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EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
AGREEMENT made as of this 4th day of February, 1999 between DIGIWEB,
INC., a Delaware corporation with a principal place of business at 0000 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxx Xxxx, XX 00000 (the "Company"), YI XXX XXXXX,
residing at 00000 Xxxxxxxxx Xxxxxx, #0000, Xxxxxxx Xxxx, XX 00000 ("Xxxxx") and
XXXXX X. XXXX, residing at 00000 Xxxxxx Xxxxx Xxx, Xxxxxxxxxxxx, XX 00000
(collectively, "Shareholders"), and DIGIWEB, INC., a Maryland corporation,
having an office at 000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Buyer").
W I T N E S S E T H :
WHEREAS, the Company desires to sell and the Buyer desires to
purchase on the date hereof (the "Closing Date") the Internet Web hosting and
related businesses of the Company as a going concern (the "Business") consisting
of the Purchased Assets (hereinafter defined), and the Assumed Liabilities (as
hereinafter defined), for a purchase price determined as set forth in Exhibit A
(the "Purchase Price") and for the assumption of the Assumed Liabilities;
WHEREAS, the Shareholders join in the execution of this Agreement as
the sole Shareholders, directors and officers of the Company and are familiar
with the material aspects of operations of the business of the Company,
including, without limitation, the Business.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE;
REPRESENTATIONS AND WARRANTIES
SECTION 1. PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, the Company hereby sells, assigns and transfers to the Buyer and
the Buyer hereby purchases and acquires from the Company, all of the right,
title and interest of the Company in and to the Purchased Assets for the
Purchase Price set forth herein.
SECTION 2. REPRESENTATIONS OF THE COMPANY AND SHAREHOLDERS. The
following
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agreements, representations and warranties are made by the Company and the
Shareholders, jointly and severally, to the Buyer.
(A) Organizational Matters; No Conflict. The Company is duly formed,
organized, and is a validly existing corporation in good standing under the laws
of the state of its incorporation, maintains offices only at the sites listed on
Exhibit A and has no other operations other than from those sites; is qualified
or authorized to transact business and is in good standing in each other
jurisdiction in which it is doing business, except where failure to be qualified
or be in good standing would not have a material adverse effect on the business
of the Company; and has the requisite power to enter into this Agreement, to
perform its obligations hereunder and to conduct its business as currently
conducted. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by the Company and by the Shareholders will not
(i) to the best knowledge of the Company and the Shareholders after due inquiry,
conflict with or violate the provisions of any applicable law (including,
without limitation, any bulk sales laws), rule or order or the Company's
Articles or Certificate of Incorporation, By-laws or any other organizational or
governing documents of the Company, (ii) conflict with or constitute a default
under any agreement or contract by which the Company or the Shareholders is
bound or (iii) require the consent or approval of, or filing with, any
governmental body or third party. The execution, delivery and performance by the
Company of this Agreement has been duly authorized and approved by all corporate
action on the part of the Company. The Shareholders are all the beneficial
and/or record owners of the issued and outstanding shares of capital stock of
the Company and the Shareholders own the number of shares of such stock set
forth opposite his or her name on Exhibit A. Also set forth on Exhibit A is the
total number and type of authorized shares and outstanding shares of capital
stock of the Company. Set forth on Exhibit B is a list of officers and directors
of the Company, all trade names used by the Company and all jurisdictions in
which the Company is doing business. This Agreement and the consummation of the
transactions contemplated hereby have been approved by the Shareholders (if
required by its By-Laws or applicable law) and by the board of directors of the
Company, and the authorized officers of the Company named on Exhibit A are
jointly and severally authorized and empowered by the Company to execute and
deliver this Agreement in the name and on behalf of the Company.
(B) Purchased Assets. (i) All vendor and customer contracts,
confidentiality agreements, purchase and sales orders, powers of attorney,
undertakings, commitments and other agreements to which the Company is a party
and which relate in any manner to the Business and/or the relationship between
the Company and the Customers (hereinafter defined), whether written or oral,
shall be referred to herein collectively as the "Business Agreements". The
Company has delivered to Buyer, on or before the Closing Date, true and correct
copies of all written Business Agreements (excluding Business Agreements with
Customers and excluding reseller agreements). Attached hereto as Exhibit C-1 are
true and correct copies of the only forms of agreements which have been entered
into between the Company and its Customers concerning the Business (collectively
the "Form Customer Agreements"). All Customers have either entered into a
written Form Customer Agreement with the Company or an oral agreement with the
Company on the same terms and conditions as the terms and conditions as set
forth in the Form Customer Agreements. Annexed as Exhibit C-2 is a list of all
written Business
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Agreements between the Company and others (excluding Customers), and vendors or
service providers, or which relate to any strategic partnerships, reselling
arrangements or joint ventures between the Company and others, concerning the
Business, copies of which (except for reseller agreements) have been provided to
Buyer prior to Closing. Also annexed as Exhibit C-2 are true and correct copies
of the only forms of reseller agreements between the Company and its resellers
(collectively, the "Form Reseller Agreements"). All resellers have entered into
a written Form Reseller Agreement on substantially similar terms and conditions
as the terms and conditions as set forth in the Form Reseller Agreement. The
Company represents that other than oral agreements with some of its Customers,
it has no oral Business Agreements which are material individually or in the
aggregate. Listed on Exhibit C-3 is a description of each and every real estate,
equipment and personal property lease (collectively, the "Leases") to which the
Company is a party and which relates to the Business. The Leases are also
included within the definition of Business Agreements as said term is used
herein. Neither the Company nor any other party, is in default under any
Business Agreement in any material respect whether individually or in the
aggregate, and no other party to any Business Agreement has made any claim or
given the Company notice of any dispute under any Business Agreement, except as
set forth on Exhibit C-4. Each Business Agreement is in full force and effect.
The Company has the right to assign the Business Agreements and the Company has
obtained all required consents to the assignment and transfer thereof, except as
set forth on Exhibit C-5. The Company is not the owner or lessee of any motor
vehicles which are used in the Business except as set forth on Exhibit C-3. The
Company does not own or lease any interest in any real property, or lease any
equipment used in the Business, except as expressly stated on Exhibit C-3.
(ii) All of the tangible assets of the Company used in the Business,
including, without limitation, all machinery, office and other equipment,
furniture, computers and related equipment, business machines, telephones and
telephone systems, parts and accessories, telephone numbers, facsimile numbers,
e-mail addresses and Internet domain addresses presently utilized by the Company
in the Business and all right, title and interest of the Company in Internet
domain addresses of third parties which are presently "parked" or located on
servers used by the Company in the Business, shall be referred to herein
collectively as the "Tangible Assets". Attached hereto as Exhibit E is a true
and correct list or description of the material Tangible Assets. As of the
Closing Date, except as provided on Exhibit E-1, each of the Tangible Assets is
in good and operable condition, reasonable wear and tear excepted.
(iii) All patents, trademarks, trade names (including, but not
limited to, those trade names listed on Exhibit B), service marks, service
names, logos, designs, formulations, copyrights and other trade rights and all
registrations and applications therefor, all know-how, trade secrets, technology
or processes, all Web sites and all computer programs, data bases and software
documentation owned or used by the Company in the Business, other than
off-the-shelf software licensed by the Company, shall be referred to herein
collectively as the "Intellectual Property". Attached hereto as Exhibit F is a
true and correct copy of all of the Intellectual Property. Such exhibit also
indicates which of such items have been patented or registered or are in the
process of application for same. To the best of its knowledge, the Company has
taken all necessary and reasonable actions to protect its rights in Intellectual
Property owned by it and to the knowledge of the Company, is not infringing on
the rights of any third parties to Intellectual
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Property used, but not owned by, the Company. Included among the Intellectual
Property, among other things, are all trade names utilized by the Company in the
Business, including those trade names listed on Exhibit B. On the Closing Date,
the Company will deliver to Buyer a Certificate of Amendment of the Company's
Articles or Certificate of Incorporation ("Certificate of Amendment") changing
its corporate name so as to delete the word "Digiweb" and will cause the same to
be duly filed with the Secretary of State's Office for the State of its
incorporation within ten (10) days from the Closing Date. Promptly after such
filing, the Company will deliver proof of said filing to Buyer. Also attached to
Exhibit F is a true and complete list of all software licensed by the Company
and used in operating and maintaining the Business (collectively, the "Licensed
Software"). The Company has valid and fully-paid licenses for all of the
Licensed Software, except as set forth on Exhibit F-1. Included among the
Intellectual Property, among other things, are all trade names utilized by the
Company in the Business, including, but not limited to, those trade names listed
on Exhibit B. On the Closing Date, the Company will deliver to Buyer written
proof in form and substance reasonably satisfactory to Buyer and its counsel
that the Company will no longer do business under any of the trade names listed
on Exhibit B and further, at the Closing, the Company will deliver to the Buyer,
for filing with the applicable governmental or quasi-governmental offices, any
required instruments to terminate any previously filed assumed name or similar
certificates regarding such trade names.
(iv) The Company represents that a true and complete copy of the
Company's customer list relating to the Business as of the Closing Date (the
"Customer List") is in the Company's file cabinet and/or is maintained in the
Company's database on the Company's servers, all of which is included in the
Purchased Assets and is being acquired by Buyer hereunder. The Customer List
includes, in the case of each customer, the name of the customer, its billing
and domain addresses, identity and contact information of each relevant contact
person, a statement of the monthly or annual (as indicated) service charges
relating to such customer and the Company's files regarding such customer. All
customers of the Company relating to the Business, including without limitation,
those customers included on the Customer List, shall be referred to herein as
the "Customers."
(v) [INTENTIONALLY OMITTED]
(vi) As used herein, the term "Purchased Assets" shall be defined as
all classes of assets of the Company as shown on the Company's certified
financial statement as of December 31, 1998 (annexed as Exhibit H) including,
without limitation, the Business Agreements, the Tangible Assets, the
Intellectual Property, the Customer List, the Customers, together with the good
will and business opportunities of the Company as it relates to the Business,
the Software Licenses, and all other assets of the Company used in connection
with the operation of the Business, wherever located, tangible or intangible,
including without limitation, all data files, books and records regarding or
relating to the foregoing, whether in electronic, paper or other form of media
and all rights the Company may have under any insurance policies relating to the
Purchased Assets regarding policies which are assigned to the Buyer at Closing
(but excluding claims arising prior to Closing), excluding, however, Excluded
Assets (as defined below). The Purchased Assets are not subject to (i) any lien
or encumbrance of any character
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whatsoever except as set forth on Exhibit M or (ii) any adverse claims by any
third parties. At the Closing upon consummation of the transactions contemplated
by this Agreement, Buyer will receive good and marketable title to the Purchased
Assets, free and clear of all liens, claims and encumbrances of any character
whatsoever. The Purchased Assets include all rights, properties, interests and
assets used by Company and/or necessary to permit Buyer to carry on the Business
as presently conducted by the Company except for Excluded Assets.
(vii) The Company and the Shareholders reasonably expect that the
business represented by the Business Agreements will continue after the date
hereof. Neither the Company nor the Shareholders have any knowledge that any
Customers, other than those listed on Exhibit G-1, intend to terminate or reduce
the amount of business they presently do with the Company, and they have no
knowledge of any state of facts which would lead them to believe that any of the
Customers will terminate their relationship with the Company or significantly
reduce the amount of business they presently do with the Company, except for a
reduction in business resulting from the devaluation of the Brazilian currency
prior to the Closing Date. Notwithstanding the foregoing, the Company and Xxxxx,
jointly and severally, agree to indemnify the Buyer in an amount, if any, equal
to three times the difference between the "1999 Annualized Gross Revenue" of the
Buyer and $2,750,000. "1999 Annualized Gross Revenue" of the Buyer shall mean
the gross revenue, after adjusting for deferred revenue, of the Buyer for the 11
months beginning February 1, 1999 and ending December 31, 1999, divided by 11
and multiplied by 12. This indemnification obligation shall be in accordance
with the following terms:
(a) The indemnification recourse by Buyer shall be solely limited to
the value of 150,000 shares of the Common Stock, hereafter defined
(referred to herein as the "Escrowed Stock"), but not to exceed
$1,000,000 in any event.
(b) The Escrowed Stock shall be delivered to the escrow agent listed
on Exhibit A (the "Escrow Agent") to be held in escrow in accordance
with the terms of a separate escrow agreement to be entered into
between the parties (the "Revenue Shortfall Escrow Agreement") on or
prior to the Closing which shall include, among other things, the
terms and conditions set forth in subparagraphs (c) through (d)
below.
(c) In the event of any claim for indemnification by Buyer, Buyer
shall provide the Company with a notice of claim and a schedule
detailing the calculation of the Claim Amount, accompanied by
reasonable supporting documentation therefore prepared in accordance
with GAAP to the extent applicable. The notice of claim shall be
submitted by Buyer to the Company no later than January 31, 2000 for
any claim hereunder. The Company will then have thirty (30) days
from receipt of the notice of claim of Buyer to respond. If the
Company disputes such calculations of the Claim Amount, the Company
shall, within said thirty (30) day period, advise Buyer in writing
and submit supporting
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documentation of its position. If the Company fails to respond and
submit such required supporting documentation within said thirty
(30) day period, then Buyer's submitted Claim Amount shall be deemed
accepted by the Company and shall be binding, final and conclusive.
(d) Any amount due to be paid to Buyer hereunder as a Claim Amount
shall be paid by the Escrow Agent out of the Escrowed Stock in the
number of shares thereof equal to amount of the Claim Amount as
ultimately determined divided by the then per share fair market
value of the Escrowed Stock. If the value of the Escrowed Stock is
less than One Million ($1,000,000) Dollars and is insufficient to
pay the Claim Amount, the Company and Xxxxx, jointly and severally,
shall pay to Buyer the difference between the value of the Escrowed
Stock and the lesser of (i) the Claim Amount and (ii) One Million
($1,000,000) Dollars.
(viii) Excluded Assets. The Company is not selling and Purchaser is
not buying or acquiring hereunder the following items ("Excluded Assets") which,
notwithstanding anything to the contrary contained herein, are not included in
the defined term "Purchased Assets": (a) All cash and cash equivalents; (b) the
Company's corporate minute and stock books, tax returns and other records having
to do solely with the Company's organization and/or capitalization; (c) any
rights to any of the Company's claims for any federal, state or local tax
refunds; (d) any rights which accrue or will accrue to the Company under this
Agreement or the transactions contemplated hereby; (e) all assets, if any,
listed on Exhibit L hereto; and (f) accounts receivable of the Company.
(C) Financial Statements. The Company has delivered to the Buyer
copies of the Company's audited financial statements for the last two fiscal
years of the Company ended December 31, 1998 and 1997, respectively. Attached
hereto as Exhibit H is a certified audited balance sheet and profit and loss
statement for the fiscal year ended December 31,1998 which reflect the assets,
liabilities, net worth, profit and loss, and cash flow of the Company with
respect to the Business. All financial statements referred to herein are
complete and correct in all material respects, present fairly the financial
condition and results of operations of the Company as at the dates of such
statements, have been prepared in accordance with generally accepted accounting
principles meeting the requirements for submission to the Securities and
Exchange Commission and have been audited and certified by an accounting firm
qualified for such submission. The books of account and records of the Company
have been maintained in accordance with good business practice and reflect
fairly all properties, assets, liabilities and transactions of the Company. The
Company has no material liabilities or obligations of any kind (whether accrued,
absolute, direct, indirect, contingent or otherwise) which are not fully accrued
or reserved against in the Company's financial statements in accordance with
generally accepted accounting principles except obligations to perform after
December 31, 1998, under open sales contracts, supply contracts, purchase orders
and other commitments, incurred in the ordinary course of business and set forth
in the Business Agreements, and except for obligations reasonably incurred in
connection with this Agreement and the consummation of the transactions
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contemplated hereby. Except as set forth on Exhibit I the Company has no bad
debts as of the Closing Date. Since the last day of the Company's last fiscal
year, the Company has conducted the Business only in the ordinary and usual
course and has not experienced any material adverse change in the Business or
the financial condition of the Company. Since December 31, 1998, the Company has
had no loss in net monthly recurring revenue from the Business except as
incurred as a result of the Brazilian currency devaluation which the Company
represents is approximately $10,000 for the month of January 1999. Between
December 31, 1998 and the Closing Date, the Company and the Shareholders warrant
and represent that they have not withdrawn, sold, assigned or transferred any
assets of the Company (other than cash), except in the ordinary course of
operations of the Business of the Company in accordance with past practices of
the Company.
(D) Assumed Liabilities. The Buyer shall not be liable for and is
not assuming any liabilities of the Company whatsoever, whether related or
unrelated to the Purchased Assets, or whether arising under the Business
Agreements or otherwise, unless specifically listed on Exhibit J hereto (the
"Assumed Liabilities"). The Company and the Shareholders understand and agree
that the Buyer is not assuming any liabilities of the Shareholders whatsoever.
The Company has no outstanding loans of any kind and none of the Company's
obligations have been guaranteed by any other person or entity.
(E) Existing Employment Arrangements. Except as set forth on Exhibit
K the Company has no employment agreements, labor or collective bargaining
agreements or employee benefit or welfare plans. All vacation pay, if any, due
to employees of the Company has been fully paid by the Company. No employees of
the Company are entitled to any sick pay. The Company has no retirement plans.
There are no pending or, to the knowledge of the Company, threatened strikes,
job actions or other labor disputes affecting the Company or its employees and
there have been no such disputes for the past three years, except as set forth
on Exhibit K. Also set forth on Exhibit K is a true and complete list of all
employees of the Company employed in connection with the Business, which list
provides, among other things, the name, residence address, title, job
description and salary information concerning each employee.
(F) Claims, Litigation, Disclosure. To the best of their knowledge,
after due inquiry, there is no claim, litigation, tax audit, proceeding or
investigation pending or, to the Company's or the Shareholders' knowledge,
threatened against the Company or any of the Shareholders, with respect to the
Business or any of the Purchased Assets of the Company (including, without
limitation, any claims of infringement or actions of opposition with respect to
Intellectual Property), nor does the Company nor the Shareholders know of any
facts which would provide a basis for any such claim, litigation, audit,
proceeding or investigation. To the best of their knowledge, the Order issued by
the United States District Court for the Northern District of Ohio, Eastern
Division, in the case of Xxxxxx Environmental Ltd. v. IWI, Inc., et al., Case
No. 1:98CV 2549, has been fully complied with as it relates to the Company.
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(G) Taxes. Except as specifically set forth on Exhibit I (the "Tax
Liabilities"), the Company has correctly prepared and timely filed all Federal,
state and local tax returns, estimates and reports, and paid all such taxes as
and when due for all such taxes arising from or in connection with the
operations of the business of the Company prior to the Closing. For purposes of
this paragraph, taxes shall mean all taxes, charges, fees, levies or other
assessments of any kind whatsoever (including, without limitation, income,
franchise, sales, use, employment and withholding taxes). On or before the
Closing, the Company shall pay off and satisfy any of the Tax Liabilities which
are then due and payable or payable for the period ending on the Closing Date
whether or not then due, and provide Buyer with evidence thereof in form
satisfactory to Buyer and its counsel. The Company is not a party to any tax
sharing agreement.
(H) No Other Agreements to Sell Assets or Business. Neither the
Company nor the Shareholders are not a party to any existing agreement which
obligates the Company or the Shareholders to sell to any other person or firm
the Purchased Assets (other than sales in the ordinary course of business), to
issue or sell any capital stock or any security convertible into or exchangeable
for capital stock of the Company or to effect any merger, consolidation or other
reorganization of the Company or to enter into any agreement with respect
thereto.
(I) No Brokers. The only broker, leasing agent, finder or similar
person or entity with whom the Company or the Shareholders have made contact or
had any dealings with or entered into any agreement, arrangement or
understanding with concerning this Agreement or the transactions contemplated is
the party or parties listed in item 6 on Exhibit A, if any, and the Company and
the Shareholders shall be solely responsible for any finder's fee, brokerage
commissions or similar payment which may be due to such party or parties, which
payment shall be made on or about the time of Closing.
(J) Environmental Compliance. (i) To the best of their knowledge,
neither the Company nor any operator of the Company's properties is in
violation, or alleged to be in violation, of any federal, state or local
judgment, decree, order, consent agreement, law (including common law), license,
rule or regulation pertaining to environmental health or safety matters,
including without limitation those arising under the Resource Conservation and
Recovery Act, as amended, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, as amended, Water Act, as amended, the Federal
Clean Air Act, as amended, the Toxic Substances Control Act, or any state or
local analogue (hereinafter "Environmental Laws").
(ii) Neither the Company nor the Shareholders have received a
notice, complaint, order, directive, claim or citation from any third party,
including without limitation any federal, state or local governmental authority,
indicating or alleging that the Company or any predecessor may have any
liability or obligation under any Environmental Law.
(iii) To the best of their knowledge: (A) No portion of the
property of the Company has been used by any person for the generation,
handling, processing, treatment,
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storage or disposal of Hazardous Materials except in accordance with applicable
Environmental Laws; (B) no underground tank or other underground storage
receptacle for Hazardous Materials, asbestos-containing materials or
polychlorinated biphenyls are located on any portion of any location occupied by
the Company each of which is listed as a Site on Exhibit A; (C) in the course of
any activities conducted by the Company or its invitees, agents, contractors,
licensees or employees in connection with the Business of the Company, no
Hazardous Materials have been generated or are being used except in accordance
with applicable Environmental Laws; and (D) there have been no releases (i.e.,
any past or present releasing, spilling, leaking, leaching, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Materials on, upon, into or from the property
currently or formerly owned, operated or leased by the Company, which releases
would have a material adverse effect on the value of any of the property or
adjacent properties or the environment.
(iv) To the best of their knowledge, the execution, delivery
and performance of this Agreement is not subject to any Environmental Laws which
condition, restrict or prohibit the sale, lease or other transfer of property or
operations, including, without limitation, any so-called "environmental cleanup
responsibility acts" or requirements for the transfer of permits, approvals, or
licenses. There have been no environmentally related audits, studies, reports,
analyses (including soil and groundwater analyses), or investigations of any
kind performed with respect to the currently or previously owned, leased, or
operated properties of the Company.
For purposes of this Section, "Hazardous Material" shall mean any
hazardous waste, as defined by 42 U.S.C. Sec. 6903(5), any hazardous
substances or wastes as defined by 42 U.S.C. Sec. 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Sec. 9601(33) or any toxic substances or
wastes, oil or hazardous materials or other chemicals or substances regulated
by any public or governmental authority.
(K) Year 2000. Except as set forth on Exhibit J-1, all information
technology included in the Purchased Assets including, without limitation, in
all products and services (i) provided by the Business, whether to third parties
or for internal use or (ii) to the best of the Company's knowledge after
reasonable investigation, used in combination with any information technology of
its clients, customers, suppliers or vendors, accurately processes or will
process date and time data (including, but not limited to calculating, comparing
and sequencing) from, into and between the years 1999 and 2000 and the twentieth
century and the twenty-first century, including leap year calculations and
neither performance nor functionality of such technology will be affected by
dates prior to, during and after the year 2000. The Purchased Assets do not
include any obligations under warranty agreements, service agreements or
otherwise to remedy any information technology defect relating to the year 2000.
(L) Licenses and Compliance with Laws. The Company holds no material
governmental or regulatory licenses, permits, consents or approvals in
connection with the Business, and, to the best of the Company's and its
shareholders' knowledge, after due inquiry, the Company is in compliance with
all material laws and regulations applicable to the Business.
(M) Common Stock. The Company acknowledges that it has received and
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reviewed the Confidential Memorandum dated March 12, 1998, as amended through
January 31, 1999 (the "Offering") describing the offering by Parent of up to
4,800,000 shares of its common stock, $.01 par value ("Common Stock"), to
persons or entities who sell Web hosting businesses to Parent or its affiliates.
The Company understands that the Common Stock to be issued by parent to the
Company hereunder as part of the Purchase Price shall be subject to the terms of
the Offering, including without limitation, that the Common Stock will be issued
subject to a Right of First Refusal Agreement, the form of which is annexed as
an exhibit to the Offering.
(N) True and Complete. No representation or warranty made by Company
or the Shareholders in this Agreement, nor any statement, certificate or exhibit
furnished by or on behalf of Company pursuant to this Agreement, nor any
document or certificate delivered to Buyer pursuant to this Agreement, or in
connection with the transactions contemplated hereby, contains or shall contain
any untrue statement of a material fact, or omits or shall omit to state a
material fact necessary to make the statements contained therein not misleading.
Neither the Company nor the Shareholders have failed to disclose to Buyer any
pending developments or circumstances of which any of them are aware which are
reasonably likely to have a material adverse effect on the Company or the
Business.
SECTION 3. REPRESENTATIONS OF THE BUYER AND THE PARENT. Buyer and
Parent represent and warrant to the Company as follows.
(A) Corporate Matters; No Conflict. Buyer is a wholly owned
subsidiary of Sage Networks, Inc. ("Parent"). Each of the Buyer and Parent is
duly incorporated, validly existing and in good standing under the laws of the
State of Maryland and Delaware, respectively, is in good standing in each other
jurisdiction in which it is doing business, except where failure to be in good
standing would not have a material adverse effect on the business of Buyer or
Parent, and has the corporate power to enter into this Agreement, to perform its
obligations hereunder and to conduct its business as currently conducted. The
execution, delivery and performance of this Agreement and the transactions
contemplated hereby (and thereby) by the Buyer and Parent, respectively, will
not (a) conflict with or violate the provisions of any applicable law, rule or
order or the Buyer's or the Parent's respective Certificate of Incorporation or
by-laws, (b) conflict with or constitute a default under any agreement or
contract by which the Buyer or Parent is bound or (c) require the consent or
approval of, or filing with, any governmental body or third party. The
execution, delivery and performance by the Buyer of this Agreement has been
authorized and approved by all requisite corporate action on the part of the
Buyer.
(B) Authorization of Common Stock. The issuance and delivery by
Parent of the Common Stock has been authorized and approved by all requisite
corporate action on the part of Parent. Upon issuance and delivery to the
Company or its designee(s) in accordance with the first paragraph of this
Agreement, the Common Stock will be duly authorized, validly issued, fully paid
and non-assessable.
(C) No Brokers. The only broker, leasing agent, finder or similar
person or entity with whom the Buyer or Parent have made contact or had dealings
with or entered into any agreement, arrangement or understanding with concerning
this Agreement or the transactions contemplated hereunder is the party or
parties listed in item 7 on Exhibit A, if any, and the Buyer and Parent shall be
solely responsible for any finder's fee, brokerage commissions or similar
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payment which may be due to such party or parties, which payment shall be made
on or about the time of Closing.
(D) Stock Ownership; Title; and Status. (i) Parent has as of the
date hereof, good and marketable title to the Common Stock, free and clear of
all claims, liens and encumbrances, except that the Common Stock is subject to
the terms of the Articles of Incorporation of the Parent, the Offering and the
Right of First Refusal Agreement referenced in Article III Section 2(Q) hereof.
The Parent has full legal right, power and authority to sell, assign and
transfer the Common Stock to the Company.
(E) Claims, Litigation, Disclosure. To the best of the knowledge of
the Buyer and Parent, after due inquiry, there is no claim, litigation, tax
audit, proceeding or investigation pending or, to the Buyer's or Parent's
knowledge, threatened against the Buyer or Parent, nor does the Buyer or Parent
know of any facts which would provide a basis for any such claim, litigation,
audit, proceeding or investigation.
(F) True and Complete. No representation or warranty made by Buyer
or Parent in this Agreement, nor any statement, certificate or exhibit furnished
by or on behalf of Buyer or Parent pursuant to this Agreement, nor any document
or certificate delivered to the Company pursuant to this Agreement, or in
connection with the transactions contemplated hereby, contains or shall contain
any untrue statement of a material fact, or omits or shall omit to state a
material fact necessary to make the statements contained therein not misleading.
Neither the Buyer nor Parent have failed to disclose to the Company any pending
developments or circumstances of which any of them are aware which are
reasonably likely to have a material adverse effect on the Buyer or Parent.
(G) Registration Rights. Parent has not issued any registration
rights or "piggy-back" registration rights to any sellers of businesses acquired
by Parent to whom its common stock, issued under the Offering, was given as
partial or full consideration for such acquisition.
ARTICLE II.
CERTAIN COVENANTS OF THE PARTIES
SECTION 1. NON-COMPETITION; NON-SOLICITATION.
(A) For a period commencing on the Closing Date and ending on the
second anniversary of the Closing Date, neither the Company nor any of the
Shareholders shall, directly or indirectly, engage in any capacity in any
Internet Web hosting business in any state in the United States or throughout
the world which is similar to and/or in competition with the Business or the
business of Buyer or Parent or their respective affiliates.
(B) The Company and the Shareholders understand that pursuant to
this Agreement they have received confidential and proprietary information of
Buyer and Parent, including, without limitation, information contained in the
Offering and other trade secrets. Neither the Company nor the Shareholders, nor
any of its officers, directors, employees, agents
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or contractors who received or learned of such confidential and proprietary
information shall at any time, either before or after the Closing Date, disclose
to any third party any such confidential or proprietary information of Buyer or
make use of any of such information except in evaluating whether to enter into
this Agreement. In connection with such evaluation, the Company and the
Shareholders may disclose such proprietary information to their legal and
financial consultants on a need to know basis on the condition that those
consultants are similarly prohibited from further disclosing such information as
provided herein.
(C) For a period commencing on the Closing Date and ending on the
second anniversary of the Closing Date, neither the Company, nor any of the
Shareholders, unless acting with the express written consent of the Buyer or
Parent, will, directly or indirectly, interfere with, solicit or endeavor to
entice away:
(i) any person who was an employee, subcontractor or
consultant of the Company, the Buyer, the Parent or any of their affiliates
during the twelve months immediately preceding the date of such solicitation,
interference or endeavor,
(ii) with respect to any Internet Web hosting business similar
to or in competition with the Business in which the Company, Buyer, Parent, or
any of their affiliates is or has been engaged on or after the date of this
Agreement (and in the case of Xxxxx only, and during the "Agreement Term" as
defined in his Employment Agreement with Buyer), any person or entity who was or
is a customer or client of the Company or of the Buyer or of the Parent, or
their respective affiliates, or any person or entity who requested or received a
proposal from Buyer, Parent or the Company, or their respective affiliates.
THE COMPANY AND THE SHAREHOLDERS, AND EACH OF THEM, EXPRESSLY
ACKNOWLEDGES, UNDERSTANDS AND AGREES (i) THAT REMEDIES AT LAW FOR ANY BREACH OF
THIS ARTICLE II, SECTION 1 WILL BE INADEQUATE, (ii) THAT THE DAMAGES RESULTING
FROM SUCH BREACH ARE NOT READILY SUSCEPTIBLE TO MEASUREMENT IN MONETARY TERMS
AND (iii) THAT BUYER AND/OR PARENT SHALL BE ENTITLED TO IMMEDIATE INJUNCTIVE
RELIEF AND MAY OBTAIN TEMPORARY AND PERMANENT ORDERS RESTRAINING ANY THREATENED
OR FURTHER BREACH OF THIS ARTICLE II, SECTION 1 BY THE COMPANY AND/OR THE
SHAREHOLDERS. THE COMPANY AND THE SHAREHOLDERS HAVE BEEN ADVISED BY THEIR
RESPECTIVE COUNSEL WITH RESPECT TO THE MEANING AND EFFECT OF THIS ARTICLE II,
SECTION 1.
SECTION 2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
(A) The representations and warranties of the parties herein
contained shall survive the closing of the purchase contemplated by this
Agreement, notwithstanding any investigation at any time made by or on behalf of
the other party, provided that any claims for indemnification in accordance with
Article II, Section 2 below with respect to any representation
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or warranty must be made (and will be null and void unless made) on or before
the date eighteen (18) months following the Closing Date (except in the case of
representations contained in Paragraphs (B)(vi), (G), (I) and (J) of Article I,
Section 2 hereof, which must be made within six (6) months following the
expiration of the applicable statute of limitations).
(B) The Company and the Shareholders, jointly and severally, hereby
agree to indemnify and hold Buyer, Parent, and their respective officers,
directors, stockholders, affiliates, employees, representatives and other agents
harmless from and against any and all claims, liabilities, losses, damages or
injuries, together with costs and expenses, including reasonable legal fees,
arising out of or resulting from (i) any breach, misrepresentation or material
omission of the representations and warranties made by the Company and/or the
Shareholders in this Agreement or in any Exhibit hereto or other documents
delivered in connection herewith, (ii) any breach in any material respect by the
Company and/or the Shareholders, or any of them, unless waived in writing by the
Buyer, of any covenant or agreement contained in or arising out of this
Agreement, or any other agreement delivered in connection herewith on the
Closing Date, including without limitation, the Employment Agreement to be
entered into at the Closing between Xxxxx and Parent, (iii) the Business
conducted by the Company prior to the Closing Date and any actions or events
associated therewith, (iv) any and all liabilities of the Company, other than
the Assumed Liabilities, and (v) any failure by the Shareholders or the Company
to comply with any provisions of the bulk sales or similar laws of any
jurisdiction which are applicable to this Agreement or the transactions
contemplated hereby.
Notwithstanding the foregoing, neither Shareholder shall be
responsible for more than his or her pro rata share of such liability based on
their respective stock ownership of the Company as of the Closing as set forth
on Exhibit A hereto. The obligations of the Company and the Shareholders
pursuant to this Paragraph (B) of this Section shall be limited to an aggregate
amount not in excess of the Purchase Price. Neither the Buyer nor the Parent
shall make any claim hereunder unless and until the aggregate amount of such
claim exceeds $25,000; provided, however, that if the aggregate amount of claims
by the Buyer or the Parent exceeds $25,000, the obligations of the Company and
Shareholders hereunder shall be with respect to the entire amount of such
claims.
(C) Buyer and Parent hereby agree to indemnify and hold the Company
and the Shareholders harmless from and against any and all claims, liabilities,
losses, damages or injuries, together with costs and expenses, including
reasonable legal fees, arising out of or resulting from (i) any breach,
misrepresentation or material omission in the representations and warranties
made by the Buyer and/or Parent in this Agreement, (ii) any breach in any
material respect by Buyer and/or Parent, unless waived in writing by the
Company, of any covenant or agreement of Buyer and/or Parent contained in or
arising out of this Agreement, or (iii) the Business as conducted by Buyer
and/or Parent, after the Closing Date.
(D) Any party claiming a right to indemnification hereunder (the
"Indemnified Party") shall give the other party from whom indemnification is
sought (the "Indemnifying Party") prompt written notice of any claim, demand,
action, suit, proceeding or discovery of fact upon which the Indemnified Party
intends to base a claim for indemnification under this Section
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2, provided, however, that no failure to give such notice shall excuse any
Indemnifying Party from any obligation hereunder except to the extent the
Indemnifying Party is materially prejudiced by such failure. The Indemnified
Party shall have full responsibility and authority with respect to the
disposition of any action, suit or proceeding brought against it; provided,
however, that it will not settle any such action, suit or proceeding without the
prior written consent of the Indemnifying Party, which will not be unreasonably
withheld or delayed. In the event any action, suit or proceeding is brought
against the Indemnified Party with respect to which the Indemnifying Party may
have liability under the indemnity agreements contained in Paragraphs (B) and
(C) of Article II, Section 2 hereof, the Indemnifying Party shall have the
right, without prejudice to the Indemnified Party's rights under this Agreement,
at the Indemnifying Party's sole expense, to be represented by counsel of its
own choosing and with whom counsel for the Indemnified Party shall confer in
connection with the defense of any such action, suit, or proceeding. The
Indemnified Party shall make available to the Indemnifying Party and its counsel
and accountants, all books and records of the Indemnified Party relating to such
action, suit or proceeding and the parties agree to render to each other such
assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such action, suit or proceeding.
(E) On the Closing Date, one hundred twenty thousand (120,000) of
the four hundred fifty thousand (450,000) shares of the Common Stock which is
part of the Purchase Price (the "Escrowed Amount") shall be delivered to the
escrow agent listed on Exhibit A (the "Escrow Agent") to be held in escrow in
accordance with the terms of a separate escrow agreement to be entered into
between the parties (the "Indemnity Escrow Agreement") on or prior to the
Closing Date. The Escrowed Amount will be held in escrow by the Escrow Agent as
security for any indemnification obligation of the Company and the Shareholders,
or any of them, to Buyer pursuant to the terms of Article II, Section 2,
Paragraph (B) of this Agreement. Indemnity claims by Buyer pursuant to said
Paragraph (B) shall be satisfied first by the reduction of the Escrowed Amount
until the termination of the Indemnity Escrow Agreement and thereafter by the
Company and the Shareholders, jointly and severally. The Escrowed Amount does
not constitute a limit on the liability of the Company and the Shareholders to
Buyer hereunder, it being understood and agreed that the Company and each of the
Shareholders, shall remain jointly and severally liable to satisfy the amount of
such claims which exceed the Escrowed Amount. The Escrowed Amount shall be held
by the Escrow Agent pursuant to the terms of the Indemnity Escrow Agreement
which shall be agreed upon and entered into by the Escrow Agent, the Company,
the Shareholders and Buyer on or before the Closing Date. Among other things,
the Indemnity Escrow Agreement will provide that on March 31, 2000, the Escrow
Agent shall deliver to the Company or its designee the Common Stock then being
held by the Escrow Agent, if any, as has not previously been applied pursuant to
the terms of said Indemnity Escrow Agreement, unless an indemnification claim by
Buyer against the Company and/or the Shareholders is then pending.
SECTION 3. AUDIT FEES. If, as and when the Closing occurs, Buyer
will pay 50% of the accounting fees incurred by the Company in obtaining the
audited financial statements described in Article I, Section 2(C), in excess of
$40,000, inclusive of fees paid to Tai Sung, CPA and Xxxxxx, Xxxx & Worlin.
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SECTION 4. COMPLIANCE WITH '34 ACT. If, as and when Parent closes on
an initial public offering of its common stock, Parent shall make all required
filings under the Securities and Exchange Act of 1934 with respect to the Common
Stock.
ARTICLE III
CLOSING AND DELIVERIES AT CLOSING
SECTION 1. CLOSING. The closing of the purchase and sale of the
transaction contemplated herein shall take place on February 4, 1999 (the
"Closing"), at the offices of Buyer's counsel, McCarthy, Fingar, Xxxxxxx, Xxxxxx
and Xxxxx, L.L.P., located at 00 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxx Xxxxxx, XX
00000-0000 at 10:00 a.m. The deliveries described in Section 2 and 3 of this
Article III will take place at the Closing.
SECTION 2. DELIVERIES BY THE COMPANY AND THE SHAREHOLDERS. On the
Closing Date, the Company and the Shareholders will deliver, or cause to be
delivered, to the Buyer the following:
(A) Such instruments of assignment, transfer and/or conveyance
executed by the Company, and the Shareholder where applicable, as Buyer may
reasonably request in order to assign, convey and transfer to Buyer good and
marketable title to all of the Purchased Assets, free and clear of all liens,
claims, encumbrances and other charges, including, without limitation, a Xxxx of
Sale.
(B) Physical delivery of all Tangible Assets by making them
available at the Sites listed on Exhibit A, together with any and all
warranties, manuals, instructions, and other literature in the possession of the
Company or the Shareholders relating to the ownership or operation of the
Tangible Assets. In addition, such notices to telephone companies and others
required to transfer the Company's telephone and facsimile numbers, e-mail
addresses and domain addresses, used in the Business to Buyer and physical
delivery of all books, files and records concerning the Purchased Assets.
(C) Physical delivery of all original or certified copies of
documentation concerning the Intellectual Property, including, without
limitation, registrations and applications of any patents, trademarks or service
marks, original artwork, data bases, computer programs and software.
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(D) The following corporate documentation:
(i) The Company's Articles or Certificate of Incorporation
certified as of a date within thirty (30) days prior to the Closing Date by the
Secretary of State of the state of the Company's organization;
(ii) Good Standing Certificates as of date within thirty (30)
days prior to the Closing Date from the Secretary of State of the state of the
Company's organization and each other state in which the Company is qualified to
do business;
(iii) The Company's By-Laws certified as of the Closing Date
by the President or Secretary of the Company as being in full force and effect
and unmodified; and
(iv) Corporate Resolutions of the Company's Board of Directors
and the Shareholders (if required by the Company's By-Law's or applicable law),
approving this Agreement and all the transactions contemplated hereby, certified
by the President or Secretary of the Company as being in full force and effect
and unmodified.
(E) The legal opinions of counsel to the Company and the
Shareholders, in a form acceptable to Buyer and its counsel.
(F) Evidence in form satisfactory to Buyer and its counsel that the
Tax Liabilities, if any, have been paid off and satisfied.
(G) The Indemnity Escrow Agreement duly executed by the Company and
the Revenue Shortfall Escrow Agreement executed by the Company and Xxxxx.
(H) A copy of the Certificate of Amendment duly executed by the
President and Secretary of the Company which is to be filed in the Secretary of
State's Office for the State of the Company's incorporation pursuant to Article
I, Section 2, Paragraph (B) (iii) hereof.
(I) Copies of written proof in form and substance satisfactory to
Buyer and its counsel that the Company will no longer do business under any of
the trade names listed on Exhibit B as required pursuant to Article I, Xxxxxxx
0, Xxxxxxxxx (X) (iii) hereof.
(J) The Company and the Shareholders shall use their reasonable best
efforts to deliver, in a timely fashion after the Closing, a Non-Disclosure and
Intellectual Property Agreement in a form to be provided by Buyer, executed by
each employee of the Company who will be employed by Buyer or its affiliate
after the Closing.
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(K) Notices of termination of all employees of the Company employed
in connection with Business satisfactory to Buyer, which notices will be
delivered to the employees at such time as Buyer determines which employees to
retain.
(L) An employment agreement between Xxxxx and Buyer ("Employment
Agreement") executed by Xxxxx.
(M) Assignment and Assumption of Lease for the site listed on
Exhibit A.
(N) Keys to all entrances and possession of the Site listed on
Exhibit A.
(O) Estoppel Certificate and Consent to Assignment concerning the
Lease for the site listed on Exhibit A executed by Landlord and the Company.
(P) A Subscription Agreement duly executed by the Company covering
the issuance of the Common Stock (the "Subscription Agreement"), substantially
in the form as annexed to the Offering.
(Q) A Right of First Refusal Agreement duly executed by the Company
limiting the right of the Company to transfer the Common Stock (the "Right of
First Refusal Agreement"), substantially in the form as annexed to the Offering.
(R) Such notice or notices as Buyer may reasonably request in order
to notify the customers included on the Customer List that the Business has been
sold to Buyer.
(P) Consent to a press release in form satisfactory to the Company
and Buyer relating to this Agreement and the transactions contemplated hereby.
(Q) Stock Power executed in blank by the Company for the shares of
Common Stock to be held by the Escrow Agent.
(R) Trademark Assignment executed by the Company.
SECTION 3. DELIVERIES BY THE BUYER.
On the Closing Date, the Buyer will deliver, or cause to be
delivered, to the Company and the Shareholder the following:
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(A) The Purchase Price by delivery of certificates for the four
hundred fifty thousand (450,000) shares of Common Stock and Four Million Nine
Hundred Eighty-four Thousand Five Hundred Sixteen Dollars ($4,984,516) as
calculated on Exhibit A hereto, by cash, or certified or official bank check
payable to the order of the Company, or by wire transfer of federal funds to the
account of the Company, as the Company and Shareholder shall direct in writing
on or before the Closing Date; provided, however, Buyer may, upon written
agreement of all parties hereto, deduct from the cash portion of the Purchase
Price and pay directly amounts due any creditor of the Company, including,
without limitation, the Tax Liabilities (but excluding any amounts due for any
of the Assumed Liabilities), in which event, evidence of such payment shall be
presented at the Closing. Notwithstanding the foregoing, one hundred twenty
thousand (120,000) of the four hundred fifty thousand (450,000) shares of Common
Stock shall be delivered to the Escrow Agent to be held in accordance with the
terms of the Indemnity Escrow Agreement, and one hundred fifty thousand
(150,000) shares of Common Stock shall be delivered to the Escrow Agent to be
held in accordance with the terms of the Revenue Shortfall Escrow Agreement.
(B) Such instruments of assignment and assumption executed by the
Buyer, as the parties hereto reasonably may determine necessary to effectuate
the assignment to the Buyer of the Business Agreements and the assumption by
Buyer of the Assumed Liabilities.
(C) The Indemnity Escrow Agreement and the Revenue Shortfall Escrow
Agreement, each duly executed by the Buyer and the Escrow Agent.
(D) The Employment Agreement executed by Buyer.
(E) Resolution of the Board of Directors of Buyer and Parent,
authorizing the execution of this Agreement and other documents contemplated
hereby and the transactions contemplated hereby.
(F) Certificates issued by Parent to the Company or its designee,
representing the Common Stock for that portion of the Purchase Price to be paid
in Common Stock, which certificate shall be properly legended to reflect that
the Common Stock represented thereby has not been registered under the
Securities Act of 1933, as amended, and are subject to the terms of the Right of
First Refusal Agreement.
(G) The Right of First Refusal Agreement duly executed by Parent.
(H) The Subscription Agreement duly executed by Parent.
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(I) Articles of Incorporation of Buyer and Parent, together with any
amendments thereto through the Closing Date; copy of a Good Standing Certificate
as of a date within sixty (60) days prior to Closing from the Secretary of State
of Delaware; and a filing receipt from the Secretary of State of Maryland of
Buyer, evidencing that Buyer was duly organized under the laws of the State of
Maryland within thirty (30) days prior to the Closing.
(J) The By-Laws of Buyer and Parent certified as of the Closing Date
by their respective President or Secretary as being in full force and effect and
unmodified.
(K) Legal Opinion of Counsel to Buyer and Parent.
ARTICLE IV
OBLIGATIONS FOLLOWING CLOSING
SECTION 1. FURTHER COOPERATION. The Company and the Shareholders
will, at any time and from time to time after the Closing Date, execute and
deliver such further instruments of conveyance, transfer and license, and take
such additional actions as Buyer, Parent or its successor and/or assigns, may
reasonably request, to effect, consummate, confirm or evidence the transfer to
Buyer of the Purchased Assets pursuant to this Agreement.
SECTION 2. TRANSITION ASSISTANCE AND ADJUSTMENTS.
(A) The Company shall reasonably cooperate and provide assistance to
the Buyer as shall be reasonably appropriate during the transition of the
Business and the Purchased Assets from the Company to the Buyer, or its
successors and/or assigns, after the Closing Date. All assistance shall be made
promptly when available after any request by Buyer.
(B) Buyer and its successors and/or assigns shall have the right at
any time and from time to time upon reasonable notice and during normal business
hours to examine and make copies of all corporate books, records and other
documents of the Company relating to the Business and generated prior to the
Closing Date, which documents will be maintained by the Company and the
Shareholders for a period of three (3) years after the Closing Date.
(C) The Company and the Shareholders will reasonably cooperate with
Buyer in notifying the customers included on the Customer List that the Business
has been sold to Buyer, including, without limitation, executing any additional
notices after the Closing which Buyer may reasonably request. Neither the
Company nor the Shareholders will, directly or
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indirectly, take any action which is designed or intended to have the effect of
discouraging customers, suppliers or vendors and other business associates of
the Business, from maintaining the same business relationships with Buyer or its
successors and/or assigns after the Closing Date as were maintained with the
Company and/or the Shareholders with respect to the Business prior to the
Closing Date.
(D) Following the Closing, the Company and the Shareholders or any
affiliate of the Company (as defined under federal securities laws), shall not
use the name "Digiweb" or any confusingly similar name to said trade name in any
trade or business, other than as an employee of Buyer or an affiliate of Buyer.
(E) Following the Closing, the Buyer will collect the accounts
receivable of the Company existing as of the Closing Date, and will remit all
collections to the Company without deducting a fee. Notwithstanding the
foregoing, if more than ordinary course of business efforts are required to
collect any accounts receivable over 90 days, Buyer may, with the prior approval
of the Company, expend such additional efforts and retain a fee equal to 25% of
the collections on such accounts. The Company agrees not to contact any
customers to whom the accounts receivable relate without the prior written
consent of Buyer. During the first 60 days after the Closing, receivables
collected with respect to a Customer shall first be applied to the Company's
receivables for that Customer only to the extent the Company's receivables with
respect to such Customer were less than 60 days old as of the Closing, next the
balance of such amount collected from such Customer, if any, shall be retained
by Buyer to be applied against receivables of such Customer arising after the
Closing, and then the balance remaining, if an, will be delivered to the Company
to be applied against any receivable of that Customer which was greater than 60
days old as of the Closing. All other receivables collected with respect to a
Customer shall, to the extent the Buyer has receivables with respect to such
Customer, first be applied against Buyer's receivables for that Customer and the
balance of such amount collected, if any, shall be applied to the Company's
outstanding receivables from such Customer.
(F) If Buyer or Parent determine that any additional audited
financial statements of the Company are required for any period prior to
Closing, the Company and Shareholders shall reasonably cooperate and provide
assistance in connection with the preparation and audits of such financial
statements of the Company conducted by Buyer and/or Parent after the Closing,
including, without limitation, making Company's internal accounting and auditing
personnel, as well as its external accounting personnel, available to Buyer, its
affiliate and/or its auditors upon request. The expense of any such audit shall
be paid by Buyer.
(G) Within thirty (30) days after the Closing Date, the parties will
make a determination of (i) the actual Deferred Revenue on an accrual basis as
at the Closing Date; and (ii) the Expenses allocable to periods prior to and
subsequent to the Closing Date. An adjustment shall be made between the parties
to the extent the Closing Date amount of the Deferred Revenue and Expenses is
more or less than the respective actual amounts thereof computed after the
Closing. The aforesaid adjustments shall be netted and the party owing the
netted amount shall
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make payment to the other party of said amount within ten (10) days of such
agreed upon calculation.
ARTICLE V
MISCELLANEOUS
SECTION 1. GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by the laws of the State of New York. The parties hereto submit and
consent to the exclusive jurisdiction of the state courts of the State of New
York in the Counties of New York and Westchester and the federal courts located
therein with respect to any legal actions relating to this Agreement, or any
other agreements delivered in connection herewith, between the Company and/or
the Shareholders, on the one hand, and the Buyer and/or Parent, on the other
hand, and any transactions contemplated thereby.
SECTION 2. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
SECTION 3. CONFIDENTIALITY. The Company and the Shareholders, on the
one hand, and the Buyer and Parent, on the other hand, each agree not to
disclose or use any information acquired by it about the other party during the
course of the negotiations of this Agreement and the transactions to which it
relates which is confidential in nature or not otherwise generally available to
the public without the prior written consent of such other party unless required
to do so by applicable law or by order of a court of competent jurisdiction.
Each party shall be liable for any breach by its respective employees, officers,
directives, shareholders, agents and/or contractors of the provisions of this
Section.
SECTION 4. AMENDMENTS. This Agreement supersedes any prior contracts
relating to the subject matter hereof between the Buyer, Parent, the Company and
the Shareholders. This Agreement cannot be changed, modified or amended and no
provision or requirement hereof may be waived without the consent in writing of
the parties hereto.
SECTION 5. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. Each provision of this Agreement shall be
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deemed to be the agreement of the parties hereto to the full extent that the
power to enter into such provisions shall have been conferred on the parties by
law.
SECTION 6. BENEFIT; ASSIGNMENT. This Agreement is binding upon and
inures to the benefit of the parties, their successors and permitted assigns.
This Agreement may not be assigned or the duties of the parties hereunder
delegated to others without the prior written consent of all parties hereto,
except that Buyer may assign its rights, duties and obligations hereunder to
Parent or an affiliate of Buyer or Parent without the Company's or the
Shareholders' consent.
SECTION 7. CONSTRUCTION. All exhibits annexed hereto are hereby
incorporated herein by reference and made a part of this Agreement. Whenever
used in this Agreement and the context so requires, the singular shall include
the plural and the plural shall include the singular.
SECTION 8. IMPUTED KNOWLEDGE. Anywhere in this Agreement where it
refers to the "knowledge of" the Company, or words of similar import, the
knowledge of any and all of the Shareholders shall be imputed to be the
knowledge of the Company. Anywhere in this Agreement where it refers to the
"knowledge of" the Buyer or the Parent, or words of similar import, the
knowledge of Xxxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxx shall be imputed to be the
knowledge of the Buyer and the Parent, respectively.
SECTION 9. NOTICE. Any notice required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed by registered mail, postage prepaid: if to the Company at
its address set forth on the first page hereof, with a copy to Xxx Xxxxx, Esq.,
Cameron & Xxxxxxxxx LLP, 00 Xxxxxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000, or
at such other address as the Company or any of the Shareholders shall designate
by notice to Buyer, and if to Buyer or Parent at 000 Xxxxx Xxxxxx, Xxxxxxxxx, XX
00000, with a copy to Xxxxx X. Xxxxx, General Counsel, Sage Networks, Inc., 00
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxx Xxxxxx, XX 00000, or at such other address as
it shall designate by notice to the Company and the Shareholders.
(SIGNATURES APPEAR ON FOLLOWING PAGE)
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[SIGNATURE PAGE OF ASSET PURCHASE AGREEMENT BETWEEN DIGIWEB,
INC. (A MARYLAND CORPORATION), AND DIGIWEB, INC. (A DELAWARE CORPORATION),
DATED AS OF FEBRUARY 4, 1999]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
DIGIWEB, INC. (a MARYLAND CORPORATION)
By:/s/Xxxxxxx X. Xxxxxxx
_____________________________________
Xxxxxxx X. Xxxxxxx, Chairman and Vice President
SAGE NETWORKS, INC., only with respect to
Article I, Sections 3 and Article II, Section
2(C) and Section 3
By:/s/Xxxxxxx X. Xxxxxxx
_____________________________________
Xxxxxxx X. Xxxxxxx, Co-Chairman
DIGIWEB, INC. (a DELAWARE CORPORATION)
By: /s/Yi Xxx Xxxxx
_____________________________________
Yi Xxx Xxxxx, President
SHAREHOLDERS:
/s/ Yi Xxx Xxxxx
_____________________________________
Yi Xxx Xxxxx, Shareholder
/s/ Xxxxx X. Xxxx
_________________________________________
Xxxxx X. Xxxx, Shareholder
-23-
24
DESCRIPTION OF EXHIBITS:
Exhibit A - Basic Provisions
Exhibit B - Officers; Directors; Trade Names; Jurisdictions
Exhibit C-1 - Forms of Business Agreements with Customers
Exhibit C-2 - Oral Business Agreements; Business Agreements with
Vendor/Service Providers, Resellers, Etc.
Exhibit C-3 - Leases
Exhibit C-4 - Claims or Disputes Under Business Agreements
Exhibit C-5 - Consents to Transfer or Assign Not Obtained
Exhibit D - Accounts Receivable
Exhibit E - Tangible Assets
Exhibit E-1 - Exceptions to Condition of Tangible Assets
Exhibit F - Intellectual Property
Exhibit F-1 - Exceptions to valid and fully paid Licensed Software
Exhibit G - Customer List and Related Information
Exhibit G-1 - Customer Terminations
Exhibit H - Financial Statements
Exhibit I - Bad Debts and Tax Liabilities of the Company
Exhibit J - Assumed Liabilities
Exhibit J-1 - Year 2000 Issues
Exhibit K - Existing Employment Agreements, Labor or Collective
Bargaining Agreements, Employee Benefit or Welfare
Plans, Description of Employees
Exhibit L - Excluded Assets
Exhibit M - Liens; Encumbrances
In accordance with Item 601(b)(2) of Regulation S-K all exhibits other than
Exhibit A have been omitted. The Company hereby agrees to furnish supplementally
a copy of any omitted exhibit to the Commission upon request.
25
EXHIBIT A
TO
ASSET PURCHASE AGREEMENT
BETWEEN
DIGIWEB, INC. (MARYLAND)
AND
DIGIWEB, INC. (DELAWARE)
BASIC PROVISIONS
1. NAME OF BUYER: Digiweb, Inc. (a Maryland Corporation)
2. NAME OF COMPANY: Digiweb, Inc. (a Delaware Corporation)
(a) NAMES, ADDRESSES AND STOCK OWNERSHIP OF SHAREHOLDERS OF COMPANY:
Name Number of Shares (Type)
---- -----------------------
Yi Xxx Xxxxx 700
Xxxxx X. Xxxx 300
Total Outstanding Shares 1000
(b) STATE OF INCORPORATION of COMPANY: Delaware
(c) AUTHORIZED OFFICERS of the COMPANY: Yi Xxx Xxxxx, President
DianeX. Chen, Secretary,
Treasurer and Vice President
(d) ADDRESS OF EACH SITE FROM WHICH THE COMPANY CONDUCTS THE BUSINESS:
0000 Xxxxxxx Xxxxxx, Xxxxx 000, 000-000 Xxxxxxx
Xxxx, XX 00000
3. RESIDENCE ADDRESSES of SHAREHOLDER: Yi Xxx Xxxxx
Xxxxx X. Xxxx
26
PURCHASE PRICE:
Cash at Closing: (i) $5,000,000; plus
(ii) $53,560.00, representing an amount paid by the Company
prior to the Closing for the capital improvements listed on
the schedule attached hereto which capital improvements are
physically in the Site listed in item 2(d) above on this
Exhibit A; plus
(iii) $14,307.00* for expense adjustments ("Expenses"); less
(iv) $66,351.00* representing the estimated amount for
deferred revenue of the Company as of the Closing ("Deferred
Revenue"); less
(v) $17,000 (Seller's contribution towards capital
improvements).
*Subject to post-closing adjustment in accordance with Article
IV, Section 2(G).
TOTAL CASH: $ 4,984,516
Stock at Closing: 450,000 shares of Common Stock
Ea Parent will pay to the Company an additional amount (the "Earn-Out Amount")
if both (i) the calendar year 1999 audited sales revenue of the Business ("'99
Sales Revenue") is at least $250,000 higher than the 1998 sales revenue of the
Business as stated on the Company's 1998 financial statement annexed hereto as
Exhibit H ("'98 Sales Revenue") and (ii) if the calendar year 1999 earnings of
the Business before interest, taxes, depreciation and amortization ("EBITDA") is
greater than or equal to 30% of the '99 Sales Revenue. In the event both
conditions set forth in clauses "(i)" and "(ii)" of the preceding sentence are
satisfied, then the Earn-Out Amount will be $250,000 if the '99 Sales Revenue is
at least $250,000 but less than $500,000 higher than the '98 Sales Revenue; the
Earn-Out Amount will be $500,000 if the '99 Sales Revenue is at least $500,000
but less than $750,000 higher than the '98 Sales Revenue; the Earn-Out Amount
will be $750,000 if the '99 Sales Revenue is at least $750,000 but less than
$1,000,000 higher than the '98 Sales Revenue; and the Earn-Out Amount will be
$1,000,000 if the '99 Sales Revenue is at least $1,000,000 higher than the '98
Sales Revenue. The Earn-Out Amount, if earned as provided above, will be paid to
the Company within 30 days of Parent releasing its 1999 audited year-end
financial statements. During the Earn-Out period (i.e, Closing Date through
December 31, 1999), Buyer and/or Parent, or an affiliate of Buyer or Parent,
shall operate the Business as a stand-alone entity, either as a division or
wholly owned subsidiary of Parent, as Parent may determine in its sole
discretion.
5. INTENTIONALLY OMITTED
6. COMPANY AND SHAREHOLDER'S BROKER: Xxxxxxx & Associates, L.P.
27
7. BUYER'S BROKER: AmTech Associates
8. ESCROW AGENT: McCarthy, Fingar, Xxxxxxx,
Xxxxxx & Xxxxx, L.L.P.
