EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of August 31, 2005
by and between
PEER 1 ACQUISITION CORPORATION,
a Delaware corporation,
and
INTERLAND,
INC.,
a Minnesota corporation
<PAGE>
ARTICLE 1.
SALE OF ASSETS AND CLOSING..............................1
1.1 Assets to
be Transferred to Purchaser.......................1
1.2
Liabilities.................................................3
1.3 Purchase
Price; Escrow; Allocation..........................4
1.4 Method of
Conveyance........................................5
1.5
Closing.....................................................5
1.6
Adjustments to Purchase Price...............................5
1.7
Determination of Adjustments................................5
1.8 Further
Assurances; Post-Closing Operations.................7
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF SELLER................8
2.1
Organization of Seller......................................8
2.2
Authority...................................................8
2.3 No
Conflicts................................................8
2.4 No
Consents.................................................8
2.5
Taxes.......................................................9
2.6 Legal
Proceedings...........................................9
2.7 Legal
Compliance...........................................10
2.8 ERISA
Matters..............................................10
2.9 Title to
Assets; Business..................................10
2.10
Intellectual Property Rights...............................10
2.11
Material Contracts.........................................12
2.12
Insurance..................................................12
2.13
Financial Statements.......................................12
2.14
Accounts Receivable........................................12
2.15
Condition of Tangible Assets...............................13
2.16
Affiliate Transactions.....................................13
2.17
Environmental Matters......................................13
2.18
Debt Instruments...........................................13
2.19
Employee Agreements........................................13
2.20
Sufficiency of Assets......................................14
2.21
Brokers....................................................14
2.22
Disclosure.................................................14
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER............15
3.1
Organization...............................................15
3.2 Authority;
Non-Contravention...............................15
3.3 No
Consents................................................15
3.4
Brokers....................................................15
3.5
Funds......................................................15
ARTICLE 4.
COVENANTS OF SELLER....................................15
4.1 Further
Actions; Consents..................................15
4.2 Covenant
Not to Hire Purchaser's Other Employees...........17
4.3 Seller's
Noncompetition Covenant...........................17
4.4
Subsidiaries...............................................18
4.5
Purchaser's Use of "Interland" Name and Seller's Logo......18
4.6
Cooperation with Post-Closing Audit........................18
4.7
Cooperation as to Certain Intellectual Property............18
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ARTICLE 5.
COVENANTS OF PURCHASER.................................19
5.1 No
Additional Representations..............................19
5.2
Employees..................................................19
5.3 Benefits
Matters...........................................19
5.4 Sales and
Transfer Taxes...................................20
5.5 Covenant
Not to Hire Seller's Other Employees..............20
5.6
Guarantee..................................................21
ARTICLE 6.
CLOSING DELIVERIES OF SELLER...........................21
6.1 Tax
Affidavit..............................................21
6.2 Other
Documents............................................21
ARTICLE 7.
INDEMNIFICATION AND SURVIVAL...........................21
7.1
Indemnification by Seller..................................21
7.2
Indemnification by Purchaser...............................21
7.3 Notice and
Defense of Third-Party Claims...................22
7.4 Limits on
Indemnification..................................22
7.5 Survival
of Representations and Warranties and Agreements..22
7.6 Exclusive
Remedy...........................................22
7.7 Liability
Limitation.......................................23
ARTICLE 8.
DEFINITIONS............................................23
8.1
Definitions................................................23
ARTICLE 9.
MISCELLANEOUS..........................................30
9.1
Notices....................................................30
9.2 Entire
Agreement...........................................31
9.3
Expenses...................................................31
9.4 Attorneys'
Fees............................................31
9.5 Public
Announcements.......................................31
9.6
Confidentiality............................................32
9.7 Waiver and
Amendment.......................................32
9.8 Successors
and Assigns; No Third Party Beneficiaries.......32
9.9 Dispute
Resolution.........................................33
9.10
Incorporation of Schedules.................................33
9.11
Headings...................................................33
9.12
Interpretation.............................................33
9.13
Governing Law..............................................34
9.14
Counterparts...............................................34
9.15
Jurisdiction; Agents for Service of Process................34
9.17
Disclosure.................................................34
9.18
Individuals................................................34
9.19
Books and Records..........................................34
9.20
Cooperation................................................35
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This ASSET
PURCHASE AGREEMENT dated as of August 31,
2005, is made and
entered into by and among Peer 1
Acquisition Corporation, a Delaware corporation
("Purchaser") and INTERLAND, INC., a Minnesota corporation ("Seller").
Capitalized terms not otherwise defined herein have the meanings set forth
in
Article 8.
WHEREAS, as part
of its web hosting business line, Seller owns and operates
a line of products and services,
including dedicated
server, managed
dedicated
server and complex managed dedicated server services that provide Dedicated
Hosting Services ("Business"); and
WHEREAS,
Seller desires to sell, transfer and assign to
Purchaser,
and
Purchaser desires to purchase and acquire
from Seller,
all of the assets
that
are necessary or incidental for the daily
operation of the Business by Purchaser
following Closing, and in connection
therewith,
Purchaser has agreed
to assume
certain enumerated liabilities of Seller relating to
the Business, all on
the
terms set forth herein;
NOW, THEREFORE,
in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and
valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1.
SALE OF
ASSETS AND CLOSING
1.1 Assets.
(a) Assets to be
Transferred
to Purchaser.
On the terms and
subject to the conditions set forth in this Agreement, Seller, on behalf of
itself and its Subsidiaries (as defined
below in Section 1.4(b)), hereby agrees
to sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser hereby
agrees to purchase and pay for, at the Closing, free and clear of all Liens
other than Permitted Liens, all of Seller's
and the Subsidiaries'
right, title
and interest in, to and under the assets of
Seller and the
Subsidiaries used
primarily in the Business that are set
forth on Schedule 1.1 hereto, including,
without limitation the following
(collectively,
together with the
Intellectual
Property to be licensed or sublicensed
to Purchaser
pursuant to Section
1.1(b)
below, the "Assets"):
(i) All notes
and accounts
receivable derived
from the operation of the
Business, including prepaid payments made to
Seller for services to be rendered
by Purchaser post-Closing under any
Contract;
(ii) All prepaid
and similar items
connected with the Business, including
all prepaid expenses, advance payments,
security deposits,
employee travel
and
expense advances and other prepaid
items;
(iii) All spare
parts inventories of the Business set forth in Section
(a)(iii) of Schedule 1.1;
(iv)
To the extent assignable, all leasehold interests used in the
operation of the Business and owned
leasehold improvements pertaining to the
Leased Real Estate set forth in Section
(a)(iv) of Schedule 1.1;
(v) Subject to
the leases covering
the Leased Real
Estate, all personal
property currently owned by Seller and now or since September 1, 2004 used
exclusively in the operation of the Business
wherever located, including all
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machinery and equipment, computer equipment and systems,
software, materials,
furniture, office equipment, cars, trucks and other vehicles set forth in
Section (a)(v) of Schedule 1.1;
(vi)
All supplier lists pertinent to the Business, and all orders,
contracts and commitments for the purchase
of goods or services intended for use
in the Business, including all such items relating to the purchase of
capital
assets, products and supplies, that are specifically set forth in Section
(a)(vi) of Schedule 1.1;
(vii) All
customer lists applicable to the Business and all purchase
orders, contracts, commitments and proposals for the
sale of goods or services
by the Business;
(viii)
All other orders, contracts and commitments pertaining to the
Business, including all leases (whether or
not capitalized), licenses (including
the Outbound IP Licenses (as defined in
Section 2.10 below), conditional sale or
title retention agreements and guarantees,
that are specifically set forth in
Section (a)(viii) of Schedule 1.1
("Contracts");
(ix) The
Intellectual
Property owned by
Seller or licensed by Seller from
third parties and listed on Section (a)(ix)
of Schedule 1.1;
provided that with
respect to licenses for third party
intellectual
property that are defined as
Non-Material Contracts, Purchaser is obligated to obtain any required
third
party consents for assignment as set forth
below;
(x) All permits,
franchises, licenses, bonds, approvals, qualifications and
the like of the Business ("Permits") issued by any government or
governmental
unit, agency, board, body or instrumentality,
whether federal,
state or local
and all applications therefor pertaining to
the Business, and that are set forth
in Section (a)(x) of Schedule 1.1, all to the extent assignable without
depriving Seller of any Permit required for Seller's conduct of its retained
business following Closing;
(xi) Copies of
all business books and
records of the
Business,
including
copies of all financial, operating, inventory, personnel, payroll and
customer
records and all sales and promotional literature, correspondence and files;
provided, however, that if any such books or records
are subject to any
legal
privilege, the Parties agree to cooperate to protect such privilege to the
extent practicable, and provided further that any such
books and records shall
not include any information relating to any Affiliates of
Seller except to the
extent reasonably necessary to enable Purchaser to conduct the Business as
previously conducted by Seller; and
(xii) All other
assets, tangible or intangible, owned by Seller or the
Subsidiaries that are predominantly used in the Business and listed in
Section
(a)(xii) of Schedule 1.1.
(b) Assets to be
Licensed to
Purchaser or to which Purchaser will have
Access.
(i) On the terms and subject
to the conditions set
forth in this Agreement
and that certain Administrative Services Agreement dated as of the
date hereof
between Seller and Purchaser (the
"Administrative
Services Agreement"),
Seller
hereby agrees to grant a royalty-free, non-exclusive licenses to the
Intellectual Property owned by Seller and listed on
Section (b)(i) of Schedule
1.1 (which Intellectual Property will continue to be owned and used
by Seller
following Closing), which licenses may be
transferred by Purchaser in connection
with a future sale of the Business subject
to the licenses to Purchaser granted
in this Section 1.1(b)(i). The license
granted hereunder shall be perpetual with
respect to the software source code identified in Section (b)(i) of Schedule
1.1, provided that the perpetual license shall not apply to any third
party
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products identified in Section 1.1(b)(ii) which may be embedded
in such source
code. Seller is not making any
representations
or warranties
with respect to
which portions of such source code are
covered by the license; and
(ii)
Pursuant to the terms of the Transition Agreements, Seller shall
provide Purchaser with access to, or the ability for
its customers to use, the
third party Intellectual Property licensed by Seller from
third parties listed
on Section 1.1 (b)(ii) of Schedule
1.1, to the extent
permitted by such third
party licenses. Seller shall continue to retain
the license to, and continue to
use, the foregoing Intellectual Property
following Closing.
(c) Excluded
Assets.
Notwithstanding anything to the contrary contained in
Section 1.1 or elsewhere in the
Agreement,
the assets listed in
Section (c) of
Schedule 1.1 (collectively, the "Excluded Assets") are not
part of the sale and
purchase contemplated hereunder, are excluded from the Assets and
shall remain
the property of Seller, or the
Subsidiaries, after the Closing.
1.2
Liabilities.
(a) Assumed
Liabilities. In connection with the sale, transfer, conveyance,
assignment and delivery of the Assets
pursuant to this
Agreement, on the
terms
and subject to the conditions set forth in this Agreement, at the Closing,
Purchaser hereby agrees to assume and to pay
and perform and discharge when due
the obligations of Seller under the
Contracts specifically
listed on
Schedules
1.1 and 2.11, excluding any obligations of Seller under such
Contracts which
obligations result from Seller's
violation or breach of
any such Contract,
and
all liabilities taken into account in the Closing
Working Capital Amount
that
are specifically set forth on Schedule 1.2(a) (collectively, the "Assumed
Liabilities"), and no others.
(b) Retained Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed
Liabilities,
Purchaser shall not assume by
virtue of this Agreement or the
transactions contemplated hereby, and shall have
no liability for, any Liabilities or obligations of Seller or its
Affiliates
(including, without limitation, those related to the Business) of any kind,
character or description whatsoever, whether actual or contingent, direct or
indirect, matured or unmatured, liquidated
or unliquidated, or known or unknown,
whether arising out of occurrences prior to, at or after the date of the
Agreement (the "Retained Liabilities"). Seller hereby acknowledges that it is
retaining the Retained Liabilities, and Seller agrees to pay, discharge and
perform all such liabilities and obligations
promptly as and when
due. Without
limiting the generality of the foregoing, Purchaser shall not assume or be
obligated to pay, perform or discharge any liabilities, obligations or
commitments of Seller or its Affiliates
relating to or arising out of any of the
following, whether or not disclosed in any
schedule to this Agreement:
(i) Transaction
Documents.
All liabilities and
obligations arising out of
Seller's obligations under this Agreement and the other
documents executed
in
connection with the transactions
contemplated herein;
(ii) Taxes.
All liabilities for current and
deferred federal,
state and
local Taxes of Seller or its
Affiliates.
(iii)
Indebtedness.
All liabilities and
obligations to repay indebtedness
for borrowed money incurred by Seller, or any of its Affiliates including
applicable lines of credit and guarantees
of third party obligations;
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(iv)
Professional
Fees. All liabilities and obligations of
Seller or its
Affiliates for fees, costs and expenses of attorneys, independent public
accountants, investment bankers or other
representatives incurred in connection
with the negotiation, preparation or consummation of this Agreement and the
transactions contemplated herein;
(v) Litigation.
All liabilities and obligations of Seller or its Affiliates
relating to the Business arising out of any Action based on
any state of facts
or events occurring on or prior to the
Closing Date;
(vi) Employment
Matters. All liabilities and obligations of
Seller or its
Affiliates for any workers' compensation,
Taxes or withholdings or similar items
and any wages, bonuses, commissions, sick pay or vacation payments,
severance
payments or other compensation arising or accruing on or prior to
the Closing
Date;
(vii)
Employee Plans. All liabilities or obligations of Seller or its
Affiliates, arising prior to, on or after the
Closing, to provide
benefits to
former or current employees of Seller and their
dependents
under any employee
benefit plan of Seller and any other benefit or compensation plan, fund,
arrangement or agreement of Seller; and
(viii) Violation
of Law. Any violation or non-compliance with any Laws by
Seller or its Affiliates relating to the operation of the Business prior to
Closing, and any liabilities or obligations of
Seller or its Affiliates under
any Environmental Laws due to past or present
actions, activities of
Seller or
its Affiliates, or any, circumstances,
conditions,
events or incidents
created
by Seller or its Affiliates, including the release, emission, discharge,
presence or disposal of any Hazardous
Substance.
1.3 Purchase
Price; Escrow; Allocation.
(a) Purchase
Price. The purchase price for the Assets and other obligations
of Seller under this Agreement shall be Fourteen Million United States Dollars
(US $14,000,000) (the "Purchase Price"), as adjusted in accordance
with the
provisions set forth in Sections 1.6 and 1.7. The Purchase Price shall be
payable as follows (subject to such
adjustments):
(i) Cash
Payment. At the Closing, the Purchaser shall deliver to
Seller an
amount equal to the Purchase Price (as
adjusted pursuant to Section 1.7(a)) less
the Escrow Amount (as defined in Section
1.3(a)(ii)
below (the "Cash
Payment")
by wire transfer of immediately available United States funds to such bank
account as Seller designates to Purchaser
in writing.
(ii) Escrow.
Concurrently
with the Closing,
Purchaser shall deposit an
amount equal to 20% of the Purchase
Price (prior to adjustment) (the "Escrow
Amount") in escrow with a third party
escrow agent mutually
agreeable to Seller
and Purchaser pursuant to an escrow agreement in
substantially the same form as
attached hereto as Exhibit A (the "Escrow
Agreement").
(b) Allocation. The parties agree that the Purchase
Price, as adjusted
hereunder, and all other amounts constituting
consideration within
the meaning
of Section 1060 of the Code (the
"Consideration"),
shall be allocated among the
Assets in accordance with Section 1060 of the Code.
No later than thirty
(30)
days after the determination of the Working
Capital Adjustment,
the Purchaser
shall cause to be prepared and delivered to
the Seller a schedule allocating the
Consideration to the Assets (the "Purchase
Price Allocation").
The Seller shall
have the right to review the Purchase
Price Allocation and any work sheets
and
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other papers prepared in connection
with the Purchase
Price Allocation. The
Seller will be deemed to have accepted such
Purchase Price Allocation unless it
provides written notice of disagreement
to the Purchaser
within 15 days
after
the receipt of the Purchaser's Purchase Price Allocation.
If the Seller
timely
provides such notice, the Purchaser and the Seller shall use commercially
reasonable efforts to resolve any dispute
between them
concerning the Purchase
Price Allocation. If Seller and Purchaser are able
to resolve such dispute (or
if Seller has accepted or has been deemed to accept the Purchase Price
Allocation), the Purchaser and the Seller shall file or cause
to be filed all
Tax Returns (including IRS Form 8594) consistent with the Purchase Price
Allocation, and neither the Purchaser nor
the Seller (or any of their respective
Affiliates) will take a position
inconsistent with the Purchase Price Allocation
on any Tax Return, in any proceeding before any taxing authority or
otherwise.
If a taxing authority disputes the Purchase Price Allocation, the party
receiving notice of the dispute will promptly notify the other party
hereto
concerning such dispute. In the event there is any Purchase
Price adjustment
hereunder, the Purchaser and the Seller agree to adjust
such Purchase
Price
Allocation to reflect such Purchase Price
adjustment
and to file
consistently
any Tax Returns required as a result of such Purchase Price adjustment.
Notwithstanding anything herein to the contrary,
if the parties do not agree to
the Purchase Price Allocation, neither party shall be obligated
to utilize the
Purchase Price Allocation of the other in
the preparation of any Tax Return.
1.4 Method of
Conveyance.
(a) At the Closing,
(i) Seller will assign
and
transfer to Purchaser good and valid title in and to the
Assets (free and clear
of all Liens, other than Permitted Liens) by delivery of good and
sufficient
instruments of conveyance, assignment and transfer (the "Assignment
Instruments"), in form and substance reasonably acceptable to Purchaser's
counsel, as shall be effective to vest in
Purchaser good and valid title to the
Assets free and clear of any Liens other
than Permitted
Liens; (ii) Purchaser
will assume from Seller the due payment, performance and discharge of the
Assumed Liabilities by delivery of good and sufficient instruments of
assumption, in form and substance reasonably
acceptable to Seller's counsel, as
shall be effective to cause Purchaser to assume the Assumed
Liabilities as and
to the extent provided in Section 1.2(a)
(the "Assumption
Instruments");
(iii)
Purchaser and Seller shall enter into: the
several transition
agreements in the
form of Exhibit B hereto (collectively the
"Transition Agreements").
(b)
Notwithstanding
anything to the contrary contained herein, the parties
hereto acknowledge that the right, title
and interest in the Assets set forth on
Schedule 1.4(b) are owned by subsidiaries
of Seller listed on such schedule (the
"Subsidiaries"), which Assets shall be
transferred at Closing in accordance with
Section 4.4.
1.5 Closing. The
closing of the transactions contemplated by this Agreement
(the "Closing") shall take place on August 31,
2005, 2005 (the "Closing Date"),
at the offices of Arnall Golden Gregory
LLP, Atlanta, Georgia
at 10:00 a.m. The
Closing shall be deemed effective as of
11:59 p.m., Atlanta time, on the Closing
Date.
1.6 Adjustments to Purchase Price. The Purchase Price shall be (i)
increased on a dollar-for-dollar basis by the excess, if any, of the Closing
Working Capital Amount over the Target
Working Capital Amount and (ii) decreased
on a dollar-for-dollar basis by the excess, if any, of the Target Working
Capital Amount over the Closing
Working Capital Amount (the "Working Capital
Adjustment").
1.7
Determination of Adjustments. (a) At Closing, Seller shall deliver to
the Purchaser an officer's certificate, certifying as to (i) the estimated
Closing Working Capital Amount (the "Seller
Statement of
Adjustments"),
as of
August 31, 2005 the "Adjustment Date",
which certificate shall be accompanied by
a statement of such amount prepared in good faith from the
books and records of
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the Business in accordance with the methodology used to prepare Annex A. The
Purchase Price payable at the Closing shall be determined using the Seller
Statement of Adjustments.
(b) As soon as
practicable,
but in any
event within 60 days after the
Closing Date, the Purchaser shall cause to be prepared and
delivered to the
Seller a statement (the "Purchaser
Statement of
Adjustments")
certifying as to
the Purchaser's determination of (i) the Closing Working Capital
Amount as of
the Closing Date, prepared in good faith from the books and records of the
Business in accordance with the methodology used to prepare Annex A. The
Purchaser Statement of Adjustments shall certify the amount payable by the
Seller to the Purchaser, or by the Purchaser to the Seller,
pursuant to Section
1.7(e).
(c) Upon
receipt of the
Purchaser Statement of Adjustments, the Seller
shall have the right during the succeeding
15-day period (the
"Review Period")
to examine the Purchaser Statement of Adjustments, and all books and records
used to prepare the Purchaser Statement of
Adjustments. If the Seller objects to
the Purchaser's determination of the Closing
Working Capital Amount, they shall
so notify the Purchaser in writing (such
notice, a "Disagreement Notice") on or
before the last day of the Review Period,
setting forth a
specific
description
of the Seller's objection and the amount of the
adjustment to the
Purchaser's
determination of such amounts and allocation which the Seller reasonably
believes should be made. If no Disagreement Notice is delivered within the
Review Period, the Purchaser Statement of Adjustment
shall be deemed to
have
been accepted by the parties
hereto. The Purchaser will, and will cause the
Business to, provide the Seller full access
(during normal business hours and
upon reasonable prior notice to Purchaser)
to the books, ledgers, files, reports
and operating records of the Business
and the then
current employees of the
Business, and will fully cooperate in allowing Seller to review the Purchaser
Statement of Adjustments. Any amounts and allocation that are not in dispute
shall be paid promptly (and prior to the resolution of any amounts that are
in
dispute) in accordance with Section 1.7(e)
and Section 1.7(f).
(d) Dispute
Resolution.
(i) In the event
that a Disagreement Notice is delivered in accordance with
Section 1.7(c), the Purchaser and the Seller shall attempt to resolve the
objections set forth therein within 30 days of receipt
of such Disagreement
Notice. The objections set forth in the
Disagreement Notice that are resolved by
the Purchaser and the Seller in
accordance with this
Section 1.7(d)(i)
shall
collectively be referred to herein as the
"Resolved Objections."
The Purchaser
Statement of Adjustments shall be adjusted to reflect any
Resolved
Objections.
Any amounts that constitute Resolved Objections shall be paid promptly
(and in
any event no later than three (3) Business
Days following such resolution in
accordance with Section 1.7(e) and Section
1.7(f)).
(ii)
If the Purchaser and the Seller are unable to resolve all the
objections set forth in the Disagreement Notice within such 30-day period
they
shall jointly submit such disagreement within five days of the end of such
30-day period to Deloitte & Touche
LLP(Atlanta
office), or another mutually
agreeable nationally recognized audit firm that has not
been engaged by any of
the parties hereto (or their respective Affiliates) within a period of three
years prior to the date hereof (the "CPA
Firm"). If the Purchaser and Seller
cannot agree on the appointment of the CPA Firm, then the CPA Firm shall be
drawn by lot from the names of an equal
number of nationally
recognized
audit
firms submitted by the Purchaser and Seller
hereto that have not been engaged by
any of the parties hereto (or their
respective
Affiliates)
within a period of
three years prior to the date hereof.
The CPA Firm shall
review the
objections
set forth in the Disagreement Notice that are not Resolved Objections
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(collectively, the "Differences"). The CPA Firm shall determine, only with
respect to Differences submitted to the CPA Firm, the
Closing Working
Capital
Amount prepared from the books and
records of the Business in accordance with
GAAP Practices. The CPA Firm shall be instructed to make its determination
promptly after its appointment.
The Purchaser and the
Seller shall each pay 50%
of the fees and disbursements of the CPA Firm. The Purchaser and the Seller
shall, and the Purchaser shall cause the Business to,
provide to the CPA
Firm
full cooperation. The CPA Firm's resolution of the Differences shall be
conclusive and binding upon the parties,
except in the case of
manifest error.
The Differences as resolved by the CPA Firm in
accordance
with this Section
1.7(d)(ii) shall collectively be referred to herein as the "CPA-Determined
Differences."
(e) The Closing
Working Capital Amount as finally determined in accordance
with Section 1.7(c) and (d), shall be used to
recalculate the
adjustment,
if
any, to the Purchase Price initially made
pursuant to the Section 1.7(a).
(f) On or before
the fifth day following (or, if not a Business Day, on the
next Business Day) the latest to occur of
(x) the 30th day following receipt by
the Seller of the Purchaser Statement of
Adjustments, (y) the
resolution by the
Purchaser and the Seller of all objections
set forth in the Disagreement Notice,
if any, and (z) the resolution by the CPA
Firm of all
Differences, if any,
the
recalculation required by Section 1.7(e) shall
be made and the Purchaser shall
pay to the Seller the amount of any
increase in the
Purchase Price beyond
that
received by the Seller in the aggregate prior thereto, or the Seller shall
return to the Purchaser the excess amount
of the Purchase Price
received by the
Seller in the aggregate prior thereto (in either case, a "Purchase Price
Adjustment Payment"). A Purchase Price Adjustment
Payment shall be made (i) in
the case of a payment to the Purchaser, by the Seller by wire transfer of
immediately available funds to a bank account or accounts designated by the
Purchaser and (ii) in the case of a payment
to the Seller, by the
Purchaser by
wire transfer of immediately available funds to a bank account or accounts
designated by the Seller.
1.8 Further
Assurances;
Post-Closing
Operations. (a) At any
time or from
time to time after the Closing, at Purchaser's request and without further
consideration, Seller shall execute and deliver to Purchaser such other
instruments of sale, transfer, conveyance,
assignment and confirmation, provide
such materials and information and take such other actions as Purchaser may
reasonably deem necessary or desirable in order
more effectively to
transfer,
convey and assign to Purchaser,
and to confirm
Purchaser's title to, all of the
Assets. Except as otherwise provided
herein, after the
Closing Purchaser shall
have sole and absolute discretion over the operation of the Business or as
provided in the Transition Agreements, and exploitation and disposition
of the
Assets.
(b) At any time
or from time to time after the Closing, Purchaser shall not
prohibit those persons who at the time of
Seller's request for assistance, with
reasonable notice, are employed by Purchaser and listed on Schedule
1.8(b)
("Cooperating Employees") from assisting Seller
in the defense of the law suits
listed opposite their name on Schedule 1.8(b). Purchaser shall grant those
Cooperating Employees time off from work to
provide such
assistance to Seller,
and Seller shall reimburse Purchaser for
any reasonable expense Purchaser incurs
as a result thereof. Purchaser will also reasonably cooperate with Seller in
making available any of Purchaser's
employees,
who were formerly
employed by
Seller, whom Seller may need to assist it in
the defense of any
post-Closing
litigation, provided that Seller shall
reimburse Purchaser for any reasonable
expense Purchaser incurs as a result
thereof.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller (for
purposes of Section
2.3(c), 2.4, 2.5, 2.9, 2.10, 2.11 and
Section 2.17 only, the definition of the term "Seller" shall include the
Subsidiaries of Seller that own the Assets
set forth on Schedule
1.4(b)) hereby
represents and warrants to Purchaser as
follows:
2.1 Organization of Seller. Seller (i) is a corporation
duly organized,
validly existing and in good standing
under the Laws of the
State of Minnesota
and (ii) has full power and authority to conduct the Business as and to the
extent now conducted and to own, use and
lease the Assets.
2.2 Authority.
Seller has full power and authority, on behalf of itself and
its Subsidiaries, to execute and deliver this Agreement and the Operative
Agreements to which it is a party,
to perform its
obligations
hereunder and
thereunder and to consummate the
transactions
contemplated hereby
and thereby,
including without limitation to sell and transfer
(pursuant to this
Agreement)
the Assets. The execution and delivery by Seller of this
Agreement and the
Operative Agreements to which it is a party,
and the performance by Seller of
its obligations hereunder and thereunder,
have been duly and
validly authorized
by the board of directors of the Seller,
no other corporate
action on the part
of Seller or any of its stockholders
being necessary. This Agreement has been
duly and validly executed and delivered by
Seller and constitutes, and upon the
execution and delivery by Seller of the
Operative Agreements to which it is a
party, such Operative Agreements will constitute, legal, valid and binding
obligations of Seller and its applicable
subsidiaries
enforceable against them,
in accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws and subject to limitations imposed by general equitable
principles.
2.3 No
Conflicts. The execution and delivery by Seller of this Agreement
do
not, and the execution and delivery by Seller of the
Operative Agreements to
which it is a party, the performance by Seller of its
obligations
under this
Agreement and the Operative Agreements and the consummation of
the transactions
contemplated hereby and thereby will
not:
(a) conflict with or result in a violation or
breach of any of the terms,
conditions or provisions of the Certificate of Incorporation (or other
comparable corporate charter documents) of
Seller;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to
Seller or any of its Assets; or
(c) subject to the Consents referred to in Section 2.4 and except in
respect of Contracts relating to services to be provided pursuant to the
Transition Agreements, (i) conflict with or result in a
violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a
default
under, (iii) require Seller to obtain any
consent, approval or
action of, make
any filing with or give any notice to any
Person as a result or under the terms
of, or (iv) result in the creation or
imposition of any Lien
upon Seller or any
of its Assets under, any Material Contract
or License to which Seller is a party
or by which any of its Assets is bound,
which, in the case of clause (b)
above
and this clause (c), would have a Material Adverse Effect on the Business or
Assets.
2.4 No Consents.
No permit, consent, approval, novation, authorization or
other Order of or filing with any
Governmental
or Regulatory
Authority or any
other Person is required with respect to Seller (or its Affiliates) in
connection with the execution, delivery and consummation of this Agreement
and
the Operative Agreements, or the actions of Seller
contemplated hereby,
or to
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permit Purchaser to continue to conduct the Business as it is currently
conducted following the purchase of the Assets by
Purchaser pursuant
hereto,
except for (a) compliance with any
applicable requirements of the Securities Act
and the Exchange Act, (b) the consents to the assignment of the Material
Contracts listed on Schedule 2.4 attached hereto and (c) any other
permits,
consents, approvals, novations, authorizations and other filings
or orders (i)
relating to Non-Material Contracts (as defined in and subject to Section
4.1(b)(ii)) or (ii) which, if not obtained from such respective contracting
party or made, would not have individually or in the aggregate a Material
Adverse Effect on the Business or the
Assets.
2.5 Taxes.
Except as disclosed on Schedule 2.5, there are no pending or,
to
the Knowledge of Seller threatened, actions or proceedings, assessments or
collections of Taxes of any kind with
respect to the Business that could subject
Purchaser to any liability for Taxes for
any period (or portion
thereof) ending
or prior to the Closing Date or could
impair any of the Assets.
(a) There are no
Liens for Taxes
upon any of the
Assets or any
property
with respect to the Business, except for
Permitted Liens.
(b) None of the
Assets is property (i) which Seller or Purchaser is or will
be required to treat as owned by another
person pursuant to the provisions of
Section 168(f) of the Internal
Revenue Code of 1954
(as in effect
immediately
prior to the Tax Reform Act of 1986);
(ii) is "tax-exempt
use property"
within
the meaning of Section 168(h)(1) of the Code; (iii) is property used
predominately outside the United States within
the meaning of Prop. Treas. Reg.
ss. 1.168-2(g)(5); or (iv) is "tax-exempt
bond financed
property" within
the
meaning of Section 168(g)(5) of the
Code.
(c) Except as
disclosed on Schedule
2.5, there are no
unpaid Taxes of the
Seller for which Purchaser may become
liable.
(d) Schedule 2.5
discloses all jurisdictions in which the Business is doing
business and where it is required to file
Tax Returns.
(e) The
Seller is not a
foreign person
within the meaning of Section
1445(b)(2) of the Code.
(f) Purchaser is not required to withhold from the Purchase Price any
amounts for Taxes of Seller.
2.6 Legal Proceedings. As of the date of this
Agreement,
except as set
forth on Schedule 2.6, there is no suit, action, hearing claim, audit,
compliance review, legal, administrative, arbitration, citation, unfair labor
practice charge, employment discrimination charge or other proceeding
pending
or, to the Knowledge of Seller,
threatened, nor to the
Knowledge of Seller, any
investigation pending or threatened
affecting the Business, Seller or any of the
Assets before any Governmental or Regulatory Authority which would have a
Material Adverse Effect on the Business or
the Assets or that would reasonably
be expected to materially adversely affect the ability of Seller to
consummate
the transactions contemplated hereby; and there is no judgment, decree,
injunction, ruling, award, charge, Order or writ of any Governmental or
Regulatory Authority outstanding against,
binding upon or involving the Business
or the Assets. Neither Seller nor, to
Seller's Knowledge,
any of its directors,
officers or employees is currently
charged with or, to
Seller's Knowledge,
is
currently under such investigation with respect to, any violation of any
provision of any legal Rule in respect of
the Business.
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2.7 Legal
Compliance. Except
with respect to Taxes and Environmental Laws
which are subject to Section 2.5 and 2.17,
respectively, Seller is in compliance
with all Legal Rules applicable to it, except for violations which in the
aggregate would not have a Material
Adverse Effect with
respect to the Business
or the Assets, or materially impede Purchaser's ability to use and enjoy the
Assets in a manner substantially
similar to the manner
in which the Assets were
used and enjoyed by Seller in its conduct
of the Business. Seller owns, holds or
possesses or lawfully uses in its operation of the Business all permits,
certificates, licenses, approvals and other authorizations
("Authorizations")
required in connection with the operation
of the Business as now conducted, all
of which are valid and effective,
except for those which
in the aggregate,
if
not obtained or valid and effective, would
not have a Material Adverse Effect on
the Business or the Assets. All such
Authorizations are
listed and described on
Schedule 2.7. Seller shall be solely
responsible
for all notices and
payment
obligations arising under the Worker Adjustment and Retraining Act or any
comparable state or local law with respect to the termination or layoff by
Seller of any of the employees of the Business which occurs on or before the
Closing. Seller further agrees to indemnify
and hold Purchaser harmless for any
costs, legal fees, liability or damages or claims asserted against Seller
arising out of Seller's failure to provide
the required notices or payments with
respect to such terminations or
layoffs.
2.8 ERISA
Matters. Purchaser will incur no liability with respect to, or
on
account of, and Seller will retain any
liability for, and on account of, any
Benefit Plan. Except as set forth on
Schedule 2.8, neither Seller nor any of its
Affiliates has, since August 31, 2001, with
respect to any Employee, maintained
or contributed to, or been obligated or required to
contribute to, any
Plan.
Seller has complied, in all material
respects, with its
obligations
(including
obligations to make contributions) in respect of the
Benefit Plans, there is no
material outstanding liability of Seller or any of its
respective Affiliates to
any such Benefit Plan and all such Benefit
Plans are, to the extent required by
applicable law, fully funded to meet potential claims for benefits by such
employees and any former employee.
Neither Seller nor any
of its Affiliates has
or has had, any liability, contingent or otherwise,
(i) under a
multiemployer
plan as defined in Section 3(37) of ERISA, (ii) under any Plan or
arrangement
that provides post-retirement welfare benefits except as may be
required under
Section 4980B of the Code, or (iii) under any Plan that is
subject to Title IV
of ERISA or Section 412 of the Code.
2.9 Title to
Assets; Business.
Seller owns all right,
title and interest
in, and has good title to, or in the case
of leased Assets,
a valid leasehold
interest in, all of the Assets,
free and clear of any
and all Liens, except for
Permitted Liens and except as set forth on Schedule 2.9. With regard to
leasehold interests in real property used in the operation of the Business
("Leased Real Estate"), Seller enjoys peaceful possession of the Leased Real
Estate. Except in respect of services to
be provided pursuant to the Transition
Agreements and except as set forth on
Schedule 2.9,
the sale of the Assets
by
Seller, including by subsidiaries of Seller set forth
on Schedule 1.4(b),
to
Purchaser pursuant to this Agreement will effectively convey the Assets to
Purchaser which are solely used in the
Business as currently
conducted and all
of the tangible and intangible property
used by Seller (whether owned, leased or
held under license by Seller, by any of
Seller's Affiliates or
Associates or by
others) solely in connection with the conduct of the
Business as currently
conducted by Seller.
2.10
Intellectual Property
Rights. The Intellectual Property necessary to
the conduct of the Business as conducted by
Seller immediately
prior to Closing
is included in the Assets, except for the Excluded Intellectual Property (as
defined in Section 4.7). All of the
Intellectual Property included in the Assets
is either the sole and exclusive property of Seller (the "Owned Intellectual
Property") as set forth in Sections 1.1(a) and 1.1(b)(i) and Schedules
1.1(a)(ix) and 1.1(b)(i) or is the subject
of an appropriate
license from third
parties in favor of Seller under a contract (the "Licensed Intellectual
Property") as set forth in Sections 1.1(a) and 1.1(b)(ii) and Schedules
1.1(a)(ix) and 1.1(b)(ii). Schedule 2.10 sets forth all
material
Intellectual
Property related to or used in the
Business, including,
without limitation, (1)
trademarks, service marks, trade names and the like,
including all common
law
marks, (2) patents, patent renewals and renewal rights, extension patents,
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<PAGE>
patent applications and inventions, designs and improvements described and
claimed therein, patentable inventions and other patent rights
(including any
divisions, continuations, continuations-in-part,
reissues,
reexaminations, or
interferences thereof, whether or not patents are issued on any such
applications and whether or not any such
applications are modified, withdrawn or
resubmitted). Seller has not granted any third party any license to use the
Owned Intellectual Property except for: (1) incidental licenses granted to
customers of Seller for the purpose of permitting customers to utilize the
services provided by Seller to such customers as part of the Business, (2)
incidental licenses granted to Seller's
vendors who provide services to Seller's
customers and who may be deemed to have
used the Owned Intellectual Property as
part of the provision of such services, and (3) such licenses as are
disclosed
in Schedule 2.10 (collectively, "Outbound IP Licenses"). The Outbound IP
Licenses granted to Seller's vendors and customers are limited to use by
customers in connection with Seller's services or use by vendors in
connection
with delivering services to Seller or Seller's
customers.
With respect to
the
Owned Intellectual Property, (i) Seller has, except for the Outbound IP
Licenses, the exclusive right to use the
Owned Intellectual Property included in
the Assets, (ii) all registrations with and applications to Governmental or
Regulatory Authorities required in respect of
such Owned Intellectual Property
are valid and in full force and effect and,
as of the Closing Date, all Taxes or
maintenance fees or the taking of any other actions by Seller required to
maintain their validity or effectiveness have been paid or taken,
(iii) there
are no restrictions on the direct or indirect transfer of such Owned
Intellectual Property, (iv) Seller will deliver to Purchaser, on or within
fifteen (15) business days after the
execution of this Agreement, documentation,
to the extent existing, with respect to any
invention, process, design, computer
program or other know-how or trade secret
included in such Owned
Intellectual
Property, which documentation is accurate in
all material respects,
(v) Seller
has taken security measures that Seller
deems reasonable to protect the secrecy,
confidentiality and value of any of its
trade secrets included in the Owned
Intellectual Property, provided, however, that such security
measures were, in
any event, as reasonably protective as the security
measures Seller has
taken
with respect to its other confidential information and trade secrets,
(vi) to
the Knowledge of Seller, no such Owned
Intellectual Property
is being infringed
by any other Person, (vii) to the Knowledge of Seller, no third party has
asserted ownership rights in such Owned Intellectual Property, except as
disclosed in Section 2.6, and (viii) no action is
pending or, to the
Knowledge
of Seller, threatened, that seeks to limit, cancel or
question the validity of
Seller's right to own or use such Owned Intellectual Property except as
disclosed in Schedule 2.6. With respect to the Licensed
Intellectual
Property
and the Outbound IP Licenses, (a) Seller's conduct of the
Business prior to the
Effective Date is in material compliance
with respect to any applicable contract
governing the use of such Licensed Intellectual Property or Outbound IP
Licenses, (b) Seller has received no notice from any party to an applicable
contract that it is in breach of any
material obligations in such contract, (c)
to the Knowledge of Seller, there are no registrations with
and applications to
Governmental or Regulatory Authorities required in respect of such
Licensed
Intellectual Property or Outbound IP Licenses, (d) Seller will deliver to
Purchaser, on or within fifteen (15) business days after
the execution of this
Agreement, all documentation in its possession relating to such Licensed
Intellectual Property or Outbound IP
Licenses; provided that Seller makes no
representation as to the accuracy or
completeness of such documentation, and (e)
to the Knowledge of Seller, no party to any license agreement relating to
Licensed Intellectual Property or Outbound
IP Licenses is, or is alleged to be,
in breach or default thereunder. Except as disclosed in Schedule
2.10, the use
of the Assets and the operation of the Business does not infringe upon any
Intellectual Property right of any third party, and no former or current
employee, agent, consultant or independent
contractor involved in the conception
or development of Owned Intellectual
Property has a valid
claim of ownership to
the Owned Intellectual Property. Except as
otherwise provided in Schedule 2.6 or
2.10, Seller has not received notice
that Seller is infringing any Intellectual
Property of any other Person in connection
with the conduct of the Business, no
claim is pending or, to Seller's Knowledge, has been made upon Seller to
such
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<PAGE>
effect that has not been resolved and, to Seller's Knowledge, Seller is not
infringing any Intellectual Property of any other Person in
connection with the
conduct of the Business.
2.11 Material Contracts. As of the date hereof,
Schedule 2.11 sets
forth
those written contracts, agreements,
leases, licenses or instruments relating to
the Business for which similar services and products are not readily
commercially available from providers other
than the current
contracting party
thereto or which are otherwise material to
the operation of the Business (each a
"Material Contract" and collectively the
"Material Contracts").
Each Material
Contract and, to the Knowledge of Seller, each Non-Material Contract (i) is
valid, binding, enforceable and in full force and
effect in accordance with its
terms, (ii) subject to obtaining any
necessary consents in
respect thereto in
accordance with Section 4.1 hereof, the consummation of the transactions
contemplated herein will not affect the validity, binding nature or
enforceability thereof, (iii) the Seller is not, and to
Seller's Knowledge the
other party thereto is not, in default
thereof and (iv) to
Seller's
Knowledge,
no event has occurred which with notice or lapse of time would
constitute
a
breach or default, or permit termination, modification or acceleration
thereunder.
2.12
Insurance.
As of the date
hereof, Seller holds and maintains the
liability, property, workers' compensation and other
insurance policies listed
on Schedule 2.12, which are in effect and
insure the Business,
the Employees or
the Assets. Each such insurance policy is valid and binding and in
full force
and effect, no premiums due thereunder have not been paid and Seller has
not
received any written notice of cancellation or termination in respect of any
such policy or is in default thereunder. Neither Seller nor, to Seller's
Knowledge, the Person to whom such policy has
been issued has received written
notice that any insurer under any policy
referred to in this
Section is denying
liability with respect to a claim
thereunder or defending under a reservation of
rights clause. Purchaser acknowledges that effective upon the Closing
none of
the insurance policies set forth on Schedule 2.12 will be transferred to
Purchaser and that from and after
Closing none of such
policies will cover any
of the Business, Assets or Affected
Employees.
2.13 Financial
Statements. Seller has made available to Purchaser copies of
(i) the unaudited pro forma financial statements of Seller, consisting of the
pro forma working capital statements for the monthly
periods between June
30,
2004 and July 31, 2005 (such working capital statement as of July 31, 2005
is
referred to herein as the "Interim Working
Capital Statement"),
and the partial
pro forma profit and loss statement for the period from March 31, 2004
through
July 31, 2005 (together with the Interim Working Capital Statement, the
"Financial Statements"). The partial pro forma profit and loss statement
contained in the financial statements presents fairly in all
material respects,
the results of operations of the Business for the period covered thereby,
subject, in the good faith belief of
Seller, only to the exceptions set forth on
Schedule 2.13. The Interim Working Capital
Statement, with respect to the Assets
and the Assumed Liabilities, presents fairly in all material respects, the
working capital of the Business as of its
date and, to the extent possible, was
prepared on a consistent basis with the
other Financial Statements.
2.14 Accounts
Receivable. Except as set forth on Schedule 2.14, to Seller's
Knowledge all accounts receivable of the Business that are reflected on the
Interim Working Capital Statement
(collectively,
the "Accounts
Receivable") to
the extent outstanding as of the Adjustment
Date represent
valid obligations
arising from sales actually made or
services actually
performed in the ordinary
course of the Business. The reserves shown in the Interim Working Capital
Statement have been calculated based on
Seller's historical
experience and are,
to Seller's Knowledge, adequate for the
continued operation of the Business from
and after Closing in the manner conducted by Seller prior to Closing. To the
Knowledge of Seller, there is no reasonable basis for concluding that the
Accounts Receivable net of such reserve would not be
collectible by Seller
if
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<PAGE>
Seller were to continue to conduct the
Business.. The
Accounts Receivable aging
report attached hereto as part of Schedule
2.14 is accurate at
and as of July
31, 2005, and which report shall be updated
as of the Closing Date and delivered
to Purchaser within 5 days following the
Closing.
2.15 Condition
of Tangible Assets. All material facilities, equipment and
other material items of tangible property and assets that are
included in the
Assets are in the aggregate in operating
condition and repair, subject to normal
wear and maintenance, and are usable in the regular and ordinary course of
business, except any such assets which are
set forth on Schedule 2.15.
2.16 Affiliate
Transactions. Except as disclosed in Seller's Public Filings
and other than with respect to Seller's wholly owned subsidiaries or as
disclosed on Schedule 2.16, no officer, director, Affiliate or Associate of
Seller or any Associate of any such
officer, director or
Affiliate provides
or
causes to be provided any assets, services
or facilities used or held for use in
connection with the Business, and the Business does not provide
or cause to be
provided any assets, services or facilities to any such officer, director,
Affiliate or Associate.
2.17
Environmental Matters.
To Seller's Knowledge,
except as set forth on
Schedule 2.17 attached hereto, the present and former
activities of Seller
on
all real property owned, leased or subleased related to the Business is in
material compliance with all applicable
Environmental Laws,
and any regulation,
order, decree, judgment or injunction entered, promulgated or approved
thereunder, and Seller has received no
notice of violation regarding, and Seller
has no Knowledge of, any past or present
actions, activities, circumstances,
conditions, events or incidents, including the release,
emission, discharge,
presence or disposal of any Hazardous
Substance, which are
reasonably likely to
form the basis of any material liabilities or obligation of or claims
against
the Business under any Environmental
Laws with respect to
the Business.
Seller
has provided to Purchaser a copy of each assessment, report, , result of
investigations or compliance audit, that is in the possession
of the Seller or
its consultants or contractors regarding the environmental condition of the
Business or compliance (or noncompliance)
by Seller with any Environmental Laws.
The representations and warranties in this Section 2.17 are the sole and
exclusive representations of the Seller
concerning environmental matters.
2.18
Debt Instruments. Seller has no debentures, notes, mortgages,
indentures, guarantees, capitalized leases or other
instruments related to the
Business under which there may be issued or by which
there may be secured
or
evidenced any indebtedness for money borrowed, in each case to which Seller
is
currently a party, has or may acquire rights or may become subject to any
Liability or obligation or by which it or
the Assets are bound.
Seller is not a
guarantor or otherwise indirectly or collaterally liable for any Liability
related to the Business of any other Person. None of the Liabilities of the
Business or of Seller incurred in
connection with the conduct of the Business is
guaranteed by or subject to a similar
contingent obligation of any other Person.
2.19 Employee
Agreements.
Except as set forth on
Schedule 2.19 and except
for David Brown, no Employee has a written contract guaranteeing a term of
employment or restricting Seller's right to terminate employment subject to
applicable Laws. Except as set forth on
Schedule 2.19,
Employees are parties to
a written agreement (a "Confidentiality Agreement"), under which each such
person or entity (i) is obligated
to disclose
and transfer to
Seller, without
the receipt by such person of any
additional value
therefore (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of employment with or performance of
services for Seller, he or she makes or conceives of either solely or jointly
with others, that relate to any subject
matter with which his
or her work for
Sellers may be concerned, or relate to or are connected with the Business,
products or projects of Seller, or involve the use of the time, material or
facilities of Seller, and (ii) is obligated to maintain
the confidentiality
of
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proprietary information of Seller.
Except for the
Confidentiality
Agreements,
Seller's severance policy and except as to David Brown and as set forth on
Schedule 2.19, there are no written or, to
Seller's Knowledge,
oral, contracts
of employment between Seller and any Employee. To Seller's Knowledge, no
Employee is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or
administrative agency,
that would conflict with
their obligation to promote the
interests of Seller with regard to the Business
or the Assets or that would conflict with the Business or the Assets.
Neither
the execution nor the delivery of this
Agreement,
nor the carrying on of
the
Business by its Employees, will, to
Seller's Knowledge,
conflict with or result
in a breach of the terms, conditions or provisions
of, or constitute a
default
under, any contract, covenant or instrument under which
any of such Employee is
now obligated. To Seller's Knowledge,
it is currently not
necessary for Seller
to utilize in the Business any inventions
of any Employee made or owned prior to
their employment by or affiliation with
Seller, nor, to Seller's Knowledge, is
it necessary to utilize any other assets or
rights of any Employee made or owned
prior to their employment with or engagement by Seller, in violation of any
registered patents, trade names, trademarks or copyrights or any other
limitations or restrictions to which any such Employee is a
party or to which
any of such assets or rights may be
subject. To Seller's Knowledge, none of
Seller's Employees, that has had knowledge or access
to information relating to
the Assets has taken, removed or made use of any proprietary documentation,
manuals, products, materials, or any other tangible item from his or her
previous employer which has resulted in Seller's access to or use of such
proprietary items included in the Assets,
and Seller will not
gain access to or
make use of any such proprietary items in the Business, except to the extent
that any such activities would not have a
Material Adverse Effect on Seller, the
Assets or the Business. As of the date of
this Agreement, Seller
is not a party
to a collective bargaining agreement with any trade union, none of Seller's
employees are members of a trade union
certified as a bargaining agent with
Seller and no proceedings to implement any
such collective
bargaining agreement
or certifications are pending. Except as set forth on Schedule
2.19, there are
no policies or agreements between Seller and any Employee with respect to
payments to such Employee upon any change
of control of Seller.
2.20
Sufficiency
of Assets.
Except as set forth in
Schedule 2.20, the
Assets constitute all of the assets
necessary,
in conjunction with
Purchaser's
assets immediately prior to Closing,
including those
constituting
Purchaser's
corporate overhead, to operate the Business in the
manner presently operated by
the Seller.
2.21 Brokers.
Seller has no Liability, directly or indirectly,
to pay any
fees, commissions or other amounts to any of
Seller's directors,
officers or
employees in connection with this Agreement or the transactions contemplated
hereby or in connection with any sale of the Assets.
Seller has no
Liability,
directly or indirectly, to pay any fees, commissions or other amounts to any
broker, finder or agent with respect to this Agreement or the transactions
contemplated hereby or in connection with any sale of the Assets, except to
Mirus Securities. Seller agrees to
indemnify and hold harmless Purchaser for any
such Liability.
2.22
Disclosure.
No representation or warranty made by Seller in this
Agreement or in any of the Schedules or
Exhibits appended
hereto contains any
untrue statement of a material fact or
omits a material fact
necessary to make
each statement contained herein or therein, in light of the circumstances in
which they were made, not materially
misleading.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby
represents and warrants to Seller as follows:
3.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and has
full corporate power and authority to own
and/or lease all of its properties and
assets, and to carry on its business as now
being conducted.
3.2 Authority;
Non-Contravention.
This Agreement, the Operative Agreements
and the other agreements contemplated
hereby to be executed by the Purchaser and
Guarantor (as defined in Section 5.7)
pursuant hereto have been duly executed
and delivered by Purchaser
and Guarantor, and constitute valid and binding
obligations of Purchaser and Guarantor
enforceable against it in accordance with
their terms, except as enforceability may be
limited by applicable
bankruptcy,
insolvency, reorganization, moratorium or other similar laws and subject to
limitations imposed by general equitable
principles. The Purchaser and Guarantor
have full power and authority to execute
and deliver and perform its obligations
under this Agreement, the Operative Agreements and the other agreements
contemplated herein to be executed by each of Purchaser and Guarantor. The
execution and delivery by Purchaser and
Guarantor of this
Agreement does not,
and the execution and delivery by Purchaser
of the Operative Agreements to which
it is a party, the performance by Purchaser and
Guarantor of their
obligations
under this Agreement and the Operative
Agreements and the
consummation
of the
transactions contemplated hereby and
thereby will not conflict with or result in
a violation or breach of any of the terms,
conditions
or provisions of the
Certificate of Incorporation or Bylaws of
Purchaser and Guarantor.
3.3 No Consents.
No permit, consent, approval, novation, authorization or
other Order of or filing with any
Governmental
or Regulatory
Authority or any
other Person is required in connection with the execution, delivery and
consummation of this Agreement and the
other agreements
contemplated hereby
to
be executed by Purchaser or Guarantor, as appropriate, or the actions of the
Purchaser and Guarantor contemplated
hereby.
3.4 Brokers.
Purchaser has no Liability, directly or indirectly, to pay any
fees, commissions or other amounts to
any broker, finder or
agent with respect
to this Agreement or the transactions
contemplated hereby.
Purchaser agrees
to
indemnify and hold harmless Seller from any
such liability.
3.5 Funds. Purchaser has sufficient financial resources and credit
available on market terms to enable it to consummate the transactions
contemplated by this Agreement.
ARTICLE 4.
COVENANTS OF SELLER
4.1 Further Actions; Consents. Notwithstanding its inclusion in this
Article 4, this Section 4.1 includes
covenants of both Seller and Purchaser.
(a) Except as
otherwise provided in
this Section 4.1,
Sections 5.2, 5.3,
5.4, 5.5 and 5.6, or in the Transition Agreements, each of the parties hereto
shall execute such documents and other
instruments and take such further actions
as may be reasonably required or desirable to carry out
the provisions
hereof
and consummate the transactions
contemplated hereby.
Upon the terms and subject
15
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to the conditions hereof, each of the parties hereto shall
use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things
necessary, proper or
advisable to consummate
and make effective as promptly as
practicable the
transactions
contemplated by
this Agreement and to obtain in a timely
manner all necessary waivers, consents,
including specifically consents to the assignment of
Material Contracts,
and
approvals and to effect all necessary
registrations and filings.
(b) Notwithstanding the foregoing, in respect of the Contracts (in
each
case other than leases related to the
Leased Real Estate):
(i) the
parties acknowledge that prior to the date hereof, Seller has
obtained and delivered to Purchaser
consent to the
assignment of those Material
Contracts identified on Schedule
4.1(b);
(ii) the parties
acknowledge
that some or all of
the Contracts other than
the Material Contracts (collectively,
"Non-Material
Contracts") may require the
consent, approval or waiver of the other
party thereto to such assignment;
(iii) the
parties agree that
notwithstanding any
such requirement
as to
consent to assignment of the Non-Material
Contracts, Purchaser hereby waives the
requirement that any such consent to
assignment be obtained;
(iv) Seller
shall, during the 90-day period immediately following the
Closing, use its commercially reasonable efforts, with the reasonable
cooperation of Purchaser, to obtain consents in respect of the
Non-Material
Contracts. "Commercially reasonable efforts", for this purpose shall mean
Seller's sending written consents, keeping
Purchaser apprised of the results and
otherwise reasonably cooperating with Purchaser and shall not include any
action, amendment to, or the payment of
any amount of money except as expressly
required by the terms of, the Non-Material
Contract;
(v) the parties
agree that to the
extent that Seller has not obtained any
consent to a Non-Material Contract during such 90-day period (A) Seller may
terminate such Non-Material Contract in accordance
with the terms thereof
and
pay all termination fees required in connection therewith and (B) Purchaser
shall be solely responsible for obtaining replacement goods or services in
respect thereof commencing from and after the Closing Date (provided that
Purchaser shall indemnify Seller against any liability in any case
where the
consent to assignment of a customer contract is not obtained and the
customer
does not cancel the Contract and looks to Seller for performance ("Customer
Claims"), in which case Purchaser
shall perform such
Contracts as an agent for
Seller; and further provided that as to
contracts associated
with the operation
of Seller's network, Purchaser shall be responsible for
termination fees which
could have been avoided by timely
notification by Purchaser of its determination
that such Contracts should terminate);
and
(vi)
the parties agree that if the consent to the assignment of any
Non-Material Contract is obtained but does not contain an express
full release
of Seller from Seller's direct and indirect obligations from and after the
Closing under such Non-Material Agreement,
to Seller's reasonable
satisfaction,
then Purchaser shall indemnify Seller in respect of any Losses
incurred by
Seller from and after the Closing Date in respect of any such Non-Material
Contract.
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<PAGE>
(vii)
Notwithstanding the foregoing, with respect to the Leased Real
Estate
located in Fremont, California, the Purchaser and Seller shall concurrently
herewith enter into the Rental Fund Escrow
Agreement in
substantially the
form
attached hereto as Exhibit C.
(d) Seller and
Purchaser covenant and
agree that any customer who contacts
Purchaser desiring Shared Hosting Services will be referred by Purchaser
to
Seller; and any customer who contacts
Seller desiring Dedicated Hosting Services
will be referred by Seller to Purchaser, provided that in the case of Seller,
that Seller is not violating the terms of
the Section 4.3 of this Agreement, and
provided that in the case of Purchaser,
that Purchaser is not Competing.
(e) Seller and
Purchaser covenant and
agree that they will jointly attempt
to categorize those internal support servers
that are included in the Assets as
either exclusive or non-exclusive to the
Business. With respect
to any internal
support servers that are non-exclusive to
the Business, either Party may, at its
sole expense and to the extent
allowed by any third
party licenses,
create a
duplicate server for their own exclusive
use.
4.2 Covenant Not
to Hire Purchaser's Other Employees. Seller hereby agrees
with Purchaser that, except as otherwise agreed to in
writing between Purchaser
and Seller, for an eighteen (18) month
period following the Closing Date, except
with Purchaser's written consent, Seller shall not hire any person
employed by
Purchaser or its Affiliates in any capacity, except as provided in the
Administrative Services Agreement. The
foregoing, however,
shall not in any way
limit the ability of Seller to hire any
person to become an
employee of Seller
if such person has been terminated by
Purchaser at least six months prior to the
date such person is hired by Seller.
4.3 Seller's
Noncompetition Covenant.
(a) In consideration of the purchase of the Assets by
Purchaser,
Seller
agrees that, from and after the Closing until
the first anniversary
of the of
the Closing Date, Seller shall not and
shall cause its Affiliates not to, within
any area in which the Business is currently
conducted,
directly or
indirectly,
provide Dedicated Hosting Services to its
customers, or,
acquire, own,
manage,
operate, control, be employed by or participate in
the ownership,
management,
operation or control of, except on behalf of Purchaser (pursuant to the
Transition Agreements or otherwise), or be connected in any manner
with, any
business advertising managed and/or
unmanaged dedicated hosting services of the
type and character engaged in and competitive with the Business conducted by
Seller on the Closing Date ("Competitive
Dedicated Hosting Services"). For these
purposes, ownership of securities of 1% or
less of any class of securities of a
Person engaged in the business of providing Competitive Dedicated Hosting
Services shall not be considered to be
competition with the Purchaser;
(b) In
consideration
of the purchase of the
Assets by Purchaser,
Seller
agrees that, from and after the Closing
until the second
anniversary
of the
Closing Date, Seller shall not and shall cause
its Affiliates not to, except on
behalf of Purchaser (pursuant to the Transition Agreements or otherwise),
directly or indirectly start, acquire, own, manage, operate, control, be
employed by or participate in the
ownership,
management,
operation or
control
of, or be connected in any manner with,
any business
advertising
Competitive
Dedicated Hosting Services through
marketing and sales
efforts in which Seller
uses the "Interland" name or other
brand;
(c) In
consideration
of the purchase of the
Assets by Purchaser,
Seller
agrees that, from and after third
anniversary of the
Closing Date, Seller shall
not and shall cause its Affiliates not to,
within any area in which the Business
is currently conducted, except on behalf of Purchaser (pursuant to the
Transition Agreements or otherwise), directly or indirectly solicit the
customers of the Business that were customers of the Business on the
Closing
Date;
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<PAGE>
(d)
Notwithstanding the foregoing, Purchaser acknowledges that (i) Seller
owns and will continue to operate its business
of Shared Hosting
Services and
that the provision of such services by
Seller and its
Affiliates shall not
be
deemed to constitute a violation of this Section 4.3; (ii) it shall not
constitute a violation of this Section 4.3 if (A) Seller
acquires a
business
that incidentally, and not as its principal business activity, provides
Dedicated Hosting Services, provided that Seller has offered
Purchaser the
opportunity to acquire the customers
receiving the Dedicated Hosting Services at
the price at which it acquired such customer accounts, which offer shall be
accepted or declined within sixty (60) days; or (B) if Seller is acquired,
whether by stock sale, merger or other business combination, or sale of its
assets, to a Person engaged in whole or in part in the
business of
providing
Dedicated Hosting Services;
(e)
Notwithstanding the foregoing, Purchaser acknowledges and agrees that
Seller may act as a reseller for Purchaser, when an enterprise distribution
partner of Seller refers to Seller a
customer who is seeking Dedicated Hosting
Services or collocation service. Purchaser shall provide Seller with a 25%
discount off of its standard rate for the
applicable service
provided to Seller
pursuant to this Section 4.3(e).
4.4 Subsidiaries. Seller covenants and agrees that it shall cause the
Subsidiaries to transfer any and all interest in the Assets to
Purchaser at
Closing.
4.5 Purchaser's
Use of "Interland" Name and Seller's Logo. Purchaser shall
be entitled to use the name "Interland" and Seller's logo only in accordance
with the applicable provisions of the Administrative Services Agreement
constituting a part of the Transition
Agreement.
4.6 Cooperation
with Post-Closing Audit. Following the Closing, the Seller,
and its Affiliates, shall reasonably cooperate with the audit of the
Business
conducted by the accounting firm of KPMG, or other
accounting firm
selected by
the Purchaser, and provide such accounting firm
with the information reasonably
requested by such accounting firm, to the extent such information is in the
possession of the Seller or its Affiliates
without material expense or burden,
in order for Purchaser and its accounting firm to create audited financial
statements of the Business as a stand alone entity in compliance with GAAP
(which audit Purchaser anticipates completing within forty-five (45) days
following the Closing Date). All fees and expenses of the
accounting
firm and
other third parties engage by Purchaser in
connection
with the audit shall
be
paid by Purchaser.
4.7 Cooperation
as to Certain
Intellectual Property.
Following Closing,
Seller shall cooperate, which cooperation shall not
require Seller to incur any
expense, with Purchaser as reasonably
requested by Purchaser
in acquiring from
third parties rights to use: (i) the
intellectual
property licensed by Seller
from third parties identified in Section
1.1(b)(ii),
and (ii) the
intellectual
property licensed by Seller from third
parties listed on
Schedule 4.7,
which
intellectual property will not be assigned or sublicensed to Purchaser
(collectively, the "Excluded Intellectual
Property"). Seller
agrees to provide
up to one hundred (100) hours of
consulting
time (including, if requested by
Purchaser, the time of Glen Hoffman or other Seller personnel reasonably
selected by Purchaser) in order to consult with Purchaser with respect to
appropriate back office systems, which may include consulting with respect to
Seller's current back office systems.
Such consulting shall be at no cost to
Purchaser.
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<PAGE>
ARTICLE 5.
COVENANTS OF PURCHASER
5.1 No
Additional
Representations.
Purchaser acknowledges that neither
Seller nor any other person or entity acting on behalf of Seller or any
Affiliate of Seller has made any
representation or warranty, express or implied,
as to the accuracy or completeness
of any information regarding the Business,
except as expressly set forth in the
Agreement.
5.2 Employees.
Purchaser and Seller
acknowledge
and agree that
Purchaser
will not offer employment to any Employees on or prior to the Closing
Date.
Purchaser may, however, offer employment
"at will" on or before ninety (90) days
following the Closing Date to each of the Employees listed on Schedule 5.2
attached hereto (each employee receiving
such offer, an "Offeree") with benefits
described in Section 5.3, provided that each such Employee successfully
completes Purchaser's pre-employment process which shall include but not be
limited to testing for controlled
substances and
background screening.
In the
event any Affected Employee is terminated without Cause within one year
after
the Closing Date, Purchaser shall pay severance to
such terminated
employee in
accordance with Seller's current severance policy as described on
Schedule 5.3
attached hereto. As of the date hereof,
none of the Employees listed on Schedule
5.2 is on a leave of absence pursuant to Seller's written leave of absence
policy.
5.3 Benefits
Matters. (a) Purchaser shall, and shall
cause its Affiliates
to (if applicable), give the Affected Employees full credit for all purposes
(including without limitation for purposes of eligibility to participate,
eligibility to commence benefits and
vesting, as applicable but not for purposes
of benefit accrual under a Plan that is a
defined benefit pension plan, if any)
under any Plans, policies, practices or arrangements
maintained by Purchaser or
its Affiliates, for the Affected Employees' service with the Seller and
its
Affiliates and their respective predecessors to the same extent
recognized by
the Seller or its Affiliates, as
applicable, immediately prior to the Closing.
(b) Following
the Closing, to the extent permitted by Purchasers' insurance
carriers (after good faith negotiations by Purchaser with such carriers) and
permitted by law, Purchaser shall ensure, and shall cause its Affiliates to
ensure (if applicable), that:
(i) no
limitations or exclusions as to preexisting conditions,
evidence of
insurability or good health, or waiting periods are applicable
to any Affected
Employees or their dependents or
beneficiaries
under any welfare
benefit plans
in which such Affected Employees may be
eligible to participate; and
(ii) any costs
or expenses
incurred by Affected Employees (and their
dependents or beneficiaries) during the calendar year in which the Closing
occurs, up to and including the Closing Date, shall be taken into account
for
purposes of satisfying applicable
deductible,
co-payment,
coinsurance, maximum
out-of-pocket provisions and like adjustments or limitations on
coverage under
any welfare benefit plans in which the Affected
Employees may be eligible to
participate.
(c) Purchaser
shall and shall cause
its Affiliates (if
applicable) (i) to
extend coverage to the Affected Employees under Plans and arrangements of
Purchaser or its Affiliates on the same
terms and conditions
that such coverage
is provided to similarly situated
employees of Purchaser
or its Affiliates,
as
applicable, and (ii) on the Closing Date,
provide Affected
Employees salary,
commissions and bonus opportunities
substantially
equivalent to those
provided
to Affected Employees by Seller or its
Affiliates immediately
prior to Closing,
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<PAGE>
provided however, that Purchaser reserves the right to adjust such
salary,
commissions and bonus opportunities
thereafter.
(d) Accrued Time Off. Schedule 5.3 sets forth a complete list of the
accrued vacation and other earned time off for each Offeree
as of the Closing
Date. Each Affected Employee shall be
credited under Purchaser's (or Purchaser's
Affiliate's) vacation and other earned time off policy
with the full amount of
vacation and earned time off accrued by
such Affected Employee
but unused as of
the Closing under the vacation policies of Seller applicable to such Affected
Employee.
(e) 401(k)
Plans.
(i) Purchaser
hereby covenants that, as soon as practicable, but not later
than ninety (90) days following the Closing (i) it shall take all steps
reasonably necessary to effect the adoption
of a tax-qualified
retirement plan
that provides eligible employees of
Purchaser (including the Affected Employees)
the opportunity to defer compensation
pursuant to Section
401(k) of the Code (a
"401(k) Plan"), and (ii) all Affected
Employees shall be granted service credit,
for purposes of eligibility and vesting under the Purchaser's 401(k) Plan, to
the same extent that such Affected Employees were credited with service
under
the Seller's 401(k) Plan.
(ii) Affected
Employees who are
participants
in the Seller's 401(k)
Plan
shall, effective as of the date they become
Affected Employees, cease to be
eligible to participate in Seller's
401(k) Plan,
and such Affected
Employees
shall have a fully vested and
non-forfeitable interest in their account balances
thereunder. As soon as practicable
following the date
that is ninety (90) days
following the Closing, and following (A) delivery by
Seller to Purchaser of the
most current IRS determination letter regarding the tax-qualified status of
Seller's 401(k) Plan and (B) delivery by Purchaser to Seller a favorable
determination letter regarding the tax-qualified
status of Purchaser's
401(k)
Plan (or, if the Purchaser adopts a
prototype or volume submitter 401(k) plan, a
copy of the IRS opinion letter issued with respect to such
prototype or
volume
submitter plan), Seller shall cause the trustee of Seller's 401(k) Plan to
transfer to the Purchaser's 401(k) Plan all
of the assets and liabilities of the
Seller's 401(k) Plan that are attributable to Affected Employees. Unless
otherwise agreed by Seller and Purchaser,
the assets to be
transferred shall be
cash or promissory notes for loans made to
Affected Employees under the terms of
the Seller's 401(k) Plan. In the event the plan to plan transfer has not
occurred by the first anniversary of the Closing Date,
Affected Employees who
are participants in Seller's 401(k)
Plan may transfer their account balances in
any manner permitted by Seller's 401(k)
Plan.
5.4 Sales and Transfer Taxes. Purchaser shall pay only the first One
Hundred Thousand U.S. Dollars (US$100,000) of any sales,
use, excise or
gains
taxes, documentary stamps or transfer taxes payable by reason of the
transfer
and conveyance of the Assets hereunder.
Seller shall be
responsible for payment
of any additional such taxes. .
5.5 Covenant Not
to Hire Seller's Other Employees. Upon the consummation of
the transactions contemplated hereby, Purchaser
agrees with Seller that, for an
eighteen (18) month period following the Closing Date, except with Seller's
written consent, Purchaser shall not hire any
person employed by Seller or its
Affiliates in any capacity other than the Employees set forth
on Schedule 5.2.
The foregoing, however, shall not in any way limit the
ability of Purchaser to
hire any person to become an employee of Purchaser if such person has been
terminated by Seller at least six months
prior to the date such person is hired
by Purchaser.
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<PAGE>
5.6 Guarantee. Peer 1 Network Enterprises, Inc. ("Guarantor") hereby
unconditionally guarantees the full and timely payment and performance by
Purchaser of all obligations of Purchaser
arising under this
Agreement and all
agreements delivered pursuant hereto.
ARTICLE 6.
CLOSING DELIVERIES OF SELLER
In addition to
the other Closing
deliveries
required elsewhere in this
Agreement.
6.1 Tax
Affidavit.
At Closing, Seller shall deliver to Purchaser an
affidavit of Seller's Chief Financial
Officer, in form
reasonably
satisfactory
to Purchaser, stating under penalties of perjury such Seller's
United States
taxpayer identification number and that such Seller is not a foreign
person
within the meaning of section 1445(b)(2) of
the Code.
6.2 Other Documents.
Seller shall have
furnished Purchaser with such other
and further documents and certificates, including certificates of each of
Seller's officers and others, as Purchaser
shall reasonably
request to evidence
compliance with the conditions set forth in
this Agreement.
ARTICLE 7.
INDEMNIFICATION AND SURVIVAL
7.1 Indemnification by Seller. On and
after the Closing Date, Seller shall
defend, indemnify and hold harmless
Purchaser, each of its
Affiliates and each
of their respective Affiliates, officers, directors, employees, agents,
successors and assigns (collectively,
"Purchaser's
Indemnified Persons"),
and
shall reimburse Purchaser's Indemnified
Persons, for, from and against, each and
every demand, claim (including Customer Claims and other third
party claims),
fine, fee, penalty, deficiency, loss (which shall include any
diminution in
value), liability, judgment, and damage
(including interest, costs and expenses,
including court costs, fines, penalties, fees of accountants and other
experts
and other expenses of litigation,
reasonable
attorneys'
fees) (each a
"Loss,"
and collectively, "Losses") imposed on or incurred by
Purchaser's
Indemnified
Persons, directly or indirectly,
relating to, resulting
from or arising out of
any breach of any representation or warranty in any respect, whether or not
Purchaser's Indemnified Persons relied thereon
or had knowledge thereof, or any
breach or nonfulfillment of any covenant, agreement or other obligation of
Seller under this Agreement, or any certificate or other
document delivered
or
to be delivered pursuant hereto or relating
to, resulting from or arising out of
any Retained Liability or for any Taxes of the
Seller for any period
ending on
or before the Closing.
7.2
Indemnification by Purchaser. On and after the Closing Date,
Purchaser
shall defend, indemnify and hold harmless Seller
and its Affiliates,
officers,
employees, agents, successors and assigns (Sellers and such other Persons,
collectively "Seller Indemnified Persons") and shall reimburse Seller
Indemnified Persons for, from and against all
Losses imposed on or
incurred by
Seller Indemnified Persons, directly or
indirectly, relating
to, resulting from
or arising out of any breach of any
representation
or warranty in any
respect,
whether or not Seller Indemnified Persons relied thereon or had knowledge
thereof, or any breach or nonfulfillment of any covenant, agreement or other
obligation of Purchaser under this Agreement or any certificate or other
document delivered or to be delivered pursuant hereto, including without
limitation Losses relating to, resulting from or arising out of any
Assumed
Liability.
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7.3 Notice and
Defense of
Third-Party
Claims. If any action, claim or
proceeding shall be brought or asserted by a
third party against an indemnified
party or any successor thereto (the "Indemnified Person") in respect of which
indemnity may be sought under this Article
7 from an indemnifying
person or any
successor thereto (the "Indemnifying
Person"), the Indemnified Person shall give
prompt written notice of such action or claim to
the Indemnifying
Person who
shall assume the defense thereof, including
the employment of counsel reasonably
satisfactory to the Indemnified
Person and the payment
of all expenses;
except
that any delay or failure to so notify the
Indemnifying Person shall relieve the
Indemnifying Person of its obligations
hereunder only to the
extent, if at all,
that it is prejudiced by reason of such
delay or failure. The Indemnified Person
shall have the right to employ separate
counsel in any of the foregoing actions,
claims or proceedings and to participate in the defense
thereof, but the fees
and expenses of such counsel shall be at
the expense of the
Indemnified Person
unless both the Indemnified Person and the Indemnifying Person are named as
parties and the Indemnified Person shall in good faith determine that the
representation by the same counsel is
inappropriate.
7.4 Limits on Indemnification. No claim may be made against Seller for
indemnification hereunder unless the
aggregate of all Purchaser Losses under the
Agreement incurred exceed One Hundred Thousand Dollars (US $100,000) (the
"Aggregate Basket"), at which time all
amounts in excess of the Aggregate Basket
may be claimed in full. In no event shall the Seller be
required to
indemnify
Purchaser for Purchaser Losses under this Agreement which in the aggregate
exceed sixty percent (60%) of the Purchase Price. Any claim by Seller for
indemnification against a third party claim based on conduct of Purchaser
following Closing shall not be subject to the
limitations
contained in this
Section 7.4.
7.5 Survival of Representations and Warranties and Agreements. The
representations and warranties made by the parties in this
Agreement or in any
document, certificate or instrument executed and delivered
pursuant hereto
(including those made in the Schedules
and Exhibits
hereto) shall survive
the
Closing hereunder and shall not merge in
the performance
of any obligation
by
any party hereto, and will remain in full force
through the eighteenth
(18th)
full month following Closing, without
regard to any investigation made by any of
the parties; provided, however, that (i) the
representations and warranties set
forth in Sections 2.5 (Tax Matters),
2.8 (ERISA Matters)
and 2.10 (Intellectual
Property) will survive until 30 days after the
expiration
of the applicable
statute of limitations (with extensions),
(ii) the representation and warranties
set forth in 2.17 (Environmental Matters) will survive until three (3) years
following the Closing Date, and (iii) the
representation
and warranties of
the
parties set forth in Sections 2.2 (Authorization), 2.9 (Title to Assets;
Business), 3.1 (Organization) and 3.2
(Authorization) will survive indefinitely.
Any claim (whether or not fixed as to
liability or liquidates as to amount)
pending on the expiration date of the
applicable survival period set forth above
for which a claim notice has been given in
accordance
with this Article VII
on
or before such expiration date may continue to be asserted and indemnified
against until finally resolved.
All covenants and
obligations undertaken by the
parties in this Agreement or in any
document, certificate or instrument executed
and delivered pursuant hereto (including
those made in the Schedules or Exhibits
hereto) shall survive in accordance with
their terms.
7.6 Exclusive
Remedy. From and after
the Closing, no party hereto shall be
liable or responsible in any manner
whatsoever to the other parties, whether for
indemnification or otherwise, except for
indemnity as expressly provided in this
Article 7 and elsewhere in this Agreement
which provides the exclusive remedies
and causes of action of the parties
hereto with
respect to any matter
arising
out of or in connection with the Agreement
or any Schedule hereto or any opinion
or certificate delivered in connection herewith;
provided that the
limitations
contained in this Article 7 shall not apply to any
claims arising
out of the
fraud of any party. After the Closing, Purchaser shall not be entitled to a
rescission of the sale of the Assets.
Notwithstanding
anything to the
contrary
contained herein, the rights and remedies
set forth in the Transition Agreements
22
<PAGE>
shall be the sole and exclusive source of
rights and remedies in respect thereto
and the parties' respective rights thereunder shall not be
governed or limited
by any provision contained herein.
7.7 Liability Limitation. Notwithstanding anything to the contrary
contained herein, in no event shall any party be liable for any punitive,
special, incidental or consequential
damages, including
lost profits,
arising
out of any breach of representations,
warranties, covenants
or other provisions
of this Agreement.
ARTICLE 8.
DEFINITIONS
8.1 Definitions. (a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings
indicated below:
"401(k) Plan"
has the meaning ascribed to it in Section 5.3
"AAA" has the
meaning ascribed to it in Section 9.9.
"Accounts Receivable" has the
meaning ascribed to it in Section 2.14.
"Administrative
Services Agreement" has the meaning ascribed to it in
Section 1.1(b)(i).
"Affected
Employees" means those Offerees who accept an offer of
employment
pursuant to Section 5.2 hereof.
"Affiliate"
means any Person that
directly, or
indirectly through one
of
more intermediaries, controls or is controlled
by or is under common
control
with the Person specified. For purposes of
this definition,
control of a Person
means the power, direct or indirect, to direct or cause the
direction of the
management and policies of such Person
whether by contract or otherwise.
"Aggregate
Basket" has the meaning ascribed to it in Section 7.4.
"Agreement"
means this Asset
Purchase Agreement and the Schedules and
Exhibits hereto, as the same shall be
amended from time to time.
"Assets" has the
meaning ascribed to it in Section 1.1.
"Assignment
Instruments" has the meaning ascribed to it in Section 1.4(a).
"Associate"
means, with respect to any Person,
any corporation or other
business organization of which such Person is an officer or partner or
is the
beneficial owner, directly or indirectly,
of ten percent (10%)
or more of any
class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such
Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same
home as such Person.
"Assumed
Liabilities" has the meaning ascribed to it in Section 1.2(a).
"Assumption
Instruments" has the meaning ascribed to it in Section 1.4(a).
23
<PAGE>
"Benefit Plan"
means any Plan established by Seller, or any predecessors or
Affiliates of Seller, existing since August
31, 2001 to which Seller contributes
or has contributed or under which Seller
or any of its Affiliates has, or since
August 31, 2001 had, an obligation to contribute, on behalf of any employee,
former employee or director, or under which any employee,
former employee or
director of Seller or any dependent or beneficiary thereof is covered, is
eligible for coverage or has benefit
rights.
"Business"
has the meaning ascribed to it in the forepart of this
Agreement.
"Business Day"
means a day other than Saturday, Sunday or any day on which
banks located in the State of New York are
authorized or obligated to close.
"Cash Payment"
has the meaning ascribed to it in Section 1.3(a)(i).
"Cause" means
termination of an Affected Employee's employment by Purchaser
for one or more of the following reasons:
(a) Affected Employee
has breached or
threatens to breach a fiduciary duty owed to the Purchaser; (b) Affected
Employee has engaged or threatens to engage in dishonesty, fraud, gross
negligence, willful malfeasance or other acts of
misconduct in the performance
of Affected Employee's duties or during the course of Affected Employee's
employment; (c) upon the willful and continued
failure by Affected
Employee to
substantially perform his or her duties with the
Purchaser,
or excessive or
unreasonable absence from the performance of his or her duties with the
Purchaser for any reason, other than for authorized
vacation or sick
leave; or
(d) Affected Employee has willfully
violated or threatens
to violate Purchaser
policies, or has willfully violated or threatens to violate
any law, rule or
regulation (other than traffic violations or similar offenses)
which result in
material injury to Purchaser.
"Closing"
means the closing of
the transactions
contemplated
by Section
1.5.
"Closing Date" has the
meaning set forth in Section 1.5.
"Closing
Working Capital Amount" shall mean the
amount of Working Capital
of the Business as of the Adjustment
Date.
"Code" means the
Internal Revenue Code
of 1986, as amended,
and the rules
and regulations promulgated thereunder.
"Competing"
means Purchaser directly or indirectly owning, managing,
operating, controlling, being employed by or participating in the ownership,
management, operation or control of, or being
connected in any manner with, any
business providing Shared Hosting Services
of the type and character engaged in
and competitive with the business conducted
by Seller on the Closing Date.
Notwithstanding
the foregoing, Seller acknowledges that Purchaser shall not
be deemed to be "Competing" (a) solely by virtue of the fact that
Purchaser
provides collocation, bandwidth and/or Dedicated Hosting
Services to customers
which directly sell Shared Hosting Services; (b) if Purchaser acquires a
business that incidentally, and not as its
principal business activity, provides
Shared Hosting Services; or (c) if
Purchaser is acquired, whether by stock sale,
merger or other business combination, or
sale of its assets, by a Person engaged
in whole or in part in the business of
providing Shared
Hosting Services.
For
these purposes, ownership of securities of
one percent (1%) or less of any class
of securities of a Person engaged in the business of
providing Shared
Hosting
Services shall not be considered to be
"Competing" with the Seller.
"Competitive
Dedicated Hosting
Services" has the meaning ascribed to it in
Section 4.3(a).
24
<PAGE>
"Confidentiality
Agreement" has the meaning ascribed to it in Section 2.19.
"Confidential
Information" has the meaning ascribed to it in Section 9.6.
"Consideration"
has the meaning ascribed to it in Section 1.3(b).
"Contracts" has
the meaning ascribed to it in Section 1.1(a)(viii).
"Cooperating Employees" has the
meaning ascribed to it in Section 1.8(b).
"CPA-Determined
Differences"
has the meaning ascribed to it in Section
1.7(d)(ii).
"CPA Firm" has
the meaning ascribed to it in Section 1.7(d)(ii).
"Customer
Claims" has the meaning ascribed to it in Section 4.1(b)(v).
"Dedicated
Hosting Services" means that form of web
hosting service where
the customer purchases the exclusive use of one
(but not less than one) or more
web servers and specifically excludes Shared Hosting Services, and virtual
private servers.
"Differences"
has the meaning ascribed to it in Section 1.7(d)(ii).
"Disagreement
Notice" has the meaning ascribed to it in Section 1.7(c).
"Employee"
means each
employee, officer or consultant of Seller
engaged
primarily in the conduct of the Business
and identified on Schedule 8.1 attached
hereto.
"Environmental
Laws" means the following laws as the same have been amended
from time to time: (i) Clean Air Act (42
U.S.C. ss. 7401, et
seq.); (ii) Clean
Water Act (33 U.S.C. ss. 1251, et seq.); (iii) Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901, et seq.); (iv) Comprehensive Environmental
Response, Compensation and Liability Act
(42 U.S.C. ss. 9601, et seq.); (v) Safe
Drinking Water Act (42 U.S.C. ss. 300f, et
seq.); (vi) Toxic Substances Control
Act (15 U.S.C. ss. 2601, et seq.); (vii) Rivers and Harbors Act (33
U.S.C. ss.
401, et seq.); (viii) Emergency Planning and Community Right to Know Act;
together with all other Legal Rules
regulating emissions,
discharges,
releases
or threatened releases of any Hazardous Substance into ambient air, land,
surface water, groundwater, personal property or structures, or otherwise
regulating the manufacture, processing, distribution, use, treatment,
storage,
disposal, transport, discharge or handling
of any Hazardous Substance.
"ERISA"
means the Employee
Retirement
Income Security Act of 1974, as
amended, and the rules and regulations
promulgated thereunder.
"Escrow
Agreement" has the meaning ascribed to it in Section
1.3(a)(ii).
"Escrow Amount"
has the meaning ascribed to it in Section 1.3(a)(ii).
"Exchange Act"
means the Securities
Exchange Act of 1934, as amended, and
the rules and regulations promulgated
thereunder.
"Excluded
Assets" has the meaning ascribed to it in Section 1.1(c).
"Excluded
Intellectual Property"
has the meaning ascribed to it in Section
4.7.
25
<PAGE>
"GAAP" means
U.S. generally
accepted accounting principles applied on a
consistent basis during the relevant
periods.
"GAAP
Practices"
means GAAP applied on
a basis consistent
with the past
practices of Seller.
"Governmental
or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission,
official or other instrumentality of
the United States or any state, county, city or other political subdivision
thereof.
"Guarantor" has
the meaning ascribed to it in Section 5.7.
"Hazardous
Substance"
means any matter that
is regulated as a
pollutant,
contaminant, hazardous or toxic substance, material, constituent or waste or
pollutant under any Environmental Health and Safety Law by any
Governmental or
Regulatory Authority and includes, without limitation, asbestos and
asbestos-containing materials and any material or substance that is: (i)
designated as a "hazardous substance" pursuant to section 307 of the
Federal
Water Pollution Control Act, 33 U.S.C.
section 1251,
et seq. (33 U.S.C.
ss.
1317); (ii) defined as a "hazardous waste" pursuant to section 1004 of the
Federal Solid Waste Disposal Act, 42 U.S.C.
section 6901, et seq. (42 U.S.C. ss.
6903); (iii) defined as a "hazardous
substance"
pursuant to section
101 of the
Comprehensive Environmental Response,
Compensation and
Liability Act, 42 U.S.C.
section 9601, et seq. (42 U.S.C.
ss. 9601); or (iv) so designated or
defined
under any other applicable Legal Rule.
"Indebtedness"
of any Person means
all obligations of
such Person (i) for
borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred
purchase price of
goods or services (other
than trade payables or accruals incurred in the ordinary
course of
business),
(iv) under capital leases, but not any real
estate leases, and (v) in the nature
of guarantees of the obligations
described in clauses
(i) through (iv) above of
any other Person.
"Indemnified
Person" has the meaning ascribed to it in Section 7.3.
"Indemnifying
Person" has the meaning ascribed to it in Section 7.3.
"Intellectual
Property" means all patents and patent rights, trademarks and
trademark rights, trade names and trade name rights,
service marks and
service
mark rights, service names and service name
rights, brand names,
domain names,
inventions, processes, formulae, copyrights and copyright
rights, trade dress,
business and product names, logos,
slogans, trade secrets, industrial models,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, manufacturing,
engineering and technical drawings,
know-how, all pending applications for
and
registrations of patents, trademarks, service marks and copyrights and
(other
than with respect to the name "Interland") all goodwill pertaining to the
forgoing.
"Interim
Working Capital Statement" has the meaning ascribed to it in
Section 2.13.
"IRS" means the
United States Internal Revenue Service.
"Knowledge
of Seller"
means the actual
knowledge of Joel
Kocher, Allen
Shulman, Gonzalo Troncoso, Jonathan Wilson, Denise Grey, Richard Piterlo,
Ted
Smith, Dave Brown, Jorge Quintero, and
David Weinand, each of whom have reviewed
Article 2 and the corresponding
Schedules.
26
<PAGE>
"Laws" means all
laws, statutes, rules,
regulations,
ordinances and other
pronouncements having the effect of law of the
United States, or any state,
county, city or other political
subdivision,
or any Governmental or
Regulatory
Authority.
"Leased Real
Estate" has the meaning ascribed to it in Section 2.9.
"Licensed
Intellectual Property"
has the meaning assigned to it in Section
2.10.
"Legal
Rules" means the requirements of all laws, codes, statutes,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations of all Governmental
or Regulatory Authorities
with jurisdiction.
"Liabilities"
means all Indebtedness, obligations and other liabilities
of
a Person (whether absolute, accrued,
contingent, fixed or
otherwise, or whether
due or to become due).
"Licensed
Intellectual Property"
has the meaning ascribed to it in Section
2.10.
"Licenses"
means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or
Regulatory Authority.
"Liens" means
any mortgage, pledge,
assessment, security
interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale contract, title retention contract or other contract to
give
any of the foregoing.
"Loss" and
"Losses" have the meanings ascribed to them in Section 7.1
"Material
Adverse Effect" and "Material Adverse Change" mean any Loss
in
excess of $25,000 resulting from a breach of an individual representation,
warranty or covenant.
"Material
Contract" and "Material Contracts" have the meanings
ascribed to
them in Section 2.11.
"NASDAQ" has the
meaning ascribed to it in Section 9.5.
"Non-Material
Contracts"
has the meaning ascribed to it in Section
4.1(b)(ii).
"Offeree" has
the meaning ascribed to it in Section 5.2.
"Operative
Agreements" means, collectively, the Assignment Instruments and
the Assumption Instruments.
"Order" means
any writ, judgment,
decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case
whether preliminary
or final).
"Outbound IP
Licenses" has the meaning ascribed to it in Section 2.10.
"Owned
Intellectual
Property" has the meaning assigned to it in Section
2.10.
"Panel" has the
meaning ascribed to it in Section 9.9.
27
<PAGE>
"Permitted
Lien" means (i) any
Lien for Taxes not yet due or delinquent or
being contested in good faith by
appropriate
proceedings
for which adequate
reserves have been established in accordance with GAAP Practices, (ii) any
statutory Lien arising in the ordinary course of business by operation of
Law
with respect to a Liability that is not yet due or
delinquent
and (iii) those
liens identified on Schedule 2.9.
"Person"
means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business
organization, trust, union,
association or Governmental or Regulatory
Authority.
"Plan"
means any bonus,
incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom
stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral,
including, but not
limited to, any "employee
benefit plan" within the meaning of Section
3(3) of ERISA or a
multiemployer
plan within the meaning of Section 3(37) of
ERISA.
"Purchase Price"
has the meaning ascribed to it in Section 1.3(a).
"Purchase
Price Adjustment Payment" has the meaning ascribed to it in
Section 1.7(f).
"Purchase
Price Allocation" has the meaning ascribed to it in Section
1.3(b).
"Purchaser"
has the meaning ascribed to it in the forepart of this
Agreement.
"Purchaser
Representatives" means Purchaser's officers, employees,
counsel,
advisors and representatives.
"Purchaser's
Indemnified Persons" has the meaning ascribed to it in Section
7.1.
"Purchaser
Statement of Adjustments" has the meaning ascribed to it in
Section 1.7(b).
"Representatives" means officers, directors, employees, agents, counsel,
accountants, financial advisors,
consultants and other representatives.
"Resolved
Objections" has the meaning ascribed to it in Section
1.7(d)(i).
"Retained
Liabilities" has the meaning ascribed to it in Section 1.2(b).
"Review Period"
has the meaning ascribed to it in Section 1.7(c).
"SEC" means the
Securities and Exchange Commission.
"Securities
Act" means the
Securities
Act of 1933,
as amended,
and the
rules and regulations promulgated
thereunder.
"Seller" has the
meaning ascribed to it
in the forepart of this Agreement,
except for the exception noted in, Article
2 for the purpose of Section 2.9.
"Seller
Indemnified Persons" has the meaning ascribed to it in Section
7.2.
28
<PAGE>
"Seller's
Public Filings" means all material forms,
reports, schedules,
statements and other documents (including
all exhibits and schedules thereto and
documents incorporated by reference
therein), in each case as amended, filed by
Seller with the SEC.
"Seller
Representative"
means Seller's
officers, directors, employees,
counsel, advisors and representatives.
"Seller
Statement of Adjustments" has the meaning ascribed to it in
Section
1.7(a).
"Shared Hosting
Services" means that
form of web hosting service where the
customer purchases the non-exclusive use of a web server and which the web
server is also available for the non-exclusive use of other customers and
includes (i) offering for sale to a
reseller the
capability of selling
Shared
Hosting Services even if such capability involves providing the reseller the
exclusive use of one or more web servers,
and (ii) versions of Shared Hosting
Services in which the end-user has root
control, or near-root
control, of less
than all of the server, sometimes described as a "virtual
private server"
and
(iii) the service sold by Seller under the name "Accelerator" prior to the
Closing Date.
"Subsidiaries"
has the meaning ascribed to it in Section 1.4(b).
"Target
Working Capital Amount" means negative One Million Two
Hundred
Sixty-Nine Thousand Dollars ( -
$1,269,144.85).
"Tax" and
"Taxes" mean any
Governmental or
Regulatory Authority
income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits,
environmental (including taxes under Code
Section 59A), customs, capital stock,
franchise, profits,
withholding,
social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer,
registration, value added, alternative or add-on
minimum, estimated or other tax, fee,
charge, lien impost or
assessment of any
kind whatsoever, including any interest,
penalty, or addition thereto.
"Tax Returns"
means any return,
declaration, report,
claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any
amendment thereof.
"Transition
Agreements" has the meaning ascribed to it in Section 1.4(a).
"Working
Capital" shall mean
the aggregate current
assets of the Business
less the aggregate current liabilities of
the Business, determined in accordance
with the methodology utilized in the preparation of pro forma
calculation and
Working Capital attached as Annex A
hereto.
"Working Capital
Adjustment" has the meaning ascribed to it in Section 1.6.
(b) Construction of Certain Terms and
Phrases. Unless the
context of this
Agreement otherwise requires, (i) words of
any gender include each other gender;
(ii) words using the singular or plural number also include the plural or
singular number, respectively; (iii) the terms "hereof,"
"herein," "hereby" and
derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement and (v) the phrases "ordinary
course of business" and "ordinary course
of business consistent with past practice"
refer to the business and practice of
Seller in connection with the Business. Whenever this Agreement refers to a
number of days, such number shall refer to
calendar days unless
Business Days
are specified.
29
<PAGE>
ARTICLE 9.
MISCELLANEOUS
9.1 Notices. All
notices, requests and
other communications hereunder must
be in writing and will be deemed to have been
duly given only if delivered
personally or by facsimile transmission (which is acknowledged by other
means)
or mailed (first class postage prepaid) to the parties at the following
addresses or facsimile numbers:
If to Purchaser, to:
Peer 1 Network Enterprises, Inc.
Suite 1600
555 West Hastings Street
Vancouver, British Columbia
Canada V6B 4NS
Attention: Geoffrey
Hampson, Chief Executive Officer
Telephone: (604)
683-7747
Telecopier: (604)
683-4634
with a copy to:
Gardner Carton & Douglas LLP
191 North Wacker Drive, Suite 3700
Chicago, Illinois 60606
Attention: Jesse H.
Ruiz
Telephone: (312)
569-1135
Telecopier: (312)
569-3135
If to Seller, to:
Interland, Inc.
303 Peachtree Center Avenue
Suite 500
Atlanta, GA 30303
Attention: Allen
Shulman, President
Telephone: (404)
260-2536
Telecopier: (404)
260-2760
with a copy to:
Arnall Golden Gregory, LLP
171 17th Street, N.W.
Suite
2100
Atlanta, GA 30363
Attention: Jonathan
Golden
Telephone: (404)
873-8700
Telecopier: (404)
873-8701
30
<PAGE>
All such
notices, requests and
other communications
will (i) if delivered
personally to the address as provided in this
Section, be deemed given upon
delivery, (ii) if delivered by facsimile
transmission to the facsimile number as
provided in this Section, be deemed given upon receipt as of such time as
receipt is acknowledged by other than
automatic means, and (iii) if delivered by
mail in the manner described above to the address as provided
in this Section,
be deemed given upon receipt (in each case
regardless
of whether such
notice,
request or other communication is received
by any other Person to whom a copy of
such notice, request or other communication is
to be delivered pursuant to this
Section). Any party from time to time may
change its address,
facsimile number
or other information for the purpose of notices to that
party by giving notice
specifying such change to the other party
hereto.
9.2 Entire
Agreement. This Agreement (including the Recitals, Schedules
and
Exhibits hereto) and the other agreements and instruments, the execution and
delivery of which are provided for herein,
constitutes the entire
agreement and
understanding of the parties hereto with respect to the subject
matter hereof,
and terminates and supersedes any and all prior agreements, arrangements and
understandings, both oral and written,
among the parties
hereto concerning the
subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
NEITHER PURCHASER
NOR SELLER MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR
ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL
ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE
EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES
OF ANY DOCUMENTATION
OR
OTHER INFORMATION WITH RESPECT TO ANY ONE
OR MORE OF THE FOREGOING.
9.3 Expenses. Subject to Section 9.4 and except as otherwise expressly
provided herein, Purchaser and Seller will pay its own
respective
costs and
expenses in connection with the
negotiation, preparation, execution and delivery
of this Agreement and the consummation of
the transactions
contemplated hereby,
including, but not limited to, attorneys' fees, accountants' fees and other
professional fees and expenses.
9.4 Attorneys' Fees. If a legal proceeding is brought to enforce or
interpret the provisions of this Agreement
or any other agreement
or instrument
provided for herein or as to the rights or obligations of any party to this
Agreement or such other agreement or instrument,
the prevailing
party in such
action shall be entitled to recover as an
element of such party's costs of suit,
and not as damages, a reasonable attorneys' fee to be fixed by the
court. The
prevailing party shall be the party who is
entitled to recover its costs of suit
as ordered by the court or by applicable law or court rules. A party not
entitled to recover its costs shall not
recover attorneys' fees.
9.5 Public
Announcements. Except
as otherwise required by Law or the rules
and regulations of the Nasdaq National
Market ("NASDAQ"), neither Seller nor
Purchaser will issue or make any reports,
statements or releases
to the public
or generally to the employees, customers, suppliers or other Persons to whom
Seller sells goods or provides services in connection with the
Business or with
whom Seller otherwise has significant
business relationships
in connection with
the Business with respect to this Agreement or the transactions contemplated
hereby without the consent of the other,
which consent shall not be unreasonably
withheld. If either party is unable to
obtain the approval of its public report,
statement or release from the other party
and such report,
statement or release
is required by Law or NASDAQ, then such party may make or issue the
legally
required report, statement or release and promptly
furnish the other party with
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a copy thereof. Seller and Purchaser will also obtain the other party's
prior
approval of any press release to be issued immediately following the Closing
announcing the consummation of the
transactions
contemplated by this Agreement,
except as otherwise required by law, NASDAQ,
the TSX Venture
Exchange, or the
British Columbia Securities Commission.
9.6 Confidentiality. Each party hereto will hold, and will use its best
efforts to cause its Affiliates,
and their respective
Representatives to
hold,
in strict confidence from any Person (other than any such Affiliate or
Representative), all documents and
information concerning the other party or any
of its Affiliates and their respective customers furnished to it by the other
party or such other party's Representatives, or obtained in the course of
its
performance of this Agreement or the
Transition Agreements
(the "Confidential
Information"), except to the extent that such
documents or
information can be
shown to have been (a) previously known by
the party receiving such documents or
information, (b) in the public domain
(either prior to or
after the furnishing
of such documents or information
hereunder)
through no fault of
such receiving
party or (c) later acquired by the receiving
party from another
source if the
receiving party is not aware that such
source is under an obligation to another
party hereto to keep such documents and
information confidential; provided that
following the Closing the foregoing
restrictions
will not apply to
Purchaser's
use of documents and information concerning the Business, the Assets or the
Assumed Liabilities furnished by Seller hereunder but
will continue to apply to
documents and information, if any, solely concerning the Seller, but not
relating to the Business, Assets or Assumed Liabilities. Notwithstanding the
foregoing sentence, the restrictions contained in this Section 9.6
shall not
bind a party if such party is (i) compelled to disclose by judicial or
administrative process (including without limitation in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law, or (ii) if such
Confidential Information is disclosed in an
Action or Proceeding brought by a party hereto in pursuit of its rights or
in
the exercise of its remedies hereunder,
9.7 Waiver and
Amendment. No waiver,
amendment,
modification or change of
any provision of this Agreement shall be effective unless and until made in
writing and signed by Purchaser
(by a duly
authorized
officer other than any
former employee or direct or indirect
owner of Seller) and
Seller. No waiver,
forbearance or failure by any party of its
right to enforce any
provision of
this Agreement shall constitute a waiver or estoppel of
such party's right to
enforce any other provision of this Agreement or a continuing waiver by such
party of compliance with any provision.
9.8 Successors
and Assigns; No Third
Party Beneficiaries.
This Agreement
shall not be assigned or assignable by
Seller without the prior written consent
of Purchaser or by Purchaser without the prior written consent of Seller;
provided, however, that Purchaser may assign
without the consent of Seller, but
with not less than ten Business Days advance notice to Seller, its rights
hereunder to any Affiliate of which Purchaser owns at least 80% of the
issued
and outstanding equity thereof; in which event all references herein to
Purchaser shall be deemed references to such assignee, except that all
representations and warranties made herein with respect to
Purchaser as of the
date of this Agreement shall be deemed
representations and warranties also to be
made with respect to such assignee to the extent
applicable
as of the date of
such designation. No such assignment shall relieve
Purchaser of any obligation
hereunder. Any purported assignment in
violation of this Agreement will be void
ab initio. Subject to the preceding
sentence, each term and provision of
this
Agreement shall be binding upon and
enforceable against and inure to the benefit
of any successors or assigns of Purchaser and any successors or assigns of
Seller. Nothing in this Agreement,
expressed or implied,
is intended to confer
on any Person other than the parties and
their respective successors and assigns
any rights or remedies under or by reason
of this Agreement. Notwithstanding the
foregoing, Purchaser may assign its rights and
remedies with respect to the
representations, warranties, covenants, and
indemnities of Seller as collateral
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security for any borrowings, but in any action brought by an assignee of such
rights and remedies, Seller may assert any defense,
counterclaim
or setoff it
could have asserted had such action been brought by Purchaser and no such
assignment shall, without the further
consent of Seller (which consent shall not
be unreasonably withheld), constitute a permitted
delegation of
Purchaser's
duties.
9.9 Dispute
Resolution.
Other than as provided
in Section 1.7(d) and only
as to disputes seeking only monetary damages (and not equitable
relief) in an
amount not greater than $500,000, in the event of any dispute or
disagreement
between Seller and Purchaser as to the
interpretation
of any provision of
this
Agreement and the Operative Agreements (or the performance of obligations
thereunder), the matter, upon written
request of either party, shall be referred
to representatives of the parties for decision. The representatives shall
promptly meet in a good faith effort to resolve the dispute. If the
representatives do not agree upon a decision
within thirty (30) calendar days
after reference of the matter to them, any
controversy, dispute or claim arising
out of or relating in any way to this
Agreement or the transactions arising
hereunder shall be settled exclusively by arbitration in the City of
Atlanta,
Georgia. Such arbitration shall be administered by the American Arbitration
Association ("AAA") in accordance with its
then prevailing rules, by a panel of
three (3) independent and impartial
arbitrators selected in accordance with such
rules (the "Panel"). Notwithstanding anything to the contrary provided in
Section 9.13 hereof, the arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. ss. 1 et seq. The
fees and expenses of the AAA and the
Panel shall be shared equally by Purchaser and Seller
and advanced by them from
time to time as required; provided that at the conclusion of the arbitration,
the Panel shall award costs and expenses
(including the costs of the arbitration
previously advanced and the fees and
expenses of
attorneys,
accountants
and
other experts) to the prevailing
party. No pre-arbitration discovery shall be
permitted, except that the Panel shall have
the power in its sole discretion, on
application by any party, to order
pre-arbitration
examination solely of
those
witnesses and documents that any other party intends to introduce in its
case-in-chief at the arbitration hearing. Purchaser and Seller shall
instruct
the Panel to render its award within thirty
(30) days following
the conclusion
of the arbitration hearing. The Panel shall not be
empowered to award to
any
party equitable relief of any kind or any damages
of the type not permitted to
be recovered under Section 7.7 of this
Agreement in connection with any dispute
between or among the parties arising out of or relating in any way to this
Agreement or the transactions arising hereunder, and each party hereby
irrevocably waives any right to recover
such damages.
Notwithstanding
anything
to the contrary provided in this Section 9.9 and
without prejudice to the above
procedures, either party may apply to any
court of competent
jurisdiction for
temporary injunctive or other provisional judicial relief if such action is
necessary to avoid irreparable damage or to preserve the status
quo until such
time as the Panel is selected and
available to hear such party's request for
temporary relief. The award rendered by the
Panel shall be final and not subject
to judicial review and judgment thereon may
be entered in any court of competent
jurisdiction.
9.10
Incorporation of Schedules. All Schedules hereto are by this
reference
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
9.11
Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement,
and shall not be
deemed to limit or affect
any of the provisions hereof.
9.12
Interpretation.
The provisions of this Agreement are
intended to be
interpreted and construed in a manner so as to make such provisions valid,
binding and enforceable. In the event that any provision of
this Agreement is
determined to be partially or wholly
invalid, illegal or unenforceable, then
such provision shall be deemed to be modified or restricted to the extent
necessary to make such provision
valid, binding and enforceable, or, if such
provision cannot be modified or restricted in a manner so as to make such
provision valid, binding and enforceable,
then such provision shall be deemed to
be excised from this Agreement and the validity, binding effect and
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enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any manner. Nothing in this Agreement shall be
interpreted or construed as creating, expressly or by implication, a
partnership, joint venture, agency relationship or employment relationship
between the parties hereto or any of their
respective
officers, directors,
agents, employees or representatives.
9.13 Governing
Law. This Agreement shall be governed by and construed
in
accordance with the Laws of the State of Illinois applicable to a contract
executed and performed in such State,
without giving effect
to the conflicts of
laws principles thereof.
9.14
Counterparts.
This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same
instrument.
9.15
Jurisdiction; Agents
for Service of Process. Subject to Section 9.9,
any judicial proceeding brought against any of
the parties to this Agreement on
any dispute arising out of this Agreement or
any matter related hereto shall be
brought in the District Court for the Northern
District of Illinois,
and, by
execution and delivery of this Agreement, each of the parties accepts the
exclusive jurisdiction of such court, and
irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. The foregoing
consents to jurisdiction shall not constitute general consents to
jurisdiction
in the State of Illinois for any purpose
except as provided
above and shall not
be deemed to confer rights on any third
party. The prevailing
party or parties
in any such litigation shall be entitled to receive
from the losing
party or
parties all costs and expenses,
including reasonable counsel fees, incurred
by
the prevailing party or parties.
Each party agrees that
service of any process,
summons, notice or document by U.S.
registered mail to such party's address set
forth in Section 9.1 shall be effective
service of process for any action, suit
or proceeding in Illinois with respect to
any matters for which it has submitted
to jurisdiction pursuant to this Section
9.15.
9.16 Disclosure.
Any matter set forth in any section of the Schedules shall
be deemed set forth in all other
sections of the
Schedules to the extent that
such matter could reasonably be responsive to such other sections of the
Schedules whether or not a specific
cross-reference
appears. The inclusion of
any information (including dollar amounts)
in any section of the Schedules shall
not be deemed to be an admission or acknowledgment by the Seller that such
information is required to be listed in such section or is material to or
outside the ordinary course of the business of the Seller, nor shall such
information be deemed to establish a standard of
materiality
(and the actual
standard of materiality may be higher or lower than the
matters disclosed
by
such information). In addition, matters reflected in the Schedules are not
necessarily limited to matters required by
this Agreement to be reflected in the
Schedules. Such additional matters are set
forth for informational purposes only
and do not necessarily include other matters of a similar nature. The
information contained in this Agreement,
the Schedules and Exhibits is disclosed
solely for purposes of this Agreement,
and no information
contained herein or
therein shall be deemed to be an admission by any party hereto to any Third
Party of any matter whatsoever (including any violation of applicable
Law or
breach of contract).
9.17
Individuals.
Each party agrees that
each individual acting solely in
his or her capacity as an officer or employee of his
