EXHIBIT 2.08
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTERLAND, INC.,
PANTHERCUB ACQUISITION CORPORATION,
INNERHOST, INC.
SPIRE CAPITAL PARTNERS, L.P.,
SPIRE INVESTMENT, L.L.C.,
XXXXXX-XXXXXX MEDIA PARTNERS, L.P.
AND
EACH OF THE OTHER STOCKHOLDERS SET FORTH
ON EXHIBIT A HERETO
AUGUST 30, 2002
TABLE OF CONTENTS
[TO BE INSERTED]
THIS AGREEMENT AND PLAN OF MERGER is entered into as of August 30, 2002
(this "Agreement") by and among INTERLAND, INC., a Minnesota corporation (the
"Parent"), PANTHERCUB ACQUISITION CORPORATION, a Florida corporation (the
"Purchaser"), iNNERHOST, INC., a Florida corporation (the "Company") and SPIRE
CAPITAL PARTNERS, L.P., SPIRE INVESTMENT, L.L.C., XXXXXX-XXXXXX MEDIA PARTNERS,
L.P. and each of the other stockholders of the Company, set forth on Exhibit A
hereto (each, a "Stockholder" and collectively, the "Stockholders").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of the Parent and the Purchaser
deem it to be advisable and in the best interests of their respective
stockholders, and the Board of Directors of the Company and each of the
Stockholders deem it to be advisable and in the best interests of the
Stockholders, to effect the merger of the Purchaser with and into the Company
(the "Merger") upon the terms and conditions provided for in this Agreement;
WHEREAS, the Board of Directors of the Company and each of the Stockholders
have unanimously approved the Merger and have, and do hereby, approve and adopt
this Agreement and the Merger all in accordance with the FBCA.
NOW THEREFORE, in consideration of the foregoing premises and 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 1
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the following
meanings in this Agreement.
"ACCOUNT" means a shared or dedicated website hosting or related account of
the Company as of the Closing Date.
"ACCOUNT AGREEMENT" means an agreement between the Company and an Account
Owner with respect to an Account, that is in a form materially no less favorable
to the Company than the forms of agreement identified on Section 3.16(a) of the
Disclosure Schedule.
"ACCOUNT OWNER" means the Person obligated to pay the Account website
hosting fees to the Company.
"ADJUSTED PURCHASE PRICE" means, as of any date of calculation thereof, the
Purchase Price, as adjusted pursuant to Section 2.7(b)(ii), less any amounts
paid or the amount of any indemnification claims pending pursuant to Articles
VII or X, but without taking into account the effect of the provisions of
Section 2.7(c).
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"BASE PORTION" shall mean the Adjusted Purchase Price minus the Excess
Portion.
"BUSINESS" means all of the functions, operations, procedures, practices
and other activities that are conducted by the Company and its Affiliates
(including any supporting or related activities conducted by such Affiliates) in
connection with shared and dedicated web hosting and related services.
"CALCULATION PERIOD" means the period from August 1, 2002 through October
31, 2002.
"CLEANUP" means all actions taken to: (a) clean up, remove or treat
Hazardous Materials in the environment; (b) prevent the Release of Hazardous
Materials so that they do not endanger the environment; (c) respond to any
governmental demands for information or documents relating to cleanup, removal
or treatment of Hazardous Materials in the environment.
"CLOSING DATE VALUATION" means the amount of $2.94, constituting the
average closing price of the Parent Shares as reported by NASDAQ for the twenty
(20) trading days ending two (2) business days prior to the Closing Date.
"COMPANY SHARES" means the Preferred Stock and the Common Stock of the
Company held by the Stockholders.
"CURRENT LIABILITIES" means all items which, in accordance with GAAP, would
be classified as current liabilities.
"DEDICATED AND OTHER BUSINESS" means the Company's operation of the
Business as it relates to "dedicated" web hosting Accounts (which for all
purposes includes the revenues received by the Company from its "dedicated" web
hosting Accounts, as well as its "partner" and "other" Accounts, as well as all
"set-up fees," all as itemized and disclosed on the Company's monthly profit and
loss statements).
"ENVIRONMENTAL LAWS" means all present federal, state and local laws,
statutes, ordinances, rules, regulations, orders, policies and determinations of
any governmental authority, pertaining to health, protection of the environment,
natural resources, conservation, wildlife, waste management, regulation of
activities involving Hazardous Materials, particulate emissions and pollution,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C.ss.9601 et seq., the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C.ss.9061(2)(D), the Resource
Conservation and Recovery Act, 42 U.S.C.ss.6901 et seq., the Federal Water
Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C.ss.1251 et
seq., the Clean Air Act, 42 U.S.C.ss.7401 et seq., and the Toxic Substances
Control Act, 15 U.S.C.ss.2601 et seq., as amended, and any state or local
counterpart of each such statute or regulation.
"ESCROW AGREEMENT" means the agreement annexed hereto as Exhibit B.
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"ESCROW AMOUNT" means any Parent Shares and cash that shall be deposited in
escrow pursuant to the provisions of Section 2.7(b)(iii), which shall be held
pursuant to the terms and conditions of the Escrow Agreement.
"EXCESS PORTION" means the amount by which the Adjusted Purchase Price
shall exceed $17,100,000.
"FBCA" means the Florida Business Corporation Act.
"FORFEITURE CASH" means the sum of $523,361, which constitutes 30% of the
Other Stockholders Cash Amount payable to the Other Stockholders pursuant to
Section 2.7(b)(i), as part of the Closing Date Payment.
"FORFEITURE DATE" for any Parent Share, means the date on which it is
finally determined that such share is not subject to forfeiture under Section
2.7(b)(ii).
"FORFEITURE SHARES" means 1,608,830 of the Parent Shares issuable to the
Investor Stockholders pursuant to Section 2.7(b)(i), as part of the Closing Date
Payment.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"HAZARDOUS MATERIAL" means any hazardous substance, hazardous or toxic
waste, hazardous material, pollutant or contaminant, as those or similar terms
are used in the Environmental Laws, including asbestos and asbestos-related
products, chlorofluorocarbons, oils or petroleum-derived compounds,
polychlorinated biphenyls, pesticides, radon, mold or other potentially harmful
indoor air contaminants.
"HISTORICAL ANNUALIZED REVENUE" means six (6) times the actual revenue of
the Company from the Shared Business or the Dedicated and Other Business, as
applicable, accrued under GAAP in respect of the period June 1, 2002 through
July 31, 2002, which the parties agree is $9,844,926.
"INITIAL SHARES" means 2,078,025 of the Parent Shares issuable to the
Investor Stockholders pursuant to Section 2.7(b)(i), as part of the Closing Date
Payment.
"INVESTOR STOCKHOLDERS" means Spire Capital Partners, L.P., Spire
Investment, LLC and Xxxxxx-Xxxxxx Media Partners, L.P.
"INTELLECTUAL PROPERTY" means all proprietary rights, intangible property,
trademarks, service marks, trade names, domain names, IP addresses, software,
operating systems, customer lists and information of the Company.
"KNOWLEDGE" means, with respect to the Purchaser or Parent, the actual
knowledge of an officer or director of the Purchaser or Parent, after reasonable
investigation and, with respect to the Company, the actual knowledge of any of
the persons set forth on Schedule B hereto, after reasonable investigation.
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"LIQUIDATION PREFERENCE" means, as of the date of determination thereof,
the preferential amounts payable to the holders of Preferred Stock pursuant to
Section 6 of each of Part A and Part B of Article IV of the Company's Amended
and Restated Articles of Incorporation.
"MATERIAL ADVERSE EFFECT" means (except as otherwise provided in Section
3.6) (i) a material adverse effect on the subject party taken as a whole, or the
results of operations, financial or other condition of the subject party or its
business (including, when referring to a Material Adverse Effect on the Company,
the Business), including without limitation the initiation or continuation of a
bankruptcy proceeding or other insolvency action involving the subject party, as
debtor, (ii) any adverse effect, whether or not material, on the binding nature,
validity or enforceability of such Transaction Document as an obligation of the
subject party, as a party thereto, or (iii) the prevention, prohibition, delay
or impairment of the consummation of the transactions contemplated by any
Transaction Document or any challenge to the validity, legality or
enforceability of the Agreement.
"NET ASSET DEFICIT" means the sum of $155,499, constituting the amount by
which the Net Current and Other Assets set forth in or derived from the
Company's balance sheet as of July 31, 2002 is less than the Net Current and
Other Assets set forth in or derived from the Company's balance sheet as of
April 30, 2002.
"NET CURRENT AND OTHER ASSETS" means, as of a given date, the sum of the
Current Assets of the Company and total Other Assets (principally prepaid rent)
less the sum of (a) Current Liabilities and (b) the liabilities referred to as
(i) notes payable, (ii) capital lease obligations and (iii) construction
agreement payable (whether denominated long term or short term), but excluding
accrued dividends payable and all items related to "Commitments" (preferred
stock preferences and stockholders deficit), all as reflected on a balance sheet
of the Company which has been prepared in accordance with GAAP, consistent with
past practices.
"OTHER STOCKHOLDERS" means the Stockholders other than the Investor
Stockholders.
"PARENT SHARES" means shares of the Parent's common stock, par value $.01
per share.
"PERMITTED LIENS" means (i) liens imposed by law for taxes that are not yet
due or are being contested in good faith, (ii) carriers', warehousemen's,
mechanics', materialmen's, repairmen's, landlord's and other like liens imposed
by law, arising in the ordinary course of business and securing obligations that
are not overdue by more than 30 days or are being contested in good faith, (iii)
pledges and deposits made in the ordinary course of business in compliance with
workers' compensation, unemployment insurance and other social security laws and
regulations, (iv) deposits to secure the performances of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business, (v) easements, zoning restrictions, rights of way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Company and (vi) those liens set forth on Section
3.15(b) of the Disclosure Schedule.
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"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or any governmental body.
"POST-CLOSING ANNUALIZED REVENUE" means an amount equal to four (4) times
the revenue the Company accrued under GAAP in respect of the Calculation Period.
"REGISTRATION RIGHTS AGREEMENT" means the form of Registration Rights
Agreement attached hereto as Exhibit C pursuant to which the Parent shall agree
to file a Registration Statement permitting the resale of the Parent Shares
issued or to be issued hereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any governmental body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or any common law.
"RESELLER" means a person who acquires services from the Business in order
to resell such services to the end users of such website hosting services.
"RESELLER AGREEMENT" means an agreement between the Company and a Reseller
with respect to the purchase and resale of website hosting services, that is in
a form materially no less favorable to the Company than the forms of agreement
identified on Section 3.16(a) of the Disclosure Schedule.
"SALE ADJUSTMENT" means the net amount by which the proceeds from all bona
fide open market sales of Parent Shares by an Investor Stockholder is less than
the aggregate Closing Date Valuation of such Parent Shares.
"SHARED BUSINESS" means the Company's operation of the Business as it
relates to "shared" web hosting Accounts (including the revenues the Company
receives from its "shared" web hosting Accounts, as itemized and disclosed on
the Company's monthly profit and loss statements).
"STOCKHOLDERS' REPRESENTATIVE" means Spire Capital Partners, L.P.
"STOCKHOLDERS' WIRE TRANSFER ACCOUNT" means Stockholders' Representative's
bank account identified on Exhibit D.
"STOCK VALUATION" means the value of the Parent Shares as of a specified
date of determination.
"TOTAL ASSETS" means the sum of all items which, in accordance with GAAP,
would be classified as assets, as set forth on the balance sheet of the Company.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow Agreement, the
Registration Rights Agreement, and all other agreements, certificates and
documents required to be executed and/or delivered by any of the parties hereto
pursuant to the terms and provisions of this Agreement.
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Section 1.2 Other Definitions. The following terms are defined in the
Section indicated.
TERM SECTION
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Articles of Merger 2.3
Base Escrow Portion Schedule A
Cash Amount 2.7(a)
Closing 2.2
Closing Date 2.2
Closing Date Payment 2.7(b)(i)
COBRA 3.10(g)
Code 3.9 (c)
Common Stock 3.2(a)
Company Contact Information 6.1
Company Contracts 3.11(a)
Company's Financial Statements 3.4(a)
Company's Most Recent
Balance Sheet 3.4(a)
Continuation Coverage 3.10(g)
Contracts 3.11(a)
DOL 3.10(b)
Disclosure Schedule Article 3
Effective Time 2.3
Employee 3.10(a)
Employee Plan 3.10(a)
Entity 3.2(b)
Equitable Exceptions 4.1(b)
ERISA 3.10(a)
ERISA Affiliates 3.10(c)
Excess Escrow Portion Schedule A
FMLA 3.10(g)
Forfeiture Shares Final Valuation 2.7(c)(iii)(B)
Form S-3 4.6(g))
Governmental Entity 4.3(a)
IRCA 3.19(a)
IRS 3.10(b)
Indemnified Party 7.6(a)
Initial Shares Final Valuation 2.7(c)(iii)(A)
Insurance Policies 3.17
Investor Stockholders' Cash Amount 2.7(a)(i)
Law 3.3
Liabilities 3.5
Liens 4.2(a)
MEWA 3.10(e)
Merger Recitals
Neutral Auditors 2.7(f)
Order 3.3
Other Stockholders' Cash Amount 2.7(a)(i)
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TERM SECTION
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Other Stockholders' Escrow Deposit 2.7(b)(iii)
Parent's Financial Statement 5.5(a)
Parent's Most Recent Balance Sheet 5.5(a)
Pension Plan 3.10(b)
Permits 3.8(a)
Personal Property Lease 3.15
Preferred Stock 3.2(a)
Proceeding 3.7(a)
Purchase Price 2.7(a)
Purchaser Disclosure Schedule Article 5
Purchaser Indemnified Parties 6.3
Purchaser Loss 6.3
Purchaser Permits 5.9(a)
Qualifying Event 3.10(g)
Real Property 3.13(a)
Real Property Lease 3.13(b)
Registration Statement Effective Date 6.6
Resolution Period 2.7(d)
Restricted Shares 2.7(b)(i)
Revenue Notice 2.7(d)
Revenue Review Period 2.7(d)
Securities Act 5.12(b)
Stock Restriction Agreement 6.7
Stock Valuation 2.7(a)
Stockholder Indemnified Parties 7.2
Stockholder Loss 7.2
Surviving Corporation 2.1
Tax Return 3.9(a)
Tax or Taxes 3.9(a)
Unresolved Changes 2.7(f)
ARTICLE 2
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the FBCA, the Purchaser shall
merge with and into the Company, and the separate corporate existence of the
Purchaser shall thereupon cease, and the Company shall be the surviving
corporation in the Merger (the "Surviving Corporation").
Section 2.2 Closing. Upon the terms and subject to the conditions of this
Agreement, the consummation of the transactions contemplated by this Agreement
(the "Closing") will take place on August 30, 2002 at the offices of
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 or
at such other time or at such other place as shall be agreed upon by the
parties. The date on which the Closing occurs is hereinafter referred to as the
"Closing Date."
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Section 2.3 Effective Time. Subject to the provisions of this Agreement, on
the Closing Date the parties shall file with the Department of State of the
State of Florida articles of merger (the "Articles of Merger") executed in
accordance with the provisions of the FBCA and shall make all other filings or
recordings required under the FBCA in order to effect the Merger. The Merger
shall become effective upon the filing of the Articles of Merger or at such
other time as is agreed by the parties hereto and specified in the Articles of
Merger (the "Effective Time"). For the convenience of the parties and in order
to avoid pro-rations, the parties intend by this Agreement to shift the burdens
and benefits of the Company to the Parent and the Purchaser as of the close of
business on July 31, 2002.
Section 2.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 607.1106 of the FBCA and described in the Plan of Merger
attached hereto as Exhibit 2.4.
Section 2.5 Articles of Incorporation; By-Laws.
(a) At the Effective Time, the articles of incorporation of Purchaser, as
in effect immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable laws.
(b) At the Effective Time, the By-laws of Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by the FBCA, the articles of
incorporation of the Surviving Corporation and such By-laws.
Section 2.6 Directors and Officers of Surviving Corporation. The directors
and officers of the Purchaser at the Effective Time shall be the directors and
officers of the Surviving Corporation until their respective successors are duly
elected and qualified or their earlier death, resignation or removal in
accordance with the articles of incorporation and By-laws of the Surviving
Corporation.
Section 2.7 Conversion of Securities; Consideration; Escrow and Valuation.
(a) (i) Conversion and Consideration. At the Effective Time, by virtue of
the Merger, and without any action on the part of any Stockholder, each share of
the Company Shares, subject to the terms and conditions of this Agreement, shall
be converted without any further action, into the right to receive, and become
exchangeable for, a portion of the Purchase Price (as hereinafter defined) as
provided in this Agreement and this Section 2.7, provided, however, no
fractional Parent Shares shall be issued and instead any Investor Stockholder
otherwise entitled to receive a fractional share shall receive an amount in cash
equal to such fractional share (computed using the Closing Date Valuation). The
total consideration to the Stockholders in exchange for the Company Shares shall
be an amount equal to the sum of (a) 216% of the Historical Annualized Revenue
of the Shared Business and (b) 159% of the Historical Annualized Revenue of the
Dedicated and Other Business and (c) Two Hundred Thousand ($200,000) Dollars
minus the Net Asset Deficit (such amount determined as of the Closing Date, the
"Purchase Price"). The parties have calculated the Purchase Price to be
$17,511,074. Of such amount, an aggregate of $5,246,752 shall be paid in cash
(the "Cash Amount") and the balance shall be paid by delivery of 4,171,538
Parent Shares (valued at the Closing Date Valuation). A portion of the Cash
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Amount equal to $1,744,537 (the "Other Stockholders' Cash Amount") shall be
payable to the Other Stockholders. The $3,502,215 balance of the Cash Amount
(the "Investor Stockholders' Cash Amount"), together with all of the Parent
Shares, shall be paid to the Investor Stockholders.
(ii) Allocation and Effect. The Investor Stockholders' Cash Amount and the
Parent Shares shall be allocated among the Investor Stockholders pro rata in
accordance with the aggregate Liquidation Preference of the Preferred Stock held
by them. The Other Stockholders' Cash Amount shall be allocated among the Other
Stockholders as set forth on Schedule 2.7, or as they shall otherwise agree
pursuant to a written instrument furnished to the Parent and the Stockholders'
Representative. From and after the Effective Time, each Stockholder shall cease
to have any rights as a stockholder of the Company and such Stockholder's sole
right shall be to receive its applicable share of the Purchase Price, and all of
the Company Shares shall be cancelled and retired and cease to exist.
(b) Payment of the Purchase Price; Escrow. The Purchaser and Parent shall
pay the Purchase Price in a combination of cash and Parent Shares as follows:
(i) Initial Purchase Price Payment. The Purchase Price shall be paid on the
Closing Date by a combination of (A) a wire transfer of immediately available
funds to the Stockholders' Wire Transfer Account of the Investor Stockholders'
Cash Amount and the Forfeiture Cash, (B) a wire transfer of immediately
available funds to the Other Stockholders (or their designees) of the Other
Stockholders' Cash Amount less the Forfeiture Cash and the Other Stockholders'
Escrow Deposit in accordance with the instructions therefor set forth on Exhibit
D and (C) delivery to the Stockholders' Representative of confirmation from the
Parent's transfer agent and registrar, Xxxxx Fargo Shareholder Services, Inc.,
of the issuance of the Parent Shares, which shall be valued at the Closing Date
Valuation (collectively, the "Closing Date Payment"). The Parent Shares
delivered as part of the Closing Date Payment shall be in such denominations and
names as the Stockholders' Representative shall request. The Stockholders'
Representative shall promptly cause the Cash Amount and the Parent Shares to be
disbursed to the Escrow Agent and each of the other parties entitled to receive
the same, provided, however, that unless otherwise consented to by the Parent,
the Stockholders' Representative shall not distribute to the Other Stockholders
the Forfeiture Cash or distribute to the Investor Stockholders the Forfeiture
Shares until immediately following the adjustment to the Purchase Price provided
for in clause (ii) below, following which it shall promptly distribute any such
Forfeiture Cash then held by it to the Other Stockholders and any such
Forfeiture Shares held by it to the Investor Stockholders entitled to receive
the same (it being understood that to the extent any dispute may exist as to
whether a portion of the Forfeiture Cash and Forfeiture Shares shall be returned
to the Parent, the Stockholders' Representative shall be entitled to distribute
any Forfeiture Shares and Forfeiture Cash as to which no dispute shall exist).
(ii) Forfeiture Obligation. Within thirty (30) days following the end of
the Calculation Period, the Parent shall cause the Surviving Corporation to
deliver to the Stockholders' Representative a written notice including a
calculation of the Post-Closing Annualized Revenue, accompanied by reasonably
detailed supporting documentation (the "Revenue Notice"). If the Post-Closing
Annualized Revenue shall equal (x) no less than 95% of the aggregate Historical
Annualized Revenue of the Shared and Dedicated and Other Businesses, then the
Investor Stockholders shall be entitled to retain all of the Forfeiture Shares
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and the Other Stockholders shall be entitled to retain all of the Forfeiture
Cash or (y) less than 95% of the aggregate Historical Annualized Revenue of the
Shared and Dedicated and Other Businesses, then the Stockholders shall be
entitled to retain that portion of the Forfeiture Shares and Forfeiture Cash
computed by multiplying each thereof by a fraction the numerator of which shall
equal the amount of the Post-Closing Annualized Revenue and the denominator of
which shall equal 95% of the aggregate Historical Annualized Revenue of the
Shared and Dedicated and Other Businesses. The remaining portion of the
Forfeiture Shares and Forfeiture Cash shall, subject to the dispute provisions
set forth in Section 2.7(d) below, be returned by the Stockholders'
Representative to the Parent; provided that all such amounts to be returned
shall first be returned in the proportion of 50% Forfeiture Shares and 50%
Forfeiture Cash until, after giving effect thereto, the Excess Portion is
reduced to zero ($0) and thereafter all such amounts shall be returned in the
proportion of 91% Forfeiture Shares and 9% Forfeiture Cash. The Stockholders'
Representative shall promptly cause the retained portion of the Forfeiture
Shares to be disbursed to the Investor Stockholders and the retained portion of
the Forfeiture Cash to be disbursed to the Other Stockholders, in the respective
proportions determined pursuant to Section 2.7, provided, however, that the
Stockholders' Representative shall not distribute to the Investor Stockholders
any such Forfeiture Shares until immediately following the re-valuation provided
for in Section 2.7(c)(iii)(B), following which it shall promptly distribute such
Forfeiture Shares then held by it (as well as any additional Parent Shares
issued pursuant to Section 2.7(c)(iii)(B)).
(iii) Escrow. At the time the Closing Date Payment is to be made, (1) a
portion of the Other Stockholders' Cash Amount equal to $326,140 (the "Other
Stockholders' Escrow Deposit") and (2) 484,683 of the Parent Shares issued to
the Investor Stockholders with an aggregate value (based on the Closing Date
Valuation), which together with the Other Stockholders' Escrow Deposit
constitutes 10% of the Purchase Price, shall be deposited in escrow (by wire
transfer to the Escrow Agent in accordance with the instructions set forth on
Exhibit D) and held pursuant to the terms of the Escrow Agreement for a period
of twelve (12) months from the Closing Date. Each Stockholder shall contribute
to such escrow in the proportions and manner set forth in Schedule A and the
Stockholders' Representative shall be authorized to deliver to the Escrow Agent
on behalf of the Stockholders such Other Stockholders' Cash Amount and Parent
Shares as are to be escrowed. If any Forfeiture Shares and Forfeiture Cash are
returned to the Parent as provided in Section 2.7(b)(ii) above, then Parent
Shares, valued at the Closing Date Valuation, equal to 10% of the amount of such
Forfeiture Shares so returned shall be released to the Investor Stockholders and
10% of such Forfeiture Cash so returned shall be released to the Other
Stockholders, and the Parent and Surviving Corporation agree to promptly execute
and deliver instructions to the escrow agent permitting such release.
(c) Valuation. For all purposes of this Agreement, the value of the Parent
Shares (the "Stock Valuation") as of any date of determination thereof will be
determined as follows:
(i) The Stock Valuation of all Parent Shares issued hereunder will, as of
the issuance thereof, be deemed equal to the Closing Date Valuation.
(ii) [intentionally omitted]
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(iii) Adjustments. The Initial Shares (except the Parent Shares delivered
to the Escrow Agent pursuant to Section 2.7(b)(iii)) and the Forfeiture Shares
will be subject to adjustment, as follows:
(A) If the Stock Valuation of the Initial Shares on the later of the
Registration Statement Effective Date and the ninetieth (90th) day following the
Closing Date, computed as the average closing price of the Parent Shares as
reported by NASDAQ for the prior five (5) trading days immediately preceding the
later of such dates (the "Initial Shares Final Valuation"), is (a) more than
$3.70, then the Parent shall be entitled to receive back from the Stockholders'
Representative in respect of each Investor Stockholder, pro rata based on the
number of Initial Shares issued to such Investor Stockholder at the Closing, a
number of Parent Shares, valued at the Initial Shares Final Valuation, as is
equal to the difference between the value of the Initial Shares issued to such
Investor Stockholder valued at the Initial Shares Final Valuation and the value
of the Initial Shares issued to such Investor Stockholder valued at $3.70,
provided, however, that in no event shall the Initial Shares Final Valuation of
the Initial Shares be deemed to be greater than $5.00 or (b) less than $2.50,
then the Parent shall promptly deliver to the Stockholders' Representative, on
behalf of each Investor Stockholder, pro rata based on the number of Initial
Shares issued to such Investor Stockholder at the Closing, certificates
representing such additional number of Parent Shares, valued at the Initial
Shares Final Valuation, as is equal to the difference between the value of the
Initial Shares issued to such Investor Stockholder valued at the Initial Shares
Final Valuation and the value of the Initial Shares issued to such Investor
Stockholder valued at $2.50, provided, however, that in no event shall Initial
Shares Final Valuation of the Initial Shares be deemed to be less than $1.00.
(B) If the Stock Valuation of the Forfeiture Shares on the later of the
Registration Statement Effective Date and the applicable Forfeiture Date with
respect to such Forfeiture Shares, computed as the average closing price of the
Parent Shares as reported by NASDAQ for the prior five (5) trading days
immediately preceding the later of such dates (each "Forfeiture Shares Final
Valuation"), is (a) more than $3.70, then the Parent shall be entitled to
receive back from the Stockholders' Representative in respect of each Investor
Stockholder, pro rata based on the number of Forfeiture Shares issued to such
Investor Stockholder (as to which the Forfeiture Date has occurred), a number of
Parent Shares, valued at the Forfeiture Shares Final Valuation, as is equal to
the difference between the value of the Forfeiture Shares issued to such
Investor Stockholder (as to which the Forfeiture Date has occurred) valued at
the Forfeiture Shares Final Valuation and the value of the Forfeiture Shares
issued to such Investor Stockholder valued at $3.70, provided, however, that in
no event shall the Forfeiture Shares Final Valuation of the Forfeiture Shares be
deemed to be greater than $5.00 or (b) less than $2.50, then the Parent shall
promptly deliver to the Stockholders' Representative, on behalf of each Investor
Stockholder, pro rata based on the number of Forfeiture Shares issued to such
Investor Stockholder (as to which the Forfeiture Date has occurred),
certificates representing such additional number of Parent Shares, valued at the
Forfeiture Shares Final Valuation, as is equal to the difference between the
value of the Forfeiture Shares issued to such Investor Stockholder valued at the
Forfeiture Shares Final Valuation and the value of the Forfeiture Shares issued
to such Investor Stockholder valued at $2.50, provided, however, that in no
event shall the Forfeiture Shares Final Valuation of the Forfeiture Shares be
deemed to be less than $1.00. The calculations under this clause (B) shall be
made separately and from time to time for each portion of Forfeiture Shares as
to which the Forfeiture Date occurs on the same day.
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(C) All per share valuations and amounts set forth in the Section
2.7(c)(iii) shall be adjusted equitably in the event of any stock dividend,
stock split or reverse stock split.
(D) The Stockholder's Representative is authorized to deliver and receive
cash and shares on or behalf of each Stockholder in accordance with the
provisions of this Section 2.7, including but not limited to this Section
2.7(c)(iii).
(d) Delivery and Review. After receipt of the Revenue Notice, the
Stockholders' Representative shall have thirty (30) days to review such Revenue
Notice (the "Revenue Review Period"), together with the work papers used in the
preparation thereof. Unless the Stockholders' Representative delivers written
notice to the Purchaser on or prior to the expiration of the Revenue Review
Period stating that it has objections to such Revenue Notice (and setting forth
the details of its calculation of disputed items), the Stockholders shall be
deemed to have accepted and agreed to such Revenue Notice. If the Stockholders'
Representative so notifies the Surviving Corporation of its objections to the
Revenue Notice, the Stockholders' Representative (acting as agent for the
Stockholders) and the Surviving Corporation shall, within thirty (30) days (or
such longer period as the parties may agree) following such notice (the
"Resolution Period"), attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and conclusive.
(e) Allocation and Distribution of Purchase Price.Each of the Stockholders
agrees that the Purchase Price shall be allocated and paid among them as set
forth on Schedule 2.7 hereto pursuant to and in accordance with the separate
Settlement Agreement among the Stockholders dated as of July 30, 2002. The
Stockholders' Representative hereby agrees, by its execution hereof, to disburse
any cash amounts received by it and deliver any stock certificates to the
appropriate Stockholders in the amounts or proportions which they are entitled
to receive by virtue of the foregoing provisions of this subsection (e), subject
to the right of the Stockholders' Representative to apply portions thereof to
pay expenses for which it is entitled to be reimbursed or liabilities against
which it is entitled to be indemnified pursuant to Section 10.6 below, or to
establish a reserve in respect of such anticipated pending, asserted or
contingent liabilities.
(f) Resolution. Any computation of the amount of Forfeiture Shares or
Forfeiture Cash to be returned to the Parent pursuant to Section 2.7(b)(ii)
remaining in dispute at the conclusion of the Resolution Period (the "Unresolved
Changes") shall be submitted by the Surviving Corporation and the Stockholders'
Representative to a mutually acceptable independent auditing firm who has not
regularly provided auditing or accounting services to the Company, the
Purchaser, Parent or to any of the Stockholders during the three (3) years
preceding the Closing (such firm being referred to as the "Neutral Auditors"),
within ten (10) days after the expiration of the Resolution Period. Each party
agrees to execute, if requested by the Neutral Auditors, a reasonable engagement
letter. All fees and expenses relating to the work, if any, to be performed by
the Neutral Auditors shall be borne pro rata by the Stockholders and the
Surviving Corporation in proportion to the allocation of the dollar amount of
the Unresolved Changes made by the Neutral Auditors such that the prevailing
party or parties pays a lesser proportion of the fees and expenses. The Neutral
Auditors shall act as an arbitrator to determine, based on the provisions of
this Section, only the Unresolved Changes. The Neutral Auditors' determination
of the Unresolved Changes shall be made within forty-five (45) days of the
submission of the Unresolved Changes thereto, shall be set forth in a written
statement delivered to the Stockholders' Representative and the Surviving
Corporation, and shall be final, binding and conclusive on all Stockholders, the
Surviving Corporation and Parent. The disputed Revenue Notice shall be adjusted
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in the manner as agreed to (or deemed agreed to) by the Stockholders'
Representative and the Surviving Corporation under this Section or, if
Unresolved Changes are submitted to the Neutral Auditors, such Revenue Notice
shall be adjusted to reflect the determination of the Neutral Auditors under
this Section.
Section 2.8 Deliveries by the Company and Stockholders. On the Closing
Date, the Stockholders and the Company, as appropriate, shall deliver, or cause
to be delivered, to the Purchaser the following:
(a) Each Stockholder shall have delivered to the Purchaser certificates
evidencing the Company Shares owned by it, free and clear of all Liens or other
restrictions on transfer of any nature whatsoever, duly endorsed in blank for
transfer or accompanied by stock powers duly executed in blank.
(b) The Company shall have delivered to the Purchaser the following
corporate documentation: (i) the Company's Articles of Incorporation certified
as of a date within ten (10) days prior to the Closing Date by the Department of
State of the state of Florida; (ii) good standing certificates with respect to
the Company as of a date within ten (10) days prior to the Closing Date from the
Department of State of the state of Florida and each other state in which the
Company is qualified to do business, and (iii) the Articles of Merger, duly
executed on behalf of the Company, in form required for filing by the Department
of State of the state of Florida.
(c) Each of the other Transaction Documents, duly executed by or on behalf
of the Company and the Stockholders.
(d) Such other documents and certificates duly executed as may be required
to be delivered by the Company and the Stockholders pursuant to this Agreement
or pursuant to the terms of any Transaction Document or as may be reasonably
requested in writing by the Purchaser prior to the Closing Date.
Section 2.9 Deliveries by the Purchaser and Parent. On the Closing Date,
the Purchaser and Parent will deliver, or cause to be delivered, to the
Stockholders' Representative the following:
(a) The following corporate documentation with respect to the Purchaser:
(i) the Purchaser's Articles of Incorporation, certified as of a date within
thirty (30) days prior to the Closing Date by the Department of State of the
State of Florida; (ii) a good standing certificate with respect to the Purchaser
as of a date within thirty (30) days prior to the Closing Date from the
Department of State of the State of Florida; (iii) the Purchaser's By-Laws
certified as of the Closing Date by the President or Secretary of the Purchaser
as being in full force and effect and unmodified; (iv) corporate resolutions of
the Purchaser's Board of Directors, approving this Agreement and all the
transactions contemplated hereby on behalf of the Purchaser, certified by the
President or Secretary of the Purchaser as being in full force and effect and
unmodified; and (v) the Articles of Merger, duly executed on behalf of the
Purchaser, in form required for filing by the Department of State of the state
of Florida.
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(b) The following corporate documentation with respect to the Parent: (i)
the Parent's 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
Minnesota; (ii) a good standing certificate with respect to the Parent as of a
date within thirty (30) days prior to the Closing Date from the Secretary of
State of the State of Minnesota; (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 (iv) corporate resolutions of the Parent's Board
of Directors, 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.
(c) Delivery of the Closing Date Payment in accordance with Section
2.7(b)(i) hereof.
(d) Each of the other Transaction Documents, duly executed by the Parent or
the Purchaser, as the case may be.
Section 2.10 Such other documents and certificates duly executed as may be
required to be delivered by the Parent or the Purchaser pursuant to this
Agreement or pursuant to any Transaction Document or as may be reasonably
requested in writing by the Stockholders prior to the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to the Purchaser that the
statements set forth in this Article 3 are true, correct and complete, and will
be true, correct and complete as of the Closing (as though made then and as
though the Closing Date were substituted for the date of this Agreement),
subject to the applicable qualifications set forth in the disclosure schedule
attached to this Agreement (the "Disclosure Schedule"). 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.
Section 3.1 Organization and Authority.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization. The
Company has all requisite corporate power and authority to own, lease, operate
or use its properties and assets, and to conduct the Business. The Company is
duly qualified to do business and in good standing and is duly licensed,
authorized or qualified to transact business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing could not have a Material Adverse Effect on the Company.
14
(b) The execution, delivery and performance by the Company 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 Company and no other corporate
approval or authorization on the part of the Company is required or necessary to
authorize each such Transaction Document or the consummation of the transactions
contemplated by each such Transaction Document. Each Transaction Document to
which the Company is a party, has been or in the case of any documents to be
executed as of the Closing, will be duly and validly executed and delivered by
the Company and each such Transaction Document constitutes the legal, valid and
binding obligation of the Company enforceable against it in accordance with its
respective terms, except to the extent that enforceability may be limited by
laws affecting creditors' rights and debtors' obligations generally, and legal
limitations relating to remedies of specific performance and injunctive and
other forms of equitable relief whether considered in a proceeding in equity or
at law, including bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally (the "Equitable Exceptions").
Section 3.2 Capitalization and Company Shares.
(a) The authorized capital stock of the Company consists of (i) 10,320
shares of shares of a Series A Redeemable Preferred Stock, par value $.01 per
share, of which 10,097.36 shares are issued and outstanding, (ii) 7,999,780
shares of Series A Convertible Preferred Stock, par value $.01 per share, of
which 7,827,389 shares are issued and outstanding ((i) and (ii) collectively are
referred to herein as, the "Preferred Stock") and (iii) 141,989,900 shares of
Common Stock, par value $.01 per share (the "Common Stock"), of which 28,815,000
shares are issued and outstanding. The Company Shares are duly authorized,
validly issued, fully paid and nonassessable, are transferable or assignable
free and clear of any preemptive rights and other stockholder rights. The
Company Shares are held beneficially and of record by the Stockholders, as set
forth on Exhibit A. The Company Shares were issued and have been transferred in
accordance with all applicable Laws, including without limitation federal and
state securities Laws. Except as set forth in Section 3.2(a) of the Disclosure
Schedule, there are no outstanding or authorized options, warrants,
subscriptions, commitments, agreements or other rights that relate to the
issuance or acquisition of, or would require the Company to issue or sell, any
capital stock, equity interests or other securities of the Company, or any
security convertible into or exchangeable for any capital stock, equity
interests or other securities of the Company. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation or similar
rights with respect to the Company. Except as set forth in Section 3.2(a) of the
Disclosure Schedule, there are no agreements, understandings, trusts, or other
collaborative arrangements or understandings concerning the voting, ownership or
transfer of the capital stock of the Company.
(b) Except as provided in Section 3.2(b) of the Disclosure Schedule, the
Company has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest, or any security convertible into an equity
interest, in any corporation, partnership, limited liability company, joint
venture, association, joint stock company, trust, labor organization,
unincorporated organization or other business entity (any of the foregoing an
"Entity"), other than any marketable securities held on a short-term basis for
purposes of cash management in the ordinary course of business.
15
Section 3.3 Consents and Approvals; No Violations.
The consummation of the transactions contemplated by the Transaction
Documents: (a) will not conflict with or violate any provision of the articles
of incorporation or by-laws of the Company, (b) will not require any consent,
approval or waiver of, any filing by the Company with, or any notice by the
Company to, any Person (other than as set forth in Section 3.3 of the Disclosure
Schedule), (c) except of the type set forth in Section 3.3 of the Disclosure
Schedule, will not result in a violation or breach of, will not constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of or result in a termination, cancellation or acceleration) under, or
will not require any notice under, any of the terms, conditions or provisions of
any Contract to which the Company is a party or by which the Company or any of
its respective assets may be bound, and (d) will not violate or breach any
applicable law, statute or ordinance or any rule, regulation or policy of any
Governmental Entity (each, a "Law") or any order, writ, injunction, ruling,
charge, judgment or decree of any Governmental Entity (each, an "Order"),
applicable to the Business or the Company.
Section 3.4 Financial Statements.
(a) Section 3.4(a) of the Disclosure Schedule includes copies of the
following financial statements of the Company (the "Company's Financial
Statements"): (i) the Company's audited balance sheet and the statements of
income, changes in stockholders' equity and cash flow of the Company for the
twelve (12) months as of and ending on December 31, 2001 and (ii) the unaudited
balance sheet (the "Company's Most Recent Balance Sheet") and statements of
income of the Company for the seven (7) months ended July 31, 2002.
(b) Each of the Company's Financial Statements (including the notes
thereto) are true, complete and correct in all material respects, present fairly
the financial condition and results of operations of the Company as of the dates
of such statements, and have been prepared on an accrual basis in accordance
with GAAP (except, with respect to any unaudited interim financial statements,
the absence of notes and normal year-end adjustments). The Company's Financial
Statements (including the notes thereto) are or, in the case of future
deliveries will be consistent with the books of account and records of the
Company and such books and records are correct and complete, in all material
respects, and have been maintained in accordance with GAAP.
Section 3.5 No Undisclosed Liabilities. Except for Liabilities of the type
set forth in Section 3.5 of the Disclosure Schedule, the Company has no debt,
liability or obligation of any kind (and to the Knowledge of the Company there
is no basis for any present or future Proceeding that could reasonably be
expected to give rise to any debt, liability or obligation), whether accrued,
absolute, direct, indirect, contingent or otherwise, including any liability or
obligation on account of Taxes or any penalty, interest or fine (collectively,
the "Liabilities"), except for (a) liabilities incurred in the ordinary course
of business after July 31, 2002, and that, individually or in the aggregate,
could not have a Material Adverse Effect on the Company; (b) liabilities that
are accrued or reserved against in the Company's Most Recent Balance Sheet in
16
accordance with GAAP; (c) obligations under this Agreement or the other
Transaction Documents; and (d) obligations to perform or pay the executory
portion of any Contracts incurred in the ordinary course of business and not
required under GAAP to be reflected in the Company's Financial Statements.
Section 3.6 Absence of Certain Changes. (a) Except as provided in Section
3.6 of the Disclosure Schedule and except as contemplated hereby, since July 31,
2002:
(i) there has not been any events that, individually or in the aggregate,
have had a Material Adverse Effect on the Company and there have not been any
events that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Company, nor has the Company suffered or
incurred any material damage, or destruction to, or loss of, physical property
of the Company or the Business (whether or not covered by insurance); and
(ii) the Company has not made any material change in accounting methods or
practices or revaluation, or a material decrease in the book value, of any asset
of the Company; and
(iii) the Company has not incurred any material Liabilities, whether due or
to become due, except in the ordinary course of business consistent with past
practices, or failed to satisfy, or delayed or postponed payment of, any of its
Liabilities related to the Business as the same becomes due and owing, except
where such failure or delay occurred in the ordinary course of business
consistent with past practices; and
(iv) the Company has not materially increased (other than increases
resulting from the calculation of reserves in the ordinary course of business
consistent with past practices), or experienced any change in any assumptions
underlying or methods of calculating, any bad debt, contingency or other
reserves; and
(v) except for sales of services and licenses of software in the ordinary
course of business, there has not been any acquisition, assignment, transfer,
mortgage, pledge, encumbrance or lease of any tangible or intangible material
asset or property of the Company; and
(vi) there has not been any release, compromise, waiver or cancellation of
any material debt to or material claim by the Company or the Business, or waiver
of any material right of the Company or the Business; and
(vii) there has not been any declaration, payment or commitment for the
payment by the Company of a bonus or other additional salary, compensation, or
benefit to any director, officer or employee of the Company or the Business; and
(viii) there has not been any payment, loan or advance of any amount to, or
any other transaction with, any employee, officer, director or shareholder of
the Company or the Business, except for amounts advanced to directors, officers
or employees of the Company for out-of-pocket expenses in connection with
entertainment or travel; and
17
(ix) there has not been any employment Contract, whether written or oral,
involving the directors or officers of the Company that has been entered into,
amended or modified or terminated, nor has there been any Employee Plan (as
defined in Section 3.10(a) hereof) that has been adopted, materially amended or
modified or terminated; and
(x) there has not been any purchase, redemption or issuance of any capital
stock, equity interest or other security of the Company or any option, warrant,
right or other security exercisable for, convertible into or exchangeable for
any capital stock, equity interest or other security of the Company; and
(xi) the Company has not declared or paid a dividend, or made any other
declaration, payment or distribution of any type or nature to any stockholder or
security holder of the Company in respect of its stock or securities, whether in
cash or property; and
(xii) the Company has not agreed or committed to do any of the foregoing.
For purposes of this Section 3.6 only, an item shall be deemed "material"
and an event shall be deemed to have a "Material Adverse Effect" if any single
item or event exceeds $175,000, or if the aggregate of all such items or events
exceeds $350,000.
Section 3.7 Litigation.
(a) Except as set forth in Section 3.7(a) of the Disclosure Schedule and
disputes in which the amount claimed as due from the Company is less than
$5,000, there is no claim, action, suit, complaint, arbitration, mediation,
investigation, demand or other proceeding (each, a "Proceeding") pending or, to
the Knowledge of the Company, after due inquiry of its outside counsel Akerman,
Senterfitt & Xxxxxx, threatened against or affecting the Company or the
Business, by any Person.
(b) There are no outstanding Orders or settlements applicable to the
Company or the Business that restrict, impair or otherwise limit the conduct of
the Company or the Business in any material respect.
Section 3.8 Permits and Compliance with Law.
(a) The Company possesses all permits, licenses, variances, exemptions,
orders, approvals and authorizations of all Governmental Entities that are
necessary or appropriate for the lawful conduct of the Business as currently
conducted (the "Permits"), except where the failure to obtain or hold any such
Permits, on either an individual or aggregate basis, has not resulted, or is not
likely to result, in a Material Adverse Effect on the Company. Except as set
forth in Section 3.8(a) of the Disclosure Schedule, the Company and the Business
are in compliance with all applicable Permits, Orders and Laws, except for
violations which, individually or in the aggregate, have not resulted, or are
not likely to result, in a Material Adverse Effect on the Company. The Company
is in compliance in all respects with the terms and provisions of its Articles
of Incorporation and Bylaws, each as amended and/or restated to date.
18
(b) To the Knowledge of the Company, there is no existing or proposed Law
or Order, applicable or binding on the Company or any of its properties or the
Business or to which the Company or any of its properties or the Business is
subject or pertaining to any of the transactions contemplated or referred to in
any Transaction Document, which could be expected to prohibit or restrict the
conduct of the Business in any jurisdiction in which it now conducts or proposes
to conduct its business, or otherwise have a Material Adverse Effect on the
Company. The Company has received no notice of, and to the Knowledge of the
Company, no material expenditure is presently required by the Company to comply
with any existing Law or Order, applicable or binding on the Company or any of
its properties or to which the Company, any of its properties or the Business
are applicable or pertaining to the consummation by the Company and the
Stockholders of any of the transactions contemplated by the Transaction
Documents.
Section 3.9 Taxes.
(a) Except for the type of taxes set forth in Section 3.9(a) of the
Disclosure Schedule, (i) the Company has duly and timely paid all income,
franchise, excise, sales, use, withholding, employment related, real and
personal property and other taxes, customs, duties, fees, assessments and
charges of any federal, state and local taxing authority of a Governmental
Entity (each, a "Tax" and collectively, "Taxes") (whether or not shown on any
Tax return), and all interest and penalties with respect thereto, required to be
paid by the Company (whether by way of withholding or otherwise) to any taxing
authority, (ii) the Company has withheld and paid all Taxes (and all interest
and penalties with respect thereto) required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor or stockholder of the Company, or any other Person transacting business
with the Company, (iii) the Company has duly and timely filed all Tax returns,
reports, declarations, claims for refunds, informational returns and statements
and other statements, including any extensions (collectively, the "Tax
Returns"), required to have been filed by the Company in all jurisdictions in
which such Tax Returns were required to have been filed and all such Tax Returns
were correct and complete in all material respects, (iv) all deficiencies
proposed as a result of any audit have been paid or settled, (v) no claim has
ever been made by an authority in a jurisdiction where the Company does not file
a Tax Return that it is or may be subject to taxation by that jurisdiction and
(vi) there are no Liens on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) The Company is not a party to, or bound by, or otherwise in any way
obligated under, any Tax sharing or similar agreement. The Company (A) has not
been a member of an affiliated group filing a consolidated federal income Tax
Return or (B) does not have any Liability for the Taxes of any Person (other
than the Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(c) The Company has not consented to have the provisions of Section
341(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code") (or
comparable state law) apply to it, and the Company has not agreed or been
requested to make any adjustment under Section 481(c) of the Code by reason of a
change in accounting method or otherwise.
19
(d) The Company knows of no reason to expect any Governmental Entity to
assess any additional Taxes for any period for which Tax Returns have been
filed. To the Company's Knowledge, there is no dispute or Proceeding concerning
any Liability for Taxes of the Company claimed or raised by any Governmental
Entity in writing.
(e) The Company has not made or become obligated to make, nor, as a result
of the transactions contemplated herein or in the other Transaction Documents,
will it make or become obligated to make, any "excess parachute payment" as
defined in Section 280G of the Code.
(f) The Company has never filed a consent pursuant to Section 341(f) of the
Code, relating to collapsible corporations.
(g) No agreement, waiver or other document or arrangement extending or
having the effect of extending the period for assessment or collection of Taxes
has been executed or filed with the Internal Revenue Service or any other taxing
authority by or on behalf of the Company and no power of attorney with respect
to any Tax matter is currently in force.
(h) The Company has not constituted either a "distributing corporation" or
a "controlled corporation" within the meaning of Section 355(a)(1)(A) of the
Code in a distribution qualifying for tax free treatment under Section 355 of
the Code (i) in the two years prior to the date hereof or (ii) in a distribution
that could otherwise constitute part of a "plan" or "series of transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with this
Agreement.
Section 3.10 Employee Benefit Plans; ERISA; and Labor Relations.
(a) Section 3.10(a) of the Disclosure Schedule includes a list of the
material employee benefit plans, programs, policies or contracts providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits, change in control, deferred compensation
or other employee benefits (including, without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and each "multiemployer plan"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA), for which the
Company or any entity which is considered one employer with the Company under
Section 4001 of or Section 414 of the Code (an "ERISA Affiliate"), contributes,
maintains or is liable (whether contingent or otherwise) for, on behalf of, or
for the benefit of, any current employee of the Company (an "Employee") or
former employee, consultant, service provider or director of the Company (any
such plan or other arrangement, an "Employee Plan"). There is no pending or, to
the Company's Knowledge, threatened Proceeding relating to the Employee Plans.
To the Company's Knowledge, the Company has not engaged in a transaction with
respect to any Employee Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject the Company to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.
(b) The Company has made available to the Purchaser, as applicable, with
respect to each Employee Plan, true and complete copies of:
20
(i) the documents embodying and relating to such Employee Plan, including,
without limitation, the current plan documents and documents creating any trust
maintained pursuant thereto, all amendments, investment management agreements,
administrative service contracts, group annuity contracts, insurance contracts,
collective bargaining agreements, the most recent summary plan description with
each summary of material modifications thereto, if any, and employee handbooks;
(ii) annual reports, including, but not limited to, Forms 5500, 990 and
1041, for the last three (3) years for the Employee Plan and any related trust;
and
(iii) each material communication involving the Employee Plan or any
related trust to or from the Internal Revenue Service ("IRS"), Department of
Labor ("DOL"), or any other governmental authority.
(c) Neither the Company nor any ERISA Affiliate has ever maintained,
contributed to, or been liable for an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA.
(d) All contributions required to be made, if any, under the terms of any
Employee Plan with respect to all periods through the date hereof have been
timely made or have been reflected on the face of the Company's Most Recent
Balance Sheet (rather than in any notes thereto).
(e) The Company has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" ("MEWA") (within the meaning of Section
3(40) of ERISA), or (ii) a "plan maintained by more than one employer" (within
the meaning of Section 413(c) of the Code).
(f) Except as set forth in Section 3.10(f) of the Disclosure Schedule, the
Company is not liable for, and neither the Company nor the Purchaser will be
liable for, any contribution, tax, lien, penalty, cost, interest, claim, loss,
action, suit, damage, cost assessment or other similar type of liability or
expense of any ERISA Affiliate (including predecessors thereof) with regard to
any Employee Plan maintained, sponsored or contributed to by an ERISA Affiliate
(if a like definition of Employee Plan were applicable to the ERISA Affiliate in
the same manner as it applies to the Company).
(g) The Company, each Employee Plan and each Employee Plan "sponsor" or
"administrator" (within the meaning of Section 3(16) of ERISA) has complied in
all material respects with the applicable requirements of Section 4980B of the
Code and Section 601 et seq. of ERISA (such statutory provisions and
predecessors thereof are referred to herein collectively as "COBRA"). Section
3.10(g) of the Disclosure Schedule lists the name of each current or former
employee of the Company who has experienced a "Qualifying Event" (as defined in
COBRA) with respect to an Employee Plan, who is eligible for "Continuation
Coverage" (as defined in COBRA) and whose maximum period for Continuation
Coverage required by COBRA has not expired. Included in such list are: the
current address for each such individual, the date and type of each Qualifying
Event, whether the individual has already elected Continuation Coverage and, for
any individual who has not yet elected Continuation Coverage, the date on which
such individual was notified of his or her rights to elect Continuation
21
Coverage. Section 3.10(g) of the Disclosure Schedule also lists the name of each
Employee who is on a leave of absence (whether or not pursuant to the Family and
Medical Leave Act of 1993, as amended ("FMLA")) and is receiving or entitled to
receive health coverage under an Employee Plan, whether pursuant to FMLA, COBRA
or otherwise.
(h) With respect to each Employee Plan, except as otherwise set forth in
Section 3.10(h) of the Disclosure Schedule:
(i) there have been no material violations of or material failures to
comply with ERISA and the Code with respect to the filing of applicable reports,
documents, and notices with the DOL, the IRS, or any other governmental
authority, regarding the Employee Plan;
(ii) all amendments required to bring the Employee Plan into conformity
with applicable Law, if any, have been timely adopted or the applicable remedial
amendment period (as described in Section 401(b) of the Code) for such
amendments has not expired;
(iii) any bonding required, if any, with respect to the Employee Plan in
accordance with the applicable provisions of ERISA has been obtained and is in
full force and effect;
(iv) the Employee Plan complies with, and has been maintained and operated
in all material respects in accordance with, its respective terms and the terms
and the provisions of applicable law, including, without limitation, ERISA and
the Code (including rules and regulations thereunder);
(v) to the Company's Knowledge, the Employee Plan is not under audit or
investigation by the IRS or the DOL or any other governmental authority, and no
such completed audit, if any, has resulted in the imposition of any tax,
interest or penalty;
(vi) if the Employee Plan purports to provide benefits that qualify for
tax-favored treatment under Sections 79, 105, 106, 117, 120, 125, 127, 129 or
132 of the Code, the Employee Plan satisfies the requirements of said
Section(s); and
(vii) the Employee Plan may be unilaterally amended or terminated on no
more than 90 days notice.
(i) The Company is not subject to any liens or excise or other taxes under
ERISA, the Code, or other applicable law relating to any Employee Plan, except
for Permitted Liens.
(j) Except as set forth in Section 3.10(j) of the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability for any employee benefits, including, without limitation,
liability for severance pay, unemployment compensation, or termination pay, or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due any Employee.
22
(k) To the Company's Knowledge, no amounts payable under any Employee Plan
will fail to be deductible for federal income tax purposes by virtue of Section
280G of the Code.
(l) Except as set forth in Section 3.10(l) of the Disclosure Schedule, no
Employee Plan in any way provides for any benefits of any kind whatsoever (other
than under COBRA or the Federal Social Security Act) to any Employee who, at the
time the benefit is to be provided, is a former director or employee of, or
other provider of services to, the Company or an ERISA Affiliate (or a
beneficiary of any such person), or any other Employee, nor have any
representations, agreements, covenants or commitments been made to provide such
benefits.
(m) Except as set forth in Section 3.10(m) of the Disclosure Schedule, all
Persons involved in the conduct or operation of the Business are Employees of
the Company.
(n) Except as set forth in Section 3.10(n) of the Disclosure Schedule, (i)
there is no unfair labor practice, charge, grievance, stoppage or complaint or
other Proceeding pending or, to the Knowledge of the Company, threatened against
the Company before the National Labor Relations Board or any other Governmental
Entity, (ii) there is no labor strike, slowdown or stoppage pending or
threatened, against the Company, and (iii) there has not been any, and there are
no, pending collective bargaining negotiations relating to the employees of the
Company. There are no agreements with, or pending petitions for recognition of,
a labor union or association as the exclusive bargaining agent for any or all of
the employees of the Company, no such petitions have been pending within the
past two (2) years, and there has not been any general solicitation of
representation cards by any union seeking to represent the employees of the
Company as their exclusive bargaining agent at any time within the past two (2)
years. To the Knowledge of the Company, the Company is in compliance with all
Laws and Orders relating to the employees, consultants, service providers or
directors of the Company or involved in the Business.
Section 3.11 Material Contracts.
(a) Section 3.11(a) of the Disclosure Schedule sets forth a description of
each type of note, bond, mortgage, indenture, instrument, lease, license,
franchise, arrangement, contract, commitment, obligation or agreement, whether
written or oral (collectively, the "Contracts"), to which the Company is a party
or is bound or which relate to the conduct or operation of the Business
(collectively, the "Company Contracts") and which, either individually or in the
aggregate with same or similar types of Contracts, is material to the Company or
the Business taken as a whole, including without limitation any of the
following:
(i) each indenture, mortgage, note, installment obligation or agreement
relating to the borrowing of money by the Company or other indebtedness of the
Company or the Business for borrowed money or any guaranty by the Company or the
Business of any obligation for borrowed money;
(ii) each agreement that materially limits the freedom or ability of the
Company to compete in the Business or with any Person or in any geographical
area or otherwise to conduct the Business in its current manner, and each
agreement that materially limits the freedom or ability of any Person to compete
with the Company or the Business;
23
(iii) each Contract involving any agency, sales, servicing, marketing or
other similar agreement;
(iv) each Contract with distributors, dealers, manufacturer's
representatives or sales agents that is not terminable without penalty on 30 or
fewer days' notice;
(v) other than this Agreement, each Contract for the acquisition or
disposition of assets, other than in the ordinary course of business consistent
with past practice;
(vi) each Real Property Lease (as defined in Section 3.13(b) hereof) and
each Personal Property Lease (as defined in Section 3.15 hereof), capitalized or
otherwise;
(vii) each Contract representing, constituting or forming any partnership,
joint venture or other similar arrangement;
(viii) each Contract involving any licensing, franchise, permission or
alliance agreement or software or technology agreement or arrangement;
(ix) except as otherwise set forth in Section 3.11(a) of the Disclosure
Schedule, each Contract the performance of which involves the receipt or payment
of more than $ 100,000 in a consecutive twelve (12) month period;
(x) each Contract to sell or to register the sale of any capital stock,
equity interest or other securities of the Company;
(xi) each Contract with a Stockholder or any of its affiliates (other than
the Company);
(xii) each Contract for the employment of any individual on a full-time,
part-time, consulting or other basis, including without limitation any such
Contract that provides any severance or change of control benefits;
(xiii) each Contract under which any directors, officers or employees of
the Company involved in the Business have been advanced or loaned any amount by
the Company or the Business;
(xiv) each Contract that involves connectivity or the transmission of data
over data lines; and
(xv) each other Contract which is material to the Company or the Business
or under which the consequences of a default or termination could have a
Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.11(b) of the Disclosure Schedule and
to the Company's Knowledge, each Contract is in full force and effect, has not
been modified or amended and constitutes the legal, valid and binding obligation
of the Company and will continue to be so on identical terms following the
Closing Date.
24
(c) The Company is not in default under or in material breach of any
Company Contract, and to the Knowledge of the Company, no other party is in
default under or breach of any Company Contract, nor to the Company's Knowledge,
has any event or omission occurred which through the passage of time or the
giving of notice, or both, would constitute a default or breach thereunder or
permit the termination, modification or acceleration of any obligations or
result in the creation of any Liens, except for any defaults and breaches that,
individually or in the aggregate, could not result in a Material Adverse Effect
on the Company.
Section 3.12 Intellectual Property.
(a) The Company owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary or
appropriate for the operation of the Business in its current manner as reflected
in the Company's Most Recent Financial Statements and to the Knowledge of the
Company, as presently proposed to be conducted. Each item of Intellectual
Property owned or used by the Company immediately prior to the Closing Date
hereunder will be owned or available for use by the Company on identical terms
and conditions immediately subsequent to the Closing Date hereunder. To the
Company's Knowledge, the Company has taken all necessary and appropriate action
to maintain and protect each item of Intellectual Property that it owns or uses.
To the Knowledge of the Company's, no item of Intellectual Property owned or
used by the Company, the value of which is contingent upon maintenance of
confidentiality thereof, has been disclosed to any Person other than employees,
representatives and agents of the Company.
(b) Neither the Company, nor, to the Knowledge of the Company, any employee
or consultant of the Company has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the directors and officers (and employees
with responsibility for Intellectual Property matters) of the Company has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the Company, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Company.
(c) Section 3.12(c) of the Disclosure Schedule identifies each item of
Intellectual Property of the Company that consists of, is represented by or
constitutes (i) each patent or trademark registration which has been issued to
the Company with respect to any of its Intellectual Property, (ii) each pending
patent application or application for trademark registration which the Company
has made with respect to any of its Intellectual Property, and (iii) each type
of license, agreement or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property (together with any
exceptions), in each case identifying the type of item of Intellectual Property
covered thereby. Section 3.12(c) of the Disclosure Schedule also identifies each
trade name or unregistered trademark used by the Company in connection with any
of its businesses. With respect to each item of Intellectual Property of the
Company identified in Section 3.12(c) of the Disclosure Schedule:
(i) The Company possesses all right, title, and interest in and to the
item, free and clear of any Lien, license, or other restriction;
25
(ii) The item is not subject to any outstanding Order;
(iii) No Proceeding is pending or, to the Knowledge of the Company, is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the item;
(iv) the license, sublicense, agreement, or permission covering the item is
legal, valid, binding and enforceable against the Company and, to the Knowledge
of the Company, the other parties thereto, and is in full force and effect;
(v) the license, sublicense, agreement, or permission will continue to be
legal, valid, binding and enforceable against the Company and, to the Knowledge
of the Company, the other parties thereto, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby;
(vi) neither the Company nor, to the Knowledge of the Company, any other
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default by the Company or, to the Knowledge of the
Company, any other party thereto, or permit termination, modification, or
acceleration of the Company's obligations or, to the Knowledge of the Company,
any such other party's obligations, thereunder;
(vii) neither the Company nor, to the Knowledge of the Company, any other
party to the underlying item has repudiated any provision thereof;
(viii) with respect to each sublicense, to the Knowledge of the Company,
the representations and warranties set forth in subsections (i) through (iv)
above are true and correct with respect to the underlying item of Intellectual
Property;
(ix) the underlying item of Intellectual Property is not subject to any
outstanding Order;
(x) no Proceeding is pending or, to the Knowledge of the Company,
threatened which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(xi) the Company has not granted to any other Person any sublicense or
similar right with respect to such underlying item of Intellectual Property,
except to the extent authorized by the other party who owns or controls such
underlying item of Intellectual Property.
(d) Section 3.12(d) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that the Company uses
pursuant to license, sublicense, agreement, or permission, other than
"click-wrap" licenses, "shrink wrap" licenses, and publicly-available commercial
binary code end-user licenses.
(e) The Company will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of its businesses in its current
manner as reflected in the Most Recent Financial Statement (and as presently
proposed, to the Knowledge of the Company, to be conducted).
26
(f) To the Knowledge of the Company, there are no existing products,
inventions, procedures, or methods of manufacturing or processing that any
competitors or other third parties have developed which reasonably could be
expected to supersede, make obsolete or impair the use or value of any material
product or process of the Business or any material Intellectual Property of the
Company.
(g) To the Knowledge of the Company, at no time during the conception or
reduction to practice of any of the Intellectual Property owned by the Company
was any developer, inventor or other contributor to such Intellectual Property
operating under any grants from any Governmental Entity or subject to any
employment agreement, invention assignment, nondisclosure agreement or other
contractual obligation with any Person that could adversely affect the rights of
the Company in such Intellectual Property.
(h) Each item of Intellectual Property now owned or available for use by
the Company shall remain owned or available for use by the Company on terms and
conditions no less favorable to the Company following the consummation of the
transactions contemplated by the Transaction Documents.
Section 3.13 Real Property.
(a) The Company owns no real property. The Company has a good and valid
leasehold interest in all real property leased by the Company and used in the
operation of the Business (the "Real Property"). Except for Permitted Liens, and
except for Liens of the type specified in Section 3.13(a) of the Disclosure
Schedule, there are no Liens on the Company's interest in any Real Property.
(b) Section 3.13(b) of the Disclosure Schedule identifies (including the
address of) each Real Property currently leased or occupied by the Company
within the prior three (3) years pursuant to any Company Contract relating to
such lease or occupancy, including without limitation any lease or sublease
arrangement (each, a "Real Property Lease") and option to purchase. With respect
to each such Real Property Lease: (i) the lease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated by the Transaction
Documents; (ii) to the Knowledge of the Company, the lease has not been
repudiated by any party thereto, and the lease is not subject to disputes, oral
agreements, or forbearance programs; (iii) with respect to each sublease, the
representations and warranties in this Section are true and correct with respect
to the underlying lease; and (iv) the lease has not been assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered.
(c) Except as set forth on Section 3.13(c) of the Disclosure Schedule, all
of the buildings and other material tangible personal property owned or leased
by the Company are, taken as a whole, in good working condition (normal wear and
tear excepted), and are adequate and reasonably suitable for the purposes for
which they are presently being used. All such property is being operated in
substantial conformity with applicable statutes, regulations, and ordinances,
the failure of which to so conform would have a Material Adverse Effect on the
Company.
27
(d) The Company enjoys peaceful and undisturbed possession of all
facilities under the respective Real Property Leases. All Real Property leased
or subleased under any Real Property Lease are supplied with utilities and other
services necessary and appropriate for the operation and use of said facilities
in the Business. There are no parties in possession of any portion of the Real
Property other than the Company, whether as sublessees, subtenants at will or
trespassers.
(e) To the Knowledge of the Company, except as set forth on Schedule
3.13(e) of the Disclosure Schedule, the improvements located on the Real
Property described in any Real Property Lease are not the subject of any
official complaint or notice of violation of any applicable zoning ordinance or
building code, and there is no use or occupancy restriction or condemnation
proceeding pending or threatened against the Company.
Section 3.14 Environmental Matters. Except as otherwise set forth in
Section 3.14(a) of the Disclosure Schedule:
(a) To the Company's Knowledge, the operations and activities of the
Company with respect to the Business have at all times complied in all material
respects with all applicable Environmental Laws.
(b) The Real Property has not been used by the Company, or to the Company'
Knowledge, by any other person, for the generation, manufacture, refining,
treatment, storage or disposal of any Hazardous Materials in violation of
Environmental Laws.
(c) The Company has not received any written notice or order advising the
Company that it is responsible for Cleanup of any Hazardous Material on any Real
Property. The Company has no basis for believing that there is a reasonable
likelihood that any such notice or order will be issued.
(d) To the Knowledge of the Company, there are no incinerators, septic
tanks, cesspools or underground fuel storage tanks located on the Real Property,
all sewage is discharged into a public sanitary sewer system. To the Company's
Knowledge, no Hazardous Materials are or have been emitted, discharged or
released from or at the Real Property, directly or indirectly, into the soil,
groundwater or atmosphere or any body of water in violation of any Environmental
Laws.
(e) To the Company's Knowledge, neither the Company nor any present or
former owner or operator of the Real Property has been identified as a
potentially responsible party for Cleanup liability with respect to the
emission, discharge, generation or release of any Hazardous Material.
(f) No permits, licenses, or other authorizations issued pursuant to the
Environmental Laws are required for the present use or occupancy in all material
respects of the Real Property, or the present operation in all material respects
of the Business.
28
(g) The Company has never at any time been named as a defendant or a
potentially responsible party in any action or proceeding seeking Cleanup
damages, recovery or remediation as a result of the existence of or exposure to
any Hazardous Materials at or in or about any Real Property; and no person has
alleged in writing that the Company has or may have such liability. The Company
has delivered to the Purchaser true and complete copies and results of any
reports, studies, analyses, tests, monitoring data or other documents pertaining
to Hazardous Materials in, on or under the Real Property or concerning
compliance by the Company with Environmental Laws, which are in its possession
or which it caused to be performed.
Section 3.15 Leases of Personal Property. Section 3.15 of the Disclosure
Schedule sets forth a list of all types of leases pursuant to which the Company
leases, as lessor or lessee, material personal property used in operating the
Business or otherwise (each, a "Personal Property Lease"). To the Knowledge of
the Company, the Company has not received notice that the lessor of any of the
Personal Property Leases intends to cancel, suspend or terminate such Personal
Property Lease or modify any of the material terms thereof in a manner that
would adversely affect the Company or to exercise or not exercise any option
thereunder.
Section 3.16 Account Agreements.
(a) Section 3.16(a) of the Disclosure Schedule sets forth a list of the
forms of the Account Agreements and, to Company's Knowledge, Reseller
Agreements. Except for the Account Agreements and Reseller Agreements, there are
no other agreements, written or oral, express or implied, binding the Company
with respect to the Accounts, except for certain oral agreements, all of which
are on terms materially similar to those in the forms set forth on Schedule
3.16(a) of the Disclosure Schedule.
(b) With respect to the Account Agreements and Reseller Agreements, except
as set forth on Schedule 3.16(b) of the Disclosure Schedule:
(i) To the Company's Knowledge, each Account Agreement and Reseller
Agreement is the valid and binding obligation of the other contracting party,
enforceable in accordance with its terms against the other contracting party,
except as such enforceability may be limited by the Equitable Exceptions, and is
in full force and effect;
(ii) The Company has fulfilled all material obligations required to have
been performed by it prior to the Effective Date; and
(iii) To the Company's Knowledge, no other contracting party to any such
agreement is in breach thereof, except for suspended Accounts, and there are not
pending as of the date hereof any material disputes between the Company and any
other contracting party, (other than billing, service and similar disputes with
customers as may occur in the ordinary course of business which, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Business).
Section 3.17 Insurance. Section 3.17 of the Disclosure Schedule lists
insurance policies relating to the Company or the Business (the "Insurance
Policies"). With respect to each such Insurance Policy, (a) to the Company's
Knowledge, the policy is legal, valid, binding, enforceable and in full force
and effect, (b) neither the Company nor, to the Knowledge of the Company, any
29
other party thereto, is in breach or default (including with respect to the
payment of premiums or the giving of notices in a due and timely fashion), and
no event has occurred which, with notice or the lapse of time or both, would
constitute such a breach or default by the Company, or the Knowledge of the
Company, any other party thereto, or permit termination, modification, or
acceleration of the Company's obligations or, to the Knowledge of the Company,
any such other party's obligations under the policy, (c) neither the Company
nor, to the Knowledge of the Company, any other party to the policy has
repudiated any provision thereof, (d) except as set forth in Section 3.17 of the
Disclosure Schedule, since June 30, 2002, the Company has not failed to give any
notice or present any claim under the policy in due and timely fashion and (e)
no party to the policy has notified the Company of its intention to modify or
terminate any policy or significantly increase the premiums with respect thereto
or impose conditions upon the renewal of any such policy other than the payment
of premiums with respect thereto. Since June 30, 2002, the Company has been
covered by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during such period.
Section 3.18 Employees. Section 3.18 of the Disclosure Schedule sets forth,
as of June 30, 2002, the name and current (as of June 30, 2002) annual salary
payable by the Company to each Employee. Except as set forth on Section 3.18 of
the Disclosure Schedule or under any employment, consulting or other agreements
listed in Section 3.11(a) of the Disclosure Schedule, there are no contracts or
agreements obligating the Company to materially increase the compensation or
benefits presently being paid or hereafter payable to any of its Employees.
Except for severance obligations to Employees of the Company set forth in
Section 3.18 of the Disclosure Schedule or pursuant to employment agreements
listed in Section 3.11(a) of the Disclosure Schedule, there will not be due and
owing at the Closing to any of the Company's Employees, any material amount of
severance pay (whether arising out of the termination of Employees of the
Company prior to, on, or subsequent to the Closing.
Section 3.19 Immigration Matters.
(a) Current Employees. With respect to all current employees (as defined in
Section 274a.1(f) of Title 8, Code of Federal Regulations) of the Company, true
and complete copies of all Forms I-9 (Employment Eligibility Verification Forms)
completed pursuant to the Immigration Reform and Control Act of 1986, as
amended, and all regulations promulgated thereunder ("IRCA") and any and all
copies of documentation, records or other papers retained with Forms I-9
(Employment Eligibility Verification Forms), have been made available to the
Purchaser and Parent prior to the Closing. The Company has complied in all
material respects with IRCA with respect to the completion of Forms I-9 for all
employees and the reverification of the employment status of any and all
employees whose employment authorization documents indicated a limited period of
employment authorization.
(b) Former Employees. With respect to all former employees who left the
employment of the Company within three (3) years prior to Closing, the Company
has complied in all material respects with IRCA with respect to the maintenance
of Forms I-9 for at least three (3) years or for one (1) year beyond the date of
termination, whichever is later. True and complete copies of all Forms (I-9)
maintained for former employees pursuant to IRCA, and any and all copies of
documentation, records or other papers retained with Forms I-9, will be
delivered to Purchaser prior to the Closing.
30
(c) Visa Status. Section 3.19(c) of the Disclosure Schedule contains a true
and complete list of all employees of the Company working under INS
authorization in any non-immigrant visa status, including but not limited to E,
F, H, J, L, M, O, P or TN Visa Status together with a listing of each such
employee's visa status and visa expiration date. The Company maintains current
files containing all Labor Condition Applications (LCA) and related public and
non-public access documentation which it must present upon request by the U. S.
Department of Labor or the general public, including but not limited to all
documentation noted in 20 CFR ss. 655.760.
(d) Authorization to Work in U.S. The Company has only employed in respect
of the Business individuals authorized to work in the United States. Within the
twenty-four (24) months preceding the execution of this Agreement, the Company
has not received any written notice of any inspection or investigation relating
to its alleged noncompliance with or violation of IRCA, not has it been warned,
fined or otherwise penalized by reason of any failure to comply with IRCA.
Section 3.20 Bank Accounts. Section 3.20 of the Disclosure Schedule sets
forth a true, complete and correct list showing the name and location of each
bank or other institution in which the Company has any deposit account or safe
deposit box in respect to the Business, together with a listing of account
numbers and the persons authorized to draw thereon or have access thereto.
ARTICLE 4
SEVERAL REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each of the Stockholders severally and not jointly represents, warrants and
covenants to the Purchaser that the statements set forth in this Article 4 are
true, correct and complete, and will be true, correct and complete as of the
Closing (as though made then and as though the Closing Date were substituted for
the date of this Agreement), as such shall apply to such Stockholder and as such
is subject to the applicable qualifications set forth in the Disclosure
Schedule. 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.
Section 4.1 Organization and Authority of the Stockholders.
(a) If such Stockholder is an Entity it is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization.
Such Stockholder has all requisite corporate, partnership or other authority, as
applicable, to execute and deliver each Transaction Document to which it is
respectively a party, to perform its obligations under each such Transaction
Document and to consummate the transactions contemplated by each such
Transaction Document.
31
(b) The execution, delivery and performance by such Stockholder of each
Transaction Document to which it is a party has been authorized and approved by
all requisite corporate, partnership and other action on the part of such
Stockholder and no other corporate, partnership or other approval or
authorization on the part of such Stockholder is required or necessary to
authorize each such Transaction Document or the consummation of the transactions
contemplated by each such Transaction Document. Each Transaction Document, to
which it is a party, has been or in the case of any documents to be executed as
of the Closing, will be duly and validly executed and delivered by such
Stockholder and each such Transaction Document constitutes the legal, valid and
binding obligation of such Stockholder, enforceable against it in accordance
with its respective terms, except to the extent that enforceability may be
limited by the Equitable Exceptions.
Section 4.2 Ownership of Company Shares.
(a) Such Stockholder has good and valid title to its respective issued and
outstanding shares of the Company Shares listed as owned by it on Exhibit A,
free and clear of any security interests, pledges, mortgages, liens,
encumbrances, charges, Taxes, options or any other adverse claims, restrictions
or rights of any kind whatsoever ("Liens") and, at the Closing, such Stockholder
shall deliver all of the Company Shares, listed as owned by it on Exhibit A, to
the Purchaser, free and clear of any Liens.
(b) Except for this Agreement and the transactions contemplated hereby,
such Stockholder has no legal obligation, absolute or contingent, to any Person
to issue or sell any capital stock, equity interests, or other securities of the
Company or to enter into any agreement with respect thereto.
Section 4.3 Consents and Approvals; No Violations.
(a) Except for each of the filings, authorizations, consents and approvals
of the type set forth in Section 4.3(a) of the Disclosure Schedule, no filing
with or notice to, and no permit, authorization, consent or approval of, any
administrative, governmental or regulatory authority, agency, commission, court,
tribunal or other public body, whether a federal, state, local or other domestic
or foreign jurisdiction (each, a "Governmental Entity"), is necessary to be
obtained by such Stockholder for the consummation by the parties hereto of the
transactions contemplated by each Transaction Document.
(b) Neither such Stockholder's execution and delivery of any Transaction
Document, nor the consummation of the transactions contemplated by any
Transaction Document, nor compliance by such Stockholder with any of the
provisions of any Transaction Document: (i) will require any consent, approval
or waiver of, any filing by such Stockholder with, or any notice by such
Stockholder to, any Person (other than pursuant to Section 4.3(a) above), (ii)
except of the type set forth in Section 4.3(b) of the Disclosure Schedule, will
result in a violation or breach of, will constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of or result in a
termination, cancellation or acceleration) under, or will require any notice
under, any of the terms, conditions or provisions of any Contract to which such
Stockholder is a party or by which such Stockholder or any of its respective
assets may be bound, or (iv) will violate or breach any applicable Law or Order,
applicable to such Stockholder.
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Section 4.4 Brokers' and Finders' Fees. Except for a brokerage commission
payable to Xx. Xxxxx Xxxxxx, which shall be paid for the account of the Investor
Stockholders by the Stockholders' Representative out of the portion of the
Purchase Price payable to the Investor Stockholders, neither the Company nor
such Stockholder has incurred, or will incur, directly or indirectly, any
Liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Transaction Documents or any transaction
contemplated thereby which would result in any Person having a claim against the
Purchaser or the Company arising from the non-payment of any such fees,
commissions or similar charges.
Section 4.5 Options. Each Stockholder holding options to purchase any
shares of the Company's capital stock (either Common Stock or Preferred Stock)
acknowledges and agrees that all such options have been, as of the Closing Date,
cancelled and are of no further force or effect.
Section 4.6 Investment Intent.
(a) The Parent Shares to be acquired by such Investor Stockholder at the
Closing are being acquired solely for such Stockholder's own account for
investment purposes and not with a view to or in connection with any sale or
other distribution thereof, within the meaning of the Securities Act, except to
the extent that such Parent Shares may be sold under an effective registration
statement under the Securities Act and any applicable state securities law, or
in the opinion of counsel reasonably acceptable to Parent, pursuant to an
exemption under the Securities Act and any applicable state securities law.
(b) Each Investor Stockholder understands and acknowledges that all of the
Parent Shares acquired by such Stockholder are to be issued and sold to such
Stockholder without registration and in reliance upon certain exemptions under
the Securities Act, and in reliance upon certain exemptions from registration
requirements under applicable state securities laws.
(c) Each Investor Stockholder represents and warrants to Purchaser and
Parent that such Stockholder will not make any transfer or assignment of any of
the Parent Shares except in compliance with the Securities Act and any other
applicable securities laws.
(d) Each Investor Stockholder covenants and agrees that, prior to any
transfer or disposition not registered under the Securities Act of any of the
Parent Shares, or any shares received from Parent on account of such Parent
Shares pursuant to a stock dividend, stock split, or similar event, such
Stockholder will give written notice to Parent, expressing the intention to
effect such transfer or disposition and describing the proposed transfer or
disposition; provided, however, that no such notice shall be required with
respect to sales made pursuant to Rule 144 under the Securities Act and to
transfers of Parent Shares by the Stockholders' Representative to either the
Stockholders or the Parent or by any Stockholder to the Parent. Such notice
shall be accompanied by an opinion of counsel for such Stockholder, reasonably
acceptable to Parent, that the proposed transfer is exempt under the Securities
Act and applicable state securities laws.
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(e) Each Investor Stockholder understands and acknowledges that the Parent
Shares will be inscribed with the following legends, or another legend to the
same effect and agrees to the restrictions set forth therein:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities
laws of any other jurisdiction, in reliance upon exemptions from the
registration requirements of such laws. The shares represented by this
certificate may not be sold or otherwise transferred, nor will an
assignee or endorsee hereof be recognized as an owner of the shares by
the issuer unless (i) a registration statement under the Securities
Act of 1933 and other applicable securities laws with respect to the
shares and the transfer shall then be in effect, or (ii) in the
opinion of counsel reasonably satisfactory to the issuer, the shares
are transferred in a transaction which is exempt from the registration
requirements of such laws."
"The shares represented by this certificate are subject to a Stock
Restriction Agreement dated August 28, 2002, which restricts the
transfer of the shares, except in accordance with the provisions of
such agreement. A copy of such agreement may be inspected at the
principal office of Interland, Inc."
; provided, however, that the parties agree that each Investor Stockholder shall
be entitled to require the Parent to remove the second legend from the
certificates representing any of its Parent Shares which are no longer covered
by such Stock Restriction Agreement.
(f) Each Investor Stockholder understands and acknowledges that such
Stockholder is aware that no federal or state agency has made any recommendation
or endorsement of the Parent Shares or any finding or determination as to the
fairness of the investment in such Parent Shares.
(g) Each Investor Stockholder acknowledges and agrees that Parent has made
available all information concerning Parent and its business, assets,
liabilities, and rights which such Stockholder has requested in writing to
obtain, which information includes, and has not been limited to, the following:
the Articles of Incorporation and the Bylaws of Parent, Parent's Report on Form
10-K for the year ended August 31, 2001, Parent's Reports on Forms 10-Q for the
quarters ended November 30, 2001, February 28, 2002 and May 31, 2002, the
Registration Statement on Form S-3 (Reg. No. 333-96647) as filed with the SEC on
July 18, 2002 ("Form S-3"), Parent's Proxy Statement dated March 20, 2002,
copies of comment letters from the SEC dated August 12, 2002 and August 20,
2002. Each Investor Stockholder acknowledges and agrees that such Investor
Stockholder has received all information such Investor Stockholder requires in
order to make its investment decisions hereon.
(h) Each Investor Stockholder represents and warrants that such
Stockholder, either individually or together with a Purchaser Representative,
has such knowledge and experience in financial and business matters, and
particularly the business conducted by Parent, and is capable of evaluating the
risk of the investment in Parent Shares contemplated by this Agreement.
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(i) Each Investor Stockholder acknowledges that the Form S-3 is provided
for information purposes only, and that the Parent is not offering to any
Stockholder any of the shares currently included in the Form S-3.
(j) Each Stockholder understands and acknowledges that the desirability of
an investment in Parent may be influenced by the federal income tax
consequences, and by the various state and local tax consequences, arising from
such Stockholder's receipt of a portion of the Purchase Price, including the
Parent Shares. Because such tax effects depend, among other things, on the
specific facts, circumstances and intentions of each of the Stockholders, each
Stockholder represents and warrants that such Stockholder has consulted its own
tax advisors with respect to tax consequences, if he, she or it deems such
consultation necessary, and has not relied upon Parent or its representatives as
to such matters. Each Stockholder and such Stockholder's advisors have taken
into account the effects of federal, state and local tax laws on such
Stockholder's receipt of the Purchase Price, including the Parent Shares.
(k) Each Investor Stockholder represents and warrants that it is an
"accredited investor" as that term is defined in Rule 501 of Regulation D under
the Securities Act.
(l) Each of the Investor Stockholders represents and warrants that it is
organized in the State of Delaware and that its management company has its
principal place of business in the State of New York.
Section 4.7 Merger. Each Stockholder acknowledges and agrees that it has
consented to and approved the terms of the Merger upon the terms and conditions
set forth in this Agreement and the other Transaction Documents.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND PARENT
Each of the Purchaser and Parent jointly and severally represents, warrants
and covenants to the Company and to each of the Stockholders that the statements
set forth in this Article 5 are true, correct and complete, and will be true,
correct and complete as of the Closing (as though made then and as though the
Closing Date were substituted for the date of this Agreement), subject to the
applicable qualifications set forth in the disclosure schedule attached to this
Agreement (the "Purchaser Disclosure Schedule"):
Section 5.1 Due Organization. The Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Florida and has full corporate power and authority to carry on its business as
now conducted. The Parent is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Minnesota and has full corporate
power and authority to carry on its business as now conducted.
35
Section 5.2 Due Authorization. The execution, delivery and performance by
each of the Purchaser and Parent 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 Purchaser and Parent, respectively, and no other corporate or other
approval or authorization on the part of the Purchaser or Parent is required or
necessary to authorize each such Transaction Document or the consummation of the
transactions contemplated by each such Transaction Document. Each Transaction
Document, to which either is a party, has been or in the case of any documents
to be executed as of the Closing, will be duly and validly executed and
delivered by the Purchaser and the Parent and each such Transaction Document
constitutes the legal, valid and binding obligation of the Purchaser and the
Parent, enforceable against each of them in accordance with its respective
terms, except to the extent that enforceability may be limited by the Equitable
Exceptions.
Section 5.3 General. There is no fact within the Knowledge of Purchaser or
Parent (other than publicly known facts relating exclusively to political or
economic matters of general applicability) that (a) is likely to have a Material
Adverse Effect on the ability of Purchaser or Parent to comply with or perform
any covenant or obligation under this Agreement or (b) is likely to have the
effect of preventing, delaying, making illegal or otherwise interfering with any
of the transactions contemplated hereby.
Section 5.4 Consents and Approvals; No Violations.
The consummation of the transactions contemplated by the Transaction
Documents: (a) will not conflict with or violate any provision of the articles
or certificate of incorporation or by-laws of either the Purchaser or the
Parent, (b) will not require any consent, approval or waiver of, any filing by
the Purchaser or the Parent with, or any notice by the Purchaser or the Parent
to, any Person (other than as set forth in Section 5.4(a) of the Purchaser
Disclosure Schedule), (c) except of the type set forth in Section 5.4(b) of the
Purchaser Disclosure Schedule, will not result in a violation or breach of, will
not constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of or result in a termination, cancellation or
acceleration) under, or will not require any notice under, any of the terms,
conditions or provisions of any Contract to which either the Purchaser or the
Parent is a party or by which either the Purchaser or the Parent or any of their
respective assets may be bound, and (d) will not violate or breach any Law or
Order, applicable to the Purchaser or the Parent.
Section 5.5 Financial Statements.
(a) Section 5.5(a) of the Purchaser Disclosure Schedule includes copies of
the following financial statements of the Parent (the "Parent's Financial
Statements"): (i) the audited balance sheet and the audited balance sheet and
statements of income, changes in stockholders' equity and cash flow of the
Purchaser for the twelve (12) months as of and ending on August 31, 2001 and
(ii) the unaudited balance sheet and statements of income of the Purchaser for
the nine (9) months ended May 31, 2002 (the "Parent's Most Recent Balance
Sheet").
(b) Each of the Parent's Financial Statements (including the notes thereto)
are, or in the case of future deliveries will be, true, complete and correct in
all material respects, present fairly the financial condition and results of
operations of the Parent as of the dates of such statements, and have been
36
prepared on an accrual basis in accordance with GAAP (except, with respect to
any unaudited interim financial statements, the absence of notes and normal
year-end adjustments). The Parent's Financial Statements (including the notes
thereto) are or, in the case of future deliveries will be consistent with the
books of account and records of the Parent and such books and records are
correct and complete, in all material respects, and have been maintained in
accordance with GAAP.
Section 5.6 No Undisclosed Liabilities. Except for Liabilities of the type
set forth in Section 5.6 of the Purchaser Disclosure Schedule, neither the
Purchaser nor the Parent has any debt, liability or obligation of any kind (and
to the Knowledge of the Purchaser and the Parent there is no basis for any
present or future Proceeding that could reasonably be expected to give rise to
any Liabilities) except for (a) Liabilities incurred in the ordinary course of
business after May 31, 2002, and that, individually or in the aggregate, could
not have a Material Adverse Effect on the Purchaser or the Parent; (b)
Liabilities that are accrued or reserved against in the Parent's Most Recent
Balance Sheet in accordance with GAAP; (c) obligations under this Agreement or
the other Transaction Documents; and (d) obligations to perform or pay the
executory portion of any Contracts incurred in the ordinary course of business
and not required under GAAP to be reflected in the Purchaser's Financial
Statements.
Section 5.7 Absence of Certain Changes. (a) Except as provided in Section
5.7 of the Purchaser Disclosure Schedule and except as contemplated hereby,
since May 31, 2002:
(i) there have not been any events that, individually or in the aggregate,
have had a Material Adverse Effect on the Purchaser or the Parent and there have
not been any events that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Purchaser or the Parent; and
(ii) neither the Purchaser nor the Parent has made any material change in
accounting methods or practices or revaluation; and
(iii) neither the Purchaser nor the Parent has incurred any material
Liabilities, whether due or to become due, except in the ordinary course of
business consistent with past practices, or failed to satisfy, or delayed or
postponed payment of, any of its Liabilities as the same becomes due and owing,
except where such failure or delay occurred in the ordinary course of business
consistent with past practices; and
(iv) neither the Purchaser nor the Parent has agreed or committed to do any
of the foregoing.
Section 5.8 Permits and Compliance with Law.
(a) The Purchaser possesses all permits, licenses, variances, exemptions,
orders, approvals and authorizations of all Governmental Entities that are
necessary or appropriate for the lawful conduct of the Business as currently
conducted (the "Purchaser Permits"), except where the failure to obtain or hold
any such Purchaser Permits, on either an individual or aggregate basis, has not
resulted, or is not likely to result, in a Material Adverse Effect on the
Purchaser or the Surviving Corporation. Except as set forth in Section 5.8(a) of
the Purchaser Disclosure Schedule, the Purchaser is in compliance with all
37
applicable Purchaser Permits, Orders and Laws, except for violations which,
individually or in the aggregate, have not resulted, or are not likely to
result, in a Material Adverse Effect on the Purchaser or the Surviving
Corporation. Each of the Purchaser and the Parent is in compliance in all
respects with the terms and provisions of its Articles of Incorporation and
Bylaws, each as amended and/or restated to date.
(b) To the Knowledge of the Purchaser and the Parent, there is no existing
or proposed Law or Order, applicable or binding on either the Purchaser or the
Parent or any of their properties or to which either the Purchaser, the Parent
or any of their properties is subject or pertaining to any of the transactions
contemplated or referred to in any Transaction Document, which could be expected
to prohibit or restrict the conduct of its business in any jurisdiction in which
it now conducts or proposes to conduct its business, or otherwise have a
Material Adverse Effect on either the Purchaser, the Surviving Corporation or
the Parent. To the Knowledge of the Purchaser and the Parent, no material
expenditure is presently required by either the Purchaser or the Parent to
comply with any existing Law or Order, applicable or binding on either the
Purchaser or the Parent or any of their properties or to which either the
Purchaser or the Parent, any of their properties or their businesses are
applicable or pertaining to the consummation by the Purchaser or the Parent of
any of the transactions contemplated by the Transaction Documents.
Section 5.9 Taxes.
(a) Except for the type of taxes set forth in Section 5.9(a) of the
Purchaser Disclosure Schedule, to the Knowledge of the Purchaser and Parent, (i)
each of the Purchaser and Parent has duly and timely paid all Taxes (whether or
not shown on any Tax return), and all interest and penalties with respect
thereto, required to be paid by the Purchaser and the Parent (whether by way of
withholding or otherwise) to any taxing authority, (ii) each of the Purchaser
and Parent has withheld and paid all Taxes (and all interest and penalties with
respect thereto) required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor or
stockholder of the Purchaser and Parent, or any other Person transacting
business with the Purchaser and Parent, (iii) each of the Purchaser and Parent
has duly and timely filed all Tax Returns, required to have been filed by the
Purchaser and Parent and all such Tax Returns were correct and complete in all
material respects, (iv) all deficiencies proposed as a result of any audit have
been paid or settled, (v) no claim has ever been made by an authority in a
jurisdiction where the Purchaser or the Parent does not file a Tax Return that
either is or may be subject to taxation by that jurisdiction and (vi) there are
no Liens on any of the assets of either the Purchaser or the Parent that arose
in connection with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth in Section 5.9(b) of the Purchaser Disclosure
Schedule, neither the Purchaser nor the Parent is a party to, or bound by, or
otherwise in any way obligated under, any Tax sharing or similar agreement.
Neither the Purchaser nor the Parent (A) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return, other than the affiliated
group of which the common parent is the Parent or (B) has any Liability for the
Taxes of any Person (other than the Purchaser, Parent, or other members of the
affiliated group the common parent of which is the Parent, as applicable) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
38
(c) Except as set forth on Section 5.9(c) of the Purchaser Disclosure
Schedule, the Parent knows of no reason to expect any Governmental Entity to
assess any additional Taxes for any period which Tax Returns have been filed. To
the Parent's Knowledge, there is no dispute or Proceeding concerning any
Liability for Taxes of the Parent claimed or raised by any Governmental Entity
in writing.
(d) No agreement, waiver or other document or arrangement extending or
having the effect of extending the period for assessment or collection of Taxes
has been executed or filed with the IRS or any other taxing authority by or on
behalf of the Parent and no power of attorney with respect to any Tax matter is
currently in force.
(e) The Parent has not constituted either a "distributing corporation" or a
"controlled corporation" within the meaning of Section 355(a)(1)(A) of the Code
in a distribution qualifying for tax free treatment under Section 355 of the
Code (i) in the two years prior to the date hereof or (ii) in a distribution
that could otherwise constitute a "plan" or "series of transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with this Agreement.
Section 5.10 Parent Shares. The issuance and delivery by Parent of the
Parent Shares have been duly and validly authorized by all necessary corporate
action and, when issued in accordance with the terms and provisions of this
Agreement, the Parent Shares will (a) be issued as set forth in Section 2.7, (b)
be duly authorized, fully paid and non-assessable, (c) not be subject to any
preemptive or other statutory rights of stockholders and (d) be issued pursuant
to an exemption from the registration requirements of the Securities Act, in
compliance with all United States federal and state securities Laws.
Section 5.11 SEC Filings; S-3 Eligibility. (a) All reports and filings
required of the Parent by the Securities and Exchange Commission, whether
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934,
which have become due prior to the date of this Agreement, have been filed on a
timely basis, are complete in all material respects and do not contain any
materially misleading or untrue statements or omit to state a material fact or
anything otherwise necessary to prevent such report or filing from being
materially misleading.
(b) Parent represents and warrants that it is eligible to file a Form S-3
Registration Statement in accordance with the Securities Act of 1933, as amended
(the "Securities Act"), except that the SEC will not declare effective any such
Form S-3 until the Parent (1) resolves to the satisfaction of the SEC certain
pending SEC comments pertaining to the Parent's Annual Report on Form 10-K for
the year ended August 31, 2001 (a copy of such comments having been provided to
the Company and the Stockholders) and (2) files with the SEC either: (i) the
required pro forma and historical information pertaining to the acquisition of
Interland-Georgia in 2001, or (ii) files its Annual Report on Form 10-K for the
year ended August 31, 2002 with financial statements which include a full year
of combined operations with Interland-Georgia. The Parent knows of no reason why
it will not be able to resolve to the satisfaction of the SEC the comments
referenced in clause (1) above or why it will not be able to file the pro forma
financial statements referenced in clause (2)(i) within a reasonable period of
time following the date hereof.
39
Section 5.12 Experience. Parent has sufficient experience in the Business
as well as technical skills, financing and personnel necessary to service the
Accounts in accordance with the terms of the Account Agreements existing as of
the Closing Date.
Section 5.13 Brokers' and Finders' Fees. Neither the Purchaser nor the
Parent has incurred, or will incur, directly or indirectly, any Liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Transaction Documents or any transaction contemplated
thereby which would result in any Person having a claim against any Stockholder
or the Company arising from the non-payment of any such fees, commissions or
similar charges.
ARTICLE 6
COVENANTS
Section 6.1 Operation of the Business Following the Closing. The Parent
agrees that until completion of the Calculation Period, it shall cause the
Surviving Corporation to conduct the Business in accordance with customary
industry standards, that it shall provide (or cause the Surviving Corporation to
provide, as the case may be) service to each of the Account Owners on a basis
which is comparable to that which the Company previously provided to its
customers with Accounts substantially similar to the Accounts of such Account
Owner (and using the Company's servers and computer software, or comparable
servers and software) and that it shall use commercially reasonable efforts to
preserve intact (or cause the Surviving Corporation to preserve intact, as the
case may be) the Company's relationship with the Account Owners. Without
limiting the generality of the foregoing, during such period the Parent shall
cause the Surviving Corporation to (a) service the Accounts from and after the
Closing Date in material compliance with the service level agreements and other
terms and conditions applicable to the Account Agreements from time to time, (b)
maintain the Accounts on terms reasonably similar to the Account Agreement terms
as in effect on the Closing Date and not increase the fees charged or reduce the
level of service provided thereunder, (c) use commercially reasonable efforts to
retain the Accounts at their current level of monthly revenue, (d) for purposes
of computing Post-Closing Annualized Revenue, not make any change in accounting
practices or procedures from those employed by the Company prior to the Closing,
including, without limitation with respect to revenue recognition, (e) not sell,
assign or otherwise transfer any of the Accounts (including a transfer of the
Accounts either physically or electronically from their current location), (f)
use commercially reasonable efforts to ensure that the employees of the Company
as of the date hereof (other than the employees listed in Section 6.1 of the
Purchaser Disclosure Schedule or employees terminated with the consent of the
Stockholders' Representative and Xx. Xxxx Xxxxxxx, which consent shall not be
unreasonably withheld) continue to remain employed by the Surviving Corporation
in a comparable position, (g) use commercially reasonable efforts to maximize
the revenue of the Surviving Corporation, including by continuing marketing and
sales efforts in accordance with the past practices of the Company and through
the continued use of the telephone number, fax number, email addresses and
website of the Company in use as of the Closing Date (collectively, the "Company
Contact Information"); (h) classify all new customers that originate after the
Closing Date who have contacted the Parent, Surviving Corporation or any
Affiliate of either thereof, by use of the Company Contact Information or who
have contacted Persons employed by the Surviving Corporation as of the Effective
Date as customers of the Surviving Corporation and not of the Parent or any
Affiliate of the Parent of Surviving Corporation, (i) maintain both the separate
40
corporate existence of the Surviving Corporation and its books and records so as
to permit the separate accounting of its revenues and (j) take such steps as
Parent generally takes with respect to its other comparable accounts (which are
generally in accordance with industry standards) to prevent a dilution in the
value or number of Accounts. Notwithstanding anything in this Agreement to the
contrary, the Surviving Corporation shall be entitled to take such actions with
respect to the Accounts that are not paid within sixty (60) days of the date due
or where the Account Owners are otherwise in breach of their Account Agreements,
including suspension or termination of service, as the Parent generally takes
with respect to its other comparable accounts.
Section 6.2 Notice of Developments. Each party will give prompt written
notice to the other party of any material development affecting the transferred
assets, liabilities, financial condition, operations, contracts (including,
without limitation, the Account Owner contracts), or results of operations of
the Business.
Section 6.3 Access. Following the Closing, the Surviving Corporation will
provide the Stockholders' Representative with reasonable access on advance
notice and on a reasonable basis during regular business hours to the personnel,
officers, agents, employees, assets, properties, titles, contracts (including,
without limitation, Account Owner contracts), books, records, files and
documents of or pertaining to the Business, but only to the extent such are
reasonably necessary in order for the Stockholders' Representative to perform
its obligations and maintain its rights under this Agreement. From and after the
Closing, all of the files, lists and records of the Surviving Corporation which
are reasonably required by the Stockholders for the preparation of tax returns,
audits and the like, the determination of the final Purchase Price or the
resolution of any dispute between the parties hereto or with any third party,
shall, on reasonable notice, be made available by the Parent and Surviving
Corporation to the Stockholders' Representative during normal business hours,
for examination and duplication at the Surviving Corporation's offices, for a
period of four (4) years from and after the Closing Date. From and after the
expiration of the period provided in the preceding sentence, the Surviving
Corporation shall have the right to destroy any of such files, lists or records;
provided, however, if the Surviving Corporation wishes to destroy any of such
files, lists or records at any time after the expiration of four years after the
Closing Date, it shall first comply with the following provisions of this
subsection. At least thirty (30) days prior to destroying any of said files,
lists and records, the Surviving Corporation shall give notice of its intention
to do so to Xxxxxxxxxxxx Xxxx & Xxxxxxxxx and counsel to the Company (at the
addresses set forth in Section 11.1(a)). If such counsel shall notify the
Surviving Corporation that the Stockholders' Representative wishes to retain any
of the files, lists or records which the Surviving Corporation intends to
destroy, the Surviving Corporation shall (at the expense of the Stockholders)
deliver such files, lists or records to a location designated by such counsel in
said notification.
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Section 6.4 Audit Rights. Parent and Purchaser agree that, following the
Closing, the Surviving Corporation will provide to the Stockholders'
Representative, as promptly as practicable, any additional information
reasonably requested by the Stockholders' Representative to enable the
Stockholders' Representative to ensure an accurate accounting of the
Post-Closing Annualized Revenue. In addition, the Stockholders' Representative
shall have the right, on not less than three (3) business days' written notice
and during normal business hours, to cause Neutral Auditors to audit the
Surviving Corporation's records to ensure an accurate accounting of the
Post-Closing Annualized Revenue and the computation of the Second Payment. The
cost of such audit will be split between the Surviving Corporation and the
Stockholders. If such audit is conducted the findings of such Neutral Auditors
shall be conclusive, final and binding and each of the parties shall make
appropriate payment in accordance with such findings.
Section 6.5 Confidentiality. Except as otherwise provided in this Agreement
or as required by law or court order, each of the Company, the Stockholders, the
Purchaser and the Parent agree that all information communicated to one by the
other or the other's Affiliates, whether before or after the Closing Date, will
be received in strict confidence, will be used only for purposes of this
Agreement and will not be disclosed by the recipient party, its agents,
subcontractors or employees without the prior written consent of the other
party. Each party agrees to take all reasonable precautions to prevent the
disclosure to outside parties of such information, including, without
limitation, the terms of this Agreement, except as required by legal, accounting
or regulatory requirements. The provisions of this Section shall survive the
expiration or termination of this Agreement for any reason.
Section 6.6 Registration. Parent covenants and agrees with the Investor
Stockholders that no later than 25 days following the Closing and subject to the
terms and provisions of the Registration Rights Agreement, it will file to
register all the Parent Shares for sale from time to time under the Securities
Act, on form S-3 (if available, or on such other form as shall permit sales
thereunder from, time to time) (the "Registration Statement"), and register,
qualify or exempt the Parent Shares under the state securities laws of such
jurisdictions as any Investor Stockholder may reasonably request, and that it
will diligently pursue registration thereof, including by resolving the SEC
comments referenced in Section 5.11(b)(1) and filing the financial statements
referenced in Section 5.11(b)(2) and cause such Registration Statement to become
effective as promptly as possible and remain in effect until the second
anniversary of the Closing Date. The plan of distribution set forth in such
Registration Statement shall among other things, provide that the Parent Shares
offered thereunder may be offered for sale from time to time by the Investor
Stockholders or their respective pledgees, donees, transferees or other
successors in interest in the open market, on the NASDAQ National Market, in the
over-the-counter market, in privately negotiated transactions, hedging
transactions, or a combination of such methods, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. As used herein the term "Registration Statement Effective
Date" shall mean the first trading day following the day on which such
Registration Statement becomes effective and available for use for sales of
Parent Shares thereunder, provided, however, that for purposes of Sections
2.7(c)(iii)(A) and (B), the Registration Statement Effective Date shall in no
event be deemed to be later than one (1) year from the Closing Date.
42
Section 6.7 Stock Restriction Agreement. Each of the Investor Stockholders
agrees that it will enter into a Stock Restriction Agreement substantially in
the form of Exhibit E attached hereto (the "Stock Restriction Agreement").
Section 6.8 SEC Filings. Parent covenants and agrees with the Investor
Stockholders that from and after the Closing Date, until such time as all of the
Parent Shares have been sold by the Stockholders pursuant to the Registration
Statement referenced in Section 6.6 above, the Parent shall make all such
filings, including, but not limited to, any required amendments or supplements
to the Registration Statement, with the Securities and Exchange Commission as
may be required to be filed under the Securities Exchange Act of 1934, as
amended, in order to ensure that the registration statement referenced in
Section 6.6 above remains in full force and effect for the period described in
Section 6.6.
Section 6.9 Post-Closing Transition Services. Each of Messrs. Xxxx Xxxxxxx,
Xxxxxxx Xxxxxxx, Xxxx Xxxxxxxx and Xxxx Xxxxxxxx agrees to remain in the employ
of the Surviving Corporation for at least ninety (90) days after the Closing at
the same compensation (including scheduled raises in pay) and with benefits
comparable (but not necessarily with the same title or job responsibilities, but
not given menial or demeaning positions) to those provided for under their
existing employment agreements or arrangements set forth on Section 3.11 of the
Disclosure Schedule and to assist in the transition of the Business to the
control to the Parent and to maximize the revenues of the Business during this
post-Closing period. The Surviving Corporation and Parent acknowledge and agree
that the Company has terminated the employment of such Xxxx Xxxxxxx, Xxxxxxx
Xxxxxxx and Xxxx Xxxxxxxx without cause effective November 30, 2002, and that
such employees shall be entitled to receive 12 months' base pay as severance
(without deduction for amounts paid to such employees during the 90 day period,
and free and clear of any and all claims, offsets and counterclaims, other than
those made under such employee's employment agreements), commencing November 30,
2002, it being understood and agreed that such severance payments shall be made
by and be the sole responsibility of Parent and the Surviving Corporation.
ARTICLE 7
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival Periods. All representations and warranties of the
parties contained in any Transaction Document, the Disclosure Schedule, or any
certificate delivered in connection herewith shall survive the Closing until
twelve (12) months from the Closing Date; provided, however, that the
representations and warranties set forth in Sections 3.9, 3.10 and 3.14, Article
4 and Sections 5.2, 5.5, 5.8, 5.9, 5.10, 5.11 and 5.12 hereof shall survive
until the expiration of the applicable statutes of limitation. The covenants and
agreements of the parties hereto shall survive the Closing in accordance with
their terms, until the expiration of the applicable statute of limitations.
Section 7.2 Indemnification by the Purchaser and Parent. The Surviving
Corporation and Parent shall jointly and severally indemnify and hold harmless
the Stockholders, the Stockholders' Representative, in its capacity as such, and
their shareholders, directors, officers, employees and subsidiaries (the
"Stockholder Indemnified Parties") from and against, and agree promptly to
defend each of the Stockholder Indemnified Parties from and reimburse each of
43
the Stockholder Indemnified Parties for, any and all losses, damages, costs,
expenses, Liabilities, obligations and claims of any kind (including reasonable
attorney fees and other legal costs and expenses) (collectively, a "Stockholder
Loss") that any of the Stockholder Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(a) any breach or inaccuracy of any of the representations and warranties
made by the Purchaser or the Parent in any Transaction Document, or in any
instrument, certificate or affidavit delivered by the Purchaser or the Parent at
the Closing in accordance with the provisions hereof;
(b) any failure by the Purchaser, the Parent or the Surviving Corporation
to carry out, perform, satisfy and discharge any of its respective covenants,
agreements, undertakings, Liabilities or obligations under any Transaction
Document or under any of the other documents delivered by the Purchaser or
Parent in connection with the Transaction Documents;
(c) any Proceeding arising out of, or in any way related to, any of the
matters referred to in clauses (a) or (b) above; and
(d) any Proceeding asserted by a Person against any of the Stockholders or
the Surviving Corporation arising out of, or in any way related to, the
operation of the Surviving Corporation after the Closing, other than any such
Proceeding arising out of, as a result of, or in connection with any breach by
the Stockholders of their representations, warranties or covenants in any
Transaction Documents.
Section 7.3 Several Indemnification by the Stockholders. Each of the
Stockholders, severally, shall indemnify and hold the Purchaser, the Parent and
their respective shareholders, directors, officers, employees and subsidiaries
(including the Surviving Corporation after the Closing) (collectively, the
"Purchaser Indemnified Parties") harmless from and against, and agrees to defend
promptly each of the Purchaser Indemnified Parties from and reimburse each of
the Purchaser Indemnified Parties for, any and all losses, damages, costs,
expenses, Liabilities, obligations and claims of any kind (including reasonable
attorneys' fees and other legal costs and expenses) (collectively, a "Purchaser
Loss") that any of the Purchaser Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(a) any breach or inaccuracy of any of the representations and warranties
contained in Article 4 hereof, as such shall apply to such Stockholder;
(b) any failure by such Stockholder to carry out, perform, satisfy and
discharge any of its respective covenants, agreements, undertakings, Liabilities
or obligations under any Transaction Documents or under any of the other
documents delivered by such Stockholder in connection with the Transaction
Documents (including those set forth in Section 6.9 above); and
(c) any Proceeding arising out of, or in any way related to, any of the
matters referred to in this Section 7.3.
Section 7.4 Joint Indemnification by the Stockholders. The Stockholders,
jointly, shall indemnify and hold the Purchaser Indemnified Parties harmless
from and against, and agree to defend promptly each of the Purchaser Indemnified
Parties from and reimburse each of the Purchaser Indemnified Parties for, any
44
and all Purchaser Losses that any of the Purchaser Indemnified Parties may at
any time suffer or incur, or become subject to, as a result of or in connection
with:
(a) any breach or inaccuracy of any of the representations and warranties
made by the Company in Article 3 hereof;
(b) any failure by the Stockholders to carry out, perform, satisfy and
discharge any of their joint covenants, agreements, undertakings, Liabilities or
obligations under any Transaction Documents or under any of the other documents
delivered by the Stockholders in connection with the Transaction Documents
(other than those set forth in Section 6.9 above);
(c) any Proceeding arising out of, or in any way related to, any of the
matters referred to in this Section 7.4; and
(d) any proceeding arising from a claim of any Stockholder that it did not
receive a proper distribution of its pro rata portion of the Purchase Price from
the Stockholders' Representative pursuant to Section 2.7 and Schedule 2.7 of
this Agreement.
Section 7.5 Limits on Indemnification. Notwithstanding the foregoing, the
liability of the Purchaser, the Parent and the Surviving Corporation, on the one
hand, or the Stockholders on the other hand, under this Agreement (including
Sections 7.2, 7.3 and 7.4) shall be subject to the following limitations:
(a) Surviving Corporation's, Purchaser's and Parent's Liability. The
liability of the Purchaser, the Parent and the Surviving Corporation pursuant to
Section 7.2 is limited as follows:
(i) no such claim for indemnity will be effective unless Stockholders'
Representative provides the Surviving Corporation and Parent written notice
prior to the expiration of the applicable survival period (as set forth in
Section 7.1) of the claim, which notice shall include a statement of the basis
of the claim for indemnification, including a summary of the facts or
circumstances that form the basis for the claim and a good faith estimate of the
amount of Stockholder Losses which have occurred; and
(ii) the maximum aggregate liability of the Surviving Corporation and the
Parent with respect to claims for indemnity pursuant to Section 7.2(a) shall be
an amount equal to the maximum liability of the Stockholders under this
Agreement, which, in the case of the Investor Stockholders shall be as computed
under Section 7.5(c)(vii); and
(iii) the Surviving Corporation and the Parent shall not have any
indemnification obligation under Section 7.2(a) (or Section 7.2(c) in respect of
claims under Section 7.2(a)) until the Stockholder Losses of the Stockholder
Indemnified Persons as a group equal or exceed $250,000, in which case the
Surviving Corporation's and the Parent's obligations under Section 7.2 (a) (or
Section 7.2(c) in respect of claims under Section 7.2(a)) shall include the
entire amount of Stockholder Losses in excess of such amount (as limited by
clause (ii) above).
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(b) Stockholders' Liability for Several Obligations. The liability of the
Stockholders for the breach of representations or warranties under Article 4 or
pursuant to Section 6.9 or Section 7.3 is limited as follows:
(i) no such claim for indemnity will be effective unless the Surviving
Corporation or the Parent provides the Stockholders' Representative and the
Stockholder(s) against which such claim is being made with written notice prior
to the expiration of the applicable survival period (as set forth in Section
7.1) of the claim, which notice shall include a statement of the basis of the
claim for indemnification, including a summary of the facts or circumstances
that form the basis for the claim and a good faith estimate of the amount of
Purchaser Losses which have occurred; and (ii) each Stockholder shall not have
any indemnification obligation until the Purchaser Losses of the Purchaser's
Indemnified Persons as a group attributable to all claims against such
Stockholder under Section 7.3 equal or exceed $25,000, in which case such
Stockholder's obligations under Section 7.3 shall include the entire amount of
Purchaser Losses in excess of such amount provided that the maximum aggregate
liability of any such Stockholder with respect to such claims and any claims
payable by such Stockholder pursuant to Section 7.5(c) below, is an amount equal
to 100% of the Purchase Price (as adjusted) actually received by such
Stockholder (less any Sale Adjustments of an Investor Stockholder); which such
claims may be satisfied out of the Other Stockholders' Escrow Deposit and the
Parent Shares held in escrow pursuant to the Escrow Agreement, provided,
however, that any such claims against the Parent Shares shall not be satisfied
until all claims under clause (c) below or otherwise as to which such
Stockholder has joint and several liability hereunder (including such
Stockholder's portion of any amounts payable by or for the account of the
Stockholders hereunder) have first been satisfied out of such escrowed Other
Stockholders' Escrow Deposit and the Parent Shares and that any such claims
shall only be satisfied out of the Parent Shares allocable to the Stockholder(s)
against whom any such claims have been made. In addition, such claims may be
satisfied by any such Stockholders either with cash or by the return of Parent
Shares to the Parent, which shares shall be valued as provided in Section
7.5(c)(vii) below.
(c) Stockholders' Liability for Joint Obligations. The liability of the
Stockholders for any matter arising under this Agreement (other than under
Article 4 or Section 6.9 or Section 7.3) is limited as follows:
(i) no such claim for indemnity will be effective unless the Surviving
Corporation provides Stockholders' Representative written notice prior to the
expiration of the applicable survival period (as set forth in Section 7.1) of
the claim, which notice shall include a statement of the basis of the claim for
indemnification, including a summary of the facts or circumstances that form the
basis for the claim and a good faith estimate of the amount of Purchaser Losses
which have occurred;
(ii) the maximum aggregate liability of any Stockholder with respect to
such claims and any claims payable by such Stockholder pursuant to Section
7.5(b) above, is an amount equal to 100% of the Purchase Price (as adjusted)
actually received by such Stockholder (less any Sale Adjustments of an Investor
Stockholder); provided, however, that all such claims must first be satisfied
solely out of the Other Stockholders' Escrow Deposit and the Parent Shares held
in escrow pursuant to the Escrow Agreement until the number of shares and amount
of cash held pursuant thereto is reduced to zero, after which the Surviving
Corporation and the Parent may proceed against the Stockholders on an individual
basis, provided further, however, that the Surviving Corporation and the Parent
46
shall use commercially reasonable efforts to satisfy any such claims from, and
proceed against, all of the Stockholders on a pro rata basis in accordance with
the provisions of clause (iv) below. Any such claims may be satisfied by the
Investor Stockholders either with cash or by the return of Parent Shares to the
Parent, which shares shall be valued as provided in the Escrow Agreement with
respect to the payment of claims;
(iii) the Stockholders shall not have any indemnification obligation until
the Purchaser Losses of the Purchaser's Indemnified Persons as a group
attributable to all claims under Section 7.4 equal or exceed $250,000, in which
case the Stockholders' obligations under Section 7.4 shall include the entire
amount of Purchaser Losses in excess of such amount (as limited by clause (ii)
above);
(iv) if the indemnification or other claims made by the Purchaser
Indemnified Parties pursuant to Section 7.4 or otherwise (excluding under
Article 4, Section 6.9 or Section 7.3) exceed the value of the Parent Shares and
cash held in escrow, each Stockholder agrees to contribute toward payment of
such additional claims in the ratio set forth in item 2 of Schedule 2.7 until,
after giving effect thereto, the Excess Portion is reduced to $0, and thereafter
in the ratio set forth in item 1 of Schedule 2.7. If any Stockholder pays more
than its pro rata share of any claim (measured in accordance with the foregoing
and the provision of the clause (v) below) then it shall be entitled to
contribution from the other Stockholders as set forth herein, so that each
Stockholder, after all such contribution claims are considered and paid, will
bear only its proper share of such indemnification obligations. All such
contributions shall be deemed Purchase Price adjustments and shall be paid
within 20 days of demand, in cash to the Stockholder entitled to receive the
same;
(v) any amounts paid to a Purchaser Indemnified Person by or on behalf of a
Stockholder in respect of any indemnification or other claim made hereunder
shall be deemed a repayment, reduction of or adjustment in respect of the
Purchase Price hereunder, including for purposes of computing the allocation of
the Purchase Price among the Stockholders set forth in Schedule 2.7. Such
amounts paid shall first be considered repayments of (and reductions in respect
of) the Excess Portion of the Purchase Price, until such Excess Portion is
reduced to $0, and then shall be deemed repayments of (and reductions in respect
of) the Base Portion of the Purchase Price;
(vi) the amount of any Purchaser Losses suffered by a Purchaser Indemnified
Party under this Agreement (and the amount for which such Purchaser Indemnified
Party may seek indemnification pursuant to this Article 7 on account of such
Purchaser Losses) shall be reduced by the amount, if any, of any insurance
recovery received by the Purchaser Indemnified Party or its Affiliates from any
insurance policy maintained by such Purchaser Indemnified Party or its
Affiliates except for new insurance policies obtained after the Closing Date to
the extent that such expand coverage beyond the extent of the coverage provided
under insurance policies in effect immediately prior to or immediately following
the Closing Date. In such connection, a Purchaser Indemnified Party shall use
its commercially reasonable efforts to pursue and shall fully cooperate with the
Indemnifying Party in pursuing by all appropriate action, all amounts which may
be available from third Persons; and
47
(vii) any portion of a Purchaser Loss to be satisfied by the Investor
Stockholders other than out of funds or Parent Shares held in escrow will be
satisfied by the Investor Stockholders as follows:
(A) first, to the extent an Investor Stockholder holds Parent Shares
subject to a restriction on transfer pursuant to a Stock Restriction Agreement,
such Investor Stockholder shall satisfy a claim by returning such Parent Shares
to the Parent, which shares shall be valued at the Closing Date Valuation.
(B) second, to the extent an Investor Stockholder does not hold Parent
Shares which are subject to a restriction on transfer pursuant to a Stock
Restriction Agreement, such Investor Stockholder shall satisfy a claim by making
a cash payment or by returning Parent Shares to the Parent, which shares shall
be valued at the average closing price as reported by NASDAQ for the five (5)
trading days ending on the date of the notice referenced in clause (i) above.
Section 7.6 Notification of Claims; Election to Defend.
(a) The party entitled to be indemnified under this Article 7 (the
"Indemnified Party") shall promptly give notice to the indemnifying party after
obtaining actual Knowledge of any claim as to which recovery may be sought
hereunder. If such indemnity arises from a third-party claim, the Indemnified
Party shall permit the indemnifying party to assume the defense of that claim
and any litigation resulting therefrom using counsel reasonably acceptable to
the Indemnified Party. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by the Indemnified Party's
failure to give or delay in giving such notice unless, and then only to the
extent that, the indemnifying party's rights and remedies shall have been
prejudiced by such failure or delay. If the indemnifying party elects to assume
the defense of any such claim, the Indemnified Party shall have no further
indemnification right hereunder with respect to claims consisting of its legal
fees and expenses, so long as the indemnifying party is continuing to defend
such claim in good faith. With respect to any third-party claim, upon written
request by the indemnifying party, the Indemnified Party shall make available to
the indemnifying party all relevant information in the Indemnified Party's
possession that may be material to that claim. If the indemnifying party shall
not undertake the defense of that claim, as provided herein, then the
Indemnified Party's obligation to furnish such information shall cease.
(b) If the indemnifying party assumes the defense of a third-party claim or
litigation resulting therefrom, the indemnifying party's obligations hereunder
shall include taking all steps reasonably necessary in the defense or settlement
of such claim or litigation and holding the Indemnified Party harmless from and
against any and all damages caused by or arising out of any settlement approved
by the indemnifying party or any judgment in connection with such claim or
litigation. The indemnifying party shall not, in the defense of such claim or
any litigation resulting therefrom, consent to entry of any judgment (other than
a judgment of dismissal on the merits without costs) except with the Indemnified
Party's prior written consent or enter into any settlement (except with the
Indemnified Party's prior written consent) which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
litigation. If the Indemnified Party rejects a settlement or compromise proposed
48
by the indemnifying party, where the claim or cause of action can be resolved
solely by the payment of monetary damages, the indemnifying party shall have no
further obligation to defend the claim and the indemnifying party's
indemnification liability with respect to such claim shall be no more than the
highest bona fide offer by the indemnifying party to settle or compromise any
claim where the claimant states in writing that such offer of settlement or
compromise is unconditionally acceptable to it, but the settlement or compromise
is prevented from occurring by any action or withholding of consent or approval
by the Indemnified Party. The Indemnified Party shall be entitled to settle any
third party claim or litigation provided (i) it first sends written notice to
the indemnifying party of its desire to settle such claim or litigation and the
reasons it believes such settlement is in the best interests of the parties
hereto (the "Settlement Notice") and (ii) the indemnifying party rejects such
settlement proposal. Thereafter Indemnified Party shall be permitted to settle
such claim or litigation and proceed against the indemnifying party with a claim
for indemnification in accordance with the terms of this Agreement up to but not
exceeding the amount paid in such settlement, provided, however, that in no
event shall such settlement in any way be determinative with respect to or
otherwise deemed evidence of any kind in connection with such claim for
indemnification.
(c) If the indemnifying party shall not assume the defense of any
third-party claim or litigation resulting therefrom after receipt of notice from
the Indemnified Party, the Indemnified Party may defend against such claim or
litigation in such manner as it deems appropriate; provided, however, that the
Indemnified Party may not settle any such claim or litigation for an amount in
excess of $50,000 without the prior written consent of the indemnifying party,
unless the indemnified party first delivers a Settlement Notice and otherwise
complies with the last two sentences of Section 7.6(b) above. In the event the
indemnifying party does not consent to any such settlement, it shall thereafter
be required to assume the defense of such claim.
(d) The indemnifying party shall promptly reimburse the Indemnified Party
for the amount of any judgment rendered with respect to any third-party claim in
such litigation and for all damage incurred by the Indemnified Party in
connection with the defense of such claim or litigation, whether or not
resulting from, arising out of or incurred with respect to, the act of a third
party.
Section 7.7 Duty to Mitigate. Each Indemnified Party shall be required to
use commercially reasonable efforts to mitigate the effects of any Stockholder
Loss or Purchaser Loss, as applicable.
Section 7.8 Sole Remedy. Except as provided in Section 11.6, the
indemnification provisions provided for in this Agreement shall be the sole and
exclusive remedy and recourse available to the parties hereto for any breach of
this Agreement by an Indemnifying Party and any other claim under or with
respect to this Agreement, the Transaction Documents and all of the transactions
contemplated hereby and the parties agree that they shall have no other
entitlement, remedy or recourse, whether in contract, tort or otherwise, against
the other parties or their respective officers, directors, employees,
stockholders, agents, Affiliates, successors or assigns under or with respect to
49
this Agreement, all of such entitlements, remedies and recourses being hereby
expressly waived to the fullest extent permitted by applicable law.
Notwithstanding the foregoing, none of the parties waives any claims against the
others which may be based on fraud or intentional misconduct.
ARTICLE 8
CONDITIONS PRECEDENT
Section 8.1 Conditions to Obligation of the Stockholders. The obligations
of the Company and the Stockholders to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Each of the Purchaser and Parent shall have performed in all material
respects its agreements contained herein required to be performed at or prior to
the Closing Date, including without limitation the deliveries by the Purchaser
and Parent set forth in Section 2.5 hereof, and the representations and
warranties of the Purchaser and Parent contained herein shall be true when made
and (except for representations and warranties made as of a specified date,
which need only be true as of such date) at and as of the Closing Date; and
(b) [Intentionally Omitted];
(c) No temporary restraining Order, preliminary or permanent injunction or
other Order issued by any Governmental Entity or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, and no
Proceeding shall be pending or threatened before any court or other Governmental
Entity to restrain or prohibit, obtain substantial damages in respect of, or
nullify or render ineffective this Agreement or the consummation of the
transactions contemplated hereby. Each of the Purchaser and Parent shall have
delivered to the Stockholders a certificate, dated the Closing Date, executed by
such party or its authorized signatory, certifying the fulfillment of the
conditions specified in Section 8.1(a) hereof.
(d) The Investor Stockholders shall have received a Registration Rights
Agreement executed by the Parent.
(e) The Stockholders' Representative shall have received a copy of the
Escrow Agreement fully executed by the Purchaser, the Parent, the Surviving
Corporation and the escrow agent party thereto.
(f) The Stockholders' Representative shall have received an opinion dated
the Closing Date of the general counsel of Parent, substantially in the form of
Exhibit F attached hereto.
Section 8.2 Conditions to Obligations of the Purchaser and Parent. The
obligations of the Purchaser and Parent to effect the Merger shall be subject to
the fulfillment, at or prior to the Closing Date, of the following conditions:
(a) The Stockholders shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Closing Date, including without limitation the deliveries by the
Stockholders set forth in Section 2.4 hereof, and the representations and
50
warranties of the Company and of the Stockholders contained herein shall be true
when made and (except for representations and warranties made as of a specified
date, which need only be true as of such date) at and as of the Closing Date;
(b) [Intentionally Omitted];
(c) The Purchaser shall have received from the Stockholders' Representative
such other documents as the Purchaser's counsel shall have reasonably requested
to effectuate the transactions contemplated hereby, in form and substance
reasonably satisfactory to the Purchaser's counsel; and
(d) No Proceeding shall be pending or threatened before any Governmental
Entity or Order or injunction shall be in effect (i) that could restrain or
prohibit, obtain substantial damages in respect of, or nullify or render
ineffective any Transaction Document or the consummation of the transactions
contemplated by the Transaction Documents or (ii) that could adversely affect
(A) the Merger or (B) the right of the Surviving Corporation to own its assets
or conduct or operate the Business.
(e) The Parent shall have received a Registration Rights Agreement and a
Stock Restriction Agreement, fully executed by each of the Investor
Stockholders.
(f) The Purchaser and the Parent shall have received a copy of the Escrow
Agreement fully executed by the Stockholders and the escrow agent thereto.
(g) The Purchaser and the Parent shall have received an opinion dated the
Closing Date of counsel to the Company, substantially in the form of Exhibit G
attached hereto.
(h) No event shall have occurred since the Company's Most Recent Balance
Sheet which either alone or taken together with all other events shall have had
a Material Adverse Effect on the Company.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date:
(a) By mutual written consent of the Purchaser, the Parent and the
Stockholders' Representative;
(b) By the Stockholders' Representative, upon a material breach hereof on
the part of either the Purchaser or the Parent which has not been cured and
which would cause any condition set forth in Section 8.1 hereof to be incapable
of being satisfied by September 13, 2002;
51
(c) By the Purchaser or the Parent, upon a material breach hereof on the
part of any of the Stockholders which has not been cured and which would cause
any condition set forth in Section 8.2 hereof to be incapable of being satisfied
by September 13, 2002;
(d) By the Purchaser, Parent or the Stockholders' Representative if any
court of competent jurisdiction shall have issued, enacted, entered, promulgated
or enforced any Order which restrains, enjoins or otherwise prohibits the Merger
and such Order shall have become final and nonappealable; or
(e) by either the Purchaser, the Parent or the Stockholders' Representative
if the Merger shall not have become effective on or before September 13, 2002
(provided the terminating party is not otherwise in material breach of its
representations, warranties or obligations hereunder).
Section 9.2 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of the Purchaser, the Parent and the
Stockholders' Representative, and no amendment may materially reduce the
Purchase Price unless consented to by a majority in interest of the Stockholders
and no amendment may adversely affect the Other Stockholders in a manner
different than the adverse effect on the Investor Stockholders, unless such
amendment is consented to by a majority in interest of the Other Stockholders,
which consent shall not be unreasonably withheld. Majority in interest shall be
determined based on percentage share of the Adjusted Purchase Price.
Section 9.3 Waiver. At any time prior to the Closing Date, the Purchaser,
the Parent and the Stockholders' Representative may, to the extent permitted by
applicable law, (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any inaccuracies
in the representations and warranties by any other party contained herein or in
any documents delivered by any other party pursuant hereto and (iii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations contained herein, except any waiver which adversely
affects the Other Stockholders in a manner different from the adverse effect on
the Investor Stockholders shall be approved by a majority in interest of the
Other Stockholders, which approval shall not unreasonably be withheld. Majority
in interest shall be determined based on percentage share of the Adjusted
Purchase Price. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE 10
STOCKHOLDERS' REPRESENTATIVE
Section 10.1 Appointment; Acceptance. By executing this Agreement, each of
the Stockholders hereby irrevocably constitutes and appoints the Stockholders'
Representative, or any assignee or successor thereof, acting as hereinafter
provided, as its, his or her attorney-in-fact and agent to act in its, his or
her name, place and xxxxx in connection with all matters arising from and under
any Transaction Document after the Closing Date, and acknowledges that such
appointment is coupled with an interest. By executing this Agreement, the
Stockholders' Representative hereby (i) accepts its appointment and
authorization to act as the Stockholders' Representative and as attorney-in-fact
and agent in accordance with the terms hereof and (ii) agrees to perform its
obligations hereunder, and otherwise to comply with this Article 10.
52
Section 10.2 Authority. Each Stockholder fully and completely, without
restriction:
(a) agrees to be bound by all notices received or given by, and all
agreements and determinations made by, and all documents executed and delivered
by the Stockholders' Representative under the Transaction Documents after the
Closing Date;
(b) authorizes the Stockholders' Representative, after the Closing Date
(i) to assert claims, make demands and commence actions on behalf of the
Stockholder and under the Transaction Documents,
(ii) to dispute or to refrain from disputing any claim made by
Stockholders,
(iii) to negotiate and compromise any dispute which may arise under, and
exercise or refrain from exercising remedies available to the Stockholder under,
the Transaction Documents, and to sign any releases or other documents with
respect to such dispute or remedy (and to bind the Stockholders in so doing),
(iv) to give such instructions and do such other things and refrain from
doing such things as the Stockholders' Representative shall deem appropriate to
carry out the provisions of the Transaction Documents,
(v) to give any and all consents and notices under the Transaction
Documents, and
(vi) to perform all actions, exercise all powers, and fulfill all duties
otherwise assigned to the Stockholders' Representative in this Agreement;
(c) authorizes and directs the Stockholders' Representative to receive all
payments under the Transaction Documents payable to Stockholders after the
Closing Date on its behalf, to invest such funds pending their disbursement in
such manner as the Stockholders' Representative in its sole discretion deems
appropriate; and to disburse pro rata any payments due to the Stockholder's
under the Transaction Documents in accordance with the Stockholders'
Representative instructions.
Section 10.3 Actions. Each of the Stockholders hereby expressly
acknowledges and agrees that the Stockholders' Representative has the sole and
exclusive authority to act on its behalf in respect of all matters arising under
or in connection with the Transaction Documents after the Closing Date,
notwithstanding any dispute or disagreement among them, and that no Stockholder
shall have any authority to act unilaterally or independently of Stockholders'
Representative in respect to any such matter. Accordingly, the Purchaser, the
Parent, the Surviving Corporation and the Escrow Agent shall be entitled to rely
on any and all actions taken by the Stockholders' Representative under the
Transaction Documents without any liability to, or obligation to inquire of, any
of the Stockholders. All notices, counternotices or other instruments or
designations delivered by the Purchaser, the Parent or the Escrow Agent or any
53
other Person in regard to the Transaction Documents shall not be effective
unless, but shall be effective if, signed by the Stockholders' Representative,
and if not, such document shall have no force or effect whatsoever and the
Purchaser, the Parent, the Surviving Corporation and the Escrow Agent and any
other Person or entity may proceed without regard to any such document. Escrow
Agent and any other Person or entity are hereby expressly authorized to rely on
the genuineness of the signature of the Stockholders' Representative, and upon
receipt of any writing which reasonably appears to have been signed by the
Stockholders' Representative. The Purchaser, the Parent, the Surviving
Corporation, the Escrow Agent and any other Person may act upon the same without
any further duty of inquiry as to the genuineness of the writing.
Section 10.4 Effectiveness. The authorizations of the Stockholders'
Representative shall be irrevocable and effective until his rights and
obligations under the Transaction Documents terminate by virtue of the
termination of all obligations of the Stockholders to Purchaser and Parent and
Purchaser and Parent to Stockholders under this Agreement and the Transaction
Documents.
Section 10.5 Reimbursement of Expenses of Stockholders' Representative. The
Stockholders agree to reimburse the Stockholders' Representative for any
out-of-pocket costs and expenses it incurs in performing its services hereunder.
The Stockholders shall share such reimbursement expense, pro rata.
Section 10.6 Indemnification of Stockholders' Representative. The
Purchaser, the Parent, the Surviving Corporation and the Stockholders shall
severally indemnify and save harmless the Stockholders' Representative from and
against any and all liability, including all expenses reasonably incurred in its
defense and all costs and expenses reasonably incurred in enforcing its right to
indemnification hereunder, to which the Stockholders' Representative shall be
subject by reason of any action taken or omitted to be taken, except as may
result from the Stockholders' Representative's gross negligence or willful
misconduct; provided, however, that such indemnification shall not apply to any
actions taken or omitted in the Stockholders' Representative's capacity as a
Stockholder. This Section 10.6 shall survive the termination of this Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt if delivered personally,
telecopied (provided receipt is confirmed by other than automatic means), mailed
by registered or certified mail (return receipt requested), or sent by a
nationally-recognized overnight courier (such as Federal Express or United
Parcel Service) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
54
(a) if to the Stockholders or the Stockholders' Representative, to
Spire Capital Management
00 Xxxxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
with a copy to
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telecopy: (000) 000-0000
and
Xxxxxx Xxxxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxx
Telecopy: (000) 000-0000
and
Akerman, Senterfitt & Xxxxxx, P.A.
Xxx Xxxxx Xxxx Xxxxx Xxxxxx
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
(b) if to the Purchaser, the Parent or the Surviving Corporation, to
Interland, Inc.
000 Xxxxxxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopy; (000) 000-0000
with a copy to the same address to the attention of the General Counsel.
Section 11.2 Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
Section 11.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement.
55
Section 11.4 Entire Agreement; Assignment. This Agreement, the schedules
hereto and the other Transaction Documents constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, other than, as among the
Stockholders, the separate letter agreement entered into as of this date. This
Agreement shall not be assigned by operation of law or otherwise; provided, that
the Purchaser may assign its rights and obligations to any wholly owned
subsidiary of the Purchaser (unless to do so would restrict or delay the
consummation of the transactions contemplated by this Agreement), but no such
assignment shall relieve the Purchaser of its obligations hereunder if such
assignee does not perform such obligations.
Section 11.5 Governing Law; Jurisdiction. This Agreement shall be governed
and construed in accordance with the laws of the State of New York, without
regard to any applicable principles of conflicts of law. EACH PARTY TO THIS
AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTION DOCUMENTS, THE PARENT
SHARES OR ANY OTHER AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY SHALL ONLY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO
THE EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES
THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH
COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 11.1, SUCH SERVICE TO
BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
Section 11.6 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, and other equitable relief to prevent the breach or threatened breach of
this Agreement or any Transaction Document in addition to any other remedy at
law or equity.
Section 11.7 Publicity. Except as otherwise required by law, for so long as
this Agreement is in effect, neither the Purchaser, the Parent, the Company nor
the Stockholders shall issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the express prior approval of the other parties hereto.
Section 11.8 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person or
Persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
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Section 11.9 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired.
Section 11.10 Amendment. This Agreement may be amended at any time by the
parties hereto, but only by an instrument in writing signed on behalf of each of
the parties hereto.
Section 11.11 Fees and Expenses. Except as otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, each party shall bear its own fees and expenses incurred in
connection with the transactions contemplated by this Agreement. The Company has
accrued a good faith estimate of $80,000 for the legal fees and expenses to be
incurred for the transaction contemplated by this Agreement on its July 31, 2002
balance sheet and the Parent has consented to the amount of such accrual.
Section 11.12 Waiver of Consequential and Punitive Damages. NO PARTY WILL
HAVE ANY OBLIGATION UNDER THIS AGREEMENT FOR ANY CONSEQUENTIAL OR PUNITIVE
DAMAGES OF ANY KIND, AND THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVE AND RELEASE ALL RIGHTS AND CLAIMS TO SUCH DAMAGES, WHETHER ARISING OUT OF
NEGLIGENCE OR BREACH OF ANY KIND.
- SIGNATURES ON THE FOLLOWING PAGE -
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IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT AND PLAN
OF MERGER to be signed by their respective officers thereunto duly authorized,
as of the date first written above.
INTERLAND, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxx X.Xxxxxxx
Title: Vice President General Counsel
PANTHERCUB ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxx X.Xxxxxxx
Title: President
[Signatures continued on following page]
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iNNERHOST, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxx Xxxxxxxx
Title: Secretary
[Signatures continued on following page]
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SPIRE CAPITAL PARTNERS, L.P.
By: Spire Capital Partners, L.L.C.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Member
SPIRE INVESTMENT, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Member
SPIRE CAPITAL PARTNERS, L.P., in its capacity
as the Stockholders' Representative
By: Spire Capital Partners, L.L.C.,
Its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Member
[Signatures continued on following page]
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XXXXXX-XXXXXX MEDIA PARTNERS, L.P.
By: Xxxxxx-Xxxxxx Media, L.L.C.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Member
[Signatures continued on following page]
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/s/ Xxxx Xxxxxxx
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/s/ Xxxxxx Xxxxxx
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/s/ Xxxxx Xxxxxxxx
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/s/ Xxxxx Xxxxxxxx
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/s/ Xxxxxx Xxxxxxxxx
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/s/ Xxxxx Xxxxx
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