Exhibit 2.13
STOCK PURCHASE AGREEMENT
among
SOFT LINK, INC.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇
SOFT LINK HOLDING CORP.
and
INTERLIANT, INC.
DATED AS OF FEBRUARY 29, 2000
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT made as of this 29th day of February,
2000 by and among (A) SOFT LINK, INC., a Minnesota corporation with a principal
place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), (B) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇, an individual residing at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇, an individual residing at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Shareholders"), (C) SOFT LINK HOLDING
CORP., a Delaware corporation (the "Buyer") and (D) INTERLIANT, INC., a Delaware
corporation having an ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Parent") and the sole shareholder of the Buyer.
W I T N E S S E T H :
WHEREAS, the Company is engaged in the implementation services,
enterprise application outsourcing and consulting business (hereinafter, the
"Business");
WHEREAS, the Shareholders are the holders of all of the
outstanding shares of the authorized capital stock of the Company;
WHEREAS, the Shareholders desire to sell to the Buyer and, based
upon the expertise, experience and business contacts and relationships of the
Company, the Buyer wishes to purchase from the Shareholders all of the
outstanding shares of the Company and all associated goodwill, all on the terms
and subject to the conditions provided herein;
WHEREAS, the Buyer, the Company and the Shareholders have agreed
that, at the request of the Buyer, the Buyer and the Shareholders shall make a
joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any provisions of applicable state or local law that
are analogous to Section 338(g) or (h)(10) of the Code, with respect to the
acquisition of the Company's stock by the Buyer contemplated herein;
WHEREAS, the Shareholders are the sole Shareholders, directors
and principal officers of the Company and are familiar with the material aspects
of operation of the business of the Company, including, without limitation, the
Business; and
NOW THEREFORE, in consideration of the mutual covenants and
promises contained in this Agreement, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by all parties, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
--------------------------
Section I.1. Purchase and Sale
-----------------
In reliance on the representations, warranties and covenants
herein and subject to the terms and conditions of this Agreement, on the Closing
Date the Shareholders will sell, convey, transfer and deliver to Buyer, and
Buyer will purchase from the Shareholders one thousand (1,000) shares of common
stock, no par value, of the Company, representing all of the issued and
outstanding shares of common stock of the Company (the "Company Common Stock").
ARTICLE II
PURCHASE PRICE
--------------
Section II.1 Purchase Price.
--------------
In consideration of the sale and transfer of the Company Common
Stock by the Shareholders, subject to the terms and conditions of this Agreement
and on the basis of the representations and warranties of the Shareholders
contained herein, the Buyer shall:
(a) pay to the Shareholders, in the respective percentages set
forth in Section 2.01(d), on the Closing Date in cash the
aggregate amount of $18,225,000 (Eighteen Million Two
Hundred Twenty Five Thousand Dollars) (the "Cash
Consideration"), by wire transfer of federal funds to the
account of the Shareholders, as the Shareholders shall
direct in writing on or before the Closing Date;
(b) deliver to the Shareholders, in the respective percentages
set forth in Section 2.01(d), on the Closing Date, Two
Hundred Fifty Four Thousand Eight Hundred Seventy Nine
(254,879) shares (the "Closing Shares") of Parent's common
stock, par value $.01 per share (the "Parent Common Stock").
All such shares of Parent Common Stock will be subject to
the provisions of Section 4.01(o);
(c) pay to the Shareholders, in the respective percentages set
forth in Section 2.01(d), an amount (the "Earnout")
calculated as follows: for each $1,000,000 in gross sales of
the Company less returns, allowances and customer credits
("Net Sales Revenue") calculated in accordance with GAAP
earned by the Company during calendar year 2000 (the
"Earnout Period") in excess of $31,000,000, the Buyer shall
pay to the Shareholders $2,000,000; provided however, that
in no event will the maximum Earnout exceed $10,000,000. The
Earnout shall only be payable if the Company has earnings
before interest, taxes, depreciation and amortization for
the Earnout Period calculated in accordance with GAAP
("EBITDA"), which as a percentage (such percentage being the
"EBITDA Margin") of Net Sales Revenue for the Earnout Period
calculated in accordance with GAAP, are no less than 17.5%.
For purposes of calculating Net Sales Revenue or EBITDA: (i)
any corporate overhead allocation from the Buyer, the Parent
and their respective Affiliates (other than the Company)
shall be disregarded, unless otherwise agreed in writing by
the Shareholders, (ii) the Company shall not be charged for
the employer match component of the Parent's 401(k) plan or
any 401(k) plan adopted by the Company or any affiliate of
Parent, and (iii) the Company shall not be charged for
compensation payable to the Chief Financial Officer of the
Company designated by the Parent. The Earnout shall be
payable, if earned, at the time set forth in Section 2.02.
The Earnout shall be paid 50% in cash and, at the Buyer's
option, 50% in cash or Parent Common Stock (the "Earnout
Shares"), or any combination thereof. Subject to the
limitations set forth in Article V, the amount of Earnout
payable shall be reduced dollar-for-dollar by any
indemnification payments due from the Shareholders to the
Parent, the Buyer or the Company pursuant to Section
5.03(a);
(d) allocate the purchase price among the Shareholders in the
following percentages:
Name of Shareholder Percentage
------------------- -------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ 51%
▇▇▇▇ ▇▇▇▇▇▇▇ 49%
Section II.2 Determination and Payment of Earnout.
------------------------------------
(a) On or before the later to occur of (i) January 31, 2001, or
(ii) ten (10) business days after the Company closes its books for fiscal year
2000 but no later than March 31, 2001 (such date, the "Earnout Determination
Date"), the Buyer shall prepare and deliver to the Shareholders a statement (the
"Buyer's Statement") showing in reasonable detail the Buyer's calculations of
the Net Sales Revenue, the EBITDA Margin for the Earnout Period and the Earnout,
if any, payable in respect thereof. The Buyer will make available the work
papers used in preparing the Buyer's Statement to the Shareholders and, if
applicable the accounting firm selected to resolve any dispute pursuant to
Section 2.02(b) below, at reasonable times and upon reasonable notice at any
time from the date of the delivery of the Buyer's Statement through the
resolution of any such dispute. The Shareholders shall have a period of twenty
(20) business days after the receipt of the Buyer's Statement within which to
dispute the calculations set forth in the Buyer's Statement by means of a
written notice of dispute setting forth in reasonable detail the grounds for
such dispute (the "Shareholders' Dispute Notice"). If the Shareholders do not
timely deliver a proper Shareholders' Dispute Notice, the calculations set forth
in the Buyer's Statement shall be final and binding on the Shareholders.
(b) If the Shareholders timely deliver a proper Shareholder's
Dispute Notice, the dispute shall be resolved as set forth in this clause (b).
The Buyer and the Shareholders shall first use their good faith efforts to
resolve any dispute for a period of 45 days after the Buyer has received the
Shareholders' Dispute Notice. If no resolution is achieved during such period,
the Buyer and the Shareholders shall jointly select a nationally recognized
independent accounting firm mutually acceptable to them to resolve the remaining
elements of such dispute. The accounting firm so selected shall resolve such
dispute as soon as reasonably practicable based on a review of the Buyer's
Statement and work papers and other information supplied from time to time by
the Buyer and the Shareholders, including, without limitation, the Buyer's
Statement and the Shareholders' Dispute Notice, and communicate its resolution
of such dispute to the Buyer and the Shareholders in writing as promptly as
practicable after such firm's selection. The determination of such accounting
firm shall be final and binding on the Buyer and the Shareholders. If any
unresolved dispute is submitted to an accounting firm for resolution as provided
above, the Buyer shall pay 50% of the fees and expenses of such firm and the
Shareholders shall pay the other 50% thereof; provided that all the fees and
expenses of the Shareholders' own accountants, advisors or other
representatives, if any, shall be paid by the Shareholders and all the fees and
expenses of the Buyer's own accountants, advisors or other representatives, if
any, shall be paid by the Buyer.
(c) Upon the final determination of the Earnout pursuant to
Section 2.02(b), the Buyer shall pay to each Shareholder his or her respective
pro rata share, based on the percentages in Section 2.01(d), of the Earnout as
follows:
(i) To the extent such payments are to be made in cash (as
determined by the Buyer), the Buyer shall make such payments within ten
(10) business days after the final determination of the Earnout pursuant to
Section 2.02(b), by certified or official bank check payable to the order
of the Shareholders, or by wire transfer of federal funds to the account of
the Shareholders, in each case as the Shareholders shall direct in writing
on or before the Earnout Determination Date; and
(ii) To the extent such payments are to be made in the form
of Earnout Shares (as determined by the Buyer), the Buyer will issue the
Earnout Shares as soon as reasonably practicable after the final
determination of the Earnout. The actual number of Earnout Shares, if any,
to be paid as part of the Earnout (as determined by the Buyer) shall be
based on the average closing price of the Parent Common Stock for the
twenty (20) business days immediately preceding the Earnout Determination
Date.
(d) For the avoidance of doubt, the "final determination of the
Earnout" referred to in clause (c) above means the first to occur of: (i) the
resolution of all disputes arising as a
result of a Shareholders' Dispute Notice, (ii) the Shareholders' deemed
agreement with the calculations set forth in the Buyer's Statement, or (iii) the
Shareholders' actual agreement with the calculations set forth in the Buyer's
Statement, which agreement shall be communicated by written notice to the Buyer
and shall be irrevocable once received by the Buyer.
(e) In the event that (i) there is a dispute with respect to the
amount of the Earnout resulting in non-payment of the Earnout for a period of
more than 90 days after the Earnout Determination Date, and (ii) the Earnout set
forth in the Buyer's Statement is less than 90% of the Earnout finally
determined pursuant to this Section 2.02, then the unpaid amount of the Earnout
as finally determined pursuant to this Section 2.02 shall accrue interest at the
prime rate for commercial loans announced from time to time by The Chase
Manhattan Bank, in New York, New York from the 91st day after the Earnout
Determination Date until paid.
Section II.3 Certain Covenants.
-----------------
(a) Pay Plans. During the Earnout Period, the parties shall not
---------
cause compensation payable under the so-called "pay plans" (a true and complete
copy of which is included in the Disclosure Schedule) to be altered without the
prior written consent of the President and the Chairman of the Board of the
Company; provided, however that this Section 2.03(a) shall be of no further
force or effect if the Buyer pays to the Shareholders the maximum amount of the
Earnout payable to the Shareholders in accordance with Section 2.01(c).
(b) Budget. The Disclosure Schedule includes a budget for the
------
Company during the Earnout Period that has been agreed upon by the Buyer and the
Shareholders and the Buyer shall cause the Company to fund such budget
requirements.
(c) Employment. Notwithstanding anything to the contrary
----------
contained in this Agreement or any other Transaction Document:
(i) no Earnout shall payable to the Shareholders if,
during the Earnout Period, either the employment of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
is terminated by the Company for Cause (as defined in the Employment
Agreement) or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ terminates her employment for any
reason other than Good Reason (as defined in the Employment Agreement);
(ii) the maximum amount of the Earnout shall be payable to
the Shareholders if, during the Earnout Period, either (A) the employment
of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ is terminated by the Company without Cause, in
which case such amount shall be payable within five (5) business days after
such termination, or (B) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ terminates her employment
for Good Reason, in which case such amount shall be payable within sixty
(60) days after such termination;
(iii) if, during the Earnout, the employment of ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇▇▇▇ is terminated on account of her death or disability, the
Shareholders shall be entitled to an amount equal to the product of the
actual Earnout, if any, that they would have been entitled to receive had
such termination not occurred and a fraction the numerator of which is the
number of days elapsing prior to such termination and the denominator of
which is 366.
ARTICLE III
CLOSING
-------
Section III.1 The Closing Date.
----------------
The purchase and sale provided for in this Agreement (the
"Closing") shall take place on the date hereof at the offices of Proskauer Rose
LLP located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ at 10:00 a.m. New York time and the Closing shall be deemed effective at
the close of business on the Closing Date.
Section III.2 Further Assurances.
------------------
The Shareholders, on the one hand, and the Buyer, on the other,
agree that, at any time and from time to time after the Closing Date, each of
them will, upon request of and at the expense of the other, execute, acknowledge
and deliver, or cause to be executed, acknowledged or delivered, all such
further reasonable deeds, assignments, transfers, conveyances, powers of
attorney and assurances and take such other actions as may be reasonably
required to consummate the transactions contemplated by this Agreement,
including for the better assigning, transferring, granting, conveying, assuring
and confirming to Buyer the Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section IV.1 Representations and Warranties of the Shareholders.
--------------------------------------------------
Each Shareholder represents and warrants to the Buyer and the Parent that the
statements set forth in this Section 4.01 are true, correct and complete,
subject to the applicable qualifications set forth in the Disclosure Schedule.
The disclosure schedule delivered to Buyer and attached to this Agreement (the
"Disclosure Schedule") is divided into sections which correspond to the sections
of this Article IV. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the facts in reasonable detail. Disclosures in any subsection of the
Disclosure Schedule will constitute disclosure for purposes of other sections or
subsections only if such disclosure specifically cross-references such other
section or subsection. The inclusion of any information in the Disclosure
Schedule shall not be deemed an admission that such information is material or
outside the ordinary course of business of the Company.
(a) Organization; Good Standing; Stock Ownership; Capitalization.
------------------------------------------------------------
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota, and has
the corporate power and authority to own or lease its properties and to conduct
its business as currently conducted, and the Company is qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
where failure to qualify would have a material adverse effect on the Company or
the conduct of the Business by the Company after the Closing Date. The Company
maintains offices only at the site(s) listed in the Disclosure Schedule (the
"Sites") and has no offices from which it conducts operations other than from
the Sites.
(ii) The Shareholders are the sole beneficial and record
owners of all of the issued and outstanding shares of capital stock of the
Company and own the number of shares of such stock set forth opposite his or her
name in the Disclosure Schedule. Upon consummation of the transactions
contemplated by this Agreement, the Buyer shall acquire good and valid title to
all of such shares, free and clear of any liens, claims or encumbrances or
restrictions on transfer of any nature whatsoever. The Shareholders' residence
addresses are as set forth in the first paragraph of this Agreement. The
Shareholders are the beneficial and record owners of all of the Company's
capital stock, free and clear of any liens, encumbrances or restrictions on
transfer of any nature whatsoever other than the obligations of the Shareholders
arising under this Agreement. Except for this Agreement and the transactions
contemplated hereby, the Shareholders have no legal obligation, absolute or
contingent, to any person or firm to sell the Company's capital stock or to
enter into any agreement with respect thereto. Other than the Shareholders, no
other person or entity has ever been a shareholder of the Company.
There are no agreements relating to the Company or the Business, whether written
or oral, between the Shareholders.
(iii) The Company's authorized capital consists exclusively
of one hundred thousand (100,000) shares of capital stock, no par value, of
which only one thousand (1,000) shares of Company Common Stock are issued and
outstanding. All of the outstanding shares of Company Common Stock have been
duly authorized and are validly issued, fully paid and non-assessable. Except as
set forth in the Disclosure Schedule, (x) there are no existing options, calls
or commitments of any character whatsoever, or agreements to grant the same,
relating to the Company's capital stock and (y) the Company has no outstanding
securities convertible into or exchangeable or exercisable for any shares of
capital stock or any options, calls or commitments of any character whatsoever
with respect to the issuance of such convertible securities. Except as set forth
in the Disclosure Schedule, the Company owns no equity interests, convertible
securities, marketable securities, notes or other obligations evidenced by
written instruments of any other firm or entity other than for purposes of cash
management in the ordinary course. The Company has no subsidiaries.
(b) Corporate Authorization. The execution, delivery and
-----------------------
performance by the Shareholders and the Company of this Agreement and any other
Transaction Document to which any of them is a party has been authorized and
approved by all requisite corporate and other action on the part of the
Shareholders and the Company, and no other corporate or other approval or
authorization is required on the part of the Shareholders, the Company, any
trustee or any other person by law or otherwise in order to make this Agreement
and such other Transaction Documents the valid, binding and enforceable
obligations, as the case may be, of the Shareholders and the Company,
respectively. Each Transaction Document to which a Shareholder or the Company is
a party is that Shareholder's or the Company's, as the case may be, valid,
binding and enforceable obligation, enforceable against it in accordance with
such Transaction Document's terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application and
except that rights to indemnification and contribution may be limited by Federal
or state securities laws or public policy relating thereto. The execution,
delivery and performance by the Shareholders and the Company of any Transaction
Document to which any of them is a party and the transactions contemplated
thereby will not (a) conflict with or violate the provisions of any applicable
law, rule or order or the Company's Articles of Incorporation or by-laws, (b)
conflict with or constitute a default (with or without notice or lapse of time
or both) under any agreement or contract by which the Company or the
Shareholders or their respective assets are bound, or (c) require the consent or
approval of, or filing with, any governmental body or third party other than in
the case of clause (b) and (c) those items set forth in the Disclosure Schedule.
For purposes of this Agreement, the term "Transaction Documents" means this
Agreement, the Employment Agreements, the Escrow Agreement, the Lock-up
Agreement and the Piggyback Registration Rights Agreement. The Disclosure
Schedule includes a list of officers and directors of the Company, all trade
names used by the Business and all jurisdictions in which the Business is
conducted.
(c) The Company's Assets.
--------------------
(i) All vendor and customer contracts, distribution
agreements, confidentiality agreements, purchase and sales orders, powers of
attorney, undertakings, commitments, joint ventures and other agreements to
which the Company is a party or by which it assets are bound, whether written or
oral, shall be referred to herein collectively as the "Business Agreements". The
Company has delivered to the Buyer true and correct copies of all written
Business Agreements and detailed summaries of all material terms of all oral
Business Agreements. The Disclosure Schedule includes true and correct copies of
all the agreements which have been entered into between the Company and its
Customers concerning the Business under which the Company has any present or
potential liability or obligation, or from which the Company derives, or may in
the future derive, a benefit. The Disclosure Schedule includes a detailed
summary of all material terms of all oral Business Agreements, as well as a copy
of all written Business Agreements between the Company and vendors or service
providers, or which relate to strategic partnerships, reselling arrangements or
joint ventures
between the Company and others, concerning the Business. The Disclosure Schedule
includes a description of each and every real estate lease, equipment and
personal property lease (collectively, the "Leases") to which the Company is a
party (whether as a principal or guarantor or otherwise). The Leases are also
included within the definition of Business Agreements as said term is used
herein. The Company is not the owner of any motor vehicles. The Company is not a
lessee of any motor vehicles other than pursuant to the leases set forth in the
Disclosure Schedule (the "Automobile Leases"). The Shareholders shall cause the
Automobile Leases to be transferred to such of the Shareholders and/or employees
of the Company as currently have the use of the underlying motor vehicles, at no
cost or expense and without further liability to the Company, no later than
ninety (90) days after the Closing Date, pursuant to documentation reasonably
satisfactory to Buyer. The Company does not own or lease any interest in any
real property, except as expressly stated in the Disclosure Schedule. The
Company does not lease any equipment used in the Business, except as expressly
stated in the Disclosure Schedule. Neither the Company nor, to the Shareholders'
and the Company's knowledge, any other party is in default under any Business
Agreement and no other party to any Business Agreement has given the Company
notice of any dispute under any Business Agreement or has made any claim, except
as set forth in the Disclosure Schedule. Each Business Agreement is in full
force and effect and the Company has obtained all required consents to the
execution, delivery and performance of this Agreement and all other agreements
to be entered into in connection herewith and all the transactions contemplated
hereby and thereby, except as set forth in the Disclosure Schedule. The
Disclosure Schedule includes a detailed summary of all the warranties given by
the Company to PeopleSoft, Inc., whether written or oral, relating to the
Business.
(ii) All of the tangible assets of the Company used in the
Business, including, without limitation, all machinery, office and other
equipment, furniture, hardware, computers and related equipment, business
machines and telephones, telephone systems, parts and accessories presently
utilized by the Company in the Business, shall be referred to herein
collectively as the "Tangible Assets". The Disclosure Schedule includes a true
and correct list or description of the Tangible Assets with a net book value as
of the Closing Date of at least $500.00. As of the Closing Date, each of the
Tangible Assets is in working condition, reasonable wear and tear excepted.
(iii) All patents, trademarks, trade names, service marks,
service names, logos, designs, formulations, copyrights and other trade rights
and all registrations and applications therefor, all know-how, trade secrets,
software, technology or processes, research and development, all telephone
numbers, facsimile numbers, e-mail addresses and Internet domain addresses, all
Web sites and all computer programs, control panels, surcharge calculators, data
bases and software documentation owned or used by the Company, if any, other
than off-the-shelf software licensed by the Company, shall be referred to herein
collectively as the "Intellectual Property". The "Intellectual Property"
comprises all intellectual property rights necessary for the conduct of the
Business as currently conducted. The Disclosure Schedule include a true and
complete list of all Registered Intellectual Property and all Licensed Software.
As used herein, the "Registered Intellectual Property" means all patents,
registered trademarks, registered tradenames, registered domain names,
registered copyrights and registered service marks, and any patent applications
or applications for registration of the foregoing and all goodwill associated
therewith. As used herein, "Licensed Software" means all software that the
Company has the right to use under license from third parties, including,
without limitation, all off-the-shelf or shrink-wrap licensed software. Except
as set forth in the Disclosure Schedule, the Company has good and marketable
title to all of the Registered Intellectual Property. The Company has not
disclosed to any person or entity other than the representatives of the Buyer
and the Parent (except in the ordinary course of business and consistent with
past practices or pursuant to written confidentiality agreements for the benefit
of the Company) any trade secrets, formula, process or know-how not theretofore
a matter of public knowledge. Except as set forth on the Disclosure Schedule (i)
to the Shareholders' knowledge, the Company has the unrestricted right to use
the Intellectual Property in the manner in which such Intellectual Property is
currently used, and (ii) the Company has valid, enforceable, perpetual, royalty-
free and fully-paid licenses for all of the Licensed Software. Except as set
forth in the Disclosure Schedule, no claims or notices of infringement have been
asserted, or to the Shareholders' knowledge, threatened by any person or entity
with respect to the use by the Company of any Intellectual Property or
challenging or questioning the validity or effectiveness of any the Company's
rights in any Intellectual Property; and to
the Shareholders' knowledge, the use of such Intellectual Property does not
infringe on the rights of any person or entity. Except as set forth on the
Disclosure Schedule: (i) the Company does not own or use any Intellectual
Property pursuant to any written agreement; (ii) the Company has not granted any
person or entity any rights pursuant to a written license agreement or
otherwise, to use the Intellectual Property; and (iii) all of the Intellectual
Property is free and clear of any royalty obligations.
(iv) Set forth in the Disclosure Schedule is a true and complete
list of all customers of the Company for whom the Company provided services
during 1999 and 2000 to date (the "Customer List"). In the case of each customer
the Company maintains in its record as at the Closing Date, the name of the
customer, its billing addresses and identity and contact information of each
relevant contact person. All customers of the Company relating to the Business,
including without limitation, those customers included on the Customer List,
shall be referred to herein as the "Customers".
(v) As used herein, the term "the Company's Assets" shall be
all assets of the Company (other than the Excluded Assets), including, without
limitation, all classes of assets of the Company as shown on the Company's
balance sheet as of December 31, 1999 (included in the Disclosure Schedule), the
Business Agreements, the Tangible Assets, the Intellectual Property, the
Licensed Software, the Customer List, the Customers, together with the goodwill
and business opportunities of the Company as it relates to the Business, and all
other assets of the Company whether or not used in connection with the operation
of the Business, wherever located, tangible or intangible, including without
limitation, all rights the Company may have under any insurance policies, and
all books, records and files (whether in paper or electronic format). Except as
set forth in the Disclosure Schedule, the Company has good and valid title to
the Company's Assets to the extent it is possible to have title in any such
assets, and the Company's Assets other than the Intellectual Property, the
Licensed Software, the Customers and the Customer List are not subject to (i)
any lien or encumbrance of any character whatsoever other than Permitted Liens
or (ii) any adverse claims by any third parties, whether by assignment or
otherwise, other than Permitted Liens. The Company's Assets include all rights,
properties, interests and assets used by Company and/or necessary to permit the
Company to carry on the Business as presently conducted by the Company.
"Permitted Liens" means: (A) liens securing specific liabilities accrued for on
the Company's balance sheet that is included within the Interim Financial
Statements, (B) liens for taxes not yet due or being contested in good faith for
which adequate reserves have been made on the Company's balance sheet included
within the Interim Financial Statements and which have been included in the
computation of Net Worth for purposes of Sections 4.01(p) and 5.08, (C) liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business and
which sales contracts and equipment leases are disclosed in the Disclosure
Schedule; (D) easements, covenants, rights of way and other restrictions of
record which are disclosed in the Disclosure Schedule; and (E) liens that may
arise solely by reason of the Buyer's and the Parent's (as opposed to any other
person's or entity's) participation in the transactions contemplated hereby.
(vi) The Shareholders are not aware of any reason that the
business represented by the Business Agreements will not continue after the date
hereof and the Closing Date, subject to normal customer turnover and the effect
of completion of projects that are the subject of such Business Agreements. The
Shareholders do not have any knowledge that any customers included on the
Customer List to whom the Company is providing services as of the Closing Date,
other than those listed in the Disclosure Schedule, intend to terminate their
relationship with the Company or significantly reduce the amount of business
they presently do with the Company, subject to normal customer turnover and the
effect of completion of projects that are the subject of the applicable Business
Agreements.
(vii) Notwithstanding anything to the contrary contained herein,
the Shareholders shall retain all right, title and interest to those assets set
forth in the Disclosure Schedule under the heading "Excluded Assets" (the
"Excluded Assets").
(d) Financial Statements. The Disclosure Schedule includes copies of
--------------------
the Company's: (i) audited financial statements for the last three fiscal years
of the Company ended December 31, 1999, 1998 and 1997, including in each case,
notes thereto, together with the reports
thereon of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & Associates, Ltd., independent certified public
accountants, respectively, and (ii) an unaudited statement of operations for the
period from January 1, 2000 through the last day of the calendar month ending
immediately prior to the Closing and an unaudited balance sheet as of the last
day of such calendar month (the "Interim Financial Statements" and, together
with the statements referred to in clause (i), the "Financial Statements").
Except as set forth in the Disclosure Schedule, each of the aforementioned
financial statements, are true, complete and correct in all material respects,
present fairly the financial condition and results of operations of the Company
as at the dates of such statements, and have been prepared on an accrual basis
in accordance with generally accepted accounting principles, applied on a basis
consistent with the financial statements referred to in Section 4.01(d)(i)
("GAAP") (except, with respect to the Interim Financial Statements, the absence
of notes and normal year-end adjustments). The books of account and records of
the Company have been maintained in accordance with reasonably good business
practice. The Company has no material liabilities or obligations of any kind
(whether accrued, absolute, direct, indirect, contingent or otherwise) which are
not fully accrued or reserved against in the Company's financial statements as
at December 31, 1999 and for the period ending December 31, 1999 (except for
changes in the ordinary course of business since December 31, 1999). Except as
set forth in the Disclosure Schedule, since the last day of the Company's last
fiscal year, the Company has conducted the Business only in the ordinary and
usual course consistent with past practice and has not experienced any material
adverse change in the Business or the financial condition of the Company. Except
as set forth in the Disclosure Schedule, since December 31, 1999 there has not
been any change in the number of shares of capital stock of the Company issued
or outstanding or any declaration, setting aside, or payment of any dividend or
other distribution (whether in cash, securities, property or otherwise) in
respect of the Company's capital stock. Except as set forth in the Disclosure
Schedule, since December 31, 1999, the Shareholders warrant and represent that
neither the Company nor the Shareholders have withdrawn, expended or applied any
cash or other assets of the Company, except in the ordinary course of operations
of the Business of the Company in accordance with past practices of the Company.
(e) Existing Employment Arrangements.
--------------------------------
(i) Except as set forth in the Disclosure Schedule, the Company
has no employment agreements, labor or collective bargaining agreements and
there are no employee benefit or compensation plans, agreements, arrangements or
commitments (including, but not limited to, "employee benefit plans," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), maintained by the Company for any employees of the Company
or with respect to which the Company has any material liability, or makes or has
an obligation to make contributions ("Employee Plans").
(ii) Each Employee Plan by its terms and operation is in
compliance in all material respects with all applicable laws. Each Employee Plan
which is an "employee pension benefit plan" (within the meaning of Section 3(2)
of ERISA) is qualified under Section 401(a) of the Code and the trust, if any,
forming part of such plan is exempt from federal income tax under Section 501(a)
of the Code. There is no dispute, arbitration, claim, suit, or grievance,
pending or, to the knowledge of the Shareholders and the Company, threatened
involving an Employee Plan (other than routine claims for benefits), and, to the
knowledge of the Shareholders and the Company, there is no basis for such a
claim. Neither the Company nor any entity that is or was at any time treated as
a single employer with the Company under Section 414(b), (c), (m) or (o) of the
Code has at any time maintained, contributed to or been required to contribute
to, or has any liability with respect to, any plan subject to Title IV of ERISA
or Section 412 of the Code. Except as set forth in the Disclosure Schedule, the
events and transactions contemplated by this Agreement and any other Transaction
Document (either alone or together with any other event occurring prior to the
Closing) will not (w) entitle any employees to severance pay or other similar
payments under any Employee Plan, (x) except as set forth in the Disclosure
Schedule, accelerate the time of payment or vesting or increase the amount of
benefits due under any Employee Plan or compensation to any Company employees or
(y) result in any payments (including parachute payments) under any Employee
Plan becoming due to any employee.
(iii) There are no pending or, to the knowledge of the
Shareholders or the Company, threatened strikes, slowdowns, work stoppages,
lock-outs or other general labor disputes affecting the Company or its employees
and there have been no such actions or disputes for the past three years. Also
set forth in the Disclosure Schedule is a true and complete list of all
employees of the Company employed in connection with the Business, which list
provides, among other things, the name, residence address, title and salary
information concerning each employee, as well a true and correct list of each
employee who holds an H1B1 visa, if any.
(iv) The Company has not suffered a "plant closing" or "mass
layoff" within the meaning of the Worker Adjustment and Retraining Notification
Act ("WARN") determined without regard to any actions taken by the Buyer on or
after the Closing Date.
(v) The Company is in compliance in all material respects with
all laws and orders relating to the employment of labor, including, without
limitation, all such laws and orders relating to wages, hours, discrimination,
civil rights, immigration, safety and the collection and payment of withholding
and/or Social Security taxes and similar taxes.
(vi) Except as set forth in the Disclosure Schedule, the
employment of all employees of the Company is on an at-will basis.
(f) Claims, Litigation, Disclosure. Except as set forth in the
------------------------------
Disclosure Schedule, there is no claim, litigation, tax audit, proceeding or
investigation pending or, to the Shareholders' or the Company's knowledge,
threatened against the Company, the Business or any of the assets of the Company
(including, without limitation, any claims of infringement or actions of
opposition with respect to Intellectual Property or Licensed Software), nor does
the Company nor the Shareholders know of any facts which would provide a basis
for any such claim, litigation, audit, proceeding or investigation.
(g) Taxes. Except as set forth in the Disclosure Schedule, the
-----
Company and its affiliates and any combined, unitary or similar group of which
the Company or any such affiliate is or was a member, as the case may be
(individually, an "Affiliate" of the Company and, collectively, the Company's
"Affiliates"), have (i) correctly prepared and timely filed all tax returns,
declarations, reports, estimates, information returns and statements in respect
of any Taxes (the "Tax Returns") required to be filed or sent by or with respect
to the Company or any Affiliate (copies of which to the extent requested by the
Buyer have been provided to the Buyer), (ii) timely paid all Taxes that are or
were due and payable whether or not shown (or required to be shown) on a Tax
Return, (iii) no liability for Taxes with respect to any taxable period, or
portion thereof, ending on or before the Closing Date that is in excess of the
reserve for taxes reflected on the December 31, 1999 balance sheet of the
Company except for changes in the ordinary course of business since December 31,
1999, and (iv) complied in all material respects with all applicable laws, rules
and regulations relating to the withholding and payment of Taxes and have timely
withheld and paid over to the proper governmental authorities all amounts
required to be withheld and paid over under all applicable laws. There are no
liens for Taxes upon the assets of the Company or any of its Affiliates except
liens for Taxes not yet due. Except as set forth in the Disclosure Schedule, no
claim has ever been made in writing by any taxing authority with respect to the
Company or any of its Affiliates in a jurisdiction where the Company and/or any
of its Affiliates do not file Tax Returns that the Company or any such Affiliate
is or may be subject to taxation by that jurisdiction. Neither the Company nor
any of its Affiliates has requested any extension of time within which to file
any Tax Return, which Tax Return has not since been timely filed. Except as set
forth in the Disclosure Schedule, (i) no deficiency for any Taxes has been
proposed, asserted or assessed against the Company or any of its Affiliates
which has not been resolved and paid in full, and (ii) there are no outstanding
waivers or consents given by the Company or any of its Affiliates regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns. No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns. Neither the Company nor any of its Affiliates (i) is a party to
any agreement providing for the allocation, sharing or indemnification of Taxes;
(ii) is required to include in income any adjustment pursuant to Section 481(a)
of the Code by reason of a voluntary change in accounting method initiated by
the Company or an Affiliate, nor does the Company or any Affiliate thereof have
any knowledge that the Internal Revenue Service (the
"IRS") has proposed any such adjustment or change in accounting method; or (iii)
is or has been a United States real property holding company (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code. Neither the Company nor any of its Affiliates has
filed a consent pursuant to Section 341(f) of the Code, or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company
or any of its Affiliates. No property of the Company or any of its Affiliates is
property that the Company, any of its Affiliates or any party to this
transaction is or will be required to treat as being owned by another person
pursuant to Section 168(f)(8) of the Code (prior to its amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code. No indebtedness of the Company or any of its
Affiliates is "corporate acquisition indebtedness" within the meaning of Section
279(b) of the Code. Neither the Company nor any of its Affiliates has
distributed the stock of any company in a transaction satisfying the
requirements of Section 355 of the Code. There are no tax rulings, requests for
rulings or closing agreements that could affect the tax liability of the Company
after the Closing and the Company will not be required to include in income
after the Closing income attributable to a taxable period before the Closing as
a result of the installment method of accounting, the completed contract method
of accounting, the long-term contract method of accounting or the cash method of
accounting. Neither the Company nor any of its Affiliates is a party to any
joint venture, partnership or other arrangement that could be treated as a
partnership for U.S. federal income tax purposes. None of the Company or its
Affiliates owns any interest in real property that would be subject to Tax upon
its transfer. There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to, nor will the
consummation of the transactions contemplated hereby obligate the Company or any
of its Affiliates to make, the payment of any amount that would not be
deductible by the Company or any Affiliate thereof by reason of Section 280G of
the Code. Except as set forth in the Disclosure Schedule, the Company will have
no liability for any Taxes under Section 1374 of the Code (or any similar
provision of State or local law) in connection with the deemed sale of its
assets caused by the Section 338 Election or otherwise. The Company has been an
S Corporation for federal and state income tax purposes since its inception.
For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, occupancy, rent, transaction, property or other
taxes, customs, duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (including, without limitation, any
state, local, federal or other taxing authority, whether domestic or foreign).
For purposes of this Agreement, "Taxes" shall also include any obligations under
any agreements or arrangements with any person with respect to the liability
for, or sharing of, Taxes (including pursuant to Treasury Regulation (S) 1.1502-
6 or comparable provisions of state, local or foreign tax law) and including
liability for Taxes as a transferee or successor, by contract or otherwise.
(h) No Other Agreements to Sell Assets or Business. Except as
----------------------------------------------
set forth in the Disclosure Schedule, neither the Shareholders nor the Company
is a party to any existing agreement which obligates the Company or any
Shareholder to sell to any other person or firm the Company's Assets (other than
sales in the ordinary course of business), to issue or sell any capital stock or
any security convertible into or exchangeable for capital stock of the Company
or to effect any merger, consolidation, sale or other reorganization of the
Company or to enter into any agreement with respect thereto.
(i) No Brokers. The only broker, leasing agent, finder or
----------
similar person or entity with whom the Company or the Shareholders have made
contact or had any dealings with or entered into any agreement, arrangement or
understanding with concerning this Agreement and to whom the Company and/or the
Shareholders is responsible to pay a finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated by this
Agreement is ▇▇▇▇▇▇▇▇▇-Agio-▇▇▇▇▇, and the Shareholders shall be solely
responsible for the payment of any such fee, commission or payment.
(j) Environmental Compliance.
------------------------
(i) The Company is not in violation, or alleged to be in
violation, of any federal, state or local judgment, decree, order, consent
agreement, law (including common law), license, rule, regulation, ordinance
or code pertaining to health, safety or the environment, including without
limitation those arising under the Resource Conservation and Recovery Act,
as amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Federal Clean Water Act, as
amended, the Federal Clean Air Act, as amended, the Toxic Substances
Control Act, or any state or local analogue (hereinafter "Environmental
Laws").
(ii) Neither the Company nor any Shareholder has received a
notice, complaint, order, directive, claim, demand or citation from any
third party, including without limitation any federal, state or local
governmental authority, indicating or alleging that the Company or any
predecessor may have any liability or obligation under any Environmental
Law.
(iii) (A) No property owned, operated or occupied by the
Company has been used by the Company for the generation, handling,
processing, treatment, storage or disposal of Hazardous Materials, except
in full compliance with applicable Environmental Laws; (B) to the knowledge
of the Shareholders and the Company, no underground tank or other
underground storage receptacle for Hazardous Materials, asbestos-containing
materials or polychlorinated biphenyls are located on any property owned,
operated or occupied by the Company, each of which property is listed as a
Site in the Disclosure Schedule; (C) in the course of any activities
conducted by the Company or its invitees, agents, contractors, licensees or
employees in connection with the Business of the Company, no Hazardous
Materials have been generated or are being used except in full compliance
with applicable Environmental Laws; and (D) there have been no releases
(i.e., any past or present releasing, spilling, leaking, leaching, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping) or threatened releases of Hazardous Materials on, upon, under,
into or from the property currently or formerly owned, operated or leased
by the Company, which releases would have a material adverse effect on the
property or adjacent properties or the environment for which the Company
would have liability.
(iv) The execution, delivery and performance of this
Agreement (including without limitation the occurrence of the Closing) is
not subject to any Environmental Laws which condition, restrict or prohibit
the sale, lease or other transfer of property, operations or control of the
Company, including, without limitation, New Jersey's Industrial Site
Recovery Act and Connecticut's Real Property Transfer Act, or which impose
requirements for the transfer of permits, approvals, or licenses.
(v) The Shareholders and the Company have provided to the
Buyer all environmental audits, assessments, studies, reports, analyses
(including soil and groundwater analyses), inspection reports or
investigations of any kind performed at the request of the Company or the
Shareholders with respect to the currently or previously owned, leased, or
operated properties of the Company.
(vi) The Company has not contractually, nor to the
knowledge of the Shareholders and the Company, by operation of law,
including the Environmental Laws, by common law or otherwise assumed or
succeeded to any environmental liabilities or obligations of any
predecessors or any other person or entity.
For purposes of this Section, "Hazardous Materials" shall mean any
petroleum, petroleum products, petroleum-derived substances, radioactive
materials, hazardous wastes, polychlorinated biphenyls, lead-based paint, radon,
urea formaldehyde, asbestos or any materials containing asbestos, pesticides,
and any chemicals, materials or substances regulated under an Environmental Law,
or defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "extremely hazardous substances," "hazardous materials,"
"hazardous constituents," "toxic substances," "pollutants," "contaminants," or
any similar denomination intended to classify or regulate
such chemicals, materials or substances by reason of their toxicity,
carcinogenicity, ignitability, corrosivity or reactivity or other
characteristics under any Environmental Law.
(k) Year 2000. To the Company's and the Shareholders' knowledge,
---------
all information technology owned, used or supplied to others by the Company,
including, without limitation, in all products and services (i) provided by the
Business, whether to third parties or for internal use or (ii) used in
combination with any information technology of its clients, customers, suppliers
or vendors, accurately processed, continues to process and will process
correctly entered and formatted date and time data (including, but not limited
to, calculating, comparing and sequencing) from, into and between the years 1999
and 2000 and the twentieth century and the twenty-first century, including leap
year calculations and neither performance nor functionality of such technology
will be affected by dates prior to, during and after the year 2000. Other than
as set forth in the Disclosure Schedule, the Company has no obligations under
warranty agreements or service agreements, written or oral, to remedy or be
liable for any information technology defect relating to the year 2000.
(l) Credit Card and Bank Accounts. Set forth in the Disclosure
-----------------------------
Schedule is a true and complete list of the Company's employees to whom have
been issued a Company credit card, including the type of card and account
number. Set forth in the Disclosure Schedule, is a true and complete list of
the Company's bank accounts or other accounts and the authorized signatories for
said accounts.
(m) Licenses and Compliance with Laws. The Company is in
---------------------------------
compliance with all laws and regulations applicable to the Business and all
governmental or regulatory licenses, permits, consents or approvals ("Permits")
necessary for the lawful conduct of the Business, except in the case of each of
the foregoing instances, where the failure to have any Permit or to comply with
laws and regulations, would not have a material adverse effect on the business
or operations of the Company. A list of all the Permits that the Company holds
is included in the Disclosure Schedule.
(n) True and Complete. No representation or warranty made by the
-----------------
Shareholders in this Agreement or any Transaction Document nor any Exhibit to
this Agreement or any Transaction Document nor the Disclosure Schedule contains
any untrue statement of a material fact, or omits to state a material fact
necessary to make the statements contained therein not misleading.
(o) Parent Common Stock and Securities Matters. The Shareholders
------------------------------------------
acknowledge and agree that (i) a reasonable time prior to the date hereof the
Shareholders received from the Buyer or the Parent, and carefully reviewed a
copy of the Disclosure Materials, (ii) the Shareholders had reasonable time and
opportunity to ask questions and receive answers concerning the terms and
conditions of this Agreement and the transactions contemplated hereby and to
obtain any additional information from the Buyer or (the Parent that was
necessary for the Shareholders to verify the accuracy of the Disclosure
Materials, (iii) the Shareholders will acquire the Closing Shares and, if
applicable, the Earnout Shares for their own account without any view to the
distribution thereof except in accordance with the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder ("Securities Act")
and all applicable state securities or "blue sky" laws, (iv) the Closing Shares
and, if applicable, the Earnout Shares may not be transferred beneficially or of
record unless subsequently registered under the Securities Act and all
applicable state securities and "blue sky" laws or unless an exemption from such
registration is available; (v) the Closing Shares and, if applicable, the
Earnout Shares will not be registered under the Securities Act on the grounds
that the offering and sale thereof contemplated by this Agreement will be exempt
from registration pursuant to Regulation D promulgated pursuant to the
Securities Act, and that the Buyer's and the Parent's reliance upon such
exemption is predicated upon the representations of the Shareholders set forth
herein, (vi) each Shareholder represents that he or she has the requisite
knowledge, experience and sophistication in financial and business matters such
that he or she is capable of fully and completely evaluating the merits and
risks inherent in the receipt of the Closing Shares and, if applicable, the
Earnout Shares, (vii) each Shareholder is an "accredited investor" as that term
is defined in Rule 501(c) of Regulation D of the Securities Act, and (viii) the
Shareholders' primary residence is at the address identified in the first
paragraph of this Agreement. As used herein the term "Disclosure Materials"
means, with respect to the Parent, (i) the
registration statement on form S-1 (Reg. No. 333-74403), (ii) the final
prospectus pursuant to Rule 424(b) dated July 7, 1999 ("Prospectus") with
respect to the offering of eight million fifty thousand (8,050,000) shares
(including the over allotment shares) of the Parent Common Stock, (iii) the
Quarterly Reports on Form 10-Q with respect to the fiscal quarters ended June
30, 1999 and September 30, 1999 and filed with the Securities and Exchange
Commission on August 16, 1999 and November 11, 1999, (iv) the Current Reports on
Form 8-K dated September 27, 1999 and February 7, 2000 and on Form 8-K/A dated
November 22, 1999 and (v) the Offering Memorandum, dated February 10, 2000
relating to the Company's 7% Convertible Subordinated Notes due 2005 (which
offering memorandum has been provided to the Shareholders for informational
purposes only and not as an offer to sell the securities described therein or
any other securities of the Company) (the "Offering Memorandum").
Each Shareholder further acknowledges and agrees that "stop
transfer" instructions shall be placed against the Closing Shares and, if
applicable, the Earnout Shares on the transfer books of the Parent's stock
transfer agent until such time as such Closing Shares and, if applicable, the
Earnout Shares are available for resale in accordance with all applicable law
and with respect to the Closing Shares and, if applicable, the Earnout Shares
pursuant to the Lock-Up Agreement, and that the certificates evidencing the
Closing Shares and, if applicable, the Earnout Shares shall bear the following
legend:
The Shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or under any applicable state securities laws
and neither the Shares nor any interest therein may be
sold, transferred, pledged or otherwise disposed of in
the absence of such registration or an exemption from
registration under such Act and the rules and
regulations thereunder and in the absence of
registration or an exemption from registration under
any applicable state securities laws. [With respect to
the Closing Shares only: The transfer of the Shares is
also subject to the restrictions set forth in a lock-up
agreement executed by the registered owner of the
Shares.]
(p) Net Worth. Immediately prior to giving effect to the
---------
consummation of the transactions contemplated by this Agreement, the Net Worth
of the Company shall be not less than $5,100,000. As used herein the term "Net
Worth" means the total stockholders equity as shown on the Closing Balance
Sheet.
(q) Questionable Payments. Neither the Company nor any
---------------------
Shareholder nor any director, officer, agent, employee, or any other Person
acting on behalf of the Company or any Shareholder, has, directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment, or
other unlawful expenses; made any unlawful payment to government officials or
employees or to political parties or campaigns; established or maintained any
unlawful fund of corporate monies or other assets; made or received any bribe,
or any unlawful rebate, payoff, influence payment, kickback or other payment;
given any favor or gift which is not deductible for federal income tax purposes;
or made any bribe, kickback, or other payment of a similar or comparable nature,
to any governmental or non-governmental Person, regardless of form, whether in
money, property, or services, to obtain favorable treatment in securing business
or to obtain special concessions, or to pay for favorable treatment for business
or for special concessions secured.
(r) Accounts Receivable. Except as set forth in the Disclosure
-------------------
Schedule, all of the accounts, notes and other receivables of the Company (i)
reflected on the financial statements of the Company provided pursuant to
Section 4.01(d) for its fiscal year ended December 31, 1999 as of the date of
the balance sheet included therein and (ii) as of the date hereof, represent
sales actually made in the ordinary course of business consistent with past
practice for goods or services delivered or rendered in bona fide arm's-length
transactions, constitute only valid, undisputed claims, have not been extended
or rolled over in order to make them current and are collectible at their
recorded amounts net of reserves for non-collectibility reflected on such
financial statements in accordance with GAAP together with any additional
reserve that would be accrued as of the Closing Date in accordance with GAAP.
(s) Interests of Related Persons. Except as set forth in the
----------------------------
Disclosure Schedule, none of the Shareholders nor any officer, director,
relative, or "Affiliate" (with such term having the meaning ascribed thereto in
Rule 405 promulgated under the Securities Act of 1933, as amended) of the
Company or the Shareholders:
(i) owns any interest in any Person (other than the beneficial
ownership for investment purposes of 5% or less of any class of equity
securities of any Person which is registered under Section 12 of the
Securities Exchange Act of 1934) which is a competitor, supplier or
customer of the Company or serves as an officer, director, employee or
consultant for any such Person;
(ii) owns, in whole or in part, any property, asset or right of
material significance, used in connection with the Business;
(iii) has an interest in any Business Agreement; or
(iv) has any contractual arrangements with the Company.
(t) Termination of Employee Plans. Except as specified on the
-----------------------------
Disclosure Schedule, prior to the Closing Date, the Company terminated all the
Employee Plans and there will be no duty, liability or obligation of any nature
whatsoever of the Company, the Buyer and the Parent with respect to any action
taken with respect to the Employee Plans prior to the Closing Date, it being
understood that, without limiting the foregoing, the Shareholders and not the
Company, the Buyer and the Parent, shall bear all costs and expenses (including,
without limitation, legal fees) arising from or necessitated by such
termination, including, without limitation, costs and expenses relating to (i)
the submission of the Company's 401(k) Plan to the IRS for a determination
letter and (ii) the distribution of the assets of the 401(k) Plan to the
participants (the "Employee Plans Termination"). Effective as of a date not
more than 30 days after the Closing Date, the Buyer shall cause the Company to
adopt a Section 401(k) plan (which may be a new plan or a 401(k) plan maintained
by the Buyer or one of its affiliates) and any employee who was eligible to
participate in the terminated 401(k) plan immediately prior to the termination
of such plan shall be eligible to participate in the newly adopted 401(k) plan
as of the effective date of adoption.
(u) Termination of Working Capital Credit Facility. The Company has
----------------------------------------------
terminated all working capital credit or other facilities with FirstStar Bank of
Minnesota, N.A., as evidenced by the Revolving Credit Agreement, dated December
24, 1999, and all related promissory notes, guarantees, UCCs or security
agreements, without any duty, liability or obligation of any nature whatsoever
to the Company from and after the Closing Date (the "Credit Facility
Termination").
Section IV.2 Representations of the Buyer and Parent. The Buyer
---------------------------------------
and Parent represent and warrant to the Shareholders as follows:
(a) Corporate Matters; No Conflict. The Buyer is duly incorporated,
------------------------------
validly existing and in good standing under the laws of the State of Delaware
and is a wholly-owned first tier subsidiary of the Parent. The Buyer is in good
standing in each other jurisdiction in which it is doing business, except where
failure to be in good standing would not have a material adverse effect on the
business of the Buyer and has the corporate power to enter into this Agreement,
to perform its obligations hereunder and to conduct its business as currently
conducted. The execution, delivery and performance of each Transaction Document
to which it is a party and the transactions contemplated thereby by the Buyer
will not (a) conflict with or violate the provisions of any applicable law, rule
or order or the Buyer's Certificate of Incorporation or by-laws, (b) conflict
with or constitute a default (with or without notice or the lapse of time or
both) under any agreement or contract by which the Buyer is bound, or (c)
require the consent or approval of, or filing with, any governmental body or
third party. The execution, delivery and performance by the Buyer of each
Transaction Document to which it is a party has been authorized and approved by
all requisite corporate action on the part of the Buyer, and no other corporate
or other approval or authorization is required on the part of the Buyer, any
trustee or any other person by law or otherwise in
order to make this Agreement and such other Transaction Documents the valid,
binding and enforceable obligations of the Buyer. Each Transaction Document to
which the Buyer is a party is the Buyer's valid, binding and enforceable
obligation, enforceable against it in accordance with such Transaction
Document's terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application and except that
rights to indemnification and contribution may be limited by Federal or state
securities laws or public policy relating thereto.
(b) No Brokers. The only broker, leasing agent, finder or similar
----------
person or entity with whom the Buyer has made contact or had any dealings with
or entered into any agreement, arrangement or understanding with concerning this
Agreement and to whom the Buyer is responsible to pay a finder's fee, brokerage
commission or similar payment to is the party listed in item 2 on Exhibit A, if
any, and the Buyer shall be solely responsible for the payment of any such fee,
commission or payment.
Section IV.3 Representations and Warranties of the Parent. The
--------------------------------------------
Parent represents and warrants to the Shareholders that the statements set forth
in this Section 4.03 are true, correct and complete, subject to the
qualifications set forth in the Exhibits to this Section 4.03.
(a) Organization and Qualification. The Parent is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, with the requisite corporate power and authority to own or lease its
properties and to conduct its business as currently conducted, and to carry on
its business as currently conducted, and the Parent is qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
where failure to qualify would have a material adverse effect on the Parent or
the conduct of its business.
(b) Corporation Authorization. The execution, delivery and
-------------------------
performance by the Parent of any Transaction Document to which it is a party has
been authorized and approved by all requisite corporate and other action on the
part of the Parent, and no other corporate or other approval or authorization is
required on the part of the Parent or any other person by law or otherwise in
order to make this any such Transaction Document the valid, binding and
enforceable obligations of the Parent. Each Transaction Document to which the
Parent is a party is the valid, binding and enforceable obligation of the
Parent, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except that rights to
indemnification and contribution may be limited by Federal or state securities
laws or public policy relating thereto.
(c) Authorization and Validity; Issuance of Shares. The Closing
----------------------------------------------
Shares are, and the Earnout Shares, if any, will be, validly issued, fully paid
and non-assessable, free and clear of all liens, encumbrances and rights of
first refusal, other than liens and encumbrances created by the Shareholders,
this Agreement and the other Transaction Documents and will not be subject to
any preemptive or similar rights. Assuming the accuracy of the Shareholders'
representations in Section 4.01(o), the issuance by the Parent of the Closing
Shares is exempt from registration under the Securities Act.
(d) No Conflicts. The execution, delivery and performance of this
------------
Agreement and the transactions contemplated hereby by Parent will not (i)
conflict with or violate the provisions of any applicable law, rule or order or
Parent's Certificate of Incorporation or by-laws, (ii) conflict with or
constitute a default under any agreement or contract by which Parent is bound,
or (iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which Parent is subject (including Federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Parent Common Stock is traded or listed) applicable to Parent, or by
which any material property or asset of Parent is bound or affected for any
violation, conflict, default or breach, except, in each such case, for any
violation, conflict, default or breach which is not reasonably expected to have
a material adverse effect on the Parent or the conduct of its business.
(e) Consents and Approvals. Except as specifically set forth on
----------------------
Exhibit 4.03(e), the Parent is not required to obtain any consent, waiver,
---------------
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal or state governmental authority,
regulatory or self regulatory agency in connection with the execution, delivery
and performance by the Parent of this Agreement, other than (i) any filings,
notices or registrations under applicable federal or state securities laws, (ii)
the filing of a form D with the Commission, and (iii) any approvals required by
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
(f) Investment Company. The Parent is not, and is not controlled by
------------------
or under common control with an affiliate of an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(g) Broker's Fees. No fees or commissions or similar payments with
-------------
respect to the transactions contemplated by this Agreement have been paid or
will be payable by the Parent to any broker, financial advisor, finder,
investment banker, or bank.
(h) Certain Securities Matters.
--------------------------
(i) Financial and Other Information. The Parent has delivered
-------------------------------
to the Shareholders a copy of the Disclosure Materials. The Disclosures
Materials did not, as of the time of their respective filings, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Except as set forth
on Exhibit 4.03(h)(i), no event has occurred since the respective dates of
------------------
such filings which requires the Parent to amend any of the Disclosure
Materials or to file a current report on Form 8-K. Each of the Parent's
financial statements included in the Disclosure Materials (including the
related notes and schedules) have been prepared in accordance with GAAP
applied on a consistent basis and as of its respective date and for the
period then ended, fairly presents the consolidated financial position and
results of operations of the Parent and its consolidated subsidiaries
(except, with respect to interim statements, for the omission of notes and
for normal year end adjustments).
(ii) Capitalization. Except as set forth in the Disclosure
--------------
Materials or Exhibit 4.03(h)(ii): (A) the authorized share capital of the
-------------------
Parent is, in all material respects, as set forth in the Parent's most
recent Form 10-Q, and (B) there are no existing option, warrant, call,
commitment or other agreements to which the Parent is a party or bound
requiring, and there are no convertible securities of the Parent
outstanding which upon conversion would require, the issuance of any
material number of additional shares of common stock of the Parent or other
securities convertible into common stock of the Parent or the purchase or
redemption of any material number of shares of common stock of the Parent.
(iii) No Material Adverse Change. Since the date of the
--------------------------
financial statements included in the most recent Form 10-Q or 8-K, there
has been no material adverse change in the financial condition or results
of operation of the Parent and its consolidated subsidiaries.
Section IV.4 Additional Securities Matters.
-----------------------------
(a) For a period of two years from the Closing Date, the Parent shall
continue to file on a timely basis all reports that are required to be filed by
it under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
(b) Upon a Shareholder's request at any time after two years from the
Closing Date, the Parent shall, upon evidence reasonably satisfactory to the
Parent that such Shareholder is not an affiliate of the Company, direct its
transfer agent to cause replacement certificates evidencing that
Shareholder's Closing Shares and Earnout Shares to be issued to that Shareholder
without the legend set forth in Section 4.01(o). In addition, if a Shareholder
transfers Closing Shares or Earnout Shares pursuant to (i) a registration
statement effective under the Securities Act of 1933, as amended (the
"Securities Act") or (ii) Rule 144 under the Securities Act, and in the case of
clause (ii) provides to the Parent an opinion of counsel reasonably acceptable
to the Parent, then, in either case, the Parent shall promptly direct its
transfer agent to promptly deliver to the transferee of such shares a
certificate evidencing such shares but omitting the legend described in Section
4.01(o). In addition, if the Shareholders deliver to the Company an opinion of
counsel reasonably acceptable to the Parent to the effect that no subsequent
transfer of any Closing Shares or Earnout Shares shall require registration
under the Securities Act, promptly upon such transfer the Parent shall direct
its transfer agent to deliver to such transferee new certificates evidencing
such securities that do not bear the legend set forth in Section 4.01(o).
ARTICLE V
CERTAIN COVENANTS
-----------------
Section V.1 Non-competition; non-solicitation.
---------------------------------
(a) For a period commencing on the Closing Date and ending on the
third anniversary of the Closing Date, each Shareholder agrees not to engage,
either directly or indirectly, in any capacity in any business which is similar
to or in competition with the Business, as conducted immediately after giving
effect to the Closing, and which is located or does business in any state in the
United States or throughout the World.
(b) Each Shareholder understands that pursuant to this Agreement he
may have received confidential and proprietary information of Buyer and the
Parent and their respective affiliates. The Shareholders shall not, and the
Shareholders shall cause all of the Company's officers, directors, employees,
agents or contractors who received or learned of such confidential and
proprietary information not to, at any time, either before or after the Closing
Date, disclose to any third party any such confidential or proprietary
information of the Buyer or the Parent, or make use of any of such information
except in evaluating whether to enter into this Agreement. In connection with
such evaluation, the Company and the Shareholders may disclose such proprietary
information to their legal and financial consultants on a need to know basis on
the condition that those consultants are similarly prohibited from further
disclosing such information as provided herein.
(c) For a period commencing on the Closing Date and ending on the
third anniversary of the Closing Date, the Shareholders, unless acting with the
express written consent of the Buyer or the Parent, will not, directly or
indirectly, interfere with, solicit or endeavor to entice away:
(i) any person who was an employee, subcontractor or consultant
of the Company, the Buyer, the Parent or any of their affiliates during
the twelve months immediately preceding the date of such solicitation,
interference or endeavor,
(ii) with respect to any business similar to or in competition
with the Business in which the Company, the Buyer, the Parent, or any of
their affiliates is or has been engaged after the date of this Agreement,
any person or entity who was a customer or client of the Company or a
customer or client of the Buyer or the Parent, or any person or entity who,
during the twelve months immediately preceding the date of such
solicitation, requested or received a proposal from the Buyer, the Parent
or the Company.
Each Shareholder expressly acknowledges, understands and agrees (i)
that remedies at law for any breach of this Section 5.01 will be inadequate,
(ii) that the damages resulting from such breach are not readily susceptible to
measurement in monetary terms and (iii) that the Buyer and/or the Parent shall
be entitled to immediate injunctive relief and may obtain temporary and
permanent orders
restraining any threatened or further breach of this Section 5.01 by the
Shareholders. Each Shareholder have been advised by their respective counsel
with respect to the meaning and effect of this Section 5.01.
Section V.2 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the parties herein contained shall survive the
closing of the transactions contemplated by this Agreement, notwithstanding any
investigation at any time made by or on behalf of the other party; provided that
any claims for indemnification in accordance with this Article V with respect to
any representation or warranty must be made (and will be null and void unless
made) on or before April 30, 2002 (except in the case of representations
contained in Section 4.01(a)(ii) and (iii), (g) and (j), which must be made
within six (6) months following the expiration of the applicable statute of
limitations); provided further, however, that the Shareholders shall have no
liability on account of any misrepresentation or breach of representations and
warranties made by them in this Agreement, the Disclosure Schedule or any
Transaction Document to the extent that the Shareholders are able to show (it
being agreed that the Shareholders shall have the burden of proof) that ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (i) had
actual knowledge prior to the Closing Date that the fact or circumstance giving
rise to such misrepresentation or breach existed prior to the Closing Date and
(ii) actually knew prior to the Closing Date that such fact or circumstance
constituted or probably constituted a breach or misrepresentation for which
indemnification would be available under Section 5.03(A).
Section V.3 Indemnification.
---------------
(a) Indemnification by the Shareholders.
-----------------------------------
(i) Each Shareholder hereby jointly and severally agrees to
indemnify and hold the Parent, the Buyer and the Company, and each of their
respective successors, assigns, officers, directors, stockholders, affiliates,
employees, representatives and other agents harmless from and against any and
all claims, liabilities, taxes, losses, damages or injuries, together with costs
and expenses, including reasonable legal fees ("Damages"), arising out of or
resulting from (A) any misrepresentation or breach of the representations and
warranties made by the Shareholders in this Agreement, the Disclosure Schedule
or in any Transaction Document, (B) any breach by any Shareholder, unless waived
in writing by the Buyer, of any covenant or agreement contained in any
Transaction Document to which it is a party, (C) any and all Taxes of or
attributable to the Company and/or the Buyer resulting from the failure of the
Section 338 Election and any and all Taxes imposed under Section 1374 of the
Code (or any similar provisions of state or local law), (D) any and all sales,
use, value added, stamp, transfer or other similar taxes arising from the
transactions contemplated herein, (E) any and all liabilities arising out of or
relating to the Excluded Assets (including, without limitation, any Taxes
arising from the sale or other transfer of the Excluded Assets), (F) any and all
liabilities arising out of or relating to the Employee Plans Termination and the
Credit Facility Termination as a result of arising out of or actions or
omissions by the Company or the Shareholders and (G) for a period of two years
after the Closing Date, any and all liabilities of the Company arising, existing
or accruing prior to the Closing Date except for: (w) obligations of the Company
to perform services with respect to deferred revenue at Closing, if any, (x)
liabilities of the Company as of the Closing Date as set forth in the Disclosure
Schedule under the heading 5.03(a)(i), (y) all obligations of the Company under
the Business Agreements; and (z) the trade accounts payables, accrued payroll
and other liabilities of the Company as of the Closing Date or as reflected on
the Financial Statements or to the extent set forth in the Closing Date Balance
Sheet, provided that such obligations and liabilities in clause (w) and (z),
--------
respectively, are reflected in Net Worth pursuant to Section 4.01(p) and Section
5.08.
(ii) Notwithstanding anything to the contrary herein, (x) the
aggregate liability of the Shareholders for Damages under Sections 5.03(a)(i)(A)
and 5.03(a)(i)(G) shall not exceed twenty million dollars ($20,000,000), and (y)
the Shareholders shall be jointly and severally liable for Damages under clause
(ii) of the sentence immediately preceding the penulitimate sentence of Section
4.01(c)(iii) and Sections 5.03(a)(i)(A), 5.03(a)(i)(B) and 5.03(a)(i)(G) (other
than any liability arising out of the sales tax audit disclosed in the
Disclosure Statement) only after the aggregate amount of such Damages
(calculated together with all prior such Damages) exceeds two hundred and fifty
thousand dollars
($250,000) (the "Shareholders Basket") (it being understood that the parties
hereto do not intend such amount to be deemed to be a definition of what is
"material" for any purpose in this Agreement), provided, however, that if the
aggregate amount of such Damages exceeds the Shareholders Basket, then the
Shareholders shall be jointly and severally liable for all such Damages, as if
this clause (y) did not provide for the Shareholders Basket (but subject, in all
cases, to clause (x) hereof). Notwithstanding anything to the contrary contained
in this Agreement, any qualification of any representation or warranty as to
materiality shall be disregarded for the purposes of this Section 5.03(a)(ii).
For the avoidance of doubt, it is hereby acknowledged that to the extent that
any of the Shareholders' representations are qualified by a materiality standard
as a result of which no indemnity payments are made or due by the Shareholders
under Section 5.03(a)(i), then the Shareholders Basket set forth above, shall be
reduced dollar-for-dollar for each dollar for which no indemnity payment is due
because of such qualification.
(b) Indemnification by the Buyer and the Parent.
-------------------------------------------
(i) Each of the Buyer and the Parent hereby, jointly and
severally, agrees to indemnify and hold the Shareholders harmless from and
against any and all claims, liabilities, taxes, losses, damages or injuries,
together with costs and expenses, including reasonable legal fees ("Shareholders
Damages"), arising out of or resulting from (A) any misrepresentation or breach
of the representations and warranties made by the Buyer or the Parent in this
Agreement or any other Transaction Document, (B) any breach by the Buyer or the
Parent, unless waived in writing by the Shareholders, of any covenant or
agreement of the Buyer or the Parent contained in this Agreement or any other
Transaction Document, and (C) any and all liabilities arising out of the
operation of the Business by the Company after the Closing Date but not any
liability as to which the Shareholders have an indemnification obligation under
Section 5.03(a).
Section V.4 Procedure of Indemnification.
----------------------------
(a) Claim Notice. Any party claiming a right to indemnification
------------
hereunder (the "Indemnified Party") shall give the other party from whom
indemnification is sought (the "Indemnifying Party") prompt written notice (a
"Claim Notice") of any claim, demand, action, suit, proceeding or discovery of
fact upon which the Indemnified Party intends to base a claim for
indemnification under this Article V, which shall contain (x) a description and
the amount (the "Claimed Amount") of any Damages or Shareholders Damages, as the
case may be, incurred or reasonably expected to be incurred by the Indemnified
Party, (y) a statement that the Indemnified Party is entitled to indemnification
under this Article V for such Claimed Amount, and (z) a demand for payment
provided, however, that no failure to give such Claim Notice shall excuse any
Indemnifying Party from any obligation hereunder except to the extent the
Indemnifying Party is materially and actually prejudiced by such failure.
(b) Assistance. The Indemnified Party shall make available to the
----------
Indemnifying Party and its counsel and accountants, all books and records of the
Indemnified Party relating to such action, suit or proceeding and the parties
agree to render to each other such assistance as may reasonably be requested in
order to insure the proper and adequate defense of any such action, suit or
proceeding.
(c) Assumption of Defense. Within 20 days after delivery of the Claim
Notice, the Indemnifying Party may, upon written notice thereof to the
Indemnified Party, assume control of the defense of such suit or proceeding with
counsel reasonably satisfactory to the Indemnified Party, provided, however,
that any Claim relating to Taxes reflected or to be reflected in a Tax Return of
Parent or the Buyer or any combined, consolidated or unit or group of which
either is a member shall be controlled by the Parent. If the Indemnifying Party
does not so assume control of such defense within said 20 day period, the
Indemnified Party shall control such defense. The party not controlling such
defense (the "Non-controlling Party") may participate therein at its own
expense; provided that if the Indemnifying Party assumes control of such defense
and counsel to the Indemnified Party reasonably concludes that the Indemnifying
Party and the Indemnified Party have conflicting interests with respect to such
suit or proceeding, the reasonable fees and expenses of counsel to the
Indemnified Party shall be considered "Damages" or "Shareholders Damages," as
the case may be, for purposes of this Agreement.
The party controlling such defense (the "Controlling Party") shall keep the Non-
controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnified Party shall not agree to any settlement of
or consent to the entry of any judgment arising from any suit or proceeding
without the consent of the Indemnifying Party, which shall not be unreasonably
withheld or delayed. The Indemnifying Party shall not agree to any settlement
of, or the entry of any judgment arising from, any such suit or proceeding
without the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a complete release of the Indemnified Party from further
liability and does not contain any admission of liability.
(d) Indemnity Response. Within 20 days after delivery of a Claim
------------------
Notice, the Indemnifying Party shall deliver to the Indemnified Party a written
response (the "Response") in which the Indemnifying Party shall: (x) agree that
the Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Claimed Amount, by check or by wire transfer or, if
the Indemnified Party is the Buyer, the Parent or the Company, either by
delivery of an irrevocable direction to the Escrow Agent to pay the Claimed
Amount out of the Escrowed Property or by delivery of Closing Shares and/or, if
applicable, Earnout Shares together with appropriate instruments of transfer),
(y) agree that the Indemnified Party is entitled to receive part, but not all,
of the Claimed Amount (the "Agreed Amount") (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party of
the Agreed Amount, by check or by wire transfer or, if the Indemnified Party is
the Buyer, the Parent or the Company, either by delivery an irrevocable
direction to the Escrow Agent to pay the Claimed Amount out of the Escrowed
Property or by delivery of Closing Shares and/or, if applicable, Earnout Shares
together with appropriate instruments of transfer) or (z) dispute that the
Indemnified Party is entitled to receive any of the Claimed Amount. If the
Indemnifying Party in the Response disputes its liability for all or part of the
Claimed Amount, the Indemnifying Party and the Indemnified Party may follow the
procedures set forth in clause (e) below for the resolution of such dispute (a
"Dispute").
(e) Arbitration. During the 60-day period following the delivery of a
-----------
Response that reflects a Dispute, the Indemnifying Party and the Indemnified
Party shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, such Dispute shall be conclusively and
exclusively settled on the merits by arbitration under the rules of the American
Arbitration Association (the "AAA") then in effect. In the event the party
requiring arbitration is the Parent, the Buyer or the Company, such arbitration
shall take place in Minneapolis, Minnesota; in the event the party requiring
arbitration is a Shareholder, such arbitration shall take place in New York
City, New York. The arbitral tribunal shall be composed of three arbitrators,
one of which shall be appointed by the Parent or the Buyer, one of which shall
be appointed by the Shareholder Representative and the last of which shall be
appointed by the first two arbitrators. The arbitrators shall be directed to
resolve such dispute as soon as practicable using such expedited procedures as
may be available under the rules and regulations of the AAA then in effect. As
part of its award, the arbitral tribunal may make a fair allocation of the fees
and expenses of the AAA and the cost of any transcript and award either party
attorney's fees, taking into account the merits of claims and defenses. The
arbitral tribunal may grant injunctive relief. Nothing in this paragraph shall
preclude any party from seeking temporary injunctive relief from any court of
competent jurisdiction pending the appointment of the arbitral tribunal.
Section V.5 Certain Limitations on Indemnification.
--------------------------------------
(a) Tax and Insurance Reductions. All claims for indemnification by
----------------------------
any party hereto shall be determined net of (i) any proceeds of insurance
coverage actually received by the
Indemnified Party with respect to such claim, and (ii) any tax benefit actually
realized by the Indemnified Party resulting from the claim.
(b) Loss of Profit. In no event shall the Indemnifying Party be
--------------
liable to the Indemnified Party for such party's (as opposed to any third
party's) loss of profit or consequential damages arising out of or resulting
from any matter to which the Indemnified Party is entitled to indemnification
under Section 5.03.
Section V.6 Escrow.
------
(a) On the Closing Date, Sixty Three Thousand Seven Hundred Twenty
(63,720) shares of the Parent Common Stock from the Closing Shares (the
"Escrowed Property"), together with stock powers executed in blank, shall be
delivered to the escrow agent listed on Exhibit A (the "Escrow Agent") to be
held in escrow in accordance with the terms of the escrow agreement attached
hereto as Exhibit B (the "Escrow Agreement"). The Escrowed Property shall
initially consist of the following numbers of shares from the following
Shareholders and shall be allocable to such Shareholders in the percentages
indicated below:
Number of Shares Percentages
---------------- -----------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ 32,497 51%
▇▇▇▇ ▇▇▇▇▇▇▇ 31,223 49%
(b) The Escrowed Property will be held in escrow by the Escrow Agent
as security for any indemnification obligation of the Shareholders to the Buyer,
the Parent and/or, the Company, pursuant to the terms of Section 5.03. Indemnity
claims by the Buyer, the Company or the Parent pursuant to Section 5.03 shall be
satisfied first by the reduction of the Escrowed Property, if any, at its value
(as determined pursuant to the Escrow Agreement); thereafter such indemnity
claims shall be satisfied either, at the option of the Shareholders, by means of
(i) Closing Shares and, if applicable, Earnout Shares, which shares shall be
valued at their value determined in the same manner as provided in the Escrow
Agreement or (ii) cash. The value (as determined pursuant to the Escrow
Agreement) of the Escrowed Property, the Closing Shares and, if applicable, the
Earnout Shares shall not constitute a limit on the liability of the Shareholders
to the Buyer, the Company and the Parent hereunder, it being understood and
agreed that the Shareholders shall remain liable to satisfy the amount of any
claims which exceed the value of the Escrowed Property, the Closing Shares and,
if applicable, the Earnout Shares, to the extent provided in Section 5.03. The
Escrowed Property shall be held by the Escrow Agent pursuant to the terms of the
Escrow Agreement.
Section V.7 Tax Matters.
-----------
(a) Preparation and Filing of Tax Returns. The Shareholders shall
-------------------------------------
prepare and file any federal or state income or franchise Tax Returns and
employment tax returns of the Company for the taxable period ended on the
Closing Date. The Buyer, Company or Parent, or their Affiliates shall file all
other Tax Returns due after the Closing Date. The parties will cooperate with
each other in connection with the filing of Tax Returns provided herein. The
Parent, Company or Buyer or any of their Affiliates, shall notify the
Shareholders of any audit or examination that may result in a claim for
indemnification of Taxes from the Shareholders, and allow Shareholders to
participate in such audit or examination at their own expense.
(b) Allocation of Certain Taxes. Without limiting the Shareholders'
indemnity obligations under Section 5.03 hereof, the Company and the
Shareholders agree that if the Company is permitted but not required under
applicable foreign, state or local Tax laws to treat the Closing Date as the
last day of a taxable period, the Company and the Shareholders shall treat such
day as the last day of a taxable period.
(c) Cooperation on Tax Matters.
--------------------------
(i) The Company and the Shareholders shall cooperate in the
preparation of all Tax Returns for any Tax periods for which one party
could reasonably require the assistance of the other party in obtaining any
necessary information. Such cooperation shall include, but not be limited
to, furnishing prior years' Tax Returns illustrating previous reporting
practices or containing historical information relevant to the preparation
of such Tax Returns, and furnishing such other information within such
party's possession requested by the party filing such Tax Returns as is
relevant to their preparation. Such cooperation and information also shall
include without limitation promptly forwarding copies of appropriate
notices and forms or other communications received from or sent to any
taxing authority which relate to the Company, and providing copies of all
relevant Tax Returns, together with accompanying schedules and related work
papers, documents relating to rulings or other determinations by any taxing
authority and records concerning the ownership and tax basis of property,
which the requested party may possess. The Company and the Shareholders
shall make their respective employees and facilities available on a
mutually convenient basis to provide explanation of any documents or
information provided hereunder.
(ii) The party requesting the cooperation pursuant to this
clause shall reimburse the party providing the cooperation for all of such
party's out of pocket costs and expenses incurred in connection with the
provision of such cooperation.
(d) Section 338 Election.
--------------------
(i) The Shareholders shall join with the Buyer and/or the
Company in making an election under Section 338(h)(10) of the Code and
Treasury Regulation (S) 1.338(h)(10)-1(d) (the "Section 338 Regulations")
(and, to the extent requested by the Buyer, any election comparable to
Section 338 (h)(10) of the Code under state, local or foreign tax law, or
if such election is unavailable, any election comparable to Section 338(g)
of the Code under state, local or foreign tax law) (collectively, the
"Section 338 Election") with respect to the transactions contemplated by
this Agreement. At the Closing, the Shareholders shall sign and deliver
Internal Revenue Service Form 8023 (the "Federal Section 338 Form") to
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP in escrow pursuant to the Section 338
Escrow Agreement. The Shareholder shall deliver to the Buyer any state,
local or foreign forms required for the Section 338 Election (collectively,
the "State Section 338 Forms" and, together with the Federal Section 338
Form, the "Section 338 Forms") signed by each of the Shareholders as soon
as reasonably practicable after the Closing but in all events upon the
earlier of (i) 30 days prior to the outside filing date for any such State
Section 338 Form or (ii) 60 days after the Closing Date. To the extent
that any item on a Section 338 Form has not been completed prior to the
Closing, the parties shall agree at the Closing on the manner in which the
item is to be determined. The Shareholders shall at any time and from time
to time after the Closing cooperate with the Buyer in connection with the
Section 338 Election, including the signing by them of any forms that the
Buyer may reasonably request in order to accomplish the Section 338
Election. Shareholders (i) shall pay any Taxes attributable to the
transaction contemplated by this Agreement and the making of any Section
338 Election, including, without limitation, any Tax imposed upon the
Company and any Tax attributable to any Section 338 Election in which
Shareholders are not required to join and (ii) will indemnify the Buyer in
accordance with Section 5.03 against any adverse consequences arising out
of any failure to pay such Taxes.
(ii) Shareholders and the Buyer (and/or the Company) agree to
act in accordance with the Section 338 Forms in the preparation and filing
of all Tax Returns (including, without limitation, any amended Tax Returns
and claims for refund) and in the course of any tax audit, appeal or
litigation relating thereto, unless advised by counsel that it may not take
such position without violating applicable law and without incurring
penalties and except as may be required by a final determination (of a
relevant taxing authority) with respect to any such issue. Upon payment of
any indemnification obligations hereunder resulting in an adjustment of the
"modified aggregate deemed sale price" (or the "aggregate deemed sale
price," if applicable, or any deemed sale price comparable to the "modified
aggregate deemed sale price" or the " aggregate deemed sale price" under
state, local or foreign tax law), the amounts that are set forth on the
Section 338 Forms shall be appropriately adjusted.
(iii) The Parent agrees to cause the Company to comply with the
provisions of this Section 5.07. The Parent will maintain or cause to be
maintained the records relating to any Tax Returns prepared by the Company
with respect to any taxable period or portion thereof ending on or prior
to the Closing Date until the expiration of any statute of limitations
applicable thereto (including any extensions thereof).
(e) Other Tax Matters.
-----------------
(i) Neither Parent, Buyer, nor Company, nor any Affiliate
thereof, will file any refund claim or other amended Tax Return for any
taxable period ending on or before the Closing Date without the express
written consent of the Shareholders, which may be withheld in their sole
and absolute discretion.
(ii) Any rebate or refund of any Taxes of the Company for any
taxable period or portion thereof ending on or before the Closing Date
shall accrue to the benefit of the Shareholders and if received by the
Company, Buyer, Parent or any of their Affiliates, shall be repaid promptly
to the Shareholders.
(iii) With respect to any payments by Buyer of any Earnout, for
purposes of computing any imputed interest with respect to any such
payment, Buyer shall compute such imputed interest at the appropriate
"applicable federal rate" with respect to such payments as allowed by
applicable law.
Section V.8 Adjustment Based on Net Worth at Closing.
----------------------------------------
Within sixty (60) days after the Closing, the Buyer shall review the
Company's books and records as of the Closing Date to determine the accuracy of
the information set forth on the Certificate of Net Worth referred to in Section
7.01(i) and shall provide the Shareholders with an unaudited balance sheet of
the Company prepared in accordance with GAAP (the "Closing Balance Sheet").
Together with the delivery of such balance sheet, the Buyer shall notify the
Shareholder Representative in writing of any variances from the Certificate of
Net Worth. The Shareholder Representative shall have 30 days to notify the
Buyer of any dispute with its findings. Any disputes which the parties are
unable to resolve to their mutual satisfaction shall be resolved by a mutually
agreeable independent accounting firm whose decision shall be final. The fees
of the independent accounting firms shall be paid 50% by the Shareholder and 50%
by the Buyer. Upon the earlier to occur of (a) the expiration of sixty (60)
days from the Closing or (b) the resolution of a dispute, if any, there shall be
an adjustment (upwards or downwards) by the amount, if any, by which the actual
Net Worth of the Company as finally determined in accordance with this Section
5.08 exceeds or is less than $5,300,000 by more than $25,000 (the "Net Worth
Basket"). If the actual Net Worth of the Company exceeds the sum of $5,300,000
and the Net Worth Basket, the amount by which the actual Net Worth exceeds
$5,300,000 shall be paid by the Buyer to the Shareholders pro rata in accordance
--- ----
with their respective percentage interests in Section 2.01(d) by wire transfer
of immediately available funds; if the actual Net Worth of the Company is less
than $5,300,000 minus the Net Worth Basket, the amount by which $5,300,000
exceeds the actual Net Worth of the Company shall be paid to the Buyer by the
Shareholders pro rata in accordance with their respective percentage interests
--- ----
in Section 2.01(d) by wire transfer of immediately available funds. Any
adjustment pursuant to this Section 5.08 shall be deemed to be an adjustment to
the purchase price paid under Section 2.01. Any amount to be paid pursuant to
an adjustment pursuant to this Section 5.08 shall be paid in cash.
Section V.9 Exclusive Remedy.
----------------
The parties agree that the sole and exclusive remedy of each party
with respect to any and all claims relating to or arising out of
misrepresentation or breach of any representation, warranty, covenant or
agreement made by the other parties in this Agreement (which the parties agree
does not include a claim of fraud) shall be pursuant to the indemnification
provisions in this Article V. Notwithstanding the foregoing, nothing set forth
in this Article V shall be deemed to prohibit or limit any party's right at any
time to seek injunctive or equitable relief for the failure of the other party
to perform any covenant or agreement contained herein.
ARTICLE VI
PIGGY-BACK REGISTRATION RIGHTS
------------------------------
Section VI.1 Piggyback Registration Rights. The Shareholders shall
-----------------------------
become parties to the Piggyback Registration Rights Agreement dated as of
January 27, 2000, among the Parent and certain of its stockholders in the form
attached hereto as Exhibit G on the Closing Date. Notwithstanding anything to
---------
the contrary contained herein or in the Piggyback Registration Rights Agreement:
(i) the provisions of Section 2.02 of the Piggyback Registration Rights
Agreement shall not be effective with respect to the Shareholders after the
first anniversary of the Closing Date, and (ii) any piggyback registration
rights of the Shareholders shall not be exercisable in connection with any
registration required in connection with or resulting or arising from the
Company's issuance of 7% Convertible Subordinated Notes Due 2005 described in
the Offering Memorandum, except as set forth in the next sentence, and (iii) the
Shareholders will enter into any lock-up agreement with respect to their Closing
Shares and, if applicable, Earnout Shares required by the underwriters in any
public offering of the Parent Common Stock (as long as the other parties to the
Piggy-Back Registration Rights Agreement having a substantially similar or
greater number of shares of Parent Common Stock also execute such lock-up
agreement) for so long any restriction on transferability contained therein
shall not be effective in any respect with respect to the Shareholders beyond
the first anniversary of the Closing Date (the "Lock-up Agreement"). If any of
Web Hosting Organization LLC ("WHO"), Softbank Technologies Venture IV, L.P.
("SBTV"), and/or Softbank Technologies Advisors Fund, L.P. ("SBTA") register any
or all of their respective shares of Parent Common Stock in parallel
registration effected as a result of the shelf registration to be effected in
connection with the Company's issuance of 7% Convertible Subordinated Notes Due
2005 described in the Offering Memorandum, then each Shareholder shall be
entitled to exercise his or her piggy-back rights in respect of his or her "pro
rata" number of Closing Shares and Earnout Shares, if any. For purposes of this
Article VI, a Shareholder's "pro rata" number of shares means the number of
Closing Shares and Earnout Shares, if any, then owned by such Shareholder
multiplied by a fraction, the numerator of which is the aggregate number of
shares of Parent Common Stock then owned by WHO, SBTV and SBTA that are being
registered as part of such parallel registration and the denominator of which is
the total number of shares of Parent Common Stock then owned by WHO, SBTV and
SBTA collectively.
ARTICLE VII
DELIVERIES AT CLOSING
---------------------
Section VII.1 Deliveries by the Company and the Shareholders. On
----------------------------------------------
the Closing Date, the Company and the Shareholders will deliver, or cause to be
delivered, to the Buyer the following:
(a) The Shareholders shall have delivered to the Buyer certificates
evidencing the Company Common Stock, free and clear of all liens and
encumbrances or restrictions on transfer of any nature whatsoever, duly endorsed
in blank for transfer or accompanied by stock powers duly executed in blank and
with all requisite documentary or stock transfer tax stamps affixed.
(b) The following corporate documentation:
(i) The Company's Articles or Certificate of Incorporation
certified as of a date within thirty (30) days prior to the Closing Date by
the Secretary of State of the state of the Company's organization;
(ii) Good Standing Certificates with respect to the Company as
of date within thirty (30) days prior to the Closing Date from the
Secretary of State of the state of the Company's organization and each
other state in which the Company is qualified to do business;
(iii) The Company's By-Laws certified as of the Closing Date by
the President or Secretary of the Company and the Shareholders as being in
full force and effect and unmodified;
(iv) The Company's Minute and Stock Book certified as of the
Closing Date by the President or Secretary of the Company and the
Shareholders as being current, complete, accurate and unmodified; and
(v) Corporate Resolutions of the Company's Board of Directors
and the Shareholders, approving this Agreement and all the transactions
contemplated hereby on behalf of the Company, certified by the President or
Secretary of the Company and the Shareholders as being in full force and
effect and unmodified (which director resolutions shall include the
approval of the Employee Plan Termination.
(c) The legal opinion of counsel to the Company and the Shareholders
attached hereto as Exhibit C.
(d) The Employment Agreement between the Company and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-
▇▇▇▇▇▇▇, executed by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇, and the Employment Agreement
between the Company and ▇▇▇▇ ▇▇▇▇▇▇▇, executed by ▇▇▇▇ ▇▇▇▇▇▇▇, attached hereto
as Exhibits D-1 and D-2, respectively (the "Employment Agreements").
(e) A lock-up agreement regarding the Closing Shares in the form
annexed hereto as Exhibit F (the "Lock-up Agreement") executed by each
Shareholder.
(f) An escrow agreement in the form annexed hereto as Exhibit FF
executed by each Shareholder and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, as escrow
agent (the "338 Escrow Agreement").
(g) Resignations, in writing, of all the directors and certain
officers of the Company.
(h) Consents or acknowledgments to the assignment (i.e., as a result
----
of change of control provisions) of all Business Agreements listed in the
Disclosure Schedule.
(i) Consent to a press release in form satisfactory to the
Shareholders and the Buyer relating to this Agreement and the transactions
contemplated hereby.
(j) A certificate of Net Worth signed by an authorized officer of the
Company and the Shareholders (the "Certificate of Net Worth") stating such
persons' reasonable belief that that the Net Worth of the Company is not less
than $5,100,000.
(k) A list of all software (including, off-the-shelf software) used
by the Company in operating and maintaining the Business.
(l) Evidence satisfactory to the Buyer that the Company has sold the
Excluded Assets pursuant to an agreement satisfactory to the Buyer, under which
the Company is selling the Excluded Assets on an as is where is basis and makes
no representations, warranties, indemnities or
covenants to the purchaser of the Excluded Assets and such purchaser assumes all
duties, obligations and liabilities of any nature relating to the Excluded
Assets.
(m) The Escrow Agreement, executed by the Shareholders.
(n) Intentionally Omitted.
(o) Evidence satisfactory to the Buyer that the Employee Plans
Termination has occurred with no duties, obligations or liabilities to the
Company of any nature whatsoever following the Closing.
(p) Evidence satisfactory to the Buyer that all necessary approvals
pursuant to the HSR Act shall have been obtained.
(q) Evidence satisfactory to the Buyer that the Credit Facility
Termination has occurred with no duties, obligations or liabilities to the
Company of any nature whatsoever following the Closing, including without
limitation the termination of all liens and security interests in the Company's
Assets and the termination of any and all UCC financing statements.
Section VII.2 Deliveries by the Buyer. On the Closing Date, the
-----------------------
Buyer will deliver, or cause to be delivered, to the Shareholders the following:
(a) The following corporate documentation with respect to the Buyer:
(i) The Buyer's Articles or Certificate of Incorporation,
certified as of a date within thirty (30) days prior to the Closing Date by
the Secretary of State of the State of Delaware;
(ii) A Good Standing Certificate with respect to the Buyer as of
date within thirty (30) days prior to the Closing Date from the Secretary
of State of the State of Delaware;
(iii) The Buyer's By-Laws certified as of the Closing Date by the
President or Secretary of the Buyer as being in full force and effect and
unmodified; and
(iv) Corporate Resolutions of the Buyer's Board of Directors,
approving this Agreement and all the transactions contemplated hereby on
behalf of the Buyer, certified by the President or Secretary of the Buyer
as being in full force and effect and unmodified.
(b) The following corporate documentation with respect to the Parent:
(i) The Parent's Articles or Certificate of Incorporation,
certified as of a date within thirty (30) days prior to the Closing Date by
the Secretary of State of the State of Delaware;
(ii) A Good Standing Certificate with respect to the Parent as
of date within thirty (30) days prior to the Closing Date from the
Secretary of State of the State of Delaware;
(iii) The Parent's By-Laws, certified as of the Closing Date by
the President or Secretary of the Parent as being in full force and effect
and unmodified; and
(c) Corporate Resolutions of the Parent's Executive Committee,
approving this Agreement and all the transactions contemplated hereby on behalf
of the Parent, certified by the President or Secretary of the Parent as being in
full force and effect and unmodified.
(d) The Employment Agreements duly executed by the Buyer.
(e) Stock certificates evidencing 254,879 shares of Parent Common
Stock issued to the Shareholders for the Closing Shares, which certificates
shall be properly legended as provided in
Section 4.01(o). 63,720 of such shares for the Escrowed Property will be
delivered to the Escrow Agent and the other 191,159 shares for the balance of
the Closing Shares will be delivered to Shareholders.
(f) Consent to a press release in form satisfactory to the
Shareholders and the Buyer relating to this Agreement and the transactions
contemplated hereby.
(g) Delivery of the Cash Consideration.
(h) The legal opinion of counsel to the Buyer and the Parent attached
hereto as Exhibit E.
(i) The Escrow Agreement, executed by the Buyer and the Escrow
Agent.
(j) The 338 Escrow Agreement, executed by the Buyer.
ARTICLE VIII
OBLIGATIONS FOLLOWING CLOSING
-----------------------------
Section VIII.1 Intentionally Omitted.
---------------------
Section VIII.2 Transition Assistance and Adjustments. For a period of
-------------------------------------
90 days after the Closing Date, the Shareholders shall provide such reasonable
cooperation and assistance to the Buyer, the Company and the Parent as shall be
reasonably necessary during the transition of the Business as contemplated in
this Agreement.
Section VIII.3 Intentionally Omitted.
---------------------
Section VIII.4 Parent's Option and Employee Benefit Plans. The Parent
------------------------------------------
shall issue one hundred thousand (100,000) options under the Parent's stock
option plan to such employees of the Company after the Closing in such
proportions as may be mutually agreed upon by the Shareholders and the Buyer, in
accordance with the terms and conditions of such plan.
ARTICLE IX
MISCELLANEOUS
-------------
Section IX.1 Governing Law; Jurisdiction. This Agreement shall be
---------------------------
governed by the laws of the State of New York. In connection with any action
relating to this Agreement or any other agreements delivered in connection
herewith, the parties hereto submit and consent to the exclusive jurisdiction,
subject to Section 5.04(e), of the state courts of the State of New York in the
County of Westchester and the federal courts located therein.
Section IX.2 Counterparts. This Agreement may be executed in
------------
several counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument.
Section IX.3 Knowledge. The phrase "to the knowledge of the
---------
Shareholders and the Company", or words of comparable import, shall mean facts
or circumstances within the actual personal knowledge of any of the Shareholders
and ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. Facts or circumstances shall be deemed to be
within the "actual personal knowledge" of any of the above-named persons if such
person knew, or would have known had such person made due inquiry, of such facts
or circumstances.
Section IX.4 Amendments. This Agreement supersedes any prior
----------
contracts relating to the subject matter hereof among the Company, the
Shareholders, the Buyer and the Parent. This Agreement cannot be changed,
modified or amended and no provision or requirement hereof may be waived without
the consent in writing of the parties hereto.
Section IX.5 Severability. The invalidity or unenforceability of any
-----------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Each provision of this Agreement shall be deemed to be the agreement of
the parties hereto to the full extent that the power to enter into such
provisions shall have been conferred on the parties by law.
Section IX.6 Benefit; Assignment.
-------------------
(a) This Agreement is binding upon and inures to the benefit
of the parties, their successors and permitted assigns. This Agreement may not
be assigned or the duties of the parties hereunder delegated to others without
the prior written consent of all parties hereto, except that the Buyer may
assign its rights, duties and obligations hereunder to the Parent or to a
wholly-owned subsidiary of the Buyer or the Parent without the Company's or the
Shareholders' consent and any such assignment shall not relieve the assignor of
any liability hereunder.
(b) This Agreement is not intended, nor shall it be
construed, to confer any right or privilege upon any person or entity
(including, without limitation, any former or current employee of the Company)
other than the parties hereto and, accordingly, there shall be no third party
beneficiaries to this Agreement.
Section IX.7 Construction. All exhibits annexed hereto are hereby
------------
incorporated herein by reference and made a part of this Agreement. Whenever
used in this Agreement and the context so requires, the singular shall include
the plural and the plural shall include the singular.
Section IX.8 Notices. All notices and other communications hereunder
-------
shall be in writing and deemed to have been duly given when delivered by hand,
when received by registered or certified mail, postage prepaid, return receipt
requested, when given by prepaid courier delivery services such as Federal
Express, DHL or other similar services on the day received, or when given by
facsimile transmission upon receipt by sender of a confirmed receipt of
transmission, as follows:
(a) if to the Buyer or the Parent, at
Interliant, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
Telecopier No.: (▇▇▇)▇▇▇-▇▇▇▇
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Shareholders, to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ (as the
Shareholder Representative) at the address set forth in the
first paragraph of this Agreement;
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Plaza VII
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: 612/607-7100
Section IX.9 Shareholders' Representative.
----------------------------
(a) In order to administer the transactions contemplated by this
Agreement and the Escrow Agreement, including, without limitation, the
indemnification obligations of the Shareholders under Section 5.03, the
Shareholders hereby designate and appoint the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ as their
representative for this Agreement and the Escrow Agreement and as attorney-in-
fact and agent for and on behalf of each Shareholder (in such capacity, the
"Shareholder Representative"). Said power of attorney shall be coupled with an
interest and shall be irrevocable.
(b) Each Shareholder hereby authorizes the Shareholder
Representative to represent each Shareholder, and theirs successors, with
respect to all matters arising under this Agreement and the Escrow Agreement,
including, without limitation, (i) to take all action necessary in connection
with the indemnification obligations of the Shareholders under Section 5.03,
including, the defense or settlement of any claims and the making of payments
with respect thereto, (ii) to give and receive all notices required to be given
under this Agreement or the Escrow Agreement and (iii) to take any and all
additional action as is contemplated to be taken by or on behalf of the
Shareholders by the Shareholder Representative pursuant to this Agreement and
the Escrow Agreement.
(c) In the event that the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇ or any substitute
Shareholder Representative becomes unable to perform its responsibilities as
Shareholder Representative or resigns from such position, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
shall select another representative to fill such vacancy and such substituted
Shareholder Representative shall be deemed to be the Shareholder Representative
for all purposes of this Agreement and the Escrow Agreement. Upon the
occurrence of such event, the Shareholders shall provide written notice to the
Parent, the Buyer and the Escrow Agent and shall indicate the identity of the
substitute Shareholder Representative, who shall have agreed to the terms of
this Section as if he, she or it were a party hereto.
(d) All decisions and actions by the Shareholder Representative,
including, without limitation, any agreement between the Shareholder
Representative and the Buyer, the Parent or the Escrow Agent relating to the
indemnification obligations of the Shareholders under Section 5.03, including,
the defense or settlement of any claims and the making of payments with respect
hereto, shall be binding upon all the Shareholders as if they had taken such
action themselves, and no Shareholder shall have the right to object, dissent,
protest or otherwise contest the same. The Shareholder Representative shall
incur no liability to the Shareholders with respect to any action taken or
suffered by the Shareholder Representative in reliance upon any notice,
direction, instruction, consent, statement or other documents believed by it to
be genuinely and duly authorized, nor for any other action or inaction with
respect to the indemnification obligations of the Shareholders under Section
5.03, including the defense or settlement of any claims and the making of
payments with respect thereto, except to the extent resulting from the
Shareholder Representative's own willful misconduct or negligence. The
Shareholder Representative may, in all questions arising under this Agreement or
the Escrow Agreement, rely on the advice of counsel, and for anything done,
omitted or suffered in good faith by the Shareholder Representative shall not be
liable to the Shareholders.
(e) The Buyer, the Company, the Parent and the Escrow Agent are
hereby authorized to rely conclusively on the actions, instructions and
decisions of the Shareholder Representative with respect to this Agreement and
the Escrow Agreement, including, without limitation, the indemnification
obligations of the Shareholders under Section 5.03, including the defense or
settlement of any claims or the making of payments by the Shareholder
Representative hereunder, and no party hereunder shall have any cause of action
against the Buyer, the Company, the Parent or the
Escrow Agent to the extent such parties have relied upon the actions,
instructions or decisions of the Shareholder Representative. If the Shareholder
Representative undertakes any action hereunder in his capacity as a Shareholder
Representative, the Shareholder Representative shall be deemed to make a
representation to each of the Buyer, the Company, the Parent and the Escrow
Agent that the Shareholder Representative is authorized hereunder to undertake
such action. The Shareholder Representative agrees to indemnify and hold
harmless each of the Buyer, the Company, the Parent and the Escrow Agent, and
each of their respective successors, assigns, officers, directors, stockholders,
affiliates, employees, representatives and other agents, from and against any
and all claims, liabilities, taxes, losses, damages or injuries, together with
costs and expenses, including reasonable legal fees suffered by such party as a
result of the reliance by such party on the actions of the Shareholder
Representative hereunder. The Shareholders hereby confirm that the Escrow Agent
is an intended third party beneficiary of the terms of this Section and may
enforce such Section in its own right and name.
(f) The Shareholders acknowledge and agree that the Shareholder
Representative may incur costs and expenses on behalf of the Shareholders in his
capacity as Shareholder Representative. Each of the Shareholders agrees to pay
the Shareholder Representative, promptly upon demand by the Shareholder
Representative therefor, a percentage of any expenses equal to such
Shareholder's ownership interest in the Company immediately prior to the
Closing.
[SIGNATURE PAGE OF STOCK PURCHASE AGREEMENT
BETWEEN SOFT LINK HOLDING CORP., SOFT LINK, INC.,
AND CERTAIN OTHER PARTIES
DATED AS OF FEBRUARY 29, 2000]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
SOFT LINK HOLDING CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
INTERLIANT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
SOFT LINK, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇, President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------
▇▇▇▇ ▇▇▇▇▇▇▇