<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 1999
REGISTRATION NO. 333-70717
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------
USINTERNETWORKING, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7379 52-2078325
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
ONE USI PLAZA
ANNAPOLIS, MARYLAND 21401-7478
(410) 897-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
WILLIAM T. PRICE, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ONE USI PLAZA
ANNAPOLIS, MARYLAND 21401-7478
(410) 897-4400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES F. ROGERS, ESQ. WILLIAM B. GANNETT, ESQ.
LATHAM & WATKINS CAHILL GORDON & REINDEL
1001 PENNSYLVANIA AVENUE, N.W., SUITE 1300 80 PINE STREET
WASHINGTON, DC 20004 NEW YORK, NY 10005-1702
(202) 637-2200 (212) 701-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of the Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Explanatory Note: This Amendment No. 4 to the Form S-1 Registration Statement
(Registration No. 333-70717) of USINTERNETWORKING, Inc. is being filed solely to
include Exhibits to the Registration Statement. Accordingly, Part 1, the form of
prospectus, has been omitted from this filing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market Listing Fee.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 23,978
NASD Filing Fee........................................................... 9,125
Nasdaq National Market Listing Fee........................................ *
Transfer Agent Fees....................................................... *
Accounting Fees and Expenses.............................................. *
Legal Fees and Expenses................................................... *
Printing and Mailing Expenses............................................. *
Miscellaneous............................................................. *
---------
Total................................................................. $ *
</TABLE>
- ------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.
In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of the corporation. No indemnification may be made in respect of any
claim, issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in the preceding two
II-1
<PAGE>
paragraphs, Section 145 requires that such person be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not entitled to
be indemnified by the corporation as authorized in Section 145.
Our Certificate provides that one of our officers or directors will not be
personally liable to us or our stockholders for monetary damages for any breach
of his fiduciary duty as an officer or director, except in certain cases where
liability is mandated by the DGCL. The provision has no effect on any
non-monetary remedies that may be available to us or our stockholders, nor does
it relieve us or our officers or directors from compliance with federal or state
securities laws. The Certificate also generally provides that we will indemnify,
to the fullest extent permitted by law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, investigation, administrative hearing or any other proceeding (each, a
"Proceeding") by reason of the fact that he is or was our director or officer,
or is or was serving at our request as a director, officer, employee or agent of
another entity, against expenses incurred by him in connection with such
Proceeding. An officer or director shall not be entitled to indemnification from
us if (i) the officer or director did not act in good faith and in a manner
reasonably believed to be in, or not opposed to, our best interests, or (ii)
with respect to any criminal action or proceeding, the officer or director had
reasonable cause to believe his conduct was unlawful.
Our Bylaws provide that we will indemnify any person who is made a party to
any threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was our director or officer, and may indemnify any of
our employees or agents in those circumstances, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding. No indemnification may be provided for any person who shall have
been finally adjudicated not to have acted honestly or in the reasonable belief
that his or her action was in or not opposed to our best interests or who had
reasonable cause to believe that his or her conduct was unlawful.
Indemnification must be provided to any of our directors, officers, employees or
agents to the extent the person succeeded, on the merits or otherwise, in
defense of any action or claim described above. Any indemnification under this
provision of the Bylaws, unless required under the Bylaws or ordered by a court,
can be made only as authorized in each specific case upon a determination by a
majority of disinterested directors or by independent legal counsel or by the
shareholders that such indemnification is appropriate under the standard set
forth in the preceding sentence.
The underwriting agreement to be filed as Exhibit 1.1 to the Registration
Statement provides for indemnification by the underwriters of USI and its
directors and certain officers, and by USI of the underwriters, for certain
liabilities arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding all securities
sold and employee stock options granted by the Registrant since January 14,
1998. Further included is the consideration, if any, received by the Registrant
for such securities, and information relating to the section of the Securities
Act of 1933, as amended (the "Securities Act"), and the rules of the Securities
and Exchange Commission under which exemption from registration was claimed. All
awards of options did not involve any sale under the Securities Act. None of
these securities were registered under the Securities Act. Except as described
below, no sale of securities involved the use of an underwriter and no
commissions were paid in connection with the sales of any securities.
II-2
<PAGE>
1. At various times during the period from January 1998 through January 5,
1999, we have granted to employees and directors options to purchase an
aggregate of 13,458,000 shares of Common Stock with an exercise price of
$0.33. The issuance of these securities were not registered under the
Securities Act in reliance upon Rule 701 of the rules promulgated under the
Securities Act.
2. On February 13, 1998, we issued 100 shares of Common Stock to Christopher R.
McCleary.
3. On May 13, 1998, we issued 15,750,000 shares of Common Stock to Christopher
R. McCleary, Stephen E. McManus, Andrew A. Stern and Christopher Poelma at
par value. The purchase price for the Common Stock was paid with cash and
notes payable to the Company.
4. On May 13, 1998, we issued 38,333.33 shares of Series A Preferred Stock for
an aggregate purchase price of $23 million to the Initial Series A
Investors. The purchase price for such shares was paid in cash at the time
of the issuance. We simultaneously issued 1,666.67 shares of Series A
Preferred Stock for an aggregate purchase price of $1 million to Christopher
R. McCleary. The purchase price for such shares was paid by the forgiveness
by Mr. McCleary of $1 million of debt that we owed him.
5. On June 18, 1998, we issued 5,000 shares of Series A Preferred Stock for an
aggregate purchase price of $3 million to certain of the Initial Series A
Purchasers. We simultaneously issued 5,833.33 shares of Series A Preferred
Stock for $3.5 million to U S WEST. The purchase price for such shares was
paid in cash at the time of issuance.
6. On June 19, 1998, we issued 3,000 shares of Series A Preferred Stock for an
aggregate purchase price of $1.6 million to HAGC Partners, Chris Horgan (who
later transferred his interest to his affiliate, Southeastern Technology
Fund, L.P.) and the Account Management Purchasers. The purchase price for
such shares was paid in cash at the time of issuance. We simultaneously
issued 1,166.67 shares of Series A Preferred Stock for a purchase price of
$700,002 to USI Partners. The purchase price for such shares was paid in
cash at the time of issuance.
7. On September 8, 1998, we issued convertible promissory notes in the
aggregate amount of $9,095,000, together with warrants to purchase 7,795,722
shares of Common Stock for $.01 per share, to certain of the existing
holders of the Series A Preferred Stock. The purchase price for such notes
and warrants was paid in cash at the time of issuance.
8. On December 16, 1998, we issued convertible promissory notes in the
aggregate amount of $8 million to certain of the existing holders of the
Series A Preferred Stock. The purchase price for such notes was paid in cash
at the time of issuance.
9. On December 24, 1998, we issued convertible promissory notes in the amount
of $5 million to U S WEST. The purchase price for such notes was paid in
cash at the time of issuance.
10. On December 31, 1998, we issued 59,278.56 shares of Series B Preferred Stock
for an aggregate purchase price of $62,242,500 to certain holders of the
convertible promissory notes described above, certain holders of Series A
Preferred Stock, and a number of new investors. The purchase price for such
shares was paid in cash and/or by conversion of certain outstanding
convertible promissory notes at the time of issuance.
All of the shares of preferred stock described in paragraphs 3 through 10
above are being exchanged for shares of Common Stock prior to completion of this
offering. The issuances of the securities above were made in reliance on on or
more exemptions from registration under the Securities Act, including those
provided by Section 4(2) and Rule 701 thereunder. The purchasers of these
securities represented that they had adequate access, through their employment
with us or otherwise, to information about us.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1+ Amended and Restated Certificate of Incorporation of the Registrant
3.2* Form of Second Restated Certificate of Incorporation of the Registrant
3.3+ Bylaws of the Registrant
4.1* Specimen Certificate for shares of Common Stock, $.001 par value, of the Registrant
5.1* Opinion of Latham & Watkins with respect to the validity of the securities being offered.
10.1+ Stock Purchase Agreement between USI and the Initial Series A Purchasers dated May 13, 1998
10.2+ Stock Purchase Agreement between USI and certain of the Initial Series A Purchasers dated June 18, 1998
10.3+ Stock Purchase Agreement between USI and U S WEST dated June 18, 1998
10.4+ Stock Purchase Agreement between USI and the Account Management Purchasers dated June 19, 1998
10.5+ Stock Purchase Agreement between USI and HAGC Partners dated June 19, 1998
10.6+ Stock Purchase Agreement between USI and Chris Horgen dated June 19, 1998
10.7+ Stock Purchase Agreement between USI and USI Partners, Ltd. dated June 19, 1998
10.8+ Stock Purchase Agreement among USI, IIT Holding, Inc., Luis Sebastian Alegrett, Michael Mai, Carlos E.
Bravo, and Vicente Perez de Tudela dated August 28, 1998
10.9* Amended and Restated Stock Purchase Agreement among USI, Advanced Communication Resources, Inc., Matthew
D. Kanter, The Benjamin Kanter 1997 QSST Trust, The Ronald Kanter 1997 QSST Trust and David S. Walden
dated October 2, 1998
10.10 Stock Purchase Agreement between USI and certain other parties dated December 31, 1998
10.11* Amended and Restated Stockholders Agreement between USI and certain other parties dated December 31, 1998
10.12* Employment Agreement between USI and Christopher R. McCleary dated May 29, 1998
10.13* Employment Agreement between USI and Stephen E. McManus dated June 2, 1998
10.14* Employment Agreement between USI and Andrew A. Stern dated July 27, 1998
10.15* Employment Agreement between USI and Jeffrey L. McKnight dated December 15, 1998
10.16+# Outsource Alliance Agreement between USI and PeopleSoft USA, Inc. dated September 28, 1998
10.17+# iMAP Agreement between USI and U S WEST, Inc. dated January 15, 1999
10.18+# Software License Agreement between USI and Sagent Technology, Inc. dated June 25, 1998
10.19+# Software License and Service Agreement between USI and Broadvision, Inc. dated July 22, 1998
10.20* Note Purchase Agreement among USI and the Account Management Purchasers dated September 8, 1998
10.21* Note Purchase Agreement between USI and Southeastern Technology Fund, L.P. dated September 8, 1998
10.22* Note Purchase Agreement among USI and certain other parties dated September 8, 1998
10.23* Note Purchase Agreement between USI and U S WEST dated September 8, 1998
10.24* Note Purchase Agreement between USI and certain other parties dated December 16, 1998
10.25* Note Purchase Agreement between USI and U S WEST dated December 24, 1998
10.26# SiebelNet Agreement between USI and SiebelNet, Inc. dated January 31, 1999
10.27# Marketing Services Agreement by and between USI, and U S WEST Communications Services, Inc. and U S WEST
Interprise America, Inc. dated January 31, 1999
21.1+ Subsidiaries of the Registrant
23.1+ Consent of Mahoney Cohen & Company, P.C.
23.2+ Consent of Bassan & Associates S.C.
23.3+ Consent of Ernst & Young LLP regarding IIT financial statements
23.4+ Consent of Ernst & Young LLP regarding USI financial statements
24.1+ Power of Attorney (included on signature page)
27.1+ Financial Data Schedule
99.1+ Report of Independent Auditors
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
# Confidential treatment requested as to certain portions.
II-4
<PAGE>
(b) Schedules
All schedules have been omitted because they are not required or because the
required information is given in the Consolidated Financial Statements or Notes
thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Articles of
Incorporation, as amended, and By-Laws, as amended, of the Registrant and the
laws of the State of Delaware or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matters have been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
USINTERNETWORKING, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN ANNAPOLIS,
MARYLAND ON FEBRUARY 18, 1999.
<TABLE>
<S> <C> <C>
USINTERNETWORKING, INC.
By: /s/ ANDREW A. STERN
-----------------------------------------
Andrew A. Stern
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- -------------------------------------- ----------------------
<S> <C> <C>
* Chairman of the Board and Chief
- ------------------------------------ Executive Officer February 18, 1999
Christopher R. McCleary (Principal Executive Officer)
*
- ------------------------------------ President and Director February 18, 1999
Stephen E. McManus
/s/ ANDREW A. STERN Executive Vice President and Chief
- ------------------------------------ Financial Officer (Principal February 18, 1999
Andrew A. Stern Financial and Accounting Officer)
*
- ------------------------------------ Director February 18, 1999
R. Dean Meiszer
*
- ------------------------------------ Director February 18, 1999
Benjamin Diesbach
*
- ------------------------------------ Director February 18, 1999
Ray A. Rothrock
*
- ------------------------------------ Director February 18, 1999
Frank A. Adams
*
- ------------------------------------ Director February 18, 1999
William F. Earthman
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- -------------------------------------- ----------------------
- ------------------------------------
John H. Wyant Director
<S> <C> <C>
- ------------------------------------
Joseph R. Zell Director
*
- ------------------------------------ Director February 18, 1999
Michael C. Brooks
*
- ------------------------------------ Director February 18, 1999
David J. Poulin
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ ANDREW A. STERN
-------------------------
Andrew A. Stern
ATTORNEY-IN-FACT
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1+ Amended and Restated Certificate of Incorporation of the Registrant
3.2* Form of Second Restated Certificate of Incorporation of the Registrant
3.3+ Bylaws of the Registrant
4.1* Specimen Certificate for shares of Common Stock, $.001 par value, of the Registrant
5.1* Opinion of Latham & Watkins with respect to the validity of the securities being offered.
10.1+ Stock Purchase Agreement between USI and the Initial Series A Purchasers dated May 13, 1998
10.2+ Stock Purchase Agreement between USI and certain of the Initial Series A Purchasers dated June 18, 1998
10.3+ Stock Purchase Agreement between USI and U S WEST dated June 18, 1998
10.4+ Stock Purchase Agreement between USI and the Account Management Purchasers dated June 19, 1998
10.5+ Stock Purchase Agreement between USI and HAGC Partners dated June 19, 1998
10.6+ Stock Purchase Agreement between USI and Chris Horgen dated June 19, 1998
10.7+ Stock Purchase Agreement between USI and USI Partners, Ltd. dated June 19, 1998
10.8+ Stock Purchase Agreement among USI, IIT Holding, Inc., Luis Sebastian Alegrett, Michael Mai, Carlos E.
Bravo, and Vicente Perez de Tudela dated August 28, 1998
10.9* Amended and Restated Stock Purchase Agreement among USI, Advanced Communication Resources, Inc., Matthew
D. Kanter, The Benjamin Kanter 1997 QSST Trust, The Ronald Kanter 1997 QSST Trust and David S. Walden
dated October 2, 1998
10.10 Stock Purchase Agreement between USI and certain other parties dated December 31, 1998
10.11* Amended and Restated Stockholders Agreement between USI and certain other parties dated December 31, 1998
10.12* Employment Agreement between USI and Christopher R. McCleary dated May 29, 1998
10.13* Employment Agreement between USI and Stephen E. McManus dated June 2, 1998
10.14* Employment Agreement between USI and Andrew A. Stern dated July 27, 1998
10.15* Employment Agreement between USI and Jeffrey L. McKnight dated December 15, 1998
10.16+# Outsourcer Alliance Agreement between USI and PeopleSoft USA, Inc. dated September 28, 1998
10.17+# iMAP Agreement between USI and U S WEST, Inc. dated January 15, 1999
10.18+# Software License Agreement between USI and Sagent Technology, Inc. dated June 25, 1998
10.19+# Software License and Service Agreement between USI and Broadvision, Inc. dated July 22, 1998
10.20* Note Purchase Agreement among USI and the Account Management Purchasers dated September 8, 1998
10.21* Note Purchase Agreement between USI and Southeastern Technology Fund, L.P. dated September 8, 1998
10.22* Note Purchase Agreement among USI and certain other parties dated September 8, 1998
10.23* Note Purchase Agreement between USI and U S WEST dated September 8, 1998
10.24* Note Purchase Agreement between USI and certain other parties dated December 16, 1998
10.25* Note Purchase Agreement between USI and U S WEST dated December 24, 1998
10.26# SiebelNet Agreement between USI and SiebelNet, Inc. dated January 31, 1999
10.27# Marketing Services Agreement by and between USI, and U S WEST Communications Services, Inc. and U S WEST
Interprise America, Inc. dated January 31, 1999
21.1+ Subsidiaries of the Registrant
23.1+ Consent of Mahoney Cohen & Company, P.C.
23.2+ Consent of Bassan & Associates S.C.
23.3+ Consent of Ernst & Young LLP regarding IIT financial statements
23.4+ Consent of Ernst & Young LLP regarding USI financial statements
24.1+ Power of Attorney (included on signature page)
27.1+ Financial Data Schedule
99.1+ Report of Independent Auditors
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
# Confidential treatment requested as to certain portions.
<PAGE>
Exhibit 10.10
STOCK PURCHASE AGREEMENT
by
and
among
USINTERNETWORKING, Inc.
and
The Parties Hereto
-------------------------
December 31, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1. DEFINITIONS............................................................................................1
1.1. Definitions................................................................................1
1.2. Accounting Terms; Financial Statements.....................................................6
1.3. Knowledge Standard.........................................................................6
1.4. Other Defined Terms........................................................................6
ARTICLE 2. AUTHORIZATION OF PREFERRED SHARES; PURCHASE AND SALE OF PREFERRED SHARES...............................7
2.1. Preferred Shares...........................................................................7
2.2. Purchase and Sale of Preferred Shares......................................................7
2.3. Closing....................................................................................7
2.4. Fees and Expenses..........................................................................8
2.5 Financial Accounting Positions; Tax Reporting...............................................8
ARTICLE 3. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO PURCHASE THE PREFERRED SHARES........................8
3.1. Representations and Warranties.............................................................8
3.2. Compliance with Terms and Conditions of this Agreement.....................................9
3.3. Delivery of Certificates Evidencing the Shares.............................................9
3.4. Closing Certificates.......................................................................9
3.5. Secretary's Certificates...................................................................9
3.6. Documents..................................................................................9
3.7. Purchase Permitted by Applicable Laws......................................................9
3.8. Consents and Approvals....................................................................10
3.9. Amended and Restated Stockholders'Agreement...............................................10
3.10. Certificate..............................................................................10
3.11. No Material Judgment or Order............................................................10
3.12. Legal Opinion............................................................................10
3.13. Approval of Counsel to the Purchasers....................................................10
3.14. Pro Forma Balance Sheet..................................................................11
3.15. Good Standing Certificates...............................................................11
3.16. No Litigation............................................................................11
3.17. Siebel Systems, Inc. Memorandum of Understanding.........................................11
3.18. SBIC Forms...............................................................................11
3.19. Repayment of Notes.......................................................................12
ARTICLE 4. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE..................................................12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4.1. Representations and Warranties............................................................12
4.2. Compliance with this Agreement............................................................12
4.3. Issuance Permitted by Applicable Laws.....................................................12
4.4. Payment of Purchase Price.................................................................12
4.5. Consents and Approvals....................................................................13
4.6. No Material Judgment or Order.............................................................13
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................13
5.1. Corporate Existence and Authority.........................................................13
5.2. Corporate Authorization; No Contravention.................................................14
5.3. Governmental Authorization; Third Party Consents..........................................14
5.4. Binding Effect............................................................................14
5.5. Capitalization............................................................................14
5.6. Private Offering..........................................................................16
5.7. Litigation................................................................................16
5.8. Financial Statements......................................................................17
5.9. Title and Condition of Assets.............................................................18
5.10. Contractual Obligations..................................................................18
5.11. Tax Matters..............................................................................18
5.12. Severance Arrangements...................................................................19
5.13. Investment Company/Government Regulations................................................19
5.14. Broker's, Finder's or Similar Fees.......................................................19
5.15. Labor Relations and Employee Matters.....................................................19
5.16. Employee Benefits Matters................................................................19
5.17. Outstanding Borrowings...................................................................20
5.18. Insurance Schedule.......................................................................21
5.19. Solvency.................................................................................21
5.20. No Other Agreements to Sell the Assets or Capital Stock of the Company...................21
5.21. Key Employees............................................................................21
5.22. Compliance with Law......................................................................21
5.23. Software.................................................................................22
5.24. Disclosure...............................................................................24
5.25. No Default or Breach.....................................................................24
5.27. Patents, Trademarks, Etc..................................................................24
5.28. Use of Real Property......................................................................25
5.29. ERISA-Prohibited Transactions............................................................26
5.30. Absence of Certain Changes or Events......................................................26
5.31. Environmental Matters.....................................................................26
5.32. Potential Conflicts of Interest...........................................................27
5.33. Trade Relations...........................................................................27
5.34. Acquisition Agreements....................................................................27
5.35. Location of Assets.........................................................................28
5.36. Regulatory Affiliate......................................................................28
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS......................................................28
6.1. Existence and Authority...................................................................28
6.2. Organization; Authorization; No Contravention.............................................28
6.3. Binding Effect............................................................................29
6.4. Purchase for Own Account..................................................................29
6.5. Financial Condition.......................................................................29
6.6. Receipt of Information....................................................................30
6.7. Broker's, Finder's or Similar Fees........................................................30
6.8. Governmental Authorization; Third Party Consent...........................................30
6.9. Litigation................................................................................30
ARTICLE 7. COVENANTS OF THE COMPANY WITH RESPECT TO THE PERIOD FOLLOWING THE CLOSING............................30
7.1. Reservation of Shares.....................................................................30
7.2. Year 2000.................................................................................31
7.3. Regulatory Compliance.....................................................................31
7.4. Information and Reports for SBIC Purchasers...............................................33
7.5. Financial Statements and Other Information................................................34
7.5. Subsidiaries...............................................................................36
7.6. Notice of Corporate Changes................................................................36
7.7. No Defaults................................................................................36
7.8. Permitted Investments......................................................................37
7.9. Other Information..........................................................................37
7.10. Preservation of Corporate Existence.......................................................37
7.11. Payment of Obligations....................................................................37
7.12. Compliance with Laws......................................................................38
7.13. Inspection................................................................................38
7.14. Insurance.................................................................................38
7.15. Books and Records.........................................................................38
7.16. Use of Proceeds...........................................................................39
7.17. Board Nominees............................................................................39
7.18. Granting of Employee Options..............................................................39
7.19. Business Activities.......................................................................39
ARTICLE 8. INDEMNIFICATION.......................................................................................39
8.1. Indemnification...........................................................................39
8.2. Procedure; Notification...................................................................40
8.3. Amended and Restated Stockholders'Agreement...............................................41
ARTICLE 9. MISCELLANEOUS.........................................................................................41
9.1. Survival of Representations and Warranties................................................41
9.2. Notices...................................................................................42
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
9.3. Successors and Assigns....................................................................42
9.4. Amendment and Waiver......................................................................42
9.5. Counterparts..............................................................................43
9.6. Headings..................................................................................43
9.7. Governing Law.............................................................................43
9.8. Jurisdiction..............................................................................43
9.9. Severability..............................................................................44
9.10. Rules of Construction....................................................................44
9.11. Entire Agreement.........................................................................44
9.12. Publicity................................................................................44
9.13. Further Assurances.......................................................................44
9.14. Waiver of Jury Trial.....................................................................45
9.15. Obligations of the Purchasers............................................................45
</TABLE>
iv
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of this 31st day of December, 1998, by and among USINTERNETWORKING,
Inc., a Delaware corporation (the "Company"), and the other parties whose names
appear on the signature pages hereto (collectively, the "Purchasers").
RECITALS:
A. Upon the terms and subject to the conditions set forth in
this Agreement, the Company proposes to issue and sell shares of its 8% Series B
Cumulative Convertible Redeemable Preferred Stock ("Series B Preferred Stock",
as defined below) to the Purchasers.
B. Upon the terms and subject to the conditions set forth in
this Agreement, the Purchasers desire to purchase from the Company shares of the
Series B Preferred Stock as set forth on SCHEDULE 1 hereto.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1.
DEFINITIONS
1.1. DEFINITIONS.
As used in this Agreement, and unless the context requires a
different meaning, the following terms have the meanings indicated:
"AFFILIATE" means, with respect to any specified Person, any
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, such specified Person, whether by contract, through one or
more intermediaries, or otherwise.
"AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT" means the
Amended and Restated Stockholders' Agreement substantially in the form attached
as EXHIBIT B.
"BUSINESS DAY" shall mean a day other than a Saturday or
Sunday or any federal holiday.
"CODE" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
1
<PAGE>
"COMMISSION" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act (as
defined below).
"COMMON STOCK" means the common stock, par value $.001 per
share, of the Company, or any other capital stock of the Company into which such
stock is reclassified or reconstituted.
"COMPANY PARTIES" means the Company and each of its
Subsidiaries.
"CONDITION OF THE COMPANY" means the assets, business,
properties, operations, financial condition or prospects of the Company Parties,
taken as a whole.
"CONTINGENT OBLIGATION" as applied to any Person, shall mean
any direct or indirect liability, contingent or otherwise, of that Person: (i)
with respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings; or (iii)
under any foreign exchange contract, currency swap agreement, interest rate swap
agreement or other similar agreement or arrangement designed to alter the risks
of that Person arising from fluctuations in currency values or interest rates.
Contingent Obligations shall include (a) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement, and (c) any liability of such Person for the
obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.
"CONTRACTUAL OBLIGATIONS" shall mean as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"EMPLOYEE PLANS" means all employee benefit plans within the
meaning of Section 3(3) of ERISA, in which employees of any Company Party
participate or have participated.
"EMPLOYEE STOCK OPTION PLAN" means an employee stock option
plan adopted by the Compensation Committee of the Board of Directors of the
Company, and approved by
2
<PAGE>
the Board of Directors of the Company, providing for the issuance to certain
employees of the Company Parties of options to purchase a certain number of
shares of Common Stock at a certain exercise price per share the total number of
shares of Common Stock which may be issued under all such plans shall not exceed
6.5% of the total number of outstanding shares of common stock calculated on a
fully diluted basis, not including the options and shares issuable or issued on
exercise of options pursuant to the Employee Stock Option Plan.
"ENVIRONMENTAL LAWS" shall mean any applicable past, present
or future federal, state, territorial, provincial or local law, common law
doctrine, rule, order, decree, judgment, injunction, license, permit or
regulation relating to environmental matters, including those pertaining to land
use, air, soil, surface water, ground water (including, without limitation, the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety or any other environmental matter, together with any other laws
(federal, state, territorial, provincial or local) relating to emissions,
discharges, releases or threatened releases of any pollutant or contaminant
including, without limitation, medical, chemical, biological, biohazardous or
radioactive waste and materials, into ambient air, land, surface water,
groundwater, personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, discharge or handling of any contaminant, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. 9601 ET SEQ.) ("CERCLA"), the Hazardous Material
Transportation Act (49 U.S.C. 1801 ET SEQ.), the Resource Conservation and
Recovery Act (42 U.S.C. 6901 ET SEQ.) ("RCRA"), the Federal Water Pollution
Control Act (33 U.S.C. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. 1251 ET
SEQ.), the Toxic Substances Control Act (15 U.S.C. 2601 ET SEQ.), and the
Occupational Safety and Health Act (29 U.S.C. 651 ET SEQ.).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"GAAP" means United States generally accepted accounting
principles, in effect from time to time, consistently applied.
"GOVERNMENTAL AUTHORITY" means the government of any nation,
state, city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant,
contaminant, pesticide, petroleum or petroleum product or byproduct radioactive
substance, solid waste (hazardous or extremely hazardous), special, dangerous or
toxic waste, hazardous or toxic substance, chemical or material regulated,
listed, referred to, limited or prohibited under any Environmental Law,
including without limitation: (i) friable or damaged asbestos,
asbestos-containing material, polychlorinated biphenyls (PCBs), solvents and
waste oil; (ii) any
3
<PAGE>
"hazardous substance" as defined under CERCLA or any environmental law, statute,
regulation or rule; (iii) any hazardous waste defined under RCRA or any
Environmental Law; and (iv) even if not prohibited, listed, limited or regulated
by an Environmental Law, all pollutants, contaminants, hazardous, dangerous or
toxic chemical materials, wastes or any other substances, including, without
limitation, any industrial process or pollution control waste (whether or not
hazardous within the meaning of RCRA) which could pose a hazard to the
environment, or the health and safety of any Person or impair the use or value
of any portion of the property of the Company.
"INDEBTEDNESS" means, as to any Person: (a) all obligations,
whether or not contingent, of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, unfunded credit commitments, letters of credit and bankers' acceptances,
whether or not matured), (b) all indebtedness, obligations or liabilities of
such Person evidenced by notes, bonds, debentures or similar instruments,
whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, or joint or several, that should be classified as
liabilities in accordance with GAAP, including, without limitation, any items so
classified on a balance sheet and any reimbursement obligations in respect of
letters of credit or obligations in respect of bankers acceptances; (c) all
obligations of such Person representing the balance of deferred purchase price
of property or services, except trade accounts payable and accrued commercial or
trade liabilities arising in the ordinary course of business, (d) all interest
rate and currency swaps, caps, collars and similar agreements or hedging devices
under which payments are obligated to be made by such Person, whether
periodically or upon the happening of a contingency, (e) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (f) all obligations of
such Person under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person, and (h) any Contingent Obligations of
such Person.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other), restriction,
preference or priority right or other security interest or preferential
arrangement of any kind or nature whatsoever (excluding preferred stock or
equity related preferences) including, without limitation, those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease obligation, or any
financing lease having substantially the same economic effect as any of the
foregoing.
"NOTES" means the convertible promissory notes, as amended,
originally issued by the Company to certain of the Purchasers pursuant to the
Note Purchase Agreement dated as of September 8, 1998 and the Note Purchase
Agreements dated as of December 16 and 24, 1998 by and among the Company and
certain of the Purchasers.
4
<PAGE>
"OUTSTANDING BORROWINGS" means all Indebtedness of any Company
Party for borrowed money or capitalized lease obligations (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured).
"PERSON" means any individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"PRO FORMA BALANCE SHEET" shall mean the pro forma
consolidated balance sheet of the Company Parties delivered pursuant to Section
3.15.
"REQUIREMENTS OF LAW" means, as to any Person, the provisions
of the Certificate of Incorporation and By-laws or other organizational or
governing documents of such Person, and any law, treaty, rule, regulation,
right, privilege, qualification, license or franchise, order, judgment, or
determination of an arbitrator or a court or other Governmental Authority, in
each case, applicable or binding upon such Person or any of its property or to
which such Person or any of its property is subject or applicable to any or all
of the transactions contemplated by or referred to in the Transaction Documents.
"SALE OF THE COMPANY" means (i) the sale or all or
substantially all of the Company's assets in a single transaction or series of
related transactions, or (ii) the sale of all or a controlling interest in the
Company's capital stock in a single transaction or a series of related
transactions pursuant to a sale or issuance of securities or a merger,
consolidation, or other business combination.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"SERIES B PREFERRED STOCK" means the 8% Series B Cumulative
Convertible Redeemable Preferred Stock, par value $.01 per share, of the
Company.
"SOLVENT" shall mean, with respect to the Company Parties,
considered as a whole, based on the Pro Forma Balance Sheet, (i) the assets and
the property of the Company Parties, considered as a whole, exceed the aggregate
liabilities (including contingent and unliquidated liabilities) of the Company
Parties, considered as a whole, (ii) after giving effect to the transactions
contemplated by this Agreement, the Company Parties, considered as a whole, will
not be left with unreasonably small capital, and (iii) after giving effect to
the transactions contemplated by this Agreement, the Company Parties, considered
as a whole, are able both to service and to pay their liabilities as they
mature. In computing the amount of contingent or unliquidated liabilities at any
time, such liabilities will be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that is
likely to become an actual or matured liability.
5
<PAGE>
"SUBSIDIARY" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"TRANSACTION DOCUMENTS" shall mean collectively, this
Agreement, the Amended and Restated Stockholders' Agreement, the Certificate and
the By-laws of the Company.
"TRANSACTION EXPENSES" means any and all reasonable
out-of-pocket (i) legal expenses for one counsel to Whitney and for one counsel
to certain of the other Purchasers in connection with the negotiation,
preparation, execution and delivery of the Transaction Documents, the
consummation of the transactions contemplated thereby and preparation for any of
the foregoing, including, without limitation, travel expenses, reasonable fees,
charges and disbursements of counsel and any similar or related legal costs and
legal expenses; (ii) other expenses incurred by J.H. Whitney & Co. and the
Purchasers in connection with the negotiation, preparation, execution and
delivery of the Transaction Documents, including, without limitation, expenses
incurred in connection with J.H. Whitney & Co.'s and the Purchasers' due
diligence investigation; and (iii) legal and other expenses, not to exceed
$15,000, incurred by Waller-Sutton Media Partners in connection with the
foregoing.
"WHITNEY" means J. H. Whitney & Co., a New York limited
partnership, J. H. Whitney III, L.P., a Delaware limited partnership, and
Whitney Strategic Partners III, L.P., a Delaware limited partnership.
1.2. ACCOUNTING TERMS; FINANCIAL STATEMENTS.
All accounting terms used herein not expressly defined in this
Agreement shall have the respective meanings given to them in accordance with
GAAP.
1.3. KNOWLEDGE STANDARD.
When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person or any similar phrase shall mean, (i) with
respect to any individual, the actual knowledge of such Person, (ii) with
respect to any corporation, the actual knowledge of the officers and directors
of such corporation and the knowledge of such facts that such persons should
have in the exercise of their duties after reasonable inquiry, and (iii) with
respect to a partnership, the actual knowledge of the officers and directors of
the general partner of such partnership and the knowledge of such facts that
such persons should have in the exercise of their duties after reasonable
inquiry.
1.4. OTHER DEFINED TERMS.
The following terms shall have the meanings specified in the
Sections set forth below:
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TERM SECTION
---- -------
Actions 5.7
Certificate 2.1
Closing Date 2.2
Closing 2.3
Liabilities 8.1
Preferred Shares 2.1
Purchase Price 2.2
Regulatory Affiliate 7.3
SBA 3.18
SBIC 7.4
</TABLE>
ARTICLE 2.
AUTHORIZATION OF PREFERRED SHARES;
PURCHASE AND SALE OF PREFERRED SHARES
2.1. PREFERRED SHARES.
The Board of Directors of the Company has authorized the
issuance and sale of up to 59,279 shares (the "Preferred Shares") of the Series
B Preferred Stock and has duly adopted resolutions establishing the rights,
preferences, privileges and restrictions of the Series B Preferred Stock. The
Preferred Shares will have the respective rights, preferences and privileges set
forth in the Company's First Amended and Restated Certificate of Incorporation
in the form attached hereto as EXHIBIT A (the "Certificate").
2.2. PURCHASE AND SALE OF PREFERRED SHARES.
Upon the terms and subject to the conditions herein contained,
on such day as the parties may agree (the "Closing Date"), but in any event
prior to December 31, 1998, the Company shall issue and sell to each Purchaser,
and each Purchaser shall acquire from the Company, the number of Preferred
Shares set forth next to such Purchaser's name on SCHEDULE 1 hereto. The
aggregate purchase price of such Preferred Shares to be paid by the Purchasers
shall be Sixty-Two Million Two Hundred Forty-Two Thousand Five Hundred Dollars
($62,242,500) (the "Purchase Price").
2.3. CLOSING.
The closing of the sale to and purchase by the Purchasers of
the Preferred Shares (the "Closing") shall occur at 11 o'clock A.M., local time
on the Closing Date at the offices of Latham & Watkins, 1001 Pennsylvania
Avenue, N.W., Washington, D.C. 20004, or such other location as the parties may
agree. At the Closing, (i) the Company shall deliver to each Purchaser a stock
certificate evidencing the Preferred Shares being purchased by such Purchaser,
free and clear of any Liens of any nature whatsoever, other than those created
by the Certificate or the Amended and Restated Stockholders' Agreement,
registered in such Purchaser's name, and (ii) each Purchaser shall deliver to
the Company that portion of the Purchase Price, as set forth next to such
Purchaser's name on SCHEDULE 1 hereto, by cashier's or certified check or wire
7
<PAGE>
transfer of immediately available funds, all or part of which shall, in the case
of each Purchaser holding a Note, be paid by crediting against the portion of
the Purchase Price due from such Purchaser the principal amount of such Note
that is to be converted into Preferred Shares, and any accrued but unpaid
interest thereon will be paid in cash at the Closing. To the extent that any
Purchaser holding a Note does not deliver at the Closing to the Company for
cancellation the Notes held by such Purchaser, the Closing shall be deemed to
have occured with respect to such Purchaser upon the payment of the cash
portion, if any, of such Purchaser's portion of the Purchase Price, but the
Company shall not deliver a stock certificate to such Purchaser until such
Purchaser's Note has been delivered to the Company for cancellation.
2.4. FEES AND EXPENSES.
Concurrently with or promptly after the Closing, the Company
shall reimburse J.H. Whitney & Co. and each Purchaser for the Transaction
Expenses, incurred by it which payment shall be made by wire transfer of
immediately available funds to an account or accounts designated by J.H. Whitney
& Co. or such Purchaser, as the case may be.
2.5 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING.
Each of the parties hereto agrees to take reporting and other
positions with respect to the Preferred Shares which are consistent with the
purchase price of the Preferred Shares set forth herein for all financial
accounting purposes, unless otherwise required by applicable GAAP or Commission
rules (in which case the parties agree only to take positions inconsistent with
the purchase price of the Preferred Shares set forth herein provided that the
Purchasers have consented thereto, which consent shall not be unreasonably
withheld). Each of the parties to this Agreement agrees to take reporting and
other positions with respect to the Preferred Shares which are consistent with
the purchase price of the Preferred Shares set forth herein for all other
purposes, including without limitation, for all federal, state and local tax
purposes.
ARTICLE 3.
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO PURCHASE THE PREFERRED SHARES
The obligation of each of the Purchasers to purchase the
Preferred Shares to be purchased by it hereunder, to pay, at the Closing, the
applicable portion of the Purchase Price therefor and to perform any of its
obligations hereunder shall be subject to the satisfaction as determined by, or
waived by, the Purchasers of the following conditions on or before the Closing
Date; PROVIDED, HOWEVER, that any waiver of a condition shall not be deemed a
waiver of any breach of any representation, warranty, agreement, term or
covenant or of any misrepresentation by the Company, except to the extent
expressly so waived.
3.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
Section 5 hereof shall be true and correct in all material respects at and as of
the date hereof and the Closing Date,
8
<PAGE>
as if made at and as of such date (except for those representations and
warranties that are already qualified by materiality, which shall be true and
correct in all respects).
3.2. COMPLIANCE WITH TERMS AND CONDITIONS OF THIS
AGREEMENT.
The Company shall have performed and complied with all of the
agreements and conditions set forth herein that are required to be performed or
complied with by the Company on or before the Closing Date.
3.3. DELIVERY OF CERTIFICATES EVIDENCING THE SHARES.
The Company shall have delivered to the Purchasers the
certificates evidencing the Preferred Shares as set forth in Section 2.3.
3.4. CLOSING CERTIFICATES.
The Company shall have delivered to the Purchasers a
certificate executed by the Chief Executive Officer, President, or Chief
Financial Officer of the Company, certifying that the representations and
warranties of the Company are true and correct in all material respects on and
as of the date hereof and the Closing Date, as if made at and as of such date
(except for those representations and warranties that are already qualified by
materiality, which shall be true and correct in all respects), and that the
conditions set forth in this Section 3 to be satisfied by the Company have been
satisfied on and as of the Closing Date.
3.5. SECRETARY'S CERTIFICATES.
The Purchasers shall have received a certificate from the
Company, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying (a) that the attached copies of the
Certificate and By-laws of the Company (all of which will be in form and
substance consistent with this Agreement) and resolutions of the Board of
Directors and stockholders of the Company approving this transaction are all
true, complete and correct and remain unamended and in full force and effect ,
and (b) the incumbency and specimen signature of each officer of the Company
executing any Transaction Document to which it is a party or any other document
delivered in connection therewith on behalf of the Company.
3.6. DOCUMENTS.
The Purchasers shall have received true, complete and correct
copies of such documents and such other information as they may have reasonably
requested in connection with or relating to the sale of the Preferred Shares and
the transactions required to be performed herein.
3.7. PURCHASE PERMITTED BY APPLICABLE LAWS.
The acquisition of and payment for the Preferred Shares to be
acquired by the Purchasers hereunder and the consummation of the transactions
contemplated hereby and the other Transaction Documents (a) shall not be
prohibited by any Requirements of Law applicable
9
<PAGE>
to any party hereto or such transactions, (b) shall not conflict with or be
prohibited by any Contractual Obligation of any Company Party and (c) shall not
subject any Purchaser to any penalty or other condition materially adverse to
the conduct of such Purchaser's business under or pursuant to any Requirements
of Law.
3.8. CONSENTS AND APPROVALS.
All consents, exemptions, authorizations, or other actions by,
or notices to, or filings with, Governmental Authorities and other Persons in
respect of all Requirements of Law and with respect to the material Contractual
Obligations of each Company Party, which are necessary or required in connection
with the execution, delivery or performance (including, without limitation, the
issuance of the Preferred Shares and the issuance of the Common Stock upon
conversion of the Preferred Shares) by, or enforcement against, the Company of
the Transaction Documents, shall have been obtained and be in full force and
effect and all waiting periods shall have lapsed without extension or the
imposition of any conditions or restrictions.
3.9. AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
The Amended and Restated Stockholders' Agreement shall have
been executed and delivered by all parties thereto.
3.10. CERTIFICATE.
The Certificate shall have been filed with and endorsed by the
Secretary of State of the State of Delaware.
3.11. NO MATERIAL JUDGMENT OR ORDER.
There shall not be any judgment or order of a court of
competent jurisdiction or any ruling of any Governmental Authority or any
condition imposed under any Requirements of Law which, in the reasonable
judgment of the Purchasers, would (i) prohibit the purchase of the Preferred
Shares hereunder, (ii) subject the Purchasers to any penalty if the Preferred
Shares were to be purchased hereunder, or (iii) question the validity or
legality of the transactions required to be performed under this Agreement.
3.12. LEGAL OPINION.
The Purchasers shall have received an opinion of counsel for
the Company in the form attached as EXHIBIT C hereto.
3.13. APPROVAL OF COUNSEL TO THE PURCHASERS.
All actions and proceedings hereunder and all agreements,
schedules, exhibits, certificates, financial information, filings and other
documents required to be delivered by the Company hereunder or in connection
with the consummation of the transactions contemplated hereby, and all other
related matters, shall have been in form and substance reasonably acceptable to
counsel to the respective Purchasers.
10
<PAGE>
3.14. PRO FORMA BALANCE SHEET.
The Company shall have delivered to the Purchasers a pro forma
consolidated balance sheet of the Company Parties, dated as of December 31,
1998, certified by the chief financial officer of the Company to the effect that
it fairly presents the pro forma adjustments reflecting the consummation of the
transactions contemplated by the Transaction Documents and the application of
the net proceeds therefrom, including the payment of all material fees and
expenses in connection therewith.
3.15. GOOD STANDING CERTIFICATES.
The Company shall have delivered to the Purchasers good
standing certificates for the Company, dated as of a recent date, for its
jurisdiction of incorporation and all other jurisdictions where the nature of
its business requires qualification as a foreign corporation.
3.16. NO LITIGATION.
No action, suit or proceeding before any court or any
Governmental Authority shall have been commenced or threatened, no investigation
by any Governmental Authority shall have been commenced and no action, suit or
proceeding by any Governmental Authority shall have been threatened against any
Purchaser or any Company Party (i) seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions, or (ii) which would, if resolved adversely to such
Purchaser or a Company Party, severally or in the aggregate, materially and
adversely affect the Condition of the Company.
3.17. SIEBEL SYSTEMS, INC. MEMORANDUM OF UNDERSTANDING.
The memorandum of understanding, dated as of December 23,
1998, between the Company and Siebel Systems, Inc., a copy of which is attached
hereto as Exhibit 3.17, shall be in full force and effect and shall not have
been amended, modified or terminated.
3.18. SBIC FORMS.
The Company shall have furnished to all Purchasers that are
SBICs all forms which such Purchasers shall have informed the Company (at least
five days prior to Closing) are required by the United States Small Business
Administration ("SBA") in connection with the transactions contemplated hereby,
including without limitation a Size Status Declaration on SBA Form 480, an
Assurance of Compliance on SBA Form 652-D, and a Portfolio Financing Report on
SBA Form 1031, which forms (except for execution by the respective licensee),
shall be in proper form for filing with the SBA. If such forms are requested by
a Purchaser that is an SBIC after the Closing Date, the Company will use
commercially reasonable efforts to supply such forms in timely fashion.
11
<PAGE>
3.19. REPAYMENT OF NOTES.
The Company shall have repaid its note to Blue Chip Capital
Fund II Limited Partnership, including interest thereon.
3.20. EXCHANGE OF NOTE WARRANTS.
Purchasers holding warrants representing at least 90% of the
shares covered by all of the warrants issued pursuant to the Note Purchase
Agreement dated as of September 8, 1998 (the "Old Warrants"), shall have
evidenced their agreement to exchange those warrants for new warrants with like
terms for a like number of shares of Common Stock but with an exercise price of
$.43 per share (the "New Warrants").
ARTICLE 4.
CONDITIONS TO THE OBLIGATION OF
THE COMPANY TO CLOSE
The obligation of the Company to issue and sell the Preferred
Shares and to perform the other obligations of the Company hereunder shall be
subject to the satisfaction, as determined or waived by the Company, of the
following conditions on or before the Closing Date:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchasers contained
in Section 6 hereof shall be true and correct in all material respects at and as
of the date hereof and the Closing Date, as if made at and as of such date
(except for those representations and warranties that are already qualified by
materiality, which shall be true and correct in all respects).
4.2. COMPLIANCE WITH THIS AGREEMENT.
Each of the Purchasers shall have performed and complied with
all of the agreements and conditions set forth herein that are required to be
performed or complied with by such Purchaser on or before the Closing Date.
4.3. ISSUANCE PERMITTED BY APPLICABLE LAWS.
The issuance of the Preferred Shares to be issued by the
Company hereunder and the consummation of this Agreement (a) shall not be
prohibited by any Requirements of Law, and (b) shall not conflict with or be
prohibited by any Contractual Obligations of the Purchasers.
4.4. PAYMENT OF PURCHASE PRICE.
The Purchasers shall have tendered to the Company the Purchase
Price.
12
<PAGE>
4.5. CONSENTS AND APPROVALS.
All consents, exemptions, authorizations, or other actions by,
or notices to, or filings with, Governmental Authorities and other Persons in
respect of all Requirements of Law and with respect to the material Contractual
Obligations of the Purchasers, which are necessary or required in connection
with the execution, delivery or performance by the Purchasers of the Transaction
Documents to which they are party shall have been obtained and be in full force
and effect and all waiting periods shall have lapsed without extension or
imposition of any conditions or restrictions.
4.6. NO MATERIAL JUDGMENT OR ORDER.
There shall not be any judgment or order of a court of
competent jurisdiction or any ruling of any Governmental Authority or any
condition imposed under any Requirements of Law which, in the reasonable
judgment of the Company would (i) prohibit the sale of the Shares or the
consummation of the other transactions hereunder, (ii) subject the Company to
any penalty if the Shares were to be sold hereunder or (iii) question the
validity or legality of the transactions required to be performed under this
Agreement.
4.7. EXCHANGE OF NOTE WARRANTS.
Purchasers holding Old Warrants representing at least 90% of
the shares covered by all of the Old Warrants shall have evidenced their
agreement to exchange those warrants for New Warrants.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to, and covenants with,
the Purchasers as of the date hereof and as of the Closing Date as follows:
5.1. CORPORATE EXISTENCE AND AUTHORITY.
Each of the Company Parties (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has all requisite corporate power and
authority to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged, (c) has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and the related
agreements and other documents referred to herein to which it is or will be a
party; and (d) is duly qualified and in good standing as a foreign corporation
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification, except to
the extent that the failure to do so would not, individually or in the
aggregate, have a material adverse effect on the Condition of the Company.
SCHEDULE 5.1 contains a true and correct list of each jurisdiction where a
Company Party's ownership, lease or operation of property or the conduct of its
business would require it to be qualified to do business as a foreign entity.
13
<PAGE>
5.2. CORPORATE AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by the Company of this
Agreement and each of the other Transaction Documents and the consummation of
the transactions contemplated hereby and thereby, including, without limitation,
the issuance of the Preferred Shares, (a) have been duly authorized by all
necessary corporate action, including without limitation, if required,
stockholder action, (b) do not conflict with or contravene the terms of the
Certificate or the By-laws of the Company, or any amendment thereof; (c) do not
conflict with or contravene the terms of the certificate of incorporation or the
by-laws of any of the Company's Subsidiaries, and (d) will not violate, conflict
with or result in any material breach or contravention of or creation of any
Lien under (i) any Contractual Obligation of any Company Party or (ii) any
Requirements of Law applicable to any Company Party.
5.3. GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS.
No approval, consent, compliance, exemption, authorization, or
other action by, or notice to, or filing with, any Governmental Authority or any
other Person in respect of any applicable Requirements of Law and no lapse of a
waiting period under any applicable Requirements of Law is necessary or required
in connection with the execution and delivery of Transaction Documents by the
Company or the performance by the Company Parties or enforcement against the
Company Parties of any obligation of any Company Party under the Transaction
Documents, or the transactions to be performed hereunder or thereunder other
than such approvals, consents, compliance, exemptions, authorizations or filings
as will have been obtained or made prior to the Closing Date.
5.4. BINDING EFFECT.
This Agreement has been and each of the other Transaction
Documents will be, duly executed and delivered by the Company and this Agreement
constitutes, and the Amended and Restated Stockholders' Agreement will
constitute, the legal, valid and binding obligations of the Company enforceable
against it in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability.
5.5. CAPITALIZATION.
(a) On the Closing Date immediately prior to the Closing, the
authorized capital stock of the Company will consist of (i) 600,000,000 shares
of Common Stock, of which 15,750,000 shares are issued and outstanding, (ii)
110,000 shares of Series A Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), of which 55,000 shares are issued and outstanding,
and (iii) 115,000 shares of Series B Preferred Stock, of which no shares are
issued and outstanding. As of the Closing Date, after giving effect to the
transactions contemplated by the Transaction Documents, there will be: (i)
55,000 shares (the "Series A Preferred Shares") of Series A Preferred Stock
issued and outstanding; (ii) 59,279 shares of Series B Preferred Stock issued
and outstanding; (iii) 15,750,000 shares of Common
14
<PAGE>
Stock issued and outstanding; (iv) 99,000,000 shares of Common Stock reserved
for issuance upon conversion of the Series A Preferred Shares; (v) 148,197,500
shares of Common Stock reserved for issuance upon conversion of the Preferred
Shares; (vi) 55,000 shares of Series A Preferred Stock reserved for issuance by
the Company, which shares may be issued by the Company, at its election, as
payment in kind dividends on the Series A Preferred Shares, in accordance with
the Certificate (the "Series A Dividend Shares"); (vii) 50,000 shares of Series
B Preferred Stock reserved for issuance by the Company, which shares may be
issued by the Company, at its election, as payment in kind dividends on the
Series B Preferred Shares, in accordance with the Certificate (the "Series B
Dividend Shares"); (ix) 99,000,000 shares of Common Stock reserved for issuance
upon conversion of the Series A Dividend Shares reserved for issuance as set
forth in clause (vi) hereof; (x) 125,000,000 shares of Common Stock reserved for
issuance upon conversion of the Series B Dividend Shares reserved for issuance
as set forth in clause (vii) hereof; (xi) 11,861,317 shares of Common Stock
reserved for issuance pursuant to the exercise of warrants ("Warrants"); and
(xii) 13,458,000 shares of Common Stock reserved for issuance pursuant to the
exercise of stock options issuable in accordance with the terms of the Employee
Stock Option Plan (the "Employee Options"). The Company has no shares of capital
stock held in treasury. The Warrants, the Employee Options and all shares of
capital stock of the Company outstanding as of the Closing Date, after giving
effect to the transactions contemplated by the Transaction Documents, have been
duly authorized by all necessary corporate action. All outstanding shares of
capital stock of the Company, after giving effect to the transactions
contemplated by the Transaction Documents, are, and the shares of Common Stock
issuable upon conversion of the Series A Preferred Shares and the Preferred
Shares and upon exercise of the Warrants and the Employee Options, when issued
in accordance with their respective terms, will be, validly issued, fully paid,
nonassessable and free and clear of any Liens, other than those created by the
Amended and Restated Stockholders' Agreement, and the issuance of the foregoing
has not been or will not be, as the case may be, subject to preemptive rights in
favor of any Person.
(b) SCHEDULE 5.5 sets forth, as of the Closing Date, after
giving effect to the transactions contemplated by the Transaction Documents, the
name of each holder of the issued and outstanding capital stock of the Company,
the number and class of shares of such capital stock held beneficially or of
record by each such holder and the name of each holder of warrants, options,
rights and securities convertible into capital stock of the Company, together
with the number and class of capital stock to be issued upon the exercise or
conversion of such warrants, options, rights and convertible securities and the
respective exercise prices and conversion rates of such warrants, options,
rights and convertible securities. On the Closing Date, after giving effect to
the transactions contemplated hereby and in the other Transaction Documents,
except as identified in this Section 5.5, there will be no outstanding
securities convertible into or exchangeable for capital stock of any Company
Party or options, warrants or other rights to purchase or subscribe to capital
stock of any Company Party or contracts, commitments, agreements, understandings
or arrangements of any kind to which any Company Party is a party relating to
the issuance of any capital stock of any Company Party, any such convertible or
exchangeable securities or any such options, warrants or rights. No Company
Party has issued any securities or taken any other action that in either case
has given rise to any
15
<PAGE>
adjustments pursuant to any anti-dilution rights granted to any holder of
securities of any Company Party.
(c) SCHEDULE 5.5 sets forth a complete and accurate list of
all of the Subsidiaries of the Company together with their respective
jurisdictions of incorporation or organization. All of the outstanding shares of
capital stock of the Subsidiaries that are corporations are validly issued,
fully paid and nonassessable. Except as set forth on SCHEDULE 5.5, as of the
Closing Date, all of the outstanding shares of capital stock of, or other
ownership interests in, each of the Subsidiaries are owned by the Company or by
a wholly owned Subsidiary free and clear of any Liens. Except as set forth on
SCHEDULE 5.5, the Company has no Subsidiaries and does not own of record or
beneficially, directly or indirectly, (i) any shares of outstanding capital
stock or securities convertible into capital stock of any other corporation, and
(ii) any equity, voting or participating interest in any limited liability
company, partnership, joint venture or other non-corporate business enterprise.
(d) Except as set forth on SCHEDULE 5.5 and as may be
provided in the Amended and Restated Stockholders' Agreement, no Person has
any preemptive rights, rights of first refusal, "tag along" rights, rights of
co-sale or any similar rights with respect to the issuance of the Preferred
Shares contemplated hereby or the issuance of any additional shares of stock
by any Company Party. SCHEDULE 5.5 identifies all Persons holding any such
rights and describes the material terms of all such rights.
5.6. PRIVATE OFFERING.
No form of general solicitation or general advertising was
used by the Company or its representatives in connection with the offer or sale
of the Preferred Shares. No registration of the Preferred Shares, or of shares
of Common Stock issuable upon conversion of the Preferred Shares, pursuant to
the provisions of the Securities Act or any state securities or "blue sky" laws
will be required by the offer, sale or issuance of the Preferred Shares pursuant
to this Agreement, or the issuance of shares of Common Stock issuable upon the
conversion of the Preferred Shares. The Company agrees that neither it, nor
anyone authorized to act on its behalf, will offer or sell the Preferred Shares
or any other security so as to require the registration of the Preferred Shares,
or the shares of Common Stock issuable upon the conversion of the Preferred
Shares, pursuant to the provisions of the Securities Act or any state securities
or "blue sky" laws, unless such Preferred Shares, or shares of Common Stock
issuable upon the conversion of the Preferred Shares, are so registered.
5.7. LITIGATION.
No Company Party has received any notice of and, to its
knowledge, is not subject to any charge complaint, action, court order, writ,
injunction, judgment or decree outstanding or any dispute, claim, suit,
litigation or legal proceeding at law, in equity, in arbitration, or before any
Governmental Authority, (collectively, "Actions") which if adversely determined
would have a material adverse effect on (i) any Company Party or the Condition
of the Company or (ii) the transactions required to be performed by the Company
under this Agreement or any other Transaction Document and, to each Company
Party's knowledge, there is no valid basis therefor,
16
<PAGE>
and no Action is threatened against any Company Party. No injunction, writ,
temporary restraining order, decree or any order of any nature has been issued
by any court or other Governmental Authority purporting to enjoin or restrain
the execution, delivery or performance of the Transaction Documents.
5.8. FINANCIAL STATEMENTS.
(a) The Company has furnished the Purchasers with true and
complete copies of (i) the audited consolidated and consolidating balance sheets
of the Company Parties as of June 30, 1998 and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow, together
with the notes thereto, of the Company Parties for the period from January 14,
1998 to June 30, 1998, together with the report of Ernst & Young, LLP thereon
(the "Audited Financial Statements"), and (ii) the unaudited consolidated and
consolidating balance sheets of the Company Parties as of July 31, 1998, August
31, 1998 September 30, 1998, October 31, 1998 and November 30, 1998 (the last
being referred to as "Reference Balance Sheet") and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow, together
with the notes thereto, of the Company Parties for July 31, 1998, the two-month
period ending August 31, 1998, the three-month period ending September 30, 1998,
the four-month period ending October 31, 1998, and the five-month period ended
November 30, 1998 (the "Interim Financial Statements"). The Audited Financial
Statements and the Interim Financial Statements (collectively, the "Financial
Statements") fairly present, in all material respects, the financial position of
the Company Parties as of the respective dates thereof, and the results of
operations and cash flows of the Company Parties for the respective periods set
forth therein, all in conformity with GAAP consistently applied during the
periods involved, except as otherwise set forth in the notes thereto and
subject, in the case of the Interim Financial Statements, to normal year-end
audit adjustments, which will not be materially adverse.
(b) The Pro Forma Balance Sheet delivered to the Purchasers
sets forth the assets and liabilities of the Company Parties as of December 31,
1998 on a pro forma consolidated basis assuming the consummation of the
transactions contemplated in this Agreement had taken place prior thereto. The
Pro Forma Balance Sheet has been prepared by the Company in accordance with
GAAP, consistently applied, and fairly presents in all material respects such
assets and liabilities on a pro forma basis as of November 30, 1998, as if the
transactions contemplated in this Agreement had been consummated on or prior to
such date and the fees and expenses associated therewith had been accrued or
paid, and based on the assumptions set forth in such Pro Forma Balance Sheet.
(c) The Company Parties' projections attached hereto as
SCHEDULE 5.8(B) were prepared by the Company's management in good faith, are
based on reasonable assumptions, represent management's best estimates of the
Company Parties' predicted operations and performance under the Company's
business plan and reflect actual subjective expectations of the Company's
management. The Company has no reason to believe that the results reflected in
such projections are not attainable. Such projections are the most current
projections prepared by any Company Party relating to the periods covered
thereby, and no Company Party has delivered to any Person any later dated
projections.
17
<PAGE>
5.9. TITLE AND CONDITION OF ASSETS.
Except with respect to real and personal property leased from
other Persons pursuant to lease agreements disclosed pursuant to Section 5.10,
each of the Company Parties has good title to all of the properties and assets
used in the conduct of its business, including without limitation, the
properties and assets reflected on the Reference Balance Sheet, which properties
and assets are not subject to any Lien except (a) those which are shown and
described in the Reference Balance Sheet or (b) Liens for taxes and assessments
or governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP.
5.10. CONTRACTUAL OBLIGATIONS.
SCHEDULE 5.10 lists all contracts, agreements and commitments
of each of the Company Parties as of the Closing Date, whether written or oral,
other than (a) the Transaction Documents, (b) purchase orders in the ordinary
course of business, and (c) any other contracts, agreements and commitments of
any of the Company Parties that do not extend beyond one year and involve the
receipt or payment of not more than $75,000. The Company has delivered to the
Purchasers true, complete and correct copies of all written contracts,
agreements and commitments required to be listed on SCHEDULE 5.10. Such
documents comprise a full and complete copy of all agreements and understandings
between the parties thereto with respect to the subject matter thereof and all
transactions related thereto, and there are no agreements or understandings,
oral or written, or side agreements not contained therein that materially modify
the substance thereof. Each of such documents to which it is a party has been
duly authorized by all necessary corporate action on the part of the applicable
Company Party, was validly executed and delivered by the applicable Company
Party and is the legal, valid and binding obligation of the applicable Company
Party, enforceable against the applicable Company Party in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting creditors' rights
generally and by general principles of equity relating to enforceability. Each
of such documents is in full force and effect, and none of its provisions has
been waived by any party thereto.
5.11. TAX MATTERS.
Each of the Company Parties has filed all tax returns and
reports that it was required to file. All such tax returns and reports were
correct and complete in all material respects. All taxes of any nature owed by
any Company Party (whether or not shown on any tax return) have been paid. There
are no Liens on any of the assets of any of the Company Parties that arose in
connection with any failure (or alleged failure) to pay any tax. No Company
Party has any liability for the taxes of any Person other than itself and the
other Company Parties (i) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by Contractual Obligation, or (iv) otherwise.
18
<PAGE>
5.12. SEVERANCE ARRANGEMENTS.
Except as set forth on SCHEDULE 5.12, no Company Party has
entered into any severance or similar arrangement in respect of any present or
former employee of such Company Party that will result in any obligation
(absolute or contingent) of such Company Party to make any payment to such
present or former employee of such Company Party following termination of
employment.
5.13. INVESTMENT COMPANY/GOVERNMENT REGULATIONS.
Immediately following the Closing, after giving effect to the
transactions contemplated by the Transaction Documents, no Company Party nor any
Person controlling, controlled by or under common control with a Company Party
will be an "investment company" within the meaning of the Investment Company Act
of 1940, as amended. No Company Party is subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or any federal or state statute or regulation limiting
its ability to incur Indebtedness.
5.14. BROKER'S, FINDER'S OR SIMILAR FEES.
There are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with any Company
Party or any officer, director, shareholder, or Affiliate of any Company Party
or any action taken by any such Person.
5.15. LABOR RELATIONS AND EMPLOYEE MATTERS.
(a) No Company Party is or has engaged in any unfair
labor practice.
(b) Except as set forth on SCHEDULE 5.10, no Company
Party is a party to any employment agreement (other than "at will" employment
relationships), collective bargaining agreement or covenant not to compete.
(c) No complaint under any statute or regulation
relating to employment has been filed or, to the knowledge of any of the Company
Parties, is threatened against any Company Party.
(d) No strike, labor dispute, slowdown or stoppage is
pending or, to the knowledge of any of the Company Parties, threatened against
any Company Party.
(e) No union representation question exists with
respect to the employees of any Company Party and no union organizing activities
are taking place.
5.16. EMPLOYEE BENEFITS MATTERS.
(a) Except as set forth on SCHEDULE 5.16, no
employees of any Company Party have participated in and no Company Party has
adopted, contributed to or
19
<PAGE>
implemented any Employee Plan. The option agreements to which certain of the
employees are party are all in substantially the same form as the option
agreement previously furnished to Purchasers as representative of such
agreements, with the exception of the option agreement with Vince Romano.
(b) PLAN COMPLIANCE. Each Company Party is in
compliance in all material respects with all reporting, disclosure and
registration requirements applicable to it under the Code, ERISA and all federal
and state securities laws, and Department of Labor, Internal Revenue Service and
Commission rules and regulations promulgated thereunder, with respect to all of
the Employee Plans, and is not subject to any material liability, whether
asserted or not, for any penalties to any Governmental Authority for late filing
of any return, report or other governmental filing. All of the Employee Plans
comply currently, and have complied in the past, both as to form and operation,
in all material respects, with their terms and with all requirements of
applicable law. All amounts that are currently owing to Employee Plan
participants, or contributions required to be made to the Employee Plans have
been timely paid or contributed with respect to all periods prior to the Closing
Date or provided for by adequate reserves on the Financial Statements.
(c) PROHIBITED TRANSACTIONS. Except as set forth on
SCHEDULE 5.16, no Employee Plan, nor any related trust, nor any Company Party,
nor any trustee, administrator or other "party in interest" or "disqualified
person" (within the meaning of Section 3(14) of ERISA or Section 4975(e)(2) of
the Code, respectively) with respect to the Employee Plans, has engaged in any
nonexempt "prohibited transaction" (within the meaning of Section 406 of ERISA
or Section 4975(c) of the Code, respectively) with respect to the participation
of any Company Party therein, which could subject any of the Plans or related
trusts, or any trustee, administrator or other fiduciary of any such Plan, or
any Company Party, or any Purchaser, or any other party dealing with the Plans,
to the penalties or excise tax imposed on prohibited transactions by Section 502
of ERISA or Section 4975 of the Code which could have a material adverse effect
on the Condition of the Company.
(d) COBRA. Except as set forth in SCHEDULE 5.16, each
of the Company Parties has complied with the continuation coverage requirements
of group health plans provided in Section 4980B of the Code, Sections 601 et
seq. of ERISA, the Family and Medical Leave Act of 1994, and the regulations
promulgated thereunder.
5.17. OUTSTANDING BORROWINGS.
SCHEDULE 5.17 lists (i) the amount of all Outstanding
Borrowings of each of the Company Parties as of the date hereof, (ii) the Liens
that relate to such Outstanding Borrowings and that encumber the assets of the
applicable Company Party, (iii) the name of each lender thereof, and (iv) the
amount of any unfunded commitments available to the applicable Company Party as
of November 30, 1998 in connection with any Outstanding Borrowings.
20
<PAGE>
5.18. INSURANCE SCHEDULE.
SCHEDULE 5.18 contains a true and correct summary of each
Company Party's insurance policies in effect as of the date hereof. The
insurance binders previously provided to the Purchasers contain a true and
correct summary of the expiration date, amount of coverage, type of coverage,
annual premiums, exclusions and deductibles with respect to such policies. The
Company has no self-insurance program in effect, other than with respect to its
employee health program, which is self-insured but for which catastrophic losses
are covered by insurance. All such policies are in full force and effect, are
underwritten by financially sound and reputable insurers, are sufficient for all
applicable Requirements of Law and otherwise are in compliance with the criteria
set forth in Section 7.14 hereof. All such policies will remain in full force
and effect and will not in any way be affected by, or terminate or lapse by
reason of any of the transactions contemplated hereby.
5.19. SOLVENCY.
No Company Party has (i) made a general assignment for the
benefit of its creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition in bankruptcy by its creditors,
(iii) suffered the appointment of a receiver to take possession of all or
substantially all of its assets or properties, or (iv) suffered the attachment
or other judicial seizure of all or substantially all of its assets. Each
Company Party is Solvent.
5.20. NO OTHER AGREEMENTS TO SELL THE ASSETS OR CAPITAL STOCK
OF THE COMPANY.
Other than as otherwise set forth in this Agreement, no
Company Party has a legal obligation, absolute or contingent, other than the
obligations of the Company under this Agreement or the Amended and Restated
Shareholders' Agreement, to any person or firm to (i) sell any capital stock of
any of the Company Parties or, outside of the ordinary course of business,
assets, or effect any merger, consolidation or other reorganization of any of
the Company Parties or (ii) enter into any agreement with respect any of the
foregoing.
5.21. KEY EMPLOYEES.
The performance by each Company Party's key employees of their
duties for such Company Party as contemplated by the Company's business plan
will not violate any provision of any agreement to which any of such persons or
such Company Party is a party, including any agreement with any former employer
of any such person, or give rise to any obligation or liability of any Company
Party to any third party or limit in any way such Company Party's ability to
conduct its business. None of the key employees of any Company Party is engaged,
directly or indirectly, or has any interest (other than as a shareholder of a
public company) in any entity which is engaged in competition with any Company
Party in its planned activities.
5.22. COMPLIANCE WITH LAW.
Each Company Party has complied in all material respects with
all applicable Requirements of Law.
21
<PAGE>
5.23. SOFTWARE.
(a) For purposes hereof, (i) "Operational Software" shall mean
all software used by, or necessary for the operation of the business of, any of
the Company Parties, including, without limitation, all software purchased or
licensed from third parties ("Third Party Software") all or a portion of which
is incorporated in, linked to, or necessary for the proper functioning of, or
was a tool used in connection with the development of, any such Operational
Software used by, or necessary to the operation of the business of, any of the
Company Parties, and (ii) Applications Software shall mean all software
marketed, licensed, sublicensed or otherwise distributed by any of the Company
Parties to third parties, including, without limitation, all Third Party
Software all or a portion of which is incorporated in, linked to, or necessary
for the proper functioning of, or used as a tool in connection with the
development of, any such Applications Software marketed, licensed, sublicensed
or otherwise distributed by any of the Company Parties to third parties.
Operational Software and Applications Software are collectively referred to as
the "Company Software."
(b) With respect to all Operational Software, each
Company Party has all rights to modify, duplicate, display, incorporate, execute
and use all applicable Third Party Software necessary in order to conduct its
business as currently conducted or proposed to be conducted.
(c) With respect to all Applications Software, each
Company Party has all rights to modify, duplicate, display, incorporate,
distribute, execute, use and grant sublicenses in, market or otherwise
distribute all applicable Third Party Software necessary in order to conduct its
business as currently conducted or proposed to be conducted.
(d) Except with respect to Third Party Software, the
Company Parties own the entire right, title and interest in and to the Company
Software and to each component thereof, including the source code, object code,
flowcharts, programmers' notes and annotations thereto (the "Development
Materials").
(e) All licenses in and to Third Party Software are
valid and existing and in full force and effect. No Company Party has received
any notice that any such license has been terminated or that any event has
occurred which, if not cured, will result in the termination of any such
license, and no Company Party is aware of the occurrence of any such event.
(f) Each Company Party has taken all steps
reasonably necessary to maintain the Company Software, including all components
thereof, which it owns ("Owned Software") as a trade secret or as its
copyrighted material. No third party has access to the Development Materials
relating to any Owned Software or is otherwise in a position to duplicate or
make any unauthorized use of any Owned Software, except for (i) licensees of the
Company Parties who have or may acquire access thereto in the ordinary course of
business pursuant to written agreements under which such licensees are required
to maintain such Development Materials in confidence and who, to the Company
Parties' knowledge, have not violated such requirements, and (ii) OEM purchasers
who may have or may acquire access thereto in
22
<PAGE>
accordance with written OEM agreements, true and complete copies of which have
been delivered to Purchasers.
(g) Current and complete documentation and source
code exists with respect to all Owned Software.
(h) The Owned Software is not subject to any legal
or contractual restriction which would prevent such Owned Software from being
licensed, sublicensed, marketed, incorporated in other software, modified, or
otherwise used or sold by any of the Company Parties without restriction. The
consummation of the transactions contemplated hereby will not alter any of the
rights described in the preceding sentence.
(i) No Person has disputed any Company Party's
right, title or interest in or to any of the Owned Software. With respect to the
Owned Software, neither such Software nor the use or licensing thereof infringes
upon, violates, misappropriates or conflicts with any patent, copyright, trade
secret or other proprietary right or right of exclusion of any third party. No
Company Party is aware of any breach of any confidentiality agreement in favor
of a Company Party relating to the Software either by its employees or
consultants.
(j) None of the Company Software has manifested any
significant operating problems, other than any such problems that have been
corrected or are correctable in the ordinary course of business. Such problems
will not in the aggregate result in a material amount of losses or expenses for
any of the Company Parties.
(k) All royalties due and payable to licensors of
any Third Party Software by any of the Company Parties on or prior to the date
hereof have been paid in full.
(l) To its knowledge, all computer software or
hardware owned or used by any of the Company Parties, or licensed by any of the
Company Parties, as licensor or as licensee is "Year 2000 Compliant" (as
hereinafter defined). For purposes of this Agreement, "Year 2000 Compliant"
shall mean (i) all such software or hardware shall operate in four-digit year
format, without errors in the recognition, calculation and processing of date
data relating to century recognition, leap years, single and multi-century
formulae, date values and interfaces of date-related functionalities; (ii) all
date processing shall be conducted in a four-digit year format and all date
sorting that includes a "year field" or "year category" shall be based upon a
four-digit year format; and (iii) any date arithmetic programs or calculators in
the software or hardware shall operate in accordance with the related user
documentation in the Year 2000, and the years following, without degrading
functionality or performance. No Company Party is aware of any inability on the
part of any customer, insurance company or service provider with which any of
the Company Parties transacts business to remedy any failure to be Year 2000
Compliant on a timely basis. The Company has requested certification or
comparable assurances from each supplier or licensor of the Company's Third
Party Software that such Third Party Software is Year 2000 Compliant. SCHEDULE
5.23(1) sets forth a complete list of suppliers or licensors of Third Party
Software that have provided to the Company (i) such certification or comparable
assurances or (ii) a warranty that such Third Party Software is Year 2000
Compliant. SCHEDULE 5.23(2) sets forth a complete list of customers who have
agreed that the Company shall
23
<PAGE>
have no liability for any failure of Third Party Software to be Year 2000
Compliant. Based upon such certifications or assurances heretofore received, and
upon communications had with all suppliers and licensors of Third Party
Software, and upon such independent analyses as the Company has undertaken in
the exercise of good business judgment, the Company believes that the software
licensed, installed, integrated or maintained by the Company is either Year 2000
Compliant or that the suppliers or licensors thereof are using commercially
reasonable efforts to make such software Year 2000 Compliant.
5.24. DISCLOSURE.
Each Company Party has, to the best of its knowledge, fully
responded to all requests for information, and each Company Party has accurately
answered all questions from the Purchasers concerning the Condition of the
Company, and has not knowingly withheld any facts relating thereto which it
reasonably believes to be material with respect to the Condition of the Company
or the ability of each Company Party to perform its obligations under the
Transaction Documents, or any other material agreement to which it is a party.
No information in this Agreement or in any Exhibit or Schedule attached to this
Agreement, contains or will contain any untrue statement of a material fact or
when considered together with all such information delivered to the Purchasers
omits to state any material fact necessary in order to make the statements
contained herein or therein not misleading. The disclosures made in writing by
the Company Parties in connection with this Agreement and any and all documents
describing the business and financial condition of the Company Parties provided
to the Purchasers by the Company Parties when read in the light of the
circumstances when made and taken as a whole, did not when made contain any
untrue statement of a material fact.
5.25. NO DEFAULT OR BREACH.
No Company Party is in, and the incurrence of the obligations
of any of the Company Parties contemplated by the Transaction Documents do not
constitute, nor with the giving of notice or lapse of time or both would
constitute, a default under or with respect to any Contractual Obligation of any
Company Party.
5.27 PATENTS, TRADEMARKS, ETC.
Each Company Party owns or is licensed or otherwise has the
right to use all patents, trademarks, service marks, trade names, copyrights,
licenses, franchises and other rights (collectively, the "Rights") being used to
conduct its businesses as now operated. SCHEDULE 5.27 sets forth a complete list
of licenses or other contracts relating to each Company Party's Rights and
registrations of patents, trademarks, service marks and copyrights including any
applications therefor constituting such Rights. Except as identified on Schedule
5.27, no Right or product, process, method, substance or other material
presently sold by or employed by any of the Company Parties, or which any of the
Company Parties contemplate selling or employing, infringes upon the Rights that
are owned by others, and no litigation is pending and no claim has been made
against any Company Party or, to the knowledge of any of the Company Parties, is
threatened, contesting the right of a Company Party to sell or use any Right or
product, process, method, substance or other material presently sold by or
employed by such Company Party. No
24
<PAGE>
Company Party has asserted any claim of infringement, misappropriation or misuse
by any Person of any Rights owned by a Company Party or to which it has
exclusive use. Except as set forth on SCHEDULE 5.27, no employee, officer or
consultant of any of the Company Parties has any proprietary, financial or other
interest in any Rights owned or used by each Company Party in its businesses.
Except as set forth on SCHEDULE 5.27, no Company Party has any obligation to
compensate any Person for the use of any Rights and no Company Party has granted
any license or other right to use any of the Rights of any of the Company
Parties, whether requiring the payment of royalties or not. Each Company Party
has taken all reasonable measures to protect and preserve the security,
confidentiality and value of their Rights, including trade secrets and other
confidential information. All trade secrets and other confidential information
of each of the Company Parties are presently valued and protectible and are not
part of the public domain or knowledge, nor have they been used, divulged or
appropriated for the benefit of any Person other than the Company Parties or
otherwise to the detriment of any of the Company Parties. No employee or
consultant of any Company Party has wrongfully used any trade secrets or other
confidential information of any other Person in the course of his work for such
Company Party. To the knowledge of the Company no patent, statute, law, rule,
regulation, standard or code is pending or proposed which would restrict a
Company Party's ability to use any of the Rights.
5.28 USE OF REAL PROPERTY.
Each Company Party holds all of the right, title and interest
of the tenant under the leases reflected on the Reference Balance Sheet or used
in its business free and clear of all Liens, liabilities and rights except as
provided on SCHEDULE 5.28. Except as set forth on SCHEDULE 5.28, the owned and
leased real properties reflected on the Reference Balance Sheet or used in
connection with the business of any of the Company Parties are used and operated
in compliance and conformity with all applicable leases, contracts, commitments,
licenses and permits, except to the extent that the failure so to comply would
not, individually or in the aggregate, materially adversely affect the Condition
of the Company. Except as set forth on SCHEDULE 5.28, all structures,
improvements and other buildings that are owned or covered by leases reflected
on the Reference Balance Sheet or used in connection with the business of any of
the Company Parties comply with all applicable ordinances, codes, regulations
and requirements (if required) have a valid and subsisting certificate of
occupancy for their present use (if required), and no Company Party has received
any written notice from any Governmental Authority which is still outstanding of
any failure to obtain any certificate, permit, license or approval with respect
to the real property, or of any intended revocation, modification or
cancellation of same, and no law or regulation presently in effect or condition
precludes or materially restricts continuation of the present use of such
properties. Each Company Party enjoys peaceful and undisturbed possession under
each lease relating to leased real property reflected on the Reference Balance
Sheet or used in connection with the business of such Company Party. There are
no service contracts, maintenance contracts, union contracts, concession
agreements, licenses, agency agreements or any other written contracts or
agreements affecting the real property or the leased property reflected on the
Reference Balance Sheet or used in connection with the business of any of the
Company Parties, or the operation thereof, other than those listed on SCHEDULE
5.28, except for contracts or agreements (oral or written) which are cancelable
on no more than thirty (30) days' notice.
25
<PAGE>
5.29 ERISA - PROHIBITED TRANSACTIONS.
The execution and delivery of the Transaction Documents, the
purchase and sale of the Preferred Shares hereunder and the consummation of the
transactions contemplated thereby will not result in any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code.
5.30 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since November 30, 1998, except as set forth on SCHEDULE 5.30,
no Company Party has (i) issued any stock, bonds or other corporate securities,
(ii) borrowed any amount or incurred any liabilities (absolute or contingent),
other than in the ordinary course of business, in excess of $75,000, (iii)
discharged or satisfied any Lien or incurred or paid any obligation or liability
(absolute or contingent), other than in the ordinary course of business, in
excess of $75,000, (iv) declared or made any payment or distribution to
stockholders or purchased or redeemed any shares of its capital stock or other
securities, (v) mortgaged, pledged or subjected to Lien any of its assets,
tangible or intangible, (vi) sold, assigned or transferred any of its tangible
assets, or canceled any debts or claims, (vii) sold, assigned or transferred any
patents, trademarks, trade names, copyrights, trade secrets or other intangible
assets, (viii) suffered any losses of property, or waived any rights of
substantial value, (ix) suffered any adverse change in the Condition of the
Company, (x) expended any material amount, granted any bonuses or extraordinary
salary increases, (xi) entered into any transaction involving consideration in
excess of $75,000 except as otherwise contemplated hereby or (xii) entered into
any agreement or transaction, or amended or terminated any agreement, with an
Affiliate.
5.31 ENVIRONMENTAL MATTERS.
Except as described on SCHEDULE 5.31, the property, assets and
operations of the Company Parties are and have been in compliance with all
applicable Environmental Laws; there are no Hazardous Materials stored or
otherwise located in, on or under any of the property or assets of any of the
Company Parties, including, without limitation, the groundwater, except in
compliance with applicable Environmental Laws; and there have been no releases
or threatened releases of Hazardous Materials in, on or under any property
adjoining any of the property or assets of any of the Company Parties that have
not been remediated to the satisfaction of the appropriate Governmental
Authorities and in compliance with Environmental Laws.
(a) None of the property, assets or operations of
any of the Company Parties is the subject of any Federal, state or local
investigation evaluating whether (i) any remedial action is needed to respond to
a release or threatened release of any Hazardous Materials into the environment
or (ii) any release or threatened release of any Hazardous Materials into the
environment is in contravention of any Environmental Law.
(b) None of the Company Parties is or was the owner
or operator of any property which (i) pursuant to any Environmental Law has been
placed on any list of Hazardous Materials disposal sites, including, without
limitation, the "National Priorities List" or "CERCLIS List," (ii) has, or had,
any subsurface storage tanks located thereon, or (iii) has ever
26
<PAGE>
been used as or for a waste disposal facility, a mine, a gasoline service
station or, other than for petroleum substances stored in the ordinary course of
business, a petroleum products storage facility.
(c) No Company Party has received any notice or
claim, nor are there any pending, or, to the knowledge of any Company Party, any
threatened or reasonably anticipated, lawsuits or proceedings against it, with
respect to violations of an Environmental Law or in connection with the presence
of or exposure to any Hazardous Materials in the environment or any release or
threatened release of any Hazardous Materials into the environment, and no
Company Party has any present or contingent liability in connection with the
presence either on or off the property or assets of any of the Company Parties
of any Hazardous Materials in the environment or any release or threatened
release of any Hazardous Materials into the environment.
5.32 POTENTIAL CONFLICTS OF INTEREST.
Except as set forth on SCHEDULE 5.32, no officer, director,
stockholder or other security holder of any Company Party: (a) owns, directly or
indirectly, any interest in (excepting less than 5% stock holdings for
investment purposes in securities of publicly held and traded companies), or is
an officer, director, employee or consultant of, any Person that is, or is
engaged in business as, a competitor, lessor, lessee, supplier, distributor,
sales agent or customer of, or lender to or borrower from, any Company Party;
(b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property that the Company Parties uses in the conduct of business; or
(c) has any cause of action or other claim whatsoever against, or owes or has
advanced any amount to, any of the Company Parties, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements existing on the
date hereof.
5.33 TRADE RELATIONS.
Set forth on SCHEDULE 5.33 is a true and correct list of (i)
the twenty largest customers of the ACR and the twenty largest customers of IIT,
in terms of sales during the nine-month period ended November 30, 1998, and all
of the Company's current customers; and (ii) the five largest suppliers of goods
or services to each of the Company Parties in terms of purchases during the
nine-month period ending November 30, 1998, as well as any sole source suppliers
of goods or services for which there is no ready alternative to the Company on
comparable terms. There exists no actual or, to the knowledge of the Company,
threatened termination, cancellation or limitation of, or any adverse
modification or change in, the business relationship of the Company with any
customer or any group of customers whose purchases are individually or in the
aggregate material to the business of the Company, or with any material
supplier.
5.34 ACQUISITION AGREEMENTS.
To the Company's knowledge, the representations and warranties
made in the Stock Purchase Agreement, dated as of August 28, 1998, by and among
the Company, IIT
27
<PAGE>
Holding, Inc., and the selling stockholders named therein; and the Stock
Purchase Agreement, dated as of October 2, 1998, by and among the Company,
Advanced Communication Resources, Inc. and the selling stockholders named
therein (collectively, the "Acquisition Agreements") by each of the parties
thereto were true, correct and accurate in all material respects as of the date
of each such Acquisition Agreement as of the closing of each such acquisition,
and as of the date hereof.
5.35 LOCATION OF ASSETS.
The chief executive offices of the Company Parties and the
books and records of each Company Party concerning its accounts (as such term is
defined in the Uniform Commercial Code) are located only at the address set
forth on SCHEDULE 5.34 identified as such, and the only other places of business
and locations of assets of each of the Company Parties, if any, are the
addresses set forth on SCHEDULE 5.35.
5.36 REGULATORY AFFILIATE.
The Company is not and will not, after giving effect to the
transactions contemplated hereunder, be a Regulatory Affiliate of US West.
ARTICLE 6.
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, hereby represents
and warrants, as to itself, to the Company as of the date hereof as follows:
6.1. EXISTENCE AND AUTHORITY
Such Purchaser (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, (b) has all
requisite power and authority to own its assets and operate its business, and
(c) has all requisite power and authority to execute, deliver and perform its
obligations under the Transaction Documents to which it is or will be a party.
6.2. ORGANIZATION; AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by such Purchaser of
the Transaction Documents to which it is a party or will be a party and the
consummation of the transactions contemplated thereby, including, without
limitation, the acquisition of the Preferred Shares: (a) is within such
Purchaser's authority, and has been duly authorized by all necessary action on
the part of such Purchaser; (b) does not conflict with or contravene the terms
of such Purchaser's constituent documents; and (c) will not violate, conflict
with or result in any material breach or contravention of (i) any Contractual
Obligation of such Purchaser, or (ii) the Requirements of Law or any order or
decree applicable to such Purchaser.
28
<PAGE>
6.3. BINDING EFFECT.
This Agreement has been duly executed and delivered by such
Purchaser, and this Agreement constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
6.4. PURCHASE FOR OWN ACCOUNT.
The Preferred Shares, and the shares of Common Stock to be
issued upon conversion of the Preferred Shares, are being or will be acquired by
such Purchaser for its own account and with no intention of distributing or
reselling such securities or any part thereof in any transaction that would be
in violation of the securities laws of the United States of America, or any
state, without prejudice, however, to the rights of such Purchaser at all times
to sell or otherwise dispose of all or any part of the Preferred Shares or the
shares of Common Stock issuable upon conversion of the Preferred Shares under an
effective registration statement under the Securities Act, or under an exemption
from such registration available under the Securities Act, and subject,
nevertheless, to the disposition of such Purchaser's property being at all times
within its control. If such Purchaser should in the future decide to dispose of
any of the Preferred Shares or the shares of Common Stock issuable upon
conversion of the Preferred Shares, such Purchaser understands and agrees that
it may do so only in compliance with the Securities Act and applicable state
securities laws, as then in effect. Such Purchaser agrees to the imprinting, so
long as required by law, of a legend on certificates representing all of the
Preferred Shares or the shares of Common Stock to be issued upon conversion of
the Preferred Shares to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT, DATED DECEMBER 31, 1998. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED FROM THE COMPANY UPON REQUEST."
6.5. FINANCIAL CONDITION.
Such Purchaser's financial condition is such that it is able
to bear the risk of holding the Preferred Shares for an indefinite period of
time and can bear the loss of its entire investment in the Preferred Shares.
Such Purchaser has such knowledge and experience in financial and business
matters and in making high risk investments of this type that it is capable of
evaluating the merits and risks of the purchase of the Preferred Shares.
29
<PAGE>
6.6. RECEIPT OF INFORMATION.
Such Purchaser has been furnished access to the business
records of the Company and such additional information and documents as such
Purchaser has requested and has been afforded an opportunity to ask questions of
and receive answers from representatives of the Company concerning the terms and
condition of this Agreement, the purchase of the Preferred Shares, the
prospective operations, market potential, capitalization, financial conditions,
and prospects of the business to be conducted by the Company, and all other
matters deemed relevant by such Purchaser.
6.7. BROKER'S, FINDER'S OR SIMILAR FEES.
There are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with such Purchaser
or any action taken by such Purchaser.
6.8. GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT.
No approval, consent, compliance, exemption, authorization, or
other action by, or notice to, or filing with, any Governmental Authority or any
other Person in respect of any Requirements of Law (excluding any state
securities or "Blue Sky" laws), and no lapse of a waiting period under any
Requirements of Law, is necessary or required in connection with the execution,
delivery or performance by such Purchaser (including, without limitation, the
acquisition of the Preferred Shares) or enforcement against such Purchaser of
this Agreement or the related agreements referred to herein to which it is or
will be a party or the transactions contemplated thereby.
6.9. LITIGATION.
No Actions are pending, or to the best knowledge of such
Purchaser, threatened relating to or affecting the transactions required to be
performed by such Purchaser under this Agreement or the related agreements
referred to herein to which it is or will be a party.
ARTICLE 7.
COVENANTS OF THE COMPANY WITH RESPECT
TO THE PERIOD FOLLOWING THE CLOSING
Until all Preferred Shares are no longer outstanding due to
conversion or otherwise and until the payment by the Company of all other
amounts due to the Purchasers under this Agreement or the related agreements and
other documents referred to herein or the Certificate, except for such longer
survival periods as are specifically provided in Section 7.3 and 7.5(a), the
Company hereby covenants and agrees with the Purchasers as follows:
7.1. RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out
of its authorized Common Stock, solely for the purpose of issuance or delivery
upon conversion of the Preferred
30
<PAGE>
Shares as provided in the Certificate, the maximum number of shares of Common
Stock that may be issuable or deliverable upon such conversion. Such shares of
Common Stock shall, when issued or delivered in accordance with the provisions
of the Certificate, be duly authorized, validly issued and fully paid and
non-assessable. The Company shall issue such Common Stock in accordance with the
provisions of the Certificate and shall otherwise comply with the terms thereof.
7.2. YEAR 2000.
The Company undertakes promptly to inform the Purchasers of
any material deficiency or expected cost in connection with the Company Parties
becoming Year 2000 Compliant on a timely basis. The Company will use its
commercially reasonable efforts to ensure that (i) the Company Software is Year
2000 Compliant, and (ii) each of the Company Parties will, under any agreement
between a Company Party and any third party or parties entered into after the
date hereof, expressly limit the Company Party's liability to such third party
or parties for the failure of any Company Software to be Year 2000 Compliant.
The Company will appoint a Year 2000 Compliance manager and will initiate a Year
2000 Compliance program within the first quarter of 1999.
7.3. REGULATORY COMPLIANCE.
(a) CERTAIN REDEMPTIONS AND ACQUISITIONS. The
Company shall give US WEST Communications, Inc. ("US WEST") not less than 15
days prior written notice of any redemption or repurchase of its equity
securities (including options, warrants and unconvertible securities) and shall
not redeem (other than as required pursuant to the Certificate) or repurchase
any of its equity securities to the extent that such redemption or repurchase
would cause the Company to become a Regulatory Affiliate of US WEST. US WEST
shall not acquire any of the Company's equity securities (whether from the
Company or from a third party) to the extent that such acquisition would cause
the Company to become a Regulatory Affiliate of US WEST. Any transaction in
violation of this subsection shall be void. To the extent such transaction has
taken place before either the Company or US WEST was aware that it violated this
subsection, the Company and US WEST agree to use their best commercially
reasonable efforts to cause the transaction to be rescinded. In any event, the
provisions of subsection (b) below will apply to the extent that the Company has
become a Regulatory Affiliate of US WEST.
(b) PUT AND CALL RIGHTS. In the event that the
Company at any time after the Closing Date (i) provides in-region interLATA
services that US WEST would be prohibited from providing under 47 U.S.C. ss.271,
and (ii) becomes an "Affiliate" of US WEST, as that term is defined in Section
3(1) of the Communications Act of 1934, as amended, 47 U.S.C. ss. 153(1), by
virtue of US WEST's ownership of an equity interest in the Company (in such
circumstances, a "Regulatory Affiliate"), then US WEST shall have the right to
cause the Company to purchase its "Excess Shares" (as defined below) (the "US
WEST Put") and the Company shall have the right to cause US WEST to sell to the
Company its Excess Shares (the "Company Call" and, collectively with the US WEST
Put, the "Regulatory Rights") on the following terms and conditions:
31
<PAGE>
(i) The party seeking to exercise the Regulatory
Rights shall give notice to the other party promptly after the Company has
become a Regulatory Affiliate and in no event later than 30 days after such
party first becomes aware of the fact that the Company has become a Regulatory
Affiliate. In the event that the other party disagrees that the Company has
become a Regulatory Affiliate, that party shall provide notice of such
disagreement within three Business Days of the notice from the party, and both
parties' regulatory counsel shall thereupon consult with each other to come to
an agreement on whether or not the Company has become a Regulatory Affiliate
seeking to exercise the Regulatory Rights. In the event that the regulatory
counsel do not reach an agreement within ten (10) days, the matter will be
submitted to expedited arbitration by a counsel mutually agreeable to the other
two counsel. The closing of the sale of the Excess Shares shall take place
within five Business Days of the original notice (assuming no regulatory
consents are required) if the party not seeking to exercise the Regulatory
Rights has not timely objected to the notice; if the party not seeking to
exercise the Regulatory Rights had timely objected to the notice, then the
closing shall take place within five Business Days of the arbitral resolution of
the dispute. In the event that the Company exercises the Company Call and the
purchase price for the Excess Shares is not paid entirely in cash, US WEST shall
have the right, for a period of 60 days from the date of consummation of the
purchase of the Excess Shares, to cause the Company to sell the Excess Shares to
US WEST's designee for a purchase price equal to the purchase price in fact paid
by the Company for such shares (that is, including the Company's promissory note
as set forth in subparagraph (iii) below as well as cash to the extent cash was
included in payment of the purchase price).
(ii) The Excess Shares shall be the minimum amount
of shares of the Company's equity securities that are required to be disposed of
in order that the Company not be deemed a Regulatory Affiliate.
(iii) The purchase price per share for the Excess
Shares shall be the Quoted Price (as defined in the Certificate). The purchase
price shall be paid (A) in cash to the extent of the amount that can permissibly
be paid consistent with the terms of any indentures governing the Company's debt
and the terms of any of the Company's senior and subordinated credit facilities;
and (B) the balance of the purchase price, if the purchase price has not been
paid fully in cash, shall be paid in the form of the Company's promissory note
in favor of US WEST (the "US WEST Note"), which US WEST Note shall (w) bear
interest at a rate of 12% per annum, (x) be for a term equal to the term of the
longest of the Company's then-outstanding indebtedness plus one day, subject to
mandatory prepayment in the event of a Sale of the Company, a public offering
(to the extent the proceeds thereof are not used to repay senior indebtedness)
or the refinancing of all or substantially all of the Company's indebtedness,
(y) be freely transferable (subject to applicable securities laws) and
convertible at the option of the holder (to the extent that the Company would
not become a Regulatory Affiliate as a result thereof) into a number of Shares
of Convertible Preferred Stock (split between Series A Preferred Stock and
Series B Preferred Stock in proportion to US West's then-current holdings)
determined by dividing the unpaid principal amount of such US WEST Note by the
price utilized in connection with the exercise of the US WEST Put or the Company
Call resulting in the issuance of such US WEST Note (and the accrued but unpaid
interest shall be payable in cash), and (z) be subordinated (including as to the
payment of interest) to the minimum extent required
32
<PAGE>
by the Company's senior and subordinated lenders and the terms of the Company's
indentures.
(c) CERTAIN TRANSFERS. In the event that US WEST is
required by applicable law to dispose of some or all of the Company's equity
securities that it then holds in order to prevent the Company from becoming a
Regulatory Affiliate, the Company and US WEST shall take all commercially
reasonable actions to restructure US WEST's investment in the Company in a
manner that will cause the Company not to be deemed a Regulatory Affiliate. In
the event that such a restructuring cannot be effectuated, the Company shall
waive the restrictions set forth in Section 2(b) of the Amended and Restated
Stockholders' Agreement to the extent that the proposed transferee is not a
direct competitor of the Company. In any event, the provisions of subsection (b)
above will apply to the extent that the Company has become a Regulatory
Affiliate.
(d) COOPERATION. In the event of any challenge by an
regulatory authority or any third party to the transactions contemplated by this
Agreement, the Company and US WEST agree to vigorously defend against such
challenge, to cooperate in such defense and to provide the other party such
information as it may reasonably request to assist in such defense
(e) CERTAIN ACTIONS. Without the consent of the
holders of a majority of the Series A Preferred Stock then outstanding and
two-thirds of the Series B Preferred Stock then outstanding, the Company will
not take any action that would result in the Company being deemed a Regulatory
Affiliate.
(f) SUPERSEDING AGREEMENT. The provisions of this
Section 7.3 hereby supersede and replace the provisions of Section 7.4 of the
Stock Purchase Agreement between the Company and US WEST, which Section the
Company and US WEST hereby agree is of no further force or effect.
(g) SURVIVAL. The provisions of this Section 7.3
shall survive until US WEST ceases to hold any Preferred Shares or shares of
Common Stock issued upon conversion thereof and until the payment by the Company
of all other amounts due to US WEST under this Agreement or the related
agreements and other documents referred to herein or the Certificate.
7.4. INFORMATION AND REPORTS FOR SBIC PURCHASERS.
The Company will furnish to any Purchaser that is a Small
Business Investment Company ("SBIC") such financial data and other information
relating to the business of Company as such Purchaser reasonably may request
from time to time. The Company, upon reasonable request, will cooperate fully
with such Purchaser, its representatives and counsel, in the preparation of any
document or other material which may be required by the SBA or any other
governmental agency as a predicate to or result of the transaction herein
contemplated. In addition to the foregoing, no later than ninety (90) days after
the Closing, the Company shall furnish to any Purchaser that is an SBIC a
certificate executed by the president of the Company itemizing the use of
proceeds from the sale of the Preferred Shares, and the Company shall cooperate
with such Purchaser in connection with a post-closing review. Within ninety (90)
days after the end of each fiscal year of the Company, the Company will, if
required by law, submit to
33
<PAGE>
any Purchaser that is an SBIC an economic impact
report in form reasonably satisfactory to such Purchaser.
7.5. FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company shall maintain, and cause each of its Subsidiaries
to maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP (it being understood that monthly financial statements are
not required to have footnote disclosures). The Company shall deliver to the
Purchasers each of the financial statements and other reports described below:
(a) MONTHLY AND QUARTERLY FINANCIAL INFORMATION. As
soon as available and in any event within thirty (30) days after the end of each
month, the Company shall deliver (i) the consolidated and consolidating balance
sheets of the Company and its Subsidiaries, as at the end of such month and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flow for such month and for the period from the beginning of the
then current fiscal year of the Company to the end of such month (and, with
respect to financial statements delivered for months that are also the last
month of any fiscal quarter, accompanied by the related consolidated and
consolidating statements of income, stockholders' equity and cash flow for such
fiscal quarter) and (ii) a schedule of the outstanding Indebtedness for borrowed
money of the Company and its Subsidiaries describing in reasonable detail each
such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan.
Notwithstanding the foregoing to the contrary, from and after January 1, 2001,
the financial information required to be delivered pursuant to this paragraph
shall be delivered as soon as available following the end of each fiscal
quarter, but in no event later than thirty (30) days after the end of such
fiscal quarter. After the consummation of an IPO, as defined in the Certificate
(an "IPO") the Company's obligations under this paragraph (a) shall continue
until the second anniversary of the date of this Agreement, but the financial
information shall be provided to the Company's Board of Directors and observers,
not to the Purchasers.
(b) YEAR-END FINANCIAL INFORMATION. As soon as
available and in any event within ninety (90) days after the end of the fiscal
year of the Company, the Company shall deliver (i) the consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the end
of such year and the related consolidated and consolidating statements of
income, stockholders' equity and cash flow for such fiscal year, (ii) a schedule
of the outstanding Indebtedness for borrowed money of the Company and its
Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan, and (iii) a report with respect to
the financial statements from Ernst & Young, LLP or another "Big Five" firm of
certified public accountants selected by the Company and reasonably acceptable
to the Purchasers, which report shall be issued pursuant to an audit conducted
by such firm of certified public accountants in conformity with generally
accepted accounting standards. The Company shall use its best commercially
reasonable efforts to ensure that such report shall contain an "Unqualified"
opinion (as such term is defined in AU Section 508.10 of the American Institute
of Certified Public Accountants Professional Standards).
34
<PAGE>
(c) COMPANY'S COMPLIANCE CERTIFICATE. Until the
consummation of an IPO, the Company shall deliver or cause to be delivered
within thirty (30) days after the end of each fiscal quarter a fully and
properly completed compliance certificate (in substantially the form attached
hereto as EXHIBIT D (or in such other form or substance as shall be satisfactory
to Purchasers) and referred to as a "Compliance Certificate") signed by the
chief executive officer or chief financial officer of the Company.
(d) ACCOUNTANTS' REPORTS. Promptly upon receipt
thereof, the Company shall deliver copies of all significant reports submitted
by the Company's firm of certified public accountants in connection with each
annual, interim or special audit or review of any type of the financial
statements or related internal control systems of the Company and its
Subsidiaries made by such accountants, including any comment letter submitted by
such accountants to management in connection with their services.
(e) MANAGEMENT REPORTS. Until the consummation an of
IPO, the Company will deliver within thirty (30) days after the end of each
fiscal quarter a management report (i) describing the operations and financial
condition of the Company and its Subsidiaries for the month then ended and the
portion of the current fiscal year then elapsed (or for the fiscal year then
ended in the case of year-end financials), (ii) setting forth in comparative
form the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the most recent projections for
the current fiscal year delivered pursuant to subsection 7.5(f) and (iii)
discussing the reasons for any significant variations. The information above
shall be presented in reasonable detail and shall be certified by the chief
financial officer of the Company to the effect that such information fairly
presents the results of operations and financial condition of the Company and
its Subsidiaries as at the dates and for the periods indicated.
(f) PROJECTIONS. No earlier than sixty (60) days
prior nor later than fifteen (15) days prior to the end of each fiscal year
beginning with the current fiscal year, the Company shall prepare and deliver
to Purchasers projections of the Company and its Subsidiaries for the next
succeeding fiscal year, on a month to month basis and for the following four
(4) fiscal years on a quarter to quarter basis, including a balance sheet as
of the end of each relevant period and income statements and statements of
cash flows for each relevant period and for the period commencing at the
beginning of the fiscal year and ending on the last day of such relevant
period.
(g) SEC FILINGS AND PRESS RELEASES. Promptly upon
their becoming available, the Company shall deliver copies of (i) all financial
statements, reports, notices and proxy statements sent or made available by the
Company or any of its Subsidiaries to their security holders, (ii) all regular
and periodic reports and all registration statements and prospectuses, if any,
filed by the Company or any of its Subsidiaries with any securities exchange or
with the Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available by the Company or
any of its Subsidiaries to the public concerning material developments in the
business the Company or any of its Subsidiaries.
35
<PAGE>
(h) EVENTS OF DEFAULT, ETC. Promptly upon any of the
Company Party's obtaining knowledge of any of the following events or
conditions, the Company shall deliver copies of all notices given or received by
the Company or any of its Subsidiaries with respect to any such event or
condition and a certificate of the Company's chief executive officer specifying
the nature and period of existence of such event or condition and what action
the Company has taken, is taking and proposes to take with respect thereto: (i)
any condition or event that constitutes a material breach of any provision of
this Agreement; (ii) any notice that any Person has given to the Company or any
Subsidiary, or any other action, taken with respect to a claimed default in any
agreement evidencing Indebtedness or any other material agreement to which the
Company or any Subsidiary is a party; or (iii) any event or condition that could
reasonably be expected to result in any material adverse effect on the Condition
of the Company.
(i) LITIGATION. Promptly upon any of the Company
Party's obtaining knowledge of (i) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries not previously disclosed by the Company to the Purchasers or (ii)
any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries which, in each case, is reasonably possible to have a material
adverse effect on the Condition of the Company, the Company will promptly give
notice thereof to the Purchasers and provide such other information as may be
reasonably available to them to enable the Purchasers and their counsel to
evaluate such matter.
7.5A SUBSIDIARIES.
The Company shall cause each Subsidiary acquired or created
after the date hereof to comply with the covenants and agreements herein as if
such Subsidiary had been a Subsidiary on the date hereof.
7.6 NOTICE OF CORPORATE CHANGES
The Company shall provide prompt written notice to the
Purchasers of (i) all jurisdictions in which the Company or any of its
Subsidiaries becomes qualified after the Closing Date to transact business, and
(ii) any material change after the Closing Date in the authorized and issued
capital stock or other equity interests of the Company or any of its
Subsidiaries or any other material amendment to their charter, by-laws or other
organization documents, such notice, in each case, to identify the applicable
jurisdictions or capital structures, as applicable.
7.7 NO DEFAULTS.
The Company shall deliver to the Purchasers concurrently with
the delivery of the financial statements referred to in subsection 7.5(b), a
certificate of the Company's chief financial officer stating that to his
knowledge no breach of this Agreement or any Transaction Document shall have
occurred during the period covered thereby, except as specified in such
certificate.
36
<PAGE>
7.8 PERMITTED INVESTMENTS.
The Company may invest the proceeds of the sale of the
Preferred Shares pending use of the proceeds pursuant to Section 7.16, in
government securities, certificates of deposit, or bank accounts, or in such
high-grade, short-term investment vehicles as may be approved by the Audit
Committee of the Board of Directors.
7.9 OTHER INFORMATION.
With reasonable promptness, the Company shall deliver such
other information and data with respect to the Company or any of its
Subsidiaries as from time to time may be reasonably required by any Purchaser.
7.10 PRESERVATION OF CORPORATE EXISTENCE.
The Company shall, and shall cause each of its Subsidiaries
to:
(a) preserve and maintain in full force and effect
its corporate existence;
(b) conduct its business in accordance with sound
business practices, keep its properties in good working order and condition
(normal wear and tear excepted), and from time to time make all needed repairs
to, renewals of or replacements of its properties (except to the extent that any
of such properties are obsolete or are being replaced); and
(c) file or cause to be filed in a timely manner all
reports, applications, estimates and licenses that shall be required by a
Governmental Authority.
7.11 PAYMENT OF OBLIGATIONS.
The Company shall, and shall cause each of its Subsidiaries
to, pay and discharge as the same shall become due and payable, all their
respective obligations and liabilities, including without limitation:
(a) all Tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Company or such
Subsidiary;
(b) all lawful claims which the Company and each of
its Subsidiaries is obligated to pay, which are due and which, if unpaid, might
by law become a Lien upon its property, unless the same are being contested in
good faith by appropriate proceedings and adequate reserves in accordance with
GAAP are being maintained by the Company or such Subsidiary; and
(c) all payments of principal, interest and other
amounts when due on Indebtedness.
37
<PAGE>
7.12 COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, in all material respects with all Requirements of Law
and with the directions of any Governmental Authority having jurisdiction over
them or their business or property (including all applicable Environmental
Laws).
7.13 INSPECTION.
The Company will permit, and will cause each of its
Subsidiaries to permit, representatives of the Purchasers to visit and inspect
any of their properties, to examine their corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss their
affairs, finances and accounts with their respective directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice; PROVIDED, HOWEVER, that no such inspection, examination or
inquiry, the failure to conduct same, nor any knowledge of any Purchaser,
including, without limitation, any knowledge obtained by such Purchaser in
connection with any such inspection, investigation or inquiry, shall constitute
a waiver of any rights Purchasers may have under any representation, warranty,
covenant, term or agreement under any of the Transaction Documents.
7.14 INSURANCE.
The Company and its Subsidiaries shall maintain or cause to be
maintained in good repair, working order and condition all material properties
used in their respective businesses and will make or cause to be made all
appropriate repairs, renewals and replacements thereof. The Company and its
Subsidiaries will maintain or cause to be maintained with financially sound and
reputable insurers that have a rating of "A" or better as established by Best's
Rating Guide (or an equivalent rating with such other publication of a similar
nature as shall be in current use), public liability and property damage
insurance with respect to their respective businesses and properties against
loss or damage of the kinds customarily carried or maintained by companies of
established reputation engaged in similar businesses and in amounts acceptable
to Purchasers and will deliver evidence thereof to Purchasers. Without limiting
the foregoing, the Company and its Subsidiaries will establish no later than
three (3) months after the Closing Date and maintain at all times thereafter
directors' and officers' liability insurance coverage for each of the members of
the Board of Directors of the Company in amounts satisfactory to the Purchasers;
provided, however, that the Company shall not be obligated to purchase such
insurance in the event that reasonable terms and pricing are not commercially
available. All such insurance policies shall provide that they may not be
canceled unless the insurance carrier gives at least 30 days prior written
notice of such cancellation to Purchasers.
7.15 BOOKS AND RECORDS.
The Company shall, and shall cause each of its Subsidiaries
to, keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions
38
<PAGE>
and the assets and business of the Company and each of its Subsidiaries in
accordance with GAAP consistently applied to the Company and its Subsidiaries
taken as a whole.
7.16 USE OF PROCEEDS.
The Company shall use the proceeds of the sale of Preferred
Shares hereunder only as follows: (i) for the payment of fees and expenses in
connection with the transactions contemplated hereunder and in the other
Transaction Documents, (ii) for capital expenditures, (iii) to repay a note
(including accrued but unpaid interest thereon) pursuant to Section 3.19 and the
interest on the Notes, and (iv) for general corporate purposes.
7.17 BOARD NOMINEES.
The Company shall maintain a Board of Directors consisting of
the number of directors specified in the Amended and Restated Stockholders'
Agreement, as such agreement may be amended from time to time, and use its best
efforts to have the nominees designated pursuant to such agreement elected to
the Board of Directors in accordance with, and subject to, the terms thereof.
7.18 GRANTING OF EMPLOYEE OPTIONS.
The Company may grant no more Employee Options than would
represent 6.5% of the Company's outstanding Common Stock on a fully diluted
basis, not including the options and shares issuable or issued on exercise of
options pursuant to the Employee Stock Option Plan. If the Employee Options are
granted, the Company shall grant the Employee Options at an exercise price equal
to at least the per share fair market value of the Common Stock (as determined
by the Company's Board of Directors) at the time of such grant or grants, as the
case may be.
7.19 BUSINESS ACTIVITIES.
Neither the Company nor any of its Subsidiaries shall engage
in any business or transaction other than the business in which they currently
propose to engage and the transactions contemplated by, or permitted under, the
Transaction Documents.
ARTICLE 8.
INDEMNIFICATION
8.1. INDEMNIFICATION.
(a) In addition to all other sums due hereunder or
provided for in this Agreement, the Company shall defend, indemnify and hold
harmless the Purchasers and their Affiliates and each of their respective
officers, directors, agents, employees, subsidiaries, partners, attorneys,
accountants, controlling persons and assigns (each a "Purchasing Indemnified
Party") to the fullest extent permitted by law from and against any and all
losses, costs, claims, damages, expenses (including, without limitation,
reasonable fees, disbursements and other charges of counsel, as limited by
Section 8.2 below, incurred by a Purchasing Indemnified Party
39
<PAGE>
in any action or proceeding between the Company and such Purchasing Indemnified
Party (or Purchasing Indemnified Parties) or between a Purchasing Indemnified
Party (or Purchasing Indemnified Parties) and any third party or otherwise) and
other liabilities or losses or diminution in value (collectively, "Liabilities")
incurred or suffered by any Purchasing Indemnified Party resulting from or
arising out of (i) any breach by the Company of any representation or warranty,
covenant or agreement of the Company in this Agreement or any other of the
Transaction Documents, including without limitation, the failure to make payment
when due of amounts owing pursuant to this Agreement or the other Transaction
Documents, on the due date thereof (whether at the scheduled maturity, by
acceleration or otherwise) or any legal, administrative or other actions
(including, without limitation, actions brought by any Purchaser, the Company,
any of its Subsidiaries or any equity holders of the Company or any of its
Subsidiaries or derivative actions brought by any Person claiming through or in
the name of the Company or any Subsidiary of the Company), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of the Transaction Documents, the transactions
contemplated thereby, or any Purchasing Indemnified Party's role therein or in
the transactions contemplated thereby, or (ii) without limiting the scope of
Clause (i) but without duplication, any material liability of the Company on the
Closing Date not disclosed in this Agreement, including the Exhibits and
Schedules thereto; PROVIDED, HOWEVER, that the Company shall not be liable under
this Section 8.1 to any Purchasing Indemnified Party to the extent that it is
finally judicially determined that such Liabilities resulted primarily from the
material breach by such Purchasing Indemnified Party of any representation,
warranty, covenant or other agreement of such Purchasing Indemnified Party
contained in this Agreement; PROVIDED, FURTHER, that if and to the extent that
such indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such Liabilities which
shall be permissible under applicable laws. In connection with the obligation of
the Company to indemnify for expenses as set forth above, the Company further
agrees, upon presentation of appropriate invoices containing reasonable detail,
to reimburse each Purchasing Indemnified Party for all such expenses (including,
without limitation, reasonable fees, disbursements and other charges of counsel
incurred by a Purchasing Indemnified Party in any action or proceeding between
the Company and such Purchasing Indemnified Party (or Purchasing Indemnified
Parties) or between a Purchasing Indemnified Party (or Purchasing Indemnified
Parties) and any third party or otherwise) as they are incurred by such
Purchasing Indemnified Party; PROVIDED, HOWEVER, that if a Purchasing
Indemnified Party is reimbursed hereunder for any expenses, such reimbursement
of expenses shall be refunded to the extent it is finally judicially determined
that the Liabilities in question resulted primarily from (i) the willful
misconduct or gross negligence of such Purchasing Indemnified Party or (ii) the
breach by such Purchasing Indemnified Party of any representation, warranty,
covenant or other agreement of such Purchasing Indemnified Party contained in
this Agreement or any other Transaction Document.
8.2. PROCEDURE; NOTIFICATION.
Each Purchasing Indemnified Party under this Article 8 will,
promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Purchasing Indemnified
Party in respect of which indemnity may be sought from the Company under this
Article 8, notify the Company in writing of the commencement thereof.
40
<PAGE>
The omission of any Purchasing Indemnified Party so to notify the Company of
any such action shall not relieve the Company from any liability which it may
have to such Purchasing Indemnified Party unless, and only to the extent that,
such omission results in the Company's forfeiture of substantive rights or
defenses. In case any such action, claim or other proceeding shall be brought
against any Purchasing Indemnified Party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to assume the defense
thereof at its own expense, with counsel satisfactory to such Purchasing
Indemnified Party in its reasonable judgment; PROVIDED, HOWEVER, that any
Purchasing Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action, claim
or proceeding in which the Company, on the one hand, and a Purchasing
Indemnified Party, on the other hand, is, or is reasonably likely to become, a
party, such Purchasing Indemnified Party shall have the right to employ separate
counsel at the Company's expense and to control its own defense of such action,
claim or proceeding if, in the reasonable opinion of counsel to such Purchasing
Indemnified Party, a conflict or potential conflict exists between the Company,
on the one hand, and such Purchasing Indemnified Party, on the other hand, that
would make such separate representation advisable; PROVIDED, HOWEVER, that in no
event shall the Company be required to pay fees and expenses under this Article
8 for more than one firm of attorneys in any jurisdiction in any one legal
action or group of related legal actions. The Company agrees that it will not,
without the prior written consent of the Purchaser through whom the Purchasing
Indemnified Party is entitled to indemnification, settle, compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated hereby (if any Purchasing
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of such Purchaser and each other Purchasing Indemnified
Party from all liability arising or that may arise out of such claim, action or
proceeding. The Company shall not be liable for any settlement of any claim,
action or proceeding effected against any Purchasing Indemnified Party without
its written consent, which consent shall not be unreasonably withheld. The
rights accorded to Purchasing Indemnified Parties hereunder shall be in addition
to any rights that any Purchasing Indemnified Party may have at common law, by
separate agreement or otherwise.
8.3. AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT.
Notwithstanding anything to the contrary in this Article 8,
the indemnification and contribution provisions of the Amended and Restated
Stockholders' Agreement shall govern any claim made with respect to registration
statements filed pursuant thereto or sales made under such registration
statements.
ARTICLE 9.
MISCELLANEOUS
9.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties made herein shall
survive the execution and delivery of this Agreement, the Closing, any
investigation by or on behalf of the Purchasers, acceptance of the Preferred
Shares and payment therefor, or termination of this Agreement.
41
<PAGE>
9.2. NOTICES.
All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested (with receipt confirmed),
courier service or personal delivery or via facsimile:
(a) If to the Purchasers, to their respective
address as set forth on Schedule 1.
<TABLE>
<CAPTION>
<S> <C>
(b) If to the Company: USinternetworking, Inc.
One USi Plaza
175 Admiral Cochrane Drive
Suite 400
Annapolis, Maryland 21401
Attention: Christopher R. McCleary
with a copy to: Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2505
Attention: James F. Rogers, Esq.
</TABLE>
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; if delivered
by facsimile, upon confirmation of such transmission; and five business days
after being deposited in the mail, postage prepaid, if mailed.
9.3. SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of the parties hereto. Subject to
applicable securities laws and the Amended and Restated Stockholders' Agreement,
any Purchaser may assign any of its rights under any of the Transaction
Documents to any Person and any holder of the Preferred Shares or the Common
Stock issued upon conversion of the Preferred Shares may assign, in whole or in
part, the Preferred Shares or the Common Stock issuable upon conversion of the
Preferred Shares to any Person. The Company may not assign any of its rights
under this Agreement without the written consent of the Purchasers, and any such
purported assignment by the Company without the prior written consent of the
Purchasers shall be void and of no effect. Except as provided in this Section
9.3, no Person other than the parties hereto and their successors and permitted
assigns is intended to be a beneficiary of any of this Agreement or the related
agreements referred to herein.
9.4. AMENDMENT AND WAIVER.
(a) No failure or delay on the part of the Company
or the Purchasers in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further
42
<PAGE>
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or the Purchasers at law, in
equity or otherwise.
(b) Any amendment, supplement or modification of or
to any provision of this Agreement shall be effective only if made in a writing
signed by all parties hereto. Any waiver of any provision of this Agreement, and
any consent to any departure by any party from the terms of any provision of
this Agreement, shall be effective (i) only if it is made or given in writing
and signed by Purchasers holding, in the aggregate, at least two-thirds of the
then outstanding Series B Preferred Stock, provided that any such amendment,
supplement, modification or waiver applies equally to the Preferred Shares held
by all Purchasers, and (ii) only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on any party in any case shall entitle
any party hereto to any other or further notice or demand in similar or other
circumstances.
9.5. COUNTERPARTS.
Telefacsimile transmissions of any executed original document
and/or retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of any
party hereto, the other parties hereto shall confirm telefacsimile transmissions
by executing duplicate original documents and delivering the same to the
requesting party or parties. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
9.6. HEADINGS.
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
9.7. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of law of such state.
9.8. JURISDICTION.
Each party to this Agreement hereby irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement or
any agreements or transactions contemplated hereby may be brought in the courts
of the State of Maryland or the State of New York or the United States District
Court for the District of Maryland or the United States District Court for the
Southern District of New York and hereby expressly submits to the nonexclusive
personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that such courts are
an inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts in any
43
<PAGE>
such suit, action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to the address set forth in Section 9.2,
such service to become effective 10 days after such mailing.
9.9. SEVERABILITY.
If any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
9.10. RULES OF CONSTRUCTION.
Unless the context otherwise requires, "or" is not exclusive,
and references to sections or subsections refer to sections or subsections of
this Agreement.
9.11. ENTIRE AGREEMENT.
This Agreement, together with the exhibits and schedules
hereto and the other related agreements referred to herein, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits and
schedules hereto, and the other related agreements referred to herein supersede
all prior agreements and understandings between the parties with respect to such
subject matter.
9.12. PUBLICITY.
Except as may be required by applicable law, none of the
parties hereto shall issue a publicity release or announcement or otherwise make
any public disclosure concerning this Agreement or the transactions contemplated
hereby, without prior approval by the other parties hereto, provided that a
Purchaser may nonetheless communicate with its partners concerning such
transactions and investment in the Company and may publish a "tombstone" in the
customary form with respect to its investment. If any announcement is required
by law to be made by any party hereto, prior to making such announcement such
party will deliver a draft of such announcement to the other parties and shall
give the other parties an opportunity to comment thereon.
9.13. FURTHER ASSURANCES.
Each of the parties shall execute such documents and perform
such further acts (including, without limitation, obtaining any consents,
exemptions, authorizations, or other actions by, or giving any notices to, or
making any filings with, any Governmental Authority or any other Person) as may
be reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
44
<PAGE>
9.14. WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
9.15. OBLIGATIONS OF THE PURCHASERS.
The obligations of each Purchaser shall be several and not
joint and no Purchaser shall be liable or responsible for the acts or omissions
of any other Purchaser.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.
USINTERNETWORKING, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
J. H. WHITNEY III, L.P.
By: J. H. Whitney Equity Partners III, LLC,
Its General Partner
By:
----------------------------------------
Name:
A Managing Member
WHITNEY STRATEGIC PARTNERS III, L.P.
By: J. H. Whitney Equity Partners III, LLC,
Its General Partner
By:
----------------------------------------
Name:
A Managing Member
BLUE CHIP CAPITAL FUND II LIMITED
PARTNERSHIP
By: BLUE CHIP VENTURE COMPANY, LTD.
Its General Partner
By:
----------------------------------------
John H. Wyant
Manager
46
<PAGE>
MIAMI VALLEY VENTURE FUND L.P.
By: BLUE CHIP VENTURE COMPANY OF
DAYTON, LTD.
Its Special Limited Partner
By:
----------------------------------------
John H. Wyant
Manager
GROTECH PARTNERS IV L.P.
By: GROTECH CAPITAL GROUP IV, LLC
Its General Partner
By:
----------------------------------------
Name:
Title:
GROTECH PARTNERS V L.P.
By: GROTECH CAPITAL GROUP V, LLC
Its General Partner
By:
----------------------------------------
Name:
Title:
SOUTHERN VENTURE FUND SBIC, L.P.
By: SVF SBIC, L.P.
Its General Partner
By:
----------------------------------------
Partner
By:
----------------------------------------
Partner
47
<PAGE>
SOUTHERN VENTURE FUND II, L.P.
By:
----------------------------------------
General Partner
VENROCK ASSOCIATES
By:
----------------------------------------
General Partner
VENROCK ASSOCIATES II, L.P.
By:
----------------------------------------
General Partner
USI PARTNERS, LTD.
By:
----------------------------------------
US WEST COMMUNICATIONS, INC.
By:
----------------------------------------
SIEBEL SYSTEMS, INC.
By:
----------------------------------------
Name:
Title:
WALLER-SUTTON MEDIA PARTNERS, L.P.
48
<PAGE>
By:
----------------------------------------
ARBOR VENTURE PARTNERS, L.L.C.
By: Arbor Partners L.L.C., Manager
By:
----------------------------------------
Donald J. Walker
Managing Director
SOUTHEASTERN TECHNOLOGY FUND, L.P.
By:
----------------------------------------
PNC BANK, N.A., TRUSTEE
By:
----------------------------------------
Name:
Title:
PNC BANK, N.A., CUSTODIAN
By:
----------------------------------------
Name:
Title:
49
<PAGE>
AEH PROFIT SHARING TRUST
By:
----------------------------------------
Name:
Title:
CASTELLINI MANAGEMENT COMPANY
An Ohio General Partnership
By:
----------------------------------------
General Partner
--------------------------------------------
RICHARD C. ALBRIGHT
BRUCE H. BRANDALEONER
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
CHRISTOPHER DE ROETTH
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
ELIZABETH DE ROETTH
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
50
<PAGE>
--------------------------------------------
PETER DE ROETTH
NICHOLAS DEWOLF
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
CHRISTOPHER EGAN
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
MICHAEL J. EGAN
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
RICHARD J. EGAN
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
RICHARD J. AND MAUREEN E. EGAN
GRANDCHILDREN'S TRUST
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
DONALD A. FOSS
51
<PAGE>
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
DAVID FRIEND
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
ROGER G. MARINO
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
WILLIAM G. MILLER
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
JAMES K. SCHULER
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
CAROLYN H. WALTER
By: ACCOUNT MANAGEMENT CORPORATION, poa
52
<PAGE>
By:
----------------------------------------
JANE E. WESTERVELT
By: ACCOUNT MANAGEMENT CORPORATION, poa
By:
----------------------------------------
53
<PAGE>
Exhibit 10.26
SIEBELNET AGREEMENT
THIS SIEBELNET AGREEMENT ("Agreement") is entered into this 31 day of
January, 1999 (the "Effective Date"), by and between SIEBELNET, INC., a Delaware
corporation ("SiebelNet") with its principal place of business at 1855 South
Grant Street, San Mateo, CA 94402, and USINTERNETWORKING, INC. ("USi"), a
Delaware corporation with its principal place of business at One USi Plaza,
Annapolis, MD 21401-7478
RECITALS
WHEREAS, SiebelNet owns or has the right to grant licenses to certain sales,
marketing and customer service software applications and related computer
software;
WHEREAS, USi has entered into the [CONFIDENTIAL TREATMENT] (as defined below),
pursuant to which USi has obtained certain rights;
WHEREAS, USi and SiebelNet previously entered into a preliminary agreement dated
December 23, 1998 (the "Preliminary Agreement") relating to the subject matter
hereof, which the parties contemplated would be superseded by this Agreement;
WHEREAS, USi and SiebelNet now wish to enter into this Agreement, pursuant to
which [CONFIDENTIAL TREATMENT], and shall provide certain applications
hosting services as hereinafter described;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties, SiebelNet and USi hereby agree
as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms used in this Agreement shall have the
following meanings:
"AFFILIATES" shall mean, with respect to a party hereto, any entity
controlled by, controlling, or under common control with such party; provided,
however, that such entity shall be deemed to be an Affiliate only so long as
such control exists.
"AUTHORIZED INDIVIDUAL" shall mean an individual who is permitted to
have access to and use the Programs pursuant to the terms of a User Agreement.
[CONFIDENTIAL TREATMENT]
[CONFIDENTIAL TREATMENT]
"BUSINESS PLAN" shall have the meaning assigned to it in Subsection 5.2
("Business Plan").
"CERTIFICATION SERVICES" shall mean the review and analysis by USi of
software and hardware owned or installed by a User and the provision by USi of a
written opinion to the effect
- ------------------------------------------------------------------------------
[CONFIDENTIAL TREATMENT] means that confidential material has been filed
separately with the Securities and Exchange Commission.
C-1
<PAGE>
that the use of such software and/or hardware in conjunction with the Programs
may have a negative impact on the quality of the response time or other
operating characteristics of the Programs as made available to such User
pursuant to a User Agreement, as further described in EXHIBIT F hereto.
"CONFIDENTIAL INFORMATION" shall have the meaning assigned to it in
Section 9.1 of [CONFIDENTIAL TREATMENT].
"DESIGNATED EQUIPMENT" shall mean the Hardware described as such in
EXHIBIT D ("Designated EQUIPMENT"), or such other or replacement equipment as
USi may use, with SiebelNet's prior written permission, to provide Services
hereunder.
"DESIGNATED PURPOSE" shall mean the provision of Services for the
benefit of Users pursuant to the terms of this Agreement and the User Agreement,
and shall in no event include any other activity.
"DESIGNATED SITE" shall mean, subject to Subsection 9.1 ("Designated
Site"), USi's business location with the street address of One USi Plaza,
Annapolis, MD 21403 or 1375 McCandless Drive, Milpitas, CA 95035, or such other
location as SiebelNet may approve beforehand and in writing.
"DOCUMENTATION" shall mean any instructive or illustrative materials,
in written, magnetic or electronic format, which describe the computer software
contained in the Programs and are generally provided to licensees of such
Programs.
"EFFECTIVE DATE" shall have the meaning assigned to it in the first
paragraph of this Agreement.
"ELEMENT" shall have the meaning assigned to it in EXHIBIT C
[CONFIDENTIAL TREATMENT].
"ENTERPRISE RELATIONSHIP MANAGEMENT PRODUCTS" shall mean the Programs
specified in EXHIBIT A or any other software products which Siebel or SiebelNet
may release from time to time which relate to the automation of corporate sales,
marketing or customer service functions.
[CONFIDENTIAL TREATMENT]
"FORCE MAJEURE EVENT" shall mean any condition arising outside the
reasonable control of and without fault or negligence by a party hereto
including, without limitation, acts of God, acts of the public enemy, acts of
the United States of America, or any state, territory or political division
of the United States of America or of the District of Columbia, fires,
floods, earthquakes, epidemics, quarantine restrictions, freight embargoes,
and unusually severe weather conditions.
"HARDWARE" shall mean computer hardware, networking equipment and
associated system software on which the Programs are installed for use by a User
in connection with USi's provision of Services hereunder, which may include
without limitation hardware and/or software which is: (a) procured by USi from
one or more third parties with the prior, written consent of
2.
<PAGE>
SiebelNet (such consent not to be unreasonably withheld); or (b) originally
provided to SiebelNet by [CONFIDENTIAL TREATMENT] as described in EXHIBIT E
hereto [CONFIDENTIAL TREATMENT], which may be procured by USi from Siebel or
SiebelNet under terms and conditions to be agreed to in good faith by such
parties.
"INDEMNIFYING PARTY" shall mean the party to whom an Indemnitee shall
give notice of a claim that is covered by Subsection 14.1 ("By SiebelNet") or
Subsection 14.2 ("By USi").
"INDEMNITEE" shall mean the party against whom a third party makes a
claim covered by Subsection 14.1 ("By SiebelNet") or Subsection 14.2 ("By USi")
as to which an Indemnified Party seeks indemnification.
"INITIAL TERM" shall have the meaning assigned to it in Section 16
("Term and Termination").
"MAINTENANCE SERVICES" shall mean the maintenance services defined in
EXHIBIT G which USi and SiebelNet shall provide to Users in connection with each
such User's use of the Programs.
"OBJECT CODE" shall mean computer software programs, not readily
perceivable by humans, and suitable for machine execution without the
intervening steps of interpretation or compilation.
"PROGRAMS" shall mean the computer software (in Object Code format
only) described in EXHIBIT A ("Programs") and other computer software delivered
to USi from time to time, including any and all Updates and Documentation
provided to USi hereunder.
"RENEWAL TERM" shall have the meaning assigned to it in Section 16
("Term and Termination").
"SERVICES" shall mean all aspects of USi's performance under this
Agreement, including without limitation the provision of Program hosting,
Maintenance Services and related services.
"SOURCE CODE" shall mean computer software programs not in machine
readable format and not suitable for machine execution without the intervening
steps of interpretation or compilation.
"TERM" shall mean the period of time commencing with the Effective
Date and ending with the later of: (a) the last day of the Initial Term; or
(b) the last day of the latest Renewal Term.
"TRAINED PARTY" shall have the meaning assigned to it in Section 6
("Training and Leads").
"TRAINING PARTY" shall have the meaning assigned to it in Section 6
("Training and Leads").
3.
<PAGE>
"UPDATES" shall mean any new version, release, update, enhancement,
correction or modification of the Programs, or entirely new products identified
by SiebelNet as such, which SiebelNet may, in its sole discretion, provide to
USi hereunder; provided SiebelNet shall be required to provide to USi any
Updates that SiebelNet makes generally available to its customers or other
service providers.
"USER" shall mean any person or entity which has entered into and is
party to a valid and effective User Agreement.
"USER AGREEMENT" shall mean an agreement between a User and SiebelNet,
with a minimum duration of [CONFIDENTIAL TREATMENT] following the effective
date thereof, which may include, at SiebelNet's discretion, certain product
and development obligations.
"USi FEE ADJUSTMENT" shall have the meaning assigned in EXHIBIT C
[CONFIDENTIAL TREATMENT].
"USi FEES" shall have the meaning assigned in Subsection 5.3
("Payment").
2. EXISTING AGREEMENT. [CONFIDENTIAL TREATMENT]
3. PROVISION OF SERVICES.
3.1 DELIVERY OF PROGRAMS. All Programs delivered by SiebelNet to USi
pursuant to this Agreement shall be deemed accepted by USi within thirty days of
delivery, and USi hereby waives all right of revocation. SiebelNet may deliver
additional copies of the Programs, including without limitation Updates, which
USi shall install at the Designated Site as soon as reasonably practicable or as
otherwise directed by SiebelNet.
3.2 HARDWARE AND SOFTWARE. USi shall be responsible, at its own
expense, for the acquisition, installation, operation and maintenance of the
Designated Equipment at the Designated Site to provide Services and to carry out
all of USi's obligations hereunder; except as such obligations relate to the
acquisition of the [CONFIDENTIAL TREATMENT] and any maintenance related
4.
<PAGE>
such [CONFIDENTIAL TREATMENT] that is covered by a maintenance contract
between [CONFIDENTIAL TREATMENT]and [CONFIDENTIAL TREATMENT] which is in
existence as of the date of this Agreement. Without limiting the generality
of the foregoing, in the event the parties mutually agree that USi should
acquire the [CONFIDENTIAL TREATMENT] from [CONFIDENTIAL TREATMENT], the
parties agree to negotiate in good faith the pricing and terms of such
acquisition.
3.3 PROGRAM LICENSE. In consideration of all obligations of USi
hereunder, SiebelNet hereby grants to USi (and certain USi subsidiaries as
approved in writing in advance by SiebelNet) a revocable, non-exclusive,
non-transferable license (without the right to grant sublicenses) to use,
execute and display the Programs in Object Code format: (a) solely on the
Designated Equipment; (b) solely at the Designated Site; (c) solely for the
Designated Purpose; and (d) solely during the Term. The foregoing license
includes the right to make a reasonable number of copies of the Programs for
internal back-up and archival purposes only, provided that all such copies shall
bear the original and unmodified copyright, patent and other intellectual
property markings as when originally delivered by SiebelNet. It is understood
that such unused copies do not need to be on Designated Equipment or at the
Designated Site. USi represents and warrants that any and all USi subsidiaries
which are granted a license pursuant to this Section shall comply with the terms
of such license and the other terms of this Agreement, and that USi shall be
liable for the breach by any such subsidiary of the terms of such license or
other terms of this Agreement.
3.4 SERVICES. USi shall provide the Services as further described
in EXHIBIT C [CONFIDENTIAL TREATMENT] and EXHIBIT G, which shall include the
installation and operation of the Programs on the Designated Equipment, at
the Designated Site, in order to make the use of such Programs available to
Users pursuant to the User Agreement.
3.4 NO REVERSE ENGINEERING. USi hereby acknowledges that the Programs
contain valuable trade secret and confidential information of SiebelNet and
Siebel. USi agrees not to reverse compile, reverse engineer, reverse assemble,
or otherwise attempt, directly or indirectly, to obtain or create Source Code
for the Programs or to otherwise discover or reveal such information.
3.5 TRADEMARK LICENSE. Each party (the "Licensing Party") hereby
grants to the other party (the "Licensed Party") a worldwide, non-transferable,
non-exclusive, non-sublicenseable license to use the trademarks, service marks,
trade names, and other product source identifiers of the Licensing Party
(collectively, the "Marks") to identify the corresponding goods and services of
the Licensing Party solely for the purpose of carrying out the obligations of
the Licensed Party hereunder, subject to the publicity agreement provisions of
Section 19.7.
Each Licensing Party may terminate the foregoing license if, in its
sole discretion, the Licensed Party's use of the Marks of the Licensing Party
does not conform to the Licensing Party's standards; provided, however, that
the Licensing Party must first state in writing the basis for such
termination and provide the Licensed Party a reasonable opportunity to cure.
Title to and ownership of the Licensing Party's Marks shall remain with the
Licensing Party or its licensors. The Licensed Party shall not form any
combination marks or composite marks with the Marks of the Licensing Party.
The Licensed Party shall not take any action inconsistent with
5.
<PAGE>
the Licensing Party's ownership of its Marks and any benefits accruing from use
of such Marks shall automatically vest in the Licensing Party.
3.7 NO IMPLIED LICENSES. The Programs, including all copies thereof,
are and shall remain at all times the exclusive property of SiebelNet or its
suppliers. USi acquires no rights to or licenses of such Programs except those
expressly granted herein.
3.8 CERTIFICATION SERVICES. [CONFIDENTIAL TREATMENT]
In the event [CONFIDENTIAL TREATMENT] shall have the option of
providing Services to such User by notifying [CONFIDENTIAL TREATMENT] in
writing within three (3) business days following [CONFIDENTIAL TREATMENT]
receipt of notice from [CONFIDENTIAL TREATMENT] of such objection. In the
event [CONFIDENTIAL TREATMENT] elects to provide Services to such User,
[CONFIDENTIAL TREATMENT] agrees that the Certification Services may be
provided to such User by [CONFIDENTIAL TREATMENT]. In the event
[CONFIDENTIAL TREATMENT] elects not to provide Services to such User or fails
to make a timely election to provide Services to such User,
[CONFIDENTIAL TREATMENT] agrees to waive its rights under Section 4.2 hereof
with respect to such User.
USi further agrees to offer its implementation methodology known as
RAPIDi to any and all Users, at prices and terms to be negotiated and agreed to
by USi and each such User.
3.9 PROGRAM SERVICES. In addition to all other obligations of
SiebelNet hereunder, USi agrees that it will, upon request from SiebelNet and
without any payment of any kind to USi except for the USi Fees, provide
in-person, telephone, or email assistance and support to SiebelNet or Siebel
personnel as is reasonably necessary to assist in the sales and marketing by
SiebelNet of the services described in this Agreement.
3.10 SALES REPRESENTATIVES. Each party agrees that the compensation of
its respective sales representatives shall be the sole and exclusive
responsibility of such party. Each party further agrees to compensate its sales
representatives with respect to sales of services described in this Agreement in
a manner consistent with such party's usual practices.
4 EXCLUSIVITY. [CONFIDENTIAL TREATMENT]
6.
<PAGE>
[CONFIDENTIAL TREATMENT]
5. PRICING AND PAYMENTS.
5.1 PRICING. The initial fees for the Services shall be as set forth
in EXHIBIT B hereto, which may be modified from time to time as set forth in
Subsection 5.2 below.
5.2 BUSINESS PLAN. The parties agree to meet promptly after the
Effective Date in person or by telephone, and to negotiate in good faith a
business plan ("Business Plan") which shall include prices, terms and other
details for the provision of Services hereunder and which is mutually acceptable
to both parties. The parties further agree to communicate from time to time
during the first year of the Term no less frequently than one (1) time each
ninety (90) days to discuss such Business Plan and to adjust such pricing as
they mutually agree in good faith. The parties further agree that after the
first year of the Term, they shall meet as reasonably necessary to adjust such
pricing. In the event that the parties are unable to reach agreement on the
Business Plan or any such pricing adjustments within sixty (60) days following
the commencement of good faith negotiations relating thereto, then either party
may terminate this Agreement without cause pursuant to Subsection 16(a)
("Termination for Convenience"). The parties agree that any upward adjustments
of such pricing (i) must be in response to an attendant rise in USi's cost of
providing the Services, and (ii) shall not exceed [CONFIDENTIAL TREATMENT] per
annum in the aggregate.
5.3 PAYMENT. SiebelNet shall pay to USi the fees due and owing
hereunder, subject to reduction by the USi Fee Adjustment (collectively, "USi
Fees"), according to EXHIBIT B ("Pricing"). USi agrees to issue invoices in
advance to SiebelNet for payment of USi Fees on a monthly basis for the
following month's Services (including any adjustment necessary for the prior
month's Services), and SiebelNet shall pay each properly documented invoice
no later than [CONFIDENTIAL TREATMENT] days from the date of SiebelNet's
receipt of such invoice. Notwithstanding the foregoing, the parties agree to
adjust such invoicing and payment schedule to the extent required to ensure
that SiebelNet's payments to USi for the Services provided hereunder are not
due and payable prior to the date on which Users are required to pay
SiebelNet for such services pursuant to the respective User Agreements.
6. TRAINING AND LEADS.
6.1 CROSS TRAINING. Each party (the "Training Party") shall provide
reasonable instruction to the sales representatives and pre-sales engineers
of the other party (the "Trained Party") regarding the products and services
offered by the Training Party that relate to the subject matter of this
Agreement.
7.
<PAGE>
6.2 OTHER TRAINING. USi shall develop an internal training course for
its employees regarding the use and support of the Programs. This training will
be consistent with SiebelNet's then-current training policies. Should this
training integrate or include SiebelNet-supplied materials or courses or
otherwise require payment by USi to SiebelNet pursuant to SiebelNet's then
current training policies, USi agrees to pay SiebelNet the associated fees
therefor, using the discounts defined within Section 4(a) and 4(b) of Exhibit A
to the Existing Agreement.
6.3 PRODUCT MANAGERS. Each party shall appoint at least one (1)
appropriately qualified full-time product manager whose sole responsibility
shall be to define and market the Services.
6.4 LEADS. USi will promptly provide to SiebelNet any and all
potential Services leads arising from or with respect to any sales by USi of its
iMAP product line or other operations.
7. TAXES. In addition to any other payments due under this Agreement, USi
agrees to pay, and to indemnify and hold SiebelNet and its Affiliates harmless
from, any sales, use, excise, import or export, value added or similar tax or
duty based on USi's provision of Services to SiebelNet, including any penalties
and interest, as well as any costs associated with the collection or withholding
thereof, and all governmental permit fees, license fees and customs and similar
fees levied upon the delivery by SiebelNet of the Programs to USi, which
SiebelNet or its Affiliates may incur in respect of this Agreement. SiebelNet
agrees to pay, and to indemnify and hold USi and its Affiliates harmless from,
any taxes based on the services or Programs provided by SiebelNet to its Users.
8. [CONFIDENTIAL TREATMENT]
9. SERVICE LOCATIONS, SAFETY AND SECURITY.
9.1 DESIGNATED SITE. USi shall provide Services from: (a) the
Designated Site; or (b) with SiebelNet's permission, another site, on a
temporary basis when the Designated Site is unavailable (such other site to be
considered a Designated Site for purposes of this Agreement).
9.2 SAFETY AND SECURITY. USi shall at all times maintain and enforce
at the Designated Site safety and security procedures that are at least: (a)
equal to industry standards for such locations; (b) as rigorous as those
procedures which are in effect for other similar locations owned or controlled
by USi as of the Effective Date and at any time during the Term; and (c)
compliant with other reasonable safety and security requirements as to which
SiebelNet may inform USi at any time during the Term.
10. RECORDS AND AUDITS.
10.1 RECORDS. At all times during the Term, and for three (3) years
thereafter, USi shall keep written books and records documenting the
pertinent aspects of its performance hereunder for the previous three years,
including without limitation, billing and payment records, data used for
calculations of Availability, description of Services for each User, Hardware
8.
<PAGE>
acquisition, security and access records, maintenance records and travel and
expense records (collectively, "Records"), according to Generally Accepted
Accounting Principles. At a maximum of once every six (6) months during the
Term, USi agrees to provide copies of such Records to SiebelNet promptly
following the receipt by USi of a SiebelNet reasonable request therefor.
10.2 AUDITS. At a maximum of once every six (6) months during the
Term, and upon reasonable notice from SiebelNet, USi shall provide, and shall
cause its employees and agents to provide, SiebelNet auditors and inspectors,
as SiebelNet may from time to time designate, with access to the Designated
Site and all Records during USi's normal business hours for the purpose of
performing audits or inspections of the Services (including without
limitation data processing, the procurement of new systems, disaster
recovery, maintenance and support, and the systems and physical environments
in or in which the Services are performed). USi shall provide, and shall
cause its employees and agents to provide, at the sole expense of SiebelNet,
to such auditors and inspectors any assistance as they may reasonably
require. Any information disclosed by USi to such auditors and inspectors
shall be protected by the confidentiality provisions set forth in Section 11.
11. CONFIDENTIAL INFORMATION. The parties agree that they are bound by
the provisions contained in [CONFIDENTIAL TREATMENT], and agree that such
confidentiality obligations shall apply to all activities taken and
disclosures made in furtherance of this Agreement. USi further agrees that
the following information shall be deemed to be the Confidential Information
of Siebel, as defined in [CONFIDENTIAL TREATMENT]: (i) all information which
Siebel is required to treat confidentially pursuant to a User Agreement
(which shall be protected by USi in a manner consistent with the terms of
such User Agreement), and (ii) all information regarding the existence, terms
and pricing of this Agreement.
12. CONSULTING. USi agrees that it will continue to engage in its
current consulting business with respect to the products of SiebelNet and
Siebel Systems, Inc., apart from any rights and obligations contained herein.
13. REPRESENTATIONS AND WARRANTIES.
13.1 BY SIEBELNET. SiebelNet represents and warrants that: (a) it is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware; (b) it has all the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement; (c) the
execution, delivery, and performance of this Agreement have been duly authorized
by SiebelNet; (d) no approval, authorization, or consent of any governmental or
regulatory authority is required to be obtained or made by it in order for it to
enter into and perform its obligations under this Agreement; and (e) in
connection with its obligations under this Agreement, it shall comply with all
applicable Federal, State, and local laws and regulations and shall obtain all
applicable permits and licenses.
13.2 BY USI. USi represents and warrants that: (a) it is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware; (b) it has all the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement; (c) the execution,
delivery, and performance of this Agreement have been duly authorized by USi;
(d) no approval, authorization, or consent of any governmental or regulatory
9.
<PAGE>
authority is required to be obtained or made by it in order for it to enter
into and perform its obligations under this Agreement; (e) in connection with
its obligations under this Agreement, it shall comply with all applicable
Federal, State, and local laws and regulations and shall obtain all
applicable permits and licenses; (f) it shall provide the services
contemplated by this Agreement in a manner consistent with the generally
accepted industry standards and USi's best practices, (g) it shall be at all
times either the owner of the Hardware or shall be at all times authorized by
the owner of the Hardware to use the Hardware in accordance with the terms of
this Agreement (except to the extent such Hardware is the [CONFIDENTIAL
TREATMENT] or other Hardware provided by [CONFIDENTIAL TREATMENT]).
EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 13, BOTH
PARTIES MAKE NO OTHER, AND DISCLAIM ALL, WARRANTIES WITH RESPECT TO THE SERVICES
OR SOFTWARE, EXPRESS, IMPLIED, STATUTORY OR IN ANY OTHER PROVISION OF THIS
AGREEMENT INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
14. INDEMNIFICATION.
14.1 BY SIEBELNET. SiebelNet shall indemnify USi from, and defend USi
against, any liability or expenses (including reasonable attorneys' fees)
finally awarded against USi to a third party by a court of competent
jurisdiction arising out of or relating to any claim by a third party: (a) that
SiebelNet's provision of Programs, including without limitation the Programs
listed on EXHIBIT A (but not including any goods or services provided by USi)
directly infringes any U.S. or Canadian patent issued as of the Effective Date
or any copyright, trade secret or trademark of a third party; (b) relating to
any amounts including taxes, interest, and penalties assessed against USi which
are obligations of SiebelNet pursuant to Section 7 ("TAXES"); (c) relating to
the inaccuracy or untruthfulness of any representations or warranties made by
SiebelNet pursuant to Subsection 13.1 ("By SiebelNet"); and (d)(i) relating to
any violation of Federal, State, or other laws or regulations of any nature,
including without limitation those for the protection of persons or members of a
protected class or category of persons by SiebelNet or its employees,
subcontractors or agents, (ii) relating to illegal discrimination or harassment
by SiebelNet, its employees, subcontractors or agents, (iii) relating to
work-related injury (except as may be covered by USi's workers' compensation
obligations) or death caused by the negligence or willful acts of SiebelNet, its
employees or agents; (iv) relating to tangible personal or real property damage
resulting from SiebelNet's acts or omissions inconsistent with this Agreement
(subject to (d)(iii) above).
14.2 BY USI. USi shall indemnify SiebelNet from, and defend SiebelNet
against, any liability or expenses (including reasonable attorneys' fees)
finally awarded against USi to a third party by a court of competent
jurisdiction arising out of or relating to any claim by a third party: (a) that
USi's provision of Services (but not including any goods or services provided by
SiebelNet) infringes upon or misappropriates the proprietary rights, including
any and all worldwide patent, copyright, trade secret, trademark, or similar
rights of any third party; (b) relating to any amounts including taxes,
interest, and penalties assessed against SiebelNet which are obligations of USi
pursuant to Section 7 ("Taxes"); (c) relating to the inaccuracy or
untruthfulness of any representations or warranty made by USi pursuant to
Subsection 13.2 ("By
10.
<PAGE>
USi"); and (d)(i) relating to any violation of Federal, State, or other laws or
regulations of any nature, including without limitation those for the protection
of persons or members of a protected class or category of persons by USi or its
employees, subcontractors or agents, (ii) relating to illegal discrimination or
harassment by USi, its employees, subcontractors or agents, (iii) relating to
work-related injury (except as may be covered by SiebelNet's workers'
compensation obligations) or death caused by the negligence or willful acts of
USi, its employees or agents; (iv) relating to tangible personal or real
property damage resulting from USi's acts or omissions inconsistent with this
Agreement (subject to (d)(iii) above).
14.3 PROCEDURE. If any third party makes a claim covered by Subsection
14.1 ("By SiebelNet") or Subsection 14.2 ("By USi") against an Indemnitee with
respect to which such Indemnitee intends to seek indemnification under
Subsection 14.1 ("By SiebelNet") or Subsection 14.2 ("By USi"), such Indemnitee
shall give notice of such claim to the Indemnifying Party (under Subsection 14.1
("By SiebelNet") or Subsection 14.2 ("By USi")), including a brief description
of the amount and basis therefor, if known. Upon giving such notice, the
Indemnifying Party shall be obliged to defend such Indemnitee against such
claim, and shall be entitled to assume control of the defense or settlement of
the claim with counsel chosen by the Indemnifying Party, reasonably satisfactory
to the Indemnitee. Indemnitee shall cooperate fully with, and assist, the
Indemnifying Party in its defense against or settlement of such claim in all
reasonable respects at the Indemnifying Party's expense. The Indemnifying Party
shall keep the Indemnitee fully apprised at all times as to the status of the
defense or settlement. Notwithstanding the foregoing, the Indemnitee shall have
the right to employ its own separate counsel in any such action, but the fees
and expenses of such counsel shall be at the expense of such Indemnitee;
provided, however: (a) if the parties agree that it is advantageous to the
defense for the Indemnitee to employ its own counsel; or (b) in the reasonable
judgment of the Indemnitee, based upon an opinion of counsel which shall be
provided to the Indemnifying Party, representation of both the Indemnifying
Party and the Indemnitee would be inappropriate under applicable standards of
professional conduct due to actual or potential conflicts of interest between
them, then reasonable fees and expenses of the Indemnitee's counsel shall be at
the expense of the Indemnifying Party, provided that the Indemnifying Party
approves such counsel (such consent not to be unreasonably withheld). Neither
the Indemnifying Party nor any Indemnitee shall be liable for any settlement of
any action or claim effected without its consent. Notwithstanding the foregoing,
the Indemnitee shall retain, assume, or reassume sole control over, all expenses
relating to, every aspect of the defense that it believes is not the subject of
the indemnification provided for in Subsection 14.1 ("By SiebelNet") or
Subsection 14.2 ("By USi"). Until both: (y) the Indemnitee receives notice from
the Indemnifying Party that it will defend; and (z) the Indemnifying Party
assumes such defense or settlement, the Indemnitee may, at any time after sixty
(60) days from the date notice of claim is given to the Indemnifying Party by
the Indemnitee, resist or otherwise defend the claim or, after consultation with
and consent of the Indemnifying Party, settle or otherwise compromise or pay the
claim. The Indemnifying Party shall pay all costs of the Indemnitee arising out
of or relating to that defense and any such settlement, compromise, or payment.
The Indemnitee shall keep the Indemnifying Party fully apprised at all times as
to the status of the defense. Following indemnification as provided in
Subsection 14.1 ("By SiebelNet") or Subsection 14.2 ("By USi"), the Indemnifying
Party shall be subrogated to all rights of the Indemnitee with respect to the
matters for which indemnification has been made.
11.
<PAGE>
14.4 THE FOREGOING PROVISIONS OF THIS SECTION 14 STATE THE ENTIRE
LIABILITY AND OBLIGATION OF EACH PARTY WITH RESPECT TO ANY ALLEGED INFRINGEMENT
OF ANY PATENTS, COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS.
15. DISPUTE RESOLUTION. All disputes between the parties shall initially be
referred jointly to one (1) senior executive from each party. If such executives
are unable to resolve the dispute in good faith within ten (10) days (or such
longer time as the parties may mutually agree in writing) following the referral
of the matter to them, then in such case either party may pursue all remedies
available to it, in law and equity.
16. TERM AND TERMINATION.
16.1 TERM. The initial term of this Agreement ("Initial Term") shall
be for [CONFIDENTIAL TREATMENT] from the Effective Date, which shall be
renewable at [CONFIDENTIAL TREATMENT] election for additional
[CONFIDENTIAL TREATMENT] periods thereafter ("Renewal Period").
[CONFIDENTIAL TREATMENT] shall inform [CONFIDENTIAL TREATMENT] at least sixty
(60) days prior to the end of the Initial Term or any Renewal Period whether
[CONFIDENTIAL TREATMENT] will renew the Agreement.
[CONFIDENTIAL TREATMENT]
16.2 TERMINATION.
(a) TERMINATION FOR CONVENIENCE. This Agreement may be terminated
by [CONFIDENTIAL TREATMENT] with [CONFIDENTIAL TREATMENT] prior written
notice to the other party; provided, however, that in no event shall this
Agreement be terminated without cause prior to [CONFIDENTIAL TREATMENT]
following the Effective Date. Notwithstanding the foregoing, either party may
terminate this Agreement without cause if at any time after the Effective
Date [CONFIDENTIAL TREATMENT] fails to provide staging and training at the
Designated Site and at [CONFIDENTIAL TREATMENT] sole expense, to the extent
such staging and training are reasonably required in [CONFIDENTIAL TREATMENT]
judgment to enable [CONFIDENTIAL TREATMENT] to use the [CONFIDENTIAL
TREATMENT] in order to provide Services hereunder. [CONFIDENTIAL TREATMENT]
will use its best efforts to have [CONFIDENTIAL TREATMENT] authorize
[CONFIDENTIAL TREATMENT] to log trouble and service calls directly with
[CONFIDENTIAL TREATMENT] in connection with the [CONFIDENTIAL TREATMENT], and
to arrange for [CONFIDENTIAL TREATMENT] personnel to stage and implement such
[CONFIDENTIAL TREATMENT].
(b) TERMINATION FOR BREACH. In addition to [CONFIDENTIAL TREATMENT]
termination rights set forth in EXHIBIT C hereto, either party may terminate
this Agreement for the material breach of the other party, which material
breach has remained uncured for period of thirty (30) days from the date of
delivery of written notice thereof to the breaching party. If
[CONFIDENTIAL TREATMENT] terminates the Agreement pursuant to this Section
16.2(b), [CONFIDENTIAL TREATMENT].
12.
<PAGE>
(c) EFFECT OF TERMINATION.
(i) FOR CONVENIENCE. In the event of any non-renewal of this
Agreement as described in Subsection 16.1 ("Term") or any termination of this
Agreement by [CONFIDENTIAL TREATMENT] without cause as described in
Subsection 16.2(a) ("Termination for Convenience"), except as otherwise
provided in Sections 16.2(c)(iii) and 17, all licenses granted by SiebelNet
hereunder shall immediately terminate, and USi shall immediately return to
SiebelNet all material belonging to SiebelNet or its licensors, including
without limitation all copies of the Programs and SiebelNet Confidential
Information, and shall promptly certify to SiebelNet in writing that USi has
done so. Any User Agreement already entered into by as of the date of such
non-renewal or termination shall remain in effect provided that all
associated Users have at all times remained in strict compliance with the
terms thereof.
(ii) FOR MATERIAL BREACH. In the event of any termination of this
Agreement as provided in Subsection 16.2(b) ("Termination for Breach"), except
as otherwise provided in Sections 16.2(c)(iii) and 17, all licenses granted by
SiebelNet hereunder shall immediately terminate, and USi shall immediately
return to SiebelNet all material belonging to SiebelNet or its licensors,
including without limitation all copies of the Programs and SiebelNet
Confidential Information, and shall promptly certify to SiebelNet in writing
that USi has done so. Any User Agreements already entered into by User as of the
date of the foregoing material breach shall remain in effect provided that all
associated Users have at all times remained in strict compliance with the terms
thereof.
(iii) TRANSITION SERVICES. In the event of any non-renewal of this
Agreement or any termination of this Agreement for any reason other than a
breach by SiebelNet of its exclusivity obligations pursuant to Section 4.2 ("By
SiebelNet") or its payment obligations pursuant to Section 5.3 ("Payment"), the
provisions of Section 17 ("Transition Services") shall apply.
17. TRANSITION SERVICES. Upon the expiration or termination of
this Agreement for any reason other than a breach by SiebelNet of its
exclusivity obligations pursuant to Section 4.2 ("By SiebelNet") or its
payment obligations pursuant to Section 5.3 ("Payment"):
17.1 USi shall continue to perform its obligations hereunder with
respect to the provision of Services for each User for the duration of the term
of the then-current User Agreement for such User, in accordance with the terms
of such User Agreement, PROVIDED that SiebelNet continues to pay USi under
Section 5.3 ("Payment") of the Agreement for the provision of any such Services
associated with each User for the duration of the term of the then-current
applicable User Agreement and the licenses granted by SiebelNet pursuant to
Section 3.3 ("Program License") hereunder survive during such period to the
extent necessary to provide such transition services;
17.2 USi shall cooperate fully with SiebelNet in effecting the orderly
transfer of the Programs and related materials to one (1) or more third parties,
as directed by SiebelNet, and SiebelNet shall pay USi any reasonable fees or
expenses incurred by in connection with such cooperation;
13.
<PAGE>
17.3 Upon SiebelNet's request, USi shall return to SiebelNet, or
deliver to one (1) or more third parties, as directed by SiebelNet, all copies
of the Programs, Documentation, SiebelNet Confidential Information, and all
other materials and items belonging to SiebelNet or its suppliers; and
17.4 Upon SiebelNet's request, with respect to any third party
contracts applicable to the Services, including without limitation any contracts
for maintenance, disaster recovery services, and other third party services, USi
shall transfer or assign such contracts to SiebelNet or its designees, on terms
and conditions acceptable to both parties, to the extent permitted by the terms
thereof and at USi's expense.
17.5 Upon SiebelNet's request, USi shall continue to provide Services
for each User for the duration of the term of the then-current User Agreement
for such User, in accordance with the terms of such User Agreement, PROVIDED
that SiebelNet continues to pay USi under Section 5.3 ("Payment") of the
Agreement for the provision of any Services associated with such User for the
duration of the term of the then-current applicable User Agreement, and the
licenses granted by SiebelNet pursuant to Section 3.3 ("Program License")
hereunder shall survive during such period to the extent necessary to provide
such transition services.
18. DAMAGES.
18.1 LIMITATION. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR TO
ANY OTHER PARTY FOR ANY LOSS OF USE, INTERRUPTION OF BUSINESS OR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND (INCLUDING
LOST PROFITS) REGARDLESS OF THE FORM OF ACTION WHETHER IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT PRODUCT LIABILITY OR OTHERWISE, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. SIEBELNET AGREES THAT USI'S LIABILITY UNDER
THIS AGREEMENT TO SIEBELNET WHICH ARISES SOLELY IN CONNECTION WITH AN ACTION
BROUGHT BY A USER AGAINST SIEBELNET PURSUANT TO A USER AGREEMENT SHALL NOT
EXCEED THE AMOUNT BY WHICH SIEBELNET'S LIABILITY TO SUCH USER IS ENFORCEABLY
LIMITED PURSUANT TO SUCH USER AGREEMENT, PLUS ANY ASSOCIATED FEES AND COSTS
REASONABLY INCURRED BY SIEBEL IN DEFENSE OF SUCH USER CLAIM.
18.2 EXCLUSIONS. The limitations or exculpations of liability set forth
in Subsection 18.1 ("Limitation") shall not apply to: (a) indemnification for
third party claims as set forth in Section 14 ("Indemnification"); (b) liability
resulting from the willful misconduct of a party, or (c) the violation or
infringement by either party of the other party's intellectual property rights.
14.
<PAGE>
19. GENERAL.
19.1 NOTICES. Except as otherwise specified in this
Agreement, all notices, requests, consents, approvals, and other
communications required or permitted under this Agreement shall be in writing
and shall be sent by telecopy to the number specified below. A copy of any
such notice shall also be sent by registered express air mail on the date
such notice is transmitted by telecopy to the address specified below:
In the case of SIEBELNET:
Kevin Johnson, Esq.
Vice President, Legal Affairs
Siebel Systems, Inc.
1855 South Grant Street
San Mateo, CA 94402
Fax: 650-295-5116
With a COPY to:
Eric Jensen, Esq.
Cooley Godward LLP
3000 Sand Hill Road
Suite 230
Menlo Park, CA 94025-7116
Fax: 650-854-2691
In the case of USi:
Mr. Christopher R. McCleary
Chairman & Chief Executive Officer
USinternetworking, Inc.
One USi Plaza
Annapolis, MD 21401-7478
Fax: 410-263-8645
With a copy to:
William T. Price
Vice President, General Counsel
USinternetworking, Inc.
One USi Plaza
Annapolis, MD 21401-7478
Fax: 410-263-8645
Either party may change its address or telecopy number for
notification purposes by giving the other party notice of the new address or
telecopy number and the date upon which it will become effective.
15.
<PAGE>
19.2 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one single
agreement between the parties.
19.3 HEADINGS. The section headings appearing in this Agreement
are inserted only as a matter of convenience and in no way define, limit,
construe, or describe the scope or extent of such section or in any way
affect this Agreement.
19.4 RELATIONSHIP. The performance by USi of its duties and
obligations under this Agreement shall be that of an independent contractor
and nothing contained in this Agreement, except for the limited agency
expressly provided for herein, shall create or imply an agency relationship
between SiebelNet and USi, nor shall this Agreement be deemed to constitute a
joint venture or partnership between SiebelNet and USi. Each party assumes
sole and full responsibility for its acts and the acts of its personnel.
Neither party shall have the authority to make commitments or enter into
contracts on behalf of, bind, or otherwise oblige the other party except for
the limited agency expressly provided for herein. Subject to the performance
by each party of its obligations hereunder, each party shall be free to
pursue other business opportunities, to enter into other agreements, and to
develop and market such goods and services as such party may wish without
notice or payment to, or permission from, the other party.
19.5 SEVERABILITY. If any term or provision of this Agreement
shall be found by a court of competent jurisdiction to be invalid, illegal or
otherwise unenforceable, the same shall not affect the other terms or
provisions hereof or the whole or this Agreement, but such term or provision
shall be deemed modified to the extent necessary in the court's opinion to
render such term or provision enforceable, and the rights and obligations of
the parties shall be construed and enforced accordingly, preserving to the
fullest permissible extent the intent and agreements of the parties herein
set forth.
19.6 WAIVER. No delay or omission by either party to exercise any
right or power it has under this Agreement shall impair or be construed as a
waiver of such right or power. A waiver by any party of any breach or
covenant shall not be construed to be a waiver of any succeeding breach or
any other covenant. All waivers must be in writing and signed by the party
waiving its rights.
19.7 PUBLICITY. Except as otherwise required by law or
regulation, neither party shall use the other party's name, trademarks, or
service marks or refer to the other party directly or indirectly in any media
release, public announcement, or public disclosure relating to this Agreement
or its subject matter, including, but not limited to, in any promotional or
marketing materials or business presentations without obtaining prior consent
from the other party for each such use or release.
19.8 ENTIRE AGREEMENT. This Agreement and each of the Exhibits,
which are hereby incorporated by reference into this Agreement, is the entire
agreement between the parties with respect to its subject matter, there are
no other representations, understandings, or agreements between the parties
relative to such subject matter, and this Agreement supersedes and merges all
prior and contemporaneous agreements, understandings and communications
between the parties with respect to this subject matter, including without
limitation the Preliminary Agreement. The parties further agree that to the
extent the terms of this Agreement are inconsistent with the terms of
[CONFIDENTIAL TREATMENT] is hereby amended in such respects.
16.
<PAGE>
19.9 AMENDMENTS. No amendment to, or change, waiver, or discharge
of, any provision of this Agreement shall be valid unless in writing and
signed by an authorized representative of the party against which such
amendment, change, waiver, or discharge is sought to be enforced.
19.10 SURVIVAL. The terms of Section 1 ("Definitions"), Section 2
("Existing Agreement"), Subsection 3.5 ("No Reverse Engineering"), Section 7
("Taxes"), Section 10 ("Records and Audits"), for the duration provided
therein, Section 11 ("Confidential Information"), Section 13
("Representations and Warranties"), Section 14 ("Indemnification"),
Subsection 16.2(c) ("Effect of Termination"), Section 17 ("Transition
Services"), Section 18 ("Damages") and Section 19 ("General") shall survive
the expiration or termination of this Agreement for any reason.
19.11 NO THIRD PARTY BENEFICIARIES. Each party intends that this
Agreement shall not benefit, or create any right or cause of action in or on
behalf of, any person or entity other than SiebelNet, Siebel Systems, Inc. or
USi. [CONFIDENTIAL TREATMENT]
19.12 CHOICE OF LAW AND JURISDICTION. This Agreement shall be
governed in all respects by the laws of the United States of America and the
State of California without regard to conflicts of law principles. The
parties agree that the United Nations Convention on Contracts for the
International Sale of Goods is specifically excluded from application to this
Agreement. All disputes arising under this Agreement shall be brought in the
State and Federal Courts located in Santa Clara County, as permitted by law,
and the parties hereby consent to the personal jurisdiction of such courts.
19.13 FURTHER ASSURANCES. SiebelNet and USi covenant and agree that,
subsequent to the execution and delivery of this Agreement and without any
additional consideration, each of SiebelNet and USi will execute and deliver any
further legal instruments and perform any acts which are or may become
reasonably necessary to effectuate the purposes of this Agreement.
19.14 INTERPRETATION OF DOCUMENTS. The parties understand and agree
that this Agreement has been fully reviewed and negotiated by both parties and
their attorneys, and that it shall not be interpreted to favor or disfavor
either party based on the authorship thereof.
19.15 FORCE MAJEURE. Neither party shall be liable hereunder by reason
of any failure or delay in the performance of its obligations hereunder on
account of any Force Majeure Event. SiebelNet and USi shall work together in
good faith with Sequent to establish a satisfactory disaster recovery plan for
Force Majeure Events. Once that plan is established and agreed to by all
parties, SiebelNet shall have the option of terminating this Agreement if the
total outage time resulting from such event is greater than that allowed for in
the established plan.
19.16 ASSIGNMENT. USi may not assign this Agreement in whole or in
part without the prior written permission of SiebelNet; provided, however,
that USi may assign this Agreement to an entity which acquires all or
substantially all of USi's assets or capital stock, unless such acquiring
entity is reasonably deemed by SiebelNet to be a competitor of SiebelNet or
its Affiliates. [CONFIDENTIAL TREATMENT]
17.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this SiebelNet Agreement
as of the date first above written.
SIEBELNET, INC. USINTERNETWORKING, INC.
By: /s/Jeffrey T. Amann By:/s/William T. Price
-------------------------- --------------------------
Title: Secretary Title: Vice President, Secretary &
General Counsel
----------------------- -----------------------
Date: January 31, 1999 Date: January 31, 1999
------------------------ ------------------------
18.
<PAGE>
Exhibit 10.27
USW/USi Contract Execution Copy
U S WEST/USinternetworking
MARKETING/SERVICES AGREEMENT
1. INTRODUCTION
(a) This agreement is entered into this ___ day of ___________,
1999, by and between U S WEST Communications Services, Inc. and U S WEST
Interprise America, Inc. Colorado corporations (together referred to as "U S
WEST") and USinternetworking, Inc. a Delaware corporation ("USi").
(b) U S WEST is a provider of telecommunications, Internet and
integrated data services; and
(c) USi is an Internet Managed Application Provider, or iMAP,
integrating Internet communications, network and data center management and
the use of "packaged" application software and related implementation and
ongoing support; and.
(d) USi wishes to create a relationship with U S WEST for the
purposes of selling, purchasing and otherwise marketing iMAP Services (as
hereinafter defined) to U S WEST's existing and future customers (each a
"Customer" and collectively, the "Customers); and,
(e) Each party wishes to create a relationship with the other for
the purposes of selling and purchasing network transport services from, or
through, each other, maximizing volume discounts available; and,
(f) The parties wish to work together for future product and
services innovations; and
(g) The parties wish to provide for other services and arrangements
in connection with the purchase and marketing of the Services (as hereinafter
defined).
(h) THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties, intending to be
legally bound, hereby agree as follows:
2. PURPOSE OF AGREEMENT
(a) U S WEST and USi wish to enter into a contractual teaming
arrangement for the creation and distribution of network services, Internet
Protocol Services, hosted applications, system integration services and
comprehensive customer service. Each party will purchase services from the
other for purposes of creating service packages. The goal is to provide
customers a robust portfolio of enterprise application and access solutions
not currently available from any other single source. Quality metrics,
customer experience, and performance must not vary widely between U S WEST
and USi clients
- ----------------------
[CONFIDENTIAL TREATMENT] means that certain confidential material has been
filed separately with the Securities and Exchange Commission.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 1
<PAGE>
USW/USi Contract Execution Copy
using the same services. Both parties wish to promote their brand names in
the offering made to end user customers.
This Agreement and U S WEST's ability to sell each iMAP Service
hereunder is subject to, and contingent upon, [CONFIDENTIAL TREATMENT]
3. DEFINITIONS
(a) "AGREEMENT" means this Marketing/Services Agreement, and any and
all attachments and schedules attached simultaneously with the execution of
the Agreement or agreed upon and executed subsequent hereto.
(b) "AVAILABLE" - shall describe the situation where facilities can
reach specific addresses with no incremental charges for backhauling or
buildout.
(c) "CHANGE IN CONTROL" shall mean change in ownership of more than
51% of either party.
(d) "CLIENT ASSISTANCE TEAM or CATs" shall mean teams of USi CLIENT
care professionals who have the expertise to handle end-user Customer
inquiries regarding end-user and application issues over the phone.
(e) "COMPETITIVE PRICE" - shall mean [CONFIDENTIAL TREATMENT]
(f) "COORDINATED SERVICES TEAM OR CST": Following the execution of
this Agreement U S WEST shall create a Coordinated Services Team ("CST")
responsible for the coordination of: (i) Implementation Services; (ii)
Solution Services; (iii) Billing Services; and (iv) Monitoring Services. The
primary purpose of this team will be to assist various internal U S WEST
personnel and vendor-partner personnel in coordinating the product support
needs for U S WEST Products. The CST will perform, INTER ALIA, the following
functions:
(f.1) CUSTOMER COMMUNICATIONS. The CST will serve as a
contact point for Customers buying Products from a U S WEST sales
representative.
(f.2) USi COMMUNICATIONS. The CST will serve as a single
point of contact for USi personnel needing product support assistance for U S
WEST-provided Products sold by a USi sales representative.
(f.3) IMPLEMENTATION SERVICES. The Implementation Services
cluster of the CST will coordinate and project manage all aspects of Product
implementation including design, order processing, service activation, and
service acceptance.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 2
<PAGE>
USW/USi Contract Execution Copy
(f.4) SOLUTION SERVICES. The Solution Services cluster of
the CST will coordinate and project manage issues relating to service
outages, repair, help desk support, problem resolution, and solution
acceptance.
(f.5) BILLING Services. The Billing Services cluster of the
CST will coordinate and project manage issues relating to Customer billing,
credits, and collections.
(f.6) MONITORING Services. The Monitoring Services cluster
of the CST will be responsible for the coordination of the parties' system
performance monitoring needs including proactive trouble notification and
proactive problem resolution.
(f.7) AVAILABILITY. The CST will always be available for
its internal and external customers: 24 hours a day, 7 days a week, 365 days
a year.
(g) "CUSTOMER(S)" means the end-user(s) to whom U S WEST sells iMAP
services to under this Agreement.
(h) "CUSTOMER ADMINISTRATION FUNCTIONS" - shall mean the same
services and functions also referred to as Service Support.
(i) "END USER" shall mean the end user of the Product(s) sold.
Customer shall not mean customer of record, which is assigned a separate
meaning under this Agreement.
(j) "Exclusivity" shall mean: 1) that U S WEST is USi's exclusive
sales channel of iMAP Services in U S WEST's 14-state region
[CONFIDENTIAL TREATMENT]; and 2) that USi is excluded from entering into any
similar marketing/services agreements within U S WEST's 14-state region
[CONFIDENTIAL TREATMENT]
(k) "iMAP SERVICES" - refers to the collective bundling of any and
all of USi's consulting and implementation services, customization, hardware
and software applications (as described in Schedule B) and access to USi's
Internet-based data center and network
(l) "IN-REGION" shall include the following 14 states: Arizona,
Colorado, Idaho, Iowa, New Mexico, Minnesota, Montana, Nebraska, North
Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming.
(m) "MOST FAVORED CUSTOMER" - refers to most favorable pricing and
terms available to other similarly situated customers purchasing similar
quantities of the same products and services from U S WEST.
(n) "PACKAGED PRODUCT"- shall mean a packaged solution that includes
hosted applications and network services that support access to them. The
network services shall
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 3
<PAGE>
USW/USi Contract Execution Copy
include but not be limited to Frame Relay, ATM, Internet Access, Security
Services, and Virtual Private Networking.
(o) "PRE-QUALIFIED SALES LEAD"- refers to a sales lead that has
passed the initial screening done in stage one of the sales process and the
pre-qualification form has been successfully completed.
(p) Order fulfillment and Service provisioning may also be referred
to as "PRESALE SERVICE SUPPORT" services and functions. All other services
and functions listed above may also be referred to as "POST-SALE SERVICE
SUPPORT" services and functions.
(q) "PRODUCT OR PRODUCTS" shall mean the list of USi and U S WEST
products and services made available for joint marketing, sales, and support
under this Agreement as described on Exhibit A, which is attached hereto and
made a part hereof.
(r) "PRODUCT QUOTA"- refers to sales of individual, bundled iMAP
Services sales, such as Sagent iMAP solutions that U S WEST will be required
to sell in accordance with the provisions of Schedule C.
(s) "REQUIREMENTS ANALYSIS" shall mean the analysis USi's consulting
and implementation teams perform to determine what iMAP services are best
suited for a Customer before an iMAP Services agreement is entered into.
(t) "SERVICE SUPPORT" shall refer to those services and functions
provided to customers including but not limited to the following:
- Service provisioning
- Network monitoring
- Customer notification
- Billing
- Managed repair
- Customer database management
(u) "SERVICES" shall mean the services each party may purchase from
the other, including the iMAP Services U S WEST purchases from USi and the
Internet access, managed firewall service, ATM and VPN services USi purchases
from U S WEST, all of which are described in Schedules A and B.
(v) "STAND-ALONE SERVICES"- unbundled delivery of any portion of the
iMAP Services, as well as other services delivered independently, including
but not limited to training and time and material implementation services
(w) "THIRD PARTY SOFTWARE APPLICATION PROVIDERS"- refers to the
companies that USi has entered into, or will enter into agreements with to
provide licenses, software, applications and other components to the iMAP
services [CONFIDENTIAL TREATMENT]
(x) "TOTAL iMAP SALES QUOTA"- refers to the required level of sales
made of the bundled iMAP Services, excluding stand-alone services, as
described in Schedule C.
(y) "WHOLESALE PRICE" - refers to the quoted price [CONFIDENTIAL
TREATMENT], based on a calculation of retail price less a negotiated discount.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 4
<PAGE>
USW/USi Contract Execution Copy
4. SERVICES
(a) Throughout the term of the Agreement, each party may purchase
from the other the services set forth on Schedule A and Schedule B attached
hereto and incorporated herein by reference (collectively, the "Services").
The fees to be charged for the Services are set forth in Schedules A and C,
attached hereto and incorporated herein by reference.
(b) The parties may agree to include additional Services or delete
existing Services that are discontinued or deleted from this agreement. The
other party will be notified 90 days prior to discontinuance of any Services,
subject to the terms and conditions of USi's contracts with its third party
software application providers.
(c) Each party reserves the right to modify, alter, improve or
change any and all of its Services covered by this Agreement and this
Agreement will cover the sales of Services as they may be modified, altered,
improved or changed by each party from time to time. A party wishing to
modify, alter, improve or change one or more of its Services shall provide
the other party with written notice of all such modifications, alterations,
improvements and changes. Such written notice shall be provided no less than
30 days prior to any modification, alteration, improvement or change.
(d) Each party will notify the other with respect to the
availability of new products and services. The parties may choose to
negotiate these new products and services into this agreement.
(e) The management and sale of new products and services not
described in this document or the Schedules will be negotiated at the time of
introduction of such new products and services. Nothing in this section is
intended to limit the parties' ability to separately develop new products and
services.
(f) Both parties are free to package other products and services not
listed on the product and services Schedules A and B from other providers to
enhance the overall solution to the customer.
5. U S WEST RESPONSIBILITIES
(a) U S WEST will provide [CONFIDENTIAL TREATMENT] pricing to USi
for inclusion into the total solution to the customer. Within its region, U S
WEST will offer regulated services at tariff rates on a pass-through basis. U
S WEST will also price CPE to USi at levels allowed by existing contracts
either for resell or internal consumption. Maintenance and support for CPE
will be at [CONFIDENTIAL TREATMENT]. All prices are found on the U S WEST
product list entitled Schedule A.
(b) U S WEST will be the exclusive USi sales channel within U S
WEST's fourteen state region [CONFIDENTIAL TREATMENT]. U S WEST will be
responsible to manage the sales activities of its account teams to meet or
exceed sales objectives.
(c) U S WEST will be responsible for packaging, pricing, billing,
collecting, servicing and account control for those sales initiated and
closed by U S WEST.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 5
<PAGE>
USW/USi Contract Execution Copy
(d) U S WEST will work with USi to create packages from the parties'
Services to create competitive offerings.
(e) U S WEST will target the Service to its customers where
integrated solutions are required. If U S WEST chooses not to pursue a
potential sales opportunity with a Customer in or out of its 14 state region,
or a Customer refuses to negotiate or enter into an agreement with U S WEST
for the sale of iMAP services, U S WEST will promptly notify USi within 3
business days of that opportunity or Customer so that a USi sales team may
follow up and close the opportunity.
(f) U S WEST will be USi's customer of record, for pricing and
billing purposes, on all iMAP Services provided to U S WEST's customers. USi
will maintain end customer records only to the extent that it is required
within the agreed upon customer support model, and to provide in advance an
itemized monthly invoice payable 30 days after receipt by U S WEST.
(g) U S WEST will provide office space for two (2) USi employees at
their Denver facility, co-located, to the extent possible, with the
appropriate channel and product management from U S WEST. This space will be
available by the end of February 1999. Future requirements will be reviewed
as the overall relationship evolves and grows.
(h) U S WEST agrees not to directly solicit any employees of USi for
employment at US WEST while this Agreement is in place.
(i) U S WEST may resell USi stand-alone implementation Services on a
non-exclusive basis.
(j) If U S WEST's Customer prematurely terminates its contract for
iMAP Services with U S WEST, unless such termination is directly caused by a
material breach of the provisions of this Agreement by USi, U S WEST will be
responsible for an accelerated payment to USi of [CONFIDENTIAL TREATMENT] The
accelerated payment from U S WEST to USi shall be due within 30 days of the
Customer's premature termination.
6. USi RESPONSIBILITIES:
(a) USi will provide iMAP Services to U S WEST at discounted price
levels as described in Schedule C and shall implement services in accordance
with the sales process and intervals listed on Schedule E.
(b) USi shall provide professional support Services for pre-sale
site assessment, requirements analysis, statement of work, and project plan
for implementation Services at discount rates identified in Schedule C. U S
WEST will engage and compensate USi for these Services for every U S WEST
iMAP Customer that reaches the pre-sale site assessment/requirements stage.
[CONFIDENTIAL TREATMENT]
(c) USi will provide training for [CONFIDENTIAL TREATMENT] and offer
sales and product training Services thereafter on a fee basis.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 6
<PAGE>
USW/USi Contract Execution Copy
(d) USi will calculate the monthly end Customer cost for each iMAP
Service product sold through the U S WEST channel as part of the analysis
completed in 6b, above. USi will then apply a predetermined discount to reach
a wholesale monthly recurring fee that USi will charge US WEST for the
duration of the Customer contract. US WEST will be responsible for end
Customer pricing, billing and collection. The discount structure is
identified in Schedule C.
(e) USi will bear the implementation labor risk for effort expended
on implementing within the scope of requirements analysis and statement of
work developed by USi for US WEST Customers. In the event of out of scope
labor increases, USi reserves to the right to increase the
[CONFIDENTIAL TREATMENT]price to US WEST. [CONFIDENTIAL TREATMENT]
(f) USi will staff one Business Development Manager in-Region, and
one technical Sales Engineer per [CONFIDENTIAL TREATMENT] in quota assigned.
These managers will be co-located at US WEST facilities in Denver.
(g) USi will commit to using U S WEST's Out of Region (OOR) services
for customer requirements contingent upon the provisioning of services in a
timely manner, [CONFIDENTIAL TREATMENT], within industry standards for
reliability and availability, and to the extent such OOR services are
consistent with USi's iMAP service architecture. Services available OOR from
U S WEST are Frame Relay, ATM and Internet Access and Security and VPN
Services.
(h) USi will be customer of record on all Services provided by U S
WEST as part of a total solution to an end user customer where U S WEST
initiates an inter-LATA WAN sales process.
(i) USi shall provide to U S WEST a method for demonstrating the
functionality of all iMAP applications over the world-wide web with
production-like representations of the various products U S WEST will be
expected to sell. This demonstration capability will include but not be
limited to customer sales presentations, internal training, etc.
(j) USi agrees not to directly solicit any employees of U S WEST for
employment at USi while this agreement is in place.
(k) USi will maintain end customer records only to the extent that
it is required within the agreed upon customer support model, and to provide
an itemized monthly invoice in advance to US WEST, payable 30 days after
receipt.
(l) USi will work with U S WEST to create packages from the parties'
services to create competitive offerings. USi's responsibility and obligation
under this Agreement to provide Products and iMAP Services are contingent
upon [CONFIDENTIAL TREATMENT]
(m) USi may sell stand-alone implementation services within and
outside of U S WEST's 14-state region. Contingent upon the subsequent mutual
agreement of the parties, USi may establish a finder's fee for implementation
service leads originated by U S WEST in its 14-state region and closed by USi.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 7
<PAGE>
USW/USi Contract Execution Copy
(n) USi shall offer U S WEST the same pricing methodology as USi
uses to determine pricing for USi's direct customers on pre-sale Requirements
Analysis and iMAP consulting and implementation Services.
7. CUSTOMER SUPPORT SERVICES/TRAINING
(a) Generally, customers sold by either party will be managed by
that party, therefore, all customer contact will be through the selling
organization. Components of the overall customer solution will be supported
by the party that supplies that portion of the solution. The parties agree to
work together to define interfaces, processes and handoffs that provide a
superior level of service. The parties will share customer experience metrics
to insure a consistent level of service.
(b) The party that closes the sale will be responsible for total
management of the customer relationship regardless of who provides the actual
component services to the end user customer. The parties will mutually agree
on the support model and interfaces employed. The parties will also mutually
agree to procedures in the case of a customer transfer to USi for closing if
the Customer does not fit with the U S WEST sales model.
(c) Both parties will run operations centers for their respective
services while customers will have the option of choosing from different
support levels. Where actual support work is done will be transparent to
customers. The parties agree to structure support offerings around
capabilities of each other. The parties further agree that they will provide
service levels in accordance with the baseline service levels described in
Schedule F.
(d) The parties agree to coordinate service readiness processes to
insure that the overall solution to the customer is delivered in a
coordinated fashion, and that all service elements, irrespective of whether
USi or U S WEST components, are available within defined production timelines.
(e) Billing will be performed by the parties for each of their
respective customers, therefore billing explanations, reviews, collections
and bad debt will be the responsibility of the selling party.
(f) USi will make available to U S WEST all pertinent support
training. Training will be provided at [CONFIDENTIAL TREATMENT], or at pass
through rates if provided by a third party, for [CONFIDENTIAL TREATMENT].
Thereafter, U S WEST will pay USi, at its current rates, for all necessary
support. [CONFIDENTIAL TREATMENT]. U S WEST will be responsible for any
travel and incidental expenses incurred as a result of attending USi training.
8. NETWORK SERVICES AND SUPPORT
(a) Due dates for network facilities can not be guaranteed and are
subject to availability both in U S WEST's region as well as outside of the
14-state territory.
(b) USi and U S WEST agree to regularly review network expansion
plans and requirements, as well as network transport pricing received from
third parties. USi and
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 8
<PAGE>
USW/USi Contract Execution Copy
US WEST will coordinate efforts to obtain the most favorable transport
pricing available for both parties.
(c) The parties agree that within U S WEST's 14-state region, all
inter-LATA network services shall be provided by the carrier of the
customer's choice in accordance with U S WEST's regulatory limitations.
(d) If U S WEST receives authority to enter into inter-LATA
business, the parties will re-evaluate the business relationship and/or
renegotiate terms for in-region inter-LATA services.
(e) Contingent upon the subsequent mutual agreement of the parties,
USi will provide co-location space to U S WEST for U S WEST's firewall,
router and associated equipment for delivery of U S WEST's Virtual Private
Network service as part of the iMAP service package. U S WEST will compensate
USi for this space in an amount equal to the then current commercial rates
for such space.
9. BRANDING
(a) Both parties wish to promote their respective brands in this
service offering. The parties agree that, subject to the review and consent
of USi's third party software application providers, both logos will appear
together on application splash screens, or application pages as appropriate
and mutually agreed upon.
(b) In the case of unbundling of iMAP services, USi's brand will not
be utilized.
(c) In some instances, end user customer company name and logo may
also appear in specific applications upon the written consent of the
appropriate party(s).
(d) U S WEST and USi will jointly produce marketing literature that
features the application provider as well as the U S WEST / USi brands. U S
WEST and USi will share the cost of creating joint marketing literature. Each
party will bear the cost of producing the marketing literature for its sales
efforts.
(e) The parties anticipate making public statements from time to
time. In no case shall either party make any public announcement about this
contract or the resulting business relationship without the others written
consent.
(f) Each party shall follow the other party's branding guidelines
that are included as Schedule H.
10. SALES PROCESS
(a) U S WEST will, in its discretion, hire an appropriate number of
Application Sales Consultants (ASC) that will be trained by USi to provide
technical support to the sales organizations within its region. The ASC's
will carry quota on USi products as described in Schedule C. USi will provide
training and technical support at [CONFIDENTIAL TREATMENT], in the same
manner as for its own sales force. Thereafter, U S WEST will pay USi, at its
then current rates, for all training and technical support. [CONFIDENTIAL
TREATMENT]
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 9
<PAGE>
USW/USi Contract Execution Copy
cost. US WEST will be responsible for any travel and incidental expenses
incurred as a result of attending USi training.
(b) Each of the parties will manage their respective compensation
plans with the guiding principle to incent the two organizations to work
together where appropriate and develop their own sales leads where required
for incremental market coverage.
(c) USi may at its option also staff Account Representatives and
technical support in U S WEST territory in order to provide additional
support and cover other opportunities that either do not fit the U S WEST
sales and business model or that U S WEST abandons pursuant to section 5(e)
above.
(d) Outside of its 14-state region, U S WEST sales personnel may
only present USi iMAP applications to [CONFIDENTIAL TREATMENT] along with
network services from U S WEST partners and vendors. Out of region,
[CONFIDENTIAL TREATMENT].
(e) U S WEST and USi will follow a mutually agreed upon sales
process that will accomplish order and involvement by the appropriate parties
at the right time and is subject to change as agreed upon by the parties and
included in Schedule E.
(f) Service readiness coordination for iMAP services will be lead by
USi, irrespective of the selling party organization, to insure that all
phases of application hosting, testing, training and conformance are ready
and that all service elements are installed, functional, tested and secure.
(g) Customers will be surveyed to measure client satisfaction via
mutually agreed upon survey tools, by U S WEST. Feedback concerning iMAP
Services will be supplied to USi.
(h) The parties agree that there will be no joint sales or
customers. U S WEST will manage its customer relationships and as such will
be responsible for end user pricing, billing, and collections.
(i) Where U S WEST has qualified a prospect and chooses not to
pursue the sales process because of the lack of network elements present to
create an integrated solution, the pre-qualified lead will be turned over to
USi pursuant to section 5(e) above for follow up and closing.
(j) Progress towards sales objectives will be reviewed at quarterly
meetings and appropriate action taken. U S WEST will be responsible to manage
the sales activities of its account teams to meet or exceed sales objectives.
(k) The parties will forecast anticipated sales levels by product
and geographic area quarterly for the following quarter.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 10
<PAGE>
USW/USi Contract Execution Copy
11. CONSULTING, IMPLEMENTATION, AND SUPPORT
(a) Consulting and Implementation services for site assessment,
requirements analysis, statement of work, and project plan will be provided
by USi at [CONFIDENTIAL TREATMENT].
(b) U S WEST initiated sales activities will get the same priority
of sales support response as USi initiated sales projects. USi consulting and
implementation services will be reviewed as part of the regularly scheduled,
quarterly review meetings between USi and U S WEST
(c) USi reserves the right to contract with third party
implementation partners in order to manage its resource requirements. USi
will ALWAYS provide staff project management resources, even if third party
resources are used.
12. EXCLUSIVITY
(a) USi will be the exclusive systems integrator for iMAP solutions
as defined in Schedule B, sold by U S WEST, except in cases where 11.c.
applies. As the exclusive integrator, USi will bear the implementation labor
estimate risk for effort expended on implementing within the scope of
requirements analysis and statement of work developed by USi for US WEST
customers.
(b) USi will use U S WEST network services in USi lead sales,
contingent upon the provisioning of services in a timely manner, at
Competitive Prices, within industry standards for reliability and
availability, and to the extent such services are consistent with USi's iMAP
service architecture. USi will purchase from U S WEST vendor contracts on a
preferred basis where available at [CONFIDENTIAL TREATMENT].
(c) U S WEST will be the exclusive sales channel in its 14-state
region of USi iMAP services, with exclusivity defined below, unless, (1) U S
WEST chooses at its sole discretion to transfer the opportunity to USi due to
lack of fit with network integration model; or, (2) the Customer refuses to
negotiate or enter into an agreement with U S WEST, in which case, USi shall
be permitted sell iMAP services to that Customer. U S WEST's in-region
exclusivity is defined under this Agreement as [CONFIDENTIAL TREATMENT]. U S
WEST's exclusivity under this Agreement may be transferred to another party
other than USi only upon USi's written consent, which will not be
unreasonably withheld.
(d) USi will not compete directly with U S WEST sales personnel in
the 14-state U S WEST territory, [CONFIDENTIAL TREATMENT].
(e) The parties agree to put rules and incentives in place to
arbitrate any sales disputes in a timely, and good faith manner.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 11
<PAGE>
USW/USi Contract Execution Copy
13. LICENSE/AUTHORIZATION TO SELL
(a) Subject to the terms of this Agreement and [CONFIDENTIAL
TREATMENT], USi hereby grants to U S WEST a limited, revocable authorization
to demonstrate, market, and solicit orders for USi's iMAP Services directly
to U S WEST's Customers.
(b) Nothing in this Agreement shall permit the distribution of any
Services in violation of any United States export restriction.
(c) Prior to beginning to use any of the other party's marks, the
party desiring to utilize the other's marks shall notify the other in writing
of the intended use, providing a complete description of the intended use. If
the party's whose marks are to be used notifies the other of its objections
to the proposed use, the marks shall not be so utilized.
(d) Software licenses as used in iMAP solutions are not transferable
and USi will retain title to the licenses at all times.
(e) Subject to [CONFIDENTIAL TREATMENT], USi warrants that it has
the right or authority to grant to U S WEST a limited, revocable
authorization to demonstrate, market, and solicit orders for USi's iMAP
Services to U S WEST's Customers.
14. TERM
(a) The term of this Agreement shall be for a period of
[CONFIDENTIAL TREATMENT] after the date the Agreement is entered into, with
mandatory performance reviews on a quarterly basis. If the parties do not
agree to a renewal or extension of this Agreement, or if either of the
parties fails to give the other a written notice at least 90 days in advance
of the termination of the Agreement that they do not intend to extend or
renew the Agreement, the Agreement will continue in effect until such 90 day
notice has been given.
15. TERMINATION OF AGREEMENT
(a) This Agreement may be terminated by either party for cause,
including among other reasons: 1) breach of any of the material provisions of
the Agreement; 2) a Change in Control of either party; 3) [CONFIDENTIAL
TREATMENT]; or 4) [CONFIDENTIAL TREATMENT]. Or 5) [CONFIDENTIAL TREATMENT]
(b) In the event that one party wishes to terminate the Agreement
for cause under Section 15 (a) (1) above, it shall provide the other party
with a ninety (90) days prior written
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 12
<PAGE>
USW/USi Contract Execution Copy
notice specifying the breach(es). If at the end of the 90 day period, the
breach(es) has(ve) not been materially cured, the Agreement shall be
terminated. In the event of such a termination for cause by USi, all of U S
WEST's rights to demonstrate, market and solicit iMAP services as set forth
in this Agreement shall cease immediately, except that, to the extent
permitted by USi [CONFIDENTIAL TREATMENT]. Each party shall continue to
maintain a direct relationship with all of the customers to whom that party
has sold services.
(c) In the event of a termination for cause under Section 15 (a)
(3-4) above, USi may terminate, all of U S WEST's rights under the Agreement
to purchase, market and sell [CONFIDENTIAL TREATMENT]. The right to terminate
under this section 15.e. may not be invoked until after 45 days prior written
notice has been provided to U S WEST. If USi's rights to distribute any
product may be terminated in less than 45 days that time period shall be
applicable to U S WEST.
(d) USi will be indemnified and held harmless by U S WEST from any
form of action or claim it or a third party may have against USi as a result
of a termination for cause under Section 15 (a) (3-4), assuming that such
termination is not the direct result of any action of USi.
16. TERMINATION OF EXCLUSIVITY
(a) Annual Total iMAP Quota performance below [CONFIDENTIAL
TREATMENT] of annual total iMAP Quota to be considered a breach of US West's
exclusivity rights. Upon breach there will be a 90-day cure period to assess
and review remedies. After the cure period, USi will have the right to remove
US West's exclusivity rights, at USi's discretion.
(b) Product Quotas will be established each year, for each iMAP
product. Annual Product Quota performance below [CONFIDENTIAL TREATMENT] for
any Product Quota may remove US West's exclusivity rights for this product,
at the discretion of USi, subject to the following: US West's Product Quota
performance will be reviewed against USi's own product sales performance in
each product category for the same period. US West Product Quotas may be
adjusted down (lower) based on USi's own product sales performance for the
period.
(c) US West's exclusivity shall terminate upon the acquisition or
change in control of USi.
17. NON-COMPETE
(a) During the term of this Agreement, USi shall not enter into any
similar marketing/services agreements within US West's 14-state region, with
any of the following competitors of U S WEST: [CONFIDENTIAL TREATMENT]
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 13
<PAGE>
USW/USi Contract Execution Copy
18. COMPLIANCE WITH LAWS
(a) The parties acknowledge that some of U S WEST's services are or
may be provided in accordance with the rules, regulations and tariffs of
state or federal regulatory agencies. To the extent that any conflict exists
between the rules, regulations or tariffs and this Agreement, the rules,
regulations or tariffs shall prevail.
19. [CONFIDENTIAL TREATMENT]
[CONFIDENTIAL TREATMENT]
20. [CONFIDENTIAL TREATMENT]
[CONFIDENTIAL TREATMENT]
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 14
<PAGE>
USW/USi Contract Execution Copy
21. GOVERNANCE
(a) The parties' relationship with the other, to the extent not
defined by this Agreement, shall be managed by the parties meeting quarterly
to discuss issues and resolve conflicts to mutually acceptable conclusions.
At a minimum, the parties agree to address sales status, strategy, support,
implementation, management center operations, marketing, and network and
transport strategies and issues.
22. LIMITATION OF WARRANTY AND LIABILITY
(a) Except as otherwise specifically provided herein, neither party
warrants any connection to, transmission over, nor results or use of, any
network connection, service, equipment or facilities provided under this
agreement. Each party further disclaims all warranties, whether express,
implied or statutory, including, without limitation, any implied warranties
of merchantability and fairness for a particular purpose and non-infringement
of third party rights. Except as specifically provided herein, each party
specifically disclaims any responsibility for any damages suffered by the
other party or any third party, except for those caused by such party's gross
negligence or willful misconduct.
(b) Neither party shall be liable to the other or anyone claiming
through the other for an amount in excess of [CONFIDENTIAL TREATMENT] per
incident, for any loss, damage, liability, claim or expense ("claims")
arising out of or in relation to this agreement or the provision of any
software, hardware, or service, however caused, whether grounded in contract,
tort (including negligence) or theory of strict liability. In no event shall
either party be liable for any indirect, incidental, special, punitive or
other consequential damages whether or not foreseeable (including, without
limitation, damages for the loss of data, goodwill or profits) arising out of
or in relation to this agreement even if advised beforehand of the
possibility of such liability.
23. PROPRIETARY RIGHTS
(a) Except for the limited licenses specifically granted by one
party to the other in this Agreement, each party shall at all times retain
full and exclusive right, title, and ownership interest in and to its
Services, software licenses, network, all names, logos, trade names,
trademarks, copyrights, service marks and all other intellectual property or
trade secret rights related thereto. Each party shall use reasonable efforts
to notify the other of any action by any third party known or suspected by it
to constitute an infringement of the other's proprietary rights. Each party
shall honor all reasonable requests by the other, other than engaging as a
party in litigation, to perfect and protect at such requesting party's
expense any rights of such party in its Services, network or such
intellectual property or trade secret rights.
24. INDEMNIFICATION
(a) Each party will defend, indemnify and hold the other harmless
from and against any claim by any Customer or End-user of such other party
which is based on any warranty,
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 15
<PAGE>
USW/USi Contract Execution Copy
promise or representation made by the indemnifying party as part of a service
agreement and for which the indemnifying party is responsible in accordance
with the terms of this Agreement. Each party will defend, indemnify and hold
the other harmless from and against any claim or threat of claim which is
based on any warranty, promise or representation made by such other party or
any of its Customers to a third party which is in excess of those for which
the indemnifying party is responsible under this Agreement or which is in
violation of this Agreement.
25. DISPUTE RESOLUTION
(a) Any claim, controversy or dispute between the parties, their
agents, employees, officers, directors or affiliated agents ("Dispute"),
shall be resolved by arbitration conducted by a single arbitrator mutually
agreed upon by both parties who is engaged in the practice of law and
knowledgeable in the applicable areas of law, under the then current
Commercial Arbitration rules of the American Arbitration Association. The
Federal Arbitration Act, 9 U.S.C. Sections 1-16, not state law, shall govern
the arbitrability of all Disputes. The arbitrator shall have authority to
award compensatory damages only. The arbitrator's award shall be final and
binding and may be entered in any court having jurisdiction thereof. Each
party shall bear its own costs and attorneys' fees, and shall share equally
in the fees and expenses of the arbitrator.
26. GOVERNING LAW
(a) The laws of the State of New York shall govern the construction
and interpretation of the Agreement, and the arbitration shall occur in
Washington, D.C. It is expressly agreed that either party may seek injunctive
relief in an appropriate court of law or equity pending an award in
arbitration.
27. USE OF TRADEMARKS
(a) Subject to the terms of this Agreement, each party grants a
revocable, royalty-free, non-exclusive, non-transferable license to use the
other's trademarks, trade names, service marks and logos whether registered
or not (the "Marks"), solely to promote the sale of the other's Services or
to identify a relationship between the parties. This license shall apply only
to the parties, and shall not be construed as a license or authorization for
any customer, end user or other third party to use the Marks. The license
granted herein may be terminated at anytime by the party which owns the Marks
upon ten (10) business days written notice to the other party.
(b) Use of the Marks shall be subject to the appropriate party's
guidelines, as may be amended from time to time, (including but not limited
to size, placement, color and quality control) and further subject to any
restrictions that may appear in this and other sections of this Agreement.
Written documentation concerning the parties' guidelines for the use of their
Marks shall be provided to the other party. All uses of a party's Mark shall
clearly and properly identify that party's claim of ownership. In no event
shall a
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 16
<PAGE>
USW/USi Contract Execution Copy
party use the other's Marks in a manner more prominent than its own Marks or
in a manner that causes confusion as to the identity of the parties.
(c) Prior to producing, distributing or displaying any advertising
or other material containing the other party's Marks, that party shall obtain
prior written approval from the owner of the Marks. Each party shall have the
right, at reasonable times to visit the other's facilities or inspect the
rendering of the Services to ensure compliance with this paragraph.
(d) The parties may agree to the joint branding of services, and any
such agreement shall be included as schedules to this Agreement.
(e) Neither party shall do anything that will in anyway impair the
other's rights in and to its Marks or the goodwill inherent in the Marks.
Neither party shall acquire or claim title to the other's Marks by virtue of
the license granted herein or that party's use of the Marks; it being
expressly agreed that all use of the Marks shall inure to the benefit of the
owner of the Marks.
28. CONFIDENTIALITY.
(a) Confidential Information: Except as otherwise stated herein, USi
and U S WEST each expressly undertake to retain in confidence all information
transmitted to it by the other party pursuant to this Agreement that the
disclosing party identifies as being proprietary and/or confidential or that,
by the nature of the circumstances surrounding the disclosure, ought in good
faith to be treated as proprietary and/or confidential ("Confidential
Information"), and will make no use of such Confidential Information except
under the terms and during the existence of this Agreement. Information
disclosed by USi, in any form, regarding iMAP Services, Products or Customers
to U S WEST by USi, shall be USi Confidential Information. USi and U S WEST
shall treat the terms and conditions of this Agreement as confidential:
however, either party may disclose such information in confidence to its
immediate legal and financial consultants as required in the ordinary course
of that party's business. The receiving party's obligations hereunder shall
extend for five (5) years following the disclosure of the Confidential
Information. Each party shall cause its affiliates to retain the other's
Confidential Information in accordance with the terms of this Section 28.
(b) Notwithstanding the termination of this Agreement, each party
agrees to treat such Confidential Information as confidential for a period of
two (2) years from the date of receipt of same unless otherwise agreed to in
writing by both parties. In handling the Confidential Information, each party
agrees: (a) not to copy such Confidential Information of the other unless
specifically authorized; (b) not to make disclosure of any such Confidential
Information to anyone except employees and subcontractors of such party to
whom disclosure is necessary for the purposes set forth above; and (c) to
appropriately notify such employees and subcontractors that the disclosure is
made in confidence and shall be kept in confidence in accordance with this
Agreement. The obligations set forth herein shall be satisfied by each party
through the exercise of at least
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 17
<PAGE>
USW/USi Contract Execution Copy
the same degree of care used to restrict disclosure of its own information of
like importance.
(c) Each party agrees that in the event permission is granted by the
other to copy Confidential Information, or that copying is otherwise
permitted hereunder, each such copy shall contain and state the same
confidential or proprietary notices or legends, if any, which appear on the
original. Nothing herein shall be construed as granting to either party any
right or license under any copyrights, inventions, or patents now or
hereafter owned or controlled by the other party.
(d) Upon termination of this Agreement for any reason or upon
request of the disclosing party, all Confidential Information, together with
any copies of same as may be authorized herein, shall be returned to the
disclosing party or certified destroyed by the receiving party.
(e) The obligations imposed by this Agreement shall not apply to any
information that: (1) is already in the possession of, is known to, or is
independently developed by the receiving party; or (2) is or becomes publicly
available through no fault of the receiving party; or (3) is obtained by the
receiving party from a third person without breach by such third person of an
obligation of confidence with respect to the Confidential Information
disclosed; or (4) is disclosed without restriction by the disclosing party;
or (5) is required to be disclosed pursuant to the lawful order of a
government agency or disclosure is required by operation of the law.
29. CUSTOMER SUPPORT
(a) RESPONSIBLE ENTITY. When a party to this Agreement makes a sale
of Products to a Customer the selling party shall be the primary owner
("Primary Owner") of that Customer.
(b) CUSTOMER SUPPORT. The Primary Owner shall be responsible to the
Customer for the overall customer experience ("Customer Experience")
including, but not be limited to:
(b.1) All Customer contact;
(b.2) All provisioning and implementation of the Products;
(b.3) All issues related to Product performance, outages, and
repair; and
(b.4) All issues related to Customer billing and collections.
(c) PRODUCT PERFORMANCE. The party supplying the Product shall be
responsible for the performance of that Product and meeting the service level
expectations associated with it.
30. PRODUCT SUPPORT
(a) PRODUCT SUPPORT. The parties understand and acknowledge that
many Products have unique product support operations including call-in
number, help desk, customer database, trouble-ticketing system, billing
processes, and monitoring capabilities. They further understand and
acknowledge that the Primary Owner of a Customer may not be in
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 18
<PAGE>
USW/USi Contract Execution Copy
the best position to manage the various back-end product support processes
that are internal to the other party.
With that understanding, and the awareness that the Primary Owner is
ultimately responsible for the Customer Experience as described in Section
2.2 above, the parties agree to certain product support processes below in
order to help the Primary Owner best serve the Customer's needs.
(b) USi PRODUCTS
(b.1) USi-Sold. When USi sells a USi-provided Product to a
Customer USi shall solely provide the necessary product support to itself and
U S WEST shall have no obligation to participate.
(b.2) U S WEST-Sold. When U S WEST sells a USi-provided
Product to a Customer USi shall make available to U S WEST their Customer
Assistance Team as a single point of contact to assist U S WEST in managing
the product support operations internal to USi.
(c) U S WEST PRODUCTS
(c.1) U S WEST-Sold. When U S WEST sells a U S
WEST-provided Product to a Customer U S WEST shall solely provide the
necessary product support to itself and USi shall have no obligation to
participate.
(c.2) USi-Sold. When USi sells a U S WEST-provided Product
to a Customer U S WEST shall make available to USi their Coordinated Services
Team as a single point of contact to assist USi in managing the product
support operations internal to U S WEST.
(d) RECORD KEEPING. The Primary Owner shall keep original, detailed
records ("Customer Records") of all aspects of the customer experience in an
appropriate manner (see Section V, Systems, below). These records shall
include, INTER ALIA, open and completed orders, all Customer contact, all
contact with the other party's support team (CAT or CST), implementation
information, open and closed trouble tickets, service level agreements, and
fully executed contracts.
(e) AVAILABILITY. To best serve the customer jointly, the original
Customer Records of one party shall be made available to the other party at
all times.
(f) BILLING. The parties agree that at least until a reliable
billing system can be put in place that will coordinate billing statements
for multiple Products, the Primary Owner, as the customer of record for the
Product purchased, shall receive a separate billing statement for each
Product purchased even if multiple Products are purchased together as a
"bundle." The Primary Owner is free to bill the Customer in any manner
mutually acceptable to the two parties.
(g) MONITORING. The parties agree that at least until a reliable
monitoring system can be put in place that will make available appropriate
network monitoring information, performance monitoring for the Products shall
be conducted by the business entity responsible for providing the Product.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 19
<PAGE>
USW/USi Contract Execution Copy
31. [CONFIDENTIAL TREATMENT]
[CONFIDENTIAL TREATMENT]
32. SYSTEMS
(a) DEFINITION. For purposes of this Section the word "Systems"
shall be defined to include tools that provide functionality such as customer
order, customer of record distinction, trouble ticket tracking, network
monitoring, and billing for the Customers and Products.
(b) START-UP STATUS. The parties understand and acknowledge that at
the time of the execution of this Agreement there is no single System in
place that integrates information from the existing Systems relevant to the
parties needs. The parties agree that they will make the best and most
innovative use of the tools currently available, within the framework of
future planning, as they work together to support the Customers.
(c) DEVELOPMENT. Upon execution of this Agreement the parties will
jointly endeavor to design a process to transfer information between them
that will suit their needs.
(d) KNOWLEDGE BASE. In an effort to reduce the number of times one
party needs to call the other party for product support reasons, upon
execution of this Agreement the parties will jointly endeavor to create and
maintain on an ongoing basis a Web-based knowledge base of information, or
frequently asked questions, regarding the Products.
33. SERVICE REVIEWS
(a) QUARTERLY REVIEW. From time to time the parties shall meet at a
mutually agreeable time and place to discuss operations, customer support,
and product support issues addressed in this (Section/Exhibit) and any other
topics they deem appropriate. Such meetings shall not be less frequent than
once per quarter.
(b) METRICS. From time to time the parties may share Product
performance metrics with each other as they impact overall customer care. The
parties will agree to the relevant and appropriate scope of such metrics
sharing on a case-by-case basis.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 20
<PAGE>
USW/USi Contract Execution Copy
34. NOTICES
All notices required to be given under this Agreement shall be provided in
writing to the following representatives of the parties:
For U S WEST:
Vice President - Internet Services
1999 Broadway - 8th fl
Denver, Colorado 80202
Facsimile 303-965-9281
with a copy to:
Law Department
1801 California Street - Suite 5100
Denver, Colorado 80202
Facsimile 303-308-9455
For USinternetworking:
Senior Vice President, Worldwide Sales
One USi Plaza
Annapolis, MD 21401-7478
Facsimile 410-573-1906
with a copy to:
Legal Department
One USi Plaza
Annapolis, MD 21401-7478
Facsimile 410-263-8645
35. ASSIGNMENT
This agreement may be assigned by the parties to any corporate
affiliate in which the majority of ownership is held by the parent
corporation of the assigning entity.
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 21
<PAGE>
USW/USi Contract Execution Copy
U S WEST COMMUNICATIONS SERVICES, INC.
BY: _______________________________________
TITLE:_____________________________________
US WEST INTERPRISE AMERICA, INC.
BY:________________________________________
TITLE:______________________________________
USINTERNETWORKING, INC.
BY:________________________________________
TITLE:_____________________________________
CONFIDENTIAL
For distribution only to U S WEST and USinternetworking employees
with a need to know Page 22
