EXHIBIT 2.1 ASSET PURCHASE AGREEMENT

 

 

                                                                     EXHIBIT 2.1

 

 

                            ASSET PURCHASE AGREEMENT

 

                         dated as of November 29, 2005

 

                                 by and between

 

                                WEB INTERNET, LLC,

 

                    a California limited liability company,

 

 

                                William Pemble,

 

                                      and

 

                                INTERLAND, INC.,

 

                             a Minnesota corporation

 

 

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     This ASSET   PURCHASE   AGREEMENT   dated as of November 29, 2005, is made and

entered   into by and among WEB   INTERNET,   LLC, a California   limited   liability

company ("Web Internet"),   William Pemble   ("Pemble"),   (Web Internet and Pemble

hereinafter   individually a "Seller" and collectively   "Sellers") and INTERLAND,

INC., a Minnesota   corporation   ("Purchaser").   Capitalized   terms not otherwise

defined herein have the meanings set forth in Article 8.

 

     WHEREAS,   Sellers own and operate a web hosting,   domain   registration   and

online service business ("Web Business"); and

 

     WHEREAS,   Sellers   desire to sell,   transfer and assign to   Purchaser,   and

Purchaser   desires to purchase and acquire from Sellers,   all of the assets that

are   necessary   or   incidental   for the daily   operation   of the Web Business by

Purchaser following Closing, and in connection therewith, Sellers have agreed to

assign and Purchaser has agreed to assume   substantially all liabilities related

to the Web Business (except those liabilities hereinafter   specifically excluded

from such sale), 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 by Web Internet to Purchaser. On the terms and

subject to the   conditions   set forth in this   Agreement,   Web   Internet   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 Web   Internet's   right,   title and

interest   in, to and under the assets of Web   Internet   used in the Web Business

(other than the Excluded Assets),   including,   without limitation, the following

(collectively the "Web Internet Assets"):

 

          (i) All customer accounts,   agreements and contracts with customers of

the Web Business (the "Customer   Accounts") listed in Schedule 1.1(a),   attached

hereto;

 

          (ii) All third party   contracts and   agreements   pertaining to the Web

Business   listed   in   Schedule    1.1(a),    attached   hereto   (the   "Third   Party

Agreements");

 

          (iii)   All   domain   names   owned by Web   Internet,   including   without

limitation   those   domain   names   listed in Section   (a)(iii) of   Schedule   1.1,

attached hereto (the "Domain Names");

 

          (iv) All prepaid and similar items connected with the Web Business;

 

          (v) All spare parts inventories of the Web Business, including without

limitation those spare parts listed in Section (a)(v) of Schedule 1.1,   attached

hereto;

 

          (vi)   All   personal   property   owned by Web   Internet   and used in the

operation of the Web Business wherever located, including without limitation the

machinery and equipment,   computer equipment and systems,   software,   materials,

furniture   and office   equipment   listed in Section   (a)(vi)   of   Schedule   1.1,

attached hereto ("Web Internet Personal Property");

 

 

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          (vii) All supplier lists applicable to the Web Business;

 

          (viii) All customer lists applicable to the Web Business;

 

          (ix)   All   other   orders,    contracts,     agreements   and    commitments

pertaining   to the Web   Business   that are listed in Schedule   1.1(a),   attached

hereto (the "Contracts")

 

          (x) The Intellectual Property owned by Web Internet or licensed by Web

Internet from third   parties used   exclusively   in the Web   Business,   including

without   limitation   the Web Internet   Intellectual   Property   listed in Section

(a)(x)   of   Schedule   1.1,   attached   hereto   (the   "Web   Internet   Intellectual

Property");   provided that with respect to licenses for third party intellectual

property,   Web Internet is obligated to obtain any required third party consents

for assignment to Purchaser;

 

          (xi)   All   permits,    franchises,    licenses,    bonds,   approvals   and

qualifications   of the Web   Business   that are capable of being   transferred   to

Purchaser   ("Web Internet   Permits")   issued by any   government or   governmental

unit, agency,   board, body or instrumentality,   whether federal,   state or local

and all applications therefore pertaining to the Web Business, including without

limitation those listed in Section (a)(xi) of Schedule 1.1, attached hereto;

 

          (xii) All business   books and records of the Web   Business,   including

copies of all financial,   operating, inventory, payroll and customer records and

all sales and promotional literature, correspondence and files;

 

          (xiii) All interests in Perfect Privacy LLC;

 

          (xiv) All of   Sellers'   rights,   if any,   in the Web   Service   Company

Assets;

 

          (xv)   All   cash and cash   equivalents   owned   by Web   Internet   at the

Closing   (collectively,   the "Web   Internet   Cash")   which shall be delivered by

means of a wire transfer of immediately available funds at the Closing; and

 

          (xvi) All other assets, tangible or intangible,   owned by Web Internet

that are primarily   used in the Web Business   (other than the Excluded   Assets),

and   including   without   limitation   the assets   listed in Section   (a)(xvi)   of

Schedule 1.1, attached hereto.

 

     (b) Excluded Assets.   Notwithstanding anything to the contrary contained in

this   Agreement,   the   following   assets of Sellers are not part of the sale and

purchase   contemplated   hereunder   and are   excluded   from the   Assets and shall

remain the property of the Sellers: (i) the minute books, tax records, personnel

records and other organization   documents of Sellers, (ii) Sellers' rights under

this   Agreement,   and (iii) any assets   listed in Section   (b) of   Schedule   1.1

(collectively the "Excluded Assets").

 

     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

(i) the   obligations   of Web Internet under the Customer   Accounts,   Third Party

Agreements and Contracts,   excluding any   obligations of Web Internet under such

Customer Accounts, Third Party Agreements and Contracts which obligations result

from Web   Internet's   violation or breach of any such Customer   Accounts,   Third

Party Agreements and Contracts (collectively, the "Scheduled Liabilities").

 

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     (b) Retained Liabilities. Except as set forth in Section 1.2(a), above, and

Sections 1.3(a)(ii) and 4.8, below, 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 Sellers   (including,   without limitation,

those   related   to the Web   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 this Agreement (the "Retained

Liabilities").   Sellers hereby   acknowledge that they are retaining the Retained

Liabilities,   and each   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 any Seller

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 each 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 each Seller or its Affiliates.

 

          (iii.)   Indebtedness.   Except as otherwise provided in this Agreement,

all   liabilities   and   obligations   to repay   indebtedness   for   borrowed   money

incurred by a Seller, or any Affiliate of a Seller including applicable lines of

credit and guarantees of third party obligations;

 

          (iv.)   Professional   Fees. All liabilities and obligations of a Seller

or any   Affiliate   of a Seller   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 a Seller or any

Affiliate of a Seller   arising out of any action,   claim or lawsuit based on any

state of facts or events occurring on or prior to the Closing Date.

 

     1.3 Purchase Price; Allocation.

 

     (a)   Purchase   Price.   The   purchase   price for the   Assets   shall be Three

Million   Three   Hundred   Sixty-Seven   Thousand One Hundred   Ninety-Seven   United

States Dollars (US   $3,367,197.00)   (the "Purchase   Price").   The Purchase Price

shall be payable as follows:

 

          (i) Cash   Payment.   At the   Closing,   Purchaser   shall   deliver to Web

Internet   an amount   equal to Three   Hundred   Sixty-Seven   Thousand   One Hundred

Ninety-Seven United States Dollars (US $367,197.00) (the "Cash Payment") by wire

transfer of   immediately   available   United States funds to such bank account as

Web Internet designates to Purchaser in writing prior to the closing.

 

          (ii) Assumption of   Indebtedness.   At the Closing,   in addition to the

Assumed   Liabilities   to be assumed by   Purchaser   pursuant   to Section   1.2(a),

Purchaser   shall:   (i) assume the obligations of Web Internet under that certain

line of Credit Note and Loan Agreement   dated January 1, 2003 as amended by that

certain Amended Loan Agreement   dated August 31, 2004 between Web Service,   Inc.

("Web   Service")   and Web Internet   (the "Web Service   Debt   Agreement")   in the

principal   amount of $2,250,000   payable to Web Service (the "Web Service Debt")

on terms   acceptable   to   Purchaser,   Sellers and Web   Service;   and (ii) either

assume   or repay in full the   obligation   of Web   Internet   under   that   certain

Convertible   Promissory Note dated December 30, 2004 in the principal   amount of

 

 

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$750,000   payable   to   SWSoft   Holdings,    Ltd.,   a   Bermuda    corporation   (the

"Convertible   Note")   on terms   acceptable   to   Purchaser,   Sellers   and   SWSoft

Holdings, Ltd.

 

     (b)   Allocation.   The parties   agree that the Purchase   Price 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 Closing,

the Purchaser shall cause to be prepared and delivered to the Sellers a schedule

allocating the   Consideration   to the Assets (the "Purchase Price   Allocation").

The Sellers shall have the right to review the Purchase Price Allocation and any

work sheets and other papers   prepared in   connection   with the   Purchase   Price

Allocation.   The Sellers will be deemed to have   accepted   such   Purchase   Price

Allocation   unless they provide   written notice of disagreement to the Purchaser

within 15 days after the receipt of the Purchaser's   Purchase Price   Allocation.

If the Sellers timely   provide such notice,   the Purchaser and the Sellers shall

use   commercially   reasonable   efforts   to   resolve   any   dispute   between   them

concerning the Purchase Price   Allocation.   If Sellers and Purchaser are able to

resolve such dispute (or if Sellers have   accepted or have been deemed to accept

the Purchase   Price   Allocation),   the   Purchaser   and the Sellers 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 Sellers (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 parties hereto concerning such dispute. 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.

 

     (c) Method of   Conveyance.   At the   Closing,   (i)   Sellers   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,    registration    and   transfer   (the

"Assignment   Instruments"),   in form   and   substance   reasonably   acceptable   to

Sellers'   and   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;   and (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 Purchaser's and 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").

 

     (d) Closing. The closing of the transactions contemplated by this Agreement

(the "Closing") shall take place on December 31, 2005 (the "Closing   Date"),   at

the offices of Purchaser,   Atlanta,   Georgia at 10:00 a.m. or at such other time

as the parties may mutually agree.   The Closing shall be deemed   effective as of

11:59 p.m., Atlanta time, on the Closing Date.

 

                                    ARTICLE 2.

                   REPRESENTATIONS AND WARRANTIES OF SELLERS

 

     Each   Seller,   jointly and   severally,   hereby   represents   and warrants to

Purchaser as follows:

 

     2.1 Organization of Web Internet.   Web Internet (i) is a limited   liability

company duly organized,   validly existing and in good standing under the Laws of

the State of California and (ii) has full power and authority to conduct the Web

Business   as and to the   extent   now   conducted   and to own,   use and   lease the

Assets.

 

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     2.2   Authority.   Each   Seller has full power and   authority   to execute and

deliver this Agreement and the other Transaction Documents,   to perform his, her

and its obligations   hereunder and to consummate the   transactions   contemplated

thereby,   including   without   limitation to sell and transfer   (pursuant to this

Agreement)   the   Assets.   The   execution   and   delivery   by each   Seller of this

Agreement   and the other   Transaction   Documents,   and the   performance   by each

Seller of his, her and its   obligations   thereunder,   have been duly and validly

authorized. The execution and delivery by Web Internet of this Agreement and the

Transaction   Documents to which it is a party and the   performance   by it of its

obligations   thereunder,   have been duly and validly   authorized by the board of

directors of each of them, and no other   corporate   action on the part of any of

them or any of its equity   holders   being   necessary.   This   Agreement   and each

Transaction   Documents   constitutes legal, valid and binding obligations of each

Seller enforceable against each of them, in accordance with its 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.

 

     (a) The   execution   and delivery by each Seller of this   Agreement   and the

Transaction   Documents and the   consummation   of the   transactions   contemplated

thereby will not:

 

          (i)    conflict with or result in a violation   or breach of any term or

provision of any Law or Order applicable to the Sellers or any of the Assets; or

 

          (ii)   conflict   with   or   result   in a   violation   or   breach   of,   or

constitute (with or without notice or lapse of time or both) a default under, or

require   such   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 result in the creation or   imposition   of any Lien upon such Seller or any of

his, her or its assets under,   any contract or license to which such Seller is a

party or by which   any of his,   her or its   assets   are   bound   except   for such

breaches and defaults which would not, individually or in the aggregate,   have a

Material Adverse Effect on Web Internet.

 

     (b) The   execution   and delivery by Web Internet of this   Agreement and the

Transaction   Documents and the   consummation   of the   transactions   contemplated

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   of the

Operating   Agreement (or other comparable   corporate   charter   documents) of Web

Internet.

 

     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 any Seller (or its   Affiliates)   in

connection   with the execution,   delivery and   consummation of this Agreement or

the Transaction   Documents,   or the actions of such Seller contemplated thereby,

or to   permit   Purchaser   to   continue   to   conduct   the Web   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

Customer Accounts,   Third Party Agreements and Contracts listed on Schedule 2.11

attached   hereto and (c) consents not obtained which would not,   individually or

in the aggregate, have a Material Adverse Effect. 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 Web

Internet in connection   with the   execution,   delivery and   consummation   of the

Transition Agreement or the actions of Web Internet contemplated thereby.

 

     2.5 Taxes. Except as disclosed on Schedule 2.5, there are no pending or, to

the knowledge of Sellers,   threatened,   actions or   proceedings,   assessments or

collections   of Taxes of any kind with respect to the Web Business or the Assets

 

 

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that   could   subject   Purchaser   to any   liability   for Taxes for any period (or

portion thereof) ending prior to the Closing Date or could materially impair any

of the Assets.

 

     (a) There are no Liens for   Taxes   upon any of the   Assets or any   property

with respect to the Web Business, except for Permitted Liens.

 

     (b) None of the Assets is property   (i) which any 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 any

Seller for which Purchaser may become liable.

 

     (d) Schedule 2.5 discloses all   jurisdictions   in which the Web Business is

doing business and where it is required to file Tax Returns.

 

     (e) No Seller is 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 any 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 any Seller,   threatened,   nor to the   knowledge of any

Seller, any investigation pending or threatened affecting the Web Business,   any

Seller or any of the Assets   before any   Governmental   or   Regulatory   Authority

which would have a Material   Adverse Effect on the Web Business or the Assets or

that would reasonably be expected to materially   adversely affect the ability of

Sellers 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 Web Business or the Assets.   No Seller is currently   charged with

or, to their   knowledge,   currently   under   investigation   with   respect to, any

violation of any provision of any legal Rule in respect of the Web Business.   No

director,   officer or employee of Web Internet is currently   charged with or, to

their knowledge, currently under investigation with respect to, any violation of

any provision of any Legal Rule in respect of the Web Business.

 

     2.7 Legal   Compliance.   Web Internet 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 Web   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

Sellers   in the   conduct   of the Web   Business.   Web   Internet   owns,   holds   or

possesses   or lawfully   use in the   operation   of the Web   Business all permits,

certificates,   licenses,   approvals and other authorizations   ("Authorizations")

required in connection   with the operation of the Web 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 Web Business or the Assets.   All such material   Authorizations are listed

and   described on Schedule   2.7.   Sellers   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 Web   Internet   of any of the   employees   of the   Web

Business   which   occur   on or   before   the   Closing.   Sellers   further   agree to

 

 

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indemnify and hold Purchaser   harmless for any costs,   legal fees,   liability or

damages or claims asserted   against   Sellers arising out of Sellers'   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 Sellers   will retain any   liability   for, and on account of, any

Benefit Plan.   Except as set forth on Schedule 2.8, neither Web Internet nor any

Affiliate of Web   Internet   has,   with respect to any employee of Web   Internet,

maintained or   contributed   to, or been   obligated or required to contribute to,

any   Plan.   Web   Internet   has   complied,   in all   material   respects,   with its

obligations   (including   obligations   to make   contributions)   in respect of the

Benefit Plans, there is no outstanding material liability of Web Internet or any

Affiliate of Web   Internet 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 Web

Internet   nor any   Affiliate   of Web   Internet   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.   Sellers own all right,   title and interest

in, and have good title to, or in the case of leased or licensed Assets, a valid

leasehold or license or similar   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. The sale of the Assets by Sellers to   Purchaser   pursuant to this

Agreement and the Transaction   Documents will effectively convey all of Sellers'

rights in the Assets to Purchaser.

 

     2.10 Intellectual   Property Rights. All Intellectual   Property necessary to

the conduct of the Web   Business as conducted   by Sellers   immediately   prior to

Closing is included in the Assets. All of the Web Internet Intellectual Property

included in the Assets is either the sole and exclusive property of Sellers (the

"Owned Intellectual Property") or is the subject of a license from third parties

in   favor   of   Web   Internet   under   a   contract   (the   "Licensed    Intellectual

Property").   Schedule 2.10 sets forth all patents,   trademarks,   service   marks,

brand names,   domain names and   copyrights   included   within the   definition   of

Intellectual   Property   and   related to or used in the Web   Business.   Except as

disclosed on Schedule 2.10, Sellers have not granted any third party any license

to use the Owned Intellectual   Property.   With respect to the Owned Intellectual

Property,   except as set forth on Schedule   2.10, (i) Sellers have 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 Sellers   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) Sellers

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) Sellers have taken security measures that

Sellers deem reasonable to protect the secrecy, confidentiality and value of any

of its trade   secrets   included   in the   Owned   Intellectual   Property,   (vi) to

Sellers'   knowledge,   no such Owned Intellectual   Property is being infringed by

any other   Person,   (vii) to Sellers'   knowledge,   no third   party has   asserted

ownership rights in such Owned   Intellectual   Property,   and (viii) no action is

pending or, to the knowledge of Sellers, threatened, that seeks to limit, cancel

or question the validity of Sellers' right to own or use such Owned Intellectual

Property.   With   respect to the   Licensed   Intellectual   Property,   (a) Sellers'

conduct   of   the   Web   Business   prior   to the   Effective   Date   is in   material

compliance   with respect to any   applicable   contract   governing the use of such

Licensed   Intellectual   Property,   (b) Sellers have   received no notice from any

party to an applicable contract that it is in breach of any material obligations

in such contract, (c) to Seller's knowledge, there are no registrations with and

 

 

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applications to Governmental   or Regulatory   Authorities   required in respect of

such Licensed Intellectual Property, (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,

and (e) to the knowledge of Sellers,   no party to any license agreement relating

to Licensed   Intellectual Property is, or is alleged to be, in breach or default

thereunder.   To Sellers'   knowledge,   the use of the Assets and the operation of

the Web Business do not infringe   upon any   Intellectual   Property   right of any

third party, and to Sellers'   knowledge,   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.   Sellers   have not   received   notice   that any Seller is

infringing any Intellectual   Property of any other Person in connection with the

conduct   of the Web   Business,   no claim is   pending   or, has been made upon any

Seller to such effect that has not been resolved.

 

     2.11 Contracts and   Agreements.   As of the date hereof,   Schedule 2.11 sets

forth   all   written   contracts,   agreements,   leases,   licenses   or   instruments

relating   to the   Web   Business   and   that   are   material   to the   Web   Business

including, without limitation, the Customer Accounts, Third Party Agreements and

Contracts   listed on Schedule   1.1(a).   Each   contract and   agreement   listed on

Schedule 2.11 with respect to Seller (i) is valid,   binding,   enforceable and in

full   force and   effect in   accordance   with its terms   (subject   to   applicable

bankruptcy,   insolvency, fraudulent conveyance,   reorganization,   moratorium and

similar laws affecting creditors' rights and remedies generally, and subject, as

to enforceability,   to general principles of equity),   (ii) subject to obtaining

any necessary consents in respect thereto in accordance with Section 4.7 hereof,

the   consummation of the   transactions   contemplated   herein will not affect the

validity, binding nature or enforceability thereof, (iii) to Sellers' knowledge,

Sellers that are parties to the contracts and agreements listed on Schedule 2.11

are not,   and the other   party   thereto is not,   in default   thereof and (iv) to

Sellers'   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 Financial Statements. Copies of certain unaudited financial statements

of Web Internet are included on Schedule 2.12 (the "Financial Statements").   The

Financial   Statements   present   fairly the   financial   condition   and results of

operations   of Web   Internet as of such dates,   and are correct and complete and

consistent with the books and records of Web Internet in all material respects.

 

     2.13 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.

 

     2.14   Debt   Instruments.   Except   for (i) the Web   Service   Debt,   (ii) the

Convertible   Promissory   Note,   (iii)   Liabilities   disclosed   on the   Financial

Statements,   (iv) Liabilities   incurred in the ordinary course of business since

the date of the balance sheet   included in the Financial   Statements and (v) the

Liabilities   listed   on   Schedule   2.14(a),   Web   Internet   does   not   have   any

debentures,   notes,   mortgages,   indentures,   guarantees,   capitalized leases or

other instruments related to the Web 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 Web   Internet   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.   No Seller is a   guarantor   or   otherwise   indirectly   or

collaterally   liable for any Liability   related to the Web Business of any other

Person. None of the Liabilities of the Web Business or of any Seller incurred in

connection with the conduct of the Web Business is guaranteed by or subject to a

similar contingent obligation of any other Person.   Schedule 2.14(b) sets forth,

as of the   Agreement   Date,   the   outstanding   principal   amount   of each of the

Convertible   Promissory Note and the Web Service Debt, together with the accrued

and unpaid interest applicable to each of them.

 

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     2.15 Sufficiency of Assets.   The Assets and the Excluded Assets   constitute

all of the assets   necessary to operate the Web Business in the manner presently

operated by the Sellers.

 

     2.16 Brokers. No Seller has Liability,   directly or indirectly,   to pay any

fees,   commissions   or other   amounts   to any   Person   in   connection   with this

Agreement or the transactions contemplated hereby or in connection with any sale

of the Assets.   Sellers agree to indemnify   and hold harmless   Purchaser for any

such Liability.

 

     2.17 Disclosure.   To Sellers' knowledge, no representation or warranty made

by any 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.

 

     2.18 Solvency.   The consummation of the   transactions   contemplated by this

Agreement   will not cause   either   Seller to cease to (i) have   assets   that are

greater   than the sum of all its debts or (ii) be capable of paying its debts as

they become due.   Neither   Seller is entering into this   Agreement or any of the

other agreements referenced in this Agreement with the intent to defraud,   delay

or hinder their   respective   creditors and the   consummation of the transactions

contemplated   by this   Agreement,   and the other   agreements   referenced in this

Agreement,   will not have any such effect. The transactions contemplated in this

Agreement or any   agreements   referenced in this Agreement will not constitute a

fraudulent   conveyance,   or otherwise   give rise to any right of any creditor of

either Seller to any of the Assets after the Closing.

 

 

                                    ARTICLE 3.

 

                  REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

     Purchaser hereby represents and warrants to Sellers as follows:

 

     3.1   Organization.   Purchaser   is a   corporation   duly   organized,   validly

existing and in good standing under the laws of the State of Minnesota,   and has

full corporate power and authority to 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, and the other agreements

contemplated   hereby to be executed by the Purchaser   pursuant   hereto have been

duly   executed and   delivered by   Purchaser,   and   constitute   valid and binding

obligations of Purchaser   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   has full power and

authority   to   execute   and   deliver   and   perform   its   obligations   under this

Agreement,   and the   other   agreements   contemplated   herein to be   executed   by

Purchaser.   The execution and delivery by Purchaser of this   Agreement does not,

and the execution and delivery by Purchaser of this   Agreement,   the performance

by Purchaser of its obligations under this Agreement 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.

 

     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

 

 

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consummation of this Agreement and the other agreements   contemplated   hereby to

be executed by Purchaser or the actions of the Purchaser contemplated hereby.

 

     3.4 Brokers. Purchaser has no Liability, directly or indirectly, to pay any

fees,   commissions   or other   amounts   to any   Person   in   connection   with this

Agreement or the   transactions   contemplated   hereby or in   connection   with any

purchase of the Assets.   Purchaser agrees to indemnify and hold harmless Sellers

from any such liability.

 

     3.5   Disclosure.   No   representation   or warranty made by Purchaser 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.

 

 

                                   ARTICLE 4.

 

                      COVENANTS OF SELLERS AND PURCHASERS

 

     4.1 Operation of Web Business.   Prior to the Closing, Sellers shall operate

the Web Business in substantially the same manner as they were operating the Web

Business   on the date   hereof,   consistent   with past custom and   practice,   and

Sellers   shall use their   commercially   reasonable   efforts to preserve   the Web

Business and its goodwill and all Customer Accounts,   Third Party Agreements and

Contracts   listed or described in any Schedule to this   Agreement.   Prior to the

Closing,   Sellers: (i) shall promptly notify Purchaser of any material change in

the condition   (financ