1
Exhibit 2.9
================================================================================
ASSET PURCHASE AGREEMENT
Dated March 8, 1999
among
Sage Networks Acquisition Corp.,
a Delaware corporation,
and
Sage Networks, Inc.,
a Delaware corporation,
and
Interliant, Inc.,
a Texas corporation,
and
Each of the Shareholders listed on Attachment B hereto
================================================================================
2
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...................................................... 1
ARTICLE II PURCHASE AND SALE OF ASSETS; REPAYMENT OF WOLF NOTES............ 1
SECTION 2.01 PURCHASE OF ASSETS ......................................... 1
SECTION 2.02 ASSUMPTION OF LIABILITIES .................................. 2
SECTION 2.03 WOLF NOTES ................................................. 2
ARTICLE III PURCHASE PRICE................................................. 2
SECTION 3.01 PURCHASE PRICE ............................................. 2
ARTICLE IV CLOSING......................................................... 3
SECTION 4.01 THE CLOSING DATE ........................................... 3
SECTION 4.02 CERTIFICATES, INSTRUMENTS OF TRANSFER, ETC ................. 3
ARTICLE V REPRESENTATIONS AND WARRANTIES................................... 4
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF SELLER ................... 4
SECTION 5.02 REPRESENTATIONS AND WARRANTIES OF BUYER AND SAGE ........... 15
SECTION 5.03 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS ............. 20
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SAGE AND
SELLER AND SHAREHOLDERS.......................................................21
SECTION 6.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SAGE ...... 21
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDERS ....... 24
ARTICLE VII DOCUMENTS TO BE DELIVERED ON CLOSING DATE...................... 26
SECTION 7.01 DOCUMENTS TO BE DELIVERED BY SHAREHOLDERS AND
SELLER ON CLOSING DATE ..................................... 26
SECTION 7.02 DOCUMENTS TO BE DELIVERED BY BUYER ON CLOSING DATE ......... 27
ARTICLE VIII FURTHER COVENANTS AND AGREEMENTS OF SELLER, SHAREHOLDERS,
BUYER AND SAGE............................................................. 27
SECTION 8.01 FURTHER COVENANTS AND AGREEMENTS OF SHAREHOLDERS
AND SELLER ................................................. 27
SECTION 8.02 CONSENTS TO ASSIGNMENTS; PERMITS ........................... 31
SECTION 8.03 SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC ............... 32
SECTION 8.04 INSPECTION OF RECORDS ...................................... 35
SECTION 8.05 EMPLOYEE MATTERS ........................................... 35
SECTION 8.06 RELEASE OF GUARANTIES ...................................... 35
SECTION 8.07 TAX REPORTING .............................................. 36
SECTION 8.08 SAGE OPTIONS ............................................... 36
SECTION 8.09 ESCROW DEPOSIT ............................................. 37
ARTICLE IX MISCELLANEOUS................................................... 38
SECTION 9.01 EXPENSES ................................................... 38
SECTION 9.02 TERMINATION ................................................ 38
SECTION 9.03 BENEFIT; ASSIGNMENT ........................................ 38
SECTION 9.04 GOVERNING LAW; JURISDICTION ................................ 38
SECTION 9.05 BREACH; FAILURE OF CONDITION ............................... 39
SECTION 9.06 NOTICES, ETC ............................................... 39
SECTION 9.07 HEADINGS ................................................... 40
SECTION 9.08 COUNTERPARTS ............................................... 40
SECTION 9.09 ENTIRE AGREEMENT ........................................... 40
SECTION 9.10 WAIVER; AMENDMENT; MODIFICATION ............................ 40
SECTION 9.11 SEVERABILITY ............................................... 41
i
3
* * *
ATTACHMENTS
Attachment A Definitions
Attachment B List of Signing Shareholders
* * *
EXHIBITS
Exhibit A-1 Assignment Agreement
Exhibit A-2 Form of Employment Agreement
Exhibit A-3 Form of Shareholders Agreement
Exhibit A-4 Form of Promissory Note of Sage
Exhibit A-5 Form of Incentive Stock Option Award Agreement
Form of Nonqualified Stock Option Award Agreement
* * *
DISCLOSURE EXHIBITS
Exhibit 5.01(a) Subsidiaries of Seller
Exhibit 5.01(d)(i) Assigned Agreements
Exhibit 5.01(d)(iii) Encumbrances on Business Property
Exhibit 5.01(d)(iv) Purchased Assets (Site Operations and Receivables,
Fixed Assets and Other Property)
Exhibit 5.01(e) Absence of Litigation against Seller
Exhibit 5.01(f) Absence of Conflicts
Exhibit 5.01(g) Other Agreements to Sell Assets or Stock
Exhibit 5.01(i) Seller's Financial Statements
Exhibit 5.01(j) Absence of Undisclosed Liabilities and Obligations
Exhibit 5.01(k) Tax Matters
Exhibit 5.01(m)(i) Employee Benefit Information (Plans, Agreements and
Liabilities)
Exhibit 5.01(m)(iii) Employee Benefits Information (Absence of Trigger or
Acceleration of Obligations)
Exhibit 5.01(m)(iv) Overdue 401(k) Contributions
Exhibit 5.01(m)(v) Absence of Compliance with Laws
Exhibit 5.01(n) Labor Disagreements
Exhibit 5.01(p) Insurance Policies
Exhibit 5.01(q)(i) Intangible Assets and Absence of Encumbrances or
Conflicts Regarding Intellectual Property
Exhibit 5.01(q)(ii) Customer Data
Exhibit 5.01(q)(iii) Seller's Confidentiality Agreements
ii
4
Exhibit 5.01(r) Compensation and Status of Employees
Exhibit 5.01(s) Compliance with Laws
Exhibit 5.01(t) Transactions with Certain Persons
Exhibit 5.01(u) Absence of Customer Terminations
Exhibit 5.01(v) Absence of Certain Changes or Events since December 31,
1998
Exhibit 5.02(g) Absence of Sage Litigation
Exhibit 5.02(h) Sage Compliance with Laws
Exhibit 5.02(n) Absence of Sage Changes or Events since December 31,
1998
Exhibit 5.02(p) Absence of Sage Undisclosed Liabilities
Exhibit 5.03(b) Shareholder Approvals
Exhibit 5.03(c) Absence of Shareholder Conflicts
Exhibit 5.03(f) Shareholder Affiliated Transactions
Exhibit 6.01(j) Persons to be party to Employment Agreements
Exhibit 8.05 Employee Matters
Exhibit 8.08 List of Holders of Seller Options
Exhibit Def-1 Excluded Assets
iii
5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated March 8, 1999 (this
"Agreement") is by and among Sage Networks Acquisition Corp., a Delaware
corporation ("Buyer"), Sage Networks, Inc., a Delaware corporation ("Sage"),
Interliant, Inc., a Texas corporation ("Seller"), and each of the shareholders
of the Seller listed on Attachment B hereto ("Shareholders").
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Business as a going concern from Seller, certain properties, rights and assets
of Seller as described herein, for the consideration provided herein; and
WHEREAS, Buyer is a wholly owned subsidiary of Sage; and
WHEREAS, Shareholders are the holders of all of the issued and
outstanding shares of capital stock of Seller;
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the representations, warranties, conditions and
promises hereinafter contained, Seller, Shareholders, Buyer and Sage hereby
represent, warrant and agree as follows:
ARTICLE I
Definitions
For the purposes hereof, capitalized terms used herein shall have
the respective meanings assigned to them in Attachment A or elsewhere herein.
References in this Agreement to Sections, subsections, paragraphs, clauses,
Attachments and Exhibits are to Sections, subsections, paragraphs, clauses,
Attachments and Exhibits in or to this Agreement unless otherwise indicated.
ARTICLE II
Purchase and Sale of Assets; Repayment of Wolf Notes
Section 2.01 Purchase of Assets. In reliance on the representations,
warranties and covenants contained herein and subject to the terms and
conditions hereof, on the Closing Date, Seller will (i) assign to Buyer (in the
case of the Leases, by instruments of transfer suitable for recording) all of
Seller's right, title and interest under the Assigned Agreements and (ii) sell,
convey, assign, transfer and deliver to Buyer, and Buyer will purchase from
Seller, each of the other Purchased Assets by deeds, bills of sale or other
appropriate instruments of transfer and in the case of the Intellectual
Properties, by instruments of assignment suitable for recording at the U.S.
Patent and Trademark Office where applicable.
6
Section 2.02 Assumption of Liabilities.
(a) In reliance on the representations, warranties and covenants
contained herein and subject to the terms and conditions hereof, on the Closing
Date, Buyer shall assume the Assumed Liabilities and Sage shall assume the Wolf
Notes in an aggregate principal amount not to exceed $15,900,000 (Fifteen
Million Nine Hundred Thousand Dollars) and interest accrued and unpaid thereon
from and after the Closing Date which assumption by Sage shall be effective from
and after the Closing Date.
(b) On and after the Closing Date, the Seller shall be and remain
liable for all liabilities of the Seller except the Assumed Liabilities and the
liabilities under the Wolf Notes assumed by Sage pursuant to Section 2.02(a).
Section 2.03 Wolf Notes. On the Closing Date, Sage shall repay in
full the Wolf Note that is payable to Xxxxxx Xxxx in the principal amount of
$7,900,000 (Seven Million Nine Hundred Thousand Dollars) which repayment shall
not exceed $7,900,000 (Seven Million Nine Hundred Thousand Dollars) by wire
transfer of immediately available funds to such account as may be designated in
writing by Xxxxxx Xxxx prior to the Closing Date. On the Closing Date, Sage
shall deliver its promissory note (the "Sage Note") to Xxxxxx Xxxx in the form
attached as Exhibit A-4 in exchange for the promissory note of Seller payable to
Xxxxxx Xxxx assumed under Section 2.02.
ARTICLE III
Purchase Price
Section 3.01 Purchase Price.
(a) The purchase price to be paid by Buyer for the Purchased Assets
shall consist of, the assumption of the obligations of Seller under the Assigned
Agreements, the assumption of the Assumed Liabilities, cash in the aggregate
amount of $100,000 (the "Cash Consideration") which shall be paid by wire
transfer of immediately available funds to the Seller on the Closing Date and
the delivery of the Agreement to Deliver Shares (the "Purchase Price"). All
references to number of shares in this Section 3.01 shall be appropriately
adjusted if between the date hereof and the date for determining the number of
additional shares to be delivered, the outstanding shares of Sage Common Stock
are reclassified into a greater or lesser number of shares by way of stock
dividend, stock split, reverse stock split or other reclassification.
(b) Adjustment to Purchase Price.
(i) If the Fair Market Value of the aggregate issued and
outstanding shares of the Common Stock determined on the date of the occurrence
of a Liquidity Event (excluding the shares of Common Stock issued by Sage in
connection with the Liquidity Event, if any) is less than $300,000,000 and Sage
consummates the Liquidity Event, Sage shall deliver to the holders of rights
under the Agreement to Deliver Shares other than Broadview Holding LLP (the
"Distributees"), in the
2
7
percentages set forth in Schedule I of the Agreement of Deliver Shares under the
heading "Section 4 Percentage", additional shares of Common Stock such that the
aggregate value of the Common Stock delivered or deliverable to the Distributees
pursuant to this Agreement and the Agreement to Deliver Shares (excluding for
this purpose, Unconverted Option Shares) is equal to $34,976,222 (determined at
the Fair Market Value of the shares of Common Stock determined on the date of
the Liquidity Event) but in no event shall more than 6,236,455 shares of Common
Stock in the aggregate be delivered or deliverable to all Distributees pursuant
to this Agreement and the Agreement to Deliver Shares (excluding, for this
purpose, Unconverted Option Shares).
(ii) If a Liquidity Event does not occur on or before the
first anniversary of the date of this Agreement, Sage shall deliver to the
Distributees, in the percentages set forth in Schedule I of the Agreement of
Deliver Shares under the heading "Section 4 Percentage", additional shares of
Common Stock such that the aggregate number of shares of Common Stock delivered
or deliverable to the Distributees is equal to 6,236,455 shares of Common Stock
in the aggregate delivered or deliverable to all Distributees pursuant to this
Agreement and the Agreement to Deliver Shares(excluding, for this purpose,
Unconverted Option Shares).
(iii) Any additional shares of Common Stock to be delivered in
accordance with (x) Section 3.01(b)(i) shall be delivered in a timely fashion to
permit each Distributee to participate in such Liquidity Event but in any event
within 20 days following the occurrence of the Liquidity Event and (y) Section
3.01(b)(ii) shall be delivered on the first business day after the first
anniversary of the date of this Agreement.
ARTICLE IV
Closing
Section 4.01 The Closing Date. The closing of the purchase and sale
of the Purchased Assets and the assumption of the Assumed Liabilities (the
"Closing") shall take place at the offices of Xxxxx Xxxxxxxxxx LLP, 0000 Xxxxxx
xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, at 10:00 a.m. New York time, on the fifth
business day following the date on which the applicable requirements of the HSR
Act shall have been met, or such other time, date or place as Seller,
Shareholders and Buyer may mutually agree (the "Closing Date").
Section 4.02 Certificates, Instruments of Transfer, Etc.
(a) Seller agrees that the sale and transfer of the Purchased Assets
shall be made by the Assignment Agreement, deeds, bills of sale and other
instruments of transfer reasonably acceptable to Buyer, including, without
limitation, to the extent applicable in the case of the Intellectual Properties,
instruments of assignment in suitable form for recording with the U.S. Patent
and Trademark Office. Seller and Buyer agree to use reasonable efforts to
minimize any sales, use, transfer and similar transaction Taxes
3
8
and other transaction costs, provided that such efforts shall not expose Seller,
any Shareholder or Buyer to any additional cost or risk. Such Taxes, if any,
shall be paid as and when due by Seller.
(b) From and after the Closing Date, Buyer shall have the right and
the authority to collect for its own account all Receivables which shall be
transferred to Buyer as provided herein and to endorse with the name of Seller
any checks received on account of such Receivables. From and after the Closing
Date, Seller will, promptly following receipt thereof, transfer and deliver to
Buyer any cash or other property that it may receive in respect of such
Receivables and until so transferred and delivered the same shall be deemed to
be held in trust for Buyer. From and after the Closing Date, Buyer shall also
have the right to compromise, settle and obtain the release of all claims and
liabilities related to the Assigned Agreements and to open all mail and packages
and receive all communications and deliveries addressed to Seller at the Sites.
(c) Buyer agrees to assume the Assumed Liabilities by the execution
and delivery to it of the Assignment Agreement.
(d) Seller and Shareholders hereby agree that, from time to time at
Buyer's request and without further consideration, Seller and Shareholders will
do, execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all and any such further acts, conveyances,
transfers, assignments, powers of attorney, instruments and assurances as may be
reasonably required to more effectively grant, convey, assign, transfer and set
over to and vest Buyer any and all of the Purchased Assets.
(e) Buyer hereby covenants and agrees that, from time to time at
Seller's or Shareholders' request and without further consideration, Buyer will
do, execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all and any such further acts, conveyances,
transfers, assignments, powers of attorney, instruments and assurances as may be
reasonably required to more effectively confirm to Seller and Shareholders the
assumption by Buyer of the Assumed Liabilities.
ARTICLE V
Representations and Warranties
Section 5.01 Representations and Warranties of Seller. Seller,
represents and warrants to Buyer and Sage that:
(a) Seller's Organization and Good Standing. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, has all requisite corporate power to carry on its business as it
is now being conducted, and except for the Certificate of Registration of
Interliant Inc as a branch for the purposes of English Company Law which has
been obtained by the Seller, the Seller is not qualified to do business as a
foreign corporation in any jurisdiction. Except as set forth in Exhibit 5.01(a),
Seller has no subsidiaries.
4
9
(b) Reserved.
(c) Corporate Authorization. The execution, delivery and performance
by the Seller of the Transaction Documents to which Seller is a party, the Wolf
Notes and the bills of sale, assignments and other instruments of transfer
referred to in this Agreement to which Seller is a party, have been authorized
and approved by all requisite corporate action on the part of Seller, and Seller
has the power and authority to execute, deliver and perform the Transaction
Documents to which it is a party and to consummate the transactions contemplated
thereby, no other corporate or shareholder approval or authorization is required
on the part of Seller, any trustee, any lender to the Seller or any other person
by law or otherwise (except as have been obtained) in order to make the
Transaction Documents to which it is a party, the Wolf Notes and the bills of
sale, assignments and other instruments of transfer referred to in this
Agreement the valid, binding and enforceable obligations of Seller (subject to
the receipt of required consents to assignment of the Assigned Agreements and
the requirements of the HSR Act) except as enforcement thereof may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights in general or by general principles of equity.
(d) Purchased Assets; Business.
(i) Exhibit 5.01(d)(i) is a substantially accurate and
complete list of the Assigned Agreements, setting forth the name and date of,
and parties to, each such agreement, and indicating whether any consent is
required for the assignment of such agreement by Seller to Buyer, as
contemplated by this Agreement. All material Assigned Agreements (in terms of
both revenues and liabilities) are included in Exhibit 5.01(d)(i). True and
complete copies of the Assigned Agreements have been furnished or made available
to Buyer. The Seller has no material oral business agreements. Except as set
forth on Exhibit 5.01(d)(i), Seller is not in default (and no event or
circumstance exists which, with notice or lapse of time or both, would
constitute a default by Seller) in any material respect under any of the
Assigned Agreements and, to the Knowledge of Seller, no other party to the
Assigned Agreements is in default under such agreements. Each Assigned Agreement
is in full force and effect. Except for Employment Contracts and any consents,
waivers, or approvals required by the terms of the Assigned Agreements, Seller
has the right to assign the Assigned Agreements, and Seller has not otherwise
assigned, pledged or encumbered its interest in the Assigned Agreements except
as set forth in Exhibit 5.01(d)(i). Many Assigned Agreements contain maintenance
or warranty obligations on the part of Seller that under the terms of the
Assigned Agreement are limited to the revenues received by Seller under such
Assigned Agreement. In general, the Assigned Agreements exclude liability for
consequential damages.
(ii) Seller does not own any real property. Seller's leasehold
interest in each Site is a valid and subsisting leasehold interest in such Site
pursuant to the Lease applicable thereto, and such Lease affords the tenant
thereunder the legal right to occupy such Site as of the Closing Date in
accordance with the terms thereof. Each Lease is valid and enforceable by Seller
except as enforcement thereof may be limited by bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors'
5
10
rights in general or by general principles of equity. Seller has performed, in
all material respects, all the obligations required to be performed by it under
each Lease and possesses and quietly enjoys the premises under each Lease.
Seller has not received notice of any pending or threatened condemnation
proceedings relating to all or any portion of the property or premises that are
the subject of any Lease and, to Seller's Knowledge, there are no such pending
or threatened proceedings.
(iii) Seller has good and marketable title to the Customer
Data and Fixed Assets owned by it and to the Receivables, Fixed Assets and Cash,
in each case, free and clear of all Encumbrances except those listed on Exhibit
5.01(d)(iii). The Receivables arose in the ordinary course of business of Seller
and constitute valid claims against the account debtors with respect thereto.
The Fixed Assets are in good and working condition, reasonable wear and tear and
obsolescence excepted.
(iv) Exhibit 5.01(d)(iv) sets forth the nature of the
operations at each Site and lists the Receivables as of February 28, 1999, Fixed
Assets as of February 28, 1999 and Other Property as of February 28, 1999. All
such property is located at the Sites or is in the possession of Employees of
the Seller.
(v) The Purchased Assets include all of the assets of Seller
used by Seller to conduct the Business as of the Closing Date consistent with
past practice (subject to Section 8.02 and other than the Excluded Assets).
(e) Litigation. Except as set forth in Exhibit 5.01(e), there is no
litigation, action, suit, tax audit, proceeding or to the Knowledge of the
Seller, investigation pending or, to Seller's Knowledge, threatened with respect
to the Business, any of the Purchased Assets or any of the transactions
contemplated hereby before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any other entity, which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the Purchased Assets taken as a
whole or the conduct by Buyer after the Closing Date of a business at the Sites
substantially similar to the Business. Seller is not in default with respect to
any order, writ, injunction or decree of any court or Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality which, if not cured, could reasonably be expected to have a
material adverse effect upon the Purchased Assets taken as a whole or the
conduct by Buyer after the Closing Date of a business at the Sites substantially
similar to the Business.
(f) No Conflict. Except as set forth in Exhibit 5.01(f), the
execution by Seller of the Transaction Documents to which it is a party, the
Wolf Notes and the bills of sale, assignments and other instruments of transfer
referred to in this Agreement, in each case, to which it is or will be a party,
compliance by Seller with the provisions of this Agreement and the other such
agreements to which Seller will be a party and the consummation by Seller of the
transactions contemplated hereby or thereby (i) will not violate in any material
respect any provision of applicable law to which Seller is subject, (ii) subject
to required consents to assignment of Assigned Agreements will not conflict with
any provision of the Articles of Incorporation or Bylaws of Seller or conflict
with or
6
11
constitute a default (or with notice or lapse of time or both, constitute a
default) under, or result in the termination of, or accelerate the performance
required by any of the terms, conditions or provisions of any contract,
agreement or other instrument binding on Seller, which conflict, default,
termination or acceleration would prevent, delay or impair Seller's ability to
consummate the transactions contemplated by this Agreement or have a material
adverse effect on Buyer, Sage or the Business, (iii) will not result in the
creation of any Encumbrance upon any of the Purchased Assets, (iv) do not
require the consent or approval of, or registration, declaration or filing with,
any court, administrative agency or commission or other governmental authority
or instrumentality, except for any filings under state laws required in
connection with the conveyance of the Receivables or filings required by the HSR
Act, and (v) do not violate any order, writ, injunction, decree, arbitral award,
statute, rule or regulation applicable to Seller, to any of the Purchased Assets
or to the Business of Seller, violation of which would prevent, delay or impair
Seller's ability to consummate the transactions contemplated by this Agreement
or have a material adverse effect upon Buyer or Sage or the conduct by Buyer or
Sage after the Closing Date of a business substantially similar to the Business.
(g) No Other Agreements to Sell Assets or Business. Except as set
forth in Exhibit 5.01(g), Seller does not have any legal obligation, absolute or
contingent, to any other person or firm to sell the assets of Seller (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 Seller or to
effect any merger, consolidation or other reorganization of Seller or to enter
into any agreement with respect thereto.
(h) Articles of Incorporation and Bylaws. Seller has delivered to
Buyer copies of Seller's Articles of Incorporation and Bylaws, which copies are
complete and correct as of the date hereof.
(i) Financial Statements. Attached hereto as Exhibit 5.01(i) are
true and complete copies of statements of assets, liabilities and stockholders'
equity of Seller as at December 31, 1997 and 1998 and related statements of
revenue and expenses and retained earnings and cash flow of Seller for each of
the fiscal years then ended and for 1996, all of which statements have been
audited by Ernst & Young and unaudited monthly financial statements of Seller
for the month ending January 31, 1999, each of which annual and monthly
statements has been prepared in accordance with GAAP applied on a consistent
basis (in the case of the monthly financial statements, subject to year end
adjustments and not including footnotes which may be required by GAAP) and
presents fairly the financial position of Seller and the results of the
operations of Seller as of its date and for the fiscal year or period of Seller
to which such statement pertains. Seller has reserved $125,000 for claims,
liabilities and obligations of Seller under its Employee Benefit Plans.
(j) Absence of Undisclosed Liabilities and Obligations. Except as
disclosed in Seller's December 31, 1998 audited financial statements (including
the notes thereto), set forth in Exhibit 5.01(j) or incurred in the ordinary
course of business since December 31, 1998, Seller does not have any liabilities
or obligations (whether accrued, absolute, contingent or otherwise) which in the
aggregate are material and of a nature
7
12
required to be reflected in a balance sheet of Seller prepared in accordance
with GAAP or disclosed in the notes thereto, including, without limitation, any
Taxes due or to become due.
(k) Tax Matters. Except as set forth in Exhibit 5.01(k), Seller has:
(i) timely filed and to Seller's Knowledge has correctly prepared all returns,
declarations, reports, estimates, information returns and statements ("Returns")
required to be filed or sent by or with respect to Seller in respect of any
Taxes except for any Return the failure to timely file would not have a material
adverse effect on the Business; (ii) timely paid all Taxes that are due and
payable by Seller; (iii) established on its books and records reserves that are
adequate for the payment of all Taxes not yet due and payable; and (iv) complied
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has timely and to Seller's Knowledge properly withheld
from employee wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under all applicable laws.
There are no liens for Taxes upon the Purchased Assets except liens for Taxes
not yet due, if any. Seller is not a party to any agreement providing for the
allocation, sharing or indemnification of Taxes.
(l) No Brokers. The Seller has not made contact or had any dealings
with or entered into, and will not enter into, any agreement, arrangement or
understanding with any broker, leasing agent, finder or similar person or entity
with respect to this Agreement and the transactions contemplated hereby which
will result in the obligation of Buyer or Sage to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby. The Shareholders are solely responsible for payment of all
fees payable to Broadview Holdings LLP, which is the only broker, leasing agent,
finder or similar person or entity engaged by Seller in connection with the
transactions contemplated by this Agreement.
(m) Employee Benefit Information.
(i) Except as set forth on Exhibit 5.01(m)(i), Seller does not
maintain, is not required to contribute to and has no liabilities with respect
to any Employee Benefit Plan and no Company Personnel or dependent thereof is
entitled to any benefits except as provided for by the provisions of such Plans.
Except as set forth in Exhibit 5.01(m)(i), Seller is not a party to any
Employment Contract pertaining to the Business. Each such Employment Contract
constitutes an Assigned Agreement to the extent that such Employment Contract
may be assigned in accordance with applicable law.
(ii) Seller has provided or made available to Buyer (x) copies
of all Employee Benefit Plans or in the case of an unwritten plan, a written
description thereof, (y) copies of any annual, financial or actuarial reports
and Internal Revenue Service determination letters relating to such Employee
Benefit Plans and (z) copies of all summary plan descriptions (whether or not
required to be furnished under ERISA) and all material written employee
communications relating to such Employee Benefit Plans and
8
13
distributed to Company Personnel, in each case under this subsection (z),
existing or in effect during or within the past three years.
(iii) Except as disclosed on Exhibit 5.01(m)(iii), the
transactions contemplated by this Agreement (either alone or together with any
other transaction undertaken by Seller) will not (w) entitle any Company
Personnel to severance pay or other similar payments under any Employee Benefit
Plan, (x) accelerate the time of payment or vesting or increase the amount of
benefits due under any Employee Benefit Plan or compensation to any Company
Personnel, (y) result in any payments (including parachute payments) under any
Employee Benefit Plan becoming due to any Company Personnel, or (z) terminate or
modify or give a third party a right to terminate or modify the provisions or
terms of any Employee Benefit Plan.
(iv) The Wolf Companies 401(k) Plan (the "401(k) Plan") is
qualified under Sections 401(a) and 401(k) of the Code and the related trust is
exempt from tax under Section 501(a) of the Code. A favorable determination
letter with respect to the 401(k) Plan has been received from the Internal
Revenue Service stating that such plan is so qualified and to Seller's Knowledge
nothing has occurred since the date of such letter to cause the letter to be no
longer valid or effective. Except as set forth on Exhibit 5.01 (m)(iv), all
contributions due with respect to the periods ending on or before the Closing
Date to the 401(k) Plan have been timely made, and a pro rata portion of the
contributions (including matching contributions) for the plan year in which the
Closing Date occurs have been or will have been made on or before the Closing
Date.
(v) Except as set forth on Exhibit 5.01 (m)(v), Seller has, in
the conduct of the affairs of the Business, complied in all material respects
with all applicable laws, rules, and regulations relating to the employment of
labor, including those relating to wages, hours, collective bargaining and the
payment of social security and similar taxes.
(vi) Seller has not, and prior to the Closing Date will not
have, suffered a "plant closing" or "mass layoff" within the meaning of the
Worker Adjustment and Retraining Notification Act ("WARN") and Seller will
provide Buyer, upon request, with such information as shall be necessary for
Buyer to determine its potential WARN liability.
(vii) No Purchased Asset which is to be acquired, directly or
indirectly, by Buyer pursuant to this Agreement is subject to any Encumbrance
(including a pledge of such assets as security to satisfy an obligation) under
Section 401(a)(29) of the Code, Section 412(n) of the Code, Section 302(f) of
ERISA or Section 4068 of ERISA.
(n) Labor Disagreements. Except as set forth on Exhibit 5.01(n), in
connection with the operation of the Business, (i) Seller is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (ii) Seller has not been
notified of any unfair labor practice charge
9
14
or complaint against Seller pending and, to the Knowledge of Seller, no such
charge or complaint is threatened before the National Labor Relations Board, any
state labor relations board or any court or tribunal; (iii) Seller has not been
notified of any charge or claim filed at or with the Equal Employment
Opportunity Commission, any state agency having similar jurisdiction or any
court or tribunal, actually pending and, to the Knowledge of Seller, no such
charge or claim is threatened against Seller in connection with the operation of
the Business; (iv) there is no labor strike, dispute, request for
representation, slowdown or stoppage actually pending against or affecting
Seller and, to the Knowledge of Seller, none is or has been threatened; (v)
Seller has not been notified of any grievance which might have a material
adverse effect on the conduct of the operations of the Business; and (vi) Seller
has no collective bargaining agreements with respect to any Company Personnel.
(o) Environmental Compliance.
(i) Seller has not been notified that Seller is, and Seller
does not have Knowledge that Seller is, in violation, or alleged to be in
violation, of any Environmental Laws which would have a material adverse effect
on the Business.
(ii) Seller has not received a written notice, complaint,
order, directive, claim or citation from any third party, including, without
limitation, any federal, state or local governmental authority, (A) that any
Hazardous Materials which Seller has generated, stored, transported or disposed
of has been released at any site at which a federal, state or local agency has
conducted or has ordered that any person conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law or has named
Seller as a potentially responsible party; or (B) that Seller is or shall be a
named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out of
any third party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Materials.
(iii) (A) While occupied by the Seller, no portion of the
leasehold property occupied by Seller under a Lease has been used for the
handling, processing, storage or disposal of Hazardous Materials except in
accordance with applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Materials is located on any portion
of the leasehold property occupied by Seller under a Lease; (B) in the course of
any activities conducted by Seller, no Hazardous Materials have been generated
or are being used on any of the leasehold properties occupied by Seller under a
Lease except in accordance with applicable Environmental Laws; (C) 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 by
Seller on, upon or into any leasehold property occupied by the Seller or any of
its affiliates under a Lease, which releases would have a material adverse
effect on the value of any of such property or the environment; and (D) in
addition, any Hazardous Materials that have been generated or stored on any of
the leasehold property occupied by Seller or any of its affiliates have been
transported off site at the direction of Seller only by carriers having
10
15
proper authorization therefor and treated or disposed of only by treatment or
disposal facilities maintaining valid permits as required under applicable
Environmental Laws, which transporters and facilities have been and are
operating in compliance with such permits and applicable Environmental Laws.
(iv) Neither Seller nor any of its affiliates have performed
any environmentally related audits, studies, reports, analyses (including soil
and groundwater analyses) with respect to any of the Sites.
(v) To the Knowledge of the Seller, there is not now nor has
there been (during the period of Seller's occupancy) located at any of the
leasehold property occupied by Seller under a Lease asbestos containing material
or equipment containing polychlorinated biphenyls.
(vi) The Seller has no federal, state, and municipal permits,
licenses, certificates and approvals and to Seller's Knowledge no such permits,
licenses, certificates and approval are required in connection with the Seller's
business ("Environmental Permits"). The Seller has not been notified by any
relevant governmental authority that any Environmental Permits are required by
it or that the Seller is a potentially responsible party under any Environmental
Laws.
(p) Insurance. Seller maintains and has in full force and effect the
insurance policies covering the Purchased Assets and the Business that are
described in Exhibit 5.01(p). Copies of the insurance policies covering the
Purchased Assets and the Business of Seller have been provided to Buyer.
(q) Intangible Assets; Confidentiality Agreements.
(i) The Intellectual Properties listed on Exhibit 5.01(q)(i)
are substantially all those used or being developed for use in the Business. All
material Intellectual Properties are included on Exhibit 5.01(q)(i). Other than
as disclosed in Exhibit 5.01(q)(i), Seller owns good title to or holds a valid
license, to use all Intellectual Properties listed on Exhibit 5.01(q)(i) hereto
free and clear of any Encumbrance. Except as set forth on Exhibit 5.01(q)(i),
Seller has not sent or otherwise communicated to any other person any notice,
charge, claim or assertion of, nor has any Knowledge of, any present, impending
or threatened infringement by such other person of any Intellectual Properties.
Except as set forth on Exhibit 5.01(q)(i), the Seller has taken, and will take
up to the Closing Date, reasonable actions to protect its rights in the
Intellectual Properties owned by it. To Seller's Knowledge, the Seller's rights
in the Intellectual Properties are valid and enforceable in the United States of
America except as enforcement thereof may be limited by bankruptcy insolvency or
other similar laws affecting the enforcement of creditors rights in general or
by general principals of equity. Except as disclosed on Exhibit 5.01(q)(i), the
Seller has received no written demand, claim, notice or inquiry from any person
in respect of the Intellectual Properties which challenges, threatens to
challenge or inquires as to whether there is any basis to challenge, the
validity of, or the rights of the Seller in, the Intellectual Properties. Except
as disclosed on Exhibit 5.01(q)(i), to the Knowledge of Seller, the Seller is
not in violation or infringement of,
11
16
and has not violated or infringed, any intellectual property rights of any other
person. Except as disclosed on Exhibit 5.01(q)(i), to the Knowledge of the
Seller, no third party is infringing on the rights of the Seller in and to the
Intellectual Properties. Except on commercially reasonable terms to the Business
as a whole, the Seller has not granted any license with respect to the
Intellectual Properties to any person. Included in Exhibit 5.01(q)(i) is a true
and complete list of all software licensed by the Seller (other than
shrink-wrap, off the shelf software or software that is immaterial to the
Business as a whole) and used in operating and maintaining the Business
(collectively, the "Licensed Software"). Except as disclosed on Exhibit
5.01(q)(i), the Seller has valid, royalty free or fully-paid licenses for all of
the Licensed Software.
(ii) Set forth on Exhibit 5.01(q)(ii) is a true and complete
list of the Seller's Customers (as hereinafter defined) as of February 28, 1999
which includes, in the case of each customer, the name of the customer and its
billing address. All files regarding each customer in the Customer Data have
been made available to the Buyer. All customers of the Seller, including,
without limitation, those customers included in the Customer Data shall be
referred to herein as the "Customers".
(iii) Exhibit 5.01(q)(iii) contains a substantially accurate
and complete list of all confidentiality agreements to which Seller is a party
as of the date of this Agreement. All confidentiality agreements with Customers
to which Seller is a party are included in Exhibit 5.01(q)(iii).
(r) Employees. Exhibit 5.01(r) sets forth the name, location, title,
date of employment, current salaries, bonuses and commission arrangements (and
including any changes in salaries or bonuses since December 31, 1998) of each
Employee as of March 5, 1999. Except as described on Exhibit 5.01(r), no
Employee is a party to a confidentiality agreement with Seller. Except as set
forth on Exhibit 5.01(r), no Employee of Seller has provided notice to Seller of
his or her intention to terminate his or her employment relationship with Seller
and to Seller's Knowledge no Employee has any intention to terminate his or her
employment, other than Employees the departure of which, individually or in the
aggregate, will not adversely affect the Business.
(s) Compliance with Laws. Except as set forth on Exhibit 5.01(s),
Seller has complied in all respects with all applicable statutes, regulations,
orders, ordinances and other laws of the United States of America, all state,
local and foreign governments and other governmental bodies and authorities, and
agencies of any of the foregoing relating to the Business to which it is
subject, except where possible violations of such would not have a material
adverse effect on the Business. Seller has not received any notice from any
governmental authority to the effect that, or otherwise been advised by any
governmental authority that, Seller is not in compliance with any of such
statutes, regulations and orders, ordinances, other laws or undertakings, and
Seller has no reason to anticipate that any presently existing circumstances are
likely to result in violations of any such regulations which could, in any one
case or in the aggregate, cause a material loss to Seller or otherwise have a
material adverse effect on the Business. To Seller's Knowledge, there is not
presently pending any proceeding, hearing or investigation with respect to the
adoption of amendments or modifications to existing laws or ordinances,
12
17
regulations or restrictions which, if adopted, would materially adversely affect
the Business other than those which affect the applications hosting business
generally.
(t) Transactions with Certain Persons. Except as set forth on
Exhibit 5.01(t) or which does not exceed in the aggregate $50,000, no
shareholder, officer, director or employee of Seller or member of such persons'
immediate family is presently a party to any transaction with Seller relating to
the Business which would constitute an Assigned Agreement, including, without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for the rental of real or personal
property from, or (iii) otherwise requiring payments to (other than for services
or expense reimbursements as officers, directors or employees) any such person
or corporation, partnership, trust or other entity in which any such person has
a substantial interest as a shareholder, officer, director, trustee or partner.
(u) Clients; Relationship with Accounts. Except as set forth on
Exhibit 5.01(u), no client, Customer or supplier of Seller has provided notice
to Seller since December 31, 1998 of its intention to terminate its relationship
with Seller or to substantially reduce the amount of business it provides to
Seller. Seller has no Knowledge of any intention of any client, Customer or
supplier to do so.
(v) Absence of Certain Changes or Events. Except as disclosed in
Exhibit 5.01(v) hereto, since December 31, 1998, there has not been any:
(i) change in the financial condition, assets, liabilities,
earnings or business of Seller, except for changes which have been in the
ordinary course of business and which have not, individually or in the
aggregate, been materially adverse to Seller;
(ii) change in the number of shares of capital stock of Seller
issued and outstanding or any declaration, setting aside, or payment of any
dividend or other distribution (whether in cash, securities, property or
otherwise) in respect of Seller's capital stock;
(iii) (A) increase in the compensation payable or to become
payable by Seller to any of the Company Personnel, (B) any bonus, incentive
compensation, service award or other like benefit, granted, made or accrued,
contingently or otherwise, to or to the credit of Company Personnel, or (C) any
employee welfare, pension, retirement, profit-sharing or similar payment or
arrangement (whether or not subject to ERISA) made or agreed to by Seller except
pursuant to the existing plans and arrangements described in Exhibit 5.01(m)
hereto;
(iv) significant labor trouble, or any material controversies
or material unsettled grievances threatened between Seller and any Company
Personnel or a collective bargaining organization representing or seeking to
represent Company Personnel;
(v) addition to or modification or amendment of the Employee
Benefit Plans other than (A) contributions made for the fiscal year ended
December 31,
13
18
1998 in accordance with the normal practices of Seller or (B) the extension of
coverage to other Company Personnel who became eligible after December 31, 1998;
(vi) mortgage, pledge or subjection to any Encumbrance of any
of Seller's assets, except the lien of Taxes not yet due and payable and
purchase money security interests in the normal course of business;
(vii) sale, assignment or transfer of any assets of Seller
that are material, singly or in the aggregate, to Seller other than in the
ordinary course;
(viii) waiver of any rights of substantial value to Seller
whether or not in the ordinary course of business;
(ix) cancellation or termination by Seller of any contract,
agreement or other instrument material to the Business to which Seller is or was
a party;
(x) capital expenditure or the execution of any lease
providing for annual payments with respect to any aspect of the business of
Seller or any incurring of liability therefor individually in excess of $10,000
or in the aggregate in excess of $25,000;
(xi) except as evidenced by the Wolf Notes, borrowing of money
(other than in the ordinary course of business) by Seller or guaranteeing of any
indebtedness of others;
(xii) lending of any money or otherwise pledging the credit of
Seller;
(xiii) failure to conduct the operations of the Business in
the ordinary course;
(xiv) change in the method of accounting or accounting
practice of Seller;
(xv) loss of services of any Company Personnel that is or are
material, individually or in the aggregate, to the conduct of the business of
Seller;
(xvi) agreement by Seller to do any of the foregoing.
(w) Vehicles. There are no vehicles owned or leased by Seller.
(x) Year 2000. Seller is using reasonable procedures to verify that
the software used in its products will recognize and process date fields after
the turn of the century, and perform date-dependent calculations and operations
(including sorting, comparing and reporting) after the turn of the century
correctly, and is using reasonable efforts to ensure that its software will not
produce invalid and/or incorrect results as a result of the change of century
(all without human intervention, other than original data entry of valid dates),
provided that the software receives correct and properly formatted
14
19
date inputs from all software and hardware that exchanges data with or provides
data to the software.
(y) Wolf Notes. The Wolf Notes are presently outstanding in the
aggregate principal amount of $16,000,000. No event of default or event which
with the passage of time or giving of notice would constitute an event of
default has occurred and is continuing with respect to the Wolf Notes. Interest
on the Wolf Notes and all other amounts other than principal due thereunder by
Seller, if any, have been paid in full to and including the Closing Date.
(z) Disclosure. The representations of Seller in this Agreement or
in any exhibit, or other documents delivered by Seller in accordance with this
Agreement (taken together) do not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
included therein or herein, in the light of the circumstances in which they are
made, not misleading.
Section 5.02 Representations and Warranties of Buyer and Sage. Each
of Buyer and Sage hereby represents and warrants to Seller and Shareholders as
follows:
(a) Organization and Good Standing. Each of Buyer and Sage is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all requisite corporate power to
carry on its business as it is now being conducted.
(b) Corporate Authorization. (i) The execution, delivery and
performance by each of Buyer and Sage of the Transaction Documents to which it
is a party have been authorized and approved by all requisite corporate action
on behalf of Buyer and Sage, and each of Buyer and Sage has the power and
authority to execute, deliver and perform the Transaction Documents to which it
is a party and to consummate the transactions thereby contemplated, and no other
corporate or shareholder approval or authorization is required of Buyer or Sage,
any lender to Buyer or Sage or any other person by law or otherwise in order to
make the Transaction Documents to which either is a party the valid, binding and
enforceable obligations of Buyer or Sage, as the case may be (subject to the
receipt of required consents to assignments of the Assigned Agreements and the
requirements of the HSR Act), in accordance with their respective terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights in general or by
general principles of equity.
(ii) When issued in accordance with this Agreement and the Agreement to
Deliver Shares, the Common Stock constituting the Purchase Price Shares will be
duly authorized, validly issued, fully paid and nonassessable and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through Sage except as set forth in this Agreement, the Shareholders
Agreement and Sage's Certificate of Incorporation. The issuance, sale and
delivery of Common Stock constituting the Purchase Price Shares are not subject
to any preemptive right of stockholders of Sage, or
15
20
to any right of first refusal or other right in favor of any person, which have
not been duly and validly waived.
(c) No Conflict. The execution, delivery and performance by each of
Buyer and Sage of the Transaction Documents to which it is a party, compliance
by Buyer and Sage with the provisions of the Transaction Documents to which it
is a party and the consummation by Buyer and Sage of the transactions
contemplated thereby (i) will not violate in any material respect any provision
of applicable law to which Buyer or Sage is subject, (ii) will not conflict with
any provision of the Certificate of Incorporation or Bylaws of Buyer or Sage or
conflict with or constitute a default (or with notice or lapse of time or both,
constitute a default) under, or result in the termination of, or accelerate the
performance required by any of the terms, conditions or provisions of any
contract, agreement or other instrument binding on Buyer or Sage, which
conflict, default, termination or acceleration would prevent, delay or impair
Buyer's or Sage's ability to consummate the transactions contemplated by this
Agreement or have a material adverse effect upon Buyer or Sage, (iii) do not
require the consent or approval of, or registration, declaration or filing with,
any court, administrative agency or commission or other governmental authority
or instrumentality except for filings required by the HSR Act, and (iv) does not
violate any order, writ, injunction, decree, arbitral award, statute, rule or
regulation applicable to Buyer or Sage, violation of which would have a material
adverse effect upon Buyer or Sage.
(d) No Brokers. Neither Buyer nor Sage has made contact or had any
dealings with or entered into, and will not enter into, any agreement,
arrangement or understanding with any broker, leasing agent, finder or similar
person or entity with respect to this Agreement and the transactions
contemplated hereby which will result in the obligation of Shareholders or
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
(e) Capitalization. The authorized capital stock of Sage consists of
102,647,658 shares of capital stock of which 100,000,000 have been designated
common stock, $.01 par value, of which 26,832,197 shares are issued and
outstanding and 2,647,658 have been designated Series A Convertible Preferred
Stock, $.01 par value (the "Preferred Stock"), all of which is issued and
outstanding. Sage has issued Warrants dated January 28, 1999 (the "Warrants")
for the purchase of 749,625 shares common stock. Sage has issued options (the
"Options") for the purchase of approximately 579,000 shares of Common Stock.
Sage has reserved sufficient shares of Common Stock for issuance upon conversion
of the Preferred Stock or exercise of the Warrants, the Options and the Sage
Options. The authorized capital stock of Buyer consists of 100 shares of common
stock, $.01 par value per share, all of which are issued and outstanding. Except
for the Preferred Stock, the Warrants and the Options, Sage has not issued
options, warrants, convertible securities or other rights to receive Common
Stock. Buyer is a wholly-owned subsidiary of Sage. Sage has no other
subsidiaries except Net Daemons Associates, Inc., B.N. Technology, Inc.,
Digiweb, Inc., Telephonetics, Inc. and Interliant of Texas, Inc.
16
21
(f) Financial Statements. Buyer has delivered to Seller true and
complete copies of statements of assets, liabilities and stockholders' equity of
Sage as at December 31, 1997 and 1998 and related consolidated statements of
revenue and expenses and retained earnings and cash flow of Sage for each of the
fiscal years then ended, all of which statements have been audited by Ernst &
Young, each of which has been prepared in accordance with GAAP applied on a
consistent basis and presents fairly the financial position of Sage and the
results of the operations of Sage as of its date and for the fiscal year of Sage
to which such statement pertains.
(g) Litigation. Except as set forth in Exhibit 5.02(g), there is no
litigation, action, suit, tax audit, proceeding or to the Knowledge of Sage or
the Buyer, investigation pending or, to the Knowledge of Sage or the Buyer,
threatened with respect to Sage or any subsidiary thereof or any of their
respective assets or properties or any of the transactions contemplated hereby
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any other entity,
which, if adversely determined, could reasonably be expected to have a material
adverse effect upon Sage and its subsidiaries taken as a whole. Neither Sage nor
Buyer is in default with respect to any order, writ, injunction or decree of any
court or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality which, if not cured, could reasonably
be expected to have a material adverse effect upon Sage and its subsidiaries
taken as a whole.
(h) Compliance with Laws. Except as set forth on Exhibit 5.02(h),
each of Buyer and Sage have complied in all respects with all applicable
statutes, regulations, orders, ordinances and other laws of the United States of
America, all state, local and foreign governments and other governmental bodies
and authorities, and agencies of any of the foregoing to which it is subject,
except where possible violations of such would not have material adverse effect
on Sage and its subsidiaries taken as a whole. Neither Buyer nor Sage has
received any notice from any governmental authority to the effect that, or
otherwise been advised that, Buyer or Sage is not in compliance with any of such
statutes, regulations and orders, ordinances, other laws or undertakings, and
Buyer and Sage have no reason to anticipate that any presently existing
circumstances are likely to result in violations of any such regulations which
could, in any one case or in the aggregate, cause a material loss to Sage and
its subsidiaries taken as a whole or otherwise have a material adverse effect on
Sage and its subsidiaries taken as a whole. To the Knowledge of Sage, there is
not presently pending any proceeding, hearing or investigation with respect to
the adoption of amendments or modifications to existing laws or ordinances,
regulations or restrictions which, if adopted, would materially adversely affect
Sage and its subsidiaries taken as a whole.
(i) Sage Intellectual Property. Sage and its subsidiaries own or
possess adequate licenses, assignments or other rights to use all patents,
patent applications, trademarks, trademark applications, service marks, service
xxxx applications, trade names, copyrights, software, source code, object code,
manufacturing processes, formulae, trade secrets, customer lists and know how,
including any third party rights connected therewith (collectively, "Sage
Intellectual Property") necessary to the conduct of its business as conducted
and as proposed to be conducted, and no claim is
17
22
pending against Sage or its subsidiaries or, to the best of Sage's Knowledge,
threatened to the effect that the operations of Sage or its subsidiaries
infringe upon or conflict with the asserted rights of any other person under any
Sage Intellectual Property. To the Knowledge of Sage, no claim is pending
against Sage or any of its subsidiaries or threatened to the effect that any
Sage Intellectual Property owned or licensed by Sage or any subsidiary, or which
Sage or any subsidiary otherwise has the right to use, is invalid or
unenforceable by Sage. There are no restrictions on the ability of Sage to
compete against any third party.
(j) Taxes. Each of Sage and its subsidiaries has: (i) timely filed
and to Sage's Knowledge has correctly prepared all Returns required to be filed
or sent by or with respect to Sage and its subsidiaries in respect of any Taxes
except for any Return the failure to timely file would not have a material
adverse effect on the business of Sage and its subsidiaries; (ii) timely paid
all Taxes that are due and payable by Sage or Buyer; (iii) established on its
books and records reserves that are adequate for the payment of all Taxes not
yet due and payable; and (iv) complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and has timely and
to Seller's Knowledge properly withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws. There are no liens for Taxes upon the assets of
Sage and its subsidiaries except liens for Taxes not yet due. Neither Sage nor
Buyer is a party to any agreement providing for the allocation, sharing or
indemnification of Taxes.
(k) Customers. To the Knowledge of Sage, customers which in the
aggregate would be material to the business of Sage and its subsidiaries taken
as a whole have not given notice of termination of their arrangements with Sage.
(l) Year 2000. Sage is using reasonable procedures to verify that
the software used in its products will recognize and process date fields after
the turn of the century, and perform date-dependent calculations and operations
(including sorting, comparing and reporting) after the turn of the century
correctly, and is using reasonable efforts to ensure that its software will not
produce invalid and/or incorrect results as a result of the change of century
(all without human intervention, other than original data entry of valid dates),
provided that the software receives correct and properly formatted date inputs
from all software and hardware that exchanges data with or provides data to the
software.
(m) Environmental Matters. Sage and each subsidiary thereof has (i)
complied in all material respects with the Environmental Laws applicable to it,
(ii) provided to Seller a copy of any order, notice, permit, application, or any
other written communication or report received by Sage from any governmental
authority or any other person or sent by or for Sage to a governmental authority
in connection with any matter relating to environmental laws applicable to Sage
and (iii) has provided Seller with copies of any environmental assessment
reports, certificates, engineering studies or other written material or data
Sage may have relating to environmental laws applicable to Sage. There is no
Environmental Claim pending or, to the Knowledge of Sage, threatened
18
23
against Sage or any subsidiary thereof with respect to the operations or
business of Sage of any subsidiary thereof.
For purposes of this Section 5.02(m) "Environmental Claim" means any
claim, action, cause of action, investigation of which Sage, including any of
its management employees, are aware, or written notice by any person alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Material at any leasehold property occupied by
Sage or any subsidiary thereof under a lease, or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
(n) Absence of Certain Changes or Events. Except as disclosed in
Exhibit 5.02(n) hereto, since December 31, 1998, there has not been any (i)
change in the financial condition, assets, liabilities, earnings or business of
Sage, except for changes which have been in the ordinary course of business and
which have not, individually or in the aggregate, been materially adverse to
Sage and its subsidiaries taken as a whole; (ii) change in the method of
accounting or accounting practice of Sage; or (iii) loss of services of any
employee that is or are material, individually or in the aggregate, to Sage.
(o) Disclosure. The representations of Buyer and Sage in this
Agreement or in any exhibit, or other documents delivered in accordance with
this Agreement (taken together) do not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements included therein or herein, in the light of the circumstances in
which they are made, not misleading.
(p) Absence of Undisclosed Liabilities and Obligations. Except as
disclosed in Sage's December 31, 1998 audited financial statements (including
the notes thereto), set forth in Exhibit 5.02(p) or incurred in the ordinary
course of business since December 31, 1998, Sage and its subsidiaries do not
have any liabilities or obligations (whether accrued, absolute, contingent or
otherwise) which in the aggregate are material and of a nature required to be
reflected in a balance sheet of Sage prepared in accordance with GAAP or
disclosed in the notes thereto, including, without limitation, any Taxes due or
to become due.
(q) Labor Disagreements. (i) To its Knowledge, Sage is in compliance
in all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (ii) Sage has not been notified
of any unfair labor practice charge or complaint against Sage pending and, to
the Knowledge of Sage, no such charge or complaint is threatened before the
National Labor Relations Board, any state labor relations board or any court or
tribunal; (iii) Sage has not been notified of any charge or claim filed at or
with the Equal Employment Opportunity Commission, any state agency having
similar jurisdiction or any court or tribunal, actually pending and, to the
Knowledge of Sage, no such charge or claim is threatened against Sage; (iv)
there is no labor strike, dispute, request for representation, slowdown or
stoppage actually
19
24
pending against or affecting Sage and, to the Knowledge of Sage, none is or has
been threatened; (v) Sage has not been notified of any grievance which might
have a material adverse effect on Sage and its subsidiaries taken as a whole;
and (vi) Sage has no collective bargaining agreements with respect to any of its
employees.
Section 5.03 Representations and Warranties of Shareholders. Each
Shareholder (except as otherwise specifically provided in this Section 5.03),
severally, represents and warrants to Buyer and Sage that:
(a) Seller's Representations. To the Knowledge of each Shareholder
other than Xxxxxxx Xxxxxx, each of Seller's representations and warranties
contained in Section 5.01 is true, correct and complete.
(b) Capacity. Each Shareholder has the legal capacity to execute,
deliver and perform the Transaction Documents to which it is a party and, except
as set forth on Exhibit 5.03(b), no other approval or authorization is required
on the part of such Shareholder, any trustee, any lender to such Shareholder or
any other person by law or otherwise (except as have been obtained) in order to
make the Transaction Documents valid, binding and enforceable obligations of
such Shareholder (subject to the receipt of required consents to assignments of
the Assigned Agreements and the requirements of the HSR Act) except as
enforcement thereof may be limited by bankruptcy, insolvency, or other similar
laws affecting the enforcement of creditors' rights in general or by general
principles of equity.
(c) No Conflict. Except as set forth in Exhibit 5.03(c), the
execution by each Shareholder of the Transaction Documents to which it is a
party, compliance by such Shareholder with the provisions of the Transaction
Documents to which each such Shareholder is a party and the consummation by such
Shareholder of the transactions contemplated hereby or thereby (i) will not
violate in any material respect any provision of applicable law to which such
Shareholder is subject, (ii) will not conflict with any provision of the trust
agreement of any Shareholder that is a trust or conflict with or constitute a
default (or with notice or lapse of time or both, constitute a default) under,
or result in the termination of, or accelerate the performance required by any
of the terms, conditions or provisions of any contract, agreement or other
instrument binding on such Shareholder, which conflict, default, termination or
acceleration would prevent, delay or impair such Shareholder's ability to
consummate the transactions contemplated by this Agreement or have a material
adverse effect on Buyer, Sage or the Business, (iii) will not result in the
creation of any Encumbrance upon any of the Purchased Assets, (iv) do not
require the consent or approval of, or registration, declaration or filing with,
any court, administrative agency or commission or other governmental authority
or instrumentality, except for any filings under state laws required in
connection with the conveyance of the Receivables or filings required by the HSR
Act, and (v) do not violate any order, writ, injunction, decree, arbitral award,
statute, rule or regulation applicable to such Shareholder, violation of which
would prevent, delay or impair such Shareholder's ability to consummate the
transactions contemplated by this Agreement or have a material adverse effect
upon Buyer or Sage or the conduct by Buyer or Sage after the Closing Date of a
business substantially similar to the Business.
20
25
(d) No Other Agreements to Sell Assets or Business. No Shareholder
has any legal obligation, absolute or contingent, to any other person or firm to
sell its interest in the Seller or to effect any merger, consolidation or other
reorganization of Seller or to enter into any agreement with respect thereto.
(e) No Brokers. No Shareholder has made contact or had any dealings
with or entered into, and will not enter into, any agreement, arrangement or
understanding with any broker, leasing agent, finder or similar person or entity
with respect to this Agreement and the transactions contemplated hereby which
will result in the obligation of Buyer or Sage to pay any finder's fee,
brokerage commission or similar payment in connection with the transactions
contemplated hereby. The Shareholders are solely responsible for payment of all
fees payable to Broadview Holdings LLP, which is the only broker, leasing agent,
finder or similar person or entity engaged by any Shareholder in connection with
the transactions contemplated by this Agreement.
(f) Transactions with Certain Persons. Except as set forth on
Exhibit 5.03(f) or which does not exceed in the aggregate $50,000, no
Shareholder or member of such persons' immediate family is presently a party to
any transaction with Seller relating to the Business which would constitute an
Assigned Agreement, including, without limitation, any contract, agreement or
other arrangement (i) providing for the furnishing of services by, (ii)
providing for the rental of real or personal property from, or (iii) otherwise
requiring payments to (other than services or expense reimbursement as officers,
directors or employees) any such person or corporation, partnership, trust or
other entity in which any such person has a substantial interest as a
shareholder, officer, director, trustee or partner.
(g) Wolf Notes. Each of Xxxxxx Xxxx and Xxxxxx Xxxx represents that
the Wolf Notes are presently outstanding in the aggregate principal amount of
$16,000,000. No event of default or event which with the passage of time or
giving of notice would constitute an event of default has occurred and is
continuing with respect to the Wolf Notes. Interest on the Wolf Notes and all
other expenses due thereunder, if any, have been paid in full to and including
the Closing Date.
(h) Disclosure. The representations of Shareholders in this
Agreement or in any exhibit, or other documents delivered by any Shareholder in
accordance with this Agreement (taken together) do not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements included therein or herein, in the light of the
circumstances in which they are made, not misleading.
ARTICLE VI
Conditions Precedent to Obligations of Buyer and Sage and
Seller and Shareholders
Section 6.01 Conditions Precedent to Obligations of Buyer and Sage.
The obligation of Buyer and Sage to consummate the transactions contemplated by
this
21
26
Agreement shall be subject to the fulfillment, or the waiver by Buyer and Sage,
on or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True at the Closing Date. The
representations and warranties of Seller and Shareholders contained in this
Agreement shall be deemed to have been made again at and as of the Closing Date
and shall then be true and correct; provided that, any representations and
warranties which specifically relate to a particular date or period shall be
true and correct as of such date and for such period.
(b) Compliance with Covenants. All the terms, covenants, agreements
and conditions of this Agreement to be complied with and performed by Seller and
Shareholders on or prior to the Closing Date shall have been duly complied with
and performed in all material respects.
(c) Delivery of Closing Documents. Seller and Shareholders shall
have delivered to Buyer or Sage, as the case may be, on or prior to the Closing
Date all the documents required to be delivered pursuant to Section 7.01.
(d) Opinion of Seller's and Shareholders Counsel. Buyer and Sage
shall have received an opinion of Xxxxxxx & Xxxxx LLP, counsel to Seller and the
general counsel of the Seller, each dated the Closing Date and addressed to
Buyer and Sage, in form and substance satisfactory to Buyer and Sage, to the
effect that:
(i) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has the corporate
power to carry on its business as it is then being conducted; each of the
Shareholders that is a trust is duly formed, validly existing and in good
standing in the State of Texas;
(ii) Seller has full corporate power and authority and each
Shareholder that is a trust has full trust power to enter into the Transaction
Documents and the bills of sale, assignments and other instruments of transfer
referred to in this Agreement to which it is a party and to consummate the
transactions contemplated hereby, and all corporate, trust and other proceedings
required to be taken by Seller and each Shareholder to authorize it to enter
into the Transaction Documents to which it is a party and the bills of sale,
assignments and other instruments of transfer referred to in this Agreement and
to consummate the transactions contemplated hereby have been duly and properly
taken;
(iii) The Transaction Documents, the bills of sale,
assignments and other instruments of transfer delivered by Shareholders and
Seller pursuant to Section 7.01 to which any Shareholder or Seller is or are a
party have been duly executed and delivered by Shareholders or Seller, as
appropriate, and each constitutes a legal, valid and binding obligation of
Shareholders and Seller, as the case may be, enforceable in accordance with its
respective terms;
(iv) The execution, delivery and performance by Shareholders
and Seller of the agreements and instruments referred to in paragraph (iii)
above to which
22
27
Seller or any Shareholder is a party, (A) to the Knowledge of such counsel, will
not conflict with or violate any provision of any applicable law, rule or
regulation or any order, writ, injunction or decree, (B) will not conflict with
any provision of the Articles of Incorporation or By-laws of Seller and, to the
Knowledge of such counsel, will not conflict with or result in the breach of any
term or provision of, or constitute a default under, or result in the creation
of any lien, charge or encumbrance upon any of the Purchased Assets pursuant to,
any indenture, mortgage, lease, agreement or other instrument to which Seller is
a party or by which it is bound and (C) do not require the consent or approval
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality except
as have been obtained; and
(v) To the Knowledge of such counsel, there is no action, suit
or proceeding pending or threatened in any Federal, state, municipal or other
court, agency or other governmental body seeking to restrain or prohibit the
consummation of the transactions contemplated hereby, except as described in
such opinion.
Such opinions may be limited by its terms to the laws of the United
States of America, the State of New York and the State of Texas and may be given
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforceability of creditors' rights generally
and be limited to the extent that enforcement may be affected by the
availability of equitable remedies or the applicability of principles of equity.
(e) Approvals and Consents; Estoppels. Seller and Shareholders shall
have obtained all requisite approvals and consents from governmental or
regulatory bodies or agencies, whether Federal, state or local. Consents to
assignment of the Assigned Agreements shall have been obtained by Seller. The
consent to assignment with respect to each Lease shall also state (i) that such
Lease has not been amended, modified or supplemented and is in full force and
effect on the Closing Date, (ii) the date to which payments under such Lease
have been made, (iii) that there is no default or event which, with notice or
the passing of time, would constitute a default under such Lease and (iv) that
there are no setoffs, defenses or counterclaims against enforcement of the
obligations to be performed under such Lease in favor of the party executing
such consent which have not been waived or satisfied as specified in such
consent. In addition, Seller shall use its best efforts to include in each such
consent to assignment with respect to each Lease a statement that the landlord
under such Lease has consented to the cancellation of the guaranty or letter of
credit, if any, which supports rent payments under such Lease and that no new
guaranty or letter of credit or other credit support will be required after such
Lease is assigned to Buyer. All outstanding debt of the Seller to Xxxxxx Xxxx
and Xxxxxx Xxxx (except the Wolf Notes that are assumed pursuant to Section
2.02(a) and a promissory note in the aggregate principal amount of not more than
$100,000 payable to Xxxxxx Xxxx) shall have been paid in full and all
instruments evidencing such debt shall have been delivered to the Seller and
cancelled by the Seller.
(f) Litigation. As of the Closing Date, there shall not be in effect
any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which
23
28
is to prohibit or restrain the consummation of the transactions contemplated by
this Agreement.
(g) No Material Adverse Change. Since December 31, 1998 there shall
not have been any material adverse change in the business, assets or financial
condition of Seller.
(h) No Change in Law. There shall not have been any action, or any
statute enacted, by any government or agency thereof which would render the
parties unable to consummate the transactions contemplated herein or make the
transactions contemplated herein illegal, or prohibit or restrict the
consummation of the transactions contemplated herein. In the case of failure of
the condition set forth in this 6.01(h), Buyer shall deliver to Seller and
Shareholders an opinion of counsel to such effect.
(i) Telephone and Fax Numbers; Internet Domain Addresses, etc.
Seller shall have delivered to Buyer a letter from Seller addressed to Seller's
telephone companies instructing such companies to transfer Seller's telephone
and fax numbers to Buyer and a letter from Seller addressed to Seller's
telephone company and Internet provider instructing such entity to transfer all
Internet domain addresses used in the Business to Buyer.
(j) Employment Agreements. On the Closing Date each person listed on
Exhibit 6.01(j) shall have executed and delivered an Employment Agreement.
(k) HSR Act. The applicable requirements of the HSR Act shall have
been met.
(l) Audited Financial Statements. Seller shall have delivered to
Buyer true and complete copies of statements of assets, liabilities and
stockholders' equity of Seller as at December 31, 1997 and 1998 and related
statements of revenue and expenses and retained earnings and cash flow of Seller
for each of 1996 and the fiscal years then ended, all of which statements have
been audited by Ernst & Young, each of which has been prepared in accordance
with GAAP applied on a consistent basis and presents fairly the financial
position of Seller and the results of the operations of Seller as of its date
and for the fiscal year or period of Seller to which such statement pertains and
which audited financial statements meet the requirements for submission to the
SEC.
Section 6.02 Conditions to Obligations of Seller and Shareholders.
The obligations of Seller and Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, or the
waiver by Seller and Shareholders, on or prior to the Closing Date, of the
following conditions:
(a) Representations and Warranties True at the Closing Date. The
representations and warranties of Buyer and Sage contained in this Agreement
shall be deemed to have been made again at and as of the Closing Date and shall
then be true and correct.
24
29
(b) Compliance with Covenants. All the terms, covenants, agreements
and conditions of this Agreement to be complied with and performed by Buyer or
Sage on or prior to the Closing Date shall have been duly complied with and
performed in all material respects.
(c) Delivery of Closing Documents. Buyer shall have delivered to
Shareholder and Seller on or prior to the Closing Date all the documents
required to be delivered pursuant to Section 7.02.
(d) Opinion of Counsel to Buyer and Sage. Seller and Shareholders
shall have received an opinion or opinions of Xxxxx Xxxxxxxxxx LLP, special
counsel for Buyer and Sage, dated the Closing Date and addressed to Seller and
Shareholders, to the effect that:
(i) Each of Buyer and Sage is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation;
(ii) Each of Buyer and Sage has full corporate power and
authority to enter into the Transaction Documents to which it is a party, and to
consummate the transactions contemplated hereby, and all corporate and other
proceedings required to be taken by or on the part of Buyer and Sage to
authorize it to enter into the Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby have been duly and properly
taken;
(iii) Each of the Transaction Documents to which it is a party
has been duly executed and delivered by Buyer and Sage and constitutes a legal,
valid and binding obligation of Buyer and Sage, enforceable in accordance with
its terms;
(iv) The execution, delivery and performance by Buyer and Sage
of the instruments and agreements referred to in paragraph (iii) above, (A) will
not conflict with or violate any provision of any applicable law, rule or
regulation or any order, writ, injunction or decree known to such counsel, (B)
will not conflict with any provision of the Certificate of Incorporation or
By-laws of Buyer or Sage and, to the actual Knowledge of such counsel, will not
conflict with or result in a breach of any term or provision of, or constitute a
default under, any indenture, mortgage, lease, agreement or other instrument to
which Buyer or Sage is a party or by which it is bound, and (C) do not require
the consent or approval of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality except as have been obtained; and
(v) The Share Consideration has been duly authorized and
issued and when delivered in accordance with this Agreement will be fully paid
and nonassessable.
Such counsel's opinion may be limited to the laws of the United
States of America, the State of New York and the General Corporation Law of the
State of Delaware and such opinion may be given subject to applicable
bankruptcy, insolvency,
25
30
reorganization, moratorium and other similar laws affecting the enforceability
of creditors' rights generally and be limited to the extent that enforcement may
be affected by the availability of equitable remedies or the applicability of
principles of equity.
(e) No Change in Law. There shall not have been any action, or any
statute enacted, by any government or agency thereof which would render the
parties unable to consummate the transactions contemplated herein or make the
transactions contemplated herein illegal, prohibit or restrict the consummation
of the transactions contemplated herein. In the case of failure of the condition
set forth in this Section 6.02(f), Seller and Shareholders shall deliver to
Buyer and Sage an opinion of counsel to such effect.
(f) Litigation. As of the Closing Date, there shall not be in effect
any judgment, order, injunction or decree of any court of competent
jurisdiction, the effect of which is to prohibit or restrain the transactions
contemplated by this Agreement.
(g) HSR Act. The applicable requirements of the HSR Act shall have
been met.
(h) Payment of Wolf Notes; Cash Consideration. The portion of the
Wolf Notes registered to Xxxxxx Xxxx shall have been paid. The Sage Note shall
have been delivered to Xxxxxx Xxxx. The Cash Consideration shall have been paid.
(i) Release of Letters of Credit. The Letters of Credit numbered I-
453775, I-459014 and I-463918 dated June 13, 1995, January 18, 1996 and August
6, 1996 respectively and each as amended issued by Texas Commerce Bank shall
have been delivered to Xxxxxx Xxxx.
(j) Sage Acknowledgment. Sage shall have acknowledged in writing
that all conditions for the delivery of shares of Common Stock at set forth in
Section 6 of the Agreement to Deliver Shares have been satisfied.
ARTICLE VII
Documents to be Delivered on Closing Date
Section 7.01 Documents to be Delivered by Shareholders and Seller on
Closing Date. On the Closing Date, Shareholders and Seller shall deliver to
Buyer and Sage, in form and substance satisfactory to Buyer and its counsel:
(a) Conditions Precedent. The documents, agreements and instruments
referred to in Section 6.01, the authorization, execution and delivery of which
are conditions precedent to the obligations of Buyer and Sage.
(b) Officer's Certificates. Certificates signed by each Shareholder
and the President of Seller with respect to the matters referred to in Section
6.01(a) and (b).
26
31
(c) Bills of Sale. Bills of sale duly executed by the Seller
conveying the Purchased Assets at the Closing Date.
(d) Wolf Notes, Transaction Documents. A copy of the Wolf Notes, and
each Transaction Document to which the Seller or any Shareholder is a party,
duly executed by Seller or such Shareholder and the Employment Agreement duly
executed by each person listed on Exhibit 6.01(j).
(e) Further Instruments. Such further instruments of assignment,
conveyance or transfer or other instruments covering the Purchased Assets or any
part thereof, and such further instruments with respect to the transactions
contemplated hereby, as Buyer may reasonably request, including, without
limitation, assignments executed in suitable form for recordation at the U.S.
Patent & Trademark Office of INTERLIANT (from Wolf to Interliant) and
Primetrics, L.L.C. (from Primetrics to Seller) (the "Trademark Assignment").
Section 7.02 Documents to be Delivered by Buyer on Closing Date. On
the Closing Date, Buyer shall deliver to Seller and Shareholders in form and
substance satisfactory to Shareholders and Seller and their counsel:
(a) Conditions Precedent. The payments, documents, agreements and
instruments referred to in Section 6.02, the authorization, execution and
delivery of which are conditions precedent to the obligations of Shareholders
and Seller.
(b) Officer's Certificate. Certificates signed by an authorized
officer of Buyer and Sage with respect to the matters referred to in Section
6.02(a) and (b).
(c) Other Documents. The Transaction Documents to which Buyer and
Sage are a party, each duly executed by Buyer or Sage, as the case may be.
(d) Further Instruments. Such further instruments with respect to
the transactions contemplated hereby, including instruments of assumption, as
Seller may reasonably request.
ARTICLE VIII
Further Covenants and Agreements
of Seller, Shareholders, Buyer and Sage
Section 8.01 Further Covenants and Agreements of Shareholders and
Seller. Shareholders and Seller agree that:
(a) Conduct of Business Pending Closing. From the date of this
Agreement to the Closing Date, Shareholders (as officers, directors or employees
of Seller) and Seller:
27
32
(i) will maintain the Purchased Assets and not remove any
Purchased Assets from the Sites except in the ordinary course of business;
(ii) will perform their obligations under the Assigned
Agreements;
(iii)will conduct the Business only in the ordinary course;
(iv) will not (A) fail to comply in any material respect with
any laws, ordinances, regulations or other governmental restrictions applicable
in any respect to the Business or any of the Purchased Assets, (B) grant any
powers of attorney to act for the Business after the Closing Date, (C) mortgage
or pledge or otherwise encumber any of the Purchased Assets, (D) cancel or
terminate any contract, agreement or other instrument material to the Business,
other than contracts, agreements and other instruments which are not to be
assigned to Buyer unless Shareholders or Seller is otherwise obligated to
maintain them in effect or are necessary for the conduct of the Business, (E)
engage in or enter into any material transaction with respect to the Business of
any nature not expressly provided for herein, (F) pay any dividend or make any
other distribution or payment to the Shareholders or Seller, except salaries
regularly payable to Shareholders in the ordinary course of business as set
forth on Exhibit 5.01(r), (G) amend, modify or supplement any Employment
Contract listed on Exhibit 5.01(m)(i) (except as provided on Exhibit 5.01(m)(i))
or (H) issue any additional shares of capital stock of the Seller or any
options, rights or warrants exchangeable for or convertible into any shares of
capital stock of the Seller; and
(v) (A) take such action as may reasonably be necessary to
preserve the Purchased Assets, (B) maintain inventory of the kinds and in the
quantities maintained in the ordinary course of the Business, (C) maintain its
books and records in a manner consistent with past practices and promptly advise
Buyer in writing of any material adverse change in the condition (financial or
otherwise) of the Purchased Assets or the Business of Seller and (D) use its
reasonable commercial efforts to preserve the organization of the Business
intact and continue its operations at its present levels, to keep available to
Buyer and Sage the services of Employees and to preserve the goodwill of
Seller's suppliers, customers, creditors and others having business relations
with Seller in connection with the Business.
(b) Non-Competition; Non-Solicitation.
(i) As long as the Shareholders have a designee serving as a
director of Sage, Seller and Shareholders (other than Xxxxxxx Xxxxxx) shall not
engage in any capacity in any business that competes with or provides the same
types of services as those provided by the Business or the business conducted by
Sage and its subsidiaries. From the Closing Date to and including the date one
year following the Closing Date, Seller and Shareholders (other than Xxxxxxx
Xxxxxx) shall not engage in any capacity in any Restricted Business; provided,
however, that (x) Shareholders may participate in an investment fund that
invests in a business conducting a Restricted Business so long as the
Shareholders do not own more than 10% of such investment fund and (y)
Shareholders may own up to 5% of the shares of a publicly traded company which
conducts a
28
33
Restricted Business. For purposes of this Section 8.01(b), the term "Restricted
Business" shall mean the business of providing Lotus Notes or Domino
applications hosting services, providing outsourcing services with respect to
Lotus Notes or Domino or engaging in any other business related to WEB or
applications hosting. Seller and Shareholders understand that in connection with
the negotiations leading up to the entering into of this Agreement, Seller and
Shareholders have received, and that pursuant to this Agreement, Seller and
Shareholders will receive, confidential and proprietary information of Buyer and
its affiliates, including, without limitation, customer lists and other trade
secrets.
(ii) From and after the Closing Date to and including the date
two years following the Closing Date, Seller will not, unless acting with the
express written consent of Sage, directly or indirectly, solicit or interfere
with, or endeavor to entice away (x) any person who was employed by Seller or
Sage or any subsidiaries thereof, (y) any person who otherwise performed
services (other than legal, accounting, consulting or financial advisory
services) on a regular basis for Seller or Sage or any subsidiaries thereof or
(z) with respect to the Restricted Business, any person or entity who was a
customer or client of Seller or Sage or any subsidiaries thereof or any person
or entity who requested or received a proposal from Seller or Sage or any
subsidiaries thereof with respect to the Business, in the case of (x), (y) or
(z), during the 6 months immediately preceding the date of this Agreement.
(c) Access to Seller's Business. Seller and Shareholders shall, from
the date hereof up to and including the Closing Date, permit Buyer and Buyer's
attorneys, accountants, agents and representatives full access to the books,
records, business and assets of Seller at any reasonable time and in any
reasonable manner on reasonable advance notice and in a manner that does not
interrupt Seller's business. Buyer and Sage shall have the right to meet with
customers and suppliers of Seller and Seller will give Buyer and Sage full
cooperation with respect thereto. Buyer will cooperate and consult with Seller
and Shareholders in arranging any meetings with such customers and suppliers.
(d) Corporate Name. From and after the Closing, Buyer shall possess
to the extent permitted by law, to the exclusion of Seller and Shareholders, all
rights to the name Interliant, Inc. and any variants or derivatives of the
foregoing name, and Seller and Shareholders shall not have any rights whatsoever
to the use of such name or any formatives, variants or derivatives of such name
in the conduct of any business or otherwise. On the Closing Date, Seller and
Shareholders shall cause the name of Seller to be changed so as not to conflict
with the provisions of this Section and will provide evidence of such change to
Buyer at or promptly following the Closing. Seller and Shareholders acknowledge
and agree that following the Closing, Sage and its affiliates intend to use the
name Interliant, Inc. and variants and derivatives of such name in the conduct
of their business.
(e) Changes in Representations and Warranties. Except as described
in Section 6.01(a), between the date of this Agreement and the Closing Date,
neither Seller nor any Shareholder shall permit Seller to, enter into any
transaction, take any
29
34
action, or by inaction, permit an event to occur, which would result in any of
the representations and warranties of Seller or Shareholders herein contained
not being true and correct at and as of (i) the time immediately following the
occurrence of such transaction or event or (ii) the Closing Date. Seller and
each Shareholder shall promptly give written notice to Buyer upon becoming aware
of (A) any fact which, if known on the date hereof, would have been required to
be set forth or disclosed pursuant to this Agreement, and (B) any impending or
threatened breach in any material respect of any of the representations and
warranties contained in this Agreement and with respect to the latter shall use
all reasonable efforts to remedy same.
(f) Mutual Cooperation. The parties hereto will cooperate with each
other, and will use all commercially reasonable efforts to cause the fulfillment
of the conditions to the parties' obligations hereunder and to obtain as
promptly as possible all consents, authorizations, orders or approvals from each
and every third party, whether private or governmental, required in connection
with the transactions contemplated by this Agreement.
(g) Further Assurances. Seller and Shareholders will cooperate fully
with Buyer and Sage in connection with the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, from and after the
Closing Date, from time to time, at the request of Buyer or Sage and without
further consideration, Seller and Shareholders will execute and deliver such
other instruments, including powers of attorney, and take such other action as
Buyer or Sage may reasonably request to more effectively put Buyer or Sage in
possession and operating control of all or any part of the Purchased Assets and
Assumed Liabilities.
(h) No Mergers, Consolidations, Sales of Assets, Etc. Until the
earlier of the consummation of the transactions contemplated by this Agreement
or the termination date provided for in Section 9.02 below, neither Seller nor
any Shareholder will, directly or indirectly, solicit any inquiries or proposals
or enter into or continue any discussions, negotiations or agreements relating
to the sale or exchange of the capital stock of Seller, the merger of Seller
with, or the direct or indirect acquisition or disposition of a significant
amount of the Purchased Assets otherwise than in the ordinary course of the
business of Seller to or from, any person other than Buyer or its affiliates or
provide any assistance or any information to or otherwise cooperate with any
person in connection with any such inquiry, proposal or transaction.
(i) Transition Arrangements for Seller. Following the Closing Date,
Sage and Buyer will make their personnel reasonably available to Seller during
normal business hours on a reasonable basis consistent with past practices, at
no cost to Seller, and will cooperate with Seller's reasonable requests to
provide information in order that Seller can prepare all tax returns due with
respect to 1998 and 1999. As soon as practicable but for not more than sixty
(60) days following the Closing Date, Sage and Buyer will make their personnel
available to Seller consistent with past practices, at a cost to Seller of
$4,000 per month plus reimbursement of the out of pocket costs of Buyer and
Sage, if any, in connection therewith and which have been approved in advance by
Seller, during normal business hours and consistent with past practices of
Seller to
30
35
provide reasonable assistance to Seller, Xxxxxx Xxxx and their affiliates with
respect to payroll, benefits and management information systems. Buyer will make
Xxxxxx Xxxxxxx available to assist Seller with the prosecution and defense of
the JDA litigation described on Exhibit 5.01(e).
(j) Announcements; Confidentiality. Except as otherwise required by
law, neither Seller, any Shareholder, Buyer nor Sage shall make any announcement
to the public of the transactions contemplated hereby other than jointly or as
otherwise agreed by them in writing. Buyer and Sage will keep confidential any
information not otherwise publicly available which is derived from access,
investigation or information furnished by Seller or Shareholders in connection
with this Agreement, including the negotiations conducted in connection
herewith, and if the transactions contemplated hereby are not consummated by
March 17, 1999 or this Agreement is terminated prior to such time, Buyer will
promptly return to Seller or Shareholders all such information, and copies and
extracts therefrom, and will not thereafter use such information for any
purpose. Buyer, Sage, Seller and Shareholders will keep confidential all drafts
and executed copies of this Agreement and the contents hereof, except to the
extent necessary to comply with any applicable law or regulation or any request
or order of any government agency or court of competent jurisdiction and except
as otherwise agreed pursuant to the first sentence of this paragraph.
Notwithstanding the foregoing provisions of this Section 8.01(j), Buyer, Sage,
Seller and Shareholders may disclose any such information to their respective
attorneys, accountants and investment advisors and to their respective employees
on a need to know basis.
Section 8.02 Consents to Assignments; Permits. Anything in this
Agreement or the bills of sale notwithstanding, to the extent that any Assigned
Agreement to be sold, assigned, transferred or conveyed to Buyer, or any claim,
right or benefit arising thereunder or resulting therefrom (the "Interests"), is
not capable of being sold, assigned, transferred or conveyed without the
approval, consent or waiver of the other party thereto, or any third person
(including a government or governmental unit), or if such sale, assignment,
transfer or conveyance or attempted assignment, transfer or conveyance would
constitute a breach thereof or a violation of any law, decree, order, regulation
or other governmental edict, except as expressly otherwise provided in this
Section 8.02, this Agreement shall not constitute a sale, assignment, transfer
or conveyance thereof, or an attempted assignment, transfer or conveyance
thereof. After the Closing, until any Interest has been validly and effectively
assigned to Buyer, (i) prior to the date two years following the Closing Date,
Seller shall hold such Interest for the benefit of Buyer and Buyer shall be
entitled to receive all benefits under such Interest and shall be responsible
for the obligations under such Interest to the extent relating to the benefits
received, and (ii) any such Interest shall, notwithstanding the failure to
receive any approval, consent or waiver (but so long as the same shall not
constitute a violation of law), be deemed to be assigned, transferred or
conveyed to Buyer if (x) written notice of such assignment, transfer or
conveyance is given to the other party to such Interest on or before the Closing
Date and (y) the other party to such Interest does not, within three months
after the Closing, object to such assignment, transfer or conveyance or acts in
a manner inconsistent with such assignment, transfer or conveyance; provided
that, in any case, Buyer shall be subject to all liabilities and obligations
under such Assigned
31
36
Agreement to the extent such liabilities or obligations would have been an
Assumed Liability had the applicable Agreement been transferred and assigned.
Seller will cooperate with Buyer and Sage to obtain any such approval, consent
or waiver not obtained prior to the Closing Date.
Section 8.03 Survival of Representations, Warranties, Etc.
(a) All covenants and agreements of the parties made in this
Agreement or provided herein shall survive the Closing Date without limit,
unless otherwise specifically provided herein. All representations and
warranties of the parties made in this Agreement or as provided herein shall
survive the Closing Date and for a period ending on December 31, 2000,
notwithstanding any investigation at any time made by or on behalf of the other
party; provided, however, that the representations and warranties relating to
any Tax and any environmental matter and the representations and warranties set
forth in the first sentence of Section 5.01(d)(iii) and the third sentence of
Section 5.01(q)(i) shall survive until six months after the applicable statute
of limitations (or any extension thereof) has expired (as the case may be, the
applicable "Survival Period"); and provided, further, that any representation or
warranty which is the subject of a specific claim or dispute asserted prior to
the expiration of the Survival Period shall survive with respect to such claim
or dispute until final resolution thereof. All claims for indemnity hereunder
shall be made in writing, and shall state with reasonable specificity the matter
for which indemnification is sought.
(b) Shareholders' and Seller's Agreement to Indemnify. Seller and
Shareholders other than Xxxxxxx Xxxxxx, jointly and severally, and Xxxxxxx
Xxxxxx, severally, hereby agree to indemnify and hold Sage and Buyer and their
respective shareholders, officers and directors, 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 incorrectness or incompleteness in the representations and warranties
made by Shareholders or Seller in this Agreement, (ii) any breach in any
material respect by any Shareholder or Seller, unless waived, of any covenant or
agreement of any Shareholder or Seller contained in or arising out of this
Agreement, (iii) the Business conducted by Seller, or otherwise in connection
with the Purchased Assets, prior to the Closing Date (except for the Assumed
Liabilities), (iv) any failure by Seller to comply with the bulk sales laws of
any jurisdiction and (v) any and all actions, suits, proceedings, claims,
demands, assessments and judgements incidental to the foregoing or the
enforcement of such indemnification. Notwithstanding the above provisions, the
Shareholders shall have no indemnity obligation with respect to Section 8.08(c).
In addition to the foregoing provisions of this Section 8.03(b) and
without limiting the generality of such provisions, Seller and Shareholders,
other than Xxxxxxx Xxxxxx, jointly and severally, and Xxxxxxx Xxxxxx, severally,
agree to fully indemnify and hold harmless Sage and its affiliates and
shareholders, officers and directors of any of the foregoing against and in
respect of and, will reimburse Sage and its affiliates for: (a) any and all
liability whatsoever, and however imposed (including any claim asserted against
or deficiency assessed against or collected from or paid by Buyer, Sage or
Seller
32
37
or any affiliates thereof), in respect of any Taxes of Seller (or any
predecessors of Seller) for any and all periods through the period ending on the
Closing Date, without regard to whether or not the existence of such liability
would constitute a breach of a representation or warranty made by Seller or
Shareholders hereunder and (b) any and all liabilities of Seller existing on, or
arising under or relating to activities or transactions of Seller other than the
Assumed Liabilities.
(c) Agreement of Buyer and Sage to Indemnify. Buyer and Sage, hereby
agree, jointly and severally, to indemnify and hold Shareholders, Seller and
Seller's officers, directors and 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 incorrectness or incompleteness in the representations and warranties made
by Buyer or Sage in this Agreement, (ii) any breach in any material respect by
Buyer or Sage, unless waived, of any covenant or agreement of Buyer or Sage
contained in or arising out of this Agreement, (iii) the activities or
transactions conducted by Buyer or Sage in connection with the Purchased Assets
on or after the Closing Date, and the Assumed Liabilities on or after the
Closing Date, (iv) any breach by Buyer of the Assignment Agreement, and (v) any
and all actions, suits, proceedings, claims, demands, assessments and judgments
incidental to the foregoing or the enforcement of such indemnification.
(d) Claims. Each party shall retain its own counsel and defend
itself, subject to being reimbursed by the indemnifying party for reasonable
attorneys' fees and expenses pursuant to this Section 8.03. The indemnified
party agrees to give the indemnifying party 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 ("Claim") under this Section 8.03.
The indemnifying party shall have the right to participate jointly with the
indemnified party in the indemnified party's defense of any Claim. With respect
to any issue involved in any such Claim, as to which the indemnifying party
shall have acknowledged in writing the obligation to indemnify the indemnified
party hereunder, the indemnifying party shall have the sole right to defend,
settle or otherwise dispose of such Claim, on such terms as the indemnifying
party, in its sole discretion, shall deem appropriate; provided that such terms
do not result in any unindemnified expense to the indemnified party. In
addition, the parties agree to cooperate in any defense or settlement and to
give each other full access to all information relevant thereto.
(e) Remedies. (i) Claims by Buyer and Sage hereunder (including any
payment required by Section 8.03(b)) shall be satisfied first, from the Escrow
Deposit (to the extent not theretofore released to Seller or Shareholders) and
second, by means of an offset against any payment due pursuant to Section
3.01(b) and then by claims against the Seller and Shareholders. The indemnity
provided under Section 8.03(b) of this Agreement shall be the sole and exclusive
remedy of the parties to this Agreement for any claim arising under this
Agreement, except with respect to fraud by the Shareholders, and each party
agrees that it will not pursue any other remedy. Seller and each Shareholder
acknowledge that irreparable damage would result if the provisions of Sections
8.01(b), (d) and (h) were not complied with in accordance with their
33
38
respective specific terms. Accordingly, Seller and Shareholders agree that Buyer
and Sage shall have the right, in addition to any other rights or remedies it
may have, to injunctive relief, in respect of any failure on the part of Seller
or Shareholders to comply with provisions of Sections 8.01(b), (d) or (h).
(ii) Minimum Claim. Notwithstanding anything to the contrary
contained herein, no Claim by Buyer or Sage, on the one hand, or by Seller and
Shareholders, on the other hand, may be made hereunder unless the aggregate
amount of Claims by such party or parties hereunder exceeds $150,000 and the
amount for which an indemnitee is entitled to indemnification shall be the
amount by which the claim exceeds $150,000; provided, however that Buyer and
Sage shall indemnify Xxxxxx Xxxx for the full amount of any Claim with respect
to the matters for which indemnity is provided under Section 8.06 and Seller
shall indemnify Sage and Buyer for the full amount of any Claim with respect to
the matters for which indemnity is provided under Section 8.08(c).
(iii) Limitation of Indemnity Obligations. The respective
obligations of Seller and Shareholders under Section 8.03(b) and Buyer and Sage
under Section 8.03(c) shall be limited to an aggregate amount equal to the sum
of (w) the Cash Consideration, (x) the Fair Market Value (determined in
accordance with Section 8.03(e)(iv)) of the Purchase Price Shares, (y) the
liability under the Wolf Notes assumed by the Buyer pursuant to Section
2.02(a)(ii) and (z) the Fair Market Value of the Sage Options (or the number of
shares of Common Stock issued on exercise of such Sage Options) (determined in
accordance with Section 8.03(e)(iv)) (the sum of (w), (x), (y) and (z) is
collectively, the "Indemnity Limit"). Buyer and Sage agree that Shareholders'
obligation to pay any Claim for indemnity under this Section 8.03 shall be
limited to 80% of the amount of such Claim. The Seller's and Shareholder's
liability under this Section 8.03 shall be limited to returning the Purchase
Price Shares and cash equal to the amount of payments made by Sage or Buyer
under the Wolf Notes. This limitation shall also apply to any claim based on the
fraud of any Shareholder. The Seller and any Shareholder may satisfy any Claim
hereunder in cash or by the delivery of Common Stock to Sage. The Seller and any
Shareholder may satisfy a specified dollar amount of an indemnity obligation by
returning shares of Common Stock equal to such amount with such shares valued at
Fair Market Value on the date of satisfaction of such indemnity obligation. If
Seller or Shareholder makes a cash payment to satisfy an indemnity obligation,
then for purposes of determining when all of the Purchase Price Shares have been
returned, the Seller or Shareholder shall be deemed to have returned shares
equal to the amount of cash paid divided by the Fair Market Value of the shares
on the date of satisfaction of such indemnity obligation.
(iv) Determination of Indemnity Limit. For purposes of determining
the Indemnity Limit:
(A) The Purchase Price Shares constituting the Share
Consideration shall have a Fair Market Value of $6.67 per share.
(B) The Purchase Price Shares which are delivered pursuant to
Section 3.01(b) shall have a Fair Market Value equal to the lesser of $6.67 per
share or
34
39
the Fair Market Value per share on the date of the delivery of such shares to
the Shareholders pursuant to the Agreement to Deliver Shares.
(C) The Fair Market Value of the Sage Options shall be equal
to the Fair Market Value of the Common Stock subject to such Sage Options as
determined under clauses (A) and (B) minus the exercise price thereof.
Section 8.04 Inspection of Records. Seller and Shareholders agree,
prior to the Closing Date and for the three year period following the Closing
Date, to allow representatives of the Buyer and Sage reasonable opportunity from
time to time during normal business hours to inspect and make copies of the
books of account and other records of Seller which pertain to the Business and
which are not transferred to Buyer hereunder. Seller and Shareholders further
agree, prior to the Closing Date and for the three year period following the
Closing Date, to cooperate with Sage's accountants, counsel and other agents and
representatives, and to provide access to the Seller's records and to use
reasonable commercial efforts to provide access to the records of the Seller's
independent auditors (including, without limitation, all financial and
accounting books, workpapers and any consolidating and other worksheets of its
independent auditors). Sage shall be solely responsible for the costs and
expenses associated therewith.
Section 8.05 Employee Matters. Buyer shall offer employment to all
Employees at the same salaries or wages as in effect immediately prior to the
Closing Date other than those employees identified on Exhibit 8.05. Any such
Employees accepting such offer shall become employees of Buyer (the "Hired
Employees") on the Closing Date (the "Hire Date"). Each Hired Employee shall
receive (i) credit under Buyer's employee benefit plans (including, without
limitation, pension, welfare and fringe benefit plans) for purposes of
determining eligibility and vesting under such plans and (ii) credit for
purposes of determining vacation and severance pay, for the period during which
such Hired Employee was employed by the Seller; provided, however, that in no
event shall the Buyer be required to provide such a credit to a Hired Employee
to the extent that such credit would result in a duplication of benefits. Each
Hired Employee shall be entitled to participate in the employee benefit plans
maintained by Buyer without any waiting periods, any evidence of insurability or
the application of any preexisting condition restrictions (to the extent such
waiting periods, insurability or preexisting conditions were waived under
Seller's plan) and with credit for claims incurred prior to the Hire Date for
purposes of applying co-payments, deductibles, out of pocket maximums and
similar matters.
Section 8.06 Release of Guaranties. Promptly following the Closing
Date, Sage will cause Xxxxxx Xxxx to be released from his obligations under the
First USA Merchant Services, Inc. Credit Card Processing Services Agreement
Guaranty Addendum dated April 15, 1997 and the Guaranty dated July 31, 1996 of
Xxxxxx Xxxx in respect of the Master Lease Agreement between Wolf Communications
Company and NEC America, Inc. Sage will indemnify and hold Xxxxxx Xxxx harmless
with respect to his obligations under such Guaranty Addendum and Guaranty with
respect to periods following the Closing Date.
35
40
Section 8.07 Tax Reporting. With respect to the reporting of the
transactions contemplated by this Agreement for tax purposes, the parties agree
to the following:
(a) The Common Stock shall not be valued at an amount greater than
$6.67 per share except that if Sage is required by any governmental or
regulatory authority including the Securities Exchange Commission ("SEC") to
value the Common Stock issued under this Agreement at a higher amount, Sage
shall be permitted to value the Common Stock at such higher amount. On a timely
basis, Sage shall keep Seller informed as to all developments with respect to
the reporting of the value recorded for the Common Stock issued hereunder and
shall immediately inform Seller at the final determination regarding such value.
(b) The consideration paid to Seller (including the Common Stock)
shall be allocated among the assets set forth on the Company's balance sheet at
the Closing Date at the net book value thereof and the balance will be allocated
to "Section 197 Intangibles" as such term is defined in Section 197(c) of the
Code.
(c) The parties will attempt to agree on the reporting of the
transaction on Internal Revenue Service Form 8594, but each party is free to
report the transaction as it shall determine, in its sole discretion, provided
such reporting must be consistent with this Section 8.07.
(d) The receipt of additional shares of Common Stock under Section
3.01(b) is not intended to produce additional gain for Seller or to result in
additional basis for Buyer.
Section 8.08 Sage Options. (a) Seller will cooperate with Buyer to
cause all options to purchase capital stock of Seller (the "Seller Options")
outstanding, whether or not exercisable, at the Closing Date under the Wolf
Communications Company 1995 Employee Stock Option Plan, as amended and the
Interliant, Inc. Lidestri Stock Option Plan and Agreement (together the "Seller
Plan"), to be converted into options to purchase Sage's Common Stock pursuant to
the terms of the Sage Networks, Inc. 1998 Stock Option Plan (the "Sage Plan") in
such manner that Sage is "assuming a stock option in a transaction to which
Section 424(a) applied". Each Seller Option converted by Sage ("Sage Options")
shall be exercisable upon the terms and conditions set forth in Exhibit A-5 and
shall be exercisable for that whole number of shares of Sage Common Stock
(rounded down to the nearest whole share) equal to the number of shares of
Seller's common stock, $.01 par value per share, subject to such Seller Option
immediately prior to the Closing Date multiplied by .6079167 and (B) the option
price per share of Sage common stock, $.01 par value per share, subject to a
Sage Option shall be an amount equal to the option price per share of Seller's
common stock, $.01 par value per share, subject to such Seller Option in effect
immediately prior to the Closing Date divided by .3988448 (the option price per
share, as so determined, being rounded up to the next full cent).
36
41
(b) The holders of Seller Options shall have 30 days following the
Closing Date in which to execute a Stock Option Substitution Agreement and a
Sage Option Agreement in the forms to be provided to such holders. In the event
that a holder of a Seller Option (a) fails to execute both a Stock Option
Substitution Agreement and a Sage Option Agreement within such 30 day period and
(b) exercises the Seller Option prior to the expiration of such 30 day period (a
"Nonparticipating Option Holder"), then, and only in such event, Sage shall
deliver to Seller (or Seller's designee), within 5 business days following the
execution and delivery to Sage of a Subscription Agreement and the Shareholders
Agreement by the Seller or Seller's designee, a number of shares of Sage Common
Stock (the "Unconverted Option Shares") equal to the number of shares of Sage
Common Stock with respect to which such Nonparticipating Option Holder would
have been granted vested Sage Options had such Nonparticipating Option Holder
executed both a Stock Option Substitution Agreement and a Sage Option Agreement
within such 30 day period.
(c) Seller agrees to hold Buyer and Sage harmless with respect to
any loss or damage suffered by either of them arising out of any claim of the
Nonparticipating Option Holder with respect to the failure of Seller to make
such shares of Sage Common Stock or equivalent value available to him or her.
(d) Seller agrees that Exhibit 8.08 sets forth a list of the holders
of each Seller Option and the number of Seller Options held by each such holder
and that each nonqualified option is preceded by the letters "NQ" and each
incentive stock option is not preceded by any letters.
Section 8.09 Escrow Deposit.
(a) Promptly following the Closing Date, a portion of the Share
Consideration shall be deposited in accordance with the provisions of Section
3(a) of the Agreement to Deliver Shares (the "Escrow Deposit").
(b) During the period from the date hereof through and including
March 31, 2000 (the "Termination Date"), Buyer may notify Xxxxxx Xxxx ("Xxxx")
that Buyer is asserting a Claim pursuant to the indemnification provisions
contained in Section 8.03 hereof to all or any portion of the Escrow Deposit
("Claim Notice"). If Wolf has received a Claim Notice prior to the Termination
Date, and the Claim Notice states a claim of Buyer or Sage to all or a portion
of the Escrow Deposit (the "Claimed Amount"), Wolf and Buyer shall either:
(i) agree on the disposition of the entire Claimed Amount
(which may include a cash payment rather than the application of the Escrow
Deposit) or a portion of the Claimed Amount such agreement not to be
unreasonably withheld or delayed by Buyer or Seller; or
(ii) In the absence of such agreement, seek a final
unappealable order, judgment or decree from a court of competent jurisdiction
directing the delivery of all or a portion of the Claimed Amount.
37
42
(c) If on or before the Termination Date Wolf has not received a
Claim Notice or any Claim Notice has been resolved to the parties' satisfaction,
then promptly after the Termination Date, Wolf and Buyer shall release the
Escrow Deposit then being held hereunder to Wolf.
ARTICLE IX
Miscellaneous
Section 9.01 Expenses. If the transactions contemplated hereby are
not consummated, each of the several parties hereto shall bear the fees and
expenses relating to its compliance with the various provisions of this
Agreement and its covenants to be performed hereunder, and each of such parties
shall pay all expenses (including legal fees and expenses) incurred by it in
connection with this Agreement and the transactions contemplated hereby. If the
transactions contemplated hereby are consummated, the Shareholders will pay all
legal fees, brokers fees and other expenses incurred by the Seller and the
Shareholders in connection with this Agreement and the transactions contemplated
hereby; provided, however, that the costs relating to Seller's audited financial
statements delivered pursuant to Section 5.01(i) shall be Assumed Liabilities
and Shareholders shall reimburse Sage for one half of the filing fee required in
accordance with the HSR Act. The reasonable legal fees and expenses of counsel
to the executive officers of Seller in connection with the transactions
contemplated by this Agreement in an aggregate amount not to exceed $20,000
shall be Assumed Liabilities.
Section 9.02 Termination. If the Closing pursuant to Section 4.01
shall not have occurred on or prior to March 17, 1999, this Agreement and all
obligations of, Shareholders, Seller, Buyer and Sage hereunder, except
obligations under Section 9.01, shall terminate at 11:59 p.m. New York time on
such date, unless extended by mutual agreement of the parties.
Section 9.03 Benefit; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns and not to any other person. This Agreement shall not be
assigned by any party hereto without the written consent of each of the other
parties hereto, except that (a) the rights and obligations of Buyer or Sage may
be assigned to any wholly owned subsidiary of Buyer or Sage or any entity under
common control with Buyer and Sage, but no such transfer shall relieve Sage of
its obligations hereunder, (b) the rights and obligations of any party hereto
may be assigned in connection with the dissolution of such party and (c) the
rights and obligations of Buyer and Sage may be assigned in connection with the
merger of Buyer or Sage into or sale by Buyer or Sage of substantially all its
assets and business to a third party if the successor shall have assumed all the
obligations of the Buyer or Sage, as applicable, hereunder (but, in the case of
a sale of substantially all the assets, without relieving Buyer or Sage of its
obligations hereunder).
Section 9.04 Governing Law; Jurisdiction. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of New
38
43
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/or
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 Buyer or Sage, on the one hand, and the Seller
or the Shareholders, on the other hand, and any transactions contemplated
thereby.
Section 9.05 Breach; Failure of Condition. If either party shall
believe at any time prior to the Closing Date that any other party has breached
any representation, warranty, covenant or agreement contained in this Agreement,
or that any condition to the Closing is not reasonably likely to be satisfied,
such party shall promptly so inform such other party specifying the breach or
condition concerned, and such other party shall have a reasonable opportunity to
correct such breach or cause such condition to be satisfied, but failure to so
notify shall not release the other party from its obligations hereunder.
Section 9.06 Notices, Etc. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person or
by courier, telegraphed, telexed or by facsimile transmission or mailed by
certified or registered mail first-class, postage prepaid:
If to Seller or Shareholders:
Xxxxxx Xxxx
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxx, Esq.
Xxxxxxx & Xxxxx L.L.P.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
and a copy to:
Mayor, Day, Xxxxxxxx
& Xxxxxx, L. L. P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telecopy No: (000) 000-0000
39
44
If to Buyer or Sage:
Sage Networks, Inc.
00 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Senior Vice President
Telecopier No.: (000) 000-0000
and
E. Xxx Xxxx, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Any such notice, request, demand or other communication hereunder shall be
deemed to have been duly given or made and to have become effective (a) if
delivered by hand, at the time of sending thereof, (b) if sent by confirmed
telegraph, telex or facsimile transmission, at the time of the dispatch thereof,
and (c) if sent by registered or certified first class mail, postage prepaid,
upon mailing.
Any party may, by written notice to the other, change the address to
which notices to such party are to be delivered or mailed.
Section 9.07 Headings. The headings of the articles, sections and
paragraphs contained in this Agreement are inserted for convenience of reference
only and in no way modify the meanings of such articles, sections and
paragraphs.
Section 9.08 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall become effective when one or more counterparts have been signed by each of
the parties hereto and delivered to the other parties.
Section 9.09 Entire Agreement. This Agreement and the other
agreements referred to herein and entered into in connection herewith set forth
the entire agreement and understanding of the parties in respect of the
transactions contemplated hereby and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof including
all such agreements, arrangements and understandings between Seller,
Shareholders, Buyer and Sage.
Section 9.10 Waiver; Amendment; Modification. The parties may, by
written agreement (a) extend the time for the performance of any of the
obligations or other acts of the parties hereto or (b) waive any inaccuracies or
breaches in the representations and warranties contained in this Agreement or in
any document delivered
40
45
pursuant to this Agreement. This Agreement may be amended or modified only by a
written agreement executed by the parties hereto or by their successors and
assigns.
Section 9.11 Severability. To the extent that any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance and not
in limitation of the foregoing, if the duration or geographic extent of, or
business activity covered by, any provision of this Agreement shall be in excess
of that which is enforceable under applicable law, then such provision shall be
construed to cover only that duration, extent or activities which may be validly
and enforceably covered.
41
46
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
SAGE NETWORKS ACQUISITION CORP., as
Buyer
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx
President
SAGE NETWORKS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx
Co-Chairman
INTERLIANT, INC.,
as Seller
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
/s/ Xxxxxx Xxxx
-----------------------------------------
Xxxxxx Xxxx
Xxx Xxxxxxxx Wolf 1995 Marital Trust
dated May 24, 1995
/s/ Xxxxxx Xxxx
-----------------------------------------
By: Xxxxxx Xxxx, as Trustee
Xxxxxx X. Xxxx Children's Trust
dated May 24, 1995
/s/ Xxxxxx Xxxx
-----------------------------------------
By: Xxxxxx Xxxx , as Trustee
/s/ Xxxxxxx Xxxxxx
-----------------------------------------
Xxxxxxx Xxxxxx
42
47
Attachment A
DEFINITIONS
"Agreement" shall mean this Asset Purchase Agreement.
"Agreement to Deliver Shares" shall mean the Agreement to Deliver
Shares among Sage, Buyer and Seller dated the Closing Date.
"Assigned Agreements" shall mean the Leases and all other business
agreements, leases, contracts, purchase orders, documents and instruments of the
Seller, which relate to the Business of Seller and any renewals, extensions,
amendments or modifications thereof, Seller's membership interest in TitleLink,
L.L.C. and any additional agreements, leases, contracts, documents and
instruments which are made or entered into by Seller in the ordinary course of
business or with the prior written approval of the Buyer between the date of
this Agreement and the Closing Date, but only as and to the extent such
renewals, extensions, amendments, or modifications thereof, and any additional
agreements, leases contracts, documents and instruments, pertain to and are used
in the operation of the business of Seller as of the Closing Date.
Notwithstanding the foregoing, "Assigned Agreements" shall not include Excluded
Assets.
"Assignment Agreement" shall mean an assignment and assumption
agreement between Buyer and Seller in substantially the form of Exhibit A-1.
"Assumed Liabilities" shall be limited to (a) those payments due in
the ordinary course of the Business and (b) those claims, liabilities and
obligations of Seller relating to the Business of Seller becoming due or arising
after the Closing Date, and in the case of each of (a) and (b) as (i) set forth
on the Exhibits hereto, (ii) set forth on the Seller's audited financial
statements as at December 31, 1998, (iii) incurred in the ordinary course of
business since December 31, 1998 or (iv) included in or arising under the
Assigned Agreements, other than:
(a) Claims, liabilities and obligations of Seller or Shareholders
under this Agreement;
(b) Claims, liabilities and obligations of Seller or Shareholders
in respect of Taxes and in respect of any violations of
Environmental Laws;
(c) Claims, liabilities and obligations of Seller or Shareholders
in respect of litigation disclosed in Exhibit 5.01(e);
provided that up to $9,000 of settlement costs and out of
pocket legal fees and expenses in connection with the JDA
litigation described on Exhibit 5.01(e) shall be Assumed
Liabilities;
(d) Fees and expenses of Seller or Shareholders in connection with
the negotiation of or consummation of the transactions
contemplated by this Agreement except (i) costs relating to
Seller's audited
48
financial statements delivered pursuant to Section 5.01(i) and
(ii) the payment by Seller of counsel to the executive
officers of Seller to the extent provided in Section 9.01
shall be Assumed Liabilities; and
(e) Claims, liabilities and obligations of Seller under any
Employee Benefit Plans (other than accrued vacation and sick
pay) to the extent not reserved on the Seller's balance sheet
at the Closing Date.
"Business" shall mean the business of Seller conducted by Seller on
and prior to the Closing Date.
"Cash" shall mean all cash, cash equivalents, restricted cash,
security deposits and other cash on hand at the offices of Seller at the opening
of business on the Closing Date excluding (i) the Cash Consideration and (ii)
any cash received from Xxxxxxx Xxxxxx with respect to the exercise of his Seller
stock options.
"Claim" shall have the meaning set forth in Section 8.03(d).
"Closing" shall have the meaning provided in Section 4.01 of the
Agreement.
"Closing Date" shall have the meaning provided in Section 4.01 of
the Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.
"Common Stock" shall mean the common stock, $.01 par value per
share, of Sage.
"Company Personnel" shall mean current or former Employees,
officers, directors, or consultants of Seller.
"Conversion Ratio" shall have the meaning provided in Section 8.08.
"Customer" shall have the meaning provided in Section 5.01(q)(ii).
"Customer Data" shall mean Seller's lists of customers and clients
and all records, whether in a written, electronic or other format, regarding
such customers and clients.
"Diluted Capital" shall mean the sum of the number of shares of
Common Stock (i) issued and outstanding immediately following the Closing, (ii)
issuable upon conversion of the Preferred Stock and (iii) issuable upon exercise
of the Sage Options. "Diluted Capital" shall not include shares of Common Stock
issuable upon exercise or
XXX-X-0
00
conversion of any warrants, convertible securities, options or similar
securities issued by Sage, other than the Preferred Stock and the Sage Options.
"Employee Benefit Plans" shall mean all pension, annuity,
retirement, stock option, stock purchase, savings, profit sharing or deferred
compensation plans, or agreements, and any retainer, consultant, bonus, group
insurance, welfare, health and disability plan, fringe benefit or other
incentive or benefit contract, plan, arrangement or commitment applicable to
Company Personnel (other than regular salary and bonus arrangements).
"Employees" shall mean all full and part time employees working in
the Business.
"Employment Agreement" shall mean an agreement between Sage and each
of the persons listed on Exhibit 6.01(j) substantially in the form set forth as
Exhibit A-2.
"Employment Contracts" shall mean all employment contracts,
consulting agreements and collective bargaining agreements with respect to
employees of Seller.
"Encumbrance" shall mean any mortgage, claim, lien, pledge, option,
charge, security interest or other similar interest.
"Environmental Laws" shall mean all federal, state or local
judgments, decrees, orders, laws, licenses, ordinances, rules or regulations
pertaining to environmental matters, including, without limitation, those
arising under the Resource Conservation and Recovery Act (42 U.S.C. ss. 1801 et
seq.) ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act (33 U.S.C. ss. 1251 et seq.) ("XXXX"), the Federal Clean Air Act (33 U.S.C.
ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 7401 et
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136
et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Deposit" shall mean the escrow deposit made in accordance
with Section 8.09 hereof.
"Excluded Assets" shall mean:
(i) Seller's rights under this Agreement or any other agreement or
document delivered to or received by Seller in connection herewith;
(ii) all corporate records of Seller, including all minutes books
and other records of corporate proceedings and ownership of Seller;
XXX-X-0
00
(xxx) all tax returns and related worksheets and supporting
materials of Seller;
(iv) any Interests not sold, assigned, transferred or conveyed or
deemed to have been sold, assigned, transferred or conveyed pursuant to
Section 8.02;
(v) any automobiles used for personal use;
(vi) any receivable or note payable from any Shareholder;
(vii) any claims against Shareholders, directors and employees of
Seller;
(viii) all insurance policies of the Seller; and
(ix) any assets listed on Exhibit Def-1.
"Fair Market Value", when used with respect to the Common Stock,
shall be determined as follows:
(w) if issued in the IPO, the public offering price per share of
Common Stock in connection with the IPO as set forth on the cover page of the
Prospectus for such IPO;
(x) if traded on a securities exchange or on the NASDAQ Stock
Market, the fair market value shall be deemed to be the average of the closing
prices of the Common Stock on such exchange over the twenty business day period
ending three (3) business days prior to the date of determination;
(y) if actively traded over-the-counter, the fair market value shall
be deemed to be the average of the closing bid prices over the twenty business
day period ending three (3) business days prior to the date of determination;
and
(z) if there is no active public market, the value shall be the fair
market value thereof as (I) determined by the terms of an agreement to sell
shares of Common Stock for cash or publicly traded securities to a third party
on an arms length basis or (II) if there is no such agreement, as mutually
determined by Sage and the Seller (or, if the Seller has assigned all of its
rights and interest in the Agreement to Deliver Shares, not less than a majority
in interest of the permitted assignees of the Agreement to Deliver Shares),
provided that if Sage and the Seller (or such assignees) are unable to reach
agreement, then by independent appraisal by PriceWaterhouseCoopers LLC or such
other nationally recognized accounting firm other than the accounting firms used
by Sage and Seller selected by Seller (or, if the Seller has assigned all of its
rights and interest in the Agreement to Deliver Shares, not less than a majority
in interest of the permitted assignees of the Agreement to Deliver Shares), but
reasonably acceptable to Sage.
XXX-X-0
00
"Fixed Assets" shall mean the fixtures, equipment, leasehold
improvements, security systems, telephone systems, display stands, computers,
furniture, parts and accessories and similar assets located at the Sites or at
holding areas for the Sites and all infrastructure assets used in the operation
of the Business wherever located, in each case, to the extent owned, leased,
licensed or otherwise used of right by the Seller.
"GAAP" shall mean generally accepted accounting principles, as
presently in effect in the United States.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"Hazardous Material" shall mean any and all hazardous wastes, that
in any physical state, might represent danger to the environmental balance
because of their corrosive, toxic, venomous, reactive, explosive, flammable,
biological or irritate conditions, such as: (a) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or is reasonably likely to become friable, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyl, and radon gas; (b) any chemicals, materials,
substances or wastes which are now or hereafter become refined as or included in
the definition of "hazardous substances", "hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
applicable Environmental Laws; and (c) any other chemical, material, substance,
or waste, exposure to which is now or hereafter prohibited, limited or regulated
by any Environmental Law or by any federal, state or municipal authority.
"Intangibles" shall mean the Intellectual Properties, all business
opportunities of the Seller relative to the Business, all good will of the
Business as a going concern and all other general intangibles of Seller used in
the Business.
"Intellectual Properties" shall mean to the extent that the
following items are owned in whole or in part or licensed by Seller and used in
the Business as of the date of this Agreement all patents of any description and
pending applications therefor, all registrations of trademarks and of other
marks, all registrations of trade names, assumed names, service names, service
marks, logos, designs, formulation, labels or other trade rights, all pending
applications for any such registrations, all copyright registrations and pending
applications therefor, all other copyrights, trademarks and other marks and
trade rights, trade names assumed names, service names, service marks, logos,
slogans, designs, formulations, non-governmental licenses, computer programs and
control panels, surcharge calculators, data bases and software documentation,
all know-how, trade secrets, technology or processes, research and development
and all other inventions and designs, whether or not patentable, all telephone
numbers, fax numbers, WEB Sites, Internet Domain Addresses, email addresses,
parked Internet Domain Addresses.
"Interests" shall have the meaning provided in Section 8.02(a) of
the Agreement.
XXX-X-0
00
"IPO" shall mean the initial public offering of Common Stock by
Sage.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" when used with respect to the Seller shall mean the
actual knowledge of Xxxxx Xxxxxxxx, Xxxxxx Xxxxxxx, and Xxxx Xxxxxxxx and after
reasonable inquiry, including, without limitation, inquiry of Xxxxxxxx Xxxxxx,
when used with respect to Sage and Buyer shall mean the actual knowledge of
Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxx, Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxx after
reasonable inquiry; and when used with respect to the Shareholders shall mean
the actual knowledge of Xxxxxx Xxxx after reasonable inquiry.
"Lease" shall mean each of the real property leases listed on
Exhibit 5.01(d)(i).
"Licensed Software" shall have the meaning provided in Section
5.01(a)(i) of the Agreement.
"Liquidity Event" shall mean the earliest to occur of (i) the IPO,
(ii) a sale of all or substantially all of the assets of Sage or (iii) a merger
or consolidation of Sage (including a triangular merger involving any subsidiary
thereof) with or into any other entity (other than a merger or consolidation in
which shares of Sage's voting capital stock outstanding immediately before such
merger or consolidation are exchanged or converted into or constitute shares
which represent more than fifty percent (50%) of the surviving entity's voting
capital interests after such consolidation or merger) or a transaction or series
of related transactions in which a person or group of persons (as defined in
Rule 13d- 5(b)(1) of the Securities Exchange Act of 1934, as amended), acquires
beneficial ownership (as determined in accordance with Rule 13d-3 of such Act)
of more than 50% of the voting power of Sage; provided, however, that any
reorganization, merger or consolidation involving (1) only a change in the state
of incorporation of Sage or (2) a merger of Sage with or into a wholly-owned
subsidiary of Sage that is incorporated in the United States of America shall
not constitute a "Liquidity Event".
"Option Agreements" shall mean the option agreements delivered by
the Sage to the employees and in the amounts listed on Exhibit A-4.
"Other Property" shall mean the Customer Data and Cash.
"Preferred Stock" shall mean Sage's Series A Convertible Preferred
Stock, $.01 par value per share.
"Purchase Price" shall have the meaning provided in Section 3.01(a).
"Purchase Price Shares" shall mean the aggregate amount of the Share
Consideration and the additional shares, if any, delivered pursuant to Section
3.01(b).
"Purchased Assets" shall mean the Intangibles, Receivables, Fixed
Assets, Other Property, the rights under the Assigned Agreements and all other
assets set forth or
XXX-X-0
00
which should, in accordance with GAAP, be set forth on a balance sheet of Seller
as of the Closing Date; provided, however, that Purchased Assets shall not
include (i) Excluded Assets and (ii) Employee Benefit Plans.
"Receivables" shall mean all of Seller's outstanding accounts
receivable arising from the lease or sale of goods or for services rendered in
the Business, including receivables relating to contra-payable balances in the
payable accounts of Seller and receivables attributable to manufacturers' and
other vendors' reimbursement policies, but shall not include receivables due
from Employees or Shareholders.
"Returns" shall have the meaning provided in Section 5.01(k) of the
Agreement.
"Revenue" shall mean, with respect to any person for any period, the
revenue of such person for such period, all computed and calculated in
accordance with GAAP.
"Sage Options" shall have the meaning provided in Section 8.08.
"SEC" shall mean the Securities and Exchange Commission.
"Seller Option" shall have the meaning provided in Section 8.08.
"Seller Plan" shall have the meaning provided in Section 8.08.
"Share Consideration" shall have the meaning provided in the
Agreement to Deliver Shares.
"Shareholders Agreement" shall mean the Shareholders Agreement
executed by Sage, the Distributees, Broadview Holdings LLP, the holders of the
Sage Options and certain other substantial holders of Common Stock substantially
in the form attached as Exhibit A-3.
"Sites" shall mean each of the properties subject to the Leases.
"Subscription Agreement" shall mean the Subscription Agreement
executed by the Seller and each Shareholder that is issued all or any portion of
(i) the Share Consideration, (ii) shares delivered pursuant to Section 3.01(b)
of the Purchase Agreement and (iii) the Unconverted Option Shares.
"Survival Period" shall have the meaning provided in Section 8.03(a)
of the Agreement.
"Tax" or "Taxes", with respect to any person, shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever,
XXX-X-0
00
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) upon such person
or any affiliate thereof.
"Trademark Assignment" shall have the meaning provided in Section
7.01(e).
"Transaction Documents" shall mean collectively, this Agreement, the
Agreement to Deliver Shares, the Shareholders Agreement, the Option Agreements,
the Subscription Agreements, the Employment Agreements, the Assignment Agreement
and the Trademark Assignment.
"Unconverted Option Shares" shall have the meaning set forth in
Section 8.10(b).
"Wolf Notes" shall mean the notes of Seller issued to Xxxxxx Xxxx
and Xxxxxx Xxxx each dated the Closing Date, in the aggregate principal amount
of $16,000,000.
XXX-X-0
00
Xxxxxxxxxx X
LIST OF SHAREHOLDERS
Name Address
---- -------
XXXXXX XXXX 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
XXX XXXXXXXX 0000 Xxxxxx Xxxxxx, Xxxxx 0000
XXXX 0000 Xxxxxxx, Xxxxx 00000
MARITAL TRUST
XXXXXX X. XXXX 0000 Xxxxxx Xxxxxx, Xxxxx 0000
CHILDREN'S TRUST Xxxxxxx, Xxxxx 00000
XXXXXXX XXXXXX 0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
XXX-X-0
00
XXXXXXX X-0
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of March 10, 1999
between INTERLIANT, INC., a Texas corporation ("Seller"), and SAGE NETWORKS
ACQUISITION CORP., a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Buyer, Sage Networks, Inc, Seller and certain shareholders
of Seller have entered into that certain Agreement to Purchase Assets and
Deliver Shares dated March 8, 1999 (the "Purchase Agreement") providing, among
other things, for the sale by Seller to Buyer of the Purchased Assets;
WHEREAS, Seller is entering into this Assignment and Assumption
Agreement for the purpose of assigning and transferring to Buyer all of its
rights, liabilities and obligations to be transferred by Seller pursuant to the
Purchase Agreement; and
WHEREAS, Buyer is executing and delivering this Assignment and
Assumption Agreement for the purpose of assuming Seller's liabilities and
obligations to be assumed by Buyer pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned to them in
the Purchase Agreement.
Section 2. Assignment. Seller, for good and valuable consideration,
receipt of which is hereby acknowledged, does hereby sell, assign, convey,
transfer and deliver to Buyer all of Seller's right, title and interest in, to
or under the Purchased Assets.
Section 3. Assumption. Buyer accepts such assignment and hereby
absolutely and irrevocably undertakes, assumes and agrees to perform, pay,
satisfy or discharge when due, and to be solely responsible for all Assumed
Liabilities.
Section 4. Binding Agreement; Amendments. This Assignment and
Assumption Agreement shall be binding on Seller and Buyer and their respective
heirs, distributees, executors, and legal representatives, successors and
assigns. This Assignment and Assumption Agreement may not be modified except by
an instrument in writing which is signed by both parties.
57
Section 5. Governing Law. This Assignment and Assumption Agreement
shall be construed and enforced in accordance with the laws of the State of New
York.
Section 6. Further Assurances. Seller hereby covenants and agrees
that, from time to time at Buyer's request after the delivery of this Assignment
and Assumption Agreement and without further consideration, Seller will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all and any such further acts, conveyances,
transfers, assignments, powers of attorney, instruments and assurances as may be
reasonably required to more effectively grant, convey, assign, transfer and set
over to and vest in Buyer any and all of the Purchased Assets.
Section 7. Other Agreements Prevail. Seller and Buyer each hereby
acknowledges and agrees that neither the representations and warranties nor the
rights or remedies of any party under the Purchase Agreement shall be deemed to
be enlarged, modified or altered in any way by this Agreement. In the event of a
conflict between the terms of this Agreement and the terms of the Purchase
Agreement, the terms of the Purchase Agreement shall prevail.
Section 8. Counterparts. This Agreement may be executed in any
number of counterparts all of which together shall constitute a single
instrument. It shall not be necessary that any counterpart be signed by both
parties so long as each party shall sign at least one counterpart.
Section 9. Evidence. The parties agree that a copy of this Agreement
may be submitted to third parties as evidence of the assignment by Seller of the
Purchased Assets and the assumption by Buyer of the Assumed Liabilities.
Exh. A-1-2
58
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Assumption Agreement to be duly executed as of the date and year first above
written.
INTERLIANT, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
SAGE NETWORKS ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxx
President
Exh. A-1-3
59
STATE OF NEW YORK }
} ss:
COUNTY OF NEW YORK }
Before me, the undersigned, a Notary Public of the State of New
York, personally appeared Xxxxxxx X. Xxxxxxx, who, having been sworn by me
according to law did depose and say he was the President of Sage Networks
Acquisition Corp., a Delaware corporation, and did acknowledge the execution of
the foregoing Assignment and Assumption Agreement on behalf of Sage Networks
Acquisition Corp.
WITNESS my hand and notarial seal this 10th day of March, 1999.
/s/ Xxxxxxxxx X. Xxxxxx
------------------------------
(Written Signature)
Xxxxxxxxx X. Xxxxxx
------------------------------
(Printed Signature)
60
STATE OF ______________}
} ss:
COUNTY OF ____________ }
Before me, the undersigned, a Notary Public of the State of
___________, personally appeared Xxxxx X. Xxxxxxxx, having been sworn by me
according to law did depose and say he was the President and Chief Executive
Officer of Interliant, Inc. (the "Company") and did acknowledge the execution of
the foregoing Assignment and Assumption Agreement on behalf of said Company.
WITNESS my hand and notarial seal this 10th day of March, 1999.
/s/ Xxxxxxxxx X. Xxxxxx
------------------------------
(Written Signature)
Xxxxxxxxx X. Xxxxxx
------------------------------
(Printed Signature)
61
EXHIBIT A-2
