<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): October 1, 1999
------------
HOMECOM COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-29204 58-2153309
----------------------------------------------------------------
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization file Number) (Identification No.)
3535 Piedmont Road, Atlanta, Georgia 30305
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (404) 237-4646
-----------------
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 1, 1999, the Company sold substantially all of the assets
of its HomeCom Internet Security Services ("HISS") division to Infrastructure
Defense, Inc. ("iDefense") for $1.35 million in common stock of the non-public
acquiror and $200,000 cash. The purchase price was established through arms'
length negotiations between the Company and iDefense. The foregoing description
of the Sale is qualified in its entirety by reference to the full text of the
Asset Purchase Agreement, dated as of October 1, 1999 (the "Asset Purchase
Agreement"), by and between the Company and to Infrastructure Defense, Inc., a
Delaware corporation. The Asset Purchase Agreement is incorporated herein by
reference as Exhibit 10.77 to this Report.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
The following unaudited pro forma balance sheet as of June 30, 1998
gives effect to the disposition of assets described above as if the transaction
had occurred on that date. The following unaudited statements of operations for
the six months ended June 30, 1999 and 1998, and the year ended December 31,
1998 give effect to the disposition of assets as though it had occurred on
January 1, 1998.
The unaudited pro forma adjustments are based upon available
information and certain assumptions that management believes are reasonable in
the circumstances. The unaudited pro forma financial information purports
neither to represent what the Company's financial position or results of
operations would have actually been if the disposition had occurred on January
1, 1999 or 1998 nor to project the Company's financial position or results of
operations for any future date or period. The unaudited pro forma financial
information should be read in conjunction with the Company's financial
statements and notes thereto included in the Company's Annual Report on Form
10-K/A.
(c) Exhibit list
Exhibit Description
10.77 Asset Purchase Agreement by and between the HomeCom
Communications, Inc. and Infrastructure Defense, Inc.
dated as of October 1, 1999.
10.78 Bill of Sale and Assignment.
10.79 Non-Solicitation and Non-Compete Agreement by and
between HomeCom Communications Inc. and Infrastructure
Defense, Inc. dated as of October 1, 1999.
10.80 Registration Rights Agreement by and between
Infrastructure Defense, Inc. and HomeCom Communications,
Inc. dated as of October 1, 1999.
10.81 Opinion of Purchaser's Counsel.
10.82 Opinion of Seller's Counsel.
10.83 Referral and Service Agreement by and between
Infrastructure Defense, Inc. and HomeCom Communications,
Inc. dated as of October 1, 1999.
10.84 Value-Added Distributor Agreement between Infrastructure
Defense, Inc. and HomeCom Communications, Inc. dated as
of October 1, 1999.
<PAGE>
HomeCom Communications, Inc.
Pro Forma Unaudited Combined Condensed Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
Pro forma Pro forma
HomeCom Adjustments As adjusted
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 813,735 $200,000 (a) 1,013,735
Accounts receivable, net 1,250,644 -- 1,250,644
Loans to shareholders 370,000 -- 370,000
Investments -- 1,350,000 (a) 1,350,000
Other current assets 567,178 -- 567,178
------------ ------------ ------------
Total current assets 3,001,557 1,550,000 4,551,557
FURNITURE, FIXTURES AND EQUIPMENT, NET 1,110,434 1,110,434
DEPOSITS 112,847 112,847
INTANGIBLE ASSETS, NET 6,086,378 -- 6,086,378
OTHER NON-CURRENT ASSETS 235,934 -- 235,934
------------ ------------ ------------
Total assets $ 10,547,150 $ 1,550,000 $ 12,097,150
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,807,777 $ -- 1,807,777
Accrued payroll liabilities 438,271 -- 438,271
Unearned revenue 52,026 -- 52,026
Other current liabilities 119,220 -- 119,220
------------ ------------ ------------
Total current liabilities 2,417,294 -- 2,417,294
OBLIGATIONS UNDER CAPITAL LEASES 162,256 -- 162,256
OTHER LIABILITIES 61,250 -- 61,250
------------ ------------ ------------
Total liabilities 2,640,800 -- 2,640,800
REDEEMABLE PREFERRED STOCK 1,659,323 -- 1,659,323
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY:
Common stock 665 -- 665
Additional paid-in capital 17,705,160 -- 17,705,160
Subscriptions receivable (196,878) -- (196,878)
Accumulated deficit (11,261,920) 1,550,000 (a) (9,711,920)
------------ ------------ ------------
Total stockholders' equity 6,247,027 1,550,000 7,797,027
------------ ------------ ------------
Total liabilities and stockholders' equity $ 10,547,150 $ 1,550,000 $ 12,097,150
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HomeCom Communications, Inc.
Pro-forma Unaudited Combined Condensed Statement of Operations
for the year ended December 31, 1998
<TABLE>
<CAPTION>
Pro-forma Pro-forma
HomeCom Adjustments As adjusted
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales $ 3,292,410 $ (575,964) $ 2,716,446
Cost of Sales 2,601,311 (642,976) 1,958,335
----------- ----------- -----------
Gross Profit 691,099 67,012 758,111
Operating Expenses 6,019,041 -- 6,019,041
----------- ----------- -----------
Operating Income (Loss) (5,327,942) 67,012 (5,260,930)
Other Expenses (Income), Net (4,123,802) -- (4,123,802)
----------- ----------- -----------
Income (Loss) Before Income Taxes (1,204,140) 67,012 (1,137,128)
Income Taxes -- -- --
----------- ----------- -----------
Net Income (Loss) (1,204,140) 67,012 (1,137,128)
Preferred Stock Dividend (666,667) -- (666,667)
----------- ----------- -----------
Income (Loss) Applicable to Common Shareholders $(1,870,807) $ 67,012 $(1,803,795)
----------- ----------- -----------
----------- ----------- -----------
Basic and Diluted Loss Per Share $ (0.44) $ -- $ (0.42)
----------- ----------- -----------
----------- ----------- -----------
Weighted Average Common Shares Outstanding 4,287,183 -- 4,287,183
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HomeCom Communications, Inc.
Pro-forma Unaudited Combined Condensed Statement of Operations
for the six months ended June 30, 1999
<TABLE>
<CAPTION>
Pro-forma Pro-forma
HomeCom Adjustments As adjusted
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales $ 3,047,393 $ (163,236) $ 2,884,157
Cost of Sales 1,968,255 (414,633) 1,553,622
----------- ----------- -----------
Gross Profit 1,079,138 251,397 1,330,535
Operating Expenses 4,861,521 -- 4,861,521
----------- ----------- -----------
Operating Income (Loss) (3,782,383) 251,397 (3,530,986)
Other Expenses (Income), Net (23,757) -- (23,757)
----------- ----------- -----------
Income (Loss) Before Income Taxes (3,758,626) 251,397 (3,507,229)
Income Taxes -- -- --
----------- ----------- -----------
Net Income (Loss) (3,758,626) 251,397 (3,507,229)
Preferred Stock Dividend (792,390) -- (792,390)
----------- ----------- -----------
Income (Loss) Applicable to Common Shareholders $(4,551,016) $ 251,397 $(4,299,619)
----------- ----------- -----------
----------- ----------- -----------
Basic and Diluted Loss Per Share $ (0.77) $ -- $ (0.73)
----------- ----------- -----------
----------- ----------- -----------
Weighted Average Common Shares Outstanding 5,912,072 -- 5,912,072
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HomeCom Communications, Inc.
Notes to Pro-forma Unaudited Combined Condensed Financial Statements
(a) To record sale of security division to Infrastructure Defense, Inc. for
$1.35 million in common stock of the acquiror and $200,000 cash.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1943, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOMECOM COMMUNICATIONS, INC.
(Registrant)
Date: October 18, 1999 By: /s/ Harvey Sax
---------------- -------------------------
Harvey Sax, President and
Chief Executive Officer
(Principal Executive Officer)
<PAGE>
Exhibit Index
Exhibit Description
10.77 Asset Purchase Agreement by and between
the HomeCom Communications, Inc. and Infrastructure
Defense, Inc. dated as of October 1, 1999.
10.78 Bill of Sale and Assignment.
10.79 Non-Solicitation and Non-Compete Agreement by and
between HomeCom Communications Inc. and Infrastructure
Defense, Inc. dated as of October 1, 1999.
10.80 Registration Rights Agreement by and between
Infrastructure Defense, Inc. and HomeCom Communications,
Inc. dated as of October 1, 1999.
10.81 Opinion of Purchaser's Counsel.
10.82 Opinion of Seller's Counsel.
10.83 Referral and Service Agreement by and between
Infrastructure Defense, Inc. and HomeCom Communications,
Inc. dated as of October 1, 1999.
10.84 Value-Added Distributor Agreement between Infrastructure
Defense, Inc. and HomeCom Communications, Inc. dated as
of October 1, 1999.
<PAGE>
ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 1, 1999
BY AND BETWEEN
INFRASTRUCTURE DEFENSE, INC.
AND
HOMECOM COMMUNICATIONS, INC.
FOR THE SALE OF THE
HOMECOM INTERNET SECURITY DIVISION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 DEFINITIONS.............................................................................................1
Section 1.1 Definitions...............................................................................1
Section 1.2 Interpretation............................................................................9
ARTICLE 2 SALE AND PURCHASE OF PURCHASED ASSETS; CLOSING.........................................................10
Section 2.1 Purchase and Sale of Purchased Assets....................................................10
Section 2.2 Purchase Price...........................................................................12
Section 2.3 Closing..................................................................................12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...............................................................12
Section 3.1 Organization and Qualification...........................................................12
Section 3.2 Authority................................................................................12
Section 3.3 Subsidiaries.............................................................................13
Section 3.4 [Reserved]...............................................................................13
Section 3.5 No Conflicts.............................................................................13
Section 3.6 Governmental Approvals and Filings.......................................................13
Section 3.7 [Reserved]...............................................................................14
Section 3.8 Financial Statements.....................................................................14
Section 3.9 Absence of Changes.......................................................................14
Section 3.10 No Undisclosed Liabilities....................................................................16
Section 3.11 Taxes.........................................................................................16
Section 3.12 Legal Proceedings.............................................................................16
Section 3.13 Compliance with Laws and Orders...............................................................17
Section 3.14 Plans.........................................................................................17
Section 3.15 Leased Real Property..........................................................................18
Section 3.16 Tangible Personal Property....................................................................18
Section 3.17 Intellectual Property Rights..................................................................18
Section 3.18 Contracts.....................................................................................20
Section 3.19 Permits and Licenses..........................................................................20
Section 3.20 Bulk Sales Laws...............................................................................21
Section 3.21 [Reserved]....................................................................................21
Section 3.22 Employees, Labor Relations....................................................................21
Section 3.23 Environmental Matters.........................................................................21
Section 3.24 Substantial Customers and Suppliers...........................................................22
Section 3.25 Accounts Receivable; Notes Receivable.........................................................22
Section 3.26 Inventory.....................................................................................22
Section 3.27 Other Negotiations; Brokers...................................................................22
Section 3.28 Restrictions on Conduct of Business...........................................................22
Section 3.29 [Reserved]....................................................................................22
Section 3.30 Warranties....................................................................................23
Section 3.31 [Reserved]....................................................................................23
Section 3.32 Investment Representations....................................................................23
Section 3.33 Disclosure....................................................................................24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER............................................................24
Section 4.1 Organization.............................................................................24
Section 4.2 Authority................................................................................24
Section 4.3 No Conflicts.............................................................................25
Section 4.4 Governmental Approvals and Filings.......................................................25
Section 4.5 Capital Structure........................................................................25
Section 4.6 Legal Proceedings........................................................................25
Section 4.7 Absence of Changes.......................................................................26
Section 4.8 No Undisclosed Liabilities...............................................................26
Section 4.9 Taxes....................................................................................26
Section 4.10 Disclosure....................................................................................27
Section 4.11 Brokers.......................................................................................27
ARTICLE 5 CERTAIN AGREEMENTS OF THE PARTIES......................................................................27
Section 5.1 Conduct of Business Prior to the Closing.................................................27
Section 5.2 Further Covenants........................................................................28
Section 5.3 Access to Information....................................................................29
Section 5.4 Confidentiality..........................................................................29
Section 5.5 Regulatory and Other Authorizations; Consents............................................30
Section 5.6 No Solicitation of Offers, Etc...........................................................30
Section 5.7 Notice of Certain Matters................................................................31
Section 5.8 Further Action, Related Assets and Properties............................................31
Section 5.9 Non-Competition Agreement................................................................31
Section 5.10 Allocation of Purchase Price..................................................................31
ARTICLE 6 CONDITIONS TO CLOSING..................................................................................32
Section 6.1 Conditions to Obligations of Seller......................................................32
Section 6.2 Conditions to Obligations of the Purchaser...............................................33
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS......................................35
Section 7.1 Survival of Representations, Warranties, Covenants and Agreements........................35
ARTICLE 8 INDEMNIFICATION........................................................................................35
Section 8.1 Indemnification..........................................................................35
Section 8.2 Method of Asserting Claims...............................................................36
ARTICLE 9 TERMINATION............................................................................................37
Section 9.1 Grounds for Termination..................................................................37
Section 9.2 Effect of Termination....................................................................38
ARTICLE 10 ARBITRATION OF DISPUTES...............................................................................39
Section 10.1 Arbitration...................................................................................39
Section 10.2 Procedure for Arbitration.....................................................................39
ARTICLE 11 MISCELLANEOUS.........................................................................................40
Section 11.1 Notices.......................................................................................40
Section 11.2 Entire Agreement, Amendment...................................................................41
Section 11.3 Expenses......................................................................................41
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 11.4 Cumulative Remedies...........................................................................42
Section 11.5 Waiver........................................................................................42
Section 11.6 No Assignment, Binding Effect.................................................................42
Section 11.7 Invalid Provisions............................................................................42
Section 11.8 Governing Law.................................................................................42
Section 11.9 Consent to Jurisdiction and Service of Process................................................42
Section 11.10Construction..................................................................................43
Section 11.11Counterparts..................................................................................43
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
SELLER DISCLOSURE SCHEDULE
DISCLOSURE
SCHEDULE
SECTION DESCRIPTION
- ---------- -----------
<S> <C>
2.1(b)(xiii) Miscellaneous Assets
3.1 Jurisdictions in which Seller is Qualified to do Business
3.5 Conflicts, Violations and Breaches
3.6 Governmental Approvals and Filings
3.8 Financial Statements
3.9 Absence of Changes
3.10 Certain Liabilities
3.11 Taxes
3.12 Legal Proceedings and Attorneys' Letters
3.14 Plans
3.15 Leased Real Property
3.16 Tangible Personal Property
3.17 Intellectual Property
3.18 Contracts
3.19 Permits and Licenses
3.21 Affiliate Transactions
3.22 Employees; Labor Relations
3.23 Environmental Matters
3.24 Largest Customers and Suppliers
3.25 Accounts Receivable and Notes Receivable
3.26 Inventory
3.30 Warranties
4.4 Purchaser Governmental Approvals and Filings
5.10 Allocation of Purchase Price
</TABLE>
PURCHASER DISCLOSURE SCHEDULE
<TABLE>
<CAPTION>
DISCLOSURE
SCHEDULE
SECTION DESCRIPTION
- ---------- -----------
<S> <C>
4.3 No Conflicts
4.4 Governmental Approvals and Filings
4.6 Legal Proceedings
4.7 Absence of Changes
4.8 No Undisclosed Liabilities
4.9 Taxes
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Bill of Sale and Assignment
Exhibit B Non-Competition Agreement
Exhibit C Employment Agreement
Exhibit D Registration Rights Agreement
Exhibit E Opinion of Purchasers' Counsel
Exhibit F Opinion of Seller's Counsel
Exhibit G Service and Referral Agreement
Exhibit H VAR Agreement
</TABLE>
2
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of October
1, 1999, is entered into by and between Infrastructure Defense, Inc., a Delaware
corporation ("Purchaser"), and HomeCom Communications, Inc., a Delaware
corporation ("Seller").
BACKGROUND
Seller desires to sell to Purchaser all of the business and assets of
Seller's internet security division (the "Division"), and the Purchaser desires
to purchase such assets from Seller, all in accordance with the terms and
conditions of this Agreement. In addition, Purchaser desires to enter into
employment agreements with certain employees of Seller engaged in the business
of the Division and continue the long-term operation and management of the
business of the Division. Capitalized terms used and not otherwise defined
herein have the meanings set forth in Section 1.1 hereof.
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
hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"AAA" has the meaning ascribed to it in Section 10.1.
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with
that Person, (b) any other Person that owns or controls 5% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any option or convertible security) of that Person or any of its Affiliates,
or (c) any director, partner, officer, agent, employee or relative of such
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise.
"Agreement" means this Asset Purchase Agreement, the Exhibits and the
Disclosure Schedule and the certificates delivered in connection herewith, as
the same may be amended from time to time in accordance with the terms hereof.
"Arbitration Notice" has the meaning ascribed to it in Section 10.2.
"Arbitrators' Report" has the meaning ascribed to it in Section 10.2.
"Assets and Properties" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether
<PAGE>
absolute, accrued, contingent, fixed or otherwise and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person, including without limitation cash, cash equivalents, Investment Assets,
accounts and notes receivable, chattel paper, documents, instruments, general
intangibles, real estate, equipment, inventory, goods and Intellectual Property.
"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.
"Balance Sheet Date" has the meaning ascribed to it in Section 3.8.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Division, including without limitation
financial statements, Tax Returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Permits, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies, audits, reports
and plans.
"Business" means the business of the Division consisting of the
internet security products, services and related business of the Seller.
"Business Combination" means with respect to any Person any (i) merger,
amalgamation, consolidation or combination to which such Person is a party, (ii)
any sale, dividend, split or other disposition of any capital stock or other
equity interests of such Person, (iii) any tender offer (including without
limitation a self-tender), exchange offer, recapitalization, liquidation,
dissolution or similar transaction, (iv) any sale (including, without
limitation, a bulk sale), dividend or other disposition of all or a material
portion of the Assets and Properties of such Person or (v) the entering into of
any agreement or understanding, or the granting of any rights or options, with
respect to any of the foregoing.
"Business or Condition of the Division" means the business, operations,
assets, Liabilities, condition (financial or otherwise), results of operations,
Assets and Properties and prospects of the Division including, without
limitation, the Purchased Assets.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in New York, New York are authorized or obligated to close.
"Cash Consideration" has the meaning ascribed to it in Section 2.2.
"Claim Notice" means written notification pursuant to (a) of a Third
Party Claim as to which indemnity under Section 8.1 is sought by an Indemnified
Party, enclosing a copy of all papers served, if any, on the Indemnified Party
and otherwise describing the Indemnified Party's claim against the Indemnifying
Party under Section 8.1.
"Closing" has the meaning ascribed to it in Section 2.3.
"Closing Date" has the meaning ascribed to it in Section 2.3.
2
<PAGE>
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract,
commitment or understanding (whether written or oral).
"Company's Property" means 6100 Lincolnia Road, 2nd Floor, Alexandria,
Virginia 22313.
"Dispute" has the meaning ascribed to it in Section 10.1.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of an Indemnity Notice.
"$" or "Dollars" means lawful currency of the United States of America.
"Divisional Income Statement" shall have the meaning ascribed to it in
Section 3.8.
"Employees" shall mean the Employees listed in Section 3.22(a) of the
Disclosure Schedule.
"Employment Agreement" means a written employment agreement in the form
attached hereto as Exhibit C.
"Environment" means all air, surface water (including, without
limitation, navigable waters and ocean waters), groundwater, drinking water
supplies, stream sediment or land (including land surface or subsurface),
including all fish, wildlife, biota and all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal, penal or civil, pursuant to
or relating to any applicable Environmental Law by any Person (including but not
limited to any Governmental or Regulatory Authority, private person or citizens'
group) based upon, alleging, asserting, or claiming any actual or potential (i)
violation of or Liability under any Environmental Law, (ii) violation of any
Environmental Permit, or (iii) Liability for investigatory costs, cleanup costs,
removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, Release, or threatened Release into
the Environment, of any Hazardous Substances at any location, including but not
limited to any off-Site location to which Hazardous Substances or materials
containing Hazardous Substances were sent for handling, storage, treatment, or
disposal.
"Environmental Law" means any and all current and future United States
federal, state and local civil, penal and criminal Laws (including
administrative and judicial interpretations of these Laws by any Governmental or
Regulatory Authority), statutes, ordinances, orders, codes, treaties, rules,
regulations, Environmental Permits, policies, guidance documents, judgments,
decrees, injunctions, or agreements of or with any Governmental or Regulatory
Authority, relating to the protection of health and the Environment, worker
health and safety, and/or governing the handling, use, generation, treatment,
storage, transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of Hazardous Substances, whether now existing or
subsequently amended or enacted, and the foreign analogies thereof, all as
amended or superseded from time to time; and any common law doctrine, including
but not limited to, negligence, nuisance, trespass, personal injury, or property
damage related to or arising out of the presence, Release, or exposure to a
Hazardous Substance.
"Environmental Liabilities" means Liabilities of a Person that arise
under any Environmental Law, including, but not limited to, all financial
responsibility under any Environmental Law for site
3
<PAGE>
assessments, investigatory and testing costs, clean-up costs or corrective
actions (including, without limitation, for any removal, remedial or other
response actions), and any other costs, fines and penalties.
"Environmental Permit" means any United States federal, state, or local
permits, licenses, approvals, consents or authorizations required by any
Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or
binding agreements issued or entered into by a Governmental or Regulatory
Authority under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Financial Statements" has the meaning ascribed to it in Section 3.8.
"GAAP" means United States generally accepted accounting principles
(as defined by the United States Financial Accounting Standards Board),
consistently applied.
"Governmental or Regulatory Authority" means (i) the United States of
America, any state, commonwealth, territory, city, county, possession, or any
other political subdivision or quasi-governmental authority of any of the same,
including, but not limited to, any court, tribunal, arbitrator, authority,
department, ministry, commission, board, bureau, agency, county, municipality,
province, parish and other instrumentality or other regulatory body or entity,
and shall include, without limitation, any stock exchange, quotation service,
and the National Association of Securities Dealers, and (ii) any foreign (as to
the United States of America) sovereign entity, including, but not limited to,
nations, states, republics, kingdoms and principalities, any state, province,
commonwealth, territory or possession thereof, and any political subdivision,
quasi-governmental authority or instrumentality of any of the same.
"Hazardous Substances" means all contaminants, pollutants, chemicals,
deleterious substances, wastes or industrial, toxic or hazardous wastes or
substances including, without limitation, petroleum and petroleum products,
asbestos in any form that is or could become friable, urea, formaldehyde, foam
insulation and transformers or other equipment that contain dielectric fluid
levels of polychlorinated biphenyls ("PCBs"), flammable material or radioactive
materials (or any other chemical, material, substance or waste, exposure to
which is now or hereafter prohibited, limited or regulated by any Governmental
or Regulatory Authority), issued or discharged into the Environment in a greater
quantity or concentration than that provided for in any Environmental Law or the
presence of which in the Environment is prohibited pursuant to any Environmental
Law. For the purposes of this definition, "contaminants" means any solid, liquid
or gaseous matter, microorganism, sound, vibration, ray, heat, water, radiation
or a combination of any of them that adversely alters the quality of the
Environment.
"Indebtedness" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable arising in the ordinary
course of business), (iv) all capital lease obligations of such Person, (v) all
obligations of such Person to purchase securities or other property which arise
out of or in connection with the sale of the same or substantially similar
securities or property, (vi) all obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit,
bankers' acceptance or similar instrument, (vii) all obligations of others
secured by a Lien on any asset of such Person, whether or not such obligation
is assumed by such Person or for which such Person would be liable therefor
under applicable law or any agreement or instrument by
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virtue of such Person's ownership interest in or other relationship with such
entity, (viii) all obligations of others guaranteed by such Person, and (ix) any
swaps, puts calls, collars, caps or other derivative transactions with respect
to or in connection with any of the foregoing.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article 8.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article 8.
"Indemnity Notice" means written notification pursuant to (c) of a
claim for indemnity under Article 8 by an Indemnified Party, specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"Initiating Party" has the meaning ascribed to it in Section 10.2.
"Intellectual Property" means (i) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made
the subject of a pending patent application or applications, (ii) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (iii) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (iv)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered, including all common law rights, and registrations
and applications for registration thereof, including, but not limited to, all
marks registered in the United States Patent and Trademark Office, the Trademark
Offices of the States and Territories of the United States of America and the
Trademark Offices of other nations throughout the world, and all rights therein
provided by international treaties or conventions, (v) copyrights (registered or
otherwise) and registrations and applications for registration thereof, and
all rights provided by international treaties or conventions, (vi) computer
software, including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, (vii) trade secrets and confidential, technical and
business information (including databases and other information relating to
cyberthreat intelligence, enterprise risk assessment and electronic
security policy monitoring, consulting, management and other services,
ideas, processes, formulas, compositions, inventions and conceptions of
inventions whether patentable or unpatentable and whether or not reduced to
practice), (viii) whether or not confidential, technology (including
know-how and show-how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information, (ix)
copies and tangible embodiments of all the foregoing, in whatever form or
medium, (x) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights, and (xi) all rights to sue or recover
and retain damages and costs and attorneys' fees for present and past
infringement of any of the foregoing.
"Intellectual Property License Agreements" has the meaning ascribed to
it in Section 3.17(a).
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, financial assets, security entitlements, securities
(including rights to purchase and securities convertible into or exchangeable
for other securities), interests in joint ventures, limited liability companies
and general and limited partnerships, mortgage loans and other investment or
portfolio assets owned of record or beneficially.
"IRS" means the Internal Revenue Service of the United States.
"Judgment" means any judgment, writ, order, injunction, award or decree
of any court, judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements of any Governmental or Regulatory Authority having the
effect of law in the United States, any foreign country or any state, county,
province, territory, city or other political subdivision thereof.
"Lease" has the meaning ascribed to such term in Section 3.15.
"Leased Real Property" means the improvements commonly known as 1900
Gallows Road, Vienna, Virginia 22182.
"Liabilities" means all Indebtedness, obligations and other liabilities
(or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known or
unknown, fixed or otherwise, whether due or to become due), including, without
limitation, any fines, penalties, judgments, awards, settlements respecting
any judicial, administrative or arbitration proceedings, damages, losses,
claims or demands with respect to any Law.
"Liens" means any liens, mortgages, security interests, valid claims,
pledges, deposits, bills of sale, hypothecations, encumbrances of every kind,
arrangements for the retention of title and any other restriction, right,
interest, power or arrangement of any nature having the purpose or effect of
providing security for, or otherwise protecting against default in respect of,
the obligations of any Person, other than (i) ad valorem Taxes not currently
due and payable, and (ii) purchase money security interests.
"Loss" means any and all damages, fines, fees, penalties, deficiencies,
diminution in value of investment, losses and expenses, including without
limitation, interest, reasonable expenses of investigation, court costs,
reasonable fees and expenses of attorneys, accountants and other experts or
other expenses of litigation, arbitration or other proceedings or of any claim,
default or assessment (such fees and expenses to include without limitation
all fees and expenses of attorneys incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"Operative Agreements" means this Agreement, the Bill of Sale and
Assignment, a copy of which is attached hereto as Exhibit A, the Non-Competition
Agreement, a copy of which is attached hereto as Exhibit B, the Employment
Agreements, a copy of which is attached hereto as Exhibit C, the Registration
Rights Agreement, a copy of which is attached hereto as Exhibit D, the VAR
Agreement, a copy of which
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is attached hereto as Exhibit H, and any other agreements to be entered into in
connection with the transactions contemplated by this Agreement.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation. "Permits" means
all licenses, permits, certificates of authority, authorizations, approvals,
registrations, franchises and similar consents granted or issued by any
Governmental or Regulatory Authority.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
contractors, warehousemen, mechanics, materialmen and other similar Persons
imposed by applicable Law and incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith and which, in the case
of Owned Real Property, shall have been discharged before the Closing; (iii)
Liens relating to deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or to secure the performance of leases, trade contracts or other
similar agreements; (iv) Liens specifically identified in the Financial
Statements; and (v) Liens securing executory obligations under any lease that
constitutes an "operating lease" under GAAP. Notwithstanding the foregoing,
no Lien arising under the Internal Revenue Code shall be a Permitted Lien.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" means all employee pension plans, any bonus, incentive
compensation, deferred compensation, profit sharing, retirement, savings,
stock purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, medical, dental, health, accident, disability,
workers' compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy, program or arrangement of any kind
providing money (other than as current salary or wages), services, property or
other benefits, written or oral, funded or unfunded, and including all that have
been frozen or terminated, and all trust, escrow or similar agreements related
thereto, funded or unfunded, which are maintained by Seller with respect to
any of its present or former employees, independent contractors, directors,
officers or shareholders or with respect to which Seller has made or is
required to make payments, transfers or contributions or is required to
administer and make regulatory filings.
"Purchase Price" has the meaning ascribed to it in Section 2.2.
"Purchased Assets" has the meaning ascribed to it in Section 2.1(b).
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Purchaser Balance Sheet" means the balance sheet of Purchaser for the
period ended August 30, 1999.
"Purchaser Balance Sheet Date" means August 30, 1999.
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"Purchaser Disclosure Schedule" means the schedules delivered to
Purchaser by or on behalf of Seller, and the schedules delivered by or on behalf
of Purchaser to Seller, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein pursuant to
this Agreement.
"Purchaser Indemnities" has the meaning ascribed to it in Section 8.1
(a).
"Purchaser Common Stock" has the meaning ascribed to in Section 2.2.
"Purchaser's Knowledge" means, with respect to any information, to the
knowledge, information and belief of each of Purchaser's Representatives, no
fact or circumstance exists which would make the information untrue, inaccurate
or misleading, or which would tend to cause a reasonable person to call into
question, the truth or accuracy of such information.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment.
"Representatives" means a Person and its Affiliates and each of their
respective officers, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives.
"Resolution Period" means the period ending thirty (30) calendar days
following receipt by an Indemnified Party of an Arbitration Notice.
"Sale" has the meaning ascribed to it in Section 5.6(a).
"Securities Act" means the (United States) Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Seller's Knowledge" means, with respect to any information, to the
knowledge, information and belief of each of Seller's Representatives, no fact
or circumstance exists which would make the information untrue, inaccurate or
misleading, or which would tend to cause a reasonable person to call into
question, the truth or accuracy of such information.
"Seller Indemnities" has the meaning ascribed to it in Section 8.1 (b).
"Service and Referral Agreement" means the Service and Referral
Agreement in the form attached hereto as Exhibit G.
"Site" means any of the real properties currently or previously owned,
leased or operated by Seller or any present or prior Subsidiary, any
predecessors of Seller or any present or prior Subsidiary or any entities
previously owned by Seller or any present or prior Subsidiary, including all
soil, subsoil, surface waters and groundwater thereat.
"Stock Consideration" has the meaning ascribed to it in Section 2.2.
"Subsidiary" means, with respect to the Seller any other corporation as
to which more than 10% of the outstanding stock having ordinary voting rights or
power (and excluding stock having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may
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be exercised) is owned or controlled, directly or indirectly, by Seller and/or
by one or more of Seller's Subsidiaries, and any partnership, joint venture or
other similar relationship between Seller (or any Subsidiary thereof) and any
other Person (whether pursuant to a written agreement or otherwise) and any
limited liability company, in each case if Seller has a 10% or more equity
interest therein.
"Tax" or "Taxes" means all United States and foreign federal, state,
territorial, provincial or local net or gross income, gross receipts, net
proceeds, sales, use, franchise, ad valorem, real or personal property
(tangible and intangible), value added, transfer, franchise, stamp, leasing,
lease, user, transfer, fuel, excess profits, undistributed profits, windfall
profits, blank share, issued share, bearer share, capital stock, customs duties,
recapture, license, employee income withholding, dividend withholding, interest
withholding, other withholding, payroll, employment, unemployment, social
security, pension, health, old age security, unemployment, excise, property,
disability, severance, alternative or add-on minimum, environmental, or other
taxes, assessments, duties, fees, levies or other charges of any nature whatever
imposed by any Taxing Authority, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Tax Returns" means any United States, and foreign federal, state,
territorial, provincial or local returns, reports or statements (including
any information returns) required to be filed for purposes of a particular
Tax.
"Taxing Authority" means the IRS and any governmental agency, board,
bureau, body, department or authority of any United States federal, state,
territorial, provincial or local jurisdiction or any foreign jurisdiction,
having or purporting to exercise jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 8.2(a).
"Warranty Obligations" has the meaning ascribed to it in Section 3.30.
Section 1.2 INTERPRETATION. As used in this Agreement, the word
"including" means without limitation; the word "or" is not exclusive; and the
words "herein", "hereof", "hereby", "hereto" and "hereunder" refer to this
Agreement as a whole. Any reference to any applicable Law shall be deemed
also to refer to all rules and regulations promulgated thereunder and to
any successor Law unless the context otherwise requires. Whenever required
by the context, any gender shall include any other gender, the singular
shall include the plural and the plural shall include the singular. Unless
the context otherwise requires, references herein: (i) to Articles,
Sections, Exhibits and Schedules mean the Articles and Sections of and the
Exhibits and Schedules attached to this Agreement; and (ii) to an
agreement, instrument or other document means such agreement, instrument or
other document as amended, supplemented and modified through the date
hereof unless the context otherwise requires and thereafter from time to
time to the extent permitted by this Agreement. The Schedules and Exhibits
referred to herein shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth verbatim herein. The
Table of Contents and titles to Articles and headings of Sections or
Schedules are inserted for convenience of reference only and shall not be
deemed a part of or to affect the meaning or interpretation of this
Agreement.
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ARTICLE 2
SALE AND PURCHASE OF PURCHASED ASSETS; CLOSING
Section 2.1 PURCHASE AND SALE OF PURCHASED ASSETS.
(a) Seller agrees to sell, transfer and assign the Purchased Assets
to Purchaser, and Purchaser agrees to purchase the Purchased Assets from Seller,
free and clear of all Liens other than Permitted Liens, and in connection
therewith to assume the Assumed Liabilities all on the terms and subject to the
conditions set forth in this Agreement.
(b) The Purchased Assets shall include all of the assets of Seller
relating to or used by the Division or in connection with the Business (except
for e-mail, accounting, human resources and other general and administrative
services) including, without limitation:
(i) all machinery, equipment, computers, servers and other
hardware, software, databases, furniture, vehicles, tools, supplies and spare
parts and the tangible personal property set forth in Section 3.16 of the
Disclosure Schedule;
(ii) all client lists and other client information of the Division
or used principally in connection with the Business;
(iii) all proprietary and other information and data of the
Division or used principally in connection with the Business, whether or not
contained on any computers, servers and other equipment of Seller or located at
the Leased Real Property, the Company's Property or elsewhere;
(iv) all raw materials, work-in-process and finished products and
services of the Division;
(v) all Permits which are assignable and which are used or relied
upon principally in connection with the Business, if any, including, without
limitation, all Permits listed in Section 3.19 of the Disclosure Schedule;
(vi) all Environmental Permits which are assignable and are used
or relied upon principally in connection with the Business including, without
limitation, all Environmental Permits listed in Section 3.23 of the Disclosure
Schedule;
(vii) all Intellectual Property of the Division or used principally
in connection with the Business including, without limitation, the Intellectual
Property listed in Section 3.17(i) of the Disclosure Schedule;
(viii) the rights and interests of Seller in, to and under all
Contracts of the Division and all other Contracts to the extent related to the
Business including, without limitation, all Contracts listed in Section 3.18 of
the Disclosure Schedule;
(ix) all accounts receivable and notes receivable of the Division
or generated by or on account of the Business including, without limitation, all
accounts receivable and notes receivable listed in Section 3.25 of the
Disclosure Schedule;
(x) all Books and Records of the Division or the Business;
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(xi) all forms, labels, stationery, shipping materials, catalogues,
telephone numbers, brochures, art work, photographs and advertising materials
of the Division or the Business including, without limitation, the name "HomeCom
Internet Security";
(xii) all prepaid expenses, customer prepayments and deferred
charges of the Division or generated by or paid or received on account of
the Business; and
(xiii) goodwill and all other Assets and Properties of the Division
or relating to the Business including, without limitation, all other Assets and
Properties located on the Leased Real Property historically or the Company's
Property as of the Closing Date and all other assets listed on Section 2.1(b)
(xiii) of the Disclosure Schedule.
(c) The only Liabilities which Purchaser shall assume as a result of this
Agreement are the obligations of Seller under Contracts included in the
Purchased Assets, to the extent that such obligations are to be performed after
Closing in accordance with their respective provisions (the "Assumed
Liabilities"). No other Liabilities are assumed hereby including, without
limitation, the following:
(i) all Liabilities for Taxes (A) incurred by Seller prior to or
payable with respect to any period preceding the Closing Date, except to the
extent that provision is made therefor in the Closing Date Balance Sheet, or
(B) incurred by Seller with respect to any of the transactions contemplated
hereby;
(ii) all Liabilities, whether civil or criminal in nature, arising
out of any actual or alleged violation by Seller, or by any previous owner of
any of the Purchased Assets, of any Laws or Permits.
(iii) all Liabilities arising from a breach of any Contract by
Seller before the Closing;
(iv) all Liabilities arising from litigation pending or threatened
against Seller at the time of the Closing;
(v) except to the extent expressly provided in Article 7 hereof,
any liability or obligation in respect of severance or separation pay or
employee benefits for present or former employees of Seller including,
without limitation, the Employees;
(vi) all other present or future Liabilities of Seller or its
Affiliates; .
(vii) all Liabilities arising from or relating to activities or
business of the Seller other than those relating to the Business or the
Division;
(viii) all Liabilities arising out of tort Actions or Proceedings
asserted against the Business or Division for acts or omissions occurring prior
to the Closing Date or asserted against the Seller;
(ix) all Liabilities related to this Agreement, the Operative
Agreements or the transactions contemplated thereby; and
(x) all Liabilities related to or arising from any Plan.
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Section 2.2 PURCHASE PRICE.
(a) The aggregate purchase price (the "Purchase Price") for the
purchase of the Purchased Assets shall be $1,550,000, to be paid in stock and
cash as follows: (i) 65,854 shares of common stock of Purchaser (the "Stock
Consideration") shall be issued to Seller at Closing on the Closing Date; and
(ii) $200,000 shall be paid in cash (the "Cash Consideration") as follows:
(A) the first $50,000 payment within 30 days after the Closing Date, and (B) the
second $150,000 payment within 60 days after the Closing Date. The Purchase
Price is subject to adjustment if (i) less than all of the Employees, as set
forth in Section 3.22 of the Disclosure Schedule, enter into Employment
Agreements in the form attached hereto as Exhibit C on or prior to the Closing
Date, in which case the Purchase Price shall be reduced by $50,000 ($6,452 of
which shall be deducted from the Cash Consideration) for each Employee not
entering into an Employment Agreement.
(b) The Stock Consideration will not be registered under the Securities
Act, but will be issued in reliance on an exemption from registration and will
not be publicly sellable except in accordance with Rule 144 promulgated under
the Securities Act. Following an initial public offering of Purchaser Common
Stock, Seller will be entitled to piggyback registration rights in accordance
with the Registration Rights Agreement, a copy of which is attached hereto as
Exhibit B.
Section 2.3 CLOSING. The closing (the "Closing") of the purchase and
sale of the Purchased Assets and the other transactions contemplated hereunder
will take place at the offices of McGuire, Woods, Battle & Boothe LLP, 1750
Tysons Boulevard, Suite 1800, McLean, VA 22102 and Sims, Moss, Kline and Davis,
LLP, 400 Northpark Town Center, Suite 310, Atlanta, Georgia 30328 by the
execution of counterpart originals and delivery by facsimile on October 1, 1999
(such date being referred to herein as the "Closing Date"), to be followed by
delivery of executed originals by nationally recognized overnight delivery
services by October 4, 1999.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated herein, except as set forth in the
Disclosure Schedule (with Section references corresponding to those set forth
below), Seller hereby represents, warrants, covenants and agrees to and with
Purchaser as follows as of the date of this Agreement and as of the Closing
Date, unless otherwise specified herein:
Section 3.1 ORGANIZATION AND QUALIFICATION. Seller 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 conduct its business as
and to the extent now conducted and to own, use and lease its Assets and
Properties including, without limitation, the Purchased Assets. Seller is duly
qualified, licensed or admitted to do business and is in good standing in the
jurisdictions in which such qualification, licensure or admission is required,
except for such as do not and would not reasonably be expected to have a
material adverse effect on the Division, its Business or the Purchased Assets.
Section 3.2 AUTHORITY. Seller has the full legal capacity and authority to
execute and deliver this Agreement and the Operative Agreements to which it is a
party and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Operative Agreements by Seller and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly and validly
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approved by all necessary corporate and shareholder action, and no other action
on the part of Seller or its shareholders is necessary to authorize the
execution, delivery and performance of this Agreement and the Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby. This Agreement and the Operative Agreements have been duly and validly
executed and delivered by Seller and this Agreement and the Operative Agreements
to which Seller is a party constitute, legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
Section 3.3 SUBSIDIARIES. Seller owns all of the issued and outstanding
capital stock of Ganymede Corporation, FIMI Securities, Inc., All Things
Financial, Inc. and InsureRate, Inc. (the "Subsidiaries"). None of the
Subsidiaries have any right, title or interest in or to the Purchased Assets. No
Liability of or related to any of the Subsidiaries could reasonably be expected
to have a material adverse effect on the value of the Purchased Assets or the
Business or Condition of the Division.
Section 3.4 [RESERVED].
Section 3.5 NO CONFLICTS. The execution and delivery by Seller of this
Agreement and the Operative Agreements to which it is a party does not, and the
performance by Seller of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby did not, do not and 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
by-laws of Seller or of any agreement of the shareholders of Seller;
(b) subject to obtaining the consents and approvals and making the
filings and giving the notices referred to in Section 3.6 below or described in
Section 3.6 of the Seller Disclosure Schedule, if any, 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 Seller's Assets and Properties including, without
limitation, the Purchased Assets; or
(c) except as described in Section 3.5 of the Seller Disclosure
Schedule, (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,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi) result in the creation or
imposition of any Lien upon the Purchased Assets under any Contract or Permit
which relates to the Purchased Assets or by which any of the Purchased Assets
are bound.
Section 3.6 GOVERNMENTAL APPROVALS AND FILINGS. Except as described in
Section 3.6 of the Seller Disclosure Schedule, no permits, consents or approvals
by, or filing with or notice to, any federal, provincial, territorial, local or
foreign Governmental Authority, as applicable, including, without limitation,
any consents or approvals under the applicable United States federal or foreign
investment laws and other federal, provincial, territorial, local or foreign
competition and antitrust laws and under any Environmental Law, is required on
the part of Seller in connection with the execution, delivery and
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performance of this Agreement or any of the Operative Agreements to which Seller
is a party or the consummation of transactions contemplated hereby or thereby.
Section 3.7 [RESERVED]
Section 3.8 FINANCIAL STATEMENTS. Attached hereto as Section 3.8 of the
Seller Disclosure Schedule are true and complete copies of the unaudited
statement of income and expenses for the Division as of August 31, 1999 (the
"Divisional Income Statement") and the audited consolidated balance sheets,
income statement and statement of cash flows of Seller as of December 31, 1998
(the "Balance Sheet Date") and 1997 (collectively, the "Financial Statements").
All Financial Statements are true and correct in all material respects and were
(i) prepared from the books of account or other financial records of Seller,
(ii) prepared in accordance with GAAP consistently applied throughout the
periods involved, and (iii) fairly present the consolidated financial condition,
results of operations and cash flow of Seller and the Division as of the dates
thereof and for the periods covered thereby.
Section 3.9 ABSENCE OF CHANGES. Except as set forth in Section 3.9 of the
Seller Disclosure Schedule, since the Balance Sheet Date, Seller and the
Division have been operated in the ordinary course of business consistent with
past practice and there has not been any material adverse change, or any event
or development which, individually or together with other such events or
developments, could reasonably be expected to result in a material adverse
change, in the Business or Condition of the Division or the Purchased Assets.
None of the other representations or warranties set forth in this Agreement
shall be deemed to limit the foregoing. In addition, without limiting the
foregoing, except as disclosed in Section 3.9 of the Seller Disclosure Schedule,
there has not occurred since the Balance Sheet Date:
(a) any amendment or change to the Certificate of Incorporation of
Seller (except as disclosed in the certificate to be supplied to Purchaser
pursuant to Section 6.2 of this Agreement) or its by-laws which could have a
material adverse effect on the ability of Seller to consummate the transactions
contemplated hereby and by the Operative Agreements to which it is a party or on
the Business and Condition of the Division;
(b) any change in or incurrence of any Liability of Seller or any
Subsidiary other than in the ordinary course of business consistent with past
practices which could have a material adverse effect on the Business or
Condition of the Division;
(c) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any of the Purchased Assets or the
Business;
(d) any write-off or write-down of or any determination to write off
or write down any of the Purchased Assets;
(e) any sale, license or other disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Purchased Assets, other than in the
ordinary course of business consistent with past practice and the terms of this
Agreement and the Operative Agreements;
(f) any entering into, amendment, modification, termination (partial
or complete) or granting of a waiver under or giving any consent with respect to
(i) any active Contract which is required (or had it been in effect on the date
hereof would have been required) to be disclosed in the Seller Disclosure
Schedule pursuant to Section 3.18, (ii) any Permit held by Seller pertaining or
relating to the
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Division, its Business or the Purchased Assets, or (iii) any Intellectual
Property owned, held or used by Seller in connection with the Business or the
Purchased Assets;
(g) any capital expenditures or commitments for additions to property,
plant, equipment or Intellectual Property of the Division exceeding $1,000;
(h) any commencement or termination by the Division of any line of
business;
(i) any transaction by Seller pertaining or relating to the Division,
its Business or the Purchased Assets with any officer, director, stockholder
(including any Seller), Affiliate or Associate of Seller, other than pursuant to
any Contract in effect on the date of the Balance Sheet and disclosed to
Purchaser pursuant to Section 3.18 of the Seller Disclosure Schedule or other
than pursuant to any contract of employment listed pursuant to Section 3.18 of
the Seller Disclosure Schedule;
(j) the commencement or notice or threat of commencement of any
lawsuit or proceedings against, or investigation of, Seller or the Employees
which could have a material adverse effect on the Business and Condition of the
Division or Purchaser's ability to retain any Employee;
(k) any notice of any claim of ownership by a third party of the
Intellectual Property included in the Purchased Assets or notice of infringement
by Seller or the Employees of any third party's Intellectual Property rights;
(l) any change in pricing or royalties set or charged by Seller with
respect to the Division's products or services to clients, customers or
licensees or in pricing or royalties set or charged by Persons who have licensed
Intellectual Property or sold products or services to Seller for use by the
Division or in connection with the Business;
(m) any change in the accounting methods or procedures of Seller;
(n) any other material transaction involving or development affecting
the Division, Purchased Assets or the Business outside the ordinary course of
business consistent with past practice;
(o) any capital investment by the Seller pertaining or relating to the
Division or the Business in, any loan to, or any acquisition of the securities
or assets of, any other Person (or series of related capital investments, loans,
and acquisitions) either involving more than $1,000 or outside the ordinary
course of business consistent with past practice
(p) any issuance of any note, bond, or other debt security or created,
incurred, assumed, or guarantee of any Indebtedness by the Seller pertaining or
relating to the Division or the Business involving more than $20,000;
(q) any delay or postponement by the Division of the payment of
accounts payable and other Liabilities outside the ordinary course of business
consistent with past practice;
(r) any grant of any license or sublicense of any rights under or with
respect to the Division's or the Business' Intellectual Property outside the
ordinary course of business consistent with past practice; or
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(s) any entering into of an agreement to do or engage in any of the
foregoing, including without limitation with respect to any Business Combination
not otherwise restricted by the foregoing paragraphs.
Section 3.10 NO UNDISCLOSED LIABILITIES. Except as described in Section
3.10 of the Seller Disclosure Schedule, there are no Liabilities of, relating to
or affecting the Business or Condition of the Division or Purchased Assets
(whether or not required to be reflected in financial statements in accordance
with GAAP), other than Liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Balance Sheet and in
accordance with the provisions of this Agreement and the Operative Agreements,
which in the aggregate are not material to the Business or Condition of the
Division and are not for tort or for breach of contract. Purchaser, by entering
into this Agreement and consummating the transactions contemplated hereby, will
not assume any Liabilities other than the Assumed Liabilities.
Section 3.11 TAXES.
(a) All Tax Returns (including, without limitation, all United States
federal, state, local and other applicable income, goods and services, and sales
Tax Returns) required to have been filed by or with respect to Seller or the
Purchased Assets have been duly and timely filed, and such Tax Returns shall be
duly and timely filed through the period from the date hereof to the Closing
Date, and there are no unpaid Tax Liabilities with respect to any period (or
portion of any period) prior to the Closing Date which constitute, create or
could result in a Lien or charge against any of the Purchased Assets or have a
material adverse effect on the Business or the Division.
(b) No claim has ever been made by any jurisdiction in which Seller
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(c) Purchaser, by virtue of entering into this Agreement and
consummating the transactions contemplated hereby, will not have or acquire any
Liability for Taxes of any Person as a transferee or successor.
Section 3.12 LEGAL PROCEEDINGS.
(a) Except as disclosed in Section 3.12(a) of the Seller Disclosure
Schedule (with paragraph references corresponding to those set forth below):
(i) there are no Actions or Proceedings or Orders pending or, to
Seller's Knowledge, threatened against, relating to or affecting the Business or
Condition of the Division or the transactions contemplated hereby;
(ii) there are no facts or circumstances known to Seller that
could reasonably be expected to give rise to any Action or Proceeding that would
be required to be disclosed pursuant to clause (a)(i) above; and
(b) Prior to the execution of this Agreement, Seller has delivered all
responses of present and past counsel for Seller to auditors' requests for
information regarding Actions or Proceedings pending or threatened against,
relating to or affecting the Division, its Business or the Purchased Assets.
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Section 3.12(b) of the Seller Disclosure Schedule sets forth all Actions or
Proceedings relating to or affecting the Division, its Business or the Purchased
Assets.
Section 3.13 COMPLIANCE WITH LAWS AND ORDERS. Seller has not been at any
time, in violation of or in default under any Law or Order applicable to Seller
or any of the Purchased Assets which could have a material adverse effect on the
Business or Condition of the Division.
Section 3.14 PLANS.
(a) Set forth in Section 3.14(a) of the Seller Disclosure
Schedule is a complete and correct list of all Plans maintained or contributed
to by Seller, Plans pursuant to which Seller may have any Liability, and Plans
covering employees or former or retired employees of Seller with respect to
their employment with Seller, including, without limitation, the Employees.
(b) As to each of the Plans that is a retirement, savings or
other pension plan as defined in Section 3(2) of ERISA, Seller has complied, in
all material respects, with all applicable laws and regulations in administering
such plans, including specifically the provisions of ERISA and the qualification
provisions of Section 401 of the Internal Revenue Code. No non-exempt prohibited
transaction, as defined in Section 4975 of the Internal Revenue Code, has
occurred with respect to any such Plans and no such Plan has incurred any
accumulated funding deficiency, as defined in Section 412 of the Internal
Revenue Code, whether or not waived. There has not been, with regard to any such
Plan, any reportable event, as defined in Section 4043(b) of ERISA, that is
required to be reported to the PBGC by law or regulation. The fair market value
of the assets of each such Plan that is subject to Title IV of ERISA equals or
exceeds the present value of all benefits accrued under such Plan, whether or
not vested, based on the actuarial assumptions that would be used by the PGBC if
the Plan were terminated as of the date of this Agreement and as of the Closing
Date. As to each of the Plans that is a health, severance, insurance, disability
and other employee welfare Plan, and all other employee benefit plans and
programs as defined in Section 3(1) of ERISA, Seller has complied, in all
material respects, with all applicable laws and regulations in the
administration thereof including, without limitation, the provisions of ERISA
when applicable. Seller has not terminated any Plan or incurred any material
liability to the PBGC under Title IV of ERISA and no condition exists that could
reasonably be expected to cause the Purchaser to incur any such liability. All
premiums payable to the PBGC have been paid when due. (iii) No compensation or
benefit that is or will be payable as a result of the transactions contemplated
by this Agreement will be characterized as an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code.
(c) All required employer contributions, premium payments and
source-deducted employee contributions under the Plans have been made or will be
timely made and remitted to the funding agents thereunder. All such
contributions to the Plans for any period ending before the Closing Date that
are not yet, but will be, required to be made, are properly accrued and
reflected on the Balance Sheet or are disclosed in Section 3.14 (c) of the
Seller Disclosure Schedule.
(d) Except as set forth in Section 3.14(d) of the Seller Disclosure
Schedule, each Plan has been maintained, operated and administered in compliance
with its terms and all related documents or agreements and in compliance with
all applicable Laws, and all filings required to be made with any Governmental
or Regulatory Authority with respect to each Plan have been duly and timely
filed, including without limitation annual reports on Form 5500 Series. Any
non-compliance or failure properly to administer a Plan or related trust or fund
has not exposed such Plan or related trust or fund or
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Seller, nor could it result in any exposure of the Purchaser, to any Taxes,
penalties or Liabilities to any Person, or expose the Plan to disqualification
or the trust or fund to loss of tax exempt status.
(e) There is no pending or threatened claim (other than claims for
benefits in the ordinary course), assessment, complaint, proceeding or
investigation of any kind before any Governmental or Regulatory Authority with
respect to any Plan.
(f) All benefits, expenses and other amounts due and payable to or
under any Plan, and all contributions, transfers or payments required to be made
to any Plan, have been paid when due.
(g) As a result of the purchase of the Purchased Assets by the
Purchaser pursuant to this Agreement, the Purchaser shall not be obligated to
make a payment to any individual with respect to severance or compensation for
personal services (other than salary and benefits at current rates for services
to be performed pursuant to the Employment Agreements from and after Closing),
nor shall any benefit under any Plan be accelerated or become vested, including
without limitation any stock options or similar rights to stock.
Section 3.15 LEASED REAL PROPERTY. The only real property leased by
Seller for the conduct of the Business is the Leased Real Property. Seller has a
valid and subsisting leasehold estate in and the right to quiet enjoyment and
use of the Leased Real Property for the full term of the lease thereof. The
lease relating to the Leased Real Property (the "Lease") is in full force and
effect and is a legal and binding agreement, enforceable in accordance with its
terms against the parties thereto, and, except as set forth in Section 3.15 of
the Seller Disclosure Schedule, there is no, and Seller has not received notice
of any, default (or any condition or event which, after notice or lapse or time
or both, would constitute a default) thereunder. Seller does not owe brokerage,
commissions or finders fees with respect to the Leased Real Property. Seller has
not assigned, sublet, transferred, hypothecated or otherwise disposed of any
interest in any Leased Real Property or the Lease. Attached in Section 3.15 of
the Seller Disclosure Schedule is a true, correct and complete copy of the
Lease.
Section 3.16 TANGIBLE PERSONAL PROPERTY. Seller is in possession of
and has good and marketable title to, or has valid leasehold interests in or
valid rights under Contract to use, all tangible personal property used in the
conduct of the Business, including all tangible personal property pertaining to
the Division reflected on the Financial Statements for the period ended on the
Balance Sheet Date and tangible personal property pertaining to the Division
acquired since that date, other than property disposed of since such date in the
ordinary course of business consistent with past practice and the terms of this
Agreement and the Operative Agreements. The principal items of such tangible
personal property of the Division or used by or in connection its Business
(which for the purpose of this Agreement shall mean those having an original
purchase price of $100 or more) are listed in Section 3.16 of the Seller
Disclosure Schedule. All such tangible personal property is free and clear of
all Liens, other than Permitted Liens and Liens disclosed in Section 3.16 of the
Seller Disclosure Schedule, and are adequate and suitable for the conduct by
Seller and, on the Closing Date, Purchaser, of the Business and are in good
working order and condition, ordinary wear and tear excepted, and their use
complies in all material respects with all applicable Laws.
Section 3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) The only Intellectual Property owned or licensed for use
or otherwise used by Seller with respect to the Division or the Business is
disclosed in Section 3.17(i) of the Seller Disclosure Schedule. No other
Intellectual Property is used or necessary in the conduct of the Business.
Seller owns
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all right, title and interest in, or is validly licensed to use in accordance
with past business practice, each item of such Intellectual Property disclosed
in Section 3.17(i) of the Seller Disclosure Schedule, and none constitute
"work-made-for-hire" for customers or clients. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination or suspension of the
intellectual property license agreements ("Intellectual Property License
Agreements"), and Seller is in compliance with, and has not breached (or would
breach after notice or lapse of time) any term of, the Intellectual Property
license Agreements and, to Seller's Knowledge, all of the other parties to such
Intellectual Property License Agreements are in compliance with, and have not
breached, any of the terms thereof. There is no dispute between Seller and any
licensor of such Intellectual Property regarding the scope of the license or
performance under any applicable Intellectual Property License Agreement,
including with respect to any payments to be made by Seller thereunder.
(b) Except as disclosed in Section 3.17(ii) of the Seller
Disclosure Schedule, all such Intellectual Property disclosed in Section 3.17(i)
of the Seller Disclosure Schedule is free and clear of any and all Liens, other
than Permitted Liens. Section 3.17(ii) of the Seller Disclosure Schedule lists
all of Seller's United States or foreign registrations or applications issued
by, filed with or recorded by any Governmental or Regulatory Authority with
respect to the Intellectual Property listed in Section 3.17(i) of the Seller
Disclosure Schedule (including patent, trademark, copyright and other
registrations and applications), and all of such registrations and applications
are valid and in full force and effect and all necessary registration,
maintenance and renewal fees in connection therewith have been made and all
necessary documents and certificates in connection therewith have been filed
with the relevant patent, copyright, trademark or other authority in the United
States, or foreign jurisdictions, as the case may be, for the purpose of
maintaining the registrations or applications for registration of such
Intellectual Property. Except as described in Section 3.17(ii) of the Seller
Disclosure Schedule, (i) there are no restrictions on the direct or indirect
transfer of any such Intellectual Property subject to the terms of any license
described in Section 3.17(i) of the Seller Disclosure Schedule, (ii) Seller has
made available to Purchaser prior to the execution of this Agreement
documentation with respect to any invention, process, design, computer software
and program or other know-how or trade secret or proprietary information
included in such Intellectual Property, which documentation is accurate in all
material respects and reasonably sufficient in detail and content to identify
and explain such invention, process, design, computer software and programs or
other know-how or trade secret or proprietary information, (iii) Seller has
taken reasonable security measures to protect the secrecy, confidentiality and
value of their trade secrets and proprietary information (including the
enforcement by Seller of a policy requiring each employee or contractor to
execute proprietary information and confidentiality agreements substantially in
Seller's standard form), and (iv) Seller has not granted to any Person any
license, agreement or other permission to use such Intellectual Property. Such
Intellectual Property is not being infringed by any other Person. Seller is not
infringing any Intellectual Property of any other Person, and no claim is
pending or, to Seller's Knowledge, has been threatened to such effect with
respect to the ownership, validity, license or use of, or any infringement
resulting from, such Intellectual Property, or the sale of any products or
services by the Division.
(c) No (i) product, service or publication of Seller, (ii) material
published or distributed by Seller, or (iii) conduct or statement of Seller,
constitutes obscene material, a defamatory statement or material, or violates
any rights, including rights of publicity or privacy, of any Person.
(d) The information systems (including all computer hardware and
software) included in the Purchased Assets, all products and services presently
being purchased or acquired by the Seller for the Division or in connection with
the Business or which Seller has any Contract to purchase or acquire for the
Division or in connection with the Business, and all products and services which
Seller
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currently produces, sells or supplies, has previously produced, sold or supplied
in connection with the Business, or are planning to produce, sell or supply in
connection with the Business, are free of any "Year 2000 Problem" and any "leap
year problem" such that such systems, products and services do not and will not,
without requiring any modifications costing in the aggregate in excess of
$2,500, experience any malfunctions or other usage problems in connection with
(i) the year 2000 (and later years) as distinct from 1900's years or (ii) any
leap year.
Section 3.18 CONTRACTS.
(a) Section 3.18 of the Seller Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of all active Contracts (true and complete copies or, if not in writing,
reasonably complete and accurate written descriptions of which, together with
all amendments and supplements thereto and all waivers of any terms thereof,
have been delivered to Purchaser prior to the execution of this Agreement)
relating to the Division, the Business or the Purchased Assets.
(b) Except as would not have a material adverse effect on the Business
or Condition of the Division or the Purchased Assets, each Contract required to
be disclosed in Section 3.18 of the Seller Disclosure Schedule is in full force
and effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of each party thereto. Seller is not, nor has
received notice that it is, in violation or breach of or default in any material
respect under any such Contract (or with notice or lapse of time or both, would
be in violation or breach of or default in any material respect under any such
Contract).
(c) Section 3.18 of the Seller Disclosure Schedule contains a true and
complete list of all orders on hand as of the date hereof and as of the Closing
Date relating to the products and services of the Division. Each such order is,
except as otherwise set forth in Section 3.18 of the Seller Disclosure Schedule,
a valid and firm order.
(d) No Contract included in the Purchased Assets was procured under
circumstances which violated the Federal conflict of interest law (18 U.S.C.
207), Procurement Integrity Act (41 U.S.C. 423 et seq.), bribery and gratuity
statute (18 U.S.C. 201), Major Fraud Act (18 U.S.C. 1031), Anti-Kickback Act (41
U.S.C. 51 et seq.), Byrd Amendment (31 U.S.C. 1352), False Statements statute
(18 U.S.C. 1001), Truth in Negotiations Act (10 U.S.C. 2306a), civil False
Claims Act (31 U.S.C. 3729 et seq.); criminal False Claims Act (18 U.S.C. 287);
Program Fraud Civil Remedies Act (31 U.S.C.3801 et seq.) or the Covenant Against
Contingent Fees (48 C.F.R. Subpart 3.4).
Section 3.19 PERMITS AND LICENSES. Section 3.19 of the Seller Disclosure
Schedule contains a true and complete list of all Permits issued to Seller used
in the Business or operations of the Division, setting forth the owner, the
function and the expiration and renewal date of each. Prior to the execution of
this Agreement, Seller has delivered to Purchaser true and complete copies of
all such Permits. Except as disclosed in Section 3.19 of the Seller Disclosure
Schedule:
(a) Seller owns or validly holds all Permits that are required to
conduct, or are material to, the Business as currently conducted or to own the
Purchased Assets, and all such Permits are assignable;
(b) each Permit listed in Section 3.19 of the Seller Disclosure
Schedule is valid, binding and in full force and effect; and
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(c) Seller is not, nor has it received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any such Permit.
Section 3.20 BULK SALES LAWS. No notice to creditors or other Persons or
other action is required to be taken by Seller or any other Person with respect
to the transactions contemplated by this Agreement or the Operative Agreements
under any "bulk sales" or similar Laws.
Section 3.21 [RESERVED].
Section 3.22 EMPLOYEES, LABOR RELATIONS.
(a) Section 3.22 of the Seller Disclosure Schedule contains
a list of the names of all six employees of Seller engaged in the operation of
the Business (the "Employees"), together with such person's position or
function, years of employment, annual base salary or wages and any incentives or
bonus arrangement with respect to such person. Seller has not received any
information that would lead it to believe that any such individual will not
enter into an Employment Agreement with Purchaser on or prior to the Closing
Date.
Section 3.23 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.23 of
the Seller Disclosure Schedule (with paragraph references corresponding to those
set forth below), in connection with the Division, the operation of the Business
and the Leased Real Property:
(a) Seller has obtained and holds all necessary Environmental
Permits.
(b) Seller, and the activities of Seller and the operation and
use of the Leased Real Property, have been and are in compliance with all terms,
conditions and provisions of all applicable (i) Environmental Permits and
(ii) Environmental Laws.
(c) There are no past, pending, or threatened Environmental
Claims or Environmental Liabilities against Seller, and Seller is not aware of
any facts or circumstances which could reasonably be expected to form the basis
for any Environmental Claim or Environmental Liability against Seller.
(d) No Releases of Hazardous Substances have occurred at, from,
in, to, on, or under any Site and no Hazardous Substances are present in, on,
about or migrating to or from any Site that could give rise to an Environmental
Claim or Environmental Liability against Seller.
(e) Neither Seller nor any predecessor of Seller, nor any entity
previously owned by Seller has transported or arranged for the treatment,
storage, handling, disposal, or transportation of any Hazardous Substances to
any off-Site location which could result in an Environmental Claim or an
Environmental Liability against Seller.
(f) There are no (a) underground storage tanks, active or
abandoned, (b) polychlorinated biphenyl containing equipment, or (c) asbestos
containing material at any Site.
(g) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, on behalf of, or which
are in the possession of Seller with respect to any Site which have not been
delivered to Purchaser prior to execution of this Agreement.
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Section 3.24 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. Section 3.24 of the
Seller Disclosure Schedule lists the ten (10) largest customers or clients of
Seller with respect to the Division on the basis of revenues for products sold
or services provided in 1998 and 1999 (on an annualized basis). Section 3.24 of
the Seller Disclosure Schedule lists the ten (10) largest suppliers of Seller
with respect to the Business on the basis of cost of goods or services purchased
in 1998 and 1999 (on an annualized basis). To Seller's Knowledge, no such
customer or supplier is threatened with bankruptcy or insolvency. Except as set
forth in Section 3.24 of the Seller Disclosure Schedule, and except for deposits
or other non-material amounts paid in the ordinary course of business consistent
with past practice, Seller has not accepted any prepayment of any sales price or
fee or license fee from any client or customer that relates to products not yet
delivered or services not yet performed by Seller with respect to the Division
or its Business.
Section 3.25 ACCOUNTS RECEIVABLE; NOTES RECEIVABLE. The accounts and notes
receivable of Seller from and after August 31, 1999 are included in the
Purchased Assets and are set forth in full in Section 3.25 of the Seller
Disclosure Schedule and accurately reflected all accounts and notes receivable
in existence on the date of this Agreement and as of the Closing Date. Such
accounts and notes receivable (i) arose from bona fide sales transactions in the
ordinary course of business consistent with past practice and are payable on
ordinary trade terms, (ii) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their respective terms, (iii)
are not subject to any valid set-off or counterclaim, (iv) do not represent
obligations for goods sold on consignment, on approval or on a sale-or-return
basis or subject to any other repurchase or return arrangement, (v) are
collectible in the ordinary course of business consistent with past practice in
the aggregate recorded amounts thereof, net of any applicable reserve reflected
in the Balance Sheet, as such reserve has been adjusted on the books of Seller
since the Balance Sheet Date in the ordinary course of business consistent with
past practices, (vi) are not the subject of any Actions or Proceedings brought
by or on behalf of Seller or by the account debtor, and (vii) have not been
pledged as collateral by Seller.
Section 3.26 INVENTORY. All inventory of Seller included in the Purchased
Assets is set forth in full in Section 3.26 of the Seller Disclosure Schedule
and accurately reflect and all such inventory held by Seller as of the date of
this Agreement and as of the Closing Date. Such inventory consists of a quality
and quantity usable and salable in the ordinary course of business consistent
with past practice and industry standards. All items included in the inventory
of Seller and included in the Purchased Assets are the property of Seller, free
and clear of any Lien other than Permitted Liens, have not been pledged as
collateral, are not held by Seller on consignment from others and conform in all
material respects to all standards applicable to such inventory or its use or
sale imposed by any Governmental or Regulatory Authority.
Section 3.27 OTHER NEGOTIATIONS; BROKERS. No agent, broker, finder,
investment banker, financial advisor or other similar Person will be entitled to
any fee, commission or other compensation in connection with the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by Seller, any of Seller's Affiliates, or any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of the Seller or any such Affiliate.
Section 3.28 RESTRICTIONS ON CONDUCT OF BUSINESS. Seller is not prohibited
or otherwise restricted from conducting the Business as presently conducted or
intended to be conducted by any Contract included in the Purchased Assets, by
any Governmental or Regulatory Authority or any Law.
Section 3.29 [RESERVED].
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Section 3.30 WARRANTIES. Section 3.30 of the Seller Disclosure Schedule
sets forth (i) all written warranties, guarantees and warranty policies of
Seller with respect to the Division or its Business (the "Warranty
Obligations"), and the duration of each such Warranty Obligation, (ii) those
Warranty Obligations which are subject to any dispute or, to Seller's Knowledge,
threatened dispute and (iii) the claims experience of Seller since January 1,
1998 with respect to warranties, guarantees and warranty policies of Seller with
respect to the Division or its Business. Except as set forth in Section 3.30 of
the Seller Disclosure Schedule, there have not been any material deviations from
the Warranty Obligations, and salesmen, employees and agents of Seller are not
authorized to undertake obligations to any customer or other third parties in
excess of such Warranty Obligations.
Section 3.31 [RESERVED].
Section 3.32 INVESTMENT REPRESENTATIONS. Seller represents, warrants and
agrees with Purchaser that:
(a) Seller has been advised by Purchaser that the Purchaser Common
Stock to be acquired pursuant to this Agreement will not be registered under the
Securities Act and the issuance to such Seller of such stock is being made on
the basis of an exemption afforded under the Securities Act and the Purchaser's
reliance on such statutory exemption is based in part on the representations
made herein by Seller.
(b) Seller is either an "Accredited Investor", as defined in Rule 501
of Regulation D promulgated under the Securities Act ("Reg. D") or has been
advised by a "Purchaser Representative" (as defined in Reg. D) in connection
with the purchase of the shares of Purchaser Common Stock to be received
pursuant to this Agreement. Seller, or if Seller is not an Accredited Investor,
as advised by its Purchaser Representative, has such knowledge and experience in
financial and business matters that Seller is capable of evaluating the merits
and risk of the purchase of Purchaser Common Stock, and is able to bear the
economic risk of such investment.
(c) Seller, or if Seller is not an Accredited Investor, its Purchaser
Representative, is familiar with the condition, financial or otherwise of
Purchaser and its affairs as he, she or it has deemed necessary to evaluate the
merits and risk of becoming a stockholder of Purchaser and acknowledges that
Purchaser has offered to make available and has, when requested, made available,
such additional information that would be provided in a registration statement
under the Securities Act and granted access to such reasonable additional
information necessary to verify the accuracy of all information furnished.
(d) Seller, as advised by legal counsel, (i) is familiar with the
nature of the limitations imposed by the Securities Act, and the rules and
regulations promulgated thereunder, on the transfer of the Purchaser Common
Stock, (ii) understands that the Purchaser Common Stock must be held
indefinitely unless a disposition thereof is registered under the Securities
Act, or in the opinion of counsel to such Seller (reasonably acceptable to
Purchaser) in form and substance satisfactory to Purchaser's counsel (a signed
copy of which opinion shall have been delivered to Purchaser prior to the
disposition of any shares of Purchaser Common Stock), is exempt from
registration under the Securities Act, including a disposition in accordance
with all the requirements and limitations of Rule 144 promulgated under the
Securities Act, and complies with other applicable federal and state securities
Laws;
(e) Seller will acquire the Purchaser Common Stock for Seller's own
account, for investment and not with a view to the distribution or resale
thereof within the meaning of the Securities Act, nor with any present intention
of selling or distributing the same.
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(f) Seller will not transfer any shares of Purchaser Common Stock
except in compliance with the terms and provisions of this Section 3.32. (g)
Seller agrees that each certificate to be received by him, her or it
representing shares of Purchaser Common Stock will bear a legend including the
following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY OTHER APPLICABLE
SECURITIES LAWS."
In addition to marking the certificates with the above legend, Seller agrees
that Purchaser is authorized to notify its transfer agent of the status of the
shares of Purchaser Common Stock and to take such action, including stop
transfer instructions, as Purchaser in its sole discretion may deem necessary or
proper to prevent the violation of the Securities Act or other securities Laws
and to assure compliance with the terms of this Agreement.
Section 3.33 DISCLOSURE. No representation or warranty of Seller contained
in this Agreement, and no statement contained in the Seller Disclosure
Schedule or in any certificate, list or other writing furnished to
Purchaser pursuant to any provision of this Agreement (including without
limitation the Financial Statements) or in connection with Purchaser's due
diligence review of Seller and the Division, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to
make the statements herein or therein, in the light of the circumstances
under which they were made, not misleading.
ARTICLE 4 REPRESENTATIONS AND
WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows as of the date
of this Agreement and as of the Closing Date, unless otherwise specified herein:
Section 4.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Section 4.2 AUTHORITY. Purchaser has full corporate power and
authority to enter into this Agreement and the Operative Agreements to which it
is a party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Operative Agreements to which
it is a party by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby and thereby have been duly and validly approved by its board
of directors and no other corporate proceedings on the part of Purchaser or its
stockholders are necessary to authorize the execution, delivery and performance
of this Agreement and the Operative Agreements to which it is a party by
Purchaser and the consummation by Purchaser of the transaction contemplated
hereby and thereby. This Agreement and the Operative Agreements to which
Purchaser is a party have been duly and validly executed and delivered by
Purchaser and constitute the legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with their respective terms, except
as enforceability thereof may be limited by
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bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
Section 4.3 NO CONFLICTS. Except as set forth in Section 4.3 of the
Purchaser Disclosure Schedule, the execution and delivery by Purchaser of this
Agreement do not, and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby did not, do not
and 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
by-laws of the Purchaser;
(b) conflict with or result in a violation or breach of any term
or provision of any Law or Order applicable to the Purchaser or any of its
Assets and Properties, the effect of which, individually or in the aggregate,
would reasonably be expected to have a materially adverse effect on the ability
of Purchaser to consummate the transactions contemplated hereby or would
materially hinder or delay such consummation; or
(c) (x) conflict with or result in a violation or breach of, (y)
constitute (with or without notice or lapse of time or both) a default under or
(z) require Purchaser 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,
any Contract or Permit to which the Purchaser is a party or by which its Assets
and Properties are bound, the effect of which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on the ability of
the Purchaser to consummate the transactions contemplated by this Agreement or
would materially hinder or delay such consummation.
Section 4.4 GOVERNMENTAL APPROVALS AND FILINGS. Except as
disclosed in Section 4.4 of the Purchaser Disclosure Schedule, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of the Purchaser is required in connection with the
execution, delivery and performance of this Agreement or the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
Section 4.5 CAPITAL STRUCTURE. As of the date hereof, the
authorized capital stock of Purchaser consists of 10,000,000 shares of Purchaser
Common Stock, par value $.01 per share, of which 1,008,379 shares were issued
and outstanding. Such outstanding shares of Purchaser Common Stock are, and the
shares of Purchaser Common Stock to be issued pursuant to this Agreement will
be, validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 4.6 LEGAL PROCEEDINGS. Except as set forth in Section 4.6
of the Purchaser Disclosure Schedule, there are no Actions or Proceedings
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which (i) could
reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement or any of the Operative
Agreements, (ii) could reasonably be expected, individually or in the aggregate
with other such Actions or Proceedings, to have a material adverse effect on the
ability of the Purchaser to consummate the transactions contemplated by this
Agreement or would materially hinder or delay such consummation, or (iii) would
reasonably be expected, individually or in the aggregate with such other Actions
or Proceedings, to have a material adverse effect on the financial condition or
business operations or the Purchaser.
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Section 4.7 ABSENCE OF CHANGES. Except as set forth in Section 4.7 of the
Purchaser Disclosure Schedule, since the Purchaser Balance Sheet Date, Purchaser
has been operated in the ordinary course of business consistent with past
practice and there has not been any material adverse change, or any event or
development which, individually or together with other such events or
developments, could reasonably be expected to result in a material adverse
change, in the Purchaser or its financial condition. In addition, without
limiting the foregoing, except as disclosed in Section 4.7 of the Purchaser
Disclosure Schedule, there has not occurred since the Purchaser Balance Sheet
Date:
(t) any amendment or change to the Certificate of Incorporation of
Purchaser or its by-laws which could have a material adverse effect on the
ability of Purchaser to consummate the transactions contemplated hereby and by
the Operative Agreements to which it is a party or on the financial condition of
Purchaser;
(u) any material adverse change in any Liability or incurrence of any
material Liability of Purchaser other than in the ordinary course of business
consistent with past practices;
(v) any physical damage, destruction or other casualty loss (whether
or not covered by insurance) materially affecting Purchaser or its financial
condition;
(w) any material write-off or write-down of or any determination to
write off or write down any of Purchaser's assets;
(x) any sale, license or other disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any material assets, other than in the
ordinary course of business consistent with past practice;
(y) the commencement or notice or threat of commencement of any
lawsuit or proceedings against, or investigation of, Purchaser which could have
a material adverse effect on the financial condition, business or operations of
Purchaser;
Section 4.8 NO UNDISCLOSED LIABILITIES. Except as described in Section 4.8
of the Purchaser Disclosure Schedule or included in the Purchaser Balance Sheet,
there are no Liabilities of, relating to or affecting the Purchaser (whether or
not required to be reflected in financial statements in accordance with GAAP),
other than Liabilities incurred in the ordinary course of business consistent
with past practice since the Purchaser Balance Sheet Date and in accordance with
the provisions of this Agreement and the Operative Agreements, which in the
aggregate are not material to the business of Purchaser.
Section 4.9 TAXES. Except as set forth in Section 4.9 of the Purchaser
Disclosure Schedule:
(a) All Tax Returns (including, without limitation, all United
States federal, state, local and other applicable income, goods and services,
and sales Tax Returns) required to have been filed by or with respect to
Purchaser have been duly and timely filed, and such Tax Returns shall be duly
and timely filed through the period from the date hereof to the Closing Date,
and each such Tax Return correctly and completely reflects the Tax Liability and
all other information required to be reported thereon. All Taxes due and payable
by Purchaser have been paid (whether or not shown on any Tax Return), including
all payments of estimated Taxes (taking into account any duly obtained
extensions).
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(b) The provisions for Taxes due by Purchaser (including those
for which Tax Returns are not yet required to be filed) in the Balance Sheet for
the period ended on the date of the Balance Sheet are sufficient for all unpaid
Taxes of Purchaser.
(c) Purchaser is not a party to any agreement extending the time
within which to file any Tax Return. No claim has ever been made by any
jurisdiction in which Purchaser does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(d) Purchaser has withheld or deducted all Taxes required by Law
to have been withheld or deducted in connection with amounts paid or owing to
any present or former employee, officer, director, shareholder, creditor,
licensor, licensee, distributor, independent contractor or other third party,
and Purchaser has duly paid all amounts so withheld or deducted to the proper
recipients thereof within the times and in the manner required by such Laws.
(e) None of Purchaser's Tax Returns have been audited by IRS or
any other Taxing Authorities. There are no investigations, examinations,
reassessments, claims, actions, suits or proceedings pending or, to Purchaser's
Knowledge, threatened against Purchaser in respect of any Taxes, nor are there
any matters under discussion with the IRS or any other Taxing Authorities
relating to any Taxes imposed, levied or assessed by any such Taxing Authority.
There is no dispute concerning any Tax Liability of Purchaser either threatened,
claimed or raised by any Taxing Authority or of which Purchaser is or reasonably
should be aware. There are no Liens for Taxes upon the Assets and Properties of
Purchaser.
Section 4.10 DISCLOSURE. No representation or warranty of Purchaser
contained in this Agreement, and no statement contained in the Purchaser
Disclosure Schedule or in any certificate, list or other writing furnished to
Seller pursuant to any provision of this Agreement or with respect to Seller's
due diligence review of Purchaser contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in the light of the circumstances under which they were made,
not misleading.
Section 4.11 BROKERS. No agent, broker, finder, investment banker,
financial advisor or other similar Person will be entitled to any fee,
commission or other compensation in connection with any of the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by the Purchaser.
ARTICLE 5
CERTAIN AGREEMENTS OF THE PARTIES
Section 5.1 CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) Seller covenants and agrees that between the date hereof and
the Closing Date, Seller shall cause the Division to conduct its Business in the
ordinary course and consistent with past practice.
(b) Seller covenants and agrees that, prior to the Closing Date,
and without making any commitment on Purchaser's behalf, Seller will use all
reasonable efforts to preserve substantially intact the business organization of
the Division, to keep available to Purchaser the services of the employees and
consultants of the Business and to preserve the current relationships of the
Division with
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its clients, customers, suppliers and other persons with which the Seller has
significant business relationships with respect to the Division or the Business.
(c) Seller covenants and agrees that, prior to the Closing Date,
Seller will maintain the books and records of the Division in the usual, regular
and ordinary manner consistent with past practices; and to use all reasonable
efforts to maintain all of the Purchased Assets in good repair, working order
and operating condition (subject only to ordinary wear and tear).
(d) Seller covenants and agrees that, prior to the Closing Date,
Seller will not merge, amalgamate or consolidate or sell all or substantially
all of its Assets and Property including, without limitation, any of the
Purchased Assets, or obligate itself to do so, with or into or to any other
Person, without the prior written consent of Purchaser.
(e) Except as could not have a material adverse effect on the
Business or Condition of the Division, Seller covenants and agrees that, prior
to the Closing Date, Seller will (i) comply with all material applicable Laws,
(ii) file all Tax Returns required to be filed with any Governmental or
Regulatory Authority and make timely payments of applicable Taxes when due; and
(iii) take all reasonable actions necessary to be in compliance with, and to
maintain the effectiveness of, all material Permits.
Section 5.2 FURTHER COVENANTS. Seller covenants and agrees that, prior
to the Closing Date, Seller will not, without the prior written consent of
Purchaser, do any of the following:
(a) create, incur, assume, maintain or permit to exist any
Lien on any of the Purchased Assets, other than Permitted Liens;
(b) waive any material right under any Contract included in
the Purchased Assets;
(c) transfer to any Person any rights to the Intellectual
Property included in the Purchased Assets, other than as reasonably necessary in
the ordinary course of business consistent with past practice in rendering
services to clients and customers;
(d) enter into any agreement granting marketing,
distribution or similar rights of any type or scope with respect to any products
or services of the Division;
(e) sell, lease, license, or otherwise dispose of any of the
Purchased Assets, except in the ordinary course consistent with past practice in
rendering services to clients and customers;
(f) make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(g) abandon, modify, waive, terminate or otherwise change
any of the Permits described in Section 3.19 of the Disclosure Schedule;
(h) take any action or course of action inconsistent with
compliance with the covenants and agreements contained in this Agreement; or
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(i) take or agree to commit to take any action that would make
any representation or warranty of Seller contained herein inaccurate in any
material respect at the Closing or omit to take any action necessary to prevent
any such representation or warranty from being inaccurate in any material
respect at such time or which would diminish the value of the Purchased Assets
and the Business as a going concern.
Section 5.3 ACCESS TO INFORMATION. From the date hereof until the Closing,
upon reasonable notice, each party hereto shall, and shall cause such party's
Representatives to, (i) afford the Representatives of the other party reasonable
access, during normal business hours, to the offices, properties, books and
records of such party and to such party's officers, employees, agents,
accountants and actuaries, and (ii) furnish to the Representatives of the other
party such additional financial and operating data and other information
regarding the assets, properties, goodwill and business of such party as such
other party may from time to time reasonably request; provided, however, that
such investigation shall not unreasonably interfere with the business or
operations of such party. No investigation or access to information pursuant to
this Section 5.3 shall affect any representation or warranty made by any party
hereunder or otherwise affect the rights and remedies available to Purchaser or
Seller hereunder.
Section 5.4 CONFIDENTIALITY.
(a) The information which Purchaser acquires about Seller as a result
of the investigations permitted by this Agreement is termed "Evaluation
Material." Purchaser agrees that neither it nor any of its representatives will
use any such material for any purpose not related to the transactions
contemplated by this Agreement and will not disclose any such material to anyone
except its representatives who may need such information to perform their
respective duties and have been informed of its confidential nature and directed
to treat it confidentially. If the transactions contemplated by this Agreement
are not consummated, Purchaser agrees that it and its representatives will
return any written Evaluation Material in its possession, or will destroy and
will not retain any such material, any copies thereof or any notes or memoranda
made using such material.
(b) The confidentiality agreement contained herein will terminate upon
the earlier of two years after the date hereof or upon consummation of the
transactions contemplated hereby.
(c) The parties agree that monetary damages alone would not be a
satisfactory remedy for a breach of that portion of the confidentiality
agreement contained herein which relate to the proprietary processes employed by
Seller, and that if that provision is breached, Seller may be entitled to
injunctive relief as well as monetary damages.
(d) Notwithstanding the foregoing, Purchaser and its representatives
may use and disclose Evaluation Material and information obtained from the
Evaluation Material to the extent that (i) they acquired such information on a
non-confidential basis prior to receipt thereof from Seller or a representative
of Seller, (ii) such information has become generally available to the public,
or (iii) such information is provided to the Person using or disclosing it by a
Person who obtained such information other than as a result of a breach of this
Agreement. Furthermore, Purchaser and its representatives may disclose such
information to the extent that they are required to do so to comply with an
Order , but upon receiving notice that any such Order has been issued or is
being sought, they will promptly notify Seller and will, at Seller's expense,
cooperate with Seller's efforts to contest the issuance of such Order .
(e) Seller will hold in strict confidence from any Person (other than
any Affiliate of Purchaser or any Representative of Purchaser or such
Affiliate), unless compelled to disclose by judicial
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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, all documents and information concerning the Purchaser or
any of its Affiliates furnished to it in connection with this Agreement or the
transactions contemplated hereby, 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.
Section 5.5 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Seller and Purchaser will each use their best efforts to obtain
all authorizations, consents, orders and approvals of all federal, state, and
local and all foreign regulatory bodies and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement, and will cooperate fully with the other
parties in promptly seeking to obtain all such authorizations, consents, orders
and approvals.
(b) Purchaser and Seller will each use all reasonable efforts to
assist one another in obtaining the consents referred to in Sections 6.1(c),
6.2 (e) and, if any, the consents referred to in Section 6.2(d); provided,
however, that neither Purchaser nor Seller shall be obligated with respect to
such assistance (i) to expend any funds except the payment of the fees and
expenses of any applicable attorneys, consultants or other advisors retained by
it and applicable filing fees or (ii) to take any actions with respect to its
business which, in its reasonable judgement, is materially adverse.
Section 5.6 NO SOLICITATION OF OFFERS, ETC.
(a) Prior to the termination of this Agreement in accordance with its
terms, Seller and its Affiliates shall not, nor shall they authorize or permit
any officer, director, employee, investment banker, attorney, accountant or
other representative of or Person retained by them to, directly or indirectly,
take any action to knowingly solicit, encourage or facilitate any action that
might lead to, or accept any offers, initiate or participate in negotiations or
discussions with, or provide any non-public information to, or enter into any
letter of intent, preliminary agreement or definitive agreement with any Person
with respect to, any possible merger, amalgamation, acquisition, reorganization,
exchange offer or any sale of all or substantially all of the Purchased Assets,
purchase or sale of capital stock (whether outstanding shares, treasury or other
shares) or change in control of, or any similar transaction or transactions
involving, directly or indirectly, the Division, its Business or the Purchased
Assets (collectively, a "Sale"). Seller shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
(b) Seller acknowledges and agrees that a violation by it of Section
5.6(a) will cause irreparable damage to Purchaser. Accordingly, Purchaser agrees
that, in the event of a breach of
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Section 5.6(a), Purchaser shall be entitled to a temporary or permanent
injunction or restraining order to prevent breaches of Section 5.6(a) and to
specifically enforce the terms and provisions thereof without the need to post
any security or bond, such rights to be cumulative and in addition to whatever
other remedies at law or in equity or otherwise Purchaser may have pursuant to
this Agreement.
Section 5.7 NOTICE OF CERTAIN MATTERS.
(a) Seller covenants and agrees to give prompt notice in writing to
Purchaser of: (i) any information that indicates that any representation or
warranty of Seller contained herein was not true and correct as of the date
hereof or will not be true and correct as of the Closing Date, (ii) the
occurrence of any event which will result, or has a reasonable prospect of
resulting, in the failure to satisfy a condition specified in Article 6 hereof,
(iii) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement, (iv) any notice of, or other
communication relating to, any default or event which, with notice or lapse of
time or both, would become a default under any Contract listed on the Disclosure
Schedule, (v) any change in the officers or directors of Seller, and (vi) any
change in the employment condition or terms of employment of the Employees.
(b) Seller covenants and agrees to (i) promptly advise Purchaser of
any fact, condition or change that, individually or in the aggregate, has or
results in a material adverse effect on the Business or Condition of the
Division, and (ii) notify Purchaser of any governmental complaint, investigation
or hearing (or communications indicating that the same may be contemplated) or
adjudicatory proceeding involving the Division or the Purchased Assets, and will
keep Purchaser fully informed of such events and permit Purchaser's
Representatives reasonable access to all materials prepared in connection
therewith.
(c) The giving of any such notice under this Section 5.7 or the giving
of other information shall in no way change or modify the Sellers'
representations and warranties or the conditions to Purchaser's obligations
contained herein or otherwise affect the remedies available to Purchaser
hereunder.
Section 5.8 FURTHER ACTION, RELATED ASSETS AND PROPERTIES. Each of the
parties hereto shall execute and deliver such documents and other papers and
take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated hereby. At
any time or from time to time after the Closing, Seller shall execute and
deliver to Purchaser such other documents and instruments, provide such
materials and information and take such other actions as Purchaser may
reasonably request to consummate the transactions contemplated by this Agreement
and the Operative Agreements and otherwise to cause Seller to fulfill each of
its obligations under this Agreement and the Operative Agreements.
Section 5.9 NON-COMPETITION AGREEMENT. Seller agrees to execute and deliver
on the Closing Date a Non-Competition Agreement in the form attached hereto as
Exhibit B (the "Non-Competition Agreement").
Section 5.10 ALLOCATION OF PURCHASE PRICE. The Purchase Price has been
agreed upon by the parties and the values assigned to the various Purchased
Assets are listed in Section 5.10 of the Disclosure Schedule. Seller and the
Purchaser agree that the values were separately established as a result of good
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faith bargaining and that, in reporting the transactions contemplated by this
Agreement to the Internal Revenue Service, as is required by Section 1060 of the
Internal Revenue Code, they will use such prices.
ARTICLE 3
CONDITIONS TO CLOSING
Section 6.1 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
to consummate the transactions contemplated by this Agreement at the Closing
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date, with the same force and effect as if made as of the Closing Date, other
than such representations and warranties as are made as of another date, which
shall be true and correct as of such date; provided, however, that if any such
portion of any representation or warranty is already qualified by materiality,
for purposes of determining whether this Section 6.1 (a) has been satisfied with
respect to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects; and all the agreements, undertakings, covenants and obligations
contained in this Agreement to be complied with by Purchaser on or before the
Closing Date shall have been complied with in all material respects, and Seller
shall have received a certificate of Purchaser to such effect signed by a duly
authorized officer thereof.
(b) No Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of such
transactions; provided, however, that the parties hereto shall take all
reasonable actions necessary to have any such order or injunction vacated.All
governmental orders, approvals and consents to the transactions contemplated by
this Agreement shall have been obtained and be in effect on the Closing Date, in
form and substance reasonably acceptable to Seller except to the extent that the
failure to obtain any such consent would not have the effect of making the
transactions contemplated by this Agreement illegal or otherwise restrain or
prohibit consummation of such transactions or result in a material liability to
Seller. All statutory periods in connection with notification procedures
required under any Environmental Laws (to the extent applicable) for the
purposes of the consummation of the transactions contemplated hereby, shall have
lapsed prior to the Closing Date.
(d) Seller shall have received from McGuire, Woods, Battle & Boothe
LLP, counsel to Purchaser, a legal opinion addressed to Seller and dated the
Closing Date in the form attached hereto as Exhibit E.
(e) Seller shall have received a certificate of the Secretary or an
Assistant Secretary of Purchaser certifying the names and signatures of the
officers of Purchaser authorized to sign this Agreement, the Operative Documents
to which Purchaser is a party and any other document required to be delivered
hereunder.
(f) Purchaser shall have offered to enter into Employment Agreements
with each of the Employees it desires to employ in the form attached hereto as
Exhibit C.
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(g) Purchaser shall have executed and delivered the Registration
Rights Agreement in the form attached hereto as Exhibit D.
(h) Purchaser shall have executed and delivered the Service and
Referral Agreement in the form attached hereto as Exhibit G.
(i) Purchaser shall have executed and delivered the VAR Agreement in
the form attached hereto as Exhibit H.
(j) All proceedings, corporate or otherwise, taken by Purchaser in
connection with the transactions contemplated hereby and all instruments and
documents incident thereto shall be reasonably satisfactory in form and
substance to Seller and its counsel.
(k) Seller shall have received a Certificate of Good Standing for
Purchaser from the appropriate official of the State of Delaware, dated as of a
date not earlier than ten Business Days prior to the Closing Date.
Section 6.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement at the
Closing shall be subject to the fulfillment, at or prior to the Closing, of each
of the following conditions:
(a) Without giving effect to any matter disclosed to Purchaser between
the date hereof and the Closing Date, the representations and warranties of
Seller contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if made as of
the Closing Date, other than such representations and warranties as are made as
of another date, which shall be true and correct as of such date; provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.2(a) has been satisfied with respect to such portion of such representation or
warranty, such portion of such representation or warranty as so qualified must
be true and correct in all respects; and all the agreements, undertakings,
covenants and obligations contained in this Agreement to be complied with by
Seller on or before the Closing shall have been complied with in all material
respects, and Purchaser shall have received a certificate of Seller to such
effect signed by a duly authorized officer of Seller.
(b) No Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of such
transactions or which would have a material adverse effect on the Business or
Condition of the Division; in addition, no Action or Proceeding before any
Governmental or Regulatory Authority shall be pending or threatened and no
investigation by any Governmental or Regulatory Authority shall have commenced
seeking to restrain or prohibit (or questioning the validity or legality of) the
transactions contemplated by this Agreement or seeking to restrict in any
material respect the effective operation of the Business after the Closing or
seeking material damages from Seller or seeking damages from the Purchaser in
connection with this Agreement, which Purchaser, in good faith and with the
advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby; provided, however, that
the parties hereto shall use their reasonable best efforts to have any such
order or injunction vacated.
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(c) Purchaser shall have received a Bill of Sale and Assignment in the
form attached hereto as Exhibit A.
(d) All governmental orders, approvals and consents to the
transactions contemplated by this Agreement shall have been obtained and be in
effect on the Closing Date, in form and substance reasonably acceptable to the
Purchaser. All statutory periods in connection with any Environmental Laws (to
the extent applicable) for the purposes of the consummation of the transactions
contemplated hereby shall have lapsed prior to the Closing Date, and such
approvals as shall have been obtained shall not impose upon Purchaser, the
Division or the transactions contemplated hereby any conditions or other
requirements which would cause any thereof any material additional costs or
materially interfere with the continued operations of the Business or the
business of Purchaser, as currently conducted or materially and adversely affect
the Business or Condition of the Division.
(e) Purchaser shall have received the third party consents, approvals,
authorizations or actions to the transactions contemplated by this Agreement, if
any, in form and substance reasonably satisfactory to the Purchaser from the
parties listed in Section 6.2(d) of the Disclosure Schedule.
(f) Purchaser shall have received from Sims, Moss, Kline & Davis LLP,
counsel to Seller, a legal opinion addressed to Purchaser and dated the Closing
Date, in the form of Exhibit F attached hereto.
(g) The Purchaser shall have received a Certificate of Good Standing
for Seller from the appropriate official of the State of Delaware, dated as of a
date not earlier than ten Business Days prior to the Closing Date.
(h) Since the date of this Agreement, no events or circumstances shall
have occurred which, individually or in the aggregate, have had or may be
reasonably expected to have a material adverse effect on the Business or
Condition of the Division.
(i) Purchaser shall have received a certificate of an officer of
Seller certifying the names and signatures of the officers of Seller authorized
to sign any document required to be delivered by Seller hereunder.
(j) Seller shall have executed and delivered to Purchaser the
Non-Competition Agreement in the form attached hereto as Exhibit B.
(k) Each of Roger Nebel, Sam Migues and at least three of the other
four Employees shall have executed and delivered an Employment Agreement in the
form of Exhibit C attached hereto.
(l) Seller shall have executed and delivered the Registration Rights
Agreement in the form attached hereto as Exhibit D.
(m) Seller shall have executed and delivered the Service and Referral
Agreement in the form attached hereto as Exhibit G.
(n) Seller shall have executed and delivered the VAR Agreement in the
form attached hereto as Exhibit H.
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(o) All Liens on the Purchased Assets, other than Permitted
Liens, shall have been fully satisfied, terminated and discharged as evidenced
by releases or satisfactions satisfactory to Purchaser.
(p) All proceedings, corporate or otherwise, taken by Seller
in connection with the transactions contemplated hereby and all instruments and
documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser and its counsel.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
Section 7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding any right of Purchaser and its Affiliates (whether
or not exercised) to investigate the affairs of Seller or any right of any party
(whether or not exercised) to investigate the accuracy of the representations
and warranties of the other party contained in this Agreement or the waiver of
any provision hereof, each Seller, on the one hand, and Purchaser, on the other,
have the right to rely fully upon the representations, warranties, covenants and
agreements of the other contained in this Agreement. The representations,
warranties, covenants and agreements of Seller and Purchaser contained in this
Agreement shall survive the Closing (a) indefinitely with respect to
representations or warranties relating to Tax matters, matters relating to
Environmental Law or Environmental Liabilities, ERISA and compliance with Laws;
and (b) until the third anniversary of the Closing Date with respect to all
other representations and warranties and any covenant or agreement to be
performed in whole or in part on or prior to the Closing, except that any
representation, warranty, covenant or agreement that would otherwise terminate
in accordance with clauses (a) or (b) above will continue to survive if a Claim
Notice or Indemnity Notice (as applicable) shall have been timely given under
Article 8 on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved as provided in Article
10 but only with respect to matters described in the Claim Notice or Indemnity
Notice.
ARTICLE 8
INDEMNIFICATION
Section 8.1 INDEMNIFICATION.
(a) Seller shall indemnify Purchaser and its stockholders,
officers, directors, employees, agents and Affiliates (collectively, the
"Purchaser Indemnities"), in respect of, and hold each of them harmless from and
against, and shall pay the full amount of, any and all Losses suffered, incurred
or sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation or breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the part
of Seller contained in this Agreement or any of the Operative Agreements
(including, without limitation, any certificate delivered in connection herewith
or therewith) during any applicable survival period pursuant to Section 7 above.
(b) Purchaser agrees to indemnify Seller and its stockholders,
officers, directors, employees, agents and Affiliates (the "Seller Indemnities")
in respect of, and hold each of them harmless from and against, and shall pay
the full amount of, any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject, resulting from, arising out of or
relating to any misrepresentation or breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Purchaser contained
in this Agreement or the Operative Agreements (including,
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without limitation, any certificate delivered in connection herewith or
therewith) during any applicable survival period pursuant to Section 7.01 above.
Section 8.2 METHOD OF ASSERTING CLAIMS. All claims for indemnification by
any Indemnified Party under Section 8.1 will be asserted and resolved as
follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 8.1 in respect of, arising out of or
involving a claim or demand made by any Person not a party to this Agreement
against the Indemnified Party (a "Third Party Claim"), the Indemnified Party
must deliver a Claim Notice to the Indemnifying Party within 30 Business Days
after receipt by such Indemnified Party of written notice of the Third Party
Claim; provided, however, that failure to give such Claim Notice shall not
affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party, which counsel must be reasonably satisfactory to the
Indemnified Party, provided that all Indemnifying Parties with respect to such
Third Party Claim jointly acknowledge to the Indemnified Party its right to
indemnity pursuant hereto in respect of the entirety of such claim (as such
claim may be modified through written agreement of the parties or arbitration
hereunder) and provide assurances reasonably satisfactory to the Indemnified
Party that the Indemnifying Parties will be financially able to satisfy such
claim in full if it is decided adversely. Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the Indemnifying Party shall not
be liable to the Indemnified Party for legal expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof (except as
hereinafter provided), but shall continue to pay for any expenses of
investigation or any Loss suffered. If the Indemnifying Party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense (except as hereinafter
provided), separate from the counsel employed by the Indemnifying Party.
Notwithstanding the foregoing, if (i) the Indemnifying Party shall not assume
the defense of a Third Party Claim with counsel satisfactory to the Indemnified
Party within five Business Days of any Claim Notice, or (ii) legal counsel for
the Indemnified Party notifies the Indemnifying Party that there are or may be
legal defenses available to the Indemnified Party or to other Indemnified
Parties which are different from or additional to those available to the
Indemnifying Party, which, if the Indemnified Party and the Indemnifying Party
were to be represented by the same counsel, would constitute a conflict of
interest for such counsel or prejudice prosecution of the defenses available to
such Indemnified Party, or (iii) if the Indemnifying Party shall assume the
defense of a Third Party Claim and fail to diligently and vigorously prosecute
such defense in a timely manner, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party control the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of all
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Indemnified Parties, and (ii) provides for no relief other than the payment of
monetary damages and such monetary damages are paid in full by the Indemnifying
Party, and in all other cases may not so settle without the prior written
consent of the Indemnified Party.
(c) In the event any Indemnified Party should have a claim under
Section 8.1 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been actually
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or fails
to notify the Indemnified Party within the Dispute Period as to whether the
Indemnifying Party disputes the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively deemed
a Liability of the Indemnifying Party under Section 8.1 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its Liability with respect to such
claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration as provided in Article 10.
(d) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at law or in equity,
under federal or state securities Laws or by separate agreement (including,
without limitation, under the Operative Agreements).
(e) Any payment under this Article 8 shall be treated for tax purposes
as an adjustment of the Purchase Price to the extent such characterization is
proper and permissible under relevant Tax authorities, including court
decisions, statutes, regulations and administrative promulgations or,
alternatively, by Purchaser as an offset to a Tax benefit item, if such
characterization is permissible under such Tax authorities.
ARTICLE 6
TERMINATION
Section 9.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at
any time prior to the Closing under the following provisions:
(a) by mutual written agreement of the Purchaser and the Seller's
Representative;
(b) by Purchaser after written notice to Seller if Purchaser is
not then in material breach of any provision of this Agreement and there has
been any one or more misrepresentations in or breaches of the representations or
warranties made by Seller contained herein that, if not cured on or prior to the
Closing Date, could be reasonably expected to give Purchaser grounds not to
close under Section 6.2; a termination pursuant to this paragraph (b) shall
become effective (i) fifteen (15) days after such notice with respect to such a
misrepresentation or breach that is not capable of being cured on or prior to
the Closing Date, or (ii) immediately prior to the Closing with respect to such
a misrepresentation or breach that is capable of being cured, but is not cured,
on or prior to the Closing Date;
(c) by Purchaser if Purchaser is not then in material breach of
any provision of this Agreement after written notice to Seller of the failure by
Seller to perform and satisfy in any material respect any of its material
obligations required to be performed and satisfied by Seller on or prior to the
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Closing Date, if the aggregate of all such failures shall be material; a
termination pursuant to this paragraph (c) shall become effective (i) fifteen
(15) days after such notice with respect to such a failure that is not capable
of being cured on or prior to the Closing Date, or (ii) immediately prior to the
Closing with respect to such a failure that is capable of being cured, but is
not cured, on or prior to the Closing Date;
(d) by Seller after written notice by Seller to Purchaser if Seller is
not then in material breach of any material provision of this Agreement and
there has been one or more material misrepresentations in or material breaches
of the representations or warranties made by Purchaser herein which, if not
cured on or prior to the Closing Date, could be reasonably expected to give
Seller grounds not to close under Section 6.1; a termination pursuant to this
paragraph (d) shall become effective (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
Date with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(e) by Seller if Seller is not then in material breach of any material
provision of this Agreement after written notice by Seller to Purchaser of
Purchaser's failure to perform and satisfy in any material respect any of its
material obligations under this Agreement required to be performed and satisfied
by Purchaser on or prior to the Closing Date, if the aggregate of all such
failures shall be material; a termination pursuant to this paragraph (e) shall
become effective (i) fifteen (15) days after such notice with respect to such a
failure that is not capable of being cured on or prior to the Closing Date, or
(ii) immediately prior to the Closing Date with respect to such a failure that
is capable of being cured, but is not cured, on or prior to the Closing Date;
(f) by Purchaser or by Seller, if the Closing shall not have been
consummated by October 15, 1999; provided, however, that neither Purchaser nor
Seller may terminate this Agreement pursuant to this paragraph (f) if the
Closing shall not have been consummated within such time period by reason of the
failure of such party or any of its Affiliates to perform in all material
respects any of its or their respective covenants or agreements contained in
this Agreement; and
(g) by Purchaser or Seller if any United States federal or state, Law
or any rule or regulation thereunder shall hereafter be enacted or become
applicable that makes the transactions contemplated hereby or the consummation
of the Closing illegal or otherwise prohibited, or if any judgment, injunction,
order or decree enjoining any party hereto from consummating the transactions
contemplated hereby is entered and such judgment, injunction, order or decree
shall become final and nonappealable.
The party desiring to terminate this Agreement pursuant to the
foregoing provisions shall give written notice of such termination to the other
party.
Section 9.2 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 9.1, such termination shall be without liability of any
party to any other party to this Agreement except as hereinafter expressly
provided in this Section 9.2. If such termination shall result from the breach
by any party of its representations, warranties or covenants contained in this
Agreement, such party shall be fully liable for any and all Losses incurred or
suffered by the other parties as a result of such failure or breach and such
termination shall not be deemed to be an election of remedies. The provisions of
Sections 5.4, 5.6, this Section 9.2 and Articles 10, 11, and 12 shall survive
any termination of this Agreement pursuant
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to this Article 9, and each party hereto shall be fully responsible for any
breach of Section 5.4 or 5.6, whether or not such breach occurs prior to the
termination of this Agreement.
ARTICLE 10
ARBITRATION OF DISPUTES
Section 10.1 ARBITRATION. The parties agree that, except where
injunctive or equitable relief is provided for pursuant to this Agreement,
arbitration shall be the exclusive and final means for resolving any dispute,
controversy, claim, or differences ("Disputes") related to or arising out of or
in connection with this Agreement, or any commercial relationship or dealings of
the parties that are related to or arise out of or in connection with the
subject matter of this Agreement (including without limitation any questions
concerning the scope and application of this arbitration clause or the
arbitrability of any Dispute under this clause), which arbitration shall be
conducted according to the rules then in effect of the American Arbitration
Association (the "AAA"), or such other rules as the AAA may designate (the
"Rules").
Section 10.2 PROCEDURE FOR ARBITRATION
(a) The right of any party to require the arbitration of any
Dispute hereunder and the arbitration of any Dispute hereunder shall be governed
by the Federal laws of the United States (including expressly, but without
limitation, the Federal Arbitration Act).
(b) The arbitration shall be held in Washington, D.C. in the
event Seller demands arbitration and in Atlanta, Georgia in the event Purchaser
demands arbitration. Demand for arbitration (an "Arbitration Notice") shall be
delivered by the party demanding arbitration under this Agreement (the
"Initiating Party") to the party (or parties) with whom arbitration is sought in
accordance with the procedure set forth in the Rules. The filing fee in
connection with the arbitration shall be paid by the parting demanding
arbitration. The parties shall agree upon an arbitrator within thirty (30)
calendar days after the demand for arbitration is served. If they fail to do so
within such time, the arbitrator, or a panel of three arbitrators if so
requested by any party to the Dispute, shall be appointed by the AAA. If the
arbitrator dies, becomes disqualified or incapacitated, or fails or refuses to
act before the matter or matters subjected to such arbitration have been
determined, then, in place of such arbitrator, a new arbitrator shall promptly
be appointed in the same manner as such arbitrator. The arbitrator or
arbitration panel shall decide any matter before him or it in accordance with
this Agreement. The arbitrator shall have the power and the discretion to order
discovery and the taking of depositions.
(c) The arbitrator or arbitration panel shall proceed
promptly and diligently and render his or her decision as soon as practicable.
The decision of the arbitrator or arbitration panel shall be in writing and
presented in separate findings of fact and law (the "Arbitrators Report") which
shall be a final and binding award on the parties from which no appeal may be
taken, and an order confirming the award or judgment upon the award may be
entered in any court having jurisdiction thereto.
(d) All fees, costs and expenses (including reasonable
attorneys' fees and expenses) incurred by a party that prevails on any issue in
any arbitration commenced hereunder or in any judicial proceeding seeking to
enforce this agreement to arbitrate disputes or seeking to enforce any order or
award of any arbitration hereunder shall be assessed against the party or
parties that do not prevail on such issue or issues.
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(e) Notwithstanding the foregoing, it is hereby agreed that the
arbitrator or arbitration panel shall only have the power to order or grant
relief in a manner that is directly related to the subject matter of the dispute
before the arbitrator or arbitration panel, that the relief or order that may be
granted by the arbitrator or arbitration panel shall be limited to that which a
court of competent jurisdiction would have had the power to order or grant were
the dispute to have been heard before such court, and that no arbitrator or
arbitration panel shall have any power to add to, alter or modify the terms and
conditions of this Agreement or any other agreement executed and delivered in
connection herewith or to decide any issue which does not arise from the
interpretation or application of the provisions of this Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.1 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 against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
delivered by a nationally recognized overnight courier service prepaid, to the
parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Infrastructure Defense, Inc.
6100 Lincolnia Road
Second Floor
Alexandria, VA 22313
Attention: Kenneth J. Purfey
Facsimile: (703) 914-7100
with a copy to:
McGuire, Woods, Battle & Boothe LLP
1750 Tysons Blvd.
Suite 1800
McLean, VA 22102
Attention: Clive R.G. O'Grady, Esquire
Facsimile: (703) 712-5248
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If to Seller to:
HomeCom Communications, Inc.
Building 14, Suite 100
3535 Piedmont Road
Atlanta, GA
Attention: Harvey Sax
Facsimile: (404) 237-3060
with a copy to:
Sims, Moss, Kline & Davis LLP
400 Northpark Town Center
Suite 310
Atlanta, Georgia 30328
Attention: Jerry L. Sims
Facsimile: (770) 481-7210
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 for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given on the earlier of the fourth Business Day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided for in this Section, be deemed given on the earlier of the
first Business Day following the date sent by such overnight courier or 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 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
parties hereto. It is expressly agreed between the parties that a facsimile
transmission shall constitute notice, if provided in accordance herewith, for
all purposes.
Section 11.2 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Exhibits
hereto, the Disclosure Schedule and the Operative Agreements supersede all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof. This
Agreement may be amended, supplemented or modified only by a written instrument
duly executed by or on behalf of the Purchaser and Seller. The terms and
provisions of this Agreement are intended solely for the benefit of each party
hereto and their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights, and this
Agreement does not confer any such rights, upon any other Person other than any
Person entitled to indemnity under Article 8.
Section 11.3 EXPENSES. Except as otherwise provided in this Agreement,
each party will pay its own costs and expenses incurred in connection with this
Agreement, the Operative Agreements, and the transactions contemplated hereby
and thereby.
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Section 11.4 CUMULATIVE REMEDIES. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
Section 11.5 WAIVER. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition.
Section 11.6 NO ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned (by operation of law
or otherwise) by Seller without the prior written consent of Purchaser, and any
attempt to do so will be void. Subject to the preceding sentence, this Agreement
is binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective heirs, executors, personal representatives,
successors and assigns.
Section 11.7 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance here from and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
Section 11.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Section 11.9 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. SELLER
AND PURCHASER CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COMMONWEALTH OF VIRGINIA OR THE STATE OF GEORGIA AND IRREVOCABLY
AGREE THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE
OPERATIVE AGREEMENTS MAY BE LITIGATED IN SUCH COURTS. SELLER AND PURCHASER
ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR RESPECTIVE PROPERTIES,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND WAIVE ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR
THE OPERATIVE AGREEMENTS. PURCHASER AND SELLER FURTHER IRREVOCABLY CONSENT TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE PARTY AT THE ADDRESS SPECIFIED IN THIS AGREEMENT,
SUCH SERVICE TO BECOME EFFECTIVE FIFTEEN (15) DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY PARTY HERETO TO
SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS,
SUITS OR PROCEEDINGS AGAINST ANY OF THE OTHER PARTIES HERETO IN
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SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY ANY
APPLICABLE LAW.
Section 11.10 CONSTRUCTION. The parties hereto intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
The parties hereto agree that this Agreement is the product of negotiation
between sophisticated parties and individuals, all of whom were represented by
counsel, and each of whom had an opportunity to participate in and did
participate in, the drafting of each provision hereof. Accordingly, ambiguities
in this Agreement, if any, shall not be construed strictly or in favor of or
against any party hereto but rather shall be given a fair and reasonable
construction without regard to the rule of CONTRA PROFERENTUM.
Section 11.11 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.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
PURCHASER:
Infrastructure Defense, Inc.
By:
-------------------------------
Name: Kenneth J. Purfey
Title: Vice President and
Chief Financial Officer
SELLER:
HomeCom Communications, Inc.
By:
-------------------------------
Name:
Title:
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EXHIBIT A
BILL OF SALE AND ASSIGNMENT
This BILL OF SALE AND ASSIGNMENT ("Bill of Sale") is made as of the 1st
day of October, 1999 by HOMECOM COMMUNICATIONS, INC., a Delaware corporation
("Seller") in favor of INFRASTRUCTURE DEFENSE, INC., a Delaware corporation
("Buyer").
INTRODUCTION
A. Buyer has purchased from Seller all of its right, title and interest
in and to the assets and business of Seller's internet security division (the
"Division"), pursuant to that certain Asset Purchase Agreement (the "Purchase
Agreement"), dated as of even date herewith by and between Buyer and Seller.
Terms which are used but not defined herein shall have the respective meanings
accorded such terms in the Purchase Agreement.
B. The Purchase Agreement provides, among other things, that for the
consideration provided therein, Seller will sell to Buyer the Purchased Assets.
C. The purpose of this Bill of Sale is to record and effect the
transfer to Buyer of the Purchased Assets set forth in Section 1 hereof.
NOW, THEREFORE, for the consideration paid by Buyer at Closing as set
forth in the Purchase Agreement, the receipt of which is hereby acknowledged:
1. Seller hereby sells, transfers, conveys, assigns and delivers to
Buyer all assets of Seller relating to or used predominately by the Division or
predominately in connection with the Business including, without limitation, the
following:
(i) all machinery, equipment, computers, servers and other
hardware, software, databases, furniture, vehicles, tools, supplies and spare
parts and the tangible personal property set forth in Section 3.18 of the Seller
Disclosure Schedule to the Purchase Agreement;
(ii) all client lists and other client information of the
Division or used principally in connection with the Business;
(iii) all proprietary and other information and data of the
Division or used principally in connection with the Business, whether or not
contained on any computers, servers and other equipment of Seller or located at
the Leased Real Property, the Company's Property or elsewhere;
(iv) all raw materials, work-in-process and finished
products and services of the Division;
(v) all Permits which are assignable and which are used or
relied upon principally in connection with the Business, if any, including,
without limitation, all Permits listed in Section 3.19 of the Seller Disclosure
Schedule;
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(vi) all Environmental Permits which are assignable and are used
or relied upon principally in connection with the Business including, without
limitation, all Environmental Permits listed in Section 3.23 of the Seller
Disclosure Schedule;
(vii) all Intellectual Property of the Division or used
principally in connection with the Business including, without limitation, the
Intellectual Property listed in Section 3.17(i) of the Seller Disclosure
Schedule;
(viii) the rights and interests of Seller in, to and under all
Contracts of the Division and all other Contracts to the extent related to the
Business including, without limitation, all Contracts listed in Section 3.18 of
the Seller Disclosure Schedule;
(ix) all accounts receivable and notes receivable of the Division
or generated by or on account of the Business including, without limitation, all
accounts receivable and notes receivable listed in Section 3.25 of the Seller
Disclosure Schedule;
(x) all Books and Records of the Division or the Business;
(xi) all forms, labels, stationery, shipping materials,
catalogues, telephone numbers, brochures, art work, photographs and advertising
materials of the Division or the Business including, without limitation, the
name "HomeCom Internet Security";
(xii) all prepaid expenses, customer prepayments and deferred
charges of the Division or generated by or paid or received on account of the
Business;
(xiii) goodwill and all other Assets and Properties of the
Division or relating to the Business including, without limitation, all other
Assets and Properties located on the Leased Real Property historically or the
Company's Property as of the Closing Date and all other assets listed on Section
2.1(b)(xiii) of the Seller Disclosure Schedule; and
(xiv) all of the assets listed on SCHEDULE A hereto, which is
incorporated herein by reference.
2. Seller hereby authorizes Buyer, as its assignee, to demand and
receive any and all of the Purchased Assets transferred by this Bill of Sale, to
give receipts and releases for and in respect of the same, or any part thereof,
and to institute and prosecute any proceedings which Buyer may deem necessary
for the collection, or reduction to possession, of any of the Purchased Assets,
or for the enforcement of any claim or right of any kind.
3. Seller hereby agrees that, from time to time after the delivery of
this Bill of Sale, it will, at the request of Buyer and without further
consideration, promptly take such further action and execute and deliver such
additional assignments, bills of sale, consents or other similar instruments as
Buyer may reasonably deem necessary to complete the transfer of the title or
possession of the Purchased Assets to, or vest them in, Buyer. In the case of
contracts and rights, if any, which cannot be effectively transferred to Buyer
without the consent of third parties, Seller will use its best efforts to obtain
such consents promptly, and if any such consents are unobtainable, will use its
best efforts to assure the benefits thereof to Buyer.
4. Seller hereby affirms that the representations and warranties made
by Seller in the Asset Purchase Agreement are true and correct as of the date
hereof, and that Seller holds good and marketable title to the Purchased Assets
being sold, transferred and conveyed to Buyer hereunder,
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or will hold valid licenses therefor, free and clear of all liens, encumbrances
and liabilities, and shall, if requested in writing by Buyer, warrant and defend
the same against the claims and demands of all persons.
5. The provisions of this Bill of Sale are for the benefit of Buyer,
its successors and assigns, and all rights hereby granted Buyer may be exercised
by Buyer, its successors or assigns.
IN WITNESS WHEREOF, Sellers have executed this Bill of Sale on the date
first above-written.
ATTEST: HOMECOM COMMUNICATIONS, INC.
By:
- ----------------------- ------------------------[CORPORATE SEAL]
Name:
Title:
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SCHEDULE A
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EXHIBIT B
NON-SOLICITATION AND NON-COMPETE AGREEMENT
THIS NON-SOLICITATION AND NON-COMPETE AGREEMENT (this "Agreement"), is
dated as of the 1st day of October, 1999, by and between INFRASTRUCTURE DEFENSE,
INC., a Delaware corporation (the "Company"), and HOMECOM COMMUNICATIONS, INC.,
a Delaware corporation, and its successors ("HomeCom"). Capitalized terms used
but not defined herein shall have the respective meanings ascribed to such terms
in the Asset Purchase Agreement dated of even date herewith by and between the
Company and HomeCom (the "Asset Purchase Agreement").
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, HomeCom
will sell to the Company all of the business and assets of HomeCom's internet
security division (the "Division");
WHEREAS, the Company is willing to pay the Purchase Price set forth in
the Asset Purchase Agreement based in part on HomeCom's agreement not to compete
with the Company with respect to the business as presently being conducted by
the Division or the Company as of the date hereof or solicit the employees,
customers or clients of the Division or the Company including, but not limited
to, those employees entering into employment agreements as part of the
transaction contemplated by the Asset Purchase Agreement and those customers and
clients contained on the client list included as part of the Purchased Assets;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for good and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
HomeCom agree as follows:
1. NON-COMPETE. Except as provided in the Value-Added Distribution
Agreement of even date herewith (the "VAR Agreement"), HomeCom agrees that
during the period beginning on the date of this Agreement and for a period of
three (3) years thereafter (the "Restricted Period"), HomeCom shall not engage
in the provision of electronic infrastructure protection or internet security
products or services (the "Business") or any other activity or business which is
competitive, directly or indirectly, with the business of the Company as
historically conducted or as conducted on the date hereof which, for the
purposes of this Agreement shall mean the provision of products, reports and
consulting and other services relating to electronic infrastructure or internet
security, the protection of electronic infrastructures from strategic and other
threats and vulnerabilities, threat analysis and reduction, asset protection,
provision of single and multi-industry cyberthreat intelligence, enterprise risk
assessment, security policy consulting, monitoring and management services,
certification services designed to establish a common global language to assess
intercompany cyberthreats and vulnerabilities across the world, risk management
consulting, intelligence gathering and the provision of infrastructure solutions
addressing cyberthreats and related risks.
2. NON-SOLICITATION OF CUSTOMERS AND CLIENTS. HomeCom further agrees
that it shall not, at any time during the Restricted Period, contact any
customer or client or former customer or client of the
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Division or the Company in connection with the Business, except in furtherance
of and in accordance with the Service and Referral Agreement and the VAR
Agreement dated of even date herewith.
3. NON-SOLICITATION OF EMPLOYEES. HomeCom shall not, at any time during
the Restricted Period, solicit or seek to persuade any employee of the Company
to discontinue employment with the Company or become employed in any business
competitive, directly or indirectly, with the Business, and HomeCom shall
specifically but without limitation refrain from soliciting any employee of the
Company to go to work in any capacity for HomeCom or any of its Affiliates.
4. AVAILABILITY OF EQUITABLE RELIEF. HomeCom agrees that any breach of
this Agreement by HomeCom will cause irreparable damage to the Company and that
in the event of such breach the Company shall have, in addition to any and all
other remedies, the right to an injunction, specific performance or other
equitable relief to prevent or remedy any violation of HomeCom's covenants in
this Section or any other Section of the Agreement.
5. SEVERABILITY. HomeCom and the Company agree and acknowledge that the
provisions of this Agreement shall be devisable and separate, so that, if any
provision or provisions of this Agreement are held to be unreasonable, unlawful,
or unenforceable, such holdings shall not impair or render invalid the remaining
provisions of this Agreement. If any provision hereof is held to be too broad or
unreasonable in duration, scope or character of restriction to be enforced, such
provisions shall be modified to the extent necessary so that any provision or
portion hereof shall be legally enforceable to the fullest extent permitted by
law, and the parties hereto expressly authorize any Court of competent
jurisdiction to enforce any such provision or portion hereof so that any and all
provisions or portions hereof shall be enforced by such Court to the fullest
extent permitted by law.
6. INDEMNIFICATION. HomeCom agrees to indemnify the Company and each of
its directors, officers and stockholders, and hold the same harmless from and
against any and all claims, costs, fees (including reasonable attorneys' fees),
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any violation or breach of any covenant or agreement contained in
this Agreement, and will reimburse the Company, and its directors, officers and
stockholders for all legal or any other expenses reasonably incurred by the
Company or any of its officers, directors or stockholders, as such expenses are
incurred, in connection with any such claim, loss, damage, liability or action.
7. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may not be modified or amended except with the written consent of the
Company and HomeCom. None of the terms and provisions of this Agreement may be
waived except in writing by the person so waiving.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any other jurisdiction other than the State of Delaware.
9. NOTICE. All notices and other communications required or permitted
to be given in respect of this Agreement shall be sent by personal delivery,
nationally recognized overnight courier, facsimile or certified or registered
mail, to the following parties at the following addresses, or, in each case, at
such other address or addresses as any party shall hereafter specify by written
notice to the others:
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(i) If to the Company, to:
Infrastructure Defense, Inc.
6100 Lincolnia Road
Second Floor
Alexandria, Virginia 22313
Attention: Kenneth J. Purfey
Facsimile: (703) 914-7100
With a copy to:
McGuire, Woods, Battle & Boothe LLP
1750 Tysons Boulevard
Suite 1800
McLean, Virginia 22102
Attention: Clive R. G. O'Grady, Esquire
Facsimile: (703) 712-5248
(ii) If to HomeCom, to:
HomeCom Communications, Inc.
Building 14, Suite 100
3535 Piedmont Road
Atlanta, Georgia
Attention: Harvey Sax
Facsimile: (404) 237-3060
With a copy to:
Sims, Moss, Kline & Davis LLP
400 Northpark Town Center
Suite 310
Atlanta, Georgia 30328
Attention: Jerry L. Sims
Facsimile: (770) 481-7210
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 for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given on the earlier of the fourth business day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided for in this Section, be deemed given on the earlier of the
first business day following the date sent by such overnight courier or 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 is
to be delivered pursuant to this Section). Any party from time to time may
change its address,
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facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their authorized officers as of the day and year first above
written.
WITNESS: INFRASTRUCTURE DEFENSE, INC., a
Delaware corporation
By
- --------------------------- -----------------------------
Name: Name: Kenneth J. Purfey
Title: Vice President and
Chief Financial Officer
HOMECOM COMMUNICATIONS, INC. a
Delaware corporation
By
- ---------------------------- -----------------------------
Name: Name:
Title:
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EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is dated as of
the 1st day of October, 1999, by and between INFRASTRUCTURE DEFENSE, INC., a
Delaware corporation (the "Company"), and HOMECOM COMMUNICATIONS, INC., a
Delaware corporation and its successors and assigns ("HomeCom").
WHEREAS, pursuant to the terms of that certain Asset Purchase Agreement
of even date herewith by and between the Company and HomeCom (the "Asset
Purchase Agreement"), HomeCom is selling to the Company all of the business and
assets of HomeCom's internet security division;
WHEREAS, pursuant to the Asset Purchase Agreement, HomeCom will receive
Sixty-Five Thousand Eight Hundred Fifty-Four (65,854) shares of the Company's
common stock, par value $.01 per share (the "Common Stock"); and
WHEREAS, in order to induce HomeCom to enter into the Asset Purchase
Agreement, the Company desires to grant piggy-back registration rights to
HomeCom for the shares of Common Stock issuable upon the closing of the Asset
Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for good and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
HomeCom agree as follows:
1. GRANT OF PIGGY BACK REGISTRATION RIGHTS. Following (but not
including) the first offering of Common Stock by the Company, if the Company
proposes to register any of its Common Stock (a "Registered Offering"), either
for its own account or the account of any other holder or holders of equity
securities of the Company (other than registrations relating solely to employee
benefit plans, dividend reimbursement plans, Rule 145 transactions or any
registration of Form S-8 or Form S-4), the Company will provide HomeCom with
written notice thereof not less than thirty (30) days prior to the filing date
of such registration statement (the "Company Notice") and, subject to the other
terms and conditions set forth in this Agreement, include in such registration
and any underwriting involved therein, all Common Stock (referred to in this
Agreement as the "Registrable Securities") specified in a written request or
requests made by HomeCom to the Company within fifteen (15) days after receipt
of the Company Notice.
2. BLUE SKY REGISTRATION. The Company will take all necessary action
which may be required in qualifying or registering the Shares, included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as are reasonably requested by the Placement Agent or the
Holder, provided that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
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3. UNDERWRITER'S CUTBACK. If the registration of Registrable
Securities is to be underwritten and, in the good faith judgment of the managing
underwriter, the inclusion of all the Registrable Securities requested to be
registered hereunder would interfere with the successful marketing of the
securities to be registered in such underwritten registration, the number of
shares of Registrable Securities to be included shall be reduced to such smaller
number with the participation in such offering to be pro rata among HomeCom and
any other shareholder having the right to have securities registered in such
registration, based upon the number of securities properly requested to be
included in such registration by each such shareholder and HomeCom. Any shares
that are thereby excluded from the Registered Offering shall be withheld from
the market by HomeCom for a period (not to exceed ninety (90) days prior to the
effective date of the registration statement filed in connection therewith and
one hundred eighty (180) days thereafter) that the managing underwriter
reasonably determines is necessary in order to effect the Registered Offering.
4. TERMINATION OR WITHDRAWL OF REGISTRATION. The Company shall have
the right to terminate or withdraw any Registered Offering prior to the
effectiveness of such Registered Offering, whether or not HomeCom has elected to
include any Registrable Securities in such registration.
5. LOCK-UP. The Company shall have the right exercisable on one or
more occasions, in addition to its rights set forth in this Agreement, to
require upon written notice to HomeCom that HomeCom not sell any Shares during
the period specified in the notice, provided that such periods do not exceed one
hundred twenty (120) days in any calendar year, if the Company determines, in
its good faith judgment, that such offering or sale would interfere with any
material financing, acquisition, disposition, corporate reorganization or other
material transaction involving the Company or any of its subsidiaries.
6. EXPENSES. The cost of the registration of the Registrable
Securities will be at the Company's expense (or at the expense of the initiating
holder or holders, as the case may be), except for HomeCom's attorneys' fees and
underwriting discounts and commissions, which shall be borne by HomeCom.
7. UNDERWRITING AGREEMENT GOVERNS. In the event the terms of this
Agreement conflict with the terms of any underwriting agreement recommended or
required by the underwriter in connection with any underwritten Registered
Offering hereunder, the terms of such underwriting agreement shall control but
shall not materially impair or reduce HomeCom's rights as granted in this
Agreement.
8. INFORMATION. If HomeCom's Registrable Securities are to be included
in any Registration Statement, HomeCom shall furnish to the Company such
information as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
9. MANAGING UNDERWRITER. The managing underwriter or underwriters of
an underwritten public offering covered by these piggy-back registration rights
shall be selected by the Company (or the initiating holder or holders, as the
case may be).
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10. NON-ASSIGNMENT. The registration rights granted under this
Agreement are non-assignable, and shall become null and void with respect to any
Registrable Securities transferred other than pursuant to a then-effective
registration statement, upon such transfer.
11. TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted under this Agreement shall expire on the date on which such Registrable
Securities could be sold pursuant to an exemption from registration including,
without limitation, Rule 144, promulgated under the Securities Act, as Rule 144
may be subsequently amended, modified, or supplemented
12. REGISTRATION INDEMNIFICATION
(a) INDEMNIFICATION BY HOMECOM. HomeCom agrees to indemnify
the Company, each of its directors and officers, each underwriter, if any, of
the Registrable Securities, each person or entity who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act, and
each of their respective officers and directors, against all claims, costs, fees
(including reasonable attorneys' fees), losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in a registration
statement covering any Registrable Securities, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, and its directors,
officers, representatives, underwriters and control persons for any legal or any
other expenses reasonably incurred, as such expenses are incurred, in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in reliance upon and in conformity with written information furnished to
the Company by HomeCom or HomeCom's representative or agent for inclusion in
such registration statement.
(b) INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify HomeCom and each person, if any, who controls HomeCom within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against all claims,
costs, fees (including reasonable attorneys' fees), losses, damages, expenses
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) and liabilities (or actions in respect
thereof) to which any of them may become subject under the Securities Act, the
Exchange Act or any other statute, common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, post-effective amendment or
amendments, offering circular or other document executed by the Company or based
upon written information furnished by the Company filed in any jurisdiction in
order to qualify the securities under the securities laws thereof or filed with
the Commission or any state securities commission or agency, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by HomeCom for use in such registration
statement, any amendment or supplement thereto or any application, as the case
may be
(c) INDEMNIFICATION PROCEDURE. Each party entitled to
indemnification under this Section (for the purposes of this Section, the
"Indemnified Party") shall give notice to the party required to
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provide indemnification (for the purposes of this Section, the "Indemnifying
Party") after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action, and provided further that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation
(d) CONTRIBUTION. If the indemnification provided for in this
Agreement is unavailable, then each Indemnifying Party shall contribute to the
amount paid or payable by such Indemnifying Party as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and HomeCom on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities, or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or HomeCom, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and whether a party breached a representation or warranty
or covenant or agreement contained in this Agreement. The Company and HomeCom
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above. The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to above shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this paragraph, HomeCom shall not be required
to contribute any amount in excess to an amount equal to the consideration
represented by the Common Stock in the Asset Purchase Agreement, except in cases
of HomeCom's willful or intentional misconduct. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
13. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may not be modified or amended except with the written consent of (a)
the Company and (b) the holders of a majority of the Shares outstanding. None of
the terms and provisions of this Agreement may be waived except in writing by
the person so waiving.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law
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provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any other jurisdiction other
than the State of Delaware.
15. NOTICE. All notices and other communications required or permitted
to be given in respect of this Agreement shall be sent by personal delivery,
nationally recognized overnight courier, facsimile or certified or registered
mail, to the following parties at the following addresses, or, in each case, at
such other address or addresses as any party shall hereafter specify by written
notice to the others:
(i) If to the Company, to:
Infrastructure Defense, Inc.
6100 Lincolnia Road
Second Floor
Alexandria, Virginia 22313
Attention: Kenneth J. Purfey
Facsimile: (703) 914-7100
With a copy to:
McGuire, Woods, Battle & Boothe LLP
1750 Tysons Boulevard
Suite 1800
McLean, Virginia 22102
Attention: Clive R. G. O'Grady, Esquire
Facsimile: (703) 712-5248
(ii) If to HomeCom, to:
HomeCom Communications, Inc.
Building 14, Suite 100
3535 Piedmont Road
Atlanta, Georgia
Attention: Harvey Sax
Facsimile: (404) 237-3060
With a copy to:
Sims, Moss, Kline & Davis LLP
400 Northpark Town Center
Suite 310
Atlanta, Georgia 30328
Jerry L. Sims
Facsimile: (770) 481-7210
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
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the facsimile number as provided for in this Section, be deemed given upon
receipt, (iii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given on the earlier of the fourth
business day following mailing or upon receipt and (iv) if delivered by
overnight courier to the address as provided for in this Section, be deemed
given on the earlier of the first business day following the date sent by such
overnight courier or 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 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 parties hereto.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. HEADINGS. The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof.
18. SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance here from and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by their authorized officers as of the day and year first above
written.
WITNESS: INFRASTRUCTURE DEFENSE, INC., a
Delaware corporation
By
- ----------------------------- --------------------------------
Name: Name: Kenneth J. Purfey
Title: Vice President and
Chief Financial Officer
HOMECOM COMMUNICATIONS, INC. a
Delaware corporation
By
- ------------------------------ ----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT E
FORM OF OPINION OF PURCHASER'S COUNSEL
Capitalized terms used but not defined herein shall have the respective
meanings ascribed to such terms in the Asset Purchase Agreement dated as of
October 1, 1999 by and between Infrastructure Defense, Inc. and HomeCom
Communications, Inc. (the "Asset Purchase Agreement").
1. Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2. Purchaser has full corporate power and authority to enter into the Asset
Purchase Agreement and each of the Operative Agreements to which it is a party
and to perform its obligations thereunder and to consummate the transactions
contemplated thereby in accordance with the terms thereof. The execution,
delivery and performance of the Asset Purchase Agreement and the Operative
Agreements to which Purchaser is a party by Purchaser and the consummation by
Purchaser of the transactions contemplated thereby have been duly and validly
authorized by Purchaser's board of directors and no other corporate proceedings
on the part of Purchaser or its stockholders are necessary to authorize the
execution, delivery and performance by Purchaser of this Agreement and the
Operative Agreements to which Purchaser is a party and the consummation by
Purchaser of the transaction contemplated thereby.
3. The Asset Purchase Agreement and each of the Operative Agreements to which
Purchaser is a party have been duly and validly executed and delivered by
Purchaser and constitute the legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with their respective terms, except
as enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
4. The execution and delivery by Purchaser of the Asset Purchase Agreement and
the Operative Agreements to which it is a party, and the performance by
Purchaser of its obligations under the Asset Purchase Agreement and such
Operative Agreements and the consummation of the transactions contemplated
thereby by Purchaser did not, do not and 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 by-laws of the
Purchaser;
(b) to the best of such counsel's knowledge, conflict with or result in a
violation or breach of any term or provision of any Law or Order applicable to
the Purchaser, the effect of which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated thereby or would
materially hinder or delay such consummation; or
(c) to the best of such counsel's knowledge: (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
<PAGE>
under or (iii) require Purchaser 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, any Contract or Permit to which the Purchaser is a party, the effect
of which, individually or in the aggregate, would reasonably be expected to have
a material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated by this Agreement or would materially hinder or delay
such consummation.
5. To the best of such counsel's knowledge, except as disclosed in
Section __ of the Disclosure Schedule, no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority on the part of the
Purchaser is required in connection with the execution, delivery and performance
of the Asset Purchase Agreement or the Operative Agreements to which it is a
party or the consummation of the transactions by Purchaser contemplated thereby.
6. There are no Actions or Proceedings pending or, to the best of such
counsel's knowledge, threatened against, relating to or affecting Purchaser
which (i) could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements to which Purchaser is a party; or (ii) could reasonably
be expected, individually or in the aggregate with other such Actions or
Proceedings, to have a material adverse effect on the ability of the Purchaser
to consummate the transactions contemplated by this Agreement or materially
hinder or delay such consummation.
<PAGE>
EXHIBIT F
FORM OF OPINION OF SELLER'S COUNSEL
Capitalized terms used but not defined herein shall have the respective
meanings ascribed to such terms in the Asset Purchase Agreement dated as of
October 1, 1999 by and between Infrastructure Defense, Inc. and HomeCom
Communications, Inc. (the "Asset Purchase Agreement").
1. Seller 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 conduct its business as and to the extent now conducted and to
own, use and lease the Purchased Assets. Seller is duly qualified, licensed or
admitted to do business and is in good standing in the jurisdictions listed in
Section 3.1 of the Disclosure Schedule attached to the Asset Purchase Agreement,
which are, to the best of such counsel's knowledge, the only jurisdictions in
which the ownership, use or leasing of the Purchased Assets, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary.
2. Seller has the full legal capacity and authority to execute and
deliver the Asset Purchase Agreement and each of the Operative Agreements to
which it is a party and to perform its obligations thereunder in accordance with
the respective terms thereof and to consummate the transactions contemplated
thereby. The execution, delivery and performance of the Asset Purchase Agreement
and the Operative Agreements by Seller and the consummation by Seller of the
transactions contemplated thereby have been duly and validly approved with
respect to Seller by all corporate and shareholder action, and no other action
on the part of Seller or its shareholders is necessary to authorize the
execution, delivery and performance of the Asset Purchase Agreement and the
Operative Agreements and the consummation of the transactions contemplated
thereby. The Asset Purchase Agreement and each of the Operative Agreements to
which Seller is a party have been duly and validly executed and delivered by
Seller and the Asset Purchase Agreement and each of the Operative Agreements to
which Seller is a party constitute legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
3. Seller has no Subsidiaries or Affiliates.
4. The execution and delivery by Seller of the Asset Purchase Agreement
and the Operative Agreements to which it is a party does not, and the
performance by Seller of its obligations under the Asset Purchase Agreement and
such Operative Agreements and the consummation of the transactions contemplated
thereby did not, do not and 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 by-laws
of Seller or of any agreement of the shareholders of Seller;
<PAGE>
(b) to the best of such counsel's knowledge, 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 Seller's Assets and Properties including, without
limitation, the Purchased Assets; or
(c) to the best of such counsel's knowledge: (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, (iv) result in or give to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (vi) result in the creation or imposition of any Lien upon the Purchased
Assets under, any Contract or Permit to which Seller is a party or by which any
of its Assets and Properties is bound.
5. No permits, consents or approvals by, or filing with or notice to,
any federal, provincial, territorial, local or foreign Governmental Authority,
as applicable, including, without limitation, any consents or approvals under
the applicable United States federal or foreign investment laws and other
federal, provincial, territorial, local or foreign competition and antitrust
laws and under any Environmental Law, is required on the part of Seller in
connection with the execution, delivery and performance of the Asset Purchase
Agreement or any of the Operative Agreements to which Seller is a party or the
consummation of transactions contemplated thereby.
6. Except as disclosed in Section 3.12(a) of the Disclosure Schedule
there are no Actions or Proceedings or Orders pending or, to the best of such
counsel's knowledge, threatened against, relating to or affecting the Business
or Condition of the Division or the transactions contemplated hereby.
7. To the best of such counsel's knowledge, Seller has not been at any
time, in violation of or in default under any Law or Order applicable to Seller
or any of the Purchased Assets which could have a material adverse effect on the
Business or Condition of the Division.
8. No notice to creditors or other Persons or other action is required
to be taken by Seller with respect to the transactions contemplated by this
Agreement or the Operative Agreements under any "bulk sales" or similar Laws.
<PAGE>
EXHIBIT G
REFERRAL AND SERVICE AGREEMENT
THIS SERVICE AND REFERRAL AGREEMENT (this "Agreement"), is dated as of
the 1st day of October, 1999, by and between INFRASTRUCTURE DEFENSE, INC., a
Delaware corporation (the "Company"), and HOMECOM COMMUNICATIONS, INC., a
Delaware corporation ("HomeCom"). Capitalized terms used but not defined herein
shall have the respective meanings ascribed to such terms in the Asset Purchase
Agreement dated of even date herewith by and between the Company and HomeCom
(the "Asset Purchase Agreement").
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, HomeCom
will sell to the Company all of the business and assets of HomeCom's internet
security division (the "Division");
WHEREAS, the Company and HomeCom have agreed (i) that HomeCom will be
entitled to receive a referral fee in connection with HomeCom's referral of
customers and clients (other than existing customers and clients of the
Division) as set forth herein, and (ii) the Company has agreed to provide
certain services to HomeCom in accordance with this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for good and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
HomeCom agree as follows:
1. INTERNAL SECURITY AUDITS. The Company agrees to provide HomeCom with
annual internal security audits of HomeCom's information technology systems and
networks at no cost for 10 years in accordance with reasonable commercial
standards, limited to current corporate headquarters operations of HomeCom in
its current state of configuration (except for changes to the location of
corporate headquarters or the state of configuration which do not increase the
burden or cost to the Company of providing such audits) and, in any event, not
exceeding $40,000 worth of audit service value in any year, as determined in
good faith by the Company using industry standards to the extent readily
obtainable; provided, however, that the Company reserves the right to substitute
an audit procedure of equal or better value or, with the consent of HomeCom
(which consent shall not be unreasonably withheld), to subcontract the audit out
to a third-party or affiliated qualified vendor. The foregoing sentence
notwithstanding, the Company shall not be obligated to provide audit services
(i) until HomeCom has satisfied all material covenants and agreements contained
in the Asset Purchase Agreement, and (ii) if HomeCom is then in breach of any
material representation or warranty contained in the Asset Purchase Agreement.
The timing of such audits shall be within the reasonable discretion of the
Company. If HomeCom wishes to engage the Company to install software or
otherwise implement any recommendations resulting from the Company's annual
audit, such services will be provided for additional charges agreed to by the
parties at the time of such engagement.
2. REFERRAL FEE. HomeCom will be entitled to receive a referral fee for
referrals by HomeCom to the Company of customers who purchase the Company's
iALERT Reports (or such other products and services as may be specified by
mutual agreement of the parties from time to time), based upon a two-tier fee
structure, as follows: (A) for the referral, including name, telephone number
and other basic contact information, by HomeCom of a person or entity desiring
to purchase iALERT
<PAGE>
Reports who, within 180 days after such referral, purchases iALERT Reports from
the Company, HomeCom will be entitled to receive a referral fee equal to 5% of
subscription payments actually received by the Company (less discounts, rebates,
returns and other deductions) from such referred customer during the first year
of service by the Company to such referred customer, or (B) for the referral by
HomeCom of a current customer or customer of a current customer, provided that
virtually all of the preliminary marketing development work has been done by
HomeCom and the Company merely participates in the closing of the deal and
provision of the iALERT Reports, HomeCom will be entitled to receive a referral
fee (in lieu of and not in addition to the referral fee described in clause (A)
above) equal to 20% of subscription payments actually received by the Company
(less discounts, rebates, returns and other deductions) from such referred
customer for so long as such referred customer continues to subscribe to iALERT
Reports; PROVIDED, HOWEVER, that HomeCom shall not be entitled to any referral
fee or other payment with respect to any person or entity who is an existing
client or customer of the Division or who purchased products or services from
the Division within three years of the date hereof, it being understood that the
Purchase Price paid pursuant to the Asset Purchase Agreement includes payment in
respect of the Division's customer and client list. The determination of which
level of commission is payable to HomeCom in any particular instance will be
determined by the Company in an exercise of its good faith judgment.
3. HOMECOM OBLIGATIONS.
3.1 ACCESS TO INFORMATION AND PERSONNEL. HomeCom shall provide
the Company with details concerning its systems, network and software,
information concerning unauthorized intrusions into its systems, network and
software and access to knowledgeable HomeCom personnel to respond to questions
and otherwise to assist the Company in performing its audit services hereunder.
HomeCom agrees that the Company may include such details in its database, but
shall not reuse or republish such matters in any manner that identifies HomeCom
as the source of or otherwise associated with such data.
3.2 IMPLEMENTATION OF RECOMMENDATIONS. HomeCom shall be solely
responsible for determining whether and how to implement any recommendations
resulting from the Company's audit. HomeCom acknowledges and agrees that the
Company shall have no liability for HomeCom's failure to implement one or more
of the recommendations; any complications, incompatibilities, costs, or other
problems with the systems or networks which directly or indirectly arise from
the implementation of any recommendation; or any inadequacy or failure of any
implemented recommendations to avert, detect or prevent security breaches,
losses, intrusions or other occurrences or the consequences thereof.
4. DISCLAIMER OF WARRANTIES. ALL ASPECTS OF THE AUDIT SERVICES PROVIDED
BY THE COMPANY UNDER THIS AGREEMENT ARE PROVIDED ON AN "AS IS" BASIS WITHOUT
WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
ANY WARRANTIES OF TITLE OR NON-INFRINGEMENT OR THE IMPLIED WARRANTIES OR
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN PARTICULAR, THE COMPANY
MAKES NO REPRESENTATIONS OR WARRANTIES (I) CONCERNING THE ACCURACY,
COMPLETENESS, OR RELIABILITY OF ANY SERVICES, REPORTS, RECOMMENDATIONS, OR
INFORMATION PROVIDED UNDER THIS AGREEMENT, OR (II) THAT THE CONTENT OF SUCH
SERVICES, REPORTS, RECOMMENDATIONS, OR INFORMATION ARE APPROPRIATE, AUTHORIZED,
OR LAWFUL IN ALL COUNTRIES, STATES, OR OTHER JURISDICTIONS; OR (III) THAT THE
SERVICES
2
<PAGE>
AND/OR RECOMMENDATIONS PROVIDED WILL AVERT, DETECT OR PREVENT SECURITY BREACHES,
LOSSES, INTRUSIONS OR OTHER OCCURRENCES AND/OR THE CONSEQUENCES THEREFROM THAT
THE SERVICES AND/OR RECOMMENDATIONS ARE DESIGNED OR INTENDED TO AVERT, DETECT OR
PREVENT OR (IV) THAT ANY ELECTRONIC FILES OR TRANSMISSIONS PROVIDED BY THE
COMPANY WILL BE FREE FROM ERRORS, VIRUSES OR OTHER HARMFUL ELEMENTS; OR (V)
CONCERNING THE RESULTS WHICH WILL BE OBTAINED FROM THE USE OF SUCH SERVICES,
REPORTS, RECOMMENDATIONS OR INFORMATION.
5. LIMITATION ON LIABILITY AND DAMAGES. IN NO EVENT SHALL THE COMPANY
OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, OR THIRD PARTY CONTENT PROVIDERS BE
LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY
KIND (INCLUDING BUT NOT LIMITED TO LOST PROFITS, LOST OPPORTUNITIES, IMPAIRED
REPUTATION, LOST SOFTWARE OR DATA, FAILURE TO REALIZE EXPECTED SAVINGS OR
INVESTMENT LOSSES) ARISING OUT OF OR IN CONNECTION WITH THE ANNUAL AUDIT OR
OTHER SERVICES PROVIDED UNDER THIS AGREEMENT WHETHER ARISING IN CONTRACT, TORT
OR OTHERWISE, AND WHETHER OR NOT THE COMPANY WAS ADVISED OF THE POSSIBILITY OF
SUCH DAMAGE. IF THE COMPANY SHOULD BE FOUND LIABLE FOR ANY LIABILITY, DAMAGE,
LOSS, COST AND EXPENSE, THE MAXIMUM AGGREGATE LIABILITY OF THE COMPANY OR ANY OF
ITS AFFILIATES, EMPLOYEES, AGENTS, OR THIRD PARTY CONTENT PROVIDERS SHALL BE
STRICTLY LIMITED TO $40,000. THIS AGGREGATE LIMITATION SHALL APPLY EVEN IF SUCH
LIABILITY, DAMAGE, LOSS, COST AND EXPENSE ARE DUE DIRECTLY OR INDIRECTLY TO (I)
THE FAILURE OR INADEQUACY OF THE AUDIT, RECOMMENDATIONS OR OTHER SERVICES TO
AVERT, DETECT OR PREVENT SECURITY BREACHES, LOSSES, INTRUSIONS OR OTHER
OCCURRENCES AND/OR THE CONSEQUENCES THEREFROM, (II) THE COMPANY'S BREACH OF
CONTRACT OR WARRANTY, (III) THE COMPANY'S NEGLIGENCE (ACTIVE, PASSIVE OR
OTHERWISE), STRICT LIABILITY, VIOLATION OF ANY APPLICABLE LAW, AND/OR ANY OTHER
ALLEGED FAILURE ON THE PART OF COMPANY, ITS AGENTS AND/OR EMPLOYEES,
IRRESPECTIVE OF CAUSE OR ORIGIN; AND/OR (IV) ANY OTHER CAUSE OR REASON.
6. SOLE AND EXCLUSIVE REMEDY. HOMECOM'S EXCLUSIVE REMEDIES WITH RESPECT
TO ANY AND ALL LIABILITIES, LOSSES, COSTS OR DAMAGES RESULTING FROM ANY CAUSE
WHATSOEVER, INCLUDING BUT NOT LIMITED TO THE COMPANY'S BREACH OF CONTRACT OR
NEGLIGENCE, SHALL BE TO RECEIVE AN AMOUNT EQUAL TO THE ACTUAL DAMAGES SUFFERED
BY HOMECOM DIRECTLY CAUSED BY THE COMPANY (SUBJECT TO THE MAXIMUM LIMITATION SET
FORTH IN SECTION 5) AND TO REQUIRE THE COMPANY TO REPERFORM THE AUDIT SERVICES.
7. LIABILITY FOR LOST DATA. The Company shall not be responsible for
the repair of damage to or the replacement or restoration of, any software or
data files resulting from accident, transportation, neglect or misuse;
intentional acts by persons or entities other than the Company, failure of
electrical power, air conditioning or humidity control, or other causes beyond
its control. HomeCom shall be responsible for regularly backing up all software
and data on HomeCom's systems and network. If any act or omission of the Company
directly causes any loss or damage to HomeCom's software or data, the
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<PAGE>
Company's sole obligation and HomeCom's sole remedy shall be the Company's
provision of reasonable assistance to restore the lost software and data from
the most recent backup copy maintained by HomeCom. The Company shall have no
obligation with respect to lost software or data under any other circumstances
or to recover, restore or re-enter any other software, data, information or
records.
8. FORCE MAJEURE. The Company shall be excused from fulfilling its
contractual obligations hereunder if it is prevented or delayed in such
performance by force majeure conditions beyond its reasonable control including,
but not limited to, fire or explosions; lockouts; strikes; labor shortages or
disturbances; acts of God, including, but not limited to, floods, hurricanes,
tornadoes, earthquakes, unusually severe weather, and natural disasters; war;
insurrection; derailment that causes the normal route of movement to be
impassable or other casualty; acts of the public enemy; acts of governmental
authority; embargo; quarantine; and acts or omissions of third parties. The
Company will as soon as practicable notify HomeCom of the existence of a force
majeure condition and will use commercially reasonable efforts to continue to
perform its obligations to the extent practicable and to recommence performing
all obligations as soon as possible after the force majeure condition has ended.
9. SEVERABILITY. HomeCom and the Company agree and acknowledge that the
provisions of this Agreement shall be devisable and separate, so that, if any
provision or provisions of this Agreement are held to be unreasonable, unlawful,
or unenforceable, such holdings shall not impair or render invalid the remaining
provisions of this Agreement. If any provision hereof is held to be too broad or
unreasonable in duration, scope or character of restriction to be enforced, such
provisions shall be modified to the extent necessary so that any provision or
portion hereof shall be legally enforceable to the fullest extent permitted by
law, and the parties hereto expressly authorize any Court of competent
jurisdiction to enforce any such provision or portion hereof so that any and all
provisions or portions hereof shall be enforced by such Court to the fullest
extent permitted by law.
10. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may not be modified or amended except with the written consent of the
Company and HomeCom. None of the terms and provisions of this Agreement may be
waived except in writing by the person so waiving.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the Commonwealth of Virginia, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the Commonwealth of Virginia or any other jurisdiction) that would cause the
application of the laws of any other jurisdiction other than the Commonwealth of
Virginia.
12. NOTICE. All notices and other communications required or permitted
to be given in respect of this Agreement shall be sent by personal delivery,
nationally recognized overnight courier, facsimile or certified or registered
mail, to the following parties at the following addresses, or, in each case, at
such other address or addresses as any party shall hereafter specify by written
notice to the others:
(i) If to the Company, to:
Infrastructure Defense, Inc.
6100 Lincolnia Road
Second Floor
Alexandria, Virginia 22313
4
<PAGE>
Attention: Kenneth J. Purfey
Facsimile: (703) 914-7100
With a copy to:
McGuire, Woods, Battle &
Boothe LLP
1750 Tysons Boulevard
Suite 1800
McLean, Virginia 22102
Attention: Clive R. G.
O'Grady, Esquire
Facsimile: (703) 712-5248
(ii) If to HomeCom, to:
HomeCom Communications, Inc.
Building 14, Suite 100
3535 Piedmont Road
Atlanta, Georgia
Attention: Harvey Sax
Facsimile: (404) 237-3060
With a copy to:
Jerry Sims
Sims, Moss, Kline & Davis LLP
400 Northpark Town Center
Suite 310
Atlanta, Georgia 30328
Facsimile: (770) 481-7210
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 for in this Section, be deemed given upon receipt, (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given on the earlier of the fourth business day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided for in this Section, be deemed given on the earlier of the
first business day following the date sent by such overnight courier or 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 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
parties hereto.
13. ASSIGNMENT. The Company has entered into this Agreement in reliance
on the information provided by HomeCom and in reliance on its current structure
and information systems. This Agreement may not be assigned or transferred by
HomeCom in any manner, by operation of law or otherwise, without the prior
written consent of the Company, which consent may not be unreasonably
5
<PAGE>
withheld unless such assignment would increase the burden or costs to the
Company, in which case such consent may be withheld in the Company's sole and
absolute discretion.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. CUMULATIVE REMEDIES. All rights and remedies conferred under this
Agreement or by any other instrument or law shall be cumulative and may be
exercised singularly or concurrently.
16. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
17. SURVIVAL. The provisions of Sections 4, 5, 6, 7 and this Section 17
and any other provisions which by its nature is intended to survive shall
survive any termination or expiration of this Agreement.
18. ALLOCATION OF RISK. This Agreement in general and the limitations
of liabilities and disclaimer of warranties set forth in Sections 5, 6 and 7 in
particular represent a mutually agreed upon allocation of risk and the
consideration provided for in this Agreement and the Asset Purchase Agreement
has been calculated to reflect such allocation of risk.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their authorized officers as of the day and year first above
written. This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute but one Agreement.
WITNESS: INFRASTRUCTURE DEFENSE, INC., a
Delaware corporation
By
- ----------------------------- ---------------------------------
Name: Name: Kenneth J. Purfey
Title: Vice President and
Chief Financial Officer
HOMECOM COMMUNICATIONS, INC. a
Delaware corporation
By
- ----------------------------- ----------------------------
Name: Name:
Title:
7
<PAGE>
VALUE-ADDED DISTRIBUTOR AGREEMENT
This Value-Added Distributor Agreement (this "Agreement"), effective as
of October 1, 1999, is made between Infrastructure Defense, Inc. ("iDEFENSE"), a
Delaware corporation and HomeCom Communications, Inc.
("HomeCom"), a Delaware corporation.
RECITALS
A. Pursuant to the terms of the Asset Purchase Agreement dated of even date
herewith by and between iDEFENSE and HomeCom, HomeCom will sell to iDEFENSE all
of the business and assets of HomeCom's internet security division (the
"Division").
B. After closing of this sale, iDEFENSE will be in the business of providing
risk management consulting services with respect to security of electronic
systems and networks.
C. HomeCom wishes to have certain rights to market and distribute iDEFENSE's
consulting services to HomeCom's core financial services customers and to engage
iDEFENSE as its exclusive subcontractor and provider of such consulting
services.
AGREEMENT
NOW THEREFORE in consideration of the mutual promises, covenants and
obligations contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS.
1.1 "COMPETING SERVICES" means any software or services which
compete with the Services or Materials and other services offered or under
active development by iDEFENSE, including but not limited to any products,
reports and consulting and other services relating to electronic infrastructure
or internet security, the protection of electronic infrastructures from
strategic and other threats and vulnerabilities, threat analysis and reduction,
asset protection, provision of single and multi-industry cyberthreat
intelligence, enterprise risk assessment, security policy consulting, monitoring
and management services, certification services designed to establish a common
global language to assess intercompany cyberthreats and vulnerabilities across
the world, risk management consulting, intelligence gathering and the provision
of infrastructure solutions addressing cyberthreats and related risks.
1.2 "END USER" means a customer of iDEFENSE who uses
iDEFENSE's consulting services as a result of HomeCom's referral and marketing
efforts.
1.3 "INTELLECTUAL PROPERTY RIGHTS" means patent rights,
copyright rights (including, but not limited to, rights in audiovisual works and
moral rights), trademarks, service marks, trade secret rights, and any other
intellectual property rights.
1.4 "MARKS" shall mean all trademarks, service marks, trade
names, logos or other identifying information of iDEFENSE.
1.5 "MATERIALS" means any iAlert Reports, other reports,
analyses, recommendations, audits, software or other materials provided to the
End User by iDEFENSE in connection with the Services.
<PAGE>
1.6 "SERVICES" means the risk management consulting, software
implementation and other services provided by iDEFENSE relating to electronic
infrastructure or internet security, the protection of electronic
infrastructures from strategic and other threats and vulnerabilities, threat
analysis and reduction, asset protection, provision of single and multi-industry
cyberthreat intelligence, enterprise risk assessment, security policy
consulting, monitoring and management services, certification services designed
to establish a common global language to assess intercompany cyberthreats and
vulnerabilities across the world, risk management consulting, intelligence
gathering and the provision of infrastructure solutions addressing cyberthreats
and related risks.
1.7 All other capitalized terms will have the meaning
given in the text of this Agreement.
2. LICENSES.
2.1 AUTHORIZATION OF DISTRIBUTOR. Subject to the terms of this
Agreement, iDEFENSE appoints HomeCom as a distributor of iDEFENSE's Services and
Materials to End Users during the term of this Agreement. HomeCom's rights in
the Services and Materials will be limited to those expressly granted in this
Agreement.
2.2 PREFERRED PROVIDER OF THE SERVICES AND MATERIALS. iDEFENSE
shall be HomeCom's preferred provider of the Services and Materials. If any
HomeCom End User or other client is interested in services or reports like the
Services or Materials offered by iDEFENSE, HomeCom will first offer iDEFENSE the
opportunity to explore and provide a proposal to HomeCom's End User or other
client. If iDEFENSE fails to respond to the opportunity or provide a statement
of work proposal within three (3) business days of receipt of HomeCom's notice
of the opportunity or any later deadline specified by HomeCom, then HomeCom may
engage another provider to provide Competing Services to that End User or
client. iDEFENSE's failure to attend the first meeting with the potential End
User to discuss the risk management consulting services after receiving
reasonable notice of this meeting will also be deemed to permit HomeCom to
retain another provider of Competing Services. HomeCom will not enter into any
reseller, distribution or other agreement to engage regularly any other provider
of Competing Services. iDEFENSE reserves the right to provide its Services and
Materials directly to end users or through other value-added distributors,
resellers or distribution channels. HomeCom may also engage another provider of
Competing Services if the End User has specifically requested that such other
provider be engaged. HomeCom shall not recommend or otherwise encourage its End
Users to specify a provider other than iDEFENSE.
3. END USER AGREEMENT. The Services or Materials will be provided to an
End User pursuant to End User agreement(s) either (i) between the End User and
iDEFENSE or (ii) between the End User and HomeCom, which agreement has been
reviewed and approved by iDEFENSE. If after a reasonable amount of time HomeCom
or the End User and iDEFENSE determine in good faith that they will be unable to
agree on the terms on the End User agreement under which iDEFENSE will perform
the Services, HomeCom may engage another provider of Competing Services to
service that End User without violating the provisions of Section 2.2.
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4. PAYMENTS.
4.1 FEES. iDEFENSE will price its Services and Materials
offered to End Users based on the Service and price schedules set forth as
Exhibit B. iDEFENSE may amend and modify Exhibit B at its discretion from time
to time upon thirty (30) days' notice to HomeCom.
4.2 DISCOUNT/COMMISSION. All fees payable by the End Users for
the Services and Materials will be payable directly to iDEFENSE. iDEFENSE will
pay HomeCom a discount/commission on such fees based on the schedules set forth
in Exhibit A. No discount/commission is payable to HomeCom on amounts payable by
End Users to reimburse iDEFENSE for out-of-pocket and other expenses and taxes
incurred in providing the Services and Materials. The discount/commissions are
calculated based on all consulting and other fees payable by the End User for
iDEFENSE's Services and Materials less discounts, rebates, returns and other
deductions and excluding all reimbursements for expenses and taxes.
4.2 TAXES. All amounts payable under this Agreement are
exclusive of all sales, use, value-added, excise, customs duties, assessments
and other taxes and duties. HomeCom or its End User will pay all taxes and
duties assessed in connection with this Agreement and its performance, except
for taxes payable on iDEFENSE's net income. HomeCom will promptly reimburse
iDEFENSE for any and all taxes or duties (other than taxes on iDEFENSE's net
income) that iDEFENSE may be required to pay in connection with this Agreement
or its performance.
5. MARKETING, PRE-SALES AND SALES RESPONSIBILITIES.
5.1 PRE-SALES AND SALES ASSISTANCE. HomeCom will be
responsible for making initial marketing contacts, arranging meetings,
presenting proposals, identifying services needed by potential End Users and
otherwise handling preliminary sales efforts. At such time as the potential End
User expresses interest in engaging HomeCom to provide risk management
consulting services, HomeCom will notify iDEFENSE and will provide iDEFENSE with
a job quote based on information from the End User regarding the scope of the
proposed work, systems covered and other information necessary for iDEFENSE to
estimate the price and other terms for the work. Upon notice of any opportunity
pursuant to Section 2.2, iDEFENSE will promptly appoint a security consultant to
attend the first meeting (by phone or in person) with the potential End User and
to lead iDEFENSE's efforts to close the sale and provide the Services and
Materials. iDEFENSE will use all reasonable efforts to participate in any
further discussions, negotiations, presentations, meetings, conferences or other
interactions with the End User regarding the risk management consulting
services, provided that HomeCom provides reasonable notice of such interactions.
HomeCom will obtain iDEFENSE's prior approval of any written (whether hard copy
or electronic) proposals or other documents regarding the risk management
consulting services to be provided by iDEFENSE before such documents are
provided to the End User. iDEFENSE shall also have the right to prepare the
statement of work, requirements documents and other materials that will describe
the scope and nature of the Services and Materials to be provided by iDEFENSE.
iDEFENSE will not be obligated to provide any Services or Materials if it has
not approved and consented to such engagement and the fees and payment
arrangements therefor in advance.
5.2 HOMECOM'S MARKETING EFFORTS. HomeCom will actively and
consistently market, distribute, and obtain End Users for the Services. In the
first twelve months of this Agreement, HomeCom will enter into End User
agreements which result in iDEFENSE
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receiving aggregate consulting fees (less discounts, rebates, returns and other
deductions and not including expense reimbursements and taxes owed) of $50,000.
At least thirty (30) days prior to the completion of each successive twelve
month period, HomeCom and iDEFENSE will agree to marketing and sales goals for
the following twelve month period. HomeCom agrees to (i) conduct business in a
professional manner that reflects favorably on the services, products, goodwill
and reputation of iDEFENSE; (ii) avoid deceptive, misleading or unethical
practices which are or might be detrimental to iDEFENSE; (iii) refrain from
making any false or misleading representations about iDEFENSE or the Services
and Materials, including any representations, warranties or guarantees with
respect to the specifications, features or capabilities of the Services and
Materials that are inconsistent with the literature distributed by iDEFENSE,
(iv) retain all End User-related records for three (3) years after the date of
distribution of any Services or Materials, and assist iDEFENSE, upon request, in
maintaining contacts with the End User in order to distribute Service
information, sell or license other iDEFENSE products or services, discover
unauthorized marketing or infringing acts, or any other reasonable business
purposes of iDEFENSE; and (v) promptly report to iDEFENSE, in writing, all
suspected and actual problems with the Services and Materials of which it
becomes aware.
5.3 STANDARD MARKETING MATERIALS. iDEFENSE will make available
to HomeCom standard technical materials, brochures, service and report
descriptions, and other sales collateral for its Services as such materials
become generally available. If any sales collateral, advertisements or other
promotional or marketing material used by HomeCom makes any statement as to the
specifications, features, nature or capabilities of the Services or Materials
beyond the information provided to HomeCom by iDEFENSE, HomeCom will first
obtain the written approval of iDEFENSE prior to publishing such advertisement
or material. iDEFENSE will provide training to HomeCom and its sales personnel
and contractors as reasonably requested by HomeCom to enable such personnel to
more effectively market the Services and Materials.
5.4 COSTS RELATED TO PRE-SALES AND SALES ACTIVITY. Unless
otherwise agreed to by the parties, each of iDEFENSE and HomeCom will be
responsible for its own costs incurred in pre-sales, marketing and sales
activity related to the Services and Materials.
6. CONFIDENTIALITY.
6.1 OBLIGATIONS. During the term of this Agreement and from
three years after termination hereof, each party agrees that (i) that it will
not disclose to any third party or use any Proprietary Information (as defined
in Section 6.2) of the other party except for the purposes of fulfilling its
obligations hereunder and as expressly permitted in this Agreement; (ii) it will
take all reasonable measures to maintain the confidentiality of all Proprietary
Information in its possession or control, which will in no event be less than
the measures it uses to maintain the confidentiality of its own information of
similar importance; (iii) it will not disassemble, decompile, or reverse
engineer any software provided to it from time to time by the other party, (iv)
it will not copy or otherwise reproduce any Proprietary Information, in whole or
in part, except for the purposes permitted under clause (i) above without the
disclosing party's authorization; (v) it will disclose the Proprietary
Information to those employees, representatives and agents with a need to know
who have agreed to comply with these confidentiality obligations; and (vi) it
will assist the disclosing party in identifying and preventing any unauthorized
use or disclosure of Proprietary Information, including but not limited to
advising the disclosing party immediately of the circumstances surrounding the
unauthorized use of the Proprietary Information by any person or entity, and
cooperating with the disclosing party in seeking injunctive or other equitable
relief against any such person or entity.
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6.2 DEFINITION OF PROPRIETARY INFORMATION. "Proprietary
Information" shall mean this Agreement and all information a party discloses to
the other which has been either (i) characterized in writing as confidential at
the time of its disclosure or (ii) orally characterized as confidential at the
time of disclosure, except for information which the receiving party can
demonstrate: (a) is previously rightfully known to the receiving party without
restriction on disclosure; (b) is or becomes, from no act or failure to act on
the part of the receiving party, generally known in the relevant industry or
public domain; (c) is disclosed to the receiving party by a third party as a
matter of right and without restriction on disclosure; (d) is independently
developed by the receiving party without access to the Proprietary Information
of the disclosing party or without access to confidential or proprietary
information of the Division prior to its sale to iDEFENSE.
6.3 EFFECT OF LEGAL COMPULSION TO DISCLOSE. If a receiving
party is legally compelled to disclose any of the disclosing party's Proprietary
Information, then, prior to such disclosure, the receiving party will notify the
disclosing party of the legal compulsion in order to permit the disclosing party
to seek relief from such disclosure and/or use of the Proprietary Information.
If the receiving party remains legally compelled, the receiving party shall
disclose the Proprietary Information only to the extent necessary to comply with
the applicable legal requirements.
6.4 INJUNCTIVE RELIEF. The receiving party acknowledges that
the Proprietary Information is valuable and its disclosure would cause
substantial harm to the disclosing party that could not be remedied by the
payment of damages alone. Accordingly, the disclosing party will be entitled to
preliminary and permanent injunctive relief and other equitable relief for any
actual or threatened breach of this Section 6, without being required to post
bond or prove that monetary damages are inadequate.
7. PROPRIETARY RIGHTS.
7.1 IDEFENSE'S OWNERSHIP. The Services, Materials and all
business requirements, statements of work, functional and technical
specifications, marketing proposals and other materials developed by iDEFENSE in
connection with providing the Services or Materials to an End User will remain
the sole and exclusive property of iDEFENSE unless otherwise set forth in the
applicable End User Agreement. iDEFENSE's rights under this Section 7.1 will
include, but not be limited to: (i) all copies of the Materials, in whole and in
part; (ii) all Intellectual Property Rights in the Services and Materials; and
(iii) all modifications to, and derivative works based upon, the Services or
Materials. HomeCom will not delete or in any manner alter the Intellectual
Property Rights notices of iDEFENSE and its suppliers, if any, appearing on any
Materials delivered to HomeCom. As a condition of the license rights granted to
HomeCom in this Agreement, HomeCom will reproduce and display such notices on
each copy it makes of any Materials.
7.2 HOMECOM'S DUTIES. HomeCom will use its reasonable efforts
to protect iDEFENSE's Intellectual Property Rights in the Services and Materials
and will report promptly to iDEFENSE any infringement of such rights of which
HomeCom becomes aware. iDEFENSE reserves the sole and exclusive right at its
discretion to assert claims against third parties for infringement or
misappropriation of its Intellectual Property Rights.
7.3 TRADEMARKS. Subject to the terms and conditions of this
Agreement and during the term hereof, iDEFENSE grants HomeCom a non-exclusive,
non-transferable, limited license for the term of this Agreement to use the
Marks in HomeCom's marketing of the Services and Materials, provided that such
use is in accordance with iDEFENSE's trademark usage
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guidelines then in effect. Such use must reference the Marks as being owned by
iDEFENSE. Nothing in this Agreement grants HomeCom ownership or any rights in or
to use the Marks, except in accordance with this license. iDEFENSE will have the
exclusive right to own, use, hold, apply for registration for, and register the
Marks during the term of, and after the expiration or termination of, this
Agreement; HomeCom will neither take nor authorize any activity inconsistent
with such exclusive right.
8. IDEFENSE'S STANDARD DISCLAIMERS, LIMITATIONS OF LIABILITY AND
INDEMNITY. HomeCom acknowledges that iDEFENSE's standard disclaimers,
limitations of liability and indemnity provisions are as set forth below and
will inform its End Users of such standard provisions and use its best efforts
to include such provisions in any End User agreement between HomeCom and
iDEFENSE to provide Services or Materials for a particular End User or in any
agreement between iDEFENSE and the End User.
STANDARD DISCLAIMER OF WARRANTIES. All Services and Materials provided
by iDEFENSE under this Agreement are provided on an "as is" basis
without warranty of any kind, either express or implied, including but
not limited to any warranties of title or non-infringement or the
implied warranties or merchantability and fitness for a particular
purpose. In particular, iDEFENSE makes no representations or warranties
(i) concerning the accuracy, completeness, or reliability of any
Services, Materials or other information provided under this Agreement,
or (ii) that the content of the Services, Materials or other
information are appropriate, authorized, or lawful in all countries,
states, or other jurisdictions; or (iii) that the Services and/or
Materials provided will avert, detect or prevent security breaches,
losses, intrusions or other occurrences and/or the consequences
therefrom that the Services and/or Materials are designed or intended
to avert, detect or prevent or (iv) that any electronic files or
transmissions provided by iDEFENSE will be free from errors, viruses or
other harmful elements; or (v) concerning the results which will be
obtained from the use of the Services, Materials or other information.
LIMITATIONS OF LIABILITY.
TOTAL LIABILITY. iDEFENSE's aggregate liability under this Agreement,
whether for negligence, breach of contract, misrepresentation or
otherwise, shall in respect of a single occurrence or a series of
occurrences in no circumstances exceed the fees paid for the particular
Services or Materials provided by iDEFENSE that gave rise to the
liability. End User agrees that (i) the limitations contained in this
Section are reasonable given, among other things, the fees paid to
iDEFENSE for the Services and Materials, and (ii) these limitations
reflect a reasonable allocation of risk between iDEFENSE and End User.
EXCLUSION OF DAMAGES. In no event will iDEFENSE be liable for any
special, incidental, or consequential damages, whether based on breach
of contract, tort (including negligence), product liability, or
otherwise, and whether or not iDEFENSE has been advised of the
possibility of such damage.
SOLE AND EXCLUSIVE REMEDY. End User's exclusive remedies with respect
to any and all liabilities, losses, costs or damages resulting from any
cause whatsoever, including but not limited to iDEFENSE's breach of
contract or negligence, shall be to receive an amount equal to the
actual damages suffered by End User directly caused by iDEFENSE
(subject to the maximum limitation set forth above) and to require
iDEFENSE to re-perform the Services.
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LIABILITY FOR LOST DATA. iDEFENSE shall not be responsible for the
repair of damage to or the replacement or restoration of, any software
or data files resulting from accident, transportation, neglect or
misuse; intentional acts by persons or entities other than iDEFENSE,
failure of electrical power, air conditioning or humidity control, or
other causes beyond its control. End User shall be responsible for
regularly backing up all software and data on their systems and
network. If any act or omission of iDEFENSE directly causes any loss or
damage to End User's software or data, iDEFENSE's sole obligation and
End User's sole remedy shall be iDEFENSE's provision of reasonable
assistance to restore the lost software and data from the most recent
backup copy maintained by End User. iDEFENSE shall have no obligation
with respect to lost software or data under any other circumstances or
to recover, restore or re-enter any other software, data, information
or records.
FAILURE OF ESSENTIAL PURPOSE. The parties have agreed that the
limitations specified in this Section will survive and apply even if
any limited remedy specified in this Agreement is found to have failed
of its essential purpose.
9. INDEMNITIES.
9.1 GENERAL INDEMNITY FROM HOMECOM. HomeCom agrees to defend,
indemnify and hold harmless iDEFENSE against any third party claims against
iDEFENSE for loss, damage, liability, suits, proceedings or expense (including
but not limited to attorneys' fees and other costs of investigation or defense)
arising out of any breach of this Agreement, misrepresentation, fraud, gross
negligence or willful misconduct by HomeCom or its employees, agents or
representatives.
9.2 GENERAL INDEMNITY FROM IDEFENSE. iDEFENSE agrees to
defend, indemnify and hold harmless HomeCom against any third party claims
against HomeCom for loss, damage, liability, suits, proceedings or expense
(including but not limited to attorneys' fees and other costs of investigation
or defense) arising out of any breach of this Agreement, misrepresentation,
fraud, gross negligence or willful misconduct by iDEFENSE or its employees,
agents or representatives.
9.3 INFRINGEMENT INDEMNITY. iDEFENSE agrees to defend,
indemnify and hold harmless HomeCom against any third party claims against
HomeCom for loss, damage, liability, suits, proceedings or expense (including
but not limited to attorneys' fees and other costs of investigation or defense)
to the extent the third party claim alleges that the use of the Services or
Materials by HomeCom infringes any U.S. copyright or any U.S. patent issued as
of the date of this Agreement. iDEFENSE will have no obligation under this
Section as to any action, proceeding, or claim unless: (i) iDEFENSE is notified
of it promptly; (ii) iDEFENSE has sole control of its defense and settlement;
and (iii HomeCom provides iDEFENSE with reasonable assistance in its defense and
settlement. iDEFENSE will have no obligations under this Section 10.2 with
respect to infringement or misappropriation arising from (i) modifications to
the Services or Materials that were not authorized by iDEFENSE, (ii) the use of
the Services or Materials in combination with products, systems, software or
materials not contemplated by iDEFENSE when it provided the Services or
Materials or (iii) furnishing to HomeCom of any information, service, or
applications assistance requested by HomeCom which results in a HomeCom-specific
product or application.
10. TERM AND TERMINATION.
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10.1 TERM. The term of this Agreement will begin as of October
1, 1999 and will continue for a period of three years unless it is terminated
earlier in accordance with the provisions hereof. This Agreement shall
automatically renew for additional one-year terms unless either party notifies
the other of its desire not to renew at least 30 days prior to the end of the
current term.
10.2 EVENTS OF TERMINATION. Either party will have the right
to terminate this Agreement if: (i) the other party breaches any material term
or condition of this Agreement, and fails to cure such breach within 30 days
after written notice; (ii) the other party becomes the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors; or (iii)
the other party becomes the subject of an involuntary petition in bankruptcy or
any involuntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within 60 days of filing. If a change in control of HomeCom occurs
through a merger, such successor to HomeCom by merger shall have the option of
terminating this Agreement on thirty (30) days notice. HomeCom will provide
iDEFENSE with timely notice of any such merger transaction.
10.3 EFFECT OF TERMINATION. Upon termination or expiration of
this Agreement, iDEFENSE will pay HomeCom any discounts/commissions due and
payable for specific work performed prior to the date of termination and HomeCom
will immediately return to iDEFENSE or (at iDEFENSE's request) destroy all
copies of Proprietary Information in its possession or control and will
discontinue all advertising, reference to the Services and Materials or use of
iDEFENSE's Marks and an officer of HomeCom will certify to iDEFENSE in writing
that HomeCom has done so. Provided that HomeCom otherwise complies with the
Non-Solicitation And Non-Compete Agreement between the parties, after any
termination of this Agreement, HomeCom may engage other providers to provide
Competing Services to its End Users.
10.4 SURVIVAL. The rights and obligations of the parties
contained in Sections 5.4, 6, 7, 10.4, 12, and 14.2 and any other provision
which by its nature should survive will survive the termination or expiration of
this Agreement.
11 COMPLIANCE WITH LAW.
11.1 GENERAL. HomeCom shall obtain all licenses, permits and
approvals required by any government and shall comply with all applicable laws,
rules, policies and procedures and other laws and regulations, of any
governmental authority where the Services and Materials are to be distributed,
used or deployed.
11.2 EXPORT CONTROLS. This Agreement is subject to and
conditioned upon compliance with applicable export control laws and applicable
regulations thereunder. HomeCom agrees to comply fully with any such export laws
and to provide iDEFENSE with such documentation, assurances and access to
records as may be required to obtain licenses under any such laws.
12. DISPUTE RESOLUTION.
12.1 ESCALATION PROCEDURE. iDEFENSE and HomeCom hereby agree
that they will use all reasonable efforts to resolve any disputes arising out of
this Agreement in a co-operative and expeditious manner. If the primary point of
contact for iDEFENSE and HomeCom are unable to resolve a dispute, each party
will designate a more senior representative within its
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organization and such representative shall have authority to negotiate and
resolve the dispute with the other parties designated representatives. If these
designated representatives are unable to resolve the dispute within 30 days of
its referral, the dispute may be referred to arbitration in accordance with
Section 14.2.
12.2 ARBITRATION. If the escalation process described in
Section 14.1 fails to resolve the dispute, then such dispute shall be referred
to binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules") by any party hereto in a location mutually
agreed by the parties to be held before arbitrator selected in accordance with
the Rules. The provisions of this Agreement shall control if they conflict with
the Rules. United States federal law shall govern the arbitrability of all
claims. Notwithstanding the failure of any party to participate in the
arbitration proceedings, the arbitrator may proceed to make an award and the
costs of the arbitration shall be borne equally by all parties to the
arbitration. The parties acknowledge and agree that the award of the arbitrator
shall be the exclusive remedy of the parties and shall be enforceable in a court
of competent jurisdiction. Notwithstanding the foregoing, the parties shall be
entitled to seek injunctive relief or other equitable remedies from any court of
competent jurisdiction.
13. FORCE MAJEURE. Neither party will be responsible for any failure to
perform due to causes beyond its reasonable control (each a "FORCE MAJEURE"),
including, but not limited to, acts of God, war, riot, embargoes, acts of civil
or military authorities, denial of or delays in processing of export license
applications, failure of a common carrier, delays or failures of access
involving the Internet, World Wide Web or similar services including network
traffic and configuration problems therewith fire, floods, earthquakes,
accidents, strikes, or fuel crises or the acts or omissions of the other party
or any End User, provided that such party gives prompt written notice thereof to
the other party. The time for performance will be extended for a period equal to
the duration of the Force Majeure. As soon as Force Majeure has ceased in its
effect, the parties shall start to continue complying with their affected
obligations.
14. GENERAL.
14.1 ASSIGNMENT AND SUBLICENSING. Subject to the right of
HomeCom's successor by merger to terminate this Agreement under Section 10.2,
this Agreement will bind and inure to the benefit of each party's permitted
successors and assigns. HomeCom may not assign or sublicense this Agreement, in
whole or in part, without iDEFENSE's written consent. Any attempt to assign or
sublicense this Agreement without such consent will be null and void.
14.2 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any other jurisdiction other than the State of
Delaware. If either party employs attorneys to enforce any rights arising out of
or relating to this Agreement, the prevailing party shall be entitled to recover
reasonable attorney's fees.
14.3 SEVERABILITY. HomeCom and iDEFENSE agree and acknowledge
that the provisions of this Agreement shall be devisable and separate, so that,
if any provision or provisions of this Agreement are held to be unreasonable,
unlawful, or unenforceable, such holdings shall not impair or render invalid the
remaining provisions of this Agreement. If any provision hereof is held to be
too broad or unreasonable in duration, scope or character of restriction to be
enforced, such provisions shall be modified to the extent necessary so that any
provision or portion hereof shall be legally enforceable to the fullest extent
permitted by law, and the parties hereto expressly authorize any court of
competent jurisdiction to enforce any such provision or portion hereof so that
any and
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all provisions or portions hereof shall be enforced by such court to the fullest
extent permitted by law.
14.4 NOTICES. All notices and other communications required or
permitted to be given in respect of this Agreement shall be sent by personal
delivery, nationally recognized overnight courier, facsimile or certified or
registered mail, to the parties at the addresses set forth on the signature
pages, or, in each case, at such other address or addresses as any party shall
hereafter specify by written notice to the others. 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 for in this Section,
be deemed given upon receipt, (iii) if delivered by mail in the manner described
above to the address as provided in this Section, be deemed given on the earlier
of the fourth business day following mailing or upon receipt and (iv) if
delivered by overnight courier to the address as provided for in this Section,
be deemed given on the earlier of the first business day following the date sent
by such overnight courier or upon receipt.
14.5 INDEPENDENT CONTRACTORS. The parties to this Agreement
are independent contractors. There is no relationship of partnership, joint
venture, employment, franchise, or agency between the parties. Neither party
will have the power to bind the other or incur obligations on the other's behalf
without the other's prior written consent.
14.6 ENTIRE AGREEMENT. This Agreement and its exhibits and
the other agreements which are contemplated herein are the complete and
exclusive agreement between the parties with respect to the subject matter
hereof and supersede and replace any and all prior agreements, communications,
and understandings (both written and oral) regarding HomeCom's distribution of
the Services and Materials and the other subject matter hereof. This Agreement
may only be modified, or any rights under it waived, by a written document
executed by both parties, except that iDEFENSE may modify Exhibit B in its
discretion from time to time in accordance with Section 4.1. The terms and
conditions of this Agreement supersede those contained on any order form or
other document issued by HomeCom requesting delivery of the Services or
Materials.
14.7 REMEDIES. All rights and remedies conferred under this
Agreement or by any other instrument or law shall be cumulative and may be
exercised singularly or concurrently.
14.8 NONWAIVER. Failure by either party to enforce any term or
condition of this Agreement shall not be deemed a waiver of further enforcement
of that or any other term or condition.
14.9 AUTHORITY. Each party represents to the other that it has
due and proper authority to make and perform all duties and obligations set
forth and envisioned by this Agreement.
14.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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The parties have caused this Agreement to be executed by their
duly-authorized representatives as of the 1st day of October, 1999.
<TABLE>
<S> <C>
INFRASTRUCTURE DEFENSE, INC. HOMECOM COMMUNICATIONS, INC.
By: By:
-------------------------------------------------- -------------------------------------------------
Name: Name:
----------------------------------------------- -----------------------------------------------
Title: Title:
---------------------------------------------- ----------------------------------------------
Date: Date:
----------------------------------------------- ----------------------------------------------
Address: Address:
-------------------------------------------- --------------------------------------------
Facsimile: Facsimile:
------------------------------------------ ------------------------------------------
</TABLE>
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EXHIBIT A
FEES
<TABLE>
<CAPTION>
CUMULATIVE FEES PAYABLE BY END USERS FOR IDEFENSE'S
COMMISSION SERVICES AND MATERIALS DURING EACH TWELVE MONTH TERM
PERCENTAGE % ($X)
<S> <C>
-------------------------------------------------------------------------------------
17.5% x LESS THAN $500,000
-------------------------------------------------------------------------------------
20% $500,001 LESS THAN OR EQUAL TO x LESS THAN OR EQUAL TO $999,999
-------------------------------------------------------------------------------------
25% x LESS THAN $1,000,000
</TABLE>
At the beginning of each twelve-month term of this Agreement,
discounts/commissions will be paid at the rate of 17.5% on fees actually
received by iDEFENSE from End Users for the Services and Materials. Once fees
from End Users for iDEFENSE's Services and Materials reach a cumulative total of
$500,000 during that twelve month period, iDEFENSE will begin paying HomeCom
discounts/commissions at the rate of 20%. Once fees from End Users for
iDEFENSE's Services and Materials exceed a cumulative total of $1,000,000 during
that twelve month period, iDEFENSE will begin paying HomeCom
discounts/commissions at the rate of 25%. At the beginning of the next
twelve-month term, the discount/commission rate will be reset at 17.5% until the
cumulative total fees from End Users exceed $500,000 at which time the 20% rate
will apply until the fees then again exceed $1,000,000.
Within thirty (30) days after the end of each calendar quarter, iDEFENSE will
pay the discounts/commissions due to HomeCom based on fees (less discounts,
rebates, returns and other deductions and excluding all reimbursements for
expenses and taxes) actually received by iDEFENSE from HomeCom's End Users for
the Services and Materials during the preceding calendar quarter.
<PAGE>
EXHIBIT B
SERVICES DESCRIPTIONS AND RELATED CHARGES
DESCRIPTION AND PRICING OF IALERT ENTERPRISE SERVICE
ENTERPRISE Reports
Daily iALERT Enterprise Reports provide government agencies and companies with
tailored daily monitoring and analysis of threats, vulnerabilities, and
incidents compiled from numerous sources to help protect your critical
electronic information, communications networks, and operational capabilities.
Reports are provided on each weekday, excluding federal holidays. Included in
the base price of $100K are 10 user seats and two hours of calls time with an
iDEFENSE analyst per month.
<TABLE>
<S> <C>
- -------------------------- --------------------------------------------------------------------------------------
iALERT's Enterprise Service
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
a. Timeliness Daily
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MONITORING - Indicator Matrix
&ANALYSIS - Overview and Analysis of Sector and Enterprise Status
- Sector Vulnerability Reports (based on Sector Critical Dependencies)
- Enterprise-specific threat and vulnerability reporting
- Incidents Reporting & Analysis
- Open Sources
- Special Sources
- Sources
- Specific Client Intelligence
- Relevant security, industry and sector news
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DELIVERY Secure, subscriber-only Web site
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PRICING $100,000 per year including 10 user seats and 2 hours of call time with an analyst
per month
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ADDITIONAL USERS 1-25 = $1000 per seat
26-50 = $750 per seat
51-100 = $500 per seat
> 100 = $250 per seat
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ADDITIONAL ANALYST CALLS
$300 an hour, in 15 minute increments
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</TABLE>
<PAGE>
EXHIBIT B (continued)
SERVICES DESCRIPTIONS AND RELATED CHARGES
DESCRIPTION AND PRICING OF IALERT SECTOR SERVICE
SECTOR Reports
iDEFENSE's iALERT Sector Reports are daily reports summarizing cyberthreats,
vulnerabilities, and incidents at the sector level for the Financial Services;
Energy; Communications and Information Technology; Transportation; Health Care;
Manufacturing, Processing, and Distribution; and Government sectors. iALERT
Sector Reports cover such timely events as hacker and terrorist activity focused
at the sector as well as information technology infrastructure vulnerabilities.
Reports are provided daily for a base price of $50K PER SECTOR AND INCLUDE 10
user seats.
SECTORS INCLUDE:
FINANCIAL SERVICES. DEFINITION: INCLUDES BANKS, SAVINGS AND LOANS,
CREDIT UNIONS, LENDING INSTITUTIONS, SECURITIES BROKERAGES, TRANSACTION
CLEARING HOUSES, INSURANCE COMPANIES AND ALL RELEVANT REGULATORY
AUTHORITIES. This sector has perhaps done the most to protect itself
from attack, yet its principal vulnerability is the insider threat.
This sector's payment systems, securities and commodities exchanges,
and clearing and settlement organizations comprise the backbone of the
sector's infrastructure. LAUNCH DATE: JUNE 1, 1999.
GOVERNMENT. DEFINITION: INCLUDES GOVERNMENTAL AUTHORITIES PRIMARILY AT
THE FEDERAL LEVEL, HOWEVER, IT IS ALSO DESIRABLE TO HAVE COVERAGE OF
PERTINENT ISSUES AT LEVELS AND IN LOCATIONS IDENTIFIED BY RESPECTIVE
CLIENTS. Government's concern derives principally from its duty to
protect critical infrastructure at all levels of government--national,
state, and local--as well as from its responsibility to assure
government operations. Further, Government depends upon the private
sector to provide it with the technology and information it needs to
protect resources. LAUNCH DATE: SEPTEMBER 15, 1999.
ENERGY. DEFINITION: INCLUDES THE PRODUCTION, PROCESSING, AND
DISTRIBUTION OF ALL FORMS OF CONVENTIONAL AND NUCLEAR ENERGY, AS WELL
AS ALL RELEVANT REGULATORY AUTHORITIES. Prolonged disruption in the
flow of energy (electricity, oil, and gas) would seriously degrade the
performance and survival of the other infrastructure sectors. The
vulnerability of this sector to disruption is further conditioned by
widespread and increasing use of Supervisory Control and Data
Acquisition (SCADA) computer systems for remote control of
energy-transfer systems. LAUNCH DATE: OCTOBER 15, 1999.
COMMUNICATIONS AND INFORMATION TECHNOLOGY. DEFINITION: INCLUDES ALL
FORMS OF MASS MEDIA, TELECOMMUNICATIONS PRODUCTS AND SERVICES, AS WELL
AS COMPUTER SOFTWARE, HARDWARE, FIRMWARE AND ALL OTHER ELECTRONIC
COMPONENTS. FURTHER INCLUDES RELEVANT REGULATORY AUTHORITIES. The most
important vulnerability in this sector is increasing dependency on the
Public Switched Network (PSN), and on the Internet. These networks, in
turn, depend on electrical power for operations and on telephone lines
and fiber-optic cables that often run along transportation routes. The
more dependent we become on the PSN and the Internet, the more
vulnerable we are to damage of the physical plant. LAUNCH DATE:
NOVEMBER 15, 1999.
<PAGE>
TRANSPORTATION. DEFINITION: INCLUDES ALL FORMS OF COMMERCIAL
TRANSPORTATION SUCH AS AIR, RAIL, MARITIME AND TRUCKING - INCLUDING ALL
RELEVANT REGULATORY AUTHORITIES. Physical plant vulnerabilities
characterize this sector, however IT-related vulnerabilities have
increased as the sector becomes more interconnected and
technology-dependent. For example, electronic data interchange,
just-in-time delivery systems, and automated dispatch and tracking
controls introduce significant dependencies and vulnerabilities to
classic, well-established physical distribution systems. LAUNCH DATE:
JANUARY 15, 2000.
HEALTH CARE. DEFINITION: INCLUDES ALL ELEMENTS OF THE MEDICAL,
PHARMACEUTICAL AND MEDICAL APPLIANCE INDUSTRY AS WELL AS ALL GOVERNMENT
PROGRAMS (US FEDERAL, STATE AND LOCAL) AND ALL RELEVANT REGULATORY
AUTHORITIES. The increasing size and accessibility of medical databases
has caused growing concern for the privacy of the public, the accuracy
and assuredness of the information, and the liabilities of those who
posses the information. Tele-medicine, a procedural and technological
breakthrough, is not without its vulnerabilities. The deployment of
sufficient safeguards is paramount if medical institutions are to
prevent breaches of patient confidentiality, and if they are to assure
the timeliness and accuracy of the transmission of critical emergency
medical data. LAUNCH DATE: FEBRUARY 15, 2000.
MANUFACTURING, PROCESSING, AND DISTRIBUTION. DEFINITION: INCLUDES ALL
FORMS OF LIGHT INDUSTRY AND DURABLE GOODS PRODUCTION AS WELL AS ALL
RELEVANT REGULATORY AUTHORITIES. Information technology and
computer-driven controls have become prevalent, and many companies
spend more on computers and automated controls than they spend on the
direct manufacturing process. Such dependence on computers, artificial
intelligence, robotics, and automated inventory and control systems,
and the sector's interconnected nature create vulnerabilities to
technological failure or attack. Major disruptions have consequences
for the industry in which the problem occurred, and have widespread
effects on other sectors that depend on its products. LAUNCH DATE:
MARCH 15, 2000
<PAGE>
<TABLE>
<S> <C>
- -------------------------- --------------------------------------------------------------------------------------
iALERT's Enterprise Service
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b. Timeliness Daily
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MONITORING - Overview of Sector Status
&ANALYSIS - General Sector Threats
- Incident Reporting & Analysis
- Open Sources
- Special Sources
- General ITI Vulnerabilities
- Sources
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DELIVERY Fax or Secure Email. An access-controlled Web site will be available to clients in
early September.
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PRICING $50,000 per year including 10 user seats
--------------------------------------------------------------------------------------
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ADDITIONAL USERS 1-25 = $500 per seat
26-50 = $375 per seat
51-100 = $250 per seat
> 100 = $125 per seat
--------------------------------------------------------------------------------------
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ANALYST CALLS $300 an hour, in 15 minute increments
- -------------------------- --------------------------------------------------------------------------------------
</TABLE>
