Document:

Exhibit
10.1

 

Execution Copy

 

 

ASSET ACQUISITION AGREEMENT

 

 

among

 

 

TRAFFIX, INC.,

 

HOT ROCKET ACQUISITION CORP.,

 

HOT ROCKET MARKETING INC.,

 

and

 

MARK COLACIOPPO

 

 

FOR THE ACQUISITION OF

 

THE ASSETS OF

 

HOT ROCKET MARKETING INC.

 

 

Dated as of January 21, 2005

 

 

TABLE OF CONTENTS

 

 

	
  TABLE OF CONTENTS

  	
   

  
	
   

  	
                                                  

  
	
  1.

  	
  DEFINITIONS.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Acquired Assets.

  	
   

  
	
   

  	
  1.2

  	
  Acquired Liabilities.

  	
   

  
	
   

  	
  1.3

  	
  Additional Payment.

  	
   

  
	
   

  	
  1.4

  	
  Adwerks.

  	
   

  
	
   

  	
  1.5

  	
  Affiliate.

  	
   

  
	
   

  	
  1.6

  	
  Asserted Liability.

  	
   

  
	
   

  	
  1.7

  	
  Balance Sheet Date.

  	
   

  
	
   

  	
  1.8

  	
  Bill of Sale.

  	
   

  
	
   

  	
  1.9

  	
  Blue Sky Laws.

  	
   

  
	
   

  	
  1.10

  	
  Business Day.

  	
   

  
	
   

  	
  1.11

  	
  Cash Component.

  	
   

  
	
   

  	
  1.12

  	
  Claims.

  	
   

  
	
   

  	
  1.13

  	
  Claims Notice.

  	
   

  
	
   

  	
  1.14

  	
  Clockwork.

  	
   

  
	
   

  	
  1.15

  	
  Clockwork Assets.

  	
   

  
	
   

  	
  1.16

  	
  Clockwork Customer List.

  	
   

  
	
   

  	
  1.17

  	
  Closing.

  	
   

  
	
   

  	
  1.18

  	
  Closing Date.

  	
   

  
	
   

  	
  1.19

  	
  Closing Share Price.

  	
   

  
	
   

  	
  1.20

  	
  Code.

  	
   

  
	
   

  	
  1.21

  	
  Commission.

  	
   

  
	
   

  	
  1.22

  	
  Common Stock.

  	
   

  
	
   

  	
  1.23

  	
  Contingent Payment.

  	
   

  
	
   

  	
  1.24

  	
  Contingent Purchase Price.

  	
   

  
	
   

  	
  1.25

  	
  Contracts.

  	
   

  
	
   

  	
  1.26

  	
  Controlled Company.

  	
   

  
	
   

  	
  1.27

  	
  December 31 Financial Statements.

  	
   

  
	
   

  	
  1.28

  	
  Delivered Financial Statements.

  	
   

  
	
   

  	
  1.29

  	
  Determining Accountant.

  	
   

  
	
   

  	
  1.30

  	
  Dollars or $.

  	
   

  
	
   

  	
  1.31

  	
  Domain Names.

  	
   

  
	
   

  	
  1.32

  	
  EasySearchBar.

  	
   

  
	
   

  	
  1.33

  	
  EBITDA.

  	
   

  
	
   

  	
  1.34

  	
  EBITDA Statement.

  	
   

  
	
   

  	
  1.35

  	
  Employment Agreement.

  	
   

  
	
   

  	
  1.36

  	
  Environmental Claim.

  	
   

  
	
   

  	
  1.37

  	
  Environmental Law.

  	
   

  
	
   

  	
  1.38

  	
  ERISA.

  	
   

  
	
   

  	
  1.39

  	
  Escrow Agent.

  	
   

  
	
   

  	
  1.40

  	
  Exchange Act.

  	
   

  
	
   

  	
  1.41

  	
  Excluded Liabilities.

  	
   

  

 

i

 

	
   

  	
  1.42

  	
  Excluded Assets.

  	
   

  
	
   

  	
  1.43

  	
  Financial Statements.

  	
   

  
	
   

  	
  1.44

  	
  First Contingent Payment.

  	
   

  
	
   

  	
  1.45

  	
  Fixed Purchase Price.

  	
   

  
	
   

  	
  1.46

  	
  Fourth Contingent Payment.

  	
   

  
	
   

  	
  1.47

  	
  GAAP.

  	
   

  
	
   

  	
  1.48

  	
  Governmental Authority.

  	
   

  
	
   

  	
  1.49

  	
  Hazardous Materials.

  	
   

  
	
   

  	
  1.50

  	
  Indemnification Cap.

  	
   

  
	
   

  	
  1.51

  	
  Indemnification Threshold.

  	
   

  
	
   

  	
  1.52

  	
  Indemnifying Party.

  	
   

  
	
   

  	
  1.53

  	
  Indemnitee.

  	
   

  
	
   

  	
  1.54

  	
  Internet.

  	
   

  
	
   

  	
  1.55

  	
  Knowledge.

  	
   

  
	
   

  	
  1.56

  	
  Law.

  	
   

  
	
   

  	
  1.57

  	
  Licenses.

  	
   

  
	
   

  	
  1.58

  	
  Lien.

  	
   

  
	
   

  	
  1.59

  	
  Machinery and Equipment.

  	
   

  
	
   

  	
  1.60

  	
  Material Adverse Effect.

  	
   

  
	
   

  	
  1.61

  	
  May 31 Financial Statements.

  	
   

  
	
   

  	
  1.62

  	
  Media Inventory.

  	
   

  
	
   

  	
  1.63

  	
  Minimum Working Capital.

  	
   

  
	
   

  	
  1.64

  	
  NEWCO EBITDA.

  	
   

  
	
   

  	
  1.65

  	
  Notice of Disagreement.

  	
   

  
	
   

  	
  1.66

  	
  Operating Threshold Date.

  	
   

  
	
   

  	
  1.67

  	
  Operating Threshold Period.

  	
   

  
	
   

  	
  1.68

  	
  Order.

  	
   

  
	
   

  	
  1.69

  	
  Other Documents.

  	
   

  
	
   

  	
  1.70

  	
  Per Share Shortfall.

  	
   

  
	
   

  	
  1.71

  	
  Person.

  	
   

  
	
   

  	
  1.72

  	
  Purchase Price.

  	
   

  
	
   

  	
  1.73

  	
  Purchase Price Allocation.

  	
   

  
	
   

  	
  1.74

  	
  Registrar.

  	
   

  
	
   

  	
  1.75

  	
  Registration Rights Agreement.

  	
   

  
	
   

  	
  1.76

  	
  Restrictive Agreement.

  	
   

  
	
   

  	
  1.77

  	
  Second Contingent Payment.

  	
   

  
	
   

  	
  1.78

  	
  Securities Act.

  	
   

  
	
   

  	
  1.79

  	
  Seller Indemnified Parties.

  	
   

  
	
   

  	
  1.80

  	
  Seller’s Accountants.

  	
   

  
	
   

  	
  1.81

  	
  Seller’s Business.

  	
   

  
	
   

  	
  1.82

  	
  Seller’s Shareholder.

  	
   

  
	
   

  	
  1.83

  	
  Share Certificates.

  	
   

  
	
   

  	
  1.84

  	
  Shares.

  	
   

  
	
   

  	
  1.85

  	
  Shortfall Date.

  	
   

  
	
   

  	
  1.86

  	
  Specifications.

  	
   

  
	
   

  	
  1.87

  	
  Start Date.

  	
   

  

 

ii

 

	
   

  	
  1.88

  	
  Stub Period Financial Statement.

  	
   

  
	
   

  	
  1.89

  	
  Tax.

  	
   

  
	
   

  	
  1.90

  	
  Tax Return.

  	
   

  
	
   

  	
  1.91

  	
  Third Contingent Payment.

  	
   

  
	
   

  	
  1.92

  	
  Trade Rights.

  	
   

  
	
   

  	
  1.93

  	
  Traffix’s Accountants.

  	
   

  
	
   

  	
  1.94

  	
  Traffix Indemnified Parties.

  	
   

  
	
   

  	
  1.95

  	
  Year-End Financial Statements.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  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.

  	
   

  
	
   

  	
  3.3

  	
  Additional Payments.

  	
   

  
	
   

  	
  3.4

  	
  Shortfall Adjustment.

  	
   

  
	
   

  	
  3.5

  	
  [Intentionally Omitted]

  	
   

  
	
   

  	
  3.6

  	
  Escrow; Payment of Undisclosed Liabilities.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  THE CLOSING.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Closing.

  	
   

  
	
   

  	
  4.2

  	
  Deliveries by Seller at Closing.

  	
   

  
	
   

  	
  4.3

  	
  Deliveries by Traffix and NEWCO at Closing.

  	
   

  
	
   

  	
  4.4

  	
  Delivery of Employment Agreement at
  Closing.

  	
   

  
	
   

  	
  4.5

  	
  Payments of Outstanding Liabilities to
  Certain Vendors.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER
  AND SELLER’S SHAREHOLDERS.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Existence and Good Standing.

  	
   

  
	
   

  	
  5.2

  	
  Shareholder.

  	
   

  
	
   

  	
  5.3

  	
  Financial Statements.

  	
   

  
	
   

  	
  5.4

  	
  Books and Records.

  	
   

  
	
   

  	
  5.5

  	
  Real Property; Personal Property; Machinery
  and Equipment.

  	
   

  
	
   

  	
  5.6

  	
  Contracts.

  	
   

  
	
   

  	
  5.7

  	
  Litigation.

  	
   

  
	
   

  	
  5.8

  	
  Taxes.

  	
   

  
	
   

  	
  5.9

  	
  Liabilities.

  	
   

  
	
   

  	
  5.10

  	
  Trade Rights.

  	
   

  
	
   

  	
  5.11

  	
  Compliance with Laws.

  	
   

  
	
   

  	
  5.12

  	
  Licenses.

  	
   

  
	
   

  	
  5.13

  	
  Insurance.

  	
   

  
	
   

  	
  5.14

  	
  Supplier and Customer Relations.

  	
   

  
	
   

  	
  5.15

  	
  Employment Relations.

  	
   

  
	
   

  	
  5.16

  	
  Employee Benefit Plans.

  	
   

  

 

iii

 

	
   

  	
  5.17

  	
  [Intentionally Omitted].

  	
   

  
	
   

  	
  5.18

  	
  Valid Agreements; Restrictive Documents.

  	
   

  
	
   

  	
  5.19

  	
  Required Approvals, Notices and Consents.

  	
   

  
	
   

  	
  5.20

  	
  Disclosure.

  	
   

  
	
   

  	
  5.21

  	
  Environmental Conditions.

  	
   

  
	
   

  	
  5.22

  	
  Health and Safety Conditions.

  	
   

  
	
   

  	
  5.23

  	
  Copies of Documents.

  	
   

  
	
   

  	
  5.24

  	
  Brokers.

  	
   

  
	
   

  	
  5.25

  	
  Domain Names.

  	
   

  
	
   

  	
  5.26

  	
  Interaction with Users.

  	
   

  
	
   

  	
  5.27

  	
  EasySearchBar.

  	
   

  
	
   

  	
  5.28

  	
  Adwerks.

  	
   

  
	
   

  	
  5.29

  	
  Clockwork.

  	
   

  
	
   

  	
  5.30

  	
  Seller’s Accounts Receivable and Payable.

  	
   

  
	
   

  	
  5.31

  	
  Good Media Inventory.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS OF TRAFFIX AND PURCHASER.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Existence and Good Standing.

  	
   

  
	
   

  	
  6.2

  	
  Shares.

  	
   

  
	
   

  	
  6.3

  	
  Valid Agreements; Restrictive Documents.

  	
   

  
	
   

  	
  6.4

  	
  Required Approvals, Notices and Consents.

  	
   

  
	
   

  	
  6.5

  	
  No Brokers.

  	
   

  
	
   

  	
  6.6

  	
  Exchange Act Filings.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  POST CLOSING COVENANTS.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  General.

  	
   

  
	
   

  	
  7.2

  	
  Post-Closing Access.

  	
   

  
	
   

  	
  7.3

  	
  Cooperation in Preparation of Securities
  Law Filings.

  	
   

  
	
   

  	
  7.4

  	
  Availability of Minimum Working Capital.

  	
   

  
	
   

  	
  7.5

  	
  Survivability of Purchaser.

  	
   

  
	
   

  	
  7.6

  	
  Retention of Purchaser Business Subsequent
  to Termination of Employment of Seller’s Shareholder.

  	
   

  
	
   

  	
  7.7

  	
  Post-Closing Management of NEWCO.

  	
   

  
	
   

  	
  7.8

  	
  Non-competition.

  	
   

  
	
   

  	
  7.9

  	
  Key Employee Agreements.

  	
   

  
	
   

  	
  7.10

  	
  Payment of Excluded Liabilities.

  	
   

  
	
   

  	
  7.11

  	
  Purchase Price Allocation.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  SURVIVAL OF REPRESENTATIONS; INDEMNITIES.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

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

  	
   

  
	
   

  	
  8.2

  	
  Obligations of Seller and the Seller’s
  Shareholder to Indemnify.

  	
   

  
	
   

  	
  8.3

  	
  Survival of Representations and Warranties
  of Traffix and Purchaser.

  	
   

  
	
   

  	
  8.4

  	
  Notice and Opportunity to Defend.

  	
   

  
	
   

  	
  8.5

  	
  Limitations on Liability.

  	
   

  

 

iv

 

	
  9.

  	
  MISCELLANEOUS.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Expenses.

  	
   

  
	
   

  	
  9.2

  	
  Governing Law; Jurisdiction.

  	
   

  
	
   

  	
  9.3

  	
  Captions.

  	
   

  
	
   

  	
  9.4

  	
  Notices.

  	
   

  
	
   

  	
  9.5

  	
  Parties in Interest.

  	
   

  
	
   

  	
  9.6

  	
  Severability.

  	
   

  
	
   

  	
  9.7

  	
  Counterparts.

  	
   

  
	
   

  	
  9.8

  	
  Entire Agreement; Amendments.

  	
   

  

 

v

 

ASSET ACQUISITION AGREEMENT

 

AGREEMENT,
dated as of January 21, 2005 (this “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”); HOT
ROCKET ACQUISITION CORP., a Delaware corporation, having an address at One Blue
Hill Plaza, Fifth Floor, Pearl River, New York 10965 (hereafter referred to as “NEWCO”
or “Purchaser”); HOT ROCKET MARKETING INC., a New York corporation, having an
address at 220 Mineola Boulevard, Suite 5 & 6, Mineola, New York 11501
(hereafter referred to as “HotRocket” or “Seller”); and MARK COLACIOPPO, an
individual having an address at 25 Wheatley Avenue, Albertson, New York 11507
(hereafter referred to as “Mark”).

 

W I T N E S S E T H :

 

WHEREAS,
NEWCO, a wholly owned subsidiary of Traffix, wishes to acquire and Seller is
willing to sell to NEWCO 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 all assets of every kind, character and
description, whether tangible or intangible, whether real, personal or mixed,
and wherever situated, employed, used or held in connection with the business
or operations of Seller’s Business, including, without limitation, the
following:

 

(1)                                  all
Trade Rights and Specifications;

 

(2)                                  the
Domain Names, 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;

 

(3)                                  all
of the following relating to the Seller’s Business and/or the Trade
Rights:  customer lists (including without
limitation the Clockwork Customer List),

 

 

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 “Hot Rocket” and “Adwerks” and “Clockwork” together
with any goodwill associated therewith;

 

(4)                                  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;

 

(5)                                  all
Media Inventory;

 

(6)                                  all
Machinery and Equipment;

 

(7)                                  the
Clockwork Assets;

 

(8)                                  goodwill;
and

 

(9)                                  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                                 Additional
Payment.

 

“Additional Payment” means an additional payment of Purchase Price in
an amount equal to $375,000, payable in accordance with Section 3.3.

 

1.4                                 Adwerks.

 

“Adwerks” means Adwerks, Inc., a New York corporation.

 

1.5                                 Affiliate.

 

“Affiliate” means, with respect to any Person, any other Person,
directly or indirectly controlling, controlled by or under common control with
such Person.  For purposes of this
Agreement, Clockwork shall be deemed an Affiliate of Seller and Seller’s
Shareholder, except in any instance with respect to which Clockwork is
expressly excluded from the term “Affiliate”. 
For purposes of Section 5 of this Agreement, Adwerks and
EasySearchBar shall not be deemed Affiliates of Seller and Seller’s
Shareholder.

 

1.6                                 Asserted
Liability.

 

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

 

2

 

1.7                                 Balance
Sheet Date.

 

“Balance Sheet Date” means September 30, 2004.

 

1.8                                 Bill
of Sale.

 

“Bill of Sale” means the Bill of Sale substantially in the form of Schedule 1.8.

 

1.9                                 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.

 

1.10                           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.

 

1.11                           Cash
Component.

 

“Cash Component” means $2,832,500.

 

1.12                           Claims.

 

“Claims” has the meaning given in Section 8.2.

 

1.13                           Claims
Notice.

 

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

 

1.14                           Clockwork.

 

“Clockwork” means
Clockwork Advertising, Inc., a New York corporation.

 

1.15                           Clockwork
Assets.

 

“Clockwork Assets” means any and all assets acquired by Seller from
Clockwork pursuant to that certain Asset Acquisition Agreement dated January 21,
2005 among HotRocket, Clockwork, Joseph Frevola and Philip Colacioppo, including,
without limitation, the name “Clockwork”, the Contracts set forth on Schedule 5.6B
and the Clockwork Customer List.

 

1.16                           Clockwork
Customer List.

 

“Clockwork Customer List”
means the customer list acquired by Seller from Clockwork as described in
Sections 5.29.

 

3

 

1.17                           Closing.

 

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

 

1.18                           Closing
Date.

 

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

 

1.19                           Closing
Share Price.

 

“Closing Share Price” means $6.15, being 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 Closing Date.

 

1.20                           Code.

 

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

 

1.21                           Commission.

 

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

 

1.22                           Common
Stock.

 

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

 

1.23                           Contingent
Payment.

 

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

 

1.24                           Contingent
Purchase Price.

 

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

 

1.25                           Contracts.

 

“Contracts” means all contracts, leases, licenses, commitments, sales
orders, invoices, purchase orders and other agreements relating to the Seller’s
Business to which Seller or any Affiliate of Seller is a party or with respect
to which Seller or any Affiliate of Seller is a third-party beneficiary,
including the agreements listed on Schedules 5.6A and 5.6B.

 

1.26                           Controlled
Company.

 

“Controlled Company” means (i) any Affiliate of Seller and (ii) any
Affiliate of 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.  Without limiting the
generality of the foregoing, for purposes of this Agreement the term Controlled
Company shall be deemed to include Clockwork.

 

4

 

1.27                           December 31
Financial Statements.

 

“December 31
Financial Statements” means the income statement and balance sheet of
HotRocket, Clockwork and each of their respective subsidiaries, for the period September 30,
2004 to December 31, 2004 prepared by Seller in accordance with GAAP
applied on a consistent basis throughout the period covered thereby, subject to
the lack of footnote disclosure and changes resulting from normal year-end
adjustments (none of which would, alone or in the aggregate, be materially
adverse to the financial condition, operating results, assets, operations or
business prospects of the Seller and Clockwork).  A true, complete and correct copy of the December 31
Financial Statements is attached hereto as Schedule 1.27.

 

1.28                           Delivered
Financial Statements.

 

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

 

1.29                           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.

 

1.30                           Dollars
or $.

 

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

 

1.31                           Domain
Names.

 

“Domain Names” means any and all domain names owned by Seller or any
Affiliate of Seller, all of which are listed on Schedule 1.31, and which
have been registered with the Registrar.

 

1.32                           EasySearchBar.

 

“EasySearchBar” means
EasySearchBar, Inc., a New York corporation.

 

1.33                           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.

 

1.34                           EBITDA
Statement.

 

“EBITDA Statement” has the meaning given in Section 3.2(c).

 

1.35                           Employment
Agreement.

 

“Employment Agreement” means the employment agreement among Traffix,
Purchaser and Mark substantially in the form annexed hereto as Schedule 1.35.

 

5

 

1.36                           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.

 

1.37                           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 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.

 

1.38                           ERISA.

 

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

 

1.39                           Escrow
Agent.

 

“Escrow Agent” means the
law firm of Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn LLP.

 

1.40                           Exchange
Act.

 

“Exchange Act” means the Securities
Exchange Act of 1934, as amended.

 

1.41                           Excluded
Liabilities.

 

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

 

1.42                           Excluded
Assets.

 

“Excluded Assets” means cash, cash equivalents and accounts receivable
and all other assets which are set forth on Schedule 1.42.

 

1.43                           Financial
Statements.

 

“Financial Statements” means the Year-End Financial Statements, the
Stub Period Financial Statements, the May 31 Financial Statements and the December 31
Financial Statements.

 

6

 

1.44                           First
Contingent Payment.

 

“First Contingent Payment” means, if the NEWCO EBITDA for the 12 month
period beginning on the first day of the calendar month immediately following
the Closing Date equals at least $1,500,000, the sum of (a) the amount, but not
more than $1,500,000, by which the NEWCO EBITDA for such period exceeds
$1,500,000 and (b) 50% of the amount by which the NEWCO EBITDA for such
period exceeds $3,000,000, but in no event shall the First Contingent Payment
be greater than $4,000,000.

 

1.45                           Fixed
Purchase Price.

 

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

 

1.46                           Fourth
Contingent Payment.

 

“Fourth Contingent Payment” means the amount by which the NEWCO EBITDA
for the 12 month period beginning on the first day of the calendar month
immediately following the third anniversary of the Closing Date exceeds
$5,000,000, but in no event shall the Fourth Contingent Payment exceed the
difference between (i) $11,000,000 and (ii) the total amount, if any, of the
First Contingent Payment, the Second Contingent Payment and the Third
Contingent Payment paid to Seller.

 

1.47                           GAAP.

 

“GAAP” means United States generally accepted accounting principles.

 

1.48                           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.

 

1.49                           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.

 

1.50                           Indemnification
Cap.

 

“Indemnification Cap”
means (i) during the period of twelve consecutive months beginning on the
Closing Date, the aggregate value of the Purchase Price actually received by
HotRocket hereunder prior to the expiration of such twelve-month period; and
(ii) at all times after the expiration of such twelve-month period, an amount
equal to 80% of the aggregate value of the Purchase Price actually received by
HotRocket hereunder.

 

7

 

1.51                           Indemnification
Threshold.

 

“Indemnification
Threshold” means an amount equal to $100,000.

 

1.52                           Indemnifying
Party.

 

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

 

1.53                           Indemnitee.

 

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

 

1.54                           Internet.

 

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

 

1.55                           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.

 

1.56                           Law.

 

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

 

1.57                           Licenses.

 

“Licenses” has the meaning given in Section 5.12.

 

1.58                           Lien.

 

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

 

1.59                           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.

 

1.60                           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,
its Affiliates and/or the Acquired Assets.

 

8

 

1.61                           May
31 Financial Statements.

 

“May 31 Financial
Statements” means the Combined Income Statement, Combined Balance Sheet,
Combined Statement of Stockholders’ Equity and Combined Schedules of Media
Purchases, Selling, and General and Administrative Expenses of HotRocket and
Clockwork and each of their respective subsidiaries, for the year ended May 31,
2004 and period of inception (July 10, 2003 to May 31, 2004), prepared by
Seller’s Accountants in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, subject to the lack of footnote
disclosure and changes resulting from normal year-end adjustments (none of
which would, alone or in the aggregate, be materially adverse to the financial
condition, operating results, assets, operations or business prospects of the
Seller and Clockwork).  A true, complete
and correct copy of the May 31 Financial Statements is attached hereto as Schedule 1.61.

 

1.62                           Media
Inventory.

 

“Media Inventory” means all Internet advertising vehicles, including,
without limitation, ad buttons, ad banners, e-mail advertisements, on-site
promotions, links, pop unders and pop-ups.

 

1.63                           Minimum
Working Capital.

 

“Minimum Working Capital” means the working capital made available by
Traffix to fund the operations and growth of NEWCO from and after the Closing,
as periodically determined by Mark based upon written budgets and forecasts
submitted to Traffix on an annual basis (subject to updating on a monthly or
quarterly basis as Mark may determine or as Traffix may request); provided
that such budgets and forecasts and the amount of working capital funded by
Traffix as Minimum Working Capital shall be subject to Traffix’s approval which
shall not be unreasonably withheld or delayed; provided, further
that in no event shall the Minimum Working Capital available to NEWCO be less
than the applicable Minimum Working Capital Amount while the Contingent
Purchase Price is subject to determination in accordance with this Agreement
provided that the applicable Operating Threshold is met (as determined in
accordance with Section 7.7).

 

For purposes of this Agreement, the applicable Minimum Working Capital
Amount shall be determined as follows:

 

	
  Time Period

  	
   

  	
  Minimum Working Capital Amount

  
	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the Start Date

  	
   

  	
  $

  	
  1,000,000

  
	
   

  	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the first anniversary of the
  Start Date

  	
   

  	
  $

  	
  1,100,000

  
	
   

  	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the second anniversary of
  the Start Date

  	
   

  	
  $

  	
  1,210,000

  
	
   

  	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the third anniversary of the
  Start Date

  	
   

  	
  $

  	
   

  	
  1,331,000

  

 

9

 

1.64                           NEWCO
EBITDA.

 

“NEWCO EBITDA” means an amount determined in accordance with GAAP equal
to EBITDA for NEWCO for the applicable measurement period, which determination
shall be made no later than forty-five (45) days after the conclusion of the
12-month measurement period required to determine the amount of the First
Contingent Payment, Second Contingent Payment, Third Contingent Payment and
Fourth Contingent Payment, as the case may be. 
Solely for purposes of determining NEWCO EBITDA under this
Agreement, the following shall apply: 
(i) to the extent NEWCO uses the services of Infiknowledge, ULC
(Traffix’s technology development subsidiary), Traffix will bill NEWCO at the
rate of its cost plus 7%; (ii) to the extent Traffix or any of its other
Affiliates uses the administrative services of NEWCO, NEWCO will bill Traffix
at the rate of its cost plus 7%; (iii) to the extent NEWCO purchases media services from Traffix or its other
Affiliates or uses any other services offered by Traffix or its other
Affiliates to customers, Traffix will bill NEWCO at a rate mutually acceptable
to NEWCO and Traffix; (iv) to the extent Traffix or any of its other Affiliates
purchases media services from NEWCO or uses any other services offered by NEWCO
to customers, NEWCO will bill Traffix at a rate mutually acceptable to Traffix
and NEWCO; (v) if Traffix or any of its other Affiliates purchases media
services from any third party at the request of NEWCO, Traffix will bill NEWCO
at the rate of cost plus 15%; (vi) if NEWCO or any of its Affiliates realizes
any income, gain, profit or loss in connection with the sale of any interest in
any subsidiary of NEWCO or from the sale of any assets of such subsidiary, such
income, gain, profit or loss shall be included in (or in the case of any such
loss, deducted from) NEWCO’s other earnings for purposes of calculating NEWCO
EBITDA; and (vii) the following operating expenses of Traffix shall be
allocated to NEWCO (thereby causing a reduction to NEWCO EBITDA):

 

(a)                                  for
the 12-month period beginning on the first day of the calendar month following
the one-year anniversary of the Closing Date, operating expenses of $125,000
shall be allocated to NEWCO;

 

(b)                                 for the 12-month period beginning on the
first day of the calendar month following the two-year anniversary of the
Closing Date, NEWCO shall have operating expenses allocated to it in an amount
equal to the product of (1) $125,000, multiplied by (2) a fraction, the
numerator of which shall be the total operating expenses for NEWCO for the
12-month period beginning on the first day of the calendar month
following the two-year anniversary of
the Closing Date, and the denominator of which shall be the total operating
expenses for NEWCO for the 12-month period beginning on the first day of
the calendar month following the one-year
anniversary of the Closing Date; and

 

(c)                                  for the 12-month period beginning on the
first day of the calendar month following the three-year anniversary of the
Closing Date, NEWCO shall have operating expenses allocated to it in an amount
equal to the product of (1) the amount allocated to

 

10

 

NEWCO
in accordance with paragraph (b) above, multiplied by (2) a fraction, the
numerator of which shall be the total operating expenses for NEWCO for the
12-month period beginning on the first day of the calendar month
following the three-year
anniversary of the Closing Date, and the denominator of which shall be the
total operating expenses for NEWCO for the 12-month period beginning on the first
day of the calendar month following the two-year
anniversary of the Closing Date.

 

Notwithstanding anything in this Agreement or the Other Documents to
the contrary, the parties agree that, to the extent Seller has not obtained at
Closing one or more consents to be delivered pursuant to Section 4.2(5),
Purchaser and Traffix shall be under no obligation during the Contingent
Payment Period to pay any consideration (whether in the form of a one-time
payment, guarantee or otherwise) or make any other concession necessary to
obtain any such consent unless Purchaser and Mark agree that such consideration
or the economic effect of such concession shall become an adjustment to NEWCO
EBITDA.

 

1.65                           Notice
of Disagreement.

 

“Notice of Disagreement” has the meaning given in Section 3.2(c).

 

1.66                           Operating
Threshold Date.

 

“Operating
Threshold Date” means June 1, 2005.

 

1.67                           Operating
Threshold Period.

 

“Operating Threshold
Period” means the period beginning on the Operating Threshold Date and ending
on the date upon which the Fourth Contingent Payment is to be calculated.

 

1.68                           Order.

 

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

 

1.69                           Other
Documents.

 

“Other Documents” means all Schedules and Exhibits to this Agreement
and all other instruments, agreements, certificates, statements and documents
executed or to be executed by any party hereto pursuant to the terms of this
Agreement.

 

1.70                           Per
Share Shortfall.

 

“Per Share Shortfall” means the amount by which the Closing Share Price
exceeds the closing price of the Common Stock, as listed on Nasdaq (or the
market or exchange upon which the Common Stock is then listed) on the Shortfall
Date; provided, that the Per Share Shortfall shall not exceed twenty
(20%) percent of Closing Share Price.

 

11

 

1.71                           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.

 

1.72                           Purchase
Price.

 

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

 

1.73                           Purchase
Price Allocation.

 

“Purchase Price Allocation” has the meaning given in Section 7.11.

 

1.74                           Registrar.

 

“Registrar” means any of Godaddy.com, Bluegenesis.com, Directnic.com,
Networksolutions.com, Registrar.com, or any other similar Internet registrar.

 

1.75                           Registration
Rights Agreement.

 

“Registration Rights Agreement” means the agreement annexed hereto as Schedule 1.75.

 

1.76                           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.

 

1.77                           Second
Contingent Payment.

 

“Second Contingent Payment” means the amount by which the NEWCO 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
$3,000,000, but in no event shall the Second Contingent Payment exceed
$3,000,000.

 

1.78                           Securities
Act.

 

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

 

1.79                           Seller
Indemnified Parties.

 

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

 

1.80                           Seller’s
Accountants.

 

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

 

12

 

1.81                           Seller’s
Business.

 

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

 

1.82                           Seller’s
Shareholder.

 

“Seller’s Shareholder” means Mark.

 

1.83                           Share
Certificates.

 

“Share Certificates” means the certificates representing the Shares.

 

1.84                           Shares.

 

“Shares” means 113,821 shares of Common Stock delivered to Seller on
the Closing Date (determined by dividing $700,000 by the Closing Share Price).

 

1.85                           Shortfall
Date.

 

“Shortfall Date” means the first Business Day following the one-year
anniversary of the Closing Date.

 

1.86                           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/or its Affiliates or otherwise used in connection with the Seller’s
Business.

 

1.87                           Start
Date. 

 

“Start Date” means the first day of the calendar month immediately
following the Closing Date.

 

1.88                           Stub
Period Financial Statement.

 

“Stub Period Financial Statement” means the income statement and
balance sheet of HotRocket, Clockwork and each of their respective
subsidiaries, for the period January 1, 2004 to September 30, 2004,
prepared by Seller’s Accountants in accordance with GAAP applied on a
consistent basis throughout the period covered thereby, subject to the lack of
footnote disclosure and changes resulting from normal year-end adjustments
(none of which would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets, operations or business
prospects of the Seller and Clockwork). 
A true, complete and correct copy of the Stub Period Financial Statements
is attached hereto as Schedule 1.88.

 

13

 

1.89                           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.

 

1.90                           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.

 

1.91                           Third
Contingent Payment.

 

“Third Contingent Payment” means the amount by which the NEWCO 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
$4,000,000, but in no event shall the Third Contingent Payment exceed
$3,000,000.

 

1.92                           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), 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.

 

1.93                           Traffix’s
Accountants.

 

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

 

1.94                           Traffix
Indemnified Parties.

 

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

 

1.95                           Year-End
Financial Statements.

 

“Year-End Financial Statements” means (i) the Combined Balance Sheet,
Combined Statement of Income, Combined Statement of Stockholders’ Equity,
Combined Statement of Cash Flows, Combined Statements of Media Purchases,
Selling, and General and Administrative Expenses, and related footnotes thereto
of HotRocket and Hot Rocket Marketing (a sole proprietorship) as

 

14

 

at and for the year ended December 31, 2002; (ii) the Combined
Balance Sheet, Combined Statement of Income, Combined Statement of Stockholders’
Equity, Combined Statement of Cash Flows, Combined Statements of Media
Purchases, Selling, and General and Administrative Expenses, and related
footnotes thereto of HotRocket and Clockwork as at and for the year ended December 31,
2003 and period of inception (July 10, 2003 through December 31,
2003)), all of which have been prepared by Seller’s Accountants in accordance
with GAAP and audited by Raiche Ende LLP and attached hereto as Schedule 1.95.

 

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, but none of
the Excluded Assets, free and clear of any liabilities, Liens, security
interests, pledges, conditions or encumbrances, other than the Acquired
Liabilities.

 

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 $3,532,500, payable as follows:

 

(1)                                  the
Cash Component payable at the Closing as provided in Section 4.3; and

 

(2)                                  the
Shares, which shall be delivered at the Closing as provided in Section 4.3.

 

3.2                                 Contingent
Purchase Price.

 

(a)                                  The
contingent portion of the Purchase Price (the “Contingent Purchase Price”, and,
with the Fixed Purchase Price and the Additional Payments, 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 EBITDA Statement (as defined below) prepared in respect of the
First Contingent Payment is acceptable or (ii) final determination in accordance
with

 

15

 

Section 3.2(c) of the
amount of the NEWCO 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 EBITDA Statement prepared in respect of the Second Contingent
Payment is acceptable or (ii) final determination in accordance with Section 3.2(c)
of the amount of the NEWCO 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 EBITDA Statement prepared in respect of the Third Contingent
Payment is acceptable or (ii) final determination in accordance with Section 3.2(c)
of the amount of the NEWCO EBITDA used to calculate the Third Contingent
Payment, Purchaser shall deliver or cause to be delivered to Seller the Third
Contingent Payment; and

 

(4)                                  within
ten (10) days after the earlier of (i) receipt by Traffix of notice from Seller
stating that the EBITDA Statement prepared in respect of the Fourth Contingent
Payment is acceptable or (ii) final determination in accordance with Section 3.2(c)
of the amount of the NEWCO EBITDA used to calculate the Fourth Contingent
Payment, Purchaser shall deliver or cause to be delivered to Seller the Fourth
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 that
a Contingent Payment shall be paid entirely in cash (unless otherwise agreed by
the parties) if, at the time such Contingent Payment becomes due, any of the
following applies:  (i) Traffix has
consummated a transaction such as a tender offer under Section 13 of the
Exchange Act or other transaction as a result of which shares of Common Stock
can no longer be traded through a national securities exchange or quoted on the
National Association of Securities Dealers Automated Quotation system (“NASDAQ”),
or the automated quotation systems referred to as the “bulletin board” or “pink
sheets”; or (ii) Traffix has consummated a transaction such as a merger or
consolidation with and into another entity and Traffix’s shareholders receive
in exchange for their shares of Common Stock shares of stock of the surviving
entity that can no longer be traded through a national securities exchange or
quoted on NASDAQ, or the automated quotation systems referred to as the “bulletin
board” or “pink sheets”; or (iii) as a result of Traffix’s failure to file
reports required to be filed by it under the Exchange Act or as a result of any
other event or failure in the control of Traffix’s management, shares of Common
Stock can no longer be traded through a national securities exchange or quoted
on NASDAQ, or the automated quotation systems referred to as the “bulletin
board” or “pink sheets”, and such cessation of trading continues for more than
twelve (12) successive months.  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 day of the measurement
period used to calculate the First Contingent Payment, Second Contingent
Payment, Third Contingent Payment or Fourth Contingent Payment, as the case may
be.

 

16

 

(c)                                  Within
forty-five (45) days after the expiration of each measurement period for which
a First, Second, Third or Fourth Contingency Payment shall be calculated,
Traffix shall determine NEWCO EBITDA for such period.  Such calculation of NEWCO EBITDA shall be
determined in accordance with the terms of this Agreement and on a consistent
basis with the determination of EBITDA for Seller, by Seller’s Accountants for
purposes of calculating the closing payments due hereunder.  Not later than thirty (30) days after Traffix
has delivered to Seller its determination of the NEWCO EBITDA used to calculate
a Contingent Payment (the “EBITDA Statement”), Seller shall notify Traffix in
writing (the “Notice of Disagreement”) if Seller disagrees with the EBITDA
Statement.  If no Notice of Disagreement
is received by Traffix within such 30-day period, then the EBITDA 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 EBITDA
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 EBITDA Statement, but the scope of
its engagement will be limited to resolving those items which Seller identified
in its Notice of Disagreement as to which Seller disagreed and determining
whether such items were properly reflected on the EBITDA Statement in
accordance with the requirements of this Section 3.2.  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.

 

3.3                                 Additional
Payments.

 

If during any Additional Payment Period set forth below, Purchaser
generates NEWCO EBITDA in an amount equal to or greater than the NEWCO EBITDA
target set forth below opposite such Additional Payment Period, Seller shall be
entitled to an Additional Payment on the thirtieth (30) day following the
expiration of such Additional Payment Period.

 

	
  Additional Payment Period

  	
   

  	
  NEWCO
  EBITDA Target

  
	
   

  	
   

  	
   

  
	
  February 1,
  2005 through and including July 31, 2005

  	
   

  	
  $

  	
  1,235,000

  
	
   

  	
   

  	
   

  
	
  August 1,
  2005 through and including January 31, 2006

  	
   

  	
  $

  	
  1,250,000

  
	
   

  	
   

  	
   

  
	
  February 1,
  2006 through and including July 31, 2006

  	
   

  	
  $

  	
  1,350,000

  
	
   

  	
   

  	
   

  
	
  August 1,
  2006 through and including January 31, 2007

  	
   

  	
  $

  	
  1,350,000

  

 

17

 

Each Additional Payment shall consist of a cash payment of $300,000 and
a number of shares of Common Stock equal to the quotient of (i) $75,000 divided
by (ii) the 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
trading day on which such shares are issued, or if such shares are issued on a
day that is not a trading day, the closing price for the immediately preceding
trading day.

 

3.4                                 Shortfall
Adjustment.  

 

To the extent that on the Shortfall Date there exists a Per Share
Shortfall, within five (5) Business Days after that date Traffix shall deliver
to Seller by wire transfer of immediately available funds to an account
designated in writing by Seller, an amount equal to the product of (i) the
number of Shares beneficially owned by Seller as of the Shortfall Date and (ii)
the Per Share Shortfall.

 

3.5                                 [Intentionally
Omitted]

 

3.6                                 Escrow;
Payment of Undisclosed Liabilities.

 

(a)                                  Notwithstanding
any provision in this Agreement to the contrary, the parties agree that on the
Closing Date, Purchaser shall pay $200,000 of the Cash Component (such amount,
plus all interest and other earnings thereon, the “Escrowed Funds”) by
delivering to the Escrow Agent the Escrowed Funds by wire transfer of
immediately available funds to an account designated by the Escrow Agent.  The parties agree that the Escrowed Funds
will be held in escrow for a period of 90 days following the Closing and shall
be used by HotRocket to pay when due Undisclosed Liabilities.  For purposes of this Section 3.6, “Undisclosed
Liabilities” shall mean any and all liabilities (other than liabilities owed to
Traffix or NEWCO) of determinate monetary amounts owing by HotRocket after the
Closing Date that are not disclosed to Traffix and NEWCO in this Agreement or
the Delivered Financial Statements.  Any
party hereto that receives notice of, or otherwise becomes aware of, any
Undisclosed Liability shall provide to the other parties hereto prompt written
notice of such liability and, if known to such party, a description of the
claim from which such liability arises.

 

(b)                                 Upon
receiving notice of, or otherwise becoming aware of, any Undisclosed Liability,
HotRocket shall take prompt action to dispose of the claim or claims from which
such liability arises.  Any payment of an
Undisclosed Liability from the Escrowed Funds shall be made in accordance with
the terms of the Escrow Agreement.  If at
any time Traffix becomes liable for any Undisclosed Liability (due to
transferee liability or otherwise) or determines in its reasonable discretion
that HotRocket is not taking prompt action in respect of any Undisclosed
Liability and that NEWCO’s and Traffix’s interests would be best served by
having such liability paid promptly, Traffix shall have the right to request
that such liability be paid from the Escrowed Funds.

 

(c)                                  Notwithstanding
any provision herein to the contrary, if at the expiration of the
aforementioned 90-day period there are any Undisclosed Liabilities that are the
subject of written notices delivered pursuant to this Section 3.6 and that
remain outstanding, a

 

18

 

portion of the Escrowed Funds
sufficient to pay such liabilities in full shall continue to be held in escrow
until the claim or claims from which such liabilities arise have been resolved
and such liabilities are extinguished. 
Any Escrowed Funds in excess of such portion shall be disbursed to Hot
Rocket in accordance with the Escrow Agreement. 
Notwithstanding any provision in this Agreement or the Escrow Agreement
to the contrary, HotRocket’s liability to indemnify Traffix and Purchaser from
Undisclosed Liabilities shall not be limited to the Escrowed Funds.  The Escrow Agent shall hold the Escrow Amount
in accordance with the terms and conditions of that certain Escrow Agreement
attached hereto as Schedule 3.6.

 

4.                                      THE CLOSING.

 

4.1                                 Closing.

 

(a)                                  The
Closing is anticipated to take place simultaneously with the execution hereof
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.

 

4.2                                 Deliveries
by Seller at Closing.

 

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

 

(1)                                  a
certificate issued by the Secretary of State of the State of New York,
certifying that HotRocket is a corporation duly organized and existing in good
standing under the law of the State of New York, and copies of HotRocket’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 HotRocket has qualified to do business, to
the effect that HotRocket is in good standing in each state and that it owes no
taxes;

 

(2)                                  a
certificate signed by the Secretary of Seller certifying as to (i) the
Certificate of Incorporation and Bylaws of HotRocket being true and correct as
of the Closing Date, (ii) resolutions of the shareholders and the directors of
HotRocket, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, and (iii) the incumbency of
the executive officers of HotRocket executing this Agreement and any related
agreements;

 

(3)                                  the
Bill of Sale;

 

(4)                                  a
certificate signed by Seller’s Shareholder that (i) the representations and
warranties of Seller and 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); (ii) Seller and Seller’s
Shareholder have 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; and (iii) there is no Order or Law in effect which
prohibits Seller and Seller’s Shareholder from consummating the transaction
contemplated by this Agreement;

 

19

 

(5)                                  copies
of written consents to the assignment of those Contracts listed on Schedule 4.2(5),
where such consents are required by the terms thereof, executed by the
counterparties thereto;

 

(6)                                  (a)                                  Certificate
of Amendment to the Articles of Incorporation of HotRocket, duly executed and
in suitable form for filing with the Secretary of State of the State of New
York changing the name of HotRocket to HRM, Inc.;

 

(b)                                 a
Certificate of Amendment to the Articles of Incorporation of Adwerks, duly
executed and in suitable form for filing with the Secretary of State of the
State of New York changing the name of Adwerks to AWK, Inc.; and

 

(c)                                  a
Certificate of Amendment to the Articles of Incorporation of Clockwork, duly
executed and in suitable form for filing with the Secretary of State of the
State of New York changing the name of Clockwork to P & J, Inc.;

 

(7)                                  all
information, including log-in information and passwords, necessary to permit
Purchaser to change the administrative contact, billing contact, and technical
contact for the Domain Names to Purchaser, or to such other entity as is
directed by Purchaser;

 

(8)                                  investment
representation letters in the form requested by Traffix from Seller and the
Seller’s Shareholder regarding the Shares;

 

(9)                                  the
Registration Rights Agreement, as executed by Seller and each Seller’s
Shareholders;

 

(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 Seller is duly organized, validly existing and in good standing
under the Laws of the State of New York, (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
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
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 Seller’s Shareholder
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 Seller or Seller’s Shareholder is
a party, by Seller or 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 Seller’s Shareholder, which has not
been given or obtained prior to Closing, is required for the

 

20

 

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 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 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 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)                            an
Assignment and Assumption Agreement for those Contracts listed on Schedule 4.2(11)
hereto, which Seller and Seller’s Shareholders hereby acknowledge are the only
Contracts being assumed by Purchaser and/or Traffix hereunder;

 

(12)                            a
written acknowledgement from Matt Gately that (i) Matt Gately has acted solely
as a sales agent on behalf of Seller and/or its Affiliates; (ii) he has not
executed any contracts or sales orders on behalf of Seller or any of its
Affiliates without first obtaining Mark’s approval; and (iii) in executing
sales orders, he acted only at the direction of Seller or Clockwork, as the
case may be;

 

(13)                            that
certain letter from Direct Revenue attached as Schedule 4.2(13) hereto;
and

 

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

 

4.3                                 Deliveries
by Traffix and NEWCO at Closing.

 

At the Closing, Traffix and NEWCO shall deliver, or cause to be
delivered, to HotRocket:

 

(1)                                  $2,632,500
of the Cash Component, payable by wire transfer to the account designated by
HotRocket;

 

(2)                                  $200,000
of the Cash Component, payable by wire transfer to the account designated by
the Escrow Agent;

 

(3)                                  an
instruction letter delivered by Traffix on the Closing Date to its stock
transfer agent instructing such agent to issue to Hot Rocket 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 January 21, 2005 among Traffix, Inc.
(the “Corporation”), Hot Rocket Acquisition Corp., Hot Rocket Marketing Inc.,
and Mark Colacioppo.  The shares of stock
represented by this Certificate have not been registered under the

 

21

 

 

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.”

 

(4)                                  a
copy of Traffix’s and NEWCO’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;

 

(5)                                  a
certificate signed by the Secretary of each of Traffix and NEWCO, certifying as
to (a) the Certificate of Incorporation and By-Laws of each of Traffix and
NEWCO, respectively, (b) resolutions of the Board of Directors of each of
Traffix and NEWCO, 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 NEWCO,
respectively, executing this Agreement and any related agreements;

 

(6)                                  a
certificate signed by a duly authorized executive officer of each of Traffix
and NEWCO that (i) the representations and warranties of each of Traffix and
NEWCO 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); (ii) each of Traffix and NEWCO 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; and (iii) there is no Order or Law
in effect which prohibits Traffix and NEWCO from consummating the transaction
contemplated by this Agreement.

 

(7)                                  the
Registration Rights Agreement, as executed by Traffix;

 

(8)                                  an
Assignment and Assumption Agreement for those Contracts listed on Schedule 4.3(11)
hereto;

 

(9)                                  evidence
of issuance concurrent with the Closing of options to purchase an aggregate of
55,000 shares of Common Stock issued in the names of Mark and the Key Employees
at Closing (such options vesting in equal installments on each of the first,
second and third 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);

 

(10)                            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

 

22

 

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; (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;

 

(11)                            the
Key Employee Agreements; and

 

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

 

4.4                                 Delivery
of Employment Agreement at Closing.

 

At the Closing, Purchaser and Mark shall execute and deliver an
Employment Agreement in substantially the form of the Employment Agreement annexed
hereto as Schedule 1.35.

 

4.5                                 Payments
of Outstanding Liabilities to Certain Vendors.

 

At the Closing, Seller shall pay in full all outstanding balances owing
to American Express, Direct Revenue and Clockwork as of the Closing Date.  Seller and Seller’s Shareholder represent and
warrant to Purchaser (i) that such balances total $98,107.61, $108,575.00 and
$10,410.96, respectively and (ii) that such balances constitute not less than
85% of all amounts owing to Seller’s vendors as of the Closing Date.  HotRocket shall deliver to Purchaser at
Closing (a) invoices from each of American Express, Direct Revenue and
Clockwork setting forth the amounts owed to it by Hot Rocket and (b) checks
written by Hot

 

23

 

Rocket payable
to American Express, Direct Revenue and Clockwork, respectively, in amounts
sufficient to pay the foregoing balances in full.

 

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

 

HotRocket and the Seller’s Shareholder, jointly and severally,
represent and warrant to Traffix and Purchaser the following:

 

5.1                                 Existence
and Good Standing.

 

HotRocket 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.  HotRocket is duly qualified and in good
standing in each jurisdiction in which the failure to qualify would have a
Material Adverse Effect.

 

5.2                                 Shareholder.

 

The Seller’s Shareholder owns all of the issued and outstanding
securities of all classes of HotRocket. 
All such securities held by the Seller’s Shareholder 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 class of ownership interest of HotRocket
is authorized or outstanding other than the shares owned by the Seller’s
Shareholder.  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, or other ownership interest in
HotRocket.

 

5.3                                 Financial
Statements.

 

(a)                                  Seller
has furnished or made available to Traffix the following financial statements
(the “Delivered Financial Statements”):

 

(1)                                  the
Year-End Financial Statements;

 

(2)                                  the
Stub Period Financial Statements;

 

(3)                                  the
May 31 Financial Statements; and

 

(4)                                  the
December 31 Financial Statements.

 

The Delivered
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, subject in the case of
the unaudited financial statements included therein to the lack of footnote
disclosure and changes resulting from normal year-end adjustments (none of
which would, alone or in the aggregate, be materially adverse to the financial
condition, operating results, assets, operations or business prospects of the
Seller and its Affiliates).  The Year-End
Financial Statements have been audited by, and the Stub Period Financial
Statements and the May 31 Financial Statements have been reviewed by, Raiche
Ende LLP.  Such accountants are
independent public accountants.  Except
as set forth on 

 

24

 

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 periods covered by such Delivered
Financial Statements.  Except as set
forth on Schedule 5.3(a), the balance sheets included in the Delivered
Financial Statements, taken together, fairly present, in all material respects,
the financial condition of Seller and its Affiliates 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 GAAP 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.

 

(b)                                 Since
the Balance Sheet Date, except as set forth on Schedule 5.3(b), (i) there
has been 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) each of Seller and its Affiliates has operated its
business in a manner consistent in all material respects with past practices,
and has not incurred any liabilities or entered into any Contract other than in
the ordinary course and consistent in type with the liabilities reflected in
the Delivered Financial Statements and the Contracts entered into prior to the
date hereof and disclosed in the Schedules annexed to this Agreement and the
Delivered Financial Statements.  In
furtherance of, and without limiting the generality of, the foregoing, since
the Balance Sheet Date, except as specifically stated on Schedule 5.3(b),
neither Seller nor any Affiliate thereof has 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) (for the avoidance of doubt purchases of
Media Inventory shall not be deemed capital expenditures); canceled or waived
any claims or rights of substantial value; and made any change in any method of
accounting or auditing practice.

 

5.4                                 Books
and Records.

 

Except as set
forth on Schedule 5.4, all accounts, financial books and records, ledgers,
and other similar business records of Seller and its Affiliates of whatsoever
kind related to the Acquired Assets (including, without limitation, the
Clockwork Assets) and the Seller’s Business have been properly and accurately
kept and completed, 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 are 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.

 

25

 

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. 
Prior to January 1, 2005 Seller operated Seller’s Business from the
residence of Seller’s Shareholder.

 

(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
Lien 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.  All of Seller’s Machinery
and Equipment is set forth on Schedule 5.5(c).  Seller has no capital or operating leases
with respect to the Machinery and Equipment. 
Seller is not a party to any contract for the purchase of as yet undelivered
Machinery or Equipment.

 

(d)                                 Except
as set forth in Schedule 5.5(d), the Acquired Assets constitute all of the
assets used in connection with the Seller’s Business and at the Closing will be
available for immediate use by Purchaser. 
Except as set forth in Schedule 5.5(d), the Acquired Assets are all
of the assets necessary to conduct the Seller’s Business in the manner in
which, and to the extent to which, the Seller’s Business is currently being
conducted.  Immediately after the Closing
Date, none of Seller, Seller’s Shareholder or any Controlled Company (or any of
their respective Affiliates) shall own any right, title or interest in or to,
or have or control, any asset or other right used in connection with, related
to or necessary to the conduct of, Seller’s Business, except as set forth on Schedule 5.5(d).  For purposes of this Section 5.5(d), the
term Controlled Company shall not include Adwerks or EasySearchBar.

 

5.6                                 Contracts.

 

Except as set
forth in Schedule 5.6A, neither Seller (or any subsidiaries thereof) nor
Seller’s Shareholder is 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
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) 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).

 

Except as set
forth on Schedule 5.6A, there exists no default or event of default by
Seller (or any subsidiary thereof) or Seller’s Shareholder, or occurrence, condition,
or act (including this

 

26

 

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 Schedule 5.6A. 
Except as set forth on Schedule 5.6A, (i) neither Seller (or any
subsidiary thereof) nor Seller’s Shareholder has 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 subsidiary thereof) or
the Seller’s Shareholder, all of the covenants to be performed by any other
party thereto have been substantially performed.

 

Except as set
forth in Schedule 5.6B, neither Clockwork nor any subsidiaries thereof is
a party to or bound by any agreement, contract or commitment with any customer
or supplier.  Except as set forth on Schedule 5.6B,
there exists no default or event of default by Clockwork (or any subsidiary
thereof) 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 Schedule 5.6B. 
Except as set forth on Schedule 5.6B, (i) neither Clockwork nor any
subsidiary thereof has 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 subsidiary thereof) or the Seller’s Shareholder,
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 Shareholder, threatened since the Balance Sheet
Date, against or affecting Seller (or any subsidiaries thereof) or Seller’s
Shareholder 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
Shareholder 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
Shareholder, 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.  For
purposes of this Section 5.7, the term Affiliate shall not include
Clockwork.

 

5.8                                 Taxes.

 

Seller and
Mark and their respective Affiliates have filed all Tax Returns required to be
filed, and have paid all Taxes shown thereon as owing.  Schedule 5.8 lists all Tax Returns filed
(or with respect to which, appropriate extensions have been obtained) with
respect to Seller, Mark and their respective Affiliates for taxable periods
ended on or after December 31, 2001. 
None of such Tax Returns has been audited or is currently the subject of
an audit.  Seller has delivered to the
Purchaser correct and complete copies of all federal, state and local Tax
Returns,

 

27

 

examination
reports, and statements of deficiencies assessed against or agreed to by
Seller, Mark and/or their respective Affiliates since December 31,
2001.  None of Seller, Mark or their
respective Affiliates has 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, Mark or any of their respective Affiliates is a party to any Income Tax
allocation or sharing agreement.  For
purposes of this Section 5.8, the term Affiliate shall not include
Clockwork.

 

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 (in
the case of Clockwork, to the Knowledge of Seller or Seller’s Shareholder) for
borrowed money and all outstanding balances as of the date hereof with respect
thereto.  Neither Seller nor any of its
Affiliates (in the case of Clockwork, to the Knowledge of Seller or Seller’s
Shareholder) is 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 material
compliance with all applicable federal, state and local Laws, regulations and
Orders and all other applicable requirements of any Governmental Authority
having jurisdiction over the Seller’s Business or any of the Acquired
Assets.  Seller and its Affiliates are
not now charged with, and, to the Knowledge of Seller and the Seller’s
Shareholder, are 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.  For purposes of this Section 5.11, the
term Affiliate shall not include Clockwork.

 

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

 

28

 

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.

 

Seller does
not presently maintain any insurance policy (including life insurance) with
respect to Seller’s Business except for the insurance policies described in Section 5.16.

 

5.14                           Supplier
and Customer Relations.

 

There has not
been, and neither Seller nor the Seller’s Shareholder has any Knowledge that
would lead them to anticipate, any change in relations with the suppliers or
customers of Seller or any Affiliate thereof as a result of the acquisition of
the Acquired Assets by Purchaser that would result in a Material Adverse
Effect.  Schedule 5.14 lists the ten
largest suppliers and customers of Seller and its Affiliates, for the twelve
(12) month period ending September 30, 2004 based upon gross revenue
collected and/or paid in such period. 
Except as set forth on Schedule 5.14, none of these suppliers and
none of these customers has advised Seller or the Seller’s Shareholder, 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 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.

 

Other than Seller’s sole
shareholder, Mark, Seller has no other employees.  Seller has not committed any unfair labor
practice in connection with Seller’s Business and there is no unfair labor
practice complaint pending against Seller or any Affiliate thereof before any
applicable government entity.  Seller has
not experienced any labor difficulty during the last three (3) years.  For purposes of this Section 5.15, the
term Affiliate shall not include Clockwork.

 

5.16                           Employee
Benefit Plans.

 

Seller
maintains no “employee benefit plan” as defined in Section 3(3) of ERISA,
except for Seller’s Single Employee Pensions Plan and under which Seller’s
Shareholder is the sole participant. 
Each of such plans has been maintained in compliance with applicable
law.

 

5.17                           [Intentionally
Omitted].

 

5.18                           Valid
Agreements; Restrictive Documents.

 

Seller has
corporate authority, and Seller and the Seller’s Shareholder 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 and corporate action of Seller.  This Agreement and the Other Documents to
which Seller and/or the Seller’s Shareholder are a party have been duly
executed and delivered by Seller and/or the Seller’s Shareholder, respectively,
and constitute the

 

29

 

valid and
binding obligation of Seller and/or the Seller’s Shareholder, respectively,
enforceable against Seller and/or the Seller’s Shareholder, 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 Seller’s Shareholder nor
any of their respective Affiliates 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 Shareholder 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 HotRocket or
any of its Affiliates; 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 Shareholder or any of their respective Affiliates 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 Shareholder or any of their
respective Affiliates or upon any of their respective assets; or violate any
statute, Law or regulation of the United States or any state having
jurisdiction; and, which violations, conflicts or breaches of any of the
foregoing would have a Material Adverse Effect. 
For purposes of this Section 5.18, the term Affiliate shall not
include Clockwork.

 

5.19                           Required
Approvals, Notices and Consents.

 

Except as set
forth on Schedule 5.19 or Schedule 5.6, 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 Shareholder of this Agreement and the Other Documents or the
consummation by Seller and the Seller’s Shareholder of the transactions
contemplated hereby or thereby.  The
approval by the Seller’s Shareholder of this Agreement and the Other Documents
and the consummation by Seller and the Seller’s Shareholder 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, any Schedule hereto, or any
Other Document 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.

 

30

 

5.21                           Environmental
Conditions.

 

Prior to the
Closing Date Seller has operated Seller’s Business from the residence of Seller’s
Shareholder.  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.

 

(1)                                  Seller
is, and has been, 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 Shareholder nor Seller are aware,
without any duty of inquiry, of any threatened Environmental Claim that remains
outstanding.

 

(3)                                  Neither
Seller nor any Affiliate thereof has 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

 

(5)                                  No
approval is required under any Environmental Law for the acquisition of the
Acquired Assets pursuant to this Agreement.

 

For purposes
of this Section 5.21, the term Affiliate shall not include Clockwork.

 

5.22                           Health
and Safety Conditions.

 

Neither Seller
nor any Affiliate thereof has conducted any internal health and safety audits,
or industrial hygiene surveys.  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.  For purposes of this Section 5.22, the
term Affiliate shall not include Clockwork.

 

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
Shareholder or Seller in connection with this Agreement or the transactions
contemplated hereby, and there

 

31

 

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 Shareholder or Seller, or any action taken by any of them.

 

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                           Interaction
with Users.

 

Neither Seller
nor any of its Affiliates has engaged, through its operational software or
otherwise, in any of the following activities without first obtaining the
consent of the applicable computer user: 
(i) use of keystroke logging; (ii) interference with spyware blocking
software or attempting to uninstall spyware; and /or (iii) using another Person’s
computer to send spam or to open multiple advertisements that do not cease
unless the browser is closed or the computer is turned off.  It is the standard operating procedure of
Seller and each of its Affiliates to obtain electronically from each user of
Seller’s or such Affiliate’s software such user’s prior consent to the
installation of any software in such user’s computer.  For purposes of this Section 5.26, the
term Affiliate shall not include Clockwork.

 

5.27                           EasySearchBar.

 

Seller’s
Shareholder and Brian Rifkin (“Rifkin”) own collectively all of the issued and
outstanding securities of EasySearchBar. 
EasySearchBar has granted to each of Seller’s Shareholder and Rifkin a
perpetual, non-exclusive, royalty-free license (the “EasySearchBar License”) to
use any and all software owned, licensed or controlled by EasySearchBar.  Seller’s Shareholder has transferred and
assigned to Seller all of its right, title and interest in and to the
EasySearchBar License, free and clear of any Liens.  True, complete and correct copies of the
executed EasySearchBar License and the documentation memorializing and
effecting the aforementioned transfer and assignment are attached hereto as Schedule 5.27.  To the Knowledge of Seller or the Seller’s
Shareholder, no claim of infringement or misappropriation of Trade Rights has
been made against Seller’s Shareholder or Seller with respect to the
EasySearchBar License and, the EasySearchBar License, and NEWCO’s use thereof,
does not and will not infringe upon any Trade Rights of any third party.  The EasySearchBar License is included in the
Acquired Assets.  EasySearchBar does not
own or control any asset that is related to or necessary in the conduct of the
Seller’s Business that is not included in the Acquired Assets.  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 Shareholder, threatened against or
affecting EasySearchBar or any of its properties or rights, and to the
Knowledge of Seller or the Seller’s Shareholder 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.  EasySearchBar has no outstanding liabilities
owing to its vendors.

 

32

 

5.28                           Adwerks.

 

Since its incorporation, Adwerks has not conducted or operated any
business, owned any assets (other than the name Adwerks), earned any revenues
or incurred any liabilities.  Seller’s
Shareholder owns all of the issued and outstanding securities of Adwerks.  Seller’s Shareholder has caused Adwerks to
transfer all of its right, title and interest in and to the name “Adwerks” to
Seller, free and clear of all Liens. 
Adwerks does not own or control any asset that is related to or
necessary in the conduct of the Seller’s Business that is not included in the
Acquired Assets.  Seller’s Shareholder
has caused Adwerks’ website to be terminated.

 

5.29                           Clockwork.

 

Philip Colacioppo and Joseph Frevola own all of the issued and
outstanding securities of Clockwork. 
Clockwork has transferred and assigned to Seller all of its right, title
and interest in and to (A) the name “Clockwork”; (B) the customer list of
Clockwork; and (C) the contracts and agreements listed on Schedule 5.6B
hereto, in each instance free and clear of any Liens.  True, complete and correct copies of the
documentation memorializing and effecting the aforementioned transfers and
assignments are attached hereto as Schedule 5.29.  Each of the items described in clauses (A),
(B) and (C) above is included in the Acquired Assets.  Clockwork does not own or control any asset
that is related to or necessary in the conduct of the Seller’s Business that is
not included in the Acquired Assets. 
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
Shareholder, threatened against or affecting Clockwork (or any subsidiaries
thereof) or any of their respective properties or rights, and to the Knowledge
of Seller or the Seller’s Shareholder 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 5.29,
Clockworks is not 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.  Except as set forth on Schedule 5.29,
Clockwork is in material compliance with all applicable federal, state and
local Laws, regulations and Orders and all other applicable requirements of any
Governmental Authority having jurisdiction over Clockwork or any of the Clockwork
Assets.  Clockwork is not now charged
with, and, to the Knowledge of Seller and the Seller’s Shareholder, is not now
under investigation with respect to, any violation of any Law, regulation, or
Order affecting the Clockwork Assets. 
Except as set forth on Schedule 5.29, no consent or approval of,
other action by, or notice to, any Governmental Authority, or any third party
was required in connection with transfer and assignment by Clockwork of its
right, title and interest in and to the Clockwork Assets to Seller.

 

5.30                           Seller’s
Accounts Receivable and Payable.

 

Schedule 5.30
sets forth a list (true, complete and correct in all material respects) of all
of the Seller’s outstanding accounts receivable and accounts payable as of December 31,
2004.

 

33

 

5.31                           Good
Media Inventory.

 

All items of
Media Inventory owned by Seller immediately prior to the Closing were acquired
in the ordinary course of business, are merchantable and fit for the purpose
for which such Media Inventories were procured, and are usable and saleable in
the ordinary course of business of Purchaser. 
Schedule 5.31 sets for a true, complete and accurate list of all
Media Inventory included in the Acquired Assets.

 

6.                                      REPRESENTATIONS OF TRAFFIX AND
PURCHASER.

 

Traffix and
Purchaser represent and warrant to Seller and the Seller’s Shareholder 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 Shareholder
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.  The execution, delivery and performance of
this Agreement and the

 

34

 

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 (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.

 

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.

 

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 Exchange Act, 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.

 

35

 

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 and upon reasonable prior written notice, 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 7.3 hereof and (c)
for any other reasonable business purpose.

 

7.3                                 Cooperation
in Preparation of Securities Law Filings.

 

Seller and the
Seller’s Shareholder 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, the Exchange Act or other United
States securities laws or Blue Sky Laws relating to the transactions described
in this Agreement.  Without limiting the
generality of the foregoing, Seller and Seller’s Shareholder shall execute and
deliver all consents or waivers that may be required by Seller’s Accountants in
connection with Purchaser’s or Traffix’s hiring of Seller’s Accountants for the
purpose of meeting Traffix’s filing requirements under applicable Law.  Traffix shall reimburse Seller and Seller’s
Shareholder for any reasonable out-of-pocket expenses incurred by them in
connection with their cooperation under this Section 7.3.  Following the Closing Date, the parties
hereto shall work together in good faith to determine promptly if any
adjustments are necessary with respect to expenses arising out of the Seller’s
Business that should be prorated between the parties, including any pre-paid
expenses paid by Hot Rocket prior to the Closing covering periods after the
Closing, such as pre-paid Media Inventory, pre-paid rent on the office space
leased by Hot Rocket at 220 Mineola Boulevard, Mineola, New York, the security
deposit paid by Hot Rocket in respect of such leased office space and usual and
customary expenses normally prorated in transactions of this type.

 

7.4                                 Availability
of Minimum Working Capital.

 

Traffix hereby
warrants and represents that while the Contingent Purchase Price is subject to
determination in accordance with this Agreement it shall make available for use
by Purchaser working capital in an amount equal to at least the Minimum Working
Capital as required by the

 

36

 

terms hereof,
provided that the applicable Operating Threshold is met (as determined in
accordance with Section 7.7).

 

7.5                                 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 fifth
anniversary of the Closing Date.

 

7.6                                 Retention
of Purchaser Business Subsequent to Termination of Employment of Seller’s
Shareholder.

 

In the event the employment of Mark under his Employment Agreement (i)
is terminated by Purchaser without Cause (as defined in the Employment
Agreement) or (ii) is terminated by Mark For Good Reason (as defined in the
Employment Agreement), in either case, from the date Mark’s employment is so
terminated until the fifth anniversary of the Closing Date, Traffix and
Purchaser will not divert any sources of revenue from Purchaser that were
attributable to NEWCO EBITDA as of the date of such later termination, and will
continue to recognize revenue consistent with its prior practices; provided
the foregoing shall not serve as a limitation or constitute a waiver of any and
all rights and remedies which Mark may have under the terms of this Agreement,
the terms of the Employment Agreement or otherwise under applicable Law.

 

7.7                                 Post-Closing Management of NEWCO.

 

(a)                                  From
the Closing Date up to and including the date upon which the Fourth Contingent
Payment is due to be calculated (such period, the “Contingent Payment Period”),
provided that the Operating Threshold is met at all times during Operating
Threshold Period, Purchaser and Traffix, acting in good faith, shall (i) permit
Mark as President of NEWCO to operate the business of NEWCO in the manner
substantially similar to the manner in which the Seller’s Business was operated
during the twenty-four (24) month period prior to the Closing Date (unless
those practices are unreasonable or not consistent with prudent business
practices), subject to the other provisions of Sections 7.7(a) and (b), and
(ii) make funds, personnel and resources available on a timely basis so that
the covenant in clause (i) above can be accomplished in a reasonable manner
consistent with the amount and nature of same as a percentage of sales that
were expended or used in the operation of the Seller’s Business as operated as
of the Closing Date, and (iii) not take any action (other than actions
enforcing Purchaser’s or Traffix’s rights under any other agreement between
them and HotRocket or Mark) that would have the reasonably foreseeable
consequence of reducing Mark’s ability as President of NEWCO to operate the
business of NEWCO and Mark’s ability to receive the Contingent Payments, and
(iv) cause NEWCO to be maintained as a separate wholly-owned subsidiary of
Traffix.  During the Contingent Payment
Period, neither Purchaser nor Traffix will take any of the following actions
without the prior written approval of Mark, unless the obligations of Purchaser
and Traffix in this Section 7.7(a) are assumed by the transferee or
successor or surviving entity:  (i) sell,
lease or otherwise dispose of all or a material portion of the assets of NEWCO;
or (ii) effect any transaction that would be a consolidation or merger of NEWCO
with or into any other corporation or corporations or the sale, transfer or
assignment of securities of NEWCO.

 

37

 

(b)                                 Notwithstanding
the restrictions on Purchaser and Traffix in Section 7.7(a), (i) Mark acknowledges
that he will work with Purchaser and Traffix to implement reasonable operating
efficiencies by consolidating certain general, administrative, legal, and
accounting functions that are duplicated by Traffix’s and/or its Affiliates and
Mark’s staff; provided, that the implementation of any suggested change
by Purchaser and/or Traffix pursuant to this Section 7.7(b), other than a
change to outside legal or accounting firms, shall be subject to the consent of
Mark, which consent shall not be unreasonably withheld or delayed (the
reasonableness of the granting or denial of such consent shall be determined by
whether the requested change would interfere in a material manner with the
maximization of NEWCO EBITDA during the Contingent Payment Period); provided,
further, that the foregoing consent of Mark shall be required only for
so long as the Operating Threshold is met, and (ii) such restrictions shall not
be applied in a manner that would interfere with Traffix’ ability to implement
such internal controls that satisfy the requirements of the legislation known
as the Sarbanes-Oxley Act of 2002, the term “internal controls” being used in
the same manner as under such legislation, or with Traffix’s ability to fulfill
its reporting requirements under the Exchange Act.  Notwithstanding any provision in this
Agreement to the contrary, all billing to NEWCO’s customers, collections of
accounts receivable and all payments to NEWCO’s suppliers will be processed by
Traffix.  Mark shall submit to Traffix
all purchase orders, insertion orders and other supporting documentation
necessary for Traffix to undertake the aforementioned processing, together with
appropriate invoices prepared by Mark setting forth in reasonable detail the
action to be taken by Traffix.  If any
dispute arises from any such invoice submitted by Mark to Traffix, Mark and
Traffix will work together to resolve such dispute promptly.

 

(c)                                  In
determining whether the “Operating Threshold is met” under this Agreement, the
provisions of this Section 7.7(c) shall apply.  The Operating Threshold shall be met if NEWCO’s
average monthly Gross Profit for any two consecutive Calendar Quarters (as
defined below) is equal to or greater than the Operating Threshold in effect
during such Calendar Quarters.  The Operating
Threshold in effect at any time during the term of this Agreement shall be
determined as follows:

 

	
  Time Period

  	
   

  	
  Operating Threshold

  
	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the Start Date

  	
   

  	
  $200,000
  (average monthly Gross Profit for any two consecutive Calendar Quarters)

  
	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the first anniversary of the
  Start Date

  	
   

  	
  $220,000
  (average monthly Gross Profit for any two consecutive Calendar Quarters)

  
	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the second anniversary of
  the Start Date

  	
   

  	
  $242,000
  (average monthly Gross Profit for any two consecutive Calendar Quarters)

  
	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months beginning on the third anniversary of the
  Start Date

  	
   

  	
  $266,200
  (average monthly Gross Profit for any two consecutive Calendar Quarters)

  
	
   

  	
   

  	
   

  
	
  For the
  period of twelve consecutive months 

  	
   

  	
  $292,820
  (average monthly Gross Profit for 

  
	
   

  	
   

  	
   

  
	
  beginning on
  the fourth anniversary of the Start Date

  	
   

  	
  any two
  consecutive Calendar Quarters)

  

 

38

 

For purposes of this Section 7.7(c), the term “Gross Profit” shall
mean NEWCO’s sales revenue less the cost of goods sold incurred by NEWCO to
generate such revenues (i.e., cost of media, agency fees associated with
such media, costs of products or premiums and other items commonly referred to
as “cost of good sold”), for the period with respect to which a calculation is
made.  If two Operating Thresholds shall
apply to any period of two consecutive Calendar Quarters, the applicable
Operating Threshold shall the weighted average of the two Operating Thresholds
taking into account the portion of such period covered by each Operating
Threshold.  By way of illustration, if
during a period of two consecutive Calendar Quarters the Operating Threshold of
$220,000 applies to four calendar months and the Operating Threshold of
$242,000 applies to two calendar months, the applicable Operating Threshold
shall be $227,333 ([($220,000 x 4) + ($242,000 x 2)] / 6).  For purposes of this Agreement, the term “Calendar
Quarter” shall mean any period of three consecutive calendar months.

 

(d)                                 If
the Operating Threshold is not met at any time during the Operating Threshold
Period, Mark’s management authority under Section 7.7 shall be diminished
in accordance with this Section 7.7(d). 
From the time that the Operating Threshold is not met, prior to taking
any action that constitutes a Significant Action, Mark must obtain the prior
written approval of an executive officer of Traffix.  For purposes of this Section 7.7(d),
Significant Action means one or more actions, or a series of related actions,
that individually or in the aggregate with other such actions would result in
NEWCO incurring an obligation to pay any Person $25,000 or more during any
calendar month.

 

7.8                                 Non-competition.

 

(a)                                  Seller
and Mark acknowledge that Traffix and Purchaser are relying on the following
non-competition covenants as an essential inducement and condition precedent to
their entering into this Agreement and acquiring the Acquired Assets
hereunder.  Seller and Mark further
acknowledge that the position of Mark as a shareholder, officer and employee of
Seller required, and his position with Purchaser will require, the performance
of services which are special, unique, extraordinary and of an intellectual
character, and placed him in a position of confidence and trust with Seller and
will place him in a position of confidence and trust with Traffix and
Purchaser.  Seller and Mark therefore
agree that it is reasonable and necessary for the protection of the goodwill
and business of Traffix and Purchaser, including, without limitation, the
goodwill attributable to the Seller’s Business, that Seller and Mark make the
covenants contained herein.  Seller and
Mark also acknowledge that Traffix’s business is conducted and its customers
and prospective customers are located throughout Canada, the United States and
the world and that therefore it is impossible to place a geographic limitation
upon the scope of the restrictive covenants contained in this Section 7.8.

 

(b)                                 In
consideration for the Purchase Price, each of Seller and Mark agrees that
during the Restrictive Period (as such term is defined below), it or he, as the
case may be, will not, directly or indirectly through any Affiliate or other
intermediary (A) manufacture, produce, sell, market or otherwise promote any
Competitive Product (as defined below) or serve

 

39

 

as a partner, member, manager,
director, officer or employee of, or consultant or advisor to, or in any manner
own, control, manage, operate or otherwise participate or invest in, or be
connected with, any individual or entity that engages in the marketing or sale
of Competitive Products, or authorize the use of its or his name in connection
therewith, or (B) for itself or himself, as the case may be, or on behalf of
any other individual or entity, employ, engage or retain any person who at any
time during the preceding 12-month period shall have been an employee of
Traffix or Purchaser or their respective Affiliates, or contact any supplier,
customer or employee of Traffix or Purchaser or their respective Affiliates for
the purpose of soliciting or diverting any such supplier, customer or employee
from Traffix or Purchaser or their respective Affiliates or otherwise adversely
affecting Purchaser’s business.  As used
in this Agreement, the term “Competitive Product” means any product or service
that is substantially similar to any product or service developed, marketed,
distributed or sold by (i) Seller or Mark or any of their respective Affiliates
prior to the date of this Agreement or (ii) Traffix or NEWCO or their
respective Affiliates during the Restrictive Period.

 

(c)                                  As
used in this Agreement, the term “Restrictive Period” means the date that is
the five (5) years from the Closing Date.

 

(d)                                 Seller
and Mark acknowledge that a breach of the provisions of this Section 7.8
would irreparably damage Purchaser, and that once such a breach has occurred,
there may be no accurate way of determining the amount of damage or loss
suffered by Purchaser.  Seller and Mark
therefore agree that, notwithstanding anything contained in this Agreement to
the contrary, the terms of this Section 7.8 may be enforced through
preliminary or final injunctive relief or other equitable remedy without having
to prove irreparable injury and without the necessity for a bond or other
security.

 

(e)                                  Seller
and Mark acknowledge that the type and periods of restriction imposed in this Section 7.8
are fair and reasonable and are reasonably required for the protection of
Traffix and Purchaser and the goodwill, business and assets of Traffix and
Purchaser.  If any of the provisions of
this Section 7.8 relating to time, geographical area, services, products,
devices and/or information are deemed by a court of competent jurisdiction to
be overly broad or for any other reason unenforceable, the parties agree that
such restrictions herein as to time, geographical area, services, products,
devices and/or information shall be reduced to such time, geographical area,
services, products, devices and/or information as such court shall hold to be
reasonable and legally enforceable.  In
addition, if any court determines that any of the restrictive covenants
contained in this Section 7.8, or any part thereof, is invalid or
unenforceable, the remainder of the restrictive covenants shall not thereby be
affected and shall be given full effect without regard to the invalid portions.

 

7.9                                 Key
Employee Agreements.

 

At or promptly
after the Closing, NEWCO shall enter into employment agreements with Philip
Colacioppo and Joseph Frevola (collectively, the “Key Employees”) pursuant to
the employment agreements annexed hereto as Schedule 7.9 (the “Key
Employee Agreements”).

 

40

 

7.10                           Payment
of Excluded Liabilities.

 

Seller’s
Shareholder and Seller shall pay, perform and discharge when due all of the
Excluded Liabilities, and Seller’s Shareholder shall take all action necessary
or convenient to ensure that Seller fulfills its obligations under this Section 7.10.

 

7.11                           Purchase
Price Allocation.  

 

The parties
shall work together in good faith to determine promptly after Closing the
allocation of the Purchase Price (such allocation, the “Purchase Price
Allocation”) among the Acquired Assets. 
The Purchase Price Allocation shall be made in a manner 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 7.11.  Any state or local sales tax or other
transfer tax due with respect to the transfer of the Acquired Assets conveyed
to the Purchaser shall be paid by Seller.

 

8.                                      SURVIVAL OF REPRESENTATIONS;
INDEMNITIES.

 

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

 

The representations and warranties and covenants of Seller and Seller’s
Shareholder 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 twenty-four (24) months; provided,
however, that the representations and warranties made in Sections 5.2,
5.5, 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,
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 Shareholder to Indemnify.

 

Subject to Section 8.1,
Seller and the Seller’s Shareholder, 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 Shareholder 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
Shareholder contained in this Agreement or any of the Other Documents or (ii)
any Claim based upon the

 

41

 

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 twenty-four (24) months; provided, however,
that (i) the representation and warranty made in Section 6.2, and (ii) the
obligation to indemnify Seller and the Seller’s Shareholder for any Claim
brought by a third party incurred by Seller or the Seller’s Shareholder 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 Shareholder and
their respective officers, directors, employees and agents, and any of their
successors, heirs and assigns (collectively, “Seller Indemnified Parties”) from
and against (i) any and all Claims based upon, arising out of or otherwise in
respect of 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
brought by any third party arising out of 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) 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.

 

42

 

(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 reasonably satisfactory to the
Indemnitee 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; provided that such
defenses do not obstruct, interfere with or otherwise negatively impact those
defenses or counterclaims asserted by the Indemnifying Party.  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 reasonably
requested by the Indemnifying Party and/or 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
on Liability.

 

(a)                                  The
indemnification obligations under Section 8.2 shall not apply to any
Claims until the aggregate of all Claims suffered by the Traffix Indemnified
Parties shall exceed the Indemnification Threshold, except as provided
below.  In the event that Claims suffered
by the Traffix Indemnified Parties do exceed the Indemnification Threshold, the
Traffix

 

43

 

Indemnified Parties shall be
entitled to recover from Seller and Seller’s Shareholder, on a joint and
several basis, the full amount of such Claims in excess of the Indemnification
Threshold subject to the limits of this Agreement.  In no event shall the indemnification
obligations under Section 8.2 exceed in the aggregate the Indemnification
Cap, except as provided below.  The
limitations in this Section 8.5(a) (both the Indemnification Threshold and
the Indemnification Cap) shall not apply to (1) any breach of the
representations or warranties of Seller and Seller’s Shareholder in Sections
5.1, 5.5, 5.8, and 5.21, (2) any breach of any covenant or agreement or (3) any
willful breach under this Agreement or any fraudulent act or omission.

 

(b)                                 The
indemnification obligations under Section 8.3(b) shall not apply to any
Claims until the aggregate of all Claims suffered by the Seller Indemnified
Parties shall exceed the Indemnification Threshold, except as provided
below.  In the event that Claims suffered
by the Seller Indemnified Parties do exceed the Indemnification Threshold, the
Seller Indemnified Parties shall be entitled to recover from Purchaser and
Traffix, on a joint and several basis, the full amount of such Claims in excess
of the Indemnification Threshold subject to the limits of this Agreement.  In no event shall the indemnification
obligations under Section 8.3(b) exceed in the aggregate the
Indemnification Cap, except as provided below. 
The limitations in this Section 8.5(b) (both Indemnification
Threshold and the Indemnification Cap) shall not apply to any willful breach
under this Agreement or any fraudulent act or omission.

 

(c)                                  Any
indemnification payment made by Seller hereunder shall be payable in a
combination of cash and shares of Common Stock in the same proportion as the
combination of cash and shares of Common Stock constituting the Fixed Purchase
Price; provided that if Seller sells any shares of Common Stock after
the Closing, the portion of any such indemnification payment payable in cash
shall be increased by an amount equal to the product of (x) the number of
shares of Common Stock sold by Seller after the Closing, multiplied by (y) the
Closing Share Price.  The parties hereto
agree that the value of each share of Common Stock at the time of any such
indemnification payment shall be the Closing Share Price.

 

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 Seller and the Seller’s Shareholder 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

 

44

 

REFERENCE
TO ITS CONFLICT OF LAWS PROVISIONS.  EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY CONSENTS AND SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY 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 OF NEW YORK 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 9.4 OF THIS
AGREEMENT.

 

9.3                                 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.

 

9.4                                 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 to 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 Forchelli,
Curto, Schwartz, Mineo, Carlino & Cohn, LLP, 330 Old Country Road, Mineola,
New York 11501, Attention:  Barbara S. Alesi,
Esq.,
or such other address as shall be furnished in writing by like notice by any
such party.

 

9.5                                 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.

 

9.6                                 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.

 

45

 

9.7                                 Counterparts.

 

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

 

9.8                                 Entire
Agreement; Amendments.

 

This
Agreement, including all Schedules
attached hereto, and the Other Documents contain the entire agreement of the
parties and supersede any and all prior or contemporaneous agreements between
the parties, written or oral, with respect to the transactions contemplated
hereby.  This Agreement 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.

 

46

 

IN WITNESS
WHEREOF, the individual party has 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:

  	
   

  	
   

  
	
   

  	
  Name: Joshua
  B. Gillon

  
	
   

  	
  Title:
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOT ROCKET ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Joshua
  B. Gillon

  
	
   

  	
  Title:
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOT ROCKET MARKETING INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Mark
  Colacioppo

  
	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MARK COLACIOPPO

  

 

47Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT, dated as of
January 21, 2005 (this “Agreement”), is between TRAFFIX, INC., a Delaware corporation having an address at One
Blue Hill Plaza, Fifth Floor, Pearl River, New York 10965 (the “Company”); HOT ROCKET MARKETING, INC., a New York
corporation having an address at 220 Mineola Boulevard, Suite 5 & 6,
Mineola, New York 11501 (the “Holder”); and
MARK COLACIOPPO, an individual having an address at 25 Wheatley
Avenue, Albertson, NY 11507 (“Mark”).

 

The parties to
this Agreement, intending to be legally bound hereby, agree as follows:

 

1.     Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

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

 

“Demand” shall
have the meaning given in Section 3.2.

 

“Demand
Registration” shall have the meaning given in Section 3.2.

 

“Effective
Date” means the date of this Agreement set forth above.

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time.

 

“Initiating
Holder” means the Holder or Mark.

 

“Person” means
an individual, partnership, corporation, trust or unincorporated organization,
or a government or agency or political subdivision thereof.

 

“Piggyback
Notice” shall have the meaning given in Section 3.1.

 

“Piggyback
Registration” shall have the meaning given in Section 3.1.

 

“Prospectus”
means the prospectus included in any Registration Statement, as amended or
supplemented by any prospectus supplement and by all other amendments, and
supplements to such prospectus, including post-effective amendments and all
information incorporated by reference in such prospectus.

 

“Registrable
Securities” means any shares of Common Stock (i) issued to the Holder as of the
Effective Date or (ii) issued or issuable to an Initiating Holder after the
Effective Date in either case by virtue of any securities split or combination,
securities dividend or similar event in respect of any of the shares referred to
in clause (i) of this definition; provided, however, that shares
of Common Stock that are Registrable Securities shall cease to be Registrable
Securities upon the sale thereof to any Person other than an Initiating Holder;
and provided, further, that the Company shall have no obligation
hereunder to register any Registrable Securities of an

 

 

Initiating
Holder if the Company shall deliver to that Initiating Holder an opinion of
counsel to the effect that the proposed sale or disposition of all of the Registrable
Securities for which registration was requested or demanded does not require
registration under the Securities Act for a sale or disposition, and offers to
remove any and all legends restricting transfer from the certificates
evidencing such Registrable Securities in connection with any such sale.

 

“Registration”
shall mean either a Piggyback Registration or a Demand Registration.

 

“Registration
Expenses” means, with respect to any Registration, all registration and filing
fees; fees with respect to filings required to be made with Nasdaq or any other
exchange or market in which Registrable Securities are to be quoted or listed
for trading; fees and expenses of compliance with securities or blue sky laws;
printing expenses; expenses associated with the preparation and distribution of
any Registration Statement, any Prospectus, and amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement;
all fees and expenses associated with the listing of any Registrable Securities
on any securities exchange or exchanges; fees and disbursements of counsel for
the Company and its independent certified public accountants; fees and expenses
of underwriters customarily paid by issuers (but specifically excluding any
Selling Expenses); and fees and expenses of other persons retained by the
Company.

 

“Registration
Statement” means any registration statement of the Company filed under the
Securities Act including the Prospectus forming a part thereof, amendments and
supplements to such Registration Statement, including post-effective
amendments, and all exhibits to and all information incorporated by reference
in such registration statement.

 

“SEC” means the
Securities and Exchange Commission.

 

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

 

“Selling
Expenses” means, with respect to any holder of Registrable Securities, all
underwriting discounts, selling commissions and stock transfer or documentary
stamp taxes, if any, applicable to any Registrable Securities registered and
sold by such holder, and all fees and disbursements of any counsel for such
holder.

 

“Underwritten
Offering” means an offering registered under the Securities Act in which
securities are sold to an underwriter, whether on a “firm commitment”, “best
efforts” or other basis, for reoffering to the public.

 

2.     Securities
Subject to this Agreement.  The only
securities entitled to the benefits of this Agreement are the Registrable
Securities.

 

3.     Registration
of Registrable Securities.

 

3.1           Piggyback Registration.

 

If at any time after the Effective Date the Company shall determine to
register any of its equity securities, either for its own account or the account
of a security holder (including,

 

 

without limitation, pursuant to any public
offering or a demand for registration of any shareholder of the Company) under
the Securities Act other than on Form S-8 or Form S-4, the Company will:  (a) promptly give to the Holder written
notice thereof (the “Piggyback Notice”) and (b) include in such registration
(and any related qualification under blue sky laws or other compliance) and in
any underwriting involved therein, Registrable Securities, if requested to do
so in a written request made within ten (10) days after receipt of the
Piggyback Notice from the Company by any Initiating Holder (a “Piggyback
Registration”); except that if such offering is an Underwritten Offering and
the managing underwriter thereof shall impose a limitation on the number of
securities which may be included in such registration because, in its judgment,
such limitation is necessary to effect an orderly public distribution of the
underwritten securities, then, subject to such limitation, the Company shall
include in such registration securities requested to be registered by Persons
exercising contractual piggy-back registration rights, including pursuant to
this Agreement, pro  rata among the holders so requesting
registration on the basis of the number of securities requested to be
registered by all such holders, except to the extent that the Company’s
contractual obligations existing as of the date hereof to other parties holding
registration rights require that priority be given to such parties.  No Registrable Securities shall be included
in such Underwritten Offering if less than all of the securities with respect
to which the Company seeks inclusion, or with respect to which any party
exercising contractual demand registration rights seeks inclusion, are included
therein.  Any Registrable Securities not
included in the Underwritten Offering shall continue to maintain the piggyback
registration rights provided for in this Section 3.1.

 

3.2           Demand
Registration.

 

(a)           At
any time after the Effective Date until the delivery of a Piggyback Notice and,
subject to the other provisions of this Agreement, the Initiating Holders shall
have the right exercisable on no more than (i) one occasion in any 12-month
period; and (ii) three occasions in the aggregate, by making a written request
to the Company (such request being referred to hereinafter as a “Demand”), to
require that the Company use its reasonable efforts to effect the registration
in accordance with the provisions of the Securities Act of the offering and
sale of  Registrable Securities.  Any Demand shall be addressed to the
attention of the Secretary of the Company, and shall specify the intended
reasonable method of disposition of the Registrable Securities.  A Registration pursuant to this Section 3.2
(a “Demand Registration”) shall be on such appropriate registration form of the
SEC as shall (i) be selected by the Company, and (ii) permit the
disposition of the Registrable Securities in accordance with the intended
method or methods of disposition specified in the Demand.

 

(b)           If,
at the Company’s sole discretion, the Demand Registration is pursuant to an
Underwritten Offering, and the managing underwriter thereof shall impose a
limitation on the number of Registrable Securities which may be included in the
Registration Statement because, in its judgment, such limitation is necessary
to effect an orderly public distribution of the underwritten securities, then
the Company shall be obligated to include in such Registration Statement only such
limited portion (or none, if so required by the managing underwriter) of the
Registrable Securities with respect to which the Initiating Holders have
demanded inclusion hereunder.  No other
securities may be included in such Registration Statement if less than all of
the Registrable Securities with respect to which the Initiating Holders have
demanded inclusion are included therein. 
If the total number of Registrable Securities specified in the Demand

 

cannot be included as provided in the
preceding sentence, the Initiating Holders shall have the right to an
additional Demand.

 

(c)           The Company may delay the filing of
any Registration Statement pursuant to this Section 3.2 for a reasonable period
of time (but not to exceed 90 days) if, in the good faith judgment of the Board
of Directors of the Company, the Company would be required to include in such
Registration Statement material information which at that time could not be
publicly disclosed without materially interfering with any financing, acquisition,
corporate reorganization or other material development or transaction then
pending or in progress and without other material adverse consequences.  In the event of any such delay, the
Initiating Holders shall have the right to withdraw their request for
Registration and any such withdrawn request that would otherwise have been
considered a Demand shall not be considered for purposes of determining the
maximum number of Demands provided for in Section 3.2(a).

 

3.3           Effective Registration Statement.

 

A Registration shall not be deemed to have
been effected (i) unless a Registration Statement with respect thereto has
become effective and remained effective in compliance with the provisions of
the Securities Act with respect to the disposition of the Registrable
Securities until such time as all of such Registrable Securities included
therein have been disposed of in accordance with the intended methods of
disposition by the Initiating Holders thereof set forth in such Registration
Statement, unless the failure to so dispose of such Registrable Securities
shall be caused in whole or in part by reason of any act or omission on the
part of any Initiating Holder; provided, that with respect to any Registration
Statement filed pursuant to Rule 415 under the Securities Act, such period need
not exceed 180 days, and that with respect to any other such Registration
Statement, such period need not exceed 135 days, or (ii) if, after it has
become effective, such Registration is interfered with by any stop order, injunction
or other order or requirement of the SEC or other governmental agency or court
for any reason not attributable to the Initiating Holders and has not
thereafter become effective.

 

4.             Registration Procedures.

 

In connection
with the Company’s obligations under Section 3, the Company shall use all
reasonable efforts to effect such Registration to permit the sale of
Registrable Securities in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company shall as expeditiously
as practicable:

 

(a)           prepare and file with the SEC (which
such filing in the case of a Demand Registration shall be made within ninety
(90) days after the Company’s receipt of a Demand), a Registration Statement on
an appropriate registration form, which Registration Statement shall comply as
to form in all material respects with the requirements of the applicable form
and include or incorporate by reference all financial statements required by
the SEC to be filed therewith or incorporated by reference therein, and in
either case use all reasonable efforts to cause such Registration Statement to
become effective and remain effective in accordance with Section 3.3;

 

(b)           prepare and file with the SEC such
amendments and post-effective amendments to such Registration Statement as may
be necessary to keep the Registration Statement effective for the applicable
period, or such shorter period which shall terminate when all Registrable
Securities have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and to be filed pursuant to Rule 424 under the
Securities Act; and otherwise take all such actions as may be necessary to
cause the Registration Statement to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the Initiating Holders set forth
in such Registration Statement or supplement to the Prospectus;

 

(c)           if requested by the managing
underwriter or underwriters or an Initiating Holder being offered for sale in
connection with an Underwritten Offering, to the extent required by applicable
law, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters or such
Initiating Holder consider should be included therein relating to the plan of
distribution with respect to such Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered for sale, the purchase price being paid therefor and, with
respect to any other terms of the offering, of the Registrable Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after being
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment;

 

(d)           prior to any public offering of
Registrable Securities, use its reasonable efforts to (i) register or qualify
or cooperate with the Initiating Holders, the underwriters, if any, and their
respective counsel in connection with the Registration or qualification of such
Registrable Securities for offer and sale under the state securities or blue
sky laws of such jurisdictions as any Initiating Holder or underwriter
reasonably requests in writing and (ii) do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement; provided
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or taxation in any such
jurisdiction where it is not then so subject;

 

(e)           cooperate with the Initiating Holders
and the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold without any restrictive legends in compliance with the Securities Act;
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters may
reasonably request;

 

(f)            use all reasonable efforts to cause
all Registrable Securities covered by the Registration Statement to be listed
an each securities exchange, if any, on which the Common Stock is then listed
or on the Nasdaq Market, if the Common Stock is then traded thereon;

 

(g)           in the case of a firm commitment
underwritten offering, execute an underwriting agreement in form and substance
usual in such transactions; and

 

(h)           furnish to each Initiating Holder a
signed counterpart, addressed to the underwriters, if any, of:

 

(i)                                     an opinion of counsel for the
Company dated the effective date of such Registration Statement (and, if such
registration includes an underwritten public offering, dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and
substance to such underwriters, and

 

(ii)                                  a
“comfort” letter, dated the effective date of such Registration Statement (and,
if such registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), signed by the independent
certified public accountants who have certified the Company’s financial
statements included in such Registration Statement, covering substantially the
same matters with respect to such Registration Statement (and the prospectus
included therein) and, in the case of the accountants’ letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer’s counsel and in accountants’ letters delivered
to the underwriters in underwritten public offerings of securities and, in the
case of the accountants’ letter, such other financial matters, and, in the case
of the legal opinion, such other legal matters, as such Initiating Holder (or
the underwriters, if any) may reasonably request; and

 

(iii)                               otherwise
reasonably cooperate with the Initiating Holders to carry out the intent of
this Agreement.

 

It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Agreement with respect to the Registrable Securities of any
Initiating Holder that such Initiating Holder cooperates with the Company in
preparing such Registration.

 

5.             Indemnification.

 

5.1   Indemnification
by the Company.  In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless each Initiating
Holder, its officers and directors, each underwriter, broker or any other
person acting on behalf of such Initiating Holder and each other person, if
any, who controls any of the foregoing persons within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Initiating Holder or any such director or officer or
underwriter or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto or any document incident to registration or qualification of
any Registrable Securities or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or, with respect to
any prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by
the Company of the Securities Act or state securities or blue sky laws
applicable to

 

the Company and relating to action or
inaction required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and the Company
will reimburse such Initiating Holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment,
supplement or incidental document in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by or on behalf of any of the foregoing indemnified parties and;
provided further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person’s failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus.  Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Initiating Holder or any such director, officer,
underwriter or controlling person and shall survive the transfer of such
securities by such Initiating Holder.

 

5.2   Indemnification
by the Initiating Holder.  The Initiating
Holders hereby indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 5.1) the Company, each officer, director,
employee, representative and agent of the Company, and each other Person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged
omission from such Registration Statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by or
on behalf of any of the Initiating Holders expressly for use in the
Registration Statement or Prospectus, provided that this indemnification be
several, not joint and several, among such Initiating Holders and the liability
of each such Initiating Holders will be in proportion to and limited to the
gross amount received by such Initiating Holder from the sale of Registrable
Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling person and shall survive the transfer
of such securities by such Initiating Holder.

 

5.3   Notices
of Claims, etc.  Promptly after receipt
by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of this
Section 5, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action, provided that the failure of any indemnified
party to give notice

 

as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. 
In case any such action is brought against an indemnified party, unless
in such indemnified party’s reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable for any settlement made by the
indemnified party without its consent (which consent will not be unreasonably
withheld) or for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.  No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.

 

5.4   Other
Indemnification.  Indemnification similar
to that specified in the preceding subdivisions of this Section 5 (with
appropriate modifications) shall be given by the Company and each Initiating
Holder with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.

 

5.5   Payments.  The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.

 

5.6   Contribution.  If the indemnification provided for in this
Agreement shall for any reason be unavailable or insufficient to an indemnified
party under Sections 5.1, 5.2 or 5.4 hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, or referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
in such proportion as shall be appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Initiating Holders
included in the offering on the other hand, from the offering of the
Registrable Securities and (ii) the relative fault of the Company on the
one hand and the Initiating Holders included in the offering on the other, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations.  The
relative benefits received by the Company on the one hand and the Initiating
Holders on the other with respect to such offering shall be deemed to be in the
same proportion as the sum of the net proceeds from the offering of the securities
(before deducting expenses) received by the Company bears to the amount of the
total gross proceeds from the offering of the securities (before deducting
expenses) received by the Initiating Holders, and in each case the net proceeds
received from such offering shall be determined as set forth on the table of
the cover page of the prospectus.  The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Initiating

 

Holders the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission.  The Company
and the Initiating Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein.  The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to in this Section 5 shall be deemed to include, for
purposes of this Section 5, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim.  No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.

 

6.             Expenses of Registration.  All Registration Expenses incurred in
connection with any Registration shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any
Registration Expenses if the Registration is subsequently withdrawn at the
request of any Initiating Holder (in which case all Initiating Holders shall
bear such expense) other than as a result of a delay requested by the Company
pursuant to Section 3.2(c).  All Selling
Expenses incurred in connection with any Registration shall be borne, jointly
and severally, by the Initiating Holders; provided, however, that
if any shares other than Registrable Securities are included in a Registration
Statement, such other holders shall bear their pro rata portion of the Selling
Expenses.

 

7.             Holdback.  Each Initiating Holder, if so requested by
the underwriters’ representative or agent in connection with an Underwritten
Offering of any securities covered by a Registration Statement filed by the
Company, whether or not such Initiating Holder’s securities are included
therein, shall not effect any public sale or distribution of shares of Common
Stock or any securities convertible into or exchangeable or exercisable for
shares of Common Stock, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such underwritten or agented Registration),
during the period requested by such representative or agent; provided
that such period shall not be longer in duration than any similar restrictive
period required of executive officers of the Company.  In order to enforce the foregoing covenant,
the Company shall be entitled to impose stop-transfer instructions with respect
to the Registrable Securities of each such holder until the end of such period.

 

8.             Miscellaneous.

 

(a)           Amendments and Waivers.  The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless agreed to in writing by all parties hereto.

 

(b)           Notices.  All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier or courier guaranteeing
overnight delivery:

 

(i)            if to An Initiating
Holder, at the most current address given by such Initiating Holder to the
Company in accordance with the provisions of this Section 7(b); and

 

 

(ii)           if to the Company,
initially at Traffix, Inc., One Blue Hill Plaza, Pearl River, New York 10952,
Attention:  Jeffrey L. Schwartz, Chairman
and Chief Executive Officer, fax (845) 620-1717, and thereafter at such other
address, notice of which is given in accordance with the Provisions of this
Section 7(b).  All such notices and
communications shall be deemed to have been duly given:  at the time delivered by hand, if personally
delivered; three days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day if timely delivered to a courier
guaranteeing overnight delivery.

 

(c)           Successors and Assigns.  This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the
parties.

 

(d)           Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(e)           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in New York without regard to principles of
conflicts of laws.

 

(f)            Severability.  Each provision of this Agreement shall be
considered severable, and if for any reason any provision that is not essential
to the effectuation of the basic purposes of the Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable under existing
or future applicable law, such invalidity shall not impair the operation of or
affect those provisions of this Agreement that are valid.  In that case, this Agreement shall be
construed so as to limit any term or provision so as to make it enforceable or
valid within the requirements of any applicable law, and in the event such term
or provision cannot be so limited, this Agreement shall be construed to omit
such invalid or unenforceable provisions.

 

(g)           Entire Agreement.  This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. 
There are no representations, promises, warranties or undertakings,
other than those set forth or referred to herein with respect to the registration
rights granted by the Company hereby.

 

(h)           Jurisdiction.  Each of the parties hereto hereby irrevocably
consents and submits to the 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 clause (b)(ii) of
this Section 7.

 

(i)            Construction.  As used in this Agreement, unless the context
otherwise requires (i) references to “Sections” are to sections of this
Agreement, (ii) “hereof”, “herein”,

 

“hereunder” and comparable terms refer to
this Agreement in its entirety and not to any particular part of this
Agreement, (iii) the singular includes the plural and the masculine, feminine
and neutral gender each includes the other, (iv) “including” or “includes”
shall be deemed to be followed by the phrase “without limitation”, and (v)
headings of the various Sections and subsections are for convenience of
reference only and shall not be given any effect for purposes of interpreting
this Agreement.

 

Witness the due execution hereof, as of the Effective Date first above
written, on behalf of the undersigned thereunto duly authorized.

 

	
   

  	
  TRAFFIX,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Joshua B. Gillon

  	
   

  
	
   

  	
  Title:  Executive Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOT ROCKET
  MARKETING INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Mark Colacioppo

  	
   

  
	
   

  	
  Title:  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MARK
  COLACIOPPO

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