto may agree; provided, however, that in the event
Seller and Seller’s Shareholders are ready, willing and able to consummate the
transactions contemplated to be performed thereby as of the Closing Date
hereunder, and all Closing conditions required hereunder to be performed or
satisfied by Seller or Seller’s Shareholders or their respective designees have
been so performed and satisfied, and Traffix or Purchaser are not so ready,
willing and able to close, Purchaser shall deliver $200,000 of the Cash
Component by wire transfer to the account designated by ST, to be applied
against the Purchase Price at Closing.

 

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4.2           Delay in Closing and Termination Fee.

 

(A)           IN THE EVENT THAT ON JUNE 30, 2004, (I) SELLER AND SELLER’S
SHAREHOLDERS ARE READY, WILLING AND ABLE TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED TO BE PERFORMED THEREBY AS OF THE CLOSING DATE HEREUNDER, AND ALL
CLOSING CONDITIONS REQUIRED HEREUNDER TO BE PERFORMED OR SATISFIED BY SELLER OR
SELLER’S SHAREHOLDERS OR THEIR RESPECTIVE DESIGNEES HAVE BEEN SO PERFORMED AND
SATISFIED; AND (II) (X) PURCHASER AND TRAFFIX HAVE NOT RECEIVED THE FAIRNESS
OPINION DUE TO ANY REASON OTHER THAN THE FAILURE OF SELLER OR SELLER’S
SHAREHOLDERS TO REASONABLY COOPERATE WITH THE PURCHASER AND TRAFFIX AND THEIR
DESIGNEES IN THE PREPARATION OF THE FAIRNESS OPINION, OR (Y) THE FAIRNESS
OPINION OPINES, INTER ALIA, THAT THE TRANSACTIONS CONTEMPLATED HEREBY ARE NOT
FAIR TO THE STOCKHOLDERS OF TRAFFIX FROM A FINANCIAL POINT OF VIEW, THEN EITHER
SELLER OR PURCHASER MAY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO THE OTHER,
WHEREUPON SELLER MAY RETAIN THE $200,000 PAID IN ACCORDANCE WITH SECTION 4.1
HEREOF AS A TERMINATION FEE AND THEREAFTER NEITHER PARTY HERETO SHALL HAVE ANY
FURTHER RIGHTS AGAINST OR OBLIGATIONS TO THE OTHER.

 

(b)           In the event that (i) Seller and Seller’s Shareholders have not
reasonably cooperated with the Purchaser and Traffix and their designees in
their preparation of the Fairness Opinion, or (ii) on June 30, 2004, Seller and
Seller’s Shareholders are not ready, willing and able to consummate the
transactions contemplated to be performed thereby as of the Closing Date
hereunder, or all Closing conditions required hereunder to be performed or
satisfied by Purchaser and Traffix or their respective designees have not been
so performed and satisfied, then, in either of such instances, Seller shall
immediately return the $200,000 paid in accordance with Section 4.1 and this
Agreement shall continue in full force and effect, with the Closing Date being
July 15, 2004, time being of the essence.

 

4.3           Deliveries by Seller at Closing.

 

At the Closing, Seller shall deliver, or cause to be delivered, to Traffix and
New Send:

 

(1)           (A)  A CERTIFICATE ISSUED BY THE SECRETARY OF STATE OF THE STATE
OF NEW YORK, CERTIFYING THAT ST IS A CORPORATION DULY ORGANIZED AND EXISTING IN
GOOD STANDING UNDER THE LAW OF THE STATE OF NEW YORK, AND COPIES OF ST’S
CERTIFICATE OF INCORPORATION, INCLUDING ALL AMENDMENTS, CERTIFIED BY THE OFFICE
OF THE SECRETARY OF STATE OF NEW YORK, AND A CERTIFICATE FROM THE APPROPRIATE
OFFICE OF EACH OTHER STATE IN WHICH ST HAS QUALIFIED TO DO BUSINESS, TO THE
EFFECT THAT ST IS IN GOOD STANDING IN EACH STATE AND THAT IT OWES NO TAXES; AND

 

(b)  a certificate issued by the Secretary of State of the State of New York,
certifying that TG is a limited liability company duly organized and existing in
good standing under the law of the State of New York, and copies of TG’s
Certificate of Formation and Articles of Organization, including all amendments,
certified by the office of the Secretary of State of New York, and a certificate
from the appropriate office of each other state in which TG has qualified to do
business, to the effect that TG is in good standing in each state and that it
owes no taxes;

 

(2)           (A)  A CERTIFICATE SIGNED BY THE SECRETARY OF SELLER CERTIFYING AS
TO (I) THE CERTIFICATE OF INCORPORATION AND BYLAWS OF ST BEING TRUE AND CORRECT
AS OF THE CLOSING DATE, (II) RESOLUTIONS OF THE SHAREHOLDERS AND THE DIRECTORS
OF ST, AUTHORIZING AND APPROVING ALL MATTERS IN CONNECTION WITH THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND (III) THE INCUMBENCY OF THE
EXECUTIVE OFFICERS OF ST EXECUTING THIS AGREEMENT AND ANY RELATED AGREEMENTS;
AND

 

(b)  a certificate signed by the managing member of TG certifying as to (i) the
Certificate of Formation, Articles of Organization and Bylaws of TG being true
and correct as of the Closing Date, (ii) resolutions of the members and the
directors of TG, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, and

 

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(iii) the incumbency of the executive officers or managing members of TG
executing this Agreement and any related agreements;

 

(3)           THE BILL OF SALE;

 

(4)           A CERTIFICATE SIGNED BY A DULY AUTHORIZED EXECUTIVE OFFICER OF
EACH OF ST AND TG AND EACH SELLER’S SHAREHOLDER THAT THE REPRESENTATIONS AND
WARRANTIES OF SELLER AND EACH SELLER’S SHAREHOLDER CONTAINED IN THIS AGREEMENT
ARE TRUE, CORRECT AND COMPLETE ON AND AS OF THE CLOSING DATE, EXCEPT FOR CHANGES
CONTEMPLATED BY THE AGREEMENT AND EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES THAT ADDRESS MATTERS ONLY AS OF A PARTICULAR DATE (WHICH SHALL REMAIN
TRUE AND CORRECT AS OF SUCH PARTICULAR DATE), AND THAT SELLER AND EACH SELLER’S
SHAREHOLDER HAS PERFORMED AND COMPLIED WITH ALL COVENANTS AND AGREEMENTS
REQUIRED BY THIS AGREEMENT TO BE PERFORMED OR COMPLIED WITH BY IT ON OR PRIOR TO
THE CLOSING DATE;

 

(5)           COPIES OF WRITTEN CONSENTS TO THE ASSIGNMENT OF THOSE CONTRACTS
LISTED ON SCHEDULE 4.3(5), EXECUTED BY THE COUNTERPARTIES THERETO;

 

(6)           (A)  A CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF ST, DULY EXECUTED AND IN SUITABLE FORM FOR FILING WITH THE SECRETARY OF STATE
OF THE STATE OF NEW YORK CHANGING THE NAME OF ST TO HANDELMAN BYRNES CORP.; AND

 

(b)  a Certificate of Amendment to the Articles of Organization of TG, duly
executed and in suitable form for filing with the Secretary of State of the
State of New York changing the name of TG to Byrnes Handelman LLC;

 

(7)           CONFIRMATION THAT THE REGISTRAR HAS CORRECTLY CHANGED THE
ADMINISTRATIVE CONTACT, BILLING CONTACT, AND TECHNICAL CONTACT FOR THE DOMAIN
NAMES TO PURCHASER, OR TO SUCH OTHER ENTITY AS IS DIRECTED BY PURCHASER (A
CURRENT PRINTOUT OF A REGISTRAR WHOIS DATABASE QUERY PROVIDED TO FEDER,
KASZOVITZ, ISAACSON, WEBER, SKALA, BASS & RHINE LLP BY SELLER SHALL BE
SUFFICIENT EVIDENCE OF THE SUCCESSFUL TRANSFER OF THE DOMAIN NAMES TO
PURCHASER);

 

(8)           INVESTMENT REPRESENTATION LETTERS IN THE FORM REQUESTED BY TRAFFIX
FROM SELLER AND EACH SELLER’S SHAREHOLDER REGARDING THE SHARES;

 

(9)           THE REGISTRATION RIGHTS AGREEMENT, AS EXECUTED BY ST AND EACH
SELLER’S SHAREHOLDER;

 

(10)         an opinion of counsel to Seller, such counsel to be reasonably
acceptable to Purchaser, dated the Closing Date and addressed to Purchaser and
Traffix, in form and substance reasonably satisfactory to Purchaser and Traffix,
to the effect that (i) ST and TG are each duly incorporated or organized, as the
case may be, validly existing and in good standing under the Laws of the
jurisdiction of their incorporation or organization, as the case may be, (ii)
Seller has all requisite corporate power and authority to make, execute, deliver
and perform this Agreement and each Other Document required to be executed,
delivered and performed by it in connection with the transactions contemplated
hereby, and to sell, convey, assign, transfer and deliver the Acquired Assets to
Purchaser, as set forth herein, (iv) this Agreement, any Other Document to which
Seller or any Seller’s Shareholder is a party, and all assignments and other
instruments of conveyance, transfer and sale, as specified in such opinion,
delivered by Seller hereunder constitute the valid and binding obligations of
Seller and each Seller’s Shareholder, as the case may be, enforceable against
them in accordance with their respective terms, (v) neither the execution and
delivery of this Agreement or any Other Document to which Seller or any Seller’s
Shareholder is a party, nor the consummation of the transactions

 

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contemplated hereby and thereby, nor compliance with and fulfillment of the
terms and conditions of this Agreement or any Other Document to which Seller or
any Seller’s Shareholder is a party, by Seller or a Seller’s Shareholder, shall
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under the articles of incorporation or bylaws (or
equivalent documents) of Seller or any Contract specified as material by Seller
in a schedule attached to such opinion to which Seller and/or Seller’s
Shareholder is subject; (vi) no notice to or authorization of, any Government
Entity required by federal or New York state Law to be obtained by Seller or any
Seller’s Shareholder, which has not been given or obtained prior to Closing, is
required for the consummation by Seller and/or any Seller’s Shareholder, as the
case may be, of the transactions contemplated hereby; (vii) the consummation by
Seller or any Seller’s Shareholder of the transactions described herein shall
not violate or result in a breach or default under any federal or New York state
Law applicable to Seller or any Seller’s Shareholder and does not and will not
result in the creation or imposition of any Lien upon any of the Acquired
Assets; and (viii) to the Knowledge of such counsel, there is no litigation or
action pending or threatened against Seller (or any subsidiaries thereof) or any
Seller’s Shareholder, at Law or in equity, before or by any Government Entity or
other Person.  In rendering such opinion, such counsel may include customary
qualifications and assumptions, may rely upon certificates of government
entities and may place reasonable reliance upon the representations of officers
of Seller;

 

(11)         a written assignment of those Contracts listed on Schedule 4.3(11)
hereto, which Seller and Seller’s Shareholders hereby acknowledge are the only
Contracts being assumed by Purchaser and/or Traffix hereunder; and

 

(12)         such other instruments or documents as may be reasonably necessary
in order to consummate the transactions described in this Agreement.

 

4.4           Deliveries by Traffix and New Send at Closing.

 

At the Closing, Traffix and New Send shall deliver, or cause to be delivered, to
ST:

 

(1)           $3,500,000 OF THE CASH COMPONENT (EXCEPT AS MAY BE INCREASED
PURSUANT TO SECTION 1.67, BUT LESS ANY AMOUNTS PREVIOUSLY PAID PURSUANT TO
SECTION 4.1 AND NOT RETURNED BY SELLER PURSUANT TO SECTION 4.2(B)), PAYABLE BY
WIRE TRANSFER TO THE ACCOUNT DESIGNATED BY ST, WITH THE REMAINING $250,000 OF
THE CASH COMPONENT TO BE DISBURSED IN ACCORDANCE WITH SECTION 7.4 HEREOF;

 

(2)           THE SHARE CERTIFICATES REPRESENTING THE SHARES DELIVERABLE AT THE
CLOSING, WHICH SHALL BEAR A RESTRICTIVE LEGEND IN SUBSTANTIALLY THE FOLLOWING
FORM:

 

“Any transfer or other disposition of the shares represented by this certificate
is subject to the provisions of an Asset Acquisition Agreement dated as of June
9, 2004, among Traffix, Inc. (the “Corporation”), New Send, Inc., SendTraffic,
Inc., TrafficGroup, LLC, Craig Handelman and Greg Byrnes.  The shares of stock
represented by this Certificate have not been registered under the United States
Securities Act of 1933, as amended (the “Act”), and may be transferred only if
(i) registered under the Act and the requirements of any state having
jurisdiction are complied with or (ii) the transfer is exempt from such
registration and state requirements and counsel reasonably acceptable to the
Corporation has delivered to the Corporation a written opinion reasonably
acceptable to the Corporation setting forth the basis for such exemption.”

 

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(3)           A COPY OF TRAFFIX’S AND NEW SEND’S CERTIFICATES OF INCORPORATION,
INCLUDING ALL AMENDMENTS, CERTIFIED, IN EACH CASE, BY THE OFFICE OF THE
SECRETARY OF STATE OF DELAWARE; AND CERTIFICATES FROM THE OFFICE OF THE
SECRETARY OF STATE OF DELAWARE TO THE EFFECT THAT EACH OF SUCH ENTITIES IS IN
GOOD STANDING AND OWES NO TAXES IN DELAWARE;

 

(4)           A CERTIFICATE SIGNED BY THE SECRETARY OF EACH OF TRAFFIX AND NEW
SEND, CERTIFYING AS TO (A) THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF EACH
OF TRAFFIX AND NEW SEND, RESPECTIVELY, (B) RESOLUTIONS OF THE BOARD OF DIRECTORS
OF EACH OF TRAFFIX AND NEW SEND, RESPECTIVELY, AUTHORIZING AND APPROVING ALL
MATTERS IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY, AND (C) THE INCUMBENCY OF THE OFFICER(S) OF EACH OF TRAFFIX AND NEW
SEND, RESPECTIVELY, EXECUTING THIS AGREEMENT AND ANY RELATED AGREEMENTS;

 

(5)           A CERTIFICATE SIGNED BY A DULY AUTHORIZED EXECUTIVE OFFICER OF
EACH OF TRAFFIX AND NEW SEND THAT THE REPRESENTATIONS AND WARRANTIES OF EACH OF
TRAFFIX AND NEW SEND CONTAINED IN THIS AGREEMENT ARE TRUE, CORRECT AND COMPLETE
ON AND AS OF THE CLOSING DATE, EXCEPT FOR CHANGES CONTEMPLATED BY THE AGREEMENT
AND EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES THAT ADDRESS MATTERS ONLY AS
OF A PARTICULAR DATE (WHICH SHALL REMAIN TRUE AND CORRECT AS OF SUCH PARTICULAR
DATE), AND THAT EACH OF TRAFFIX AND NEW SEND HAS PERFORMED AND COMPLIED WITH ALL
COVENANTS AND AGREEMENTS REQUIRED BY THIS AGREEMENT TO BE PERFORMED OR COMPLIED
WITH BY IT ON OR PRIOR TO THE CLOSING DATE;

 

(6)           THE REGISTRATION RIGHTS AGREEMENT, AS EXECUTED BY TRAFFIX;

 

(7)           options to purchase an aggregate of 70,000 shares of Common Stock
issued in the names of those employees of Seller designated at Closing by
Seller, provided such designated individuals are employees of Traffix (or any
subsidiary thereof) at Closing (such options vesting in equal installments on
each of their date of grant and the first and second anniversaries of their date
of grant and otherwise governed in accordance with the terms and provisions of
Traffix’s 1996 Employee Stock Option Plan, as then amended and restated);

 

(8)           AN OPINION OF FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA, BASS &
RHINE LLP, COUNSEL TO TRAFFIX AND PURCHASER, DATED THE CLOSING DATE AND
ADDRESSED TO SELLER, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO SELLER, TO
THE EFFECT THAT (I) PURCHASER AND TRAFFIX ARE EACH DULY INCORPORATED OR
ORGANIZED, AS THE CASE MAY BE, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE
LAWS OF THE JURISDICTION OF THEIR INCORPORATION OR ORGANIZATION, AS THE CASE MAY
BE, (II) PURCHASER AND TRAFFIX HAVE ALL REQUISITE CORPORATE POWER AND AUTHORITY
TO MAKE, EXECUTE, DELIVER AND PERFORM THIS AGREEMENT AND EACH OTHER DOCUMENT
REQUIRED TO BE EXECUTED, DELIVERED AND PERFORMED BY THEM IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY, AND TO PAY THE PURCHASE PRICE, INCLUDING,
WITHOUT LIMITATION, THE ISSUANCE OF THE SHARE COMPONENT, AS SET FORTH HEREIN,
(IV) THIS AGREEMENT AND ANY OTHER DOCUMENT TO WHICH PURCHASER OR TRAFFIX IS A
PARTY, AS SPECIFIED IN SUCH OPINION, DELIVERED BY PURCHASER HEREUNDER CONSTITUTE
THE VALID AND BINDING OBLIGATIONS OF PURCHASER AND TRAFFIX, AS THE CASE MAY BE,
ENFORCEABLE AGAINST THEM IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, (V) NEITHER
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OTHER DOCUMENT TO WHICH
PURCHASER OR TRAFFIX IS A PARTY, NOR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, NOR COMPLIANCE WITH AND FULFILLMENT OF THE
TERMS AND CONDITIONS OF THIS AGREEMENT OR ANY OTHER DOCUMENT TO WHICH PURCHASER
OR TRAFFIX IS A PARTY, BY PURCHASER OR TRAFFIX, SHALL CONFLICT WITH, OR RESULT
IN A BREACH OF THE TERMS, CONDITIONS OR PROVISIONS OF, OR CONSTITUTE A DEFAULT
UNDER THE ARTICLES OF INCORPORATION OR BYLAWS OF PURCHASER OR TRAFFIX; (VI) NO
NOTICE TO OR AUTHORIZATION OF, ANY GOVERNMENT ENTITY REQUIRED BY FEDERAL OR
DELAWARE STATE LAW TO BE OBTAINED BY PURCHASER OR TRAFFIX, WHICH HAS NOT BEEN
GIVEN OR OBTAINED PRIOR TO CLOSING, IS REQUIRED FOR THE CONSUMMATION BY
PURCHASER AND/OR TRAFFIX, AS THE CASE MAY BE, OF THE TRANSACTIONS CONTEMPLATED
HEREBY;

 

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(vii) the consummation by Purchaser or Traffix of the transactions described
herein shall not violate or result in a breach or default under any federal or
Delaware state Law applicable to Purchaser or Traffix and does not and will not
result in the creation or imposition of any Lien upon any portion of the Share
Component or the Acquired Assets; and (viii) to the Knowledge of such counsel,
there is no litigation or action pending or threatened against Purchaser or
Traffix (or any subsidiaries thereof), at Law or in equity, before or by any
Government Entity or other Person, that would have a Material Adverse Effect and
that is not otherwise disclosed in a document filed by Traffix with the
Commission.  In rendering such opinion, such counsel may include customary
qualifications and assumptions, may rely upon certificates of government
entities and may place reasonable reliance upon the representations of officers
of Purchaser or Traffix;

 

(9)           an assignment and assumption agreement pursuant to which Purchaser
assumes all Acquired Liabilities; and

 

(10)         such other instruments or documents as may be reasonably necessary
in order to consummate the transactions described in this Agreement.

 

4.5           Delivery of Employment Agreements at Closing.

 

At the Closing, Traffix and Purchaser and each of Craig and Greg shall execute
and deliver an Employment Agreement in substantially the form of the Employment
Agreement annexed hereto as Schedule 1.27.

 

4.6           Holdback of Portion of Purchase Price.

 

At the Closing, Purchaser shall deposit in an interest bearing, segregated bank
account, $250,000, representing that portion of the Cash Component not delivered
at Closing to ST, such reserved amount to be disbursed in accordance with
Section 7.4 hereof.

 

4.7           Conditions to Closing.

 

(A)           THE OBLIGATION OF TRAFFIX AND PURCHASER TO CONSUMMATE THE PURCHASE
OF THE ACQUIRED ASSETS IN ACCORDANCE HEREWITH AND THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE SUBJECT TO THE SATISFACTION (OR WAIVER BY TRAFFIX
AND PURCHASER) PRIOR TO THE CLOSING OF EACH OF THE FOLLOWING CONDITIONS:

 

(1)           THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER AND THE SELLER’S
SHAREHOLDERS HEREIN SHALL BE TRUE IN ALL MATERIAL RESPECTS ON AND AS OF THE
CLOSING DATE, EXCEPT FOR CHANGES CONTEMPLATED BY THE AGREEMENT AND EXCEPT FOR
THOSE REPRESENTATIONS AND WARRANTIES THAT ADDRESS MATTERS ONLY AS OF A
PARTICULAR DATE (WHICH SHALL REMAIN TRUE AND CORRECT AS OF SUCH PARTICULAR
DATE);

 

(2)           SELLER AND SELLER’S SHAREHOLDER SHALL HAVE PERFORMED AND COMPLIED
IN ALL MATERIAL RESPECTS WITH ALL OBLIGATIONS AND CONDITIONS TO BE PERFORMED OR
COMPLIED WITH BY THEM HEREUNDER;

 

(3)           NO ORDER OR LAW SHALL BE IN EFFECT WHICH PROHIBITS CONSUMMATION OF
THE ACQUISITION;

 

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(4)           EACH CONSENT OF, OR NOTICE TO, ANY GOVERNMENTAL AUTHORITY OR OTHER
PERSON (INCLUDING THE COUNTERPARTY TO ANY CONTRACT) REQUIRED FOR THE
CONSUMMATION OF THE ACQUISITION SHALL HAVE BEEN OBTAINED OR GIVEN;

 

(5)           THERE SHALL NOT HAVE OCCURRED, SINCE THE DATE OF THIS AGREEMENT,
ANY MATERIAL ADVERSE EFFECT;

 

(6)           THE SELLER’S SHAREHOLDERS SHALL HAVE APPROVED THE SALE OF THE
ACQUIRED ASSETS AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT;

 

(7)           THERE SHALL NOT EXIST ANY LIEN AFFECTING THE ACQUIRED ASSETS,
OTHER THAN THOSE LIENS SET FORTH ON SCHEDULE 4.7(A)(7);

 

(8)           SELLER AND EACH SELLER’S SHAREHOLDER SHALL EXECUTE AND/OR DELIVER
AT THE CLOSING ALL THE DOCUMENTS SO TO BE EXECUTED AND/OR DELIVERED BY THEM AND
TAKE ALL OTHER ACTIONS AT THE CLOSING SO TO BE TAKEN BY THEM, PURSUANT TO
SECTION 4.3 AND 4.5; AND

 

(9)           Seller shall cause those of its employees and consultants (all of
whom are listed on Schedule 4.7(a)(9)) selected by Purchaser prior to Closing
(in its sole discretion), to agree to become employees-at-will of Purchaser from
and after the Closing; provided, however, that if Purchaser has notified Seller
prior to Closing that Purchaser chooses (in its sole discretion) to have an
employee or consultant continue as an employee or consultant of Purchaser from
and after the Closing on the same terms and conditions as exist under the
Seller’s written agreements therewith, Seller shall cause such employee or
consultant to consent to the assignment of Seller’s rights and obligations under
such agreement to Purchaser.

 

(B)           THE OBLIGATION OF SELLER AND EACH SELLER’S SHAREHOLDER TO
CONSUMMATE THE ACQUISITION IN ACCORDANCE HEREWITH SHALL BE SUBJECT TO THE
SATISFACTION (OR WAIVER BY SELLER AND EACH SELLER’S SHAREHOLDER) PRIOR TO OR AT
THE CLOSING OF EACH OF THE FOLLOWING CONDITIONS:

 

(1)           THE REPRESENTATIONS AND WARRANTIES MADE BY TRAFFIX AND PURCHASER
HEREIN SHALL BE TRUE IN ALL RESPECTS ON AND AS OF THE CLOSING DATE, EXCEPT FOR
CHANGES CONTEMPLATED BY THE AGREEMENT AND EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES THAT ADDRESS MATTERS ONLY AS OF A PARTICULAR DATE (WHICH SHALL REMAIN
TRUE AND CORRECT AS OF SUCH PARTICULAR DATE);

 

(2)           TRAFFIX AND PURCHASER SHALL HAVE PERFORMED AND COMPLIED WITH ALL
OBLIGATIONS AND CONDITIONS TO BE PERFORMED OR COMPLIED WITH BY THEM HEREUNDER;

 

(3)           NO ORDER OR LAW SHALL BE IN EFFECT WHICH PROHIBITS CONSUMMATION OF
THE ACQUISITION; AND

 

(4)           TRAFFIX AND PURCHASER SHALL EXECUTE AND/OR DELIVER AT THE CLOSING
ALL THE DOCUMENTS AND MONIES SO TO BE EXECUTED AND/OR DELIVERED BY IT AND TAKE
ALL OTHER ACTIONS AT THE CLOSING SO TO BE TAKEN BY IT, PURSUANT TO SECTION 4.4,
4.5 AND 4.5.

 

5.             REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER’S
SHAREHOLDERS.

 

ST, TG and each of the Seller’s Shareholders, jointly and severally, represent
and warrant to Traffix and Purchaser the following:

 

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5.1           Existence and Good Standing.

 

(a)           ST is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and has all
requisite corporate power and authority to own, lease and operate all its
properties and to carry on its business as now being conducted.  ST is duly
qualified and in good standing in each jurisdiction in which the failure to
qualify would have a Material Adverse Effect; and

 

(b)           TG is a limited liability company, duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation,
and has all requisite limited liability company power and authority to own,
lease and operate all its properties and to carry on its business as now being
conducted.  TG is duly qualified and in good standing in each jurisdiction in
which the failure to qualify would have a Material Adverse Effect.

 

5.2           Shareholders.

 

The Seller’s Shareholders own all of the issued and outstanding securities of
all classes of ST and TG, respectively.  All shares and membership interests, as
the case may be, held by the Seller’s Shareholders have been duly authorized and
validly issued and are fully paid and non-assessable, and have not been issued
in violation of any rights of other Persons.  No other class of ownership of ST
or TG is authorized or outstanding other than the shares and membership
interests, as the case may be, owned by the Seller’s Shareholders.  There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares, membership interests or other
ownership interest in ST or TG.

 

5.3           Financial Statements.

 

(A)           SELLER HAS FURNISHED OR MADE AVAILABLE TO TRAFFIX THE FOLLOWING
FINANCIAL STATEMENTS AND TAX RETURNS (THE “DELIVERED FINANCIAL STATEMENTS”):

 

(1)           FEDERAL AND STATE TAX RETURNS OF ST AND TG (AND THEIR RESPECTIVE
SUBSIDIARIES) FOR THE FISCAL YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2002
AND DECEMBER 31, 2003;

 

(2)           THE YEAR-END FINANCIAL STATEMENTS; AND

 

(3)           the Stub Period Financial Statements.

 

Except as set forth on Schedule 5.3(a), the Delivered Financial Statements,
including the footnotes thereto, are true and correct in all material respects,
and all adjustments consist only of normal recurring adjustments necessary for a
fair presentation of the results of operations and financial condition for the
period covered by such Financial Statement.  Except as set forth on Schedule
5.3(b), the balance sheets included in the Delivered Financial Statements, taken
together, fairly present, in all material respects, the financial condition of
Seller as at the respective dates thereof and, except as indicated therein, in
all material respects all known claims against and all debts and liabilities of
Seller and its Affiliates, fixed or contingent, as at the date thereof, required
to be shown thereon in accordance with reasonable and prudent United States
business and financial accounting practices and the related statements of
operations and cash flows for the periods indicated, taken together, fairly
present, in all material respects the results of operations and financial
condition for such periods.  If misstatements exist in the Year-End Financial
Statements that cause Seller’s “adjusted EBITDA after LA”, as reported in such
Year-End Financial

 

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Statements, to be reduced, but by $100,000 or less, such Year-End Financial
Statements shall still be deemed to be “true and correct in all material
respects” for purposes of this paragraph.

 

(B)           SINCE THE BALANCE SHEET DATE, EXCEPT AS SET FORTH ON SCHEDULE
5.3(B) THERE HAS BEEN (I) NO MATERIALLY ADVERSE CHANGE IN THE ASSETS OR
LIABILITIES, OR IN THE BUSINESS OR FINANCIAL CONDITION, OR IN THE RESULTS OF
OPERATIONS OF SELLER OR ITS AFFILIATES, AND (II) NO FACT OR CONDITION EXISTS OR,
TO THE KNOWLEDGE OF SELLER OR THE SELLER’S SHAREHOLDERS, IS CONTEMPLATED OR
THREATENED WHICH MIGHT RESULT IN A MATERIAL ADVERSE EFFECT IN THE FUTURE.

 

5.4           Books and Records.

 

Except as set forth on Schedule 5.4, all accounts, books, ledgers, minute books
and official and other records of Seller and its Affiliates of whatsoever kind
related to the Acquired Assets and the Seller’s Business have been properly and
accurately kept and completed in all material respects, and there are no
material inaccuracies or discrepancies of any kind contained or reflected
therein.  Seller does not own or possess any records, systems, controls, data or
information material or necessary to the conduct of the Seller’s Business, which
is recorded, stored, maintained, operated or otherwise wholly or partly
dependent on or held by any means (including all means of access thereto and
therefrom) that are not under the exclusive ownership and direct control of
Seller, other than financial records which are maintained at the locations
identified on Schedule 5.4 annexed hereto, and which, after the Closing Date,
are readily available to Traffix and Purchaser.

 

5.5           Real Property; Personal Property; Machinery and Equipment.

 

(A)           EXCEPT AS SET FORTH IN SCHEDULE 5.5(A), SELLER DOES NOT OWN OR
HAVE ANY LEASEHOLD OR OTHER INTEREST IN ANY REAL PROPERTY THAT IS PRESENTLY
NECESSARY TO CONDUCT THE DEVELOPMENT, PRODUCTION, MARKETING AND SALE OF THE
PRODUCTS AND SERVICES OFFERED AS PART OF THE SELLER’S BUSINESS.

 

(B)           EXCEPT AS SET FORTH IN SCHEDULE 5.5(B), SELLER HAS GOOD TITLE OR
HOLDS A VALID, EXISTING, ENFORCEABLE LEASE OR LICENSE TO THE ACQUIRED ASSETS,
SUBJECT TO NO ENCUMBRANCE, LIEN, CHARGE OR OTHER RESTRICTION OF ANY KIND OR
CHARACTER.

 

(C)           EXCEPT AS SET FORTH IN SCHEDULE 5.5(C), THE MACHINERY AND
EQUIPMENT ARE, INDIVIDUALLY AND IN THE AGGREGATE, IN GOOD OPERATING CONDITION,
NORMAL WEAR AND TEAR EXCEPTED.  EXCEPT AS SET FORTH IN SCHEDULE 5.5(C), (I) ALL
CAPITAL OR OPERATING LEASES UNDER WHICH SELLER LEASES EQUIPMENT; AND (II) EACH
CONTRACT FOR THE PURCHASE OF AS YET UNDELIVERED EQUIPMENT IS IN FULL FORCE AND
EFFECT AND CONSTITUTES A BINDING OBLIGATION, ENFORCEABLE IN ACCORDANCE WITH ITS
TERMS, OF SELLER.  EXCEPT AS DISCLOSED ON SCHEDULE 5.5(C), THERE ARE NO EXISTING
DEFAULTS BY SELLER UNDER ANY SUCH LEASE OR CONTRACT BEYOND APPLICABLE NOTICE AND
GRACE PERIODS OR WHICH HAVE NOT BEEN WAIVED BY THE OTHER PARTY THERETO.

 

(D)           THE ACQUIRED ASSETS CONSTITUTE ALL OF THE OPERATING ASSETS USED IN
CONNECTION WITH THE SELLER’S BUSINESS AND, AT THE CLOSING, WILL BE AVAILABLE FOR
IMMEDIATE USE BY PURCHASER.

 

5.6           Contracts.

 

Except as set forth in Schedule 5.6, neither Seller (or any subsidiaries
thereof) nor Seller’s Shareholders are a party to or bound by any agreement,
contract or commitment relating to any collective bargaining agreement, any
bonus, deferred compensation, pension, profit sharing, stock option, retirement
or other

 

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employee benefit plan; any loan or advance to, or investment in, any other
Person or any agreement relating to the making of any such loan, advance or
investment; any guarantee or other contingent liability in respect of any
indebtedness or obligation of any other Person (other than the endorsement of
negotiable instruments for collection in the ordinary course of business); any
management service, employment, consulting or any other similar type of
contract; any Restrictive Agreement; any secrecy or confidentiality agreement
with any Person, including any employee of or consultant to Seller; any
agreement, contract or commitment which involves the payment by Seller or any
Affiliate thereof of Five Thousand  Dollars ($5,000.00) or more, in the
aggregate, and is not cancelable without penalty within thirty (30) days; any
agreement with any officer or director of Seller; any licensing or franchise
agreement; or any contract with customers or other third parties for the
delivery of goods or performance of services which involves payment by Seller or
any Affiliate thereof of more than Five Thousand  Dollars ($5,000.00).

 

Except as set forth on Schedule 5.6, there exists no default or event of default
by Seller (or any subsidiaries thereof) or Seller’s Shareholders, or occurrence,
condition, or act (including this transaction) which, with the giving of notice,
the lapse of time or the happening of any other event or condition, would become
a default or event of default under any Contract identified on such Schedule. 
Except as set forth on Schedule 5.6, (i) neither Seller (or any subsidiaries
thereof) nor Seller’s Shareholders have violated any material terms or
conditions of any Contract which would permit termination or modification of any
such Contract, (ii) there are no outstanding written claims of breach or
indemnification or written notice of default or termination of any such Contract
and, (iii) to the Knowledge of Seller (or any subsidiaries thereof) or the
Seller’s Shareholders, all of the covenants to be performed by any other party
thereto have been substantially performed.

 

5.7           Litigation.

 

Except as set forth in Schedule 5.7, there is no action, suit, proceeding at law
or in equity by any Person, or any arbitration or any administrative or other
proceeding by or before any Governmental Authority, pending or, to the Knowledge
of Seller or the Seller’s Shareholders, threatened since the Balance Sheet Date,
against or affecting Seller (or any subsidiaries thereof) or Seller’s
Shareholders or any of their respective properties or rights or the operation of
the Seller’s Business, and to the Knowledge of Seller or the Seller’s
Shareholders no event has occurred or circumstance exists that provides a valid
basis for any such action, proceeding or investigation and that is reasonably
likely to give rise to or serve as the basis for the commencement of any such
action, proceeding or investigation.  Except as disclosed on Schedule 5.7, none
of Seller, the Seller’s Shareholders, any Affiliate of Seller or any Controlled
Company is subject to any Order entered in any lawsuit or proceeding which has a
Material Adverse Effect or which would prevent or interfere with the
consummation of the transactions contemplated hereby.

 

5.8           Taxes.

 

Seller, Craig and Greg and their respective Affiliates have filed all Tax
Returns that they were required to file, and have paid all Taxes shown thereon
as owing.  Schedule 5.8 lists all Tax Returns filed with respect to Seller,
Craig and Greg and their respective Affiliates for taxable periods ended on or
after December 31, 2003, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.  Seller has
delivered to the Purchaser correct and complete copies of all federal, state and
local Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by Seller, Craig, Greg and/or their respective Affiliates
since December 31, 2003.  None of Seller, Craig, Greg or their respective
Affiliates have waived any statute of limitations in respect of Income Taxes or
agreed to any extension of time with respect to an Income Tax assessment or
deficiency.  None of Seller, Craig, Greg or any of their respective Affiliates
are a party to any Income Tax allocation or sharing agreement.

 

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5.9           Liabilities.

 

There are no outstanding claims, liabilities or indebtedness, contingent or
otherwise against Seller or any of its Affiliates, except as set forth in
Schedule 5.9 or reserved against or reflected in the Delivered Financial
Statements, other than liabilities incurred subsequent to the Balance Sheet Date
in the ordinary course of business and consistent with past practice and which
in the aggregate do not have a Material Adverse Effect.  Schedule 5.9 sets forth
a list of all current arrangements of Seller and its Affiliates for borrowed
money and all outstanding balances as of the date hereof with respect thereto. 
Neither Seller nor any of its Affiliates are in default in respect of the terms
or conditions of any such indebtedness.

 

5.10         Trade Rights.

 

Schedule 5.10 contains an accurate and complete list of all Trade Rights owned
or used or anticipated to be used by Seller in the development, production,
marketing and sale of the products and services offered as part of the Seller’s
Business.  Except as set forth on Schedule 5.10, no claim of infringement or
misappropriation of Trade Rights has been made against Seller and, Seller does
not infringe or misappropriate any Trade Rights of any third party.

 

5.11         Compliance with Laws.

 

Except as set forth on Schedule 5.11, Seller and its Affiliates are in
compliance with all applicable federal, state and local Laws, regulations and
Orders and all other applicable requirements of any Governmental Authority
having jurisdiction.  Except as set forth on Schedule 5.11, Seller and its
Affiliates are not now charged with, and, to the Knowledge of Seller and the
Seller’s Shareholders, not now under investigation with respect to, any
violation of any Law, regulation, or Order affecting the Seller’s Business or
any of the Acquired Assets, and Seller and its Affiliates have filed all
material reports required to be filed with any Governmental Authority.

 

5.12         Licenses.

 

Seller has all licenses and permits and other governmental certificates,
authorizations and approvals (collectively, “Licenses”) required by any
Governmental Authority for the development, production, marketing and sale of
the products and services offered as part of the Seller’s Business and the use
of its properties as presently operated or used.  All of such Licenses are in
full force and effect and no action or claim is pending to revoke or terminate
any of the Licenses or declare any License invalid.

 

5.13         Insurance.

 

Schedule 5.13 is a schedule of all insurance policies (including life insurance)
or binders maintained by Seller.  All such policies are in full force and effect
and all premiums that have become due have been currently paid.  The coverage
under such policies for occurrences prior to the Closing shall not be materially
adversely affected by reason of the transactions contemplated hereby.  Neither
the Seller’s Shareholders nor Seller has received written notice of cancellation
or non-renewal of any such policy or binder.  Neither the Seller’s Shareholders
nor Seller has received any written notice from any of its insurance carriers
that any premiums will be materially increased in the future or that any
insurance coverage listed on Schedule 5.13 will not be available in the future
on substantially the same terms now in effect.

 

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5.14         Supplier and Customer Relations.

 

There has not been, and neither Seller nor the Seller’s Shareholders has any
Knowledge (but without any due inquiry) that would lead them to anticipate, any
adverse change in relations with the suppliers or customers of Seller or any
Affiliate thereof as a result of the transactions contemplated by this Agreement
that would result in a Material Adverse Effect.  Schedule 5.14 lists the ten
largest suppliers and customers of Seller and its Affiliates, as of the prior
three (3) months.  Except as set forth on Schedule 5.14, none of these current
suppliers and none of these current customers has advised Seller or the Seller’s
Shareholders, orally or in writing, formally or informally, that (i) it is
terminating or considering terminating, or is materially dissatisfied with its
business relationship, as a whole or in respect of any particular product or
service, or (ii) any of these current customers is contemplating reducing or
discontinuing in any material respect its purchases from Seller (or any
subsidiary thereof), or that any of these suppliers is contemplating reducing or
discontinuing in any material respect its services or sales to Seller (or any
subsidiary thereof).

 

5.15         Employment Relations.

 

(i) Seller has not committed any unfair labor practices in connection with the
Seller’s Business and there is no unfair labor practice complaint pending
against Seller or any Affiliate thereof before any applicable government entity;
(ii) there is no labor strike, dispute, slowdown or stoppage actually pending
or, to the Knowledge of Seller and the Seller’s Shareholders, threatened against
or involving Seller or any Affiliate thereof; (iii) no representation question
exists respecting the employees of Seller; and (iv) no grievance which might
have a Material Adverse Effect on the Seller’s Business, nor any arbitration
proceeding arising out of or under any collective bargaining agreement with
Seller or any Affiliate thereof is pending or, to the Knowledge of Seller and
Seller’s Shareholders, threatened, and no claim therefor has been asserted. 
Except as set forth in Schedule 5.15, (A) none of Seller or any Affiliate
thereof are a party to any collective bargaining agreement; (B) no collective
bargaining agreement is currently being negotiated by Seller or any Affiliate
thereof; and (C) Seller has not experienced any work stoppage or any other labor
difficulty during the last three (3) years.  There has not been, and Seller does
not anticipate, any adverse changes in its relations with its employees as a
result of the transactions contemplated by this Agreement that would result in a
Material Adverse Effect.

 

5.16         Personnel; Compliance with Legal Requirements for Employee Benefit
Plans

 

(A)           SCHEDULE 5.16 CONTAINS A TRUE AND COMPLETE LIST OF ALL PERSONS
EMPLOYED (AND THEIR LATEST RATES OF COMPENSATION) OR RETAINED AS INDEPENDENT
CONTRACTORS (AND THEIR LATEST RATES OF COMPENSATION) BY SELLER AND ITS
AFFILIATES AS AT THE CLOSING DATE.  SCHEDULE 5.16 ALSO LISTS ALL SALES AGENTS OR
SALES REPRESENTATIVES (AND THEIR LATEST RATES OF COMPENSATION) AS AT THE CLOSING
DATE.  EXCEPT AS SET FORTH ON SCHEDULE 5.16, NO EMPLOYEES OF SELLER OR ANY
AFFILIATE THEREOF ARE ENTITLED TO ANY ACCRUED VACATION PAY, SICK LEAVE OR
NON-STATUTORY SEVERANCE BENEFITS.

 

(B)           WITH RESPECT TO ANY EMPLOYEE BENEFIT PLAN, PROGRAM, ARRANGEMENT OR
CONTRACT (INCLUDING, WITHOUT LIMITATION, ANY “EMPLOYEE BENEFIT PLAN” AS DEFINED
IN SECTION 3(3) OF ERISA) MAINTAINED BY SELLER OR ANY AFFILIATE THEREOF OR TO
WHICH SELLER OR ANY AFFILIATE THEREOF CONTRIBUTES, SELLER HAS MADE AVAILABLE TO
TRAFFIX AND PURCHASER A TRUE AND CORRECT COPY OF (I) SUCH EMPLOYEE BENEFIT PLAN,
(II) EACH TRUST AGREEMENT RELATING TO SUCH EMPLOYEE BENEFIT PLAN, (III) THE MOST
RECENT SUMMARY PLAN DESCRIPTION OF THE EMPLOYEE BENEFIT PLAN, IF ANY, AND (IV)
INTERNAL REVENUE SERVICE DETERMINATION LETTERS FOR ALL SUCH EMPLOYEE BENEFIT
PLANS THAT ARE INTENDED TO BE TAX-QUALIFIED UNDER SECTION 401(A) OF THE CODE. 
FORMS 5500 FOR ALL SUCH EMPLOYEE BENEFIT PLANS HAVE BEEN TIMELY AND PROPERLY
FILED, OR A VALID EXTENSION FOR FILING HAS BEEN OBTAINED, AND ALL EMPLOYEES
EXCLUDED FROM PARTICIPATING IN ANY SUCH EMPLOYEE BENEFIT PLANS WERE PROPERLY
EXCLUDABLE BY SELLER OR ANY AFFILIATE THEREOF.

 

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5.17         No Changes Since the Balance Sheet Date.

 

Since the Balance Sheet Date, except as specifically stated on Schedule 5.3(b)
or Schedule 5.17, neither Seller nor any Affiliate thereof have incurred any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), except in the ordinary course of Seller’s business; permitted any of
its assets to be subjected to any mortgage, pledge, Lien, security interest,
encumbrance, restriction or charge of any kind; sold, transferred or otherwise
disposed of any assets except in the ordinary course of Seller’s business; made
any single capital expenditure or commitment therefor involving the expenditure
of more than Five Thousand Dollars ($5,000.00); made any bonus or profit sharing
distribution or payment of any kind; granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any employee who after giving effect
to such increase or prior thereto receives compensation at an annual rate of
$30,000.00 or more, except pursuant to a prior obligation or employment policy
in the ordinary course of Seller’s business, including, but not limited to,
payments to employees for unpaid past compensation and expenses; canceled or
waived any claims or rights of substantial value; made any change in any method
of accounting or auditing practice; otherwise conducted its business or entered
into any transaction, except in the usual and ordinary manner and in the
ordinary course of its business; amended or terminated any agreement which is
material to the Seller’s Business; renewed, extended or modified any lease or,
except in the ordinary course of business, any lease of personal property; or
agreed, whether or not in writing, to do any of the foregoing; and there has
been no change in the financial condition or results of operations of Seller or
any Affiliate thereof, which, individually or in the aggregate, has or would
have a Material Adverse Effect.

 

5.18         Valid Agreements; Restrictive Documents.

 

Seller has corporate or limited liability authority, as the case may be, and
Seller and the Seller’s Shareholders have the full legal right and capacity, to
execute, deliver and perform their respective obligations under this Agreement
and the Other Documents to which it or they are a party, and all of the
foregoing have been duly authorized by all necessary shareholder, member and
corporate action of Seller.  This Agreement and the Other Documents to which
Seller or the Seller’s Shareholders are a party have been duly executed and
delivered by Seller and the Seller’s Shareholders, respectively, and constitute
the valid and binding obligation of Seller and the Seller’s Shareholders,
respectively, enforceable against Seller and the Seller’s Shareholders,
respectively, in accordance with their respective terms, except as the
enforcement thereof may be limited by bankruptcy, reorganization, moratorium,
insolvency and other Laws of general applicability relating to or affecting
creditors’ rights or general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).  Except as set
forth in Schedule 5.18, neither Seller nor any Seller’s Shareholder nor any
Affiliate thereof is subject to, or a party to, any charter, by-law, mortgage,
Lien, lease, license, permit, contract, instrument, law, regulation or Order or
any other restriction of any kind or character, which has a Material Adverse
Effect, or which would prevent consummation of the transactions contemplated by
this Agreement and the Other Documents or compliance by Seller or the Seller’s
Shareholders with the terms, conditions and provisions of this Agreement and the
Other Documents.  Except as set forth in Schedule 5.18, the execution, delivery
and performance of this Agreement and the Other Documents and the consummation
of the transactions contemplated hereby and thereby will not violate, conflict
with or result in the breach of any provision of the organization documents or
operating agreement of either ST or TG or any Affiliate thereof; violate,
conflict with or result in the breach or material modification of any of the
terms of, or constitute (or with notice or lapse of time or both constitute) a
default under, or otherwise give any other contracting party the right to
accelerate or terminate, any material obligation, Contract, agreement, Lien,
Order or other instrument to which Seller or the Seller’s Shareholders or any
Affiliate thereof are a party or by or to which they or any of their respective
assets or properties may be bound or subject; violate any Order of any
Governmental Authority against, or binding upon Seller or the Seller’s
Shareholders or any Affiliate thereof or upon any of their respective assets; or
violate any statute, Law or regulation of the United

 

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States or any state having jurisdiction; and, which violations, conflicts or
breaches of any of the foregoing would have a Material Adverse Effect.

 

5.19         Required Approvals, Notices and Consents.

 

Except as set forth on Schedule 5.19, no consent or approval of, other action
by, or notice to, any Governmental Authority, or any third party is required in
connection with the execution and delivery by Seller and the Seller’s
Shareholders of this Agreement and the Other Documents or the consummation by
Seller and the Seller’s Shareholders of the transactions contemplated hereby or
thereby.  The approval by the Seller’s Shareholders of this Agreement and the
Other Documents and the consummation by Seller and the Seller’s Shareholders of
the transactions contemplated hereby or thereby shall be obtained in accordance
with applicable Law, including but not limited to the securities Laws of the
United States and any state having jurisdiction of such matters.

 

5.20         Disclosure.

 

This Agreement, the Delivered Financial Statements, or any Schedule hereto, or
any certificate, document or statement in writing to be delivered as required
under this Agreement, by or on behalf of Seller does not contain, or will not
contain, any untrue statement of a material fact, and does not omit, or will not
omit, any statement of a material fact required to be stated or necessary in
order to make the statements contained herein or therein not misleading.  There
is no fact which materially adversely affects the business or financial
condition of Seller or any Affiliate thereof which has not been, or will not be,
set forth in this Agreement or an Other Document to be delivered at the Closing.

 

5.21         Environmental Conditions.

 

Except as set forth on Schedule 5.21, no treatment, storage and disposal
facilities for Hazardous Material, or hazardous waste disposal sites or
underground storage tanks are or have been owned or used by Seller or any
Affiliate thereof in connection with the Seller’s Business, and there are no
sites at which hazardous wastes from the operation of the Seller’s Business have
been disposed.  Except as disclosed on Schedule 5.21 in connection with, or in
any way related to, the Seller’s Business:

 

(1)           SELLER HOLDS, AND IS IN SUBSTANTIAL COMPLIANCE WITH, ALL PERMITS,
LICENSES, REGISTRATIONS OR OTHER AUTHORIZATIONS REQUIRED UNDER APPLICABLE
ENVIRONMENTAL LAWS, AND IS, AND HAS BEEN, OTHERWISE IN SUBSTANTIAL COMPLIANCE
WITH ALL APPLICABLE ENVIRONMENTAL LAWS.

 

(2)           NEITHER SELLER NOR ANY AFFILIATE THEREOF HAS RECEIVED ANY WRITTEN
NOTICE OF ANY ENVIRONMENTAL CLAIM, AND NEITHER THE SELLER’S SHAREHOLDERS NOR
SELLER ARE AWARE, WITHOUT ANY DUTY OF INQUIRY, OF ANY THREATENED ENVIRONMENTAL
CLAIM THAT REMAINS OUTSTANDING.

 

(3)           NEITHER SELLER NOR ANY AFFILIATE THEREOF HAVE ENTERED INTO OR
AGREED TO OR IS SUBJECT TO, ANY JUDGMENT, DECREE OR ORDER OF ANY GOVERNMENTAL
AUTHORITY UNDER ANY ENVIRONMENTAL LAWS, INCLUDING, WITHOUT LIMITATION, RELATING
TO INVESTIGATION, CLEANUP, REMEDIATION OR REMOVAL OF HAZARDOUS MATERIALS;

 

(4)           HAZARDOUS MATERIALS HAVE NOT BEEN GENERATED, TRANSPORTED, TREATED,
STORED, DISPOSED OF, RELEASED OR THREATENED TO BE RELEASED AT, ON, FROM OR UNDER
ANY OF THE PROPERTIES INCLUDED AMONG THE ASSETS OF SELLER OR ANY AFFILIATE
THEREOF IN MATERIAL VIOLATION OF, OR IN A MANNER OR TO A LOCATION THAT IS LIKELY
TO GIVE RISE TO MATERIAL LIABILITY OF SELLER OR ANY AFFILIATE THEREOF UNDER ANY
ENVIRONMENTAL LAWS; AND

 

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(5)           NO APPROVAL IS REQUIRED UNDER ANY ENVIRONMENTAL LAW FOR THE
ACQUISITION OF THE ACQUIRED ASSETS PURSUANT TO THIS AGREEMENT.

 

5.22         Health and Safety Conditions.

 

Neither Seller nor any Affiliate thereof has conducted any internal health and
safety audits, or industrial hygiene surveys.  Except as set forth on Schedule
5.22, Seller and its Affiliates are in substantial compliance with the
requirements of the Occupational Safety and Health Act and all other federal,
state and local occupational health and safety laws, rules and regulations.

 

5.23         Copies of Documents.

 

Seller has caused to be made available for inspection and copying by Traffix or
its officers or advisers, true and correct copies of all documents referred to
in this Section 5 or in any Schedule furnished pursuant to this Section 5.

 

5.24         Brokers.

 

No broker, finder, agent or similar intermediary has acted on behalf of the
Seller’s Shareholders or Seller in connection with this Agreement or the
transactions contemplated hereby except Merriman Curhan Ford & Co., and there
are no brokerage commissions, finder’s fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with any of the Seller’s Shareholders or Seller, or any action
taken by any of them except to Merriman Curhan Ford & Co., the entire amount of
which shall be payable thereto by Seller pursuant to separate agreement.

 

5.25         Domain Names.

 

The Domain Names constitute all domain names that the Seller owns or possesses
the right to use or that are otherwise used in the operation of the Seller’s
Business.

 

5.26         Pre-Closing Obligations.

 

From and after the date hereof and until the Closing, except as otherwise
provided elsewhere herein or as Traffix may otherwise consent, Seller shall:

 

(1)           CONDUCT THE SELLER’S BUSINESS IN ORDINARY COURSE;

 

(2)           PRESERVE THE SELLER’S BUSINESS AND THE ACQUIRED ASSETS AND
MAINTAIN ITS RELATIONSHIP WITH CUSTOMERS AND OTHER PERSONS WITH WHICH IT HAS
MATERIAL BUSINESS DEALINGS;

 

(3)           NOT (I) SELL, LEASE, TRANSFER OR DISPOSE OF ANY ACQUIRED ASSET,
OTHER THAN SALES OF MERCHANDISE FROM INVENTORY IN THE ORDINARY COURSE OF
BUSINESS, OR (II) TERMINATE ANY CONTRACT, EXCEPT UPON EXPIRATION OF THE TERM
THEREOF AS PROVIDED THEREIN;

 

(4)           MAINTAIN ALL LICENSES AND TRADE RIGHTS;

 

(5)           MAINTAIN ALL INSURANCE LISTED ON SCHEDULE 5.13 IN FULL FORCE AND
EFFECT;

 

(6)           EXCEPT AS REQUIRED UNDER A CONTRACT, NOT INCREASE THE COMPENSATION
OR OTHER EMPLOYMENT BENEFITS PAYABLE TO OR FOR THE BENEFIT OF ANY EMPLOYEE;

 

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(7)           NOT AMEND ST’S CERTIFICATE OF INCORPORATION, TG’S CERTIFICATE OF
FORMATION OR ARTICLES OF ORGANIZATION, OR THE BY-LAWS OF EITHER ST OR TG OR
PERMIT THE AMENDMENT OF ANY SIMILAR DOCUMENT OF ANY OF SELLER’S AFFILIATES;

 

(8)           NOT MERGE OR CONSOLIDATE WITH ANY OTHER PERSON OR EFFECT ANY
CAPITAL REORGANIZATION;

 

(9)           NOT ACQUIRE THE BUSINESS OR ASSETS, SUBSTANTIALLY AS A WHOLE, OF
ANY OTHER PERSON, OR MAKE ANY CAPITAL EXPENDITURE IN EXCESS OF $5,000.00;

 

(10)         NOT SOLICIT OR RESPOND TO ANY INQUIRY OR PROPOSAL RELATING TO ANY
SALE OF THE SELLER’S BUSINESS OR THE ACQUIRED ASSETS FROM ANY PERSON OTHER THAN
TRAFFIX AND/OR PURCHASER;

 

(11)         FURNISH SUCH INFORMATION WITH RESPECT TO THE SELLER’S BUSINESS AND
THE ACQUIRED ASSETS AS TRAFFIX AND/OR PURCHASER MAY FROM TIME TO TIME REASONABLY
REQUEST AND SHALL PERMIT TRAFFIX AND/OR PURCHASER AND THEIR AUTHORIZED
REPRESENTATIVES ACCESS DURING REGULAR BUSINESS HOURS AND UPON REASONABLE NOTICE
TO CONDUCT A PHYSICAL INVENTORY OF THE ACQUIRED ASSETS, TO EXAMINE THE BOOKS AND
RECORDS OF SELLER AND ITS AFFILIATES RELATING TO THE SELLER’S BUSINESS AND TO
MAKE INQUIRIES OF RESPONSIBLE PERSONS DESIGNATED BY SELLER WITH RESPECT THERETO;

 

(12)         NOT MAKE ANY PRESS RELEASE OR OTHER PUBLIC ANNOUNCEMENT WITH
RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, WITHOUT THE
PRIOR WRITTEN CONSENT OF TRAFFIX; AND

 

(13)         CONDUCT, OR CAUSE TO BE CONDUCTED BY A NATIONALLY-RECOGNIZED
SERVICE COMPANY, AS OF A DATE OR DATES AS LATE AS REASONABLY PRACTICABLE PRIOR
TO THE CLOSING DATE, A SEARCH OR SURVEY OF LIENS, INCLUDING WITHOUT LIMITATION
SECURITY INTERESTS AND OTHER NOTICE FILINGS UNDER THE UNIFORM COMMERCIAL CODE,
TAX LIENS AND JUDGMENT LIENS, OF RECORD IN EACH JURISDICTION WHERE ACQUIRED
ASSETS ARE LOCATED OR IN WHICH SELLER OR ANY AFFILIATE THEREOF CONDUCTS THE
SELLER’S BUSINESS, UPON, AGAINST OR AFFECTING THE ACQUIRED ASSETS.

 

6.             REPRESENTATIONS OF TRAFFIX AND PURCHASER.

 

Traffix and Purchaser, jointly and severally, represent and warrant to Seller
and the Seller’s Shareholders as follows:

 

6.1           Existence and Good Standing.

 

Traffix and Purchaser are each corporations duly organized, validly existing and
in good standing under the laws of Delaware and each has all requisite corporate
power and authority to own, lease and operate all its properties and to carry on
its business as now being conducted.  Neither Purchaser nor Traffix is required
to qualify to do business in any jurisdiction such that the failure to qualify
would have an adverse effect on the conduct of its business.  Traffix directly
owns all of the capital stock of Purchaser.

 

6.2           Shares.

 

The Shares have been duly authorized and, when delivered at the Closing, will be
validly issued, fully paid and non-assessable, will be free and clear of any
liabilities, liens, security interests, pledges or encumbrances of any nature
whatsoever, except such as may be created by Seller or the Seller’s

 

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Shareholders and except as the sale, pledge or other disposition thereof is
limited by the provisions of the Securities Act and other applicable Blue Sky
Laws, and will have been issued in accordance with the Securities Act and other
applicable Blue Sky Laws.

 

6.3           Valid Agreements; Restrictive Documents.

 

Each of Traffix and Purchaser has corporate authority to execute, deliver and
perform their respective obligations under this Agreement and the Other
Documents to which it is a party, and all of the foregoing have been duly
authorized by all necessary corporate action.  This Agreement and the Other
Documents to which Traffix or Purchaser is a party, have been duly executed and
delivered by Traffix and Purchaser, respectively, and constitute a valid and
binding agreement of Traffix and Purchaser, respectively, enforceable against
Traffix and Purchaser, respectively, in accordance with their respective terms,
except as the enforcement thereof may be limited by bankruptcy, reorganization,
moratorium, insolvency and other laws of general applicability relating to or
affecting creditors’ rights or general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law). 
Except as set forth in any Schedule to this Agreement, Purchaser and Traffix are
not subject to, or a party to, any charter, by-law, mortgage, lien, lease,
license, permit, contract, instrument, law, rule, ordinance, regulation, or
Order or any other restriction of any kind or character, which would prevent
consummation of the transactions contemplated by this Agreement and the Other
Documents, or compliance by Purchaser or Traffix with the terms, conditions and
provisions of this Agreement and the Other Documents or which has a Material
Adverse Effect on Purchaser’s business following the Closing.  The execution,
delivery and performance of this Agreement and the Other Documents, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate, conflict with or result in the breach of any provision of the charter
documents or by-laws of Traffix or Purchaser; (ii) violate, conflict with or
result in the breach or material modification of any of the terms of, or
constitute (or with notice or lapse of time or both constitute) a default under,
or otherwise give any other contracting party the right to accelerate or
terminate, any material obligation, contract, agreement, lien, Order or other
instrument to which Traffix or Purchaser is a party or by or to which Traffix or
Purchaser may be bound or subject; (iii) violate any Order of any Governmental
Authority against, or binding upon, Traffix or Purchaser or any of their assets
which violation will or may reasonably be expected to be materially adverse to
the condition (financial or otherwise) of Traffix and Purchaser in the aggregate
or of Purchaser individually; or (iv) violate any statute, law or regulation of
the United States or any State thereof which violation will or may reasonably be
expected to be materially adverse to the condition (financial or otherwise) of
Traffix and Purchaser in the aggregate or of Purchaser individually.

 

6.4           Required Approvals, Notices and Consents.

 

Except as set forth on Schedule 6.4, no consent or approval of, other action by,
or notice to, any Governmental Authority, or any third party is required in
connection with the execution and delivery by Traffix or Purchaser of this
Agreement and the Other Documents, or the consummation by Traffix or Purchaser
of the transactions contemplated hereby or thereby.  No consent or approval of
or other action by the securityholders of Traffix is required in connection with
the execution and delivery by Traffix or Purchaser of this Agreement and the
Other Documents, or the consummation by Traffix or Purchaser of the transactions
contemplated hereby or thereby.

 

6.5           No Brokers.

 

No broker, finder, agent or similar intermediary has acted on behalf of Traffix
or Purchaser in connection with this Agreement or the transactions contemplated
hereby, and there are no brokerage commissions, finders’ fees or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with Traffix, Purchaser, or any action taken by Traffix or
Purchaser.

 

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6.6           Exchange Act Filings.

 

TRAFFIX HAS FILED ALL FORMS, REPORTS AND DOCUMENTS REQUIRED TO BE FILED BY
TRAFFIX WITH THE SEC. ALL SUCH REQUIRED FORMS, REPORTS AND DOCUMENTS ARE
REFERRED TO HEREIN AS THE “TRAFFIX SEC REPORTS.” AS OF THEIR RESPECTIVE DATES,
THE TRAFFIX SEC REPORTS (I) WERE TRUE AND CORRECT IN ALL MATERIAL RESPECTS, AS
OF THE DATES FILED WITH THE SEC, (II) WERE PREPARED IN ALL MATERIAL RESPECTS IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OR THE SECURITIES
EXCHANGE ACT OF 1934, AS THE CASE MAY BE, AND THE RULES AND REGULATIONS OF THE
SEC THEREUNDER APPLICABLE TO SUCH TRAFFIX SEC REPORTS, AND (III) DID NOT AT THE
TIME THEY WERE FILED (OR IF AMENDED OR SUPERSEDED BY A FILING PRIOR TO THE DATE
OF THIS AGREEMENT, THEN ON THE DATE OF SUCH FILING) CONTAIN ANY UNTRUE STATEMENT
OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED
THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, EXCEPT TO THE
EXTENT CORRECTED PRIOR TO THE DATE OF THIS AGREEMENT BY A SUBSEQUENTLY FILED
TRAFFIX SEC REPORT.

 

7.             POST CLOSING COVENANTS.

 

7.1           General.

 

In case at any time after the Closing any further action is necessary to carry
out the purposes of this Agreement, each of the parties will take such
reasonable further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request.  Seller
acknowledges and agrees that from and after the Closing Traffix and Purchaser
will be entitled to possession of all documents, books, records (including tax
records), agreements and financial data of any sort in its possession relating
to Seller and the Seller’s Business.

 

7.2           Post-Closing Access.

 

Following the Closing, each party will afford to the other party, its counsel
and its accountants, during normal business hours, reasonable access to the
books, records and other data of Seller or relating to the Seller’s Business,
the Acquired Assets, the Acquired Liabilities or Seller in its possession and
the right to make copies and extracts therefrom, to the extent that such access
may be reasonably required by the requesting party (a) to facilitate the
investigation, litigation and final disposition of any claims which may have
been or may be made against any party or its Affiliates, (b) to prepare the
financial information required by Section 7.4 hereof and (c) for any other
reasonable business purpose.

 

7.3           Cooperation in Preparation of Securities Law Filings

 

Seller and the Seller’s Shareholders agree to cooperate and to cause Seller’s
Accountants to cooperate with Traffix and Traffix’s Accountants in the provision
of such information and documents as may be reasonably required in order to
complete any filings required under the Securities Act or other United States
securities laws or Blue Sky Laws relating to the transactions described in this
Agreement.

 

7.4           Delivery of the Final Financial Statements and Disbursement of the
$250,000 Holdback.

 

(A)           NOT LATER THAN ONE HUNDRED TWENTY (120) DAYS AFTER THE CLOSING
DATE, SELLER SHALL PREPARE (UNDER THE DIRECT SUPERVISION OF TRAFFIX AND, IN
TRAFFIX’S SOLE DISCRETION, TRAFFIX’S ACCOUNTANTS) AND DELIVER TO TRAFFIX,
SELLER’S BALANCE SHEET, STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE PERIOD
COMMENCING THE DAY AFTER THE PERIOD COVERED BY THE STUB PERIOD FINANCIAL
STATEMENTS AND ENDING ON THE CLOSING DATE (THE “FINAL FINANCIAL STATEMENTS”). 
THE FINAL FINANCIAL STATEMENTS SHALL BE PREPARED ON THE SAME BASIS AS THE
FINANCIAL STATEMENTS WERE PREPARED AND FAIRLY

 

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present in all material respects the financial condition and results of
operations of Seller and its Affiliates at such date for the respective periods
then ended, and except as indicated therein and except for the absence of
footnotes, the balance sheets included therein shall reflect in all material
respects all known claims against and all debts and liabilities of Seller and
its Affiliates, fixed or contingent, as of the respective dates thereof,
required by reasonable and prudent United States business and financial
accounting practices to be shown thereon.

 

(b)           Not later than 30 days after Seller has delivered to Traffix the
Final Financial Statements, Traffix shall notify Seller in writing (the “Notice
of Disagreement”) if Traffix disagrees with the Final Financial Statement.  If
no Notice of Disagreement is received by Seller within such 30-day period, then
the Final Financial Statement shall be deemed to be accepted and agreed to by
Traffix.  The Notice of Disagreement shall provide specific reasons for the
disagreement.  If such Notice of Disagreement is timely given, then Traffix and
Seller shall use reasonable efforts to resolve the disagreement regarding the
Final Financial Statement.  If no agreement is reached between them within
thirty (30) days after the date on which Traffix gives its Notice of
Disagreement, then the Determining Accountant shall be appointed by Traffix’s
Accountants and Seller’s Accountants within ten (10) days thereafter with
instructions to resolve the disagreement and provide a report of its
determination of the amounts in dispute within thirty (30) days of its
appointment.  The Determining Accountant may examine all ledgers, books, records
and work papers utilized in connection with the accounting and preparation of
the Final Financial Statement but the scope of its engagement will be limited to
resolving those items which Traffix identified in its Notice of Disagreement as
to which Traffix disagreed and determining whether such items were properly
reflected on the Final Financial Statement in accordance with the requirements
of this Section 7.4.  The decision of the Determining Accountant shall be
delivered in a written report addressed to Traffix and Seller and shall be
binding and conclusive upon the parties hereto.  The costs and fees of the
Determining Accountant shall be borne one-half by Seller and one-half by
Traffix; provided, however, that if the decision of the Determining Accountant
reflects that the amount of Seller’s current assets less current liabilities
were overstated in the Final Financial Statement by $30,000 or more, then Seller
shall bear all of such costs and fees.

 

(C)           IN THE EVENT THE FINAL FINANCIAL STATEMENT (AS DEFINITIVELY
DETERMINED IN ACCORDANCE WITH THE ABOVE CLAUSE (B)) REFLECTS THAT SELLER HAD, AS
OF THE CLOSING DATE, CURRENT ASSETS LESS CURRENT LIABILITIES EQUAL TO:

 

(i)                                   at least $493,000.00, (x) Purchaser shall
promptly deliver to Seller the $250,000.00 portion of the Cash Component
retained thereby in accordance with Section 4.5, plus all interest accrued
thereon; (y) the amount in excess of such $493,000.00 shall be retained by
Purchaser; and (z) the Purchase Price shall be increased by the amount in excess
of such $493,000.00, which excess amount shall be immediately paid by Purchaser
to ST in cash;

 

(ii)                                  between $243,000.00 and $492,999.99,
Purchaser shall deliver to Seller from the $250,000.00 portion of the Cash
Component retained thereby in accordance with Section 4.5, the amount by which
such current assets less liabilities exceeds $243,000.00, and shall be permitted
to retain the balance thereof, with any accrued interest to be distributed to
the Seller and Purchaser pro rata to such disbursement; provided, however, that
if any accounts receivable of Seller are collected by Traffix or Purchaser
subsequent to the date such $250,000 has been

 

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                                                disbursed, the net amounts so
received (after deducting costs of collection) shall be promptly paid to Seller
in cash; or

 

(iii)                               less than $243,000.00, Purchaser shall be
permitted to retain the entire $250,000.00 portion of the Cash Component
retained thereby in accordance with Section 4.5, plus all interest accrued
thereon, and Seller shall become obligated to refund to Purchaser that portion
of the Cash Component delivered at Closing equal to the amount by which such
current assets less liabilities are less than $243,000.00; provided, however,
that if any accounts receivable of Seller are collected by Traffix or Purchaser
subsequent to the date such $250,000 has been disbursed, the net amounts so
received (after deducting costs of collection) shall be (x) credited against any
moneys owed by Seller to Purchaser hereunder, or (y) to the extent such
collected net amounts exceed the moneys owed by Seller to Purchaser hereunder,
promptly paid to Seller in cash.

 

7.5           [Intentionally Omitted]

 

7.6           Availability of Minimum Working Capital.

 

Traffix hereby warrants and represents that from the Closing Date until the
third anniversary of the Closing Date it shall make available for use by
Purchaser working capital in an amount equal to at least the Minimum Working
Capital.

 

7.7           Survivability of Purchaser.

 

Traffix hereby warrants and represents that Purchaser will continue to operate
as a wholly-owned subsidiary of Traffix from the Closing Date until at least the
third anniversary of the Closing Date.

 

7.8           Retention of Purchaser Business Subsequent to Termination of
Employment of ST Shareholders.

 

In the event the employment of Craig and Greg under their Employment Agreements
are terminated by Purchaser without Cause, from the date the later of Craig or
Greg is so terminated until the third anniversary of the Closing Date, Traffix
and Purchaser will not divert any sources of revenue from Purchaser that were
attributable to New Send EBITDA as of the date of such later termination, and
will continue to recognize revenue consistent with its prior practices.

 

8.             SURVIVAL OF REPRESENTATIONS; INDEMNITIES.

 

8.1           Survival of Representations and Warranties of Seller and the
Seller’s Shareholders.

 

The representations and warranties of Seller and the Seller’s Shareholders and
the indemnification obligations under Section 8.2 shall survive the execution
and delivery of this Agreement and the Other Documents and the Closing hereunder
for a period of two (2) years, provided, however, that the covenants contained
in Section 7.5 and the representations and warranties made in Sections 5.2, 5.8,
5.16, 5.21 and 5.22, shall survive the execution of this Agreement and the Other
Documents and the Closing hereunder until the date of expiration of the relevant
federal, state or other statute of limitations; provided

 

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further, however, that as to matters as to which any Indemnitee has given a
proper Claims Notice under Section 8.4 on or prior to the expiration of the
applicable survival period aforesaid, the right to indemnification with respect
thereto shall survive the expiration of any such period until such claim is
finally resolved and any obligations with respect thereto are fully satisfied.

 

8.2           Obligations of Seller and the Seller’s Shareholders to Indemnify.

 

SUBJECT TO SECTION 8.1, SELLER AND THE SELLER’S SHAREHOLDERS, JOINTLY AND
SEVERALLY, AGREE TO INDEMNIFY, DEFEND AND HOLD HARMLESS PURCHASER AND TRAFFIX,
AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, AND ANY OF THEIR
SUCCESSORS AND ASSIGNS (COLLECTIVELY, “TRAFFIX INDEMNIFIED PARTIES”) FROM AND
AGAINST ANY AND ALL LOSSES, LIABILITIES, DAMAGES, DEFICIENCIES, DEMANDS, CLAIMS,
ACTIONS, JUDGMENTS OR CAUSES OF ACTION, ASSESSMENTS, COSTS OR EXPENSES
(INCLUDING, WITHOUT LIMITATION, INTEREST, PENALTIES AND REASONABLE ATTORNEYS’
FEES AND DISBURSEMENTS) (“CLAIMS”), WHETHER SUCH CLAIMS ARE INCURRED IN
PURCHASER’S OR TRAFFIX’S DISPUTES WITH SELLER OR THE SELLER’S SHAREHOLDERS OR
INVOLVING THIRD-PARTY CLAIMS AGAINST PURCHASER OR TRAFFIX, BASED UPON, ARISING
OUT OF OR OTHERWISE IN RESPECT OF (I) ANY INACCURACY IN OR ANY BREACH OF ANY
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF SELLER OR THE SELLER’S
SHAREHOLDERS CONTAINED IN THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR (II)
ANY CLAIM BASED UPON THE OPERATION OF THE SELLER’S BUSINESS PRIOR TO THE CLOSING
DATE, REGARDLESS OF WHETHER THE SAME HAS BEEN DISCLOSED IN THIS AGREEMENT OR
OTHER DOCUMENT OR OTHERWISE LISTED ON ANY SCHEDULE HERETO; PROVIDED, HOWEVER,
THAT “CLAIMS” SHALL NOT INCLUDE ANY CLAIMS THAT ARE ACQUIRED LIABILITIES.

 

8.3           Survival of Representations and Warranties of Traffix and
Purchaser.

 

(a)           Traffix’s and Purchaser’s representations and warranties,
covenants and the indemnification obligations under Section 8.3(b) shall survive
the execution and delivery of this Agreement and the Other Documents and the
Closing for a period of two (2) years, provided however, that (i) the
representations and warranty made in Section 8.3(b), and (ii) the obligation to
indemnify Seller and the Seller’s Shareholders for any Claim incurred by Seller
or the Seller’s Shareholders based upon, arising out of, or otherwise in respect
of, the operation of the Seller’s Business on or after the Closing Date, in each
case as provided in Section 8.3(b), shall survive the execution of this
Agreement and the Other Documents and the Closing hereunder until the date of
expiration of the relevant federal, state or other statute of limitations; and
provided further however, that as to matters as to which any Indemnitee has
given a proper Claims Notice under Section 8.4 on or prior to the expiration of
the applicable period aforesaid, the right to indemnification with respect
thereto shall survive the expiration of any such period until such claim is
finally resolved and any obligations with respect thereto are fully satisfied.

 

(b)           Subject to Section 8.3(a), Traffix and Purchaser agree, jointly
and severally, to indemnify, defend and hold harmless Seller and the Seller’s
Shareholders and their respective officers, directors, employees and agents, and
any of their successors, heirs and assigns (collectively, “Seller Indemnified
Parties”) from and against any and all Claims based upon, arising out of or
otherwise in respect of (i) any inaccuracy in or any breach of any
representation or warranty or covenant or agreement of Traffix or Purchaser
contained in this Agreement or in any Other Document delivered by Traffix or
Purchaser, and (ii) any Claim incurred by Seller or the Seller’s Shareholders
resulting from the operation of the Seller’s Business on or after the Closing
Date.

 

8.4           Notice and Opportunity to Defend.

 

(A)           PROMPTLY AFTER RECEIPT BY ANY SELLER INDEMNIFIED PARTY OR TRAFFIX
INDEMNIFIED PARTY (THE “INDEMNITEE”) OF NOTICE OF ANY DEMAND, CLAIM OR
CIRCUMSTANCE WHICH, WITH THE LAPSE OF TIME, WOULD OR MIGHT GIVE RISE TO A CLAIM
OR THE COMMENCEMENT (OR THREATENED COMMENCEMENT)

 

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of any action, proceeding or investigation (an “Asserted Liability”) that may
result in any Claim, the Indemnitee shall promptly give notice thereof (the
“Claims Notice”) to the party obligated to provide indemnification pursuant to
Section 8.2 or 8.3 (the “Indemnifying Party”).  The Claims Notice shall describe
the Asserted Liability in reasonable detail, shall contain supporting
documentation (if applicable), and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Claims that have been or may be
suffered by the Indemnitee.  No indemnification obligation shall be imposed upon
an Indemnifying Party unless a proper Claims Notice is given to that
Indemnifying Party on or before the last day of the survival period for the
representation, warranty, or covenant, the alleged breach of which forms the
basis for the Claim.

 

(B)           THE INDEMNIFYING PARTY MAY ELECT TO COMPROMISE OR DEFEND, AT ITS
OWN EXPENSE AND BY ITS OWN COUNSEL, ANY ASSERTED LIABILITY.  IF THE INDEMNIFYING
PARTY ELECTS TO COMPROMISE OR DEFEND SUCH ASSERTED LIABILITY, IT SHALL WITHIN
THIRTY (30) DAYS (OR SOONER, IF THE NATURE OF THE ASSERTED LIABILITY SO
REQUIRES) NOTIFY THE INDEMNITEE OF ITS INTENT TO DO SO, AND THE INDEMNITEE SHALL
COOPERATE WITH THE INDEMNIFYING PARTY AND SHALL PROVIDE THE INDEMNIFYING PARTY
ACCESS TO ITS RECORDS AND PERSONNEL RELATING TO ANY SUCH ASSERTED LIABILITY, IN
EACH CASE, AT THE EXPENSE OF THE INDEMNIFYING PARTY, IN THE COMPROMISE OF, OR
DEFENSE AGAINST, SUCH ASSERTED LIABILITY.  IF THE INDEMNIFYING PARTY ELECTS NOT
TO COMPROMISE OR DEFEND THE ASSERTED LIABILITY OR FAILS TO NOTIFY THE INDEMNITEE
OF ITS ELECTION AS HEREIN PROVIDED, THE INDEMNITEE MAY PAY, COMPROMISE OR DEFEND
SUCH ASSERTED LIABILITY AT THE EXPENSE OF THE INDEMNIFYING PARTY.  SUBJECT TO
THE LIMITATIONS CONTAINED IN SECTION 8.4(C) ON THE OBLIGATIONS OF THE
INDEMNIFYING PARTY IN RESPECT OF PROPOSED SETTLEMENTS, THE INDEMNITEE SHALL HAVE
THE RIGHT TO EMPLOY ITS OWN COUNSEL WITH RESPECT TO ANY ASSERTED LIABILITY, BUT
THE FEES AND EXPENSES OF SUCH COUNSEL SHALL BE AT THE EXPENSE OF SUCH INDEMNITEE
UNLESS (A) THE EMPLOYMENT OF SUCH COUNSEL AT THE EXPENSE OF THE INDEMNIFYING
PARTY SHALL HAVE BEEN AUTHORIZED IN WRITING BY THE INDEMNIFYING PARTY IN
CONNECTION WITH THE DEFENSE OF SUCH ACTION, OR (B) SUCH INDEMNIFYING PARTY SHALL
NOT HAVE, AS PROVIDED ABOVE, PROMPTLY EMPLOYED COUNSEL TO TAKE CHARGE OF THE
DEFENSE OF SUCH ACTION.  THE INDEMNITEE, AT ITS OWN COST, MAY EMPLOY SEPARATE
COUNSEL TO ASSERT, BASED ON AN OPINION OF COUNSEL, ONE OR MORE LEGAL DEFENSES
AVAILABLE TO IT WHICH ARE DIFFERENT FROM OR ADDITIONAL TO THOSE AVAILABLE TO
SUCH INDEMNIFYING PARTY; THE INDEMNIFYING PARTY SHALL NOT HAVE THE RIGHT TO
DIRECT THE DEFENSE OF SUCH ACTION ON BEHALF OF THE INDEMNITEE IN RESPECT OF SUCH
DIFFERENT OR ADDITIONAL DEFENSES.  IF THE INDEMNIFYING PARTY CHOOSES TO DEFEND
ANY CLAIM, THE INDEMNITEE SHALL MAKE AVAILABLE TO THE INDEMNIFYING PARTY ANY
BOOKS, RECORDS OR OTHER DOCUMENTS WITHIN ITS CONTROL THAT ARE NECESSARY OR
APPROPRIATE FOR SUCH DEFENSE.

 

(C)           NOTWITHSTANDING THE PROVISIONS OF SECTION 8.4(B), NEITHER THE
INDEMNIFYING PARTY NOR THE INDEMNITEE MAY SETTLE OR COMPROMISE ANY CLAIM FOR
WHICH INDEMNIFICATION HAS BEEN SOUGHT AND IS AVAILABLE HEREUNDER, OVER THE
REASONABLE OBJECTION OF THE OTHER; PROVIDED, HOWEVER, THAT CONSENT TO SETTLEMENT
OR COMPROMISE SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED.  IF, HOWEVER, THE
INDEMNITEE REFUSES TO CONSENT TO A BONA FIDE OFFER OF SETTLEMENT THAT THE
INDEMNIFYING PARTY WISHES TO ACCEPT, THE INDEMNITEE MAY CONTINUE TO PURSUE SUCH
MATTER, FREE OF ANY PARTICIPATION BY THE INDEMNIFYING PARTY, AT THE SOLE EXPENSE
OF THE INDEMNITEE.  IN SUCH EVENT, THE OBLIGATION OF THE INDEMNIFYING PARTY TO
THE INDEMNITEE SHALL BE EQUAL TO THE LESSER OF (I) THE AMOUNT OF THE OFFER OF
SETTLEMENT WHICH THE INDEMNITEE REFUSED TO ACCEPT PLUS THE COSTS AND EXPENSES OF
THE INDEMNITEE PRIOR TO THE DATE THE INDEMNIFYING PARTY NOTIFIED THE INDEMNITEE
OF THE OFFER OF SETTLEMENT, AND (II) THE ACTUAL OUT-OF-POCKET AMOUNT THE
INDEMNITEE IS OBLIGATED TO PAY AS A RESULT OF THE INDEMNITEE’S CONTINUING TO
PURSUE SUCH MATTER.

 

8.5           Limitations.

 

(A)           AN INDEMNIFYING PARTY SHALL BE OBLIGATED TO INDEMNIFY FOR CLAIMS
(DETERMINED WITHOUT REGARD TO ANY MATERIALITY QUALIFICATION CONTAINED IN ANY
REPRESENTATION,

 

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warranty or covenant giving rise to a Claim for indemnity hereunder) only to the
extent that the aggregate amount of such Claims exceeds Twenty Five Thousand
Dollars ($25,000).

 

(B)           IN NO EVENT SHALL THE AGGREGATE INDEMNIFICATION LIABILITY OF
SELLER AND SELLER’S SHAREHOLDERS HEREUNDER EXCEED THE SUM OF (I) $5,000,000 FOR
ALL CLAIMS KNOWN TO SELLER OR SELLER’S SHAREHOLDERS OR ANY AFFILIATES THEREOF
PRIOR TO THE CLOSING DATE, INCLUDING, WITHOUT LIMITATION:

 

(X) ANY CLAIM INCLUDED ON ANY SCHEDULE TO THE AGREEMENT;

 

(Y) ANY CLAIM DISCLOSED ON ANY DELIVERED FINANCIAL STATEMENT OR FINAL FINANCIAL
STATEMENT; AND

 

(Z) ANY CLAIM DISCLOSED TO THE PURCHASER OR TRAFFIX IN ANY OF THE DOCUMENTS
PRODUCED IN ITS DUE DILIGENCE REVIEW IN RESPONSE TO THE MEMORANDUM OF
PURCHASER’S COUNSEL DELIVERED TO SELLER IN APRIL 2004; AND

 

(II) $1,000,000 FOR ALL CLAIMS NOT INCLUDED IN THE FOREGOING CLAUSE (I);
PROVIDED, HOWEVER, THAT SUCH LIMITATIONS SHALL NOT APPLY TO ANY OBLIGATION TO
INDEMNIFY FOR CLAIMS ARISING OUT OF, RESULTING FROM OR OTHERWISE RELATING TO
INTENTIONAL MISREPRESENTATION OR FRAUD ON THE PART OF SELLER AND/OR SELLER’S
SHAREHOLDERS.  IN NO EVENT SHALL THE AGGREGATE INDEMNIFICATION LIABILITY OF
PURCHASER AND TRAFFIX HEREUNDER EXCEED $5,000,000; PROVIDED, HOWEVER, THAT SUCH
LIMITATION SHALL NOT APPLY TO ANY OBLIGATION TO INDEMNIFY FOR CLAIMS ARISING OUT
OF, RESULTING FROM OR OTHERWISE RELATING TO INTENTIONAL MISREPRESENTATION OR
FRAUD ON THE PART OF PURCHASER OR TRAFFIX.

 

(c)           Any Claim for which Purchaser or Traffix shall be indemnified
hereunder shall be payable by Seller and/or Seller’s Shareholders (in their
discretion) in cash or through the surrender of any Shares, with such
surrendered Shares having a per share value for purposes of this clause (c)
equal to the Closing Share Price; provided, however, that if Seller, Craig or
Greg sell any shares of Common Stock after any of them has received a Claims
Notice relating to such indemnified Claim, the per share value for all Shares
surrendered in satisfaction of such Claim shall be equal to the sales price for
that sale.

 

9.             MISCELLANEOUS.

 

9.1           Expenses.

 

Except as otherwise provided herein, the parties hereto shall pay all of their
own expenses relating to the transactions contemplated by this Agreement and the
Other Documents, including, without limitation, the fees and expenses of their
respective counsel and financial advisers.

 

9.2           Governing Law; Jurisdiction.

 

It is acknowledged by the Company and the Seller’s Shareholders that this
Agreement has been negotiated with Traffix and Purchaser, each a corporation
organized under the law of Delaware, U.S.A. with its principal place of business
in Pearl River, New York, U.S.A., and that the governing law and jurisdictional
provisions of this paragraph are an inducement to Traffix and Purchaser to enter
into the transactions described in this Agreement.  THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT AND THE OTHER DOCUMENTS, AND ALL MATTERS RELATING
HERETO, SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE
TO ITS CONFLICT OF LAWS PROVISIONS. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY CONSENTS AND SUBMITS TO THE

 

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EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION
WITH ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, WAIVES ANY OBJECTION TO VENUE IN THE COUNTY
AND STATE OF NEW YORK, OR SUCH DISTRICT, AND AGREES THAT SERVICE OF ANY SUMMONS,
COMPLAINT, NOTICE OR OTHER PROCESS RELATING TO SUCH PROCEEDING MAY BE EFFECTED
IN THE MANNER PROVIDED BY SECTION 9.5 OF THIS AGREEMENT.

 

9.3           [Intentionally Omitted]

 

9.4           Captions.

 

The article and section captions used herein are for reference purposes only,
and shall not in any way affect the meaning or interpretation of this Agreement.

 

9.5           Notices.

 

Any notice or other communications required or permitted hereunder shall be in
writing and shall be deemed effective (a) one day after the date of delivery by
Federal Express or other nationally recognized courier service that provides a
delivery receipt, if delivered by priority overnight delivery between any two
points within the United States; or (b) five days after deposit in the mails, if
mailed by certified or registered mail (return receipt requested) between any
two points within the United States, and in each case of mailing, postage
prepaid, addressed to a party at its address first set forth above, with copies
to Feder, Kaszovitz, Isaacson, Weber, Skala, Bass & Rhine LLP, 750 Lexington
Avenue, New York, New York 10022-1200, Attention: Geoffrey A. Bass, Esq., and to
Cohen Mohr LLP, 1420 Beverly Road, Suite 380, McLean, VA 22101, Attention Daniel
H. DuVal, Esq., or such other address as shall be furnished in writing by like
notice by any such party.

 

9.6           Parties in Interest.

 

Except as otherwise provided elsewhere herein or in the Other Documents, this
Agreement and the Other Documents may not be transferred, assigned, pledged or
hypothecated by any party hereto, other than by operation of law.  This
Agreement and the Other Documents shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns, Except as otherwise provided
elsewhere herein, each party hereto intends that this Agreement shall not
benefit or create any right or cause of action in or on behalf of any Person
other than the parties hereto.

 

9.7           Severability.

 

In the event any provision of this Agreement or the Other Documents is found to
be void and unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement or such Other Documents shall nevertheless be
binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.

 

9.8           Counterparts.

 

This Agreement may be executed in two or more counterparts, all of which taken
together shall constitute one instrument.

 

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9.9           Entire Agreement; Amendments.

 

This Agreement, including all Schedules attached hereto, and the Other Documents
contain the entire agreement of the parties and supersedes any and all prior or
contemporaneous agreements between the parties, written or oral, with respect to
the transactions contemplated hereby.  It may not be changed or terminated
orally, but may only be changed by an agreement in writing signed by the party
or parties against whom enforcement of any waiver, change, modification,
extension, discharge or termination is sought.

 

Signature page to follow

 

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IN WITNESS WHEREOF, the individual parties have executed and the corporate
parties have each caused its corporate name to be hereunto subscribed by their
respective duly authorized officers on the date first written above.

 

 

TRAFFIX, INC.

 

 

 

 

 

By:

 

/s/ Josh Gillon

 

 

 

 

 

NEW SEND, INC.

 

 

 

 

 

By:

 

/s/ Josh Gillon

 

 

 

 

 

SENDTRAFFIC, INC.

 

 

 

 

 

By:

 

/s/ Craig Handleman

 

 

 

 

 

TRAFFICGROUP, LLC

 

 

 

 

 

By:

 

/s/ Craig Handleman

 

 

 

 

 

 

 

/s/

 

CRAIG HANDELMAN

 

 

 

 

 

 

 

/s/

 

GREG BYRNES

 

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