EXHIBIT 10.110
EXECUTION COPY
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
MONTANA ACQUISITION COMPANY, INC.
INTERLAND, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
AGREEMENT AND PLAN OF MERGER
Dated as of February 8, 2002
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER........................................................................................... 1
1.1. The Merger.............................................................................................. 1
1.2. Effects of the Merger................................................................................... 1
1.3. Closing................................................................................................. 1
ARTICLE II CONVERSION AND EXCHANGE OF SHARES.................................................................... 2
2.1. Conversion of Shares of CTN Common Stock................................................................ 2
2.2. Escrow Fund............................................................................................. 2
2.3. Delivery of Evidence of Ownership....................................................................... 2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CTN................................................................ 3
3.1. Organization, Standing and Power; No Subsidiaries....................................................... 3
3.2. Capital Structure....................................................................................... 4
3.3. Authority............................................................................................... 4
3.4. Compliance with Laws and Other Instruments; Non-Contravention........................................... 5
3.5. Technology and Intellectual Property Rights............................................................. 6
3.6. Financial Statements.................................................................................... 8
3.7. Taxes................................................................................................... 9
3.8. Absence of Certain Changes and Events................................................................... 10
3.9. Real Property; Leases in Effect......................................................................... 12
3.10. Personal Property....................................................................................... 13
3.11. Litigation and Other Proceedings........................................................................ 13
3.12. No Defaults............................................................................................. 13
3.13. Major Contracts......................................................................................... 13
3.14. Material Reductions..................................................................................... 14
3.15. Employees............................................................................................... 15
3.16. Employee Benefit Plans.................................................................................. 15
3.17. Certain Agreements...................................................................................... 16
3.18. Environmental Matters................................................................................... 16
3.19. Brokers................................................................................................. 17
3.20. Supplier and Customer Relationships..................................................................... 17
3.21. Product and Service Quality............................................................................. 17
3.22. Disruptions............................................................................................ 17
3.23. Insurance.............................................................................................. 18
3.24. Immigration Matters.................................................................................... 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.................................................. 18
4.1. Each Shareholder severally represents and warrants to Interland and Merger Sub as follows:............. 18
4.2. No Default............................................................................................. 21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF INTERLAND
AND MERGER SUB............................................................................ 21
5.1. Organization and Qualification......................................................................... 22
5.2. Capitalization......................................................................................... 22
5.3. Authority Relative to this Agreement................................................................... 23
5.4. Compliance with Laws and Other Instruments; Non-Contravention.......................................... 23
5.5. Reports and Financial Statements....................................................................... 24
5.6. Validity of Merger Shares.............................................................................. 24
5.7. Consents and Approvals of Governmental Authorities..................................................... 25
5.8. Consent and Approvals of Third Parties................................................................. 25
5.9. Absence of Certain Changes or Events................................................................... 25
5.10. Certain Tax Matters.................................................................................... 25
5.11. Brokers................................................................................................ 26
5.12. Litigation and Other Proceedings....................................................................... 26
5.13. No Defaults............................................................................................ 26
ARTICLE VI ADDITIONAL AGREEMENTS............................................................................... 26
6.1. Officers and Directors................................................................................. 26
6.2. Employee Benefits...................................................................................... 26
6.3. Additional Agreements.................................................................................. 27
6.4. Public Announcements................................................................................... 27
6.5. Nasdaq National Market Listing......................................................................... 27
6.6. Confidentiality........................................................................................ 27
6.7. Tax-Free Reorganization................................................................................ 27
6.8. Insurance.............................................................................................. 28
6.9. Co-location and Leased Line Business................................................................... 28
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6.10. Guaranties............................................................................................. 28
6.11. Automobiles............................................................................................ 28
ARTICLE VII CONDITIONS PRECEDENT............................................................................... 29
7.1. Conditions to Each Party's Obligation to Effect the Merger............................................. 29
7.2. Conditions of Obligations of Interland and Merger Sub.................................................. 29
7.3. Conditions of Obligation of CTN and the Shareholders................................................... 30
ARTICLE VIII INDEMNIFICATION.................................................................................... 31
8.1. Indemnification of Interland........................................................................... 31
8.2. Indemnification of CTN and the Shareholders............................................................ 34
ARTICLE IX MISCELLANEOUS...................................................................................... 35
9.1. Entire Agreement; Binding Effect....................................................................... 35
9.2. Governing Law.......................................................................................... 36
9.3. Notices................................................................................................ 36
9.4. Severability........................................................................................... 37
9.5. Assignment............................................................................................. 37
9.6. Counterparts........................................................................................... 37
9.7. Amendment.............................................................................................. 37
9.8. Extension; Waiver...................................................................................... 37
9.9. Interpretation......................................................................................... 38
9.10. Knowledge.............................................................................................. 38
9.11. Transfer, Sales, Documentary, Stamp and Other Similar Taxes............................................ 38
9.12. Costs.................................................................................................. 38
9.13. Construction........................................................................................... 38
EXHIBITS
Exhibit 1.1 Merger Documents
Exhibit 2.2 Escrow Agreement
Exhibit 6.5 Stock Rights Agreement
Exhibit 7.2(d) Opinion of CTN and Shareholders' Counsel
Exhibit 7.2(g) Noncompetition Agreements
Exhibit 7.3(c) Opinion of Interland's Counsel
Exhibit 7.3(g) Employment Agreements
Exhibit 7.3(h) Mutual Release Agreement
SCHEDULES
Interland Disclosure Schedule
CTN Disclosure Schedule
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INDEX OF DEFINED TERMS
Agreement........................................... 1
Business Day........................................ 2
Cap Amount.......................................... 34
Charter Documents................................... 4
Closing Date........................................ 1
Code................................................ 10
Commission.......................................... 24
Company Voting Debt................................. 4
Confidentiality Agreement........................... 28
Consent............................................. 5
CTN................................................. 1
CTN Common Stock.................................... 2
CTN Disclosure Schedule............................. 3
CTN Intellectual Property........................... 6
Damages............................................. 34
Deductible Amount................................... 34
Effective Time...................................... 1
Environmental Laws.................................. 17
Environmental Liabilities........................... 17
ERISA............................................... 16
Escrow Agent........................................ 2
Escrow Agreement.................................... 2
Escrow Fund......................................... 2
Exchange Act........................................ 24
Firstar............................................. 32
FY 2001 Balance Sheet............................... 8
FY 2001 Statement................................... 8
Governmental Entity................................. 5
Hazardous Materials................................. 17
Indemnifiable Amounts............................... 32
Interland........................................... 1
Interland Common Stock.............................. 2
Interland Disclosure................................ 21
Interland Disclosure Schedule....................... 22
IRCA................................................ 18
Knowledge........................................... 38
Lease............................................... 13
Leases.............................................. 13
Lien................................................ 6
Material Adverse Effect............................. 3
Merger.............................................. 1
Merger Documents.................................... 1
Merger Proxy........................................ 21
Merger Shares....................................... 2
Merger Sub.......................................... 1
Missouri GBCL....................................... 1
Nasdaq.............................................. 24
Ordinary Course of Business......................... 8
Person.............................................. 3
Plan................................................ 16
Reports............................................. 24
Securities Act...................................... 12
Share Exchange Ratio................................ 2
Shareholders........................................ 1
Standard Software................................... 6
Subsidiary.......................................... 3
Surviving Corporation............................... 1
Tax................................................. 9
Tax Return.......................................... 9
Tax Returns......................................... 9
Taxes............................................... 9
AGREEMENT AND PLAN OF MERGER, dated as of February 8, 2002
(this "Agreement"), by and among INTERLAND, INC., a Minnesota corporation
("Interland"); MONTANA ACQUISITION COMPANY, INC., a Missouri corporation and
wholly-owned subsidiary of Interland ("Merger Sub"); ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a
Missouri corporation ("CTN"); and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, both natural
persons and the sole shareholders of CTN (the "Shareholders").
Intending to be legally bound, and in consideration of the
mutual representations, warranties, covenants and agreements contained herein,
Interland, Merger Sub, CTN and the Shareholders agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions
hereof, and in accordance with The General and Business Corporation Law of
Missouri (the "Missouri GBCL"), Merger Sub will be merged with and into CTN (the
"Merger"). Articles of Merger and any other required documents (collectively,
the "Merger Documents"), substantially in the form attached as EXHIBIT 1.1, will
be duly prepared, executed and acknowledged by CTN and Merger Sub and thereafter
delivered to the Secretary of State of Missouri for filing in accordance with
the Missouri GBCL contemporaneously with the Closing (as defined in Section
1.3). The Merger will become effective at such time as the Merger Documents have
been filed with the Secretary of State of Missouri (the "Effective Time").
Following the Merger, CTN will continue as the surviving corporation of the
Merger (the "Surviving Corporation") under the laws of the State of Missouri and
as a wholly-owned subsidiary of Interland, and the separate corporate existence
of Merger Sub will cease.
1.2. Effects of the Merger. At and after the Effective
Time, (a) the Merger will have all of the effects provided by the Merger
Documents and applicable law, including, without limiting the generality of the
foregoing and subject thereto, at the Effective Time, except as otherwise
provided herein, all the property, rights, privileges, powers and franchises of
CTN and Merger Sub will vest in CTN as the Surviving Corporation, and all debts,
liabilities and duties of CTN and Merger Sub shall become the debts liabilities
and duties of CTN as the Surviving Corporation, (b) the Articles of
Incorporation of Merger Sub will be the Articles of Incorporation of the
Surviving Corporation until duly amended, (c) the Bylaws of Merger Sub will be
the Bylaws of the Surviving Corporation until duly amended, (d) the directors of
Merger Sub immediately prior to the Effective Time will be the directors of the
Surviving Corporation from and after the Effective Time, to hold office until
their successors are elected or appointed and qualified or until their
resignation or removal, and (e) the officers of Merger Sub immediately prior to
the Effective Time will be the officers of the Surviving Corporation, to hold
office until their successors are elected or appointed and qualified or until
their resignation or removal.
1.3. Closing. The closing of the transactions contemplated
by this Agreement will take place simultaneously with the execution hereof by
the parties (the "Closing Date") at the offices of ▇▇▇▇▇ ▇▇▇▇, LLP, Kansas City,
Missouri, unless another date or place is agreed to in writing by CTN and
Interland. If all of conditions set forth in Article VI hereof are determined to
be satisfied (or duly waived) at the Closing, concurrently with the Closing (or
on the next succeeding Business Day, if not a Business Day) the parties hereto
will cause the Merger to be consummated by the filing of the Merger Documents
with the Secretary of State of Missouri. The Closing will be deemed to have
concluded at the Effective Time. For purposes of this Agreement, "Business Day"
shall mean any day other than a Saturday, Sunday or day on which banks in Kansas
City, Missouri or Atlanta, Georgia are required or authorized to close.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
2.1. Conversion of Shares of CTN Common Stock.
(a) At the Effective Time, each of the shares of
common stock, $.01 par value, of CTN ("CTN Common Stock") issued and
outstanding immediately prior to the Effective Time will automatically,
by virtue of the Merger and without any action on the part of
Interland, Merger Sub, CTN or the holders thereof, be converted into
53,750 shares of common stock ("Share Exchange Ratio"), par value $0.01
per share, of Interland ("Interland Common Stock") (collectively, the
"Merger Shares") (it being understood that the Share Exchange Ratio
equals a fraction, (A) the numerator of which is 5,375,000, which
equals the aggregate number of Merger Shares and (B) the denominator of
which is 100, which equals the number of issued and outstanding shares
of CTN Common Stock).
(b) At the Effective Time, each share of common
stock, par value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger
and without any action on the part of Interland, Merger Sub, CTN or the
holder thereof, be converted into one share of common stock, par value
$.01 per share, of the Surviving Corporation.
2.2. Escrow Fund. As security for Shareholders' agreement
in Article VIII to indemnify Interland stock certificates representing 806,250
(15%) of the Merger Shares, registered in the name and issued to the
Shareholders (the "Escrow Fund"), will be deposited and held in escrow in
accordance with the Escrow Agreement attached as EXHIBIT 2.2 (the "Escrow
Agreement"). The Escrow Fund will be withheld on a pro rata basis among the
Shareholders. The delivery of the Escrow Fund will be made by Interland on
behalf of the Shareholders in accordance with the provisions hereof, with the
same force and effect as if such shares had been delivered by Interland directly
to such holders and subsequently delivered by such holders to the escrow agent
under the Escrow Agreement (the "Escrow Agent").
2.3. Delivery of Evidence of Ownership. At the Closing,
each Shareholder will surrender certificates representing shares of CTN Common
Stock to Interland, and duly executed counterparts of this Agreement, the Escrow
Agreement and such other duly executed
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documentation as may be reasonably required by Interland to effect a transfer of
such shares, and upon such surrender and after the Effective Time each such
holder will be entitled to receive promptly from Interland or its transfer agent
certificates registered in the name of such holder representing the applicable
number of Merger Shares to which such holder is entitled pursuant to the
provisions of this Agreement, with a portion of such shares to be deposited in
escrow pursuant to the Escrow Agreement, as provided in Section 2.2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CTN
Except as set forth in the disclosure schedule of CTN (the
"CTN Disclosure Schedule") heretofore delivered by CTN to and acknowledged as
received by Interland and Merger Sub, CTN represents and warrants to Interland
and Merger Sub, as follows each of which is material to and relied upon by
Interland:
3.1. Organization, Standing and Power; No Subsidiaries.
(a) CTN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Missouri,
has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as now being
conducted, and is duly qualified and in good standing in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business make such qualification
necessary, except for such failures to be so qualified and in good
standing that would not reasonably be expected to have a Material
Adverse Effect (defined below) on CTN.
As used in this Agreement, "Material Adverse Effect" when used
in connection with an entity means any change, event, violation
(including violations of criminal laws), inaccuracy, circumstance or
effect that is, or is reasonably likely, individually, or in the
aggregate, to be materially adverse to the business, financial
condition, results of operations, or assets of such entity, except to
the extent any such change, event, violation, inaccuracy, circumstance
or effect results from (i) changes in general economic conditions, (ii)
changes affecting the industry generally in which such entity operates
(provided that such changes do not affect such entity in a
disproportionate manner), or (iii) the announcement of the Merger, or
the transactions contemplated by this Agreement. In this Agreement, a
"Subsidiary" of any Person means a corporation, partnership, limited
liability company, joint venture or other entity of which such Person
directly or indirectly owns or controls a majority of the equity
interests or voting securities or other interests that are sufficient
to elect a majority of the Board of Directors or other managers of such
corporation, partnership, limited liability company, joint venture or
other entity. In this Agreement, "Person" means any natural person,
corporation, partnership, limited liability company, joint venture or
other entity.
CTN has delivered, or will deliver, to Interland complete and
correct copies of the articles of incorporation and bylaws ("Charter
Documents") of CTN, in each case, as amended to the date hereof. The
minute books and stock records of CTN, complete and
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correct copies of which have been, or will be, delivered to Interland,
contain correct and complete records of all material proceedings and
actions taken at all meetings of, or effected by written consent of,
the shareholders of CTN and its Board of Directors, and all original
issuances and subsequent transfers, repurchases and cancellations of
CTN's capital stock. Section 3.1 of the CTN Disclosure Schedule
contains a complete and correct list of the officers and directors of
CTN.
(b) CTN does not have any Subsidiaries (other
than three Subsidiaries for which articles of termination were filed
with the Missouri Secretary of State on or about February 6, 2002) and
does not own an equity interest in any corporation, partnership or
joint venture arrangement or other business entity other than passive
investments in equity interests of public companies as part of the cash
management program of CTN.
3.2. Capital Structure.
(a) The authorized capital stock of CTN consists
of 100 shares of CTN Common Stock, of which 100 shares are issued and
outstanding as of the date of this Agreement. No shares of CTN Common
Stock are held as treasury shares by CTN. The signature page hereof
sets forth all holders of CTN Common Stock and the number of shares
owned. There are no options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions,
arrangements or rights of any character to which CTN is a party or by
which CTN may be bound obligating CTN to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital
stock of CTN, or obligating CTN to grant, extend, or enter into any
such option, warrant, call, conversion right, conversion payment,
commitment, agreement, contract, understanding, restriction,
arrangement or right.
(b) All outstanding shares of CTN Common Stock
are duly authorized, validly issued, fully paid, nonassessable and not
ever subject to any preemptive rights (other than those which have been
duly waived), or to any agreement to which CTN is a party or by which
CTN may be bound. CTN does not have outstanding any bonds, debentures,
notes or other indebtedness the holders of which (i) have the right to
vote (or which are convertible or exercisable into securities having
the right to vote) with holders of shares of CTN Common Stock on any
matter ("Company Voting Debt") or (ii) are or will become entitled to
receive any payment as a result of the execution of this Agreement or
the completion of the transactions contemplated hereby.
3.3. Authority. CTN has all necessary corporate power and
authority to execute and deliver this Agreement and all other agreements
contemplated hereby, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby by CTN have been duly authorized by all necessary corporate action and no
corporate proceedings on the part of CTN are necessary to authorize this
Agreement or the other agreements contemplated hereby or to consummate the
transactions contemplated hereby or thereby (other than the filing and
recordation of the Merger Documents as required by the Missouri GBCL). CTN has
duly and validly executed and delivered this
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Agreement and has duly and validly executed and delivered all other agreements
contemplated hereby to be executed and delivered by CTN, and assuming due
authorization, execution and delivery by Interland and Merger Sub, each of this
Agreement and such other agreements constitutes a valid, binding and enforceable
obligation of CTN in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
3.4. Compliance with Laws and Other Instruments;
Non-Contravention. CTN holds, and at all times has held, all material licenses,
permits and authorizations from all Governmental Entities (as defined below)
necessary for the lawful conduct of its business pursuant to all applicable
statutes, laws, ordinances, rules and regulations of all such Governmental
Entities having jurisdiction over it or any part of its operations. There are no
violations or claimed violations known by CTN of any such license, permit or
authorization or any such statute, law, ordinance, rule or regulation. Assuming
the receipt of all Consents (as defined below), neither the execution, delivery
or performance of this Agreement and all other agreements contemplated hereby by
CTN and the Shareholders, nor the consummation of the Merger or any other
transaction described herein, does or will, after the giving of notice, or the
lapse of time, or both, (i) conflict with, result in a breach of, or constitute
a default under the Charter Documents of CTN or any federal, state or local
court or administrative order or process, statute, law, ordinance, rule or
regulation, or any contract, agreement or commitment to which CTN is a party, or
under which CTN is obligated, or by which CTN or any of the rights, properties
or assets of CTN are subject or bound; (ii) result in the creation of any Lien
(as defined below) upon, or otherwise affect, any of the rights, properties or
assets of CTN; (iii) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform or comply with, any
contract, agreement or commitment to which CTN is a party, or under which CTN is
obligated, or by which CTN or any of the rights, properties or assets of CTN are
subject or bound; or (iv) accelerate, postpone or modify, or give any party the
right to accelerate, postpone or modify, the time within which, or the terms and
conditions under which, any liabilities, duties or obligations are to be
satisfied or performed, or any rights or benefits are to be received, under any
contract, agreement or commitment to which CTN is a party, or under which CTN
may be obligated, or by which CTN or any of the rights, properties or assets of
CTN are subject or bound. Section 3.4 of the CTN Disclosure Schedule sets forth
a copy or description of each material agreement, contract or other instrument
binding upon CTN requiring a notice or consent (by its terms or as a result of
any conflict or other contravention required to be disclosed in the CTN
Disclosure Schedule pursuant to the preceding provisions of this Section 3.4) as
a result of the execution, delivery or performance of this Agreement and all
other agreements contemplated hereby by CTN and the Shareholders or the
consummation of the Merger or any other transaction described herein (each such
notice or consent, a "Consent"). No consent, approval, order, or authorization
of or registration, declaration, or filing with or exemption (also a "Consent")
by, any court, administrative agency or commission or other governmental
authority or instrumentality, whether domestic or foreign (each a "Governmental
Entity") or arbitrator is required by or with respect to CTN in connection with
the execution, delivery or performance of this Agreement and all other
agreements contemplated hereby by CTN and the Shareholders or the consummation
of the Merger or any other transaction described herein, except for the filing
by CTN and Merger Sub of the appropriate Merger Documents with the Secretary of
State of Missouri. The term "Lien" as used in this Agreement means any
5
mortgage, deed of trust, lien, pledge, hypothecation, assignment, security
interest, or any other encumbrance, any conditional sale or other title
retention agreement, financing lease having substantially the same economic
effect as any of the foregoing, the filing of any financing statement, notice or
other instrument and mechanic's, materialmen's and other similar liens and
encumbrances.
3.5. Technology and Intellectual Property Rights.
(a) For the purposes of this Agreement, "CTN
Intellectual Property" consists of the following intellectual property:
(i) all United States and foreign
patents, trademarks, trade names, URLs, domain names, service
marks, trade dress, moral and economic rights, copyrights,
whether registered or unregistered, and any renewal rights
therefor, mask works, inventions, schematics, databases,
technical data, software, firmware, technology, manufacturing
processes, supplier lists, customer lists, trade secrets,
know-how, moral rights and applications and registrations for
any of the foregoing;
(ii) all documents, records and files
relating to design, development, license, end user and other
documentation, manufacturing, quality control, sales,
marketing or customer support for all intellectual property
described herein;
(iii) all other tangible or intangible
proprietary information and materials; and
(iv) all license and other rights in any
third party product or any third party intellectual property
described in (i) through (iii) above;
that are owned or held by or on behalf of CTN or that are being, or
have been, used, or are currently under development for use, in the
business of CTN as it has been, is currently or is currently planned to
be conducted; provided, however, that CTN Intellectual Property will
not include any commercially available "off the shelf" standard third
party software or related intellectual property (the "Standard
Software").
(b) Section 3.5 of the CTN Disclosure Schedule
lists: (i) all patents, copyright registrations, mask works,
trademarks, service marks, domain names, trade dress, any renewal
rights for any of the foregoing, and any applications and registrations
for any of the foregoing, that are included in CTN Intellectual
Property and owned by or on behalf of CTN; (ii) all hardware products
and tools, software products and tools and services that are currently
published, offered, or under development by CTN; and (iii) all
licenses, sublicenses and other agreements to which CTN is a party and
pursuant to which CTN or any other person is authorized to use any CTN
Intellectual Property or exercise any other right with regard thereto.
The disclosures described in (iii) hereof include the identities of the
parties to the relevant agreements, a description of the nature and
subject matter thereof, the term thereof and the applicable royalty or
summary of any formula or procedure for determining such royalty.
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(c) CTN Intellectual Property and Standard
Software consists solely of items and rights that are either: (i) owned
solely by CTN; (ii) in the public domain; or (iii) rightfully used and
authorized for use by CTN and its successors pursuant to a valid
license. All CTN Intellectual Property that consists of license or
other rights to third party property is separately set forth in Section
3.5 of the CTN Disclosure Schedule. CTN has all rights in CTN
Intellectual Property and Standard Software necessary to carry out
CTN's current activities, including without limitation rights to make,
use, exclude others from using, reproduce, modify, adapt, create
derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license, rent,
lease, assign and sell CTN Intellectual Property in all geographic
locations and fields of use, and to sublicense any or all such rights
to third parties, including the right to grant further sublicenses.
(d) To the knowledge of CTN, CTN is not, nor as
a result of the execution or delivery of this Agreement and all other
agreements contemplated hereby, or performance of CTN's obligations
hereunder or the consummation of the Merger, will CTN be, in violation
of any license, sublicense or other agreement relating to any CTN
Intellectual Property or Standard Software to which CTN is a party or
otherwise bound. CTN is not obligated to provide any material
consideration (whether financial or otherwise) to any third party, nor
is any third party otherwise entitled to any consideration, with
respect to any exercise of rights by CTN or Interland, as successor to
CTN, in CTN Intellectual Property or Standard Software.
(e) To the knowledge of CTN, the use,
reproduction, modification, distribution, licensing, sublicensing,
sale, or any other exercise of rights in any product, work, technology,
service or process as used, provided, or offered at any time, or as
proposed for use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights, by CTN does not
infringe any copyright, patent, trade secret, trademark, service ▇▇▇▇,
trade name, domain name, firm name, logo, trade dress, mask work, moral
right, other intellectual property right, right of privacy, or right in
personal data of any Person. To the knowledge of CTN, no claims (i)
challenging the validity, effectiveness, or ownership by CTN of any CTN
Intellectual Property or Standard Software, or (ii) to the effect that
the use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale, or any other exercise of rights in any
product, work, technology, service, or process as used, provided or
offered at any time, or as proposed for use, reproduction,
modification, distribution, licensing, sublicensing, sale, or any other
exercise of rights, by CTN infringes on any intellectual property or
other proprietary or personal right of any Person have been asserted to
CTN or, to the knowledge of CTN, are threatened by any Person nor is
there any basis therefor. To the knowledge of CTN, there are no legal
or governmental proceedings, including interference, re-examination,
reissue, opposition, nullity, or cancellation proceedings pending that
relate to any CTN Intellectual Property or Standard Software, other
than review of pending applications for patent, and to the knowledge of
CTN there is not any information indicating that such proceedings are
threatened by any Governmental Entity or any other Person nor is there
any basis therefor. To the knowledge of CTN, all granted or issued
patents and mask works and all registered trademarks, service marks and
copyright registrations owned by CTN are valid, enforceable and
subsisting. To the
7
knowledge of CTN, there is no unauthorized use, infringement, or
misappropriation of any CTN Intellectual Property by any third party,
employee or former employee.
(f) Section 3.5 of the CTN Disclosure Schedule
separately lists all parties (other than employees) who have created
any portion of, or otherwise have any rights in or to, CTN Intellectual
Property. To the knowledge of CTN, CTN has secured from all parties who
have created any portion of, or otherwise have any rights in or to, CTN
Intellectual Property valid and enforceable written assignments of any
such work or other rights to CTN.
(g) CTN has obtained written agreements from all
employees and from third parties with whom CTN, to its knowledge, has
shared confidential proprietary information (i) of CTN or (ii) received
from others that CTN is obligated to treat as confidential and to
obtain the written agreement of employees and others to keep
confidential, which agreements require such employees and third parties
to keep such information confidential in accordance with the terms
thereof.
3.6. Financial Statements.
(a) CTN has delivered to Interland the unaudited
balance sheet of CTN as of December 31, 2001 (the "FY 2001 Balance
Sheet") and its statement of operations for the year then ended (the
"FY 2001 Statement"). The FY 2001 Balance Sheet and the FY 2001
Statement: (i) are in accordance with the books and records of CTN; and
(ii) present fairly, in all material respects, the financial position
of CTN and results of operations as of the date and time period
indicated. As of December 31, 2001 there were no material liabilities,
claims or obligations of any nature, whether accrued, absolute,
contingent, anticipated or otherwise, whether due or to become due,
that are not shown or provided for either in the FY 2001 Balance Sheet
or the CTN Disclosure Schedule, and since December 31, 2001, CTN has
incurred no liabilities, claims or obligations of any nature, whether
accrued, absolute, contingent, anticipated or otherwise, other than in
the ordinary course of business, consistent with past practice
("Ordinary Course of Business") and except for expenses reasonably
incurred for professional services by CTN or the Shareholders in
connection with the preparation and execution of this Agreement and the
consummation of the transactions contemplated herein.
(b) All of the accounts, notes and other
receivables which are reflected in the FY 2001 Balance Sheet were
acquired in the Ordinary Course of Business; and, except to the extent
reserved against in the FY 2001 Balance Sheet, all of the accounts,
notes and other receivables which are reflected therein have been
collected in full, or to the knowledge of CTN, are good and collectible
in the Ordinary Course of Business; and all of the accounts, notes and
other receivables which have been acquired by CTN since December 31,
2001 were acquired in the Ordinary Course of Business and have been
collected in full, or to the knowledge of CTN, are good and
collectible, subject to where appropriate reserves have been determined
in a manner consistent with past practices of CTN, in the Ordinary
Course of Business. No accounts, notes or other receivables are
contingent upon the performance by CTN of any obligation or contract.
Except as set forth in Section 3.6 of the Disclosure Schedule, no
Person has any Lien on any of such
8
receivables and no agreement for deduction or discount has been made
with respect thereto.
3.7. Taxes.
(a) The term "Taxes" as used herein means all
federal, state, local and foreign income tax, alternative or add-on
minimum tax, estimated, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, capital profits, lease,
service, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit
taxes, customs, duties and other taxes, governmental fees and other
like assessments and charges of any kind whatsoever, together with all
interest, penalties, additions to tax and additional amounts with
respect thereto, and the term "Tax" means any one of the foregoing
Taxes. The term "Tax Returns" as used herein means all returns,
declarations, reports, claims for refund, information statements and
other documents relating to Taxes, including all schedules and
attachments thereto, and including all amendments thereof, and the term
"Tax Return" means any one of the foregoing Tax Returns.
(b) CTN has timely filed all Tax Returns
required to be filed and has paid all Taxes owed (whether or not shown
as due on such Tax Returns), including, without limitation, all Taxes
which CTN is obligated to withhold for amounts owing to employees,
creditors and third parties. All Tax Returns filed by CTN were complete
and correct in all material respects, and such Tax Returns correctly
reflected the facts regarding the income, business, assets, operations,
activities, status and other matters of CTN and any other information
required to be shown thereon in all material respects. None of the Tax
Returns filed by CTN or Taxes payable by CTN have been the subject of
an audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any Governmental Entity, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently
pending or, to the knowledge of CTN, threatened nor is there any basis
therefor. CTN is not currently the beneficiary of any extension of time
within which to file any Tax Return, and CTN has not waived any statute
of limitation with respect to any Tax or agreed to any extension of
time with respect to a Tax assessment or deficiency. All material
elections with respect to Taxes affecting CTN, as of the date hereof,
are set forth in the Financial Statements or in Section 3.7 of the CTN
Disclosure Schedule. None of the Tax Returns filed by CTN contain a
disclosure statement under former Section 6661 of the Code or Section
6662 of the Code (or any similar provision of state, local or foreign
Tax law). CTN is not a party to any Tax sharing agreement or similar
arrangement. CTN has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was CTN), and CTN does not have any liability for the
Taxes of any Person (other than CTN) under Treasury Regulation Section
1.1502-6 (or any corresponding provision of state, local or foreign Tax
law), as a transferee or successor, by contract, or otherwise. The term
"Code" as used herein means the Internal Revenue Code of 1986, as
amended.
(c) CTN is not a party to any agreement,
contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of (i) any
9
"excess parachute payments" within the meaning of Section 280G of the
Code (without regard to the exceptions set forth in Sections 280G(b)(4)
and 280G(b)(5) of the Code) or (ii) any amount for which a deduction
would be disallowed or deferred under Section 162 or Section 404 of the
Code. CTN has not agreed to make any adjustment under Section 481(a) of
the Code (or any corresponding provision of state, local or foreign
law) by reason of a change in accounting method or otherwise, and CTN
will not be required to make any such adjustment as a result of the
transactions set forth in this Agreement. CTN does not have and has not
had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such
foreign country. No portion of the Interland Merger Shares is subject
to the Tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
None of the assets of CTN is property which is required to be treated
as being owned by any other Person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8) of the Code.
Except as set forth in Section 3.7 of the Disclosure Schedule, none of
the assets of CTN directly or indirectly secures any debt, the interest
on which is tax exempt under Section 103(a) of the Code. None of the
assets of CTN is "tax-exempt use property" within the meaning of
Section 168(h) of the Code. No claim has ever been made by any
Governmental Entity in a jurisdiction where CTN does not file Tax
Returns that it is or may be subject to Tax in that jurisdiction.
(d) There are no Liens for Taxes (other than for
ad valorem Taxes not yet due and payable) upon the assets of CTN. The
unpaid Taxes of CTN did not, as of December 31, 2001, exceed the
reserve for actual Taxes (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
as shown on the FY 2001 Balance Sheet, and will not exceed such reserve
by more than 10% as of the Effective Time of the Merger. CTN is not a
party to any joint venture, partnership, limited liability company or
other arrangement or contract which could be treated as a partnership
for federal income tax purposes.
3.8. Absence of Certain Changes and Events. Except as set
forth on Schedule 3.8, since December 31, 2001 CTN has conducted its business
only in the Ordinary Course of Business and, since such date, there has not
been:
(a) Any transaction involving more than $50,000
entered into by CTN;
(b) Any Material Adverse Effect on CTN (or any
development or combination of developments of which CTN has knowledge
which is reasonably likely to result in any Material Adverse Effect on
CTN);
(c) Any loss of or damage to any of the
properties of CTN due to fire or other casualty or other loss, whether
or not insured, amounting to more than $10,000 in the aggregate;
(d) Any declaration, setting aside or payment of
any dividend or other distribution with respect to any shares of
capital stock of CTN, other than distributions to Shareholders (as
disclosed in the Disclosure Schedule) to allow them to pay federal,
state
10
and local taxes, in accordance with past practices, or any repurchase,
redemption, retirement or other acquisition by CTN of any outstanding
shares of its capital stock, or other securities of, or other equity or
ownership interests in, CTN;
(e) Any discharge or satisfaction of any Lien or payment
or satisfaction of any obligation or liability (whether absolute,
accrued, contingent or otherwise and whether due or to become due)
other than current liabilities shown on the FY 2001 Balance Sheet and
current liabilities incurred since December 31, 2001 in the Ordinary
Course of Business;
(f) Any amendment to the Charter Documents of CTN or any
amendment of any term of any outstanding security of CTN;
(g) Any incurrence, assumption or guarantee by CTN of any
indebtedness for borrowed money;
(h) Any creation or assumption by CTN of any Lien on any
asset other than in the Ordinary Course of Business;
(i) Any making of any loan, advance or capital
contributions to, or investment in, any Person;
(j) Any sale, lease, pledge, transfer or other
disposition of any capital assets (1) to the Shareholders irrespective
of the value or (2) to any other Person, except for fair value received
having an aggregate value exceeding $10,000;
(k) Any material transaction or commitment made, or any
material contract or agreement entered into, by CTN relating to its
assets or business (including the acquisition or disposition of any
assets) or any relinquishment by CTN of any contract or other right
other than in the Ordinary Course of Business, or any change in
accounting practices;
(l) Other than in the Ordinary Course of Business or as
evidenced by the CTN Employment Manual which has been delivered to
Interland and which reflects the current policies of CTN except where
otherwise indicated in the Disclosure Schedule, any (i) grant of any
severance or termination pay to any director, officer or employee of
CTN, (ii) entering into of any employment, severance, management,
consulting, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of CTN, (iii) change in benefits payable under existing
severance or termination pay policies or employment, severance,
management, consulting or other similar agreements, (iv) change in
compensation, bonus or other benefits payable to directors, officers or
employees of CTN or (v) change in the payment or accrual policy with
respect to any of the foregoing (it being understood that all
transactions identified in subparts (i) to (iv) involving the
Shareholders after December 31, 2001 are disclosed in the Disclosure
Schedule), and the consummation of the transactions contemplated herein
will not result in any of the changes specified in (iii) to (v);
11
(m) Any labor dispute or any activity or proceeding by a
labor union or representative thereof to organize any employees of CTN,
or any lockouts, strikes, slowdowns, work stoppages or threats thereof
by or with respect to any employees of CTN;
(n) Any notes or accounts receivable or portions thereof
written off by CTN as uncollectible (1) with the Shareholders
irrespective of amount or (2) with any other Person in an aggregate
amount exceeding $10,000;
(o) Any issuance or sale of any stock, bonds, phantom
stock interest or other securities of which CTN is the issuer, or the
grant, issuance or change of any stock options, warrants, or other
rights to purchase securities of CTN or phantom stock interest in CTN;
(p) Any cancellation of any debts or claims to the
knowledge of CTN or waiver of any rights (1) with the Shareholders
irrespective of amount or (2) with any other Person having an aggregate
value exceeding $10,000;
(q) Any sale, assignment or transfer of any CTN
Intellectual Property or other similar assets, including licenses
therefor, (1) with the Shareholders irrespective of amount or (2) with
any other Person having an aggregate value exceeding $10,000;
(r) Any capital expenditures, or commitment to make any
capital expenditures, for additions to property, plant or equipment in
an aggregate amount exceeding $10,000;
(s) Payment of any amounts to, or liability incurred to
or in respect of, or sale of any properties or assets (real, personal
or mixed, tangible or intangible) to, or any transaction or any
agreement or arrangement with, any corporation or business in which CTN
or any of its corporate officers or directors, or any "affiliate" or
"associate" (as such terms are defined in the rules and regulations
promulgated under the Securities Act of 1933, as amended (the
"Securities Act") of any such Person; or
(t) To the knowledge of CTN, any agreement, undertaking
or commitment to do any of the foregoing.
Notwithstanding the foregoing, the parties acknowledge that CTN may use
its cash prior to Closing to pay the reasonable fees and expenses of the
transaction contemplated hereby incurred by CTN and its Shareholders, including
investment bankers and attorneys, as described in Section 7.1(c).
3.9. Real Property; Leases in Effect. CTN does not own any
real property. All real property and personal property leases and subleases to
which CTN is a party and any amendments or modifications thereof are listed in
Schedule 3.9 of the CTN Disclosure Schedule (each a "Lease" and collectively,
the "Leases") and are valid and in full force and effect, and there are no
existing material defaults on the part of CTN, and CTN has not received or given
notice of default or claimed default with respect to any Lease, nor is there any
event that with notice or lapse of time, or both, would constitute a default on
the part of CTN thereunder. True
12
and complete copies of each Lease have been provided to Interland, and such
Leases constitute the entire understanding relating to CTN's use and occupancy
of the leased premises. To the knowledge of CTN, the improvements located on the
real property described in the Leases are not the subject of any official
complaint or notice of violation of any applicable zoning ordinance or building
code and there is no use or occupancy restriction or condemnation proceeding
pending or threatened against CTN.
3.10. Personal Property. CTN has good and indefeasible
title, free and clear of all title defects and Liens (excepting, however, where
such title defects or Liens do not involve an amount exceeding $10,000 in the
aggregate) to all inventory, receivables, furniture, machinery, equipment and
other personal property, tangible or otherwise, reflected on the FY 2001 Balance
Sheet or used in CTN's business, except for acquisitions and dispositions since
December 31, 2001. The CTN Disclosure Schedule lists (a) all material computer
equipment and (b) all other personal property, in each case having a depreciated
book value of $10,000 or more, which are used by CTN in the conduct of its
business, and all such equipment and property, in the aggregate, is in good
operating condition and repair, reasonable wear and tear excepted. There is no
asset used or required by CTN in the conduct of its business as presently
operated which is not either owned by it or licensed or leased to it.
3.11. Litigation and Other Proceedings. There is no action,
suit, claim, investigation or proceeding pending against or, to the knowledge of
CTN, threatened against CTN or its properties and assets before any court or
arbitrator or any Governmental Entity in which the amount involved exceeds
$10,000. CTN is not subject to any order, writ, judgment, decree, or injunction
in which the amount involved exceeds $10,000.
3.12. No Defaults.
(a) CTN is not, nor to its knowledge would it
be, with the passage of time, giving of notice or both, in default or
violation of any term, condition, or provision of (a) the Charter
Documents; (b) any judgment, decree, or order applicable to CTN; or (c)
any loan or credit agreement, note, bond, mortgage or lease to which
CTN is now a party or by which it or any of its properties or assets
may be bound.
(b) CTN is not, nor to its knowledge would it
be, with the passage of time, giving of notice or both, in default
under any term, condition or provision of any indenture, contract,
agreement, license or other instrument to which CTN is now a party or
by which it or any of its properties or assets may be bound in which
the amount involved exceeds $10,000 annually.
3.13. Major Contracts. Except as set forth on the CTN
Disclosure Schedule 3.13, CTN is not a party to or subject to any of the
following:
(a) Any union contract, or any employment
contract or arrangement (other than "at-will" employment arrangements)
providing for future compensation, written or oral, with any officer,
consultant, director, or employee;
(b) Any plan or contract providing for bonuses,
pensions, deferred compensation, retirement payments, profit-sharing or
the like;
13
(c) Any joint venture contract or arrangement or
any other agreement which has involved or is expected to involve a
sharing of profits;
(d) Any OEM agreement, reseller or distribution
agreement, volume purchase agreement, corporate end user sales or
service agreement, reproduction or replication agreement or
manufacturing agreement in which the amount involved exceeds $10,000
annually or pursuant to which CTN has granted or received manufacturing
rights, most favored nation pricing provisions, or exclusive marketing,
production, publishing or distribution rights related to any product,
group of products or territory;
(e) Any agreement, license, franchise, permit,
indenture, or authorization in which the amount involved exceeds
$10,000 annually which has not been terminated or performed in its
entirety and not renewed which may be, by its terms, terminated,
impaired, or adversely affected by reason of the execution of this
Agreement and all other agreements contemplated hereby, the
consummation of the Merger, or the consummation of the transactions
contemplated hereby or thereby;
(f) Except for trade indebtedness in which the
amount involved does not exceed $10,000, any instrument evidencing or
related in any way to indebtedness incurred in the acquisition of
companies or other entities or indebtedness for borrowed money by way
of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise;
(g) Any license agreement, either as licensor or
licensee (excluding nonexclusive hardware and software licenses granted
to distributors or end-users and commercially available in licensed
software applications);
(h) Any contract or agreement containing
covenants purporting to limit CTN's freedom to compete in any line of
business in any geographic area; or
(i) Any contract or agreement, not elsewhere
specifically disclosed pursuant to this Agreement, involving the
payment or receipt by CTN of more than $10,000 in the aggregate
annually.
All contracts, arrangements, plans, agreements, leases, licenses,
franchises, permits, indentures, authorizations, instruments and other
commitments which are listed in the CTN Disclosure Schedule pursuant to this
Section 3.13 are valid and in full force and effect and CTN has not, nor, to the
knowledge of CTN, has any other party thereto, breached any provisions of, or
defaulted in any respect under the terms thereof, which would have a Material
Adverse Effect on CTN. Since the September Balance Sheet Date, CTN has not
amended, modified or terminated the terms of the contracts or agreements
referred to in this Section 3.13 unless such amendment, modification or
termination was in the Ordinary Course of Business and CTN has provided
Interland with a copy of such amendment, modification or termination.
3.14. Material Reductions. To the knowledge of CTN, none of
the parties to any of the contracts identified in the CTN Disclosure Schedule
pursuant to Section 3.13 have terminated, or, to the knowledge of CTN, expressed
to CTN an intent to materially reduce or terminate the amount of its business
with CTN in the future.
14
3.15. Employees.
(a) Any persons engaged by CTN as independent
contractors, rather than employees, have been properly classified as
such and have been so engaged in compliance with all applicable
federal, state or local laws.
(b) Hours worked by and payments made to
employees of CTN have not been in violation of the Fair Labor Standards
Act or any other applicable federal, state or local laws dealing with
such matters.
(c) CTN is not and never has been engaged in any
dispute or litigation with an employee or former employee regarding
matters pertaining to intellectual property or assignment of
inventions.
(d) CTN has never been and, to the knowledge of
CTN, is not now subject to a union organizing effort.
(e) CTN does not have any written contract of
employment or other employment, severance or similar agreement with any
of its employees or any established policy or practice relating
thereto, and all of its employees are employees-at-will.
(f) CTN is not a party to any pending, or to
CTN's knowledge, threatened, labor dispute.
(g) CTN is in material compliance with all
applicable federal, state and local laws, ordinances, rules and
regulations and requirements relating to the employment of labor,
including but not limited to the provisions thereof relating to wages,
hours, collective bargaining and ensuring equality of opportunity for
employment and advancement of minorities and women.
(h) There are no claims pending, or, to the
knowledge of CTN, threatened to be brought, in any court or
administrative agency by any former or current CTN employees for
compensation, pending severance benefits, vacation time, vacation pay
or pension benefits, or any other claim pending or, to the knowledge of
CTN, threatened in any court or administrative agency from any current
or former employee or any other Person arising out of CTN's status as
employer, whether in the form of claims for employment discrimination,
harassment, unfair labor practices, grievances, wrongful discharge, or
otherwise.
3.16. Employee Benefit Plans. Each Plan (as defined below)
covering active, former, or retired employees of CTN ("CTN Employees") is listed
in Section 3.16 of the CTN Disclosure Schedule. "Plan" means any employee
benefit plan as defined in ERISA (as defined below) and will also include any
employment, severance or similar contract, arrangement or policy and each plan
or arrangement providing for insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, pension or retirement benefits or for
deferred compensation, profit-sharing, bonuses, phantom stock, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits. CTN has made
15
available to Interland a copy of each Plan, and where applicable, any related
trust agreement, annuity, or insurance contract. All annual reports (Form 5500)
required to be filed with the Internal Revenue Service have been properly filed
on a timely basis, and CTN has made available copies of the three most recently
filed Forms 5500 for each applicable Plan. Any Plan document intended to be
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and has remained tax-qualified to the date
hereof and its related trust is tax-exempt and has been so since its creation.
No Plan is covered by Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 412 of the Code.
No "prohibited transaction," as defined in ERISA Section 406
or Code Section 4975 has occurred with respect to any Plan, unless such a
transaction was exempt from such rules. To the knowledge of CTN, each Plan has
been maintained and administered in material compliance with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such Plans. All amendments required to bring each Plan into
conformity with applicable law, including, without limitation, ERISA and the
Code, have been timely adopted, unless such amendments may still be made timely
within an applicable remedial amendment period. There are no pending, nor to the
knowledge of CTN, threatened, claims against or otherwise involving any of the
Plans and no suit, action, or other litigation (excluding claims for benefits
incurred in the ordinary course of Plan activities) has been brought against or
with respect to any Plan. To the knowledge of CTN, no Plan is under audit or
investigation by the Internal Revenue Service or the Department of Labor or any
other governmental authority and no such completed audit, if any, has resulted
in the imposition of any tax, interest or penalty.
Neither CTN nor any entity which is considered one employer
with CTN under Section 414 of the Code or Section 4001 of ERISA has ever
maintained or contributed to or incurred or expects to incur liability with
respect to any Plan subject to Title IV of ERISA or any "multi-employer plan"
within the meaning of Section 4001(a)(3) of ERISA. CTN has not engaged in, nor
is it a successor or parent corporation to an entity that has engaged in, a
transaction described in ERISA Section 4069. There have been no amendments to,
written interpretation of, or announcement (whether or not written) by CTN
relating to, or change in employee participation or coverage under, any Plan
since December 31, 2001. Neither CTN nor any of its "ERISA Affiliates" (hereby
defined to include any entities that are or have been since December 31, 1995
considered one employer with CTN under Section 414 of the Code or Section 4001
of ERISA) have any current or projected liability in respect of post-employment
or post-retirement welfare benefits for retired or former employees of CTN other
than health care continuation benefits required to be provided under applicable
law.
Any contribution, insurance premium, excise tax, interest
charge or other liability or charge imposed or required with respect to any Plan
which is attributable to any period or any portion of any period prior to
December 31, 2001 were paid or reflected as a liability on the December 31, 2001
balance sheet, including, without limitation, any portion of the matching
contribution required with respect to CTN's 401(k) Plan for the plan year ending
on or before December 31, 2001 which is attributable to elective contributions
made by participants in such plan prior to December 31, 2001 and assuming that
all participants are employed by CTN as of the end of such plan year.
16
CTN has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to a "multiple
employer welfare arrangement" (within the meaning of Section 3(40) of ERISA) or
a "plan maintained by more than one employer" (within the meaning of Section
413(c) of the Code).
To the knowledge of CTN, CTN, each ERISA Affiliate, each Plan
and each Plan "sponsor" or "administrator" (within the meaning of Section 3(16)
of ERISA) has complied in all material respects with the applicable requirements
of Section 4980B of the Code and Section 601 et seq. of ERISA (such statutory
provisions and predecessors thereof are referred to herein collectively as
"COBRA"). No tax under Section 4980B or 4980D of the Code has been incurred in
respect of any Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code.
There is no CTN Employee who is on a leave of absence (whether
or not pursuant to the Family and Medical Leave Act of 1993, as amended). All
CTN Employees eligible for health coverage under the CTN group health plan are
receiving or entitled to receive health coverage under such plan, including
eligible COBRA beneficiaries.
The consummation of the transactions contemplated by this
Agreement will not give rise to any liability for any employee benefits,
including, without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due any
CTN Employee.
3.17. Certain Agreements. Except as contemplated by this
Agreement or set forth in the CTN Employment Manual, neither the execution and
delivery of this Agreement and all other agreements contemplated hereby, nor the
consummation of the transactions contemplated hereby will: (a) result in any
payment by CTN (including, without limitation, severance, unemployment
compensation, parachute payment, bonus or otherwise) becoming due to any
director, employee, or independent contractor of CTN under any Plan, agreement,
or otherwise, (b) increase any benefits otherwise payable under any Plan or
agreement or (c) result in the acceleration of the time of payment or vesting of
any such benefits.
3.18. Environmental Matters. (a) CTN has complied, in all
material respects, with all federal, state and local laws (including, without
limitation, case law, rules, regulations, orders, judgments, decrees, permits,
licenses and governmental approvals) which are intended to protect the
environment and/or human health or safety (collectively, "Environmental Laws");
(b) CTN has not handled, generated, used, stored, transported or disposed of any
material, substance or waste which is regulated by Environmental Laws
("Hazardous Materials"), except for reasonable amounts of ordinary office and/or
office-cleaning supplies which have been used in compliance with Environmental
Laws; (c) to the knowledge of CTN, there is not now any underground storage tank
or asbestos on any real property operated or leased by CTN; (d) CTN has not
conducted, nor is it aware of, any environmental investigations, studies,
audits, tests, reviews or analyses, the purpose of which was to discover,
identify, or otherwise characterize the condition of the soil, groundwater, air
or the presence of Hazardous Materials at any real property operated or leased
by CTN; and (e) to the knowledge of CTN, there are no "Environmental
Liabilities". For purposes of this Agreement, "Environmental Liabilities" are
17
any claims, demands, or liabilities under Environmental Laws which (i) arise out
of or in any way relate to CTN's operations or activities, or any real property
at any time operated or leased by CTN, or any Shareholder's use or ownership
thereof, whether vested or unvested, contingent or fixed, actual or potential,
and (ii) arise from or relate to actions occurring (including any failure to
act) or conditions existing on or before the Closing Date.
3.19. Brokers. Except for fees and expenses of ▇▇▇▇▇▇▇ &
Associates (which shall be the sole responsibility of CTN and the Shareholders),
no broker, finder or investment bankers is entitled to any brokerage, finder's
or other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of CTN.
3.20. Supplier and Customer Relationships. To the knowledge
of CTN, it has good commercial working relationships with its material customers
and suppliers. No customer accounting for more than 5% of the Company's revenues
in any month during the last twelve calendar months ending December 31, 2001 has
canceled or otherwise terminated its relationship with CTN, decreased or limited
materially the amount of product or services ordered from Company or threatened
in writing (or to Company's knowledge orally) to take any such action.
3.21. Product and Service Quality. To the knowledge of CTN,
all services provided by CTN to customers on or prior to the date hereof conform
to applicable contractual commitments, implied warranties not disclaimed,
express warranties, product specifications and quality standards published by
CTN in all material respects and include limitations of CTN's liability that are
tied to the value of the contract. CTN has no material liability (and CTN has no
knowledge of any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against CTN giving
rise to any liability) for replacement or repair thereof, or for the taking of
any remedial action with respect thereto or other damages in connection
therewith. CTN has not received any written complaint from a customer that
alleges that CTN is in material breach of the customer contract or the agreed
upon service level commitments, except for those that CTN reasonably believes
can be addressed without resulting in a material liability. The Company's data
privacy policy is as set forth on its web site and in Schedule 3.21.
3.22. Disruptions. Since December 31, 2001 there has not
occurred any material disruption to network operations, or any material delays
in planned facility or network build out or construction activities, or any
material performance failures by CTN, or other material service disruptions,
that have resulted in material customer complaints or material breaches of
customer installation commitments, in each case with respect to CTN, which
individually or in the aggregate, have a Material Adverse Effect.
3.23. Insurance. Schedule 3.23 contains a true, correct and
complete list of all of the insurance policies maintained by CTN, which schedule
includes the name of the insurance company, the policy number, a description of
the type of insurance covered by such policy, the dollar limit of the policy,
and the annual premiums for such policy, and the name and phone number of the
insurance agent in respect thereto. Such policies are paid up to date, and no
notice of cancellation has been received.
18
3.24. Immigration Matters.
(a) With respect to all employees (as defined in
Section 274a.1(g) of Title 8, Code of Federal Regulations) of CTN, CTN
has complied with the Immigration Reform and Control Act of 1986, as
amended, and all regulations promulgated thereunder ("IRCA") with
respect to the completion, maintenance and other documentary
requirements of Forms I-9 (Employment Eligibility Verification Forms)
for all current and former employees and the reverification of the
employment status for any and all employees whose employment
authorization documents indicated a limited period of employment
authorization.
(b) Schedule 3.24 attached hereto contains a
true and complete list of all employees of each Seller, if any, who are
not citizens of the United States of America and who are not permanent
residents of the United States of America, together with a true and
complete list of the visa status and visa expiration dates of each such
employee.
(c) CTN has only employed individuals authorized
to work in the United States. CTN has not received any written notice
of any inspection or investigation relating to its alleged
noncompliance with or violation of IRCA, nor has it been warned, fined
or otherwise penalized by reason of any failure to comply with IRCA.
(d) The consummation of the transactions
contemplated by this Agreement will not (i) give rise to any liability
for the failure properly to complete and update Forms I-9, (ii) give
rise to any liability for the employment of individuals not authorized
to work in the United States and (iii) cause any current employee to
become unauthorized to work in the United States.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
4.1. Each Shareholder severally represents and warrants to
Interland and Merger Sub as follows:
(a) Such Shareholder is the lawful owner of the
shares of CTN Common Stock to be exchanged for the Merger Shares
pursuant to this Agreement and has good and clear title to such shares
of CTN Common Stock, free of all Liens. Such Shareholder is the owner
of the number of shares of CTN Common Stock set forth on the signature
page hereof.
(b) Such Shareholder has full legal right, power
and authority to enter into this Agreement and to sell and deliver the
shares of CTN Common Stock owned by him in the manner provided herein.
Such Shareholder has duly and validly executed this Agreement and has
duly and validly executed and delivered all other agreements
contemplated hereby, and each of this Agreement and such other
agreements executed by him, assuming due authorization, execution and
delivery by the other parties thereto, constitutes a valid, binding and
enforceable obligation of such Shareholder in accordance with its
terms, except to the extent that its enforceability may be limited by
applicable
19
bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable
principles.
(c) The execution, delivery and performance of
this Agreement and the other agreements contemplated hereby by such
Shareholder, and the consummation of the transactions contemplated
hereby or thereby, will not require, on the part of such Shareholder,
any consent, approval, authorization or other order of, or any filing
with, any Governmental Entity or arbitrator, or under any contract,
agreement or commitment to which such Shareholder is a party or by
which such Shareholder or property of such Shareholder is bound, and
will not constitute a violation on the part of such Shareholder of any
law, administrative regulation or ruling or court decree, or any
contract, agreement or commitment, applicable to such Shareholder or
property of such Shareholder.
(d) Such Shareholder has voted all of his shares
of CTN Common Stock for the approval of this Agreement and the
appropriate Merger Documents as required by the Missouri GBCL.
(e) Such Shareholder is acquiring the Merger
Shares solely for Shareholder's own account for investment purposes and
not with a view to or in connection with any sale or other distribution
thereof, within the meaning of the Securities Act, except to the extent
that such Merger Shares may be sold under an effective registration
statement under the Act and any applicable state securities law
including sales pursuant to or as permitted by the Stock Rights
Agreement (as identified in Sections 7.2(e) and 7.3(e)).
(f) Such Shareholder understands and
acknowledges that all of the Merger Shares acquired by Shareholder are
to be issued and sold hereunder without registration and in reliance
upon certain exemptions under the Securities Act, and in reliance upon
certain exemptions from registration requirements under applicable
state securities laws.
(g) Such Shareholder will not make any transfer
or assignment of any of the Merger Shares except in compliance with the
Securities Act and any other applicable securities laws.
(h) Except as permitted by the Stock Rights
Agreement (as identified in Sections 7.2(e) and 7.3(e)), prior to any
transfer or disposition not registered under the Securities Act of any
of the Merger Shares, or any shares received on account of such Merger
Shares pursuant to a stock dividend, stock split, or similar event,
such Shareholder will give written notice to Interland, expressing the
intention to effect such transfer or disposition and describing the
proposed transfer or disposition. Such notice shall be accompanied by
an opinion of counsel for such Shareholder, reasonably acceptable to
Interland, that the proposed transfer is exempt under the Securities
Act and applicable state securities laws.
20
(i) Such Shareholder understands and
acknowledges that the Merger Shares will be inscribed with the
following legends, or another legend to the same effect and agrees to
the restrictions set forth therein:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or under the securities laws of any other
jurisdiction, in reliance upon exemptions from the
registration requirements of such laws. The shares
represented by this certificate may not be sold or
otherwise transferred, nor will an assignee or
endorsee hereof be recognized as an owner of the
shares by the issuer unless (i) a registration
statement under the Securities Act of 1933 and other
applicable securities laws with respect to the
shares and the transfer shall then be in effect, or
(ii) permitted by the Stock Rights Agreement (as
identified in Sections 7.2(e) and 7.3(e)), and in
the opinion of counsel reasonably satisfactory to
the issuer, the shares are transferred in a
transaction which is exempt from the registration
requirements of such laws."
"The shares represented by this certificate are
subject to a Stock Rights Agreement dated February
2002, which restricts the transfer of the shares. A
copy of such Agreement may be inspected at the
principal office of Interland, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
A similar legend may be placed on all shares subject
to the Escrow Agreement.
(j) Such Shareholder understands and
acknowledges that no federal or state agency has made any
recommendation or endorsement of the Merger Shares or any finding or
determination as to the fairness of the investment in such Merger
Shares.
(k) No offer in respect of the Merger Shares was
made to the Shareholders by Interland or any person acting on
Interland's behalf by means of general or public solicitation or
general or public advertising, such as by newspaper or magazine
advertisements, by broadcast media, or at any seminar or meeting whose
attendees were solicited by such means.
(l) Such Shareholder acknowledges and agrees
that Interland has made available information (including the Reports as
defined in Section 5.5), and has provided all information concerning
Interland and its businesses, assets, liabilities, and rights which the
Shareholders have requested in writing to obtain, which information
includes, and has not been limited to, the following: the Articles of
Incorporation and the Bylaws of Interland, Interland's Report on Form
10-K for the year ended August 31, 2001, and related Form 10K/A,
including "Management's Discussion and Analysis of Financial Conditions
and Results of Operatings - Certain Factors," Interland's Annual Report
to Shareholders for the year ended August 31, 2000, Interland's Proxy
Statement dated July 5, 2001 (the "Merger Proxy") contained in the
Registration Statement on Form S-4 (Reg. No. 333-61368), including
"Risk Factors", and copies of all press releases issued by Interland
since December 31, 2000, and certain updated information identified in
an "Acknowledgement of Confidential Disclosure Statement" executed as
of even date
21
herewith by each Shareholder (collectively, the "Interland
Disclosure"). Each Shareholder acknowledges and agrees that such
Shareholder has received all information such Shareholder requires in
order to make their respective investment decisions herein. Each
Shareholder acknowledges that certain of the statements made by
Interland herein and in the Reports are forward-looking statements
under the Private Securities Litigation Reform Act of 1995. Those
statements are or were made based on management's current expectations
and estimates, and actual results may differ materially due to risks
and uncertainties.
(m) Such Shareholder hereby acknowledges that
the Merger Shares are a speculative investment. Each Shareholder
represents that he or she can bear the economic risks of such an
investment for an indefinite period of time.
(n) Such Shareholder has significant knowledge
and experience in financial and business matters, and particularly the
business conducted by Interland, and is capable of evaluating the risk
of the investment in Merger Shares contemplated by this Agreement.
(o) Such Shareholder has carefully read this
Agreement and discussed its requirements and other applicable
limitations (including those set forth in Rule 144 under the Securities
Act) with respect to the transfer or other disposition of the Merger
Shares with legal counsel.
(p) Such Shareholder understands and
acknowledges that the desirability of an investment in Interland may be
influenced by the federal income tax consequences, and by the various
state and local tax consequences, arising from such Shareholder's
receipt of the Merger Shares. Because such tax effects depend, among
other things, on the specific facts, circumstances and intentions of
each of the Shareholders, such Shareholder has not relied upon
Interland or its representatives as to such matters. Each Shareholder
represents that he has taken into account the effects of federal, state
and local tax laws on receipt of the Merger Shares.
4.2. No Default. ▇▇▇▇▇▇ represents and warrants that he
has no present intent to default on the promissory notes executed by him at the
Closing for the benefit of Interland.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF INTERLAND AND MERGER SUB
Except as set forth in the disclosure schedule of Interland
(the "Interland Disclosure Schedule"), heretofore delivered by Interland and
acknowledged as received by CTN and the Shareholders, Interland and Merger Sub
jointly and severally represent and warrant to CTN as follows, each of which is
material to and relied upon by CTN and the Shareholders:
5.1. Organization and Qualification. Interland is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has the requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its businesses as now being conducted, and
22
is duly qualified and in good standing to do business in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business make such qualification necessary, except for such failures to be
so qualified and in good standing that could not be reasonably expected to have
a Material Adverse Effect on Interland. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is recently organized and has conducted no
business activities, other than as contemplated by this Agreement.
5.2. Capitalization.
(a) The authorized capital stock of Interland
consists of 200,000,000 shares of common stock, par value $0.01 per
share, of which 137,581,087 shares were issued and outstanding at
December 31, 2001. All of the outstanding shares of Interland Common
Stock are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights.
(b) The authorized capital stock of Merger Sub
consists of 100 shares of common stock, par value $0.01 per share, one
of which, as of the date hereof, is issued and outstanding and is held
by Interland. All of the outstanding shares of Merger Sub Common Stock
have been duly authorized and validly issued, and are fully paid and
nonassessable. Merger Sub was formed for the sole purpose of
consummating the Merger and has less than $1,000 in assets or no
liabilities.
(c) Except as set forth in Section 5.2(c) of the
Interland Disclosure Schedule or the Reports (as defined in Section
5.5), there are no outstanding subscriptions, calls, unsatisfied
preemptive rights, options, warrants or other rights, agreements or
commitments of any kind (contingent or otherwise) to purchase or
otherwise receive from Interland or any Interland Subsidiary any shares
of the capital stock or any other security of Interland or any
Interland Subsidiary or obligating Interland or any Interland
Subsidiary to issue shares of its capital stock or any other securities
convertible into or evidencing the right to subscribe to shares of the
capital stock of Interland or any Interland Subsidiary.
(d) Except as set forth in Section 5.2(d) of the
Interland Disclosure Schedule and except those contemplated hereunder,
there are no registration rights with respect to any equity security of
any class of Interland or with respect to any equity security,
partnership interest or similar ownership interest of any class of any
of its Subsidiaries.
(e) Except as set forth in Section 5.2(e) of the
Interland Disclosure Schedule, all outstanding shares of Interland
Common Stock, all outstanding options to purchase Interland Common
Stock, and all outstanding shares of each of its Subsidiaries have been
issued and granted in compliance with (i) all applicable federal and
state securities laws (or the statute of limitations has expired) and
other applicable material legal requirements, and (ii) all material
requirements set forth in applicable agreements or instruments.
23
5.3. Authority Relative to this Agreement. Each of
Interland and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement and all other agreements contemplated hereby,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby by
Interland and Merger Sub have been duly authorized by all necessary corporate
action on the part of Interland and Merger Sub. Certified copies of the
resolutions adopted by the Boards of Directors of Interland and Merger Sub and
Interland as sole shareholder of Merger Sub approving this Agreement, all other
agreements contemplated hereby and the Merger have been provided to CTN. Each of
Interland and Merger Sub has duly and validly executed and delivered this
Agreement and has duly and validly executed and delivered all other agreements
contemplated hereby to be executed by it, and assuming the due authorization,
execution and delivery by CTN and the Shareholders, each of this Agreement and
such other agreements constitutes a valid, binding and enforceable obligation of
each of Interland and Merger Sub in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
5.4. Compliance with Laws and Other Instruments;
Non-Contravention. Interland holds, and at all times has held, all material
licenses, permits and authorizations from all Governmental Entities necessary
for the lawful conduct of its business pursuant to all applicable statutes,
laws, ordinances, rules and regulations of all such Governmental Entities having
jurisdiction over it or any part of its operations. There are no violations or
claimed violations known by Interland of any such license, permit or
authorization or any such statute, law, ordinance, rule or regulation. Assuming
the accuracy of the representations and warranties of CTN and the Shareholders
contained in the Agreement and the other agreements contemplated hereby, neither
the execution, delivery or performance of this Agreement and all other
agreements contemplated hereby by Interland and Merger Sub, nor the consummation
of the Merger or any other transaction described herein, does or will, after the
giving of notice, or the lapse of time, or both, (i) conflict with, result in a
breach of, or constitute a default under, the Charter Documents of Interland or
Merger Sub or any federal, foreign, state or local court or administrative order
or process, statute, law, ordinance, rule or regulation, or any contract,
agreement or commitment to which Interland is a party, or under which Interland
is obligated, or by which Interland or any of the rights, properties or assets
of Interland are subject or bound; (ii) result in the creation of any Lien upon,
or otherwise affect, any of the rights, properties or assets of Interland; (iii)
terminate, amend or modify, or give any party the right to terminate, amend,
modify, abandon or refuse to perform or comply with, any contract, agreement or
commitment to which Interland is a party, or under which Interland is obligated,
or by which Interland or any of the rights, properties or assets of Interland
are subject or bound; or (iv) accelerate, postpone or modify, or give any party
the right to accelerate, postpone or modify, the time within which, or the terms
and conditions under which, any liabilities, duties or obligations are to be
satisfied or performed, or any rights or benefits are to be received, under any
contract, agreement or commitment to which Interland is a party, or under which
Interland may be obligated, or by which Interland or any of the rights,
properties or assets of Interland are subject or bound.
24
5.5. Reports and Financial Statements.
(a) Interland and its predecessors have timely
filed all forms, reports, statements and documents (collectively, the
"Reports") required to be filed by it with the Securities and Exchange
Commission (the "Commission") and the Nasdaq National Market (the
"Nasdaq"), with the exception of Interland's Form 10-K/A, filed January
14, 2002, which was filed within 15 days after Interland's filing of a
related Form 12b-25 on December 31, 2001. Each Report (i) was prepared
in accordance with the requirements of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the Nasdaq, as the case may be, and (ii) did not at the time it was
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 made
therein, in the light of the circumstances under which they were made,
not misleading. No Interland Subsidiary is subject to the periodic
reporting requirements of the Exchange Act or required to file any
form, report or other document with the Commission, the Nasdaq, any
other stock exchange or any other comparable governmental or
self-regulatory entity.
(b) Each of the audited consolidated financial
statements and unaudited interim financial statements included in the
Reports has been prepared in accordance with generally accepted
accounting principles applied on a consistent basis as of the
respective filing dates thereof (and except as may be indicated therein
or in the notes thereto) and fairly, in all material respects, presents
the financial position of the entity or entities to which it relates as
at the respective dates thereof and the consolidated results of
operations, shareholders' equity or cash flows of such entity or
entities (subject, in the case of unaudited statements, to the absence
of footnote disclosure and in the case of unaudited interim statements
to year-end adjustments, which will not be material either individually
or in the aggregate, and except as described in Section 5.5 of the
Interland Disclosure Schedule).
(c) None of the information supplied or to be
supplied by Interland for inclusion or incorporation by reference in
the registration statement called for in the Stock Rights Agreement
will at the time it becomes effective or thereafter, as of the date of
its filing, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
5.6. Validity of Merger Shares. The Merger Shares to be
issued in the Merger will, when issued, be, duly authorized, validly issued,
fully paid and nonassessable and not subject to any Liens or preemptive rights
or similar contractual rights granted by Interland except as provided herein, in
the Escrow Agreement, the Pledge Agreement, or the Stock Rights Agreement.
5.7. Consents and Approvals of Governmental Authorities.
Except for (a) the requirements of state securities (or "Blue Sky") laws (b) the
filing and recording of the Merger Documents as provided by the Missouri GBCL,
(c) the filing of appropriate documents with the Nasdaq and (d) the filing of a
Form D and a Form 8-K with the Commission, if applicable and
25
other filings required by the Stock Rights Agreement, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Entity or arbitrator is required to be made or obtained by Interland or Merger
Sub in connection with the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby.
5.8. Consent and Approvals of Third Parties. Except as
otherwise identified in this Agreement, no consent, approval or authorization of
any other Person is required to be made or obtained by Interland or Merger Sub
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby and except for any
action to be taken by the SEC in connection with registration of the Merger
Shares post-closing.
5.9. Absence of Certain Changes or Events. Since January
1, 2001 and except as set forth in the Reports, (a) there has not been (i) any
condition, event, occurrence or development that has had or would reasonably be
expected to have a Material Adverse Effect on Interland, or which would
reasonably be expected to prevent, hinder, or materially delay the ability of
Interland to consummate the Merger, (ii) any material change by Interland or any
Interland Subsidiary in its accounting methods, principles or practices, or
(iii) any event pursuant to which Interland or any Interland Subsidiary has
incurred any material liabilities (direct, contingent or otherwise) or engaged
in any material transaction or entered into any material agreement, in each
case, outside the Ordinary Course of Business which would be reasonably expected
to have a Material Adverse Effect on Interland, and (b) Interland and its
Subsidiaries have conducted their respective businesses in the Ordinary Course
of Business.
5.10. Certain Tax Matters.
(a) Neither Interland nor, to the knowledge of
Interland, any of its affiliates (as defined Section 3.8(s)) has taken
or agreed to take or will take any action that could reasonably be
expected to prevent the Merger from constituting a "reorganization"
under Section 368(a) of the Code. Interland is not aware of any
agreement, plan or other circumstance that could reasonably be expected
to prevent the Merger from so qualifying as a reorganization under
Section 368(a) of the Code.
(b) Interland and each of its Subsidiaries have
timely filed, or applied for the extension of the applicable filing
deadline, all material Tax Returns relating to Taxes required to be
filed by or on behalf of Interland and each of its Subsidiaries with
any tax authority, and such Tax Returns are true, correct and complete
in all material respects, and Interland and each of its Subsidiaries
have paid all Taxes shown to be due on such Tax Returns.
5.11. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Interland.
5.12. Litigation and Other Proceedings. Except as set forth
on Schedule 5.12 there is no action, suit, claim, investigation or proceeding
pending against or, to the knowledge of Interland, threatened against Interland
or its Subsidiaries or their respective properties and
26
assets before any court or arbitrator or any Governmental Entity in which the
amount involved exceeds $500,000. Interland is not subject to any order, writ,
judgment, decree, or injunction in which the amount involved exceeds $500,000.
5.13. No Defaults. Interland is not, nor to its knowledge
would it be with the passage of time, giving of notice or both, in default or
violation of any term, condition, or provision of (a) the Charter Documents; (b)
any judgment, decree, or order applicable to Interland; or (c) any loan or
credit agreement, note, bond, mortgage, indenture, contract, agreement, lease,
license, or other instrument to which Interland is now a party or by which it or
any of its properties or assets may be bound, except for defaults and violations
which would not have a Material Adverse Effect on Interland.
ARTICLE VI
ADDITIONAL AGREEMENTS
Interland, Merger Sub, CTN and the Shareholders each agree to
take the following actions after the execution of this Agreement.
6.1. Officers and Directors. Interland agrees that all
rights to indemnification existing on the date hereof in favor of the present or
former officers and directors of CTN with respect to actions taken in their
capacities as directors or officers of CTN prior to the Effective Time as
provided in the Charter Documents of CTN and any applicable indemnification
agreements (copies of which have been provided to Interland) will survive the
Merger and continue in full force and effect following the Effective Time and
the obligations related thereto will be assumed by Interland; provided, however,
that such rights shall only represent the right to receive the proceeds of the
insurance policies currently in effect at CTN or substitutes therefor, as
maintained by Interland pursuant to Section 6.8.
6.2. Employee Benefits. Except as set forth in Section 6.1
and 7.3(g), nothing contained herein will be considered as requiring CTN or
Interland to continue any specific plan or benefit, or to confer upon any
employee, beneficiary, dependent, legal representative or collective bargaining
agent of such employee any right or remedy of any nature or kind whatsoever
under or by reason of this Agreement, including without limitation any right to
employment or to continued employment for any specified period, at any specified
location or under any specified job category, except as specifically provided
for in an offer letter or other agreement of employment. It is specifically
understood that continued employment with CTN or employment with Interland is
not offered or implied for any other employees of CTN and any continuation of
employment with CTN after the Closing will be at will except as specifically
provided otherwise in an accepted offer letter or other agreement of employment.
Notwithstanding the foregoing, Interland shall be responsible for all
liabilities (including any obligations pursuant to the so-called WARN Act) with
respect to any termination of employees or reduction of benefits after the
Effective Time.
6.3. Additional Agreements. In case at any time after the
Effective Time any further action is reasonably necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals,
27
immunities and franchises of CTN, the officers and directors of each corporation
which is a party to this Agreement will take all such necessary action. Without
limiting the foregoing, on or prior to the Closing Date, CTN will deliver to
Interland a properly executed statement satisfying the requirements of Treasury
Regulation Sections 1.897-2(h) and 1.1445-2(c)(3) in form and substance
reasonably acceptable to Interland.
6.4. Public Announcements. Neither Interland, CTN nor any
of the Shareholders will disseminate any press release or other announcement
concerning this Agreement or the transactions contemplated herein to any third
party (except to the directors, officers and employees of the parties to this
Agreement whose direct involvement is necessary for the consummation of the
transactions contemplated under this Agreement, to the attorneys, advisors and
accountants of the parties hereto, or except as Interland determines in good
faith to be required by applicable law after consultation with the Shareholders
and their counsel) without the prior written agreement of Interland and CTN,
which agreement shall not be unreasonably withheld or delayed.
6.5. Nasdaq National Market Listing. Interland will use
commercially reasonable efforts to cause the Merger Shares to be authorized for
trading on the Nasdaq as soon as practicable in accordance with the Stock Rights
Agreement attached hereto as EXHIBIT 6.5.
6.6. Confidentiality. CTN, ▇▇▇▇▇▇▇ & Associates and
Interland have entered into a Nondisclosure Agreement dated September 28, 2001
("Confidentiality Agreement") concerning each of Interland's and CTN's
obligations to protect the confidential information of the other. CTN and
Interland each hereby affirm each of their obligations under such agreement.
6.7. Tax-Free Reorganization.
(a) Prior to the Merger, Interland will be in
control of Merger Sub within the meaning of Section 368(c) of the Code.
(b) Interland has no present plan or intention
as part of the plan of the Merger to cause the Surviving Corporation to
issue after the Effective Time additional shares of stock that would
result in Interland losing control of the Surviving Corporation within
the meaning of Section 368(c) of the Code.
(c) Interland has no present plan or intention
to reacquire any of the Interland Common Stock, whether issued in the
Merger or otherwise.
(d) Interland has no present plan or intention
to liquidate the Surviving Corporation, to merge the Surviving
Corporation with or into another corporation other than Interland or to
sell or otherwise dispose of the Surviving Corporation stock except for
transfers of stock to a corporation controlled by Interland, which
corporation is a member of a qualified group as defined in Treas. Reg.
Section 1.368-1(d)(4)(ii).
(e) Interland has no present plan or intention
to cause the Surviving Corporation, following the Merger, (i) to cease
its historic business or (ii) to cease to use a significant portion of
its historic business assets in a business.
28
6.8. Insurance. Interland shall maintain CTN's insurance
in existence as of the Effective Time and shall timely and fully pay premiums as
they come due until such time as Interland or any third parties can no longer
make any claims for indemnification under Article VIII hereof. At its option,
Interland may substitute insurance providing equal or better coverage.
6.9. Co-location and Leased Line Business.
(a) Interland shall give the Shareholders a
30-day option to purchase the co-location and leased line business of
the Surviving Corporation at such time, if any, as Interland plans to
offer such business for sale to another party. The option shall specify
the price and any other key items. The Shareholder shall have thirty
days in which to accept the offer, and thirty days from acceptance in
which to purchase the business. If the Shareholders fail to accept the
offer or purchase the business, then Interland shall have six months
thereafter in which to sell the business, provided that the price may
be no less than 90% of that offered to the Shareholders. If both
Shareholders desire to exercise such option, they shall participate in
such exercise with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ having a 60% interest and ▇▇▇▇▇
▇▇▇▇▇▇▇ having a 40% interest.
(b) In the event either the co-location or the
leased line business is abandoned in Kansas City, such abandonment
shall be deemed to be an option to purchase the business being
abandoned for $0.00 granted to the Shareholders exercisable as
permitted in Section 6.9(a). Such purchase shall be on an "as is/where
is" basis.
(c) If the co-location or leased line business
is purchased, the parties will appropriately amend the non-competition
portions of the employment agreement and the confidentiality, invention
assignment, and non-competition agreement for employees to allow the
Shareholders to manage and operate such business but any amendment is
not required to permit a Shareholder employed by Interland to neglect
his duties as an employee.
6.10. Guaranties. To the extent that the personal
guaranties of the Shareholders described in Section 7.3(i)(2) shall not have
been obtained at or prior to the Effective Time, and the Shareholders
nevertheless agree in their sole discretion to proceed with the Closing, then
and in such event Interland shall use its best commercially reasonable efforts
(not requiring payment) to assist the Shareholders in obtaining such releases as
promptly as practicable.
6.11. Automobiles. Interland shall, and shall cause CTN to,
execute and deliver such documentation as shall be necessary to vest in the
Shareholders all right, title and interest in and to their respective
automobiles described in the Disclosure Schedule free and clear of all Liens and
obligations. The Shareholders shall not assume any and all related indebtedness
or leases.
6.12. Tax Distribution. On or before April 1, 2002,
Interland will cause the Surviving Corporation to distribute to the CTN
Shareholders an amount equal to $375,807.26 which represents a dividend for
taxes declared.
29
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger will be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Governmental Approvals. Other than the
filing of the Merger Documents with the Secretary of State of Missouri,
all statutory requirements and all Consents of Governmental Entities
legally required for the consummation of the Merger and the
transactions contemplated by this Agreement will have been filed,
occurred, or been obtained, other than such Consents for which the
failure to obtain would not have a material adverse effect on the
consummation of the Merger or the other transactions contemplated
hereby or a Material Adverse Effect on Interland or CTN.
(b) No Restraints. No statute, rule or
regulation, and no final and nonappealable order, decree or injunction
will have been enacted, entered, promulgated or enforced by any court
or Governmental Entity of competent jurisdiction which enjoins or
prohibits the consummation of the Merger.
(c) Payments. CTN shall have paid in full or
made adequate provision for the full payment of ▇▇▇▇▇▇▇ & Associates,
▇▇▇▇▇ ▇▇▇▇ LLP and Ernst & Young LLP for services rendered by each in
connection with this Agreement and the transactions contemplated
hereby.
7.2. Conditions of Obligations of Interland and Merger
Sub. The obligations of Interland and Merger Sub to effect the Merger are
subject to the satisfaction of the following conditions unless waived by
Interland and Merger Sub:
(a) Representations and Warranties of CTN and
the Shareholders. The representations and warranties of CTN and the
Shareholders set forth in this Agreement will be true and correct in
all material respects as of the date of this Agreement, except (i) as
otherwise specifically permitted by this Agreement, (ii) as a result of
actions taken or not taken at the direction of or after consultation
with and written concurrence of Interland and (iii) for representations
and warranties specifically limited to an earlier date(s) (which must
have been true as of such dates).
(b) Performance of Obligations of CTN and the
Shareholders. CTN and the Shareholders will have performed in all
material respects all agreements required to be performed by them under
this Agreement except (i) as otherwise contemplated or permitted by
this Agreement and (ii) as a result of actions taken or not taken at
the direction of or after consultation with and written concurrence of
Interland specifying an exception to this Section.
(c) Legal Action. There will not be overtly
threatened or pending any action, proceeding or other application
before any court or Governmental Entity brought by any Person or
Governmental Entity: (i) challenging or seeking to restrain or prohibit
30
the consummation of the transactions contemplated by this Agreement, or
seeking to obtain any material damages from Interland, Merger Sub or
CTN as a result of such transactions; or (ii) seeking to prohibit or
impose any limitations on Interland's ownership or operation of all or
any portion of CTN's business or assets, or to compel Interland to
dispose of or hold separate all or any portion of its or CTN's business
or assets as a result of the transactions contemplated by the Agreement
which if successful would have a material adverse effect on Interland's
ability to receive the anticipated benefits of the Merger.
(d) Opinion of Counsel. Interland will have
received an opinion dated as of the Closing Date of ▇▇▇▇▇ ▇▇▇▇ LLP,
counsel to CTN and the Shareholders, acceptable in form and substance
to Interland substantially in the form attached as EXHIBIT 7.2(d).
(e) Escrow and Stock Rights Agreements. Each
Shareholder shall have duly executed and delivered the Escrow Agreement
in the form attached hereto as EXHIBIT 2.2 and the Stock Rights
Agreement in the form attached hereto as EXHIBIT 6.5.
(f) Corporate Proceedings Satisfactory. All
corporate and other proceedings to be taken by CTN in connection with
the transactions contemplated hereby and all documents incident thereto
will be satisfactory in form and substance to Interland and its
counsel, and Interland and its counsel will have received all such
counterpart originals or certified or other copies of such documents as
they reasonably may request.
(g) Noncompetition Agreements. Each Shareholder
shall have duly executed and delivered a Noncompetition Agreement in
the form attached hereto as Exhibit 7.2(g).
(h) Each Shareholder shall have executed his
Employment Agreement as identified at Section 7.3(g).
7.3. Conditions of Obligation of CTN and the Shareholders.
The obligation of CTN and the Shareholders to effect the Merger is subject to
the satisfaction of the following conditions unless waived by CTN and the
Shareholders:
(a) Representations and Warranties of Interland
and Merger Sub. The representations and warranties of Interland and
Merger Sub set forth in this Agreement will be true and correct in all
material respects as of the date of this Agreement, except as otherwise
specifically permitted by this Agreement.
(b) Performance of Obligations of Interland and
Merger Sub. Interland and Merger Sub will have performed in all
material respects all agreements required to be performed by them under
this Agreement.
(c) Opinion of Interland's Counsel. CTN and the
Shareholders have received an opinion dated the Closing Date of the
general counsel of Interland, substantially in the form attached as
EXHIBIT 7.3(c).
31
(d) Receipt of the Merger Shares. The
Shareholders shall have received the Merger Shares as contemplated by
Section 2.1, by means of a faxed confirmation from Interland's transfer
agent to the effect that they have been issued as instructed.
(e) Escrow and Stock Rights Agreements.
Interland shall have duly executed and delivered the Escrow Agreement
in the form attached hereto as EXHIBIT 2.2 and the Stock Rights
Agreement in the form attached hereto as EXHIBIT 6.5.
(f) Legal Action. There will not be overtly
threatened or pending any action, proceeding or other application
before any court or Governmental Entity brought by any Person or
Governmental Entity: (i) challenging or seeking to restrain or prohibit
the consummation of the transactions contemplated by this Agreement, or
seeking to obtain any material damages from CTN or the Shareholders as
a result of the transactions contemplated by this Agreement or (ii)
restricting in any way the receipt, ownership, or ability to dispose of
the consideration to be received by any shareholder of CTN in the
transactions contemplated by this Agreement; provided, however, that
CTN and the Shareholders will automatically be deemed to waive this
condition if Interland agrees to indemnify, defend and hold any such
named party harmless against any such action.
(g) Employment Agreements. Each of the
Shareholders shall have received employment agreements in the form
attached hereto as EXHIBIT 7.3(g) duly executed and delivered by
Interland.
(h) Release. CTN and the Shareholders shall have
executed and delivered that certain Mutual Release Agreement
substantially in the form attached hereto as EXHIBIT 7.3(h).
(i) Release of Shareholders from Personal
Guaranties.
(1) Interland shall have paid in full the
Firstar Bank Midwest, N.A. ("Firstar") loan to CTN and Firstar
shall have fully released Shareholders of their obligations
under the personal guarantees securing such loan as evidenced
by documentation reasonably acceptable to Shareholders and
their counsel.
(2) The Shareholders shall have been fully
released from the other personal guaranties executed in favor
of CTN, as identified in the Disclosure Schedule, as evidenced
by documentation reasonably acceptable to Shareholders and
their counsel.
32
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification of Interland.
(a) General Indemnification of Interland.
Subject to this Article VIII, the Shareholders hereby agree to defend,
indemnify and hold Interland harmless from and against, and to
reimburse Interland with respect to, any and all losses, damages,
liabilities, claims, judgments, settlements, fines, out-of-pocket costs
and expenses (including reasonable attorneys' fees and expenses
actually paid ("Indemnifiable Amounts," as modified by the last
sentence of this Section 8.1(a)), of every nature whatsoever incurred
by Interland (which will be deemed to include any of the foregoing
incurred by the Surviving Corporation) by reason of or arising out of
or in connection with (i) any breach, or any claim (including claims by
parties other than Interland) that constitutes a breach, by CTN of any
representation or warranty of CTN contained in Article III of this
Agreement, other than any breach or related claim taken or not taken at
the written direction of or after consultation with and written
concurrence of Interland specifying an exception from this Section
8.1(a)(i) (it being agreed that Shareholders' obligations under this
Section 8.1(a)(i) shall be joint and several), (ii) any breach, or any
claim (including claims by parties other than Interland) that
constitutes a breach, by any of the Shareholders of any representation
or warranty of the Shareholders contained in Article IV of this
Agreement, other than any breach or related claim taken or not taken at
the written direction of or after consultation with and written
concurrence of Interland (it being agreed that Shareholders'
obligations under this Section 8.1(a)(ii) shall be several, and not
joint, based upon their ownership of CTN Common Stock immediately prior
the Effective Time), and (iii) the breach, partial or total, by CTN or
any of the Shareholders in performing any agreement or covenant
required by this Agreement to be performed by it or them other than any
action or breach taken or not taken at the written direction of or
after consultation with and written concurrence of Interland (it being
agreed that Shareholders' agreement under this Section 8.1(a)(iii)
shall be joint and several). No Shareholder will be entitled to any
indemnification from CTN or the Surviving Corporation for amounts paid
hereunder. There will be no right of contribution or subrogation from
Interland or the Surviving Corporation for indemnification payments
made by or for the account of the Shareholders. Interland and the
Surviving Corporation shall have a duty to mitigate the Indemnifiable
Amounts. It is agreed that the term "Indemnifiable Amounts" shall not
include punitive or consequential damages if they are sought by
Interland or Surviving Corporation but shall include punitive or
consequential damages if they are sought by a third party.
(b) Third Party Claims. With respect to any
claims or demands by third parties as to which Interland may seek
indemnification hereunder (including any Tax audit or other Tax
contest), whenever Interland will have received a written notice that
such a claim or demand has been asserted or threatened, Interland will
promptly notify the Shareholders of such claim or demand and of the
facts within Interland's knowledge that relate thereto within a
reasonable time after receiving such written notice. The Shareholders
will then have the right to defend, contest, negotiate or settle any
such
33
claim or demand (including any Tax audit or other Tax contest) through
counsel of their own selection, satisfactory to Interland, and solely
at the Shareholders' own cost and expense, which costs and expenses
will initially be payable out of the property being held pursuant to
the Escrow Agreement; provided however, that as a condition to
Shareholders' exercise of the preceding right, Shareholders must
deliver to Interland an affidavit stating that they each own assets
sufficient to satisfy more than half of the amount in controversy.
Notwithstanding the preceding sentence, the Shareholders will not
settle, compromise, or offer to settle or compromise any such claim or
demand without the prior written consent of Interland, which consent
will not be unreasonably withheld or delayed. Without limiting
Interland's rights to object for other reasons, Interland may object to
a settlement or compromise which includes any provision which in its
good faith reasonable judgment may have a Material Adverse Effect on or
establish an adverse precedent for Interland or any of its
Subsidiaries. If the Shareholders give notice to Interland within
thirty (30) calendar days after Interland has notified the Shareholders
that any such claim or demand has been made in writing, that the
Shareholders elect to have Interland defend, contest, negotiate, or
settle any such claim or demand, then Interland will have the right to
contest and settle any such claim or demand and seek indemnification
pursuant to this Article VIII as to any Indemnifiable Amounts;
provided, however, that Interland will not settle, compromise, or offer
to settle or compromise any such claim or demand without the prior
written consent (which may include a general or limited consent) of the
Shareholders, which consent will not be unreasonably withheld or
delayed. If the Shareholders fail to give written notice to Interland
of their intention to contest or settle any such claim or demand within
thirty (30) calendar days after Interland has notified the Shareholders
that any such claim or demand has been made in writing, or if any such
notice is given but any such claim or demand is not contested by the
Shareholders within a reasonable time thereafter, Interland will have
the right to contest and settle any such claim or demand in its sole
discretion and seek indemnification pursuant to this Article VIII as to
any Indemnifiable Amounts. In connection with the matters for which
indemnification is sought hereunder, the indemnified party agrees to
give the indemnifying party and its representatives access to its
books, records and employees, to the extent such reasonably relate to
the matters to which the claim relates.
(c) Tax Contests. Notwithstanding any of the
foregoing, Interland, at its sole expense, will have the right to
conduct any Tax audit or other Tax contest relating to the Surviving
Corporation. Interland will conduct any such Tax audit or other Tax
contest in good faith; Interland shall consult with the Shareholders
and allow them to comment before taking any position or making any
written submission with any Governmental Entity; and neither Interland
nor the Shareholders shall make any such submission without the prior
written consent of the other party which consent shall not be
unreasonably withheld or delayed.
(d) Limitations. (i) Notwithstanding any other
provision in this Agreement and except as provided in subsection
(d)(ii) of this Section, Interland will be entitled to indemnification
only to the extent that the aggregate Indemnifiable Amounts is greater
than $100,000 (the "Deductible Amount") and then and only to the extent
such amounts exceed the Deductible Amount. In no event shall the
Shareholders be liable for
34
any amounts in excess of $10,750,000 (the "Cap Amount"). All
Indemnifiable Amounts shall be reduced by any actual tax savings or
insurance payments to which the Surviving Corporation or Interland
shall be entitled directly or indirectly by reason of the occurrence of
the event or circumstance giving rise to the indemnification. (ii) The
Deductible Amount shall be increased from $100,000 to $200,000 for any
and all breach or claims under Section 8.1(a)(i) or 8.1(a)(iii) as to
which the Shareholders can demonstrate that Interland had actual
knowledge as of the Effective Time.
(e) Indemnification is Sole Remedy.
Notwithstanding any other provision in this Agreement to the contrary,
the provisions of this Article VIII will be the sole and exclusive
remedy of (and corresponding liability of any Shareholder of CTN, in
such Shareholder's capacity as such, to) Interland, Merger Sub and the
Surviving Corporation for any damage, claim, cause of action or right
of any nature arising out of or relating to this Agreement or the
transactions contemplated hereby and access to the Escrow Fund under
the terms of the Escrow Agreement shall be the sole recourse of
Interland, Merger Sub and the Surviving Corporation for such damages,
claims, causes of action or rights; provided, however, that nothing in
this Agreement or the Escrow Agreement will be deemed to limit any
right or remedy for criminal activity or fraudulent conduct on the part
of CTN or its Shareholders.
8.2. Indemnification of CTN and the Shareholders.
(a) General Indemnification of CTN and the
Shareholders. Interland hereby agrees to defend, indemnify and hold CTN
and its Shareholders harmless from and against, and to reimburse each
of them with respect to, any and all losses, damages, liabilities,
claims, judgments, settlements, fines, out-of-pocket costs and expenses
(including reasonable attorneys' fees and expenses actually paid), of
every nature whatsoever incurred by CTN and its Shareholders
("Damages," as modified by the last sentence of this Section 8.2(a)),
by reason of or arising out of or in connection with (a) any breach, or
any claim (including claims by parties other than CTN and its
Shareholders) that constitutes a breach, by Interland of any
representation or warranty of Interland or Merger Sub contained in this
Agreement, other than any breach or related claim taken or not taken at
the written direction of or after consultation with and written
concurrence of CTN and its Shareholders specifying an exception from
this Section 8.2(a) and (b) the failure, partial or total, of Interland
to perform any agreement or covenant required by this Agreement to be
performed by it or them other than any breach or related claim taken or
not taken at the written direction of or after consultation with and
written concurrence of CTN and its Shareholders. CTN and the
Shareholders shall have the duty to Mitigate the Damages. It is agreed
that the term "Damages" shall not include punitive or consequential
damages if they are sought by the Shareholders but shall include
punitive or consequential damages if they are sought by a third party.
(b) Third Party Claims. With respect to any
claims or demands by third parties as to which the Shareholders may
seek indemnification hereunder, whenever the Shareholders will have
received a written notice that such a claim or demand has been asserted
or threatened, the Shareholders will promptly notify Interland of such
claim or demand and of the facts within the Shareholders' knowledge
that relate thereto within a
35
reasonable time after receiving such written notice. Interland will
then have the right to defend, contest, negotiate or settle any such
claim or demand through counsel of its own selection, satisfactory to
the Shareholders, and solely at the Interland's own cost and expense.
Notwithstanding the preceding sentence, Interland will not settle,
compromise, or offer to settle or compromise any such claim or demand
without the prior written consent of the Shareholders, which consent
will not be unreasonably withheld or delayed. If Interland gives notice
to the Shareholders within thirty (30) calendar days after the
Shareholders have notified Interland that any such claim or demand has
been made in writing, that Interland elects to have the Shareholders
defend, contest, negotiate, or settle any such claim or demand, then
the Shareholders will have the right to contest and settle any such
claim or demand and seek indemnification pursuant to this Article VIII
as to any Damages; provided, however, that the Shareholders will not
settle, compromise, or offer to settle or compromise any such claim or
demand without the prior written consent (which may include a general
or limited consent) of Interland, which consent will not be
unreasonably withheld. If Interland fails to give written notice to the
Shareholders of its intention to contest or settle any such claim or
demand within thirty (30) calendar days after the Shareholders have
notified Interland that any such claim or demand has been made in
writing, or if any such notice is given but any such claim or demand is
not contested by Interland within a reasonable time thereafter, the
Shareholders will have the right to contest and settle any such claim
or demand in their sole discretion and seek indemnification pursuant to
this Article VIII as to any Damages. In connection with the matters for
which indemnification is sought hereunder, Interland agrees to give the
Shareholders, and their representatives, access to its books, records
and employees, to the extent such reasonably relate to the matters to
which the claim relates.
(c) Binding Effect. The indemnification
obligations contained in this Article VIII are an integral part of this
Agreement and the Merger in the absence of which the parties hereto
would not have entered into this Agreement.
(d) Time Limit. The representations, warranties,
covenants and agreements of the parties set forth in this Agreement
will survive the Effective Time and the consummation of the
transactions contemplated by this Agreement, but, except for breaches
of Sections 6.6 or 6.8 any claims with respect thereto may be made only
on or before the first-year anniversary of the date of this Agreement;
provided however, that claims relating to Tax matters may be made only
on or before the expiration of the applicable Tax statute of
limitations.
ARTICLE IX
MISCELLANEOUS
9.1. Entire Agreement; Binding Effect. This Agreement,
including the exhibits, schedules and other agreements delivered pursuant to
this Agreement, and the Confidentiality Agreement (ss.6.6), contain all of the
terms and conditions agreed upon by the parties relating to the subject matter
of this Agreement and the Confidentiality Agreement and supersede all prior
agreements, negotiations, correspondence, undertakings and communications of the
parties, whether oral or written, respecting that subject matter. This Agreement
shall be
36
binding upon the parties hereto and inure to the benefit of their respective
successors, permitted assigns, heirs and personal representatives.
9.2. Governing Law. The Merger will be governed by the
internal laws of Georgia (without giving effect to its internal conflict of laws
provisions).
9.3. Notices. All notices, requests, demands or other
communications which are required or may be given pursuant to the terms of this
Agreement will be in writing and will be deemed to have been duly given: (a) on
the date of delivery if personally delivered by hand, (b) upon the third
Business Day after such notice is deposited in the United States mail, if mailed
by registered or certified mail, postage prepaid, return receipt requested, (c)
upon the date of delivery if such notice is sent by a nationally recognized
overnight express courier or (d) by fax upon written confirmation (including the
automatic confirmation that is received from the recipient's fax machine) of
receipt by the recipient of such notice if a Business Day, and if not, on the
next succeeding Business Day:
If to Interland or Interland, Inc.
Merger Sub: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
General Counsel
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to CTN or
the Shareholders ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
37
With a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: P. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Such addresses may be changed, from time to time, by means of a notice given in
the manner provided in this Section 9.3.
9.4. Severability. If any provision of this Agreement is
held to be unenforceable for any reason, it will be modified rather than voided,
if possible, in order to achieve the intent of the parties to this Agreement to
the extent possible. In any event, all other provisions of this Agreement will
be deemed valid and enforceable to the full extent.
9.5. Assignment. No party to this Agreement may assign, by
operation of law or otherwise, all or any portion of its rights, obligations, or
liabilities under this Agreement without the prior written consent of the
non-assigning parties, which consent may be withheld in the absolute discretion
of the party asked to grant such consent. Any attempted assignment by in
violation of this Section 9.5 will be voidable and will entitle the
non-assigning parties, respectively, to terminate this Agreement at its option.
Election to void the assignment shall not require a termination of this
Agreement.
9.6. Counterparts. This Agreement may be executed in two
or more partially or fully executed counterparts each of which will be deemed an
original and will bind the signatory, but all of which together will constitute
but one and the same instrument. The execution and delivery of a Signature Page
to Agreement and Plan of Merger in the form annexed to this Agreement, including
a facsimile copy of the actual signature, by any party hereto who will have been
furnished the final form of this Agreement will constitute the execution and
delivery of this Agreement by such party.
9.7. Amendment. This Agreement may not be amended except
by an instrument in writing executed by the parties.
9.8. Extension; Waiver. At any time prior to the Effective
Time, any party hereto may in its absolute discretion, to the extent legally
allowed: (a) extend the time for the performance of any of the obligations or
other acts of any other party hereto to the party extending such time, (b) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements, covenants or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party, and no waiver or extension of any
specific act or circumstance shall be deemed to waive or extend any other action
or circumstance.
38
9.9. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference will be to a
Section, Exhibit or Schedule to this Agreement unless otherwise indicated. The
words "include," "includes," and "including" when used therein will be deemed in
each case to be followed by the words "without limitation." The table of
contents, index to defined terms, and headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
9.10. Knowledge. For purposes of this Agreement, the term
"knowledge" (including any derivation thereof such as "know," "known" or
"knowing" and regardless of whether such word starts with an initial capital) in
reference to CTN will mean the actual knowledge of the Shareholders, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇.
9.11. Transfer, Sales, Documentary, Stamp and Other Similar
Taxes. Any and all transfer, sales, documentary, stamp and other similar Taxes
imposed in connection with the transactions contemplated by this Agreement will
be paid by the Shareholders of CTN with respect to which such Tax relates.
9.12. Costs. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and all other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
9.13. Construction. The parties hereto acknowledge and
agree that each party has participated in the drafting of this document has been
reviewed by the respective legal counsel for the parties hereto and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be applied to the interpretation
of this Agreement. No inference in favor of, or against, any party shall be
drawn from the fact that one party has drafted any portion hereof.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Interland, Merger Sub, CTN and the
Shareholders have executed this Agreement as of the date first written above.
INTERLAND, INC.
By:
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Name:
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Title
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MONTANA ACQUISITION COMPANY, INC.
By:
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Name:
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Title
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▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇, in his individual capacity
60 shares of CTN Common Stock
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▇▇▇▇▇ ▇▇▇▇▇▇▇, in his individual capacity
40 shares of CTN Common Stock
[Signature Page to Agreement and Plan of Merger]
40