Exhibit 10.69

 

Execution Copy

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made as of this 11th day of
April 2003, by and among Interliant, Inc. (“Interliant”) and those of its
directly or indirectly wholly owned subsidiaries specifically identified as
“Sellers” on the signature page or pages hereto (“Sellers”) and I Acquisition,
Inc., a Delaware Corporation (“Purchaser”). Interliant UK Limited, a United
Kingdom Limited Company and Interliant UK Holdings Limited, a United Kingdom
Limited Company (together with Interliant UK Limited, the “UK Subsidiaries”),
are executing this Agreement solely with respect to Article 5, excluding
Sections 5.12 and 5.16. Sellers and Purchaser shall individually be referred to
herein as a “Party” and collectively as the “Parties.” The UK Subsidiaries are
neither Sellers nor Parties.

 

W I T N E S S E T H:

 

WHEREAS Sellers are providers of managed infrastructure solutions encompassing
messaging and collaboration, managed hosting, bundled-in managed security, and
integrated and related professional services in the United States and in Europe
(the “Business”);

 

WHEREAS, each Seller filed a petition for reorganization pursuant to title 11 of
the United States Code (the “Bankruptcy Code”) on August 5, 2002 (the “Petition
Date”), and their cases are currently pending in the United States Bankruptcy
Court for the Southern District of New York (the “Bankruptcy Court”) under lead
case number 02-23150 (ASH);

 

WHEREAS, Sellers are currently operating the Business as debtors-in-possession;
and

 

WHEREAS, the Parties desire that the Sellers sell and the Purchaser purchase
substantially all of the Assets (as hereinafter defined) of Sellers with respect
to the Business

 

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pursuant to, inter alia, sections 363 and 365 of the Bankruptcy Code.

 

NOW, THEREFORE, in consideration of the premises, the representations,
warranties and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Sellers and Purchaser hereby agree as follows:

 

 

ARTICLE 1

 

Definitions and Construction

 

1.1    “Accounts Receivable” shall have the definition set forth in Section
2.1(c).

 

1.2     Allocation Schedule” shall have the meaning set forth in Section 4.5.

 

1.3    “Alternative Transaction” means (i) any transaction or series of
transactions whereby the Assets or the Business or material portions thereof are
sold or otherwise disposed of to a party other than Purchaser pursuant to
Bankruptcy Court order; or (ii) confirmation of a plan of reorganization which
does not provide for the sale of the Assets or Business to Purchaser.

 

1.4    “Assets” shall have the meaning set forth in Section 2.1.

 

1.5    “Assumed Liabilities” or “Assumed Liability” shall mean only those
liabilities of Sellers, unpaid as of the Closing Date which would be on Schedule
1.5 (which Schedule 1.5 sets forth by category, vendor and/or payee and amount
only those current, post-petition liabilities of Sellers incurred in the
ordinary course of business as of February 28, 2003 and the long-term portion of
Sellers’ liability to GATX, but excluding the Excluded Liabilities), if said
schedule were prepared as of the Closing Date, other than the Excluded
Liabilities. For purposes of clarity, the Assumed Liabilities include (a) all of
the post-petition liabilities of Sellers which

 

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were incurred in the ordinary course of the Business, the categories of expenses
for which appear on Schedule 1.5, including accrued vacation of those employees
who are employed by Purchaser immediately after the Closing Date; (b) Sellers’
DIP Facility whether assumed by, or satisfied by Purchaser at Closing; (c) all
liabilities arising under the Executory Contracts assigned to and assumed by
Purchaser pursuant to the Conveyance Agreement, including all Cure Payments with
respect thereto; and (d) the long-term portion of Sellers’ liability to GATX,
provided, however that as of the Closing Date, the aggregate of the Assumed
Liabilities and the current liabilities of the UK Subsidiaries shall not exceed
$5,766,000.

 

1.6    “Avoidance Claims” shall have the meaning set forth in Section 2.1(k).

 

1.7    “Bankruptcy Code” shall have the meaning set forth in the recitals.

 

1.8    “Bankruptcy Court” shall have the meaning set forth in the recitals.

 

1.9    “Bidding Procedures” shall have the meaning set forth in the Procedures
Order.

 

1.10    “Break-Up Fee” means the sum of $141,000 payable to Purchaser in cash at
the closing of an Alternative Transaction.

 

1.11    “Business” shall have the meaning set forth in the recitals.

 

1.12    “Business Day” shall mean any day on which banking institutions in the
State of New York are authorized or required to remain open for general
business, excluding Saturdays.

 

1.13    “Cash Purchase Price” shall have the meaning set forth in Section
3.1(a).

 

1.14    “Claims” shall mean any lien, claim (as defined in the Bankruptcy Code),
interest, charge, mortgage, pledge, encumbrance, hypothecation, lease, sublease,
purchase option, conditional sales contract or security interest of any kind.

 

1.15    “Closing” shall have the meaning set forth in Section 2.3.

 

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1.16    “Closing Date” shall have the meaning set forth in Section 2.3.

 

1.17    “Closing Measurement Net Worth” shall have the meaning set forth in
Section 3.4(a).

 

1.18    Intentionally Omitted

 

1.19    “Consolidated Financial Statements” shall have the meaning set forth in
Section 5.7.

 

1.20    “Conveyance Agreement” shall have the meaning set forth in Section
8.4(b).

 

1.21    “Creditor Trust” shall mean that trust in a form to be mutually agreed
upon prior to the Procedures Hearing, which trust will include the terms and
conditions set forth on Exhibit 1.21.

 

1.22    “Cure Payment(s)” shall mean any amounts which the Sellers are required
to pay, in accordance with section 365(b)(1) of the Bankruptcy Code in order to
assume and assign or to assign an Executory Contract.

 

1.23    “Deposits” shall have the meaning set forth in Section 2.1(f).

 

1.24    “Environmental Laws” shall have the meaning set forth in Section 5.17.

 

1.25    “ERISA” shall have the meaning set forth in Section 5.16.

 

1.26    “Escrow Agent” shall have the definition set forth in the Escrow
Agreement.

 

1.27    “Escrow Agreement” shall have the meaning set forth in Section 3.3.

 

1.28    “Excluded Assets” shall have the meaning set forth in Section 2.2.

 

1.29    “Executory Contracts” shall mean all current contracts, leases, licenses
and other agreements to which Sellers are parties which are used in, or useful
to, the Business and shall include any contract, agreement or right which would
be deemed an executory contract under

 

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section 365 of the Bankruptcy Code. Schedule 2.1(b) lists the non-debtor parties
to substantially all of the Executory Contracts, and separately identifies each
Executory Contract previously assumed pursuant to a Bankruptcy Court order.

 

1.30    “Final Order” shall mean an order of the Bankruptcy Court, or other
court of competent jurisdiction, for which the time to appeal has expired and no
appeal was filed, or if an appeal was filed it has been dismissed or denied and
the time for further appeal has expired or no right of further appeal exists.

 

1.31    “Fixed Assets” shall have the meaning set forth in Section 2.1(a).

 

1.32    “Insurance Policies” shall have the meaning set forth in Section 4.10.

 

1.33    “Intellectual Property” shall mean (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereon, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names,
domain names, and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrights and copyrightable works and all applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registrations and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, methods, schematics, technology, technical data,
designs, drawings, flowcharts, block diagrams, specifications, customer and
supplier lists,

 

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pricing and cost information and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, (h) all copies and tangible embodiments of any of the
foregoing (in whatever form or medium), and (i) all licenses, sublicenses,
agreements, or permissions related to any of the foregoing.

 

1.34    “Key Employees” shall have the meaning set forth in Section 4.3.

 

1.35    “Legal Requirement” shall mean all applicable laws, rules, regulations,
codes, ordinances, permits, bylaws, variances, judgments, injunctions, orders,
conditions of a governmental entity.

 

1.36    “Licenses and Permits” shall have the meaning set forth in Section 5.6.

 

1.37    “Material Adverse Effect” shall mean any change in, or effect on, the
Business, the Assets or the UK Assets that (i) is or shall be materially adverse
to the Business, the Assets, the UK Assets, operations, properties (including
intangible properties), condition (financial or otherwise), customer relations
or regulatory status or prospects of Sellers or the Business, individually or
taken as a whole, or (ii) shall make this Agreement invalid or unenforceable (in
whole or material part) or (iii) prohibit the ability of Sellers to perform
their respective obligations hereunder in a timely fashion.

 

1.38    “Measurement Net Worth” shall mean the difference between and assets and
liabilities of Sellers calculated using the same methodology as that reflected
in Schedule 3.4(a).

 

1.39    “Negative Adjustment Threshold” shall have the meaning set forth in
Section 3.4(a).

 

1.40    “Outside Date” shall mean June 16, 2003.

 

1.41    “Petition Date” shall have the meaning set forth in the recitals.

 

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1.42    “Positive Adjustment Threshold” shall have the meaning set forth in
Section 3.4(a).

 

1.43    “Procedures Order” shall mean the order substantially in the form of
Exhibit 4.11.

 

1.44    “Purchase Deposit” shall have the meaning set forth in Section 3.3.

 

1.45    “Purchaser” shall have the meaning set forth in the preamble.

 

1.46    “Sale Approval Order” shall mean the order of the Bankruptcy Court
approving the transactions contemplated under the Agreement and the Transaction
Documents substantially in the form attached hereto as Exhibit 8.9.

 

1.47    “Scheduled Vendors” shall mean those vendors of the Sellers identified
on Schedule 2.1(k).

 

1.48    “Sellers” shall have the meaning set forth in the preamble.

 

1.49    “Sellers’ DIP Facility” shall mean that certain Loan and Security
Agreement dated September 9, 2002, among Interliant, Inc. and the other
companies named therein and Access Capital, Inc.

 

1.50    “Sellers’ Intellectual Property” shall have the meaning set forth in
Section 2.1(d).

 

1.51    “Sellers’ Knowledge” shall mean the knowledge of Sellers, provided, that
Sellers shall be deemed to have knowledge of a particular fact or other matter
if any individual who as of the date hereof is serving as a director or officer
of any of the Sellers has knowledge of such fact or other matter.

 

1.52    “Transaction Documents” shall have the meaning set forth in Section 5.2.

 

1.53    “UK Accounts Receivable” shall mean all of the UK Subsidiaries’ billed
and unbilled accounts receivable, notes receivable, employee advances and rights
to receive payment

 

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from customers outstanding as of the Closing.

 

1.54    “UK Assets” shall mean all of the assets of the UK Subsidiaries.

 

1.55    “UK Contracts shall mean all current contracts, leases, licenses and
other agreements which the UK Subsidiaries are parties to including those set
forth on Schedule 1.55.

 

1.56    “UK Subsidiaries” shall have the meaning set forth in the preamble.

 

1.57    “UK Subsidiaries’ Knowledge” shall mean the knowledge of the UK
Subsidiaries, provided, that the UK Subsidiaries shall be deemed to have
knowledge of a particular fact or other matter if any individual who is
presently serving as a director or officer of any of the UK Subsidiaries has
knowledge of such fact or other matter.

 

1.58    “UK Subsidiaries’ Financial Statements” shall have the meaning set forth
in Section 5.7.

 

1.59    “UK Subsidiaries’ Intellectual Property” shall mean any Intellectual
Property used, useful, or usable in the business of the UK Subsidiaries as
operated in Europe including that which is listed and separately identified on
Schedule 2.1(d). No material UK Subsidiaries’ Intellectual Property is omitted
from Schedule 2.1(d).

 

1.60    “WARN Act” shall have the meaning set forth in Section 3.2.

 

1.61    “Warrant” shall mean the warrant in a form to be mutually agreed upon
prior to the Procedures Hearing, which will have terms substantially similar to
those set forth on Exhibit 1.61.

 

1.62    Construction.    All article, section, subsection, annexes, schedule and
exhibit references used in this Agreement are to this Agreement unless otherwise
specified. All schedules, annexes and exhibits attached to this Agreement
constitute a part of this Agreement

 

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and are incorporated herein. Unless the context of this Agreement clearly
requires otherwise, (a) the singular shall include the plural and the plural
shall include the singular wherever and as often as may be appropriate, (b) the
words “includes” or “including” shall mean “including without limitation,” (c)
the word “or” is not exclusive and (d) the words “hereof,” “herein,” “hereunder”
and similar terms in this Agreement shall refer to this Agreement as a whole and
not any particular section or article in which such words appear.

 

 

ARTICLE 2

 

PURCHASE AND SALE OF ASSETS; CLOSING

 

2.1    Assets to be Acquired.     Subject to the terms and conditions of this
Agreement, Purchaser agrees to purchase from Sellers, and Sellers agree to sell
to Purchaser, as of the Closing, all right, title and interest of Sellers in and
to all of the tangible and intangible assets of Sellers including the following
assets, as the same may exist on the Closing Date, (other than the Excluded
Assets) (the “Assets”), free and clear of all Claims, except for the Assumed
Liabilities:

 

(a)  all of Sellers’ machinery, appliances, equipment, computer hardware, tools,
supplies, fixtures, and furniture used in the Business, including those items
listed on Schedule 2.1(a) attached hereto (collectively, the “Fixed Assets”);

 

(b)  all of Sellers’ Executory Contracts with respect to the Business, including
those with the parties set forth on Schedule 2.1(b) (except as may be
specifically excluded pursuant to Section 4.12), and, to the extent assignable,
all confidentiality, noncompetition and nonsolicitation covenants running in
favor of Sellers;

 

(c)  all of Sellers’ billed and unbilled accounts receivable, notes receivable,

 

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employee advances, rights to receive payment from customers outstanding as of
the Closing with respect to the Business and all intercompany notes, loans and
receivables from the UK Subsidiaries, as of the Closing (collectively, the
“Accounts Receivable”) (the billed and unbilled accounts receivable, notes
receivable, employee advances and rights to receive payment from customers of
Sellers and the UK Accounts Receivable, outstanding as of February 28, 2003, are
set forth on Schedule 2.1(c));

 

(d)  all of the Intellectual Property of Sellers used, useful, or usable in the
Business including, the name “Interliant” and/or “INIT”, and all variations
thereof, (“Sellers’ Intellectual Property”) including the Intellectual Property
set forth on Schedule 2.1(d), which is not designated as UK Subsidiaries’
Intellectual Property;

 

(e)  Sellers’ licenses, consents, permits, variances, certifications and
approvals granted by any governmental agencies to Sellers in connection with the
Business set forth on Schedule 2.1(e);

 

(f)  all claims, rights to claims, security and other deposits, investments,
refunds, prepaid expenses, rebates, causes of action, choses in action, rights
of recovery, warranty rights, and rights of set off in respect of the Business
and the Assets, including those items listed on Schedule 2.1(f) attached hereto
(collectively, the “Deposits”);

 

(g)  all of Sellers’ customer and supplier lists, all client files, all
proposals, all files related to current and former employees and auditors, all
computer databases and other records, all books and records, and business plans
used, useful or usable in the Business, and stock records and files;

 

(h)  Sellers’ cash and cash equivalents;

 

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(i)  Sellers’ right, title and interest in and to their telephone numbers and
the directory advertising for such telephone numbers used in the Business;

 

(j)  all of Sellers’ equity stock ownership interest, whether owned directly or
indirectly, in the UK Subsidiaries; and

 

(k)  all actions, suits, chosen in action or rights of Sellers arising under or
in connection with Sections 544, 545, 547, 548, 549, 550 and 553 of the
Bankruptcy Code, (“Avoidance Claims”) against the entities listed on Schedule
2.1(k) (the “Scheduled Vendors”).

 

2.2    Excluded Assets.    Notwithstanding anything to the contrary contained in
Section 2.1, Purchaser shall not acquire and Sellers shall not transfer: (a)
Sellers’ corporate minute and stock books and related files, (b) except as may
expressly be provided otherwise, any pension plan, profit sharing plan or other
plan or program providing for benefits to past or current employees of Sellers;
(c) all amounts owed, or which may be owed, to the Sellers by “L&D Messaging,
Inc.” under those certain promissory notes dated January 31, 2002; (d) all
amounts owed, or which may be owed to Sellers under that certain Asset Purchase
Agreement dated as of July 20, 2001 by and between Interpath Communications,
Inc. and Sellers; (e) any and all Avoidance Claims against persons or entities
that are not Scheduled Vendors; (f) the restricted cash at JPMorgan Chase (if
any) which support letters of credit under certain existing or prior real
property leases of Sellers; and (g) certain claims of the Sellers’ estate in
Bankruptcy, not related to the Assets of the Business as set forth on Schedule
2.2 (collectively, the “Excluded Assets”).

 

2.3    Closing.    The closing of the transactions contemplated herein (the
“Closing”) shall take place no later than the later of the third Business Day
after the Sale Approval Order

 

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becomes a Final Order or all of the conditions to the Closing shall have been
satisfied. The date on which the Closing occurs is referred to herein as the
“Closing Date.” The Closing shall take place at the offices of Sellers’ counsel
or at such other location as is mutually acceptable to Purchaser and Sellers.
The Closing shall be deemed to be effective as of 12:01 A.M. Eastern Standard
Time on the Closing Date.

 

 

ARTICLE 3

 

PURCHASE PRICE; ASSUMPTION OF LIABILITIES

 

3.1    Purchase Price.    Subject to the terms and conditions of this Agreement,
the aggregate consideration to be paid by Purchaser to Sellers at the Closing in
exchange for the Assets, which shall be paid, delivered or assumed by Purchaser,
shall be:

 

(a)  Subject to Section 3.4, $4,700,000 in immediately available funds to an
account or accounts designated by Sellers to Purchaser at least two Business
Days prior to the Closing Date (the “Cash Purchase Price”);

 

(b)  the Warrant, issued to the Creditor Trust at Closing; and

 

(c)  the assumption and the agreement by Purchaser to perform, pay and discharge
when due the Assumed Liabilities.

 

3.2    Excluded Liabilities.    The Purchaser shall not be liable for any
liabilities of Sellers other than the Assumed Liabilities and Purchaser shall
not be deemed, considered or held to be a successor to Sellers. Purchaser is
expressly not assuming any liability or obligation for (a) any transfer tax owed
by Sellers as a result of this Agreement and the transactions contemplated
herein, of whichever kind or nature; (b) Claims which arose or were incurred
prior to the Petition

 

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Date, or which are based on events, transactions or occurrences prior to the
Petition Date; (c) any liability in connection with any pension plan, profit
sharing plan or other employee benefit plan, other than the payment obligation
on behalf of Sellers for amounts withheld from Sellers’ Employees during the
last payroll cycle prior to the Closing Date for, among other items, employee
contributions to Sellers’ 401(k) plan or payroll taxes, which obligations remain
unpaid as of the Closing Date, or to satisfy obligations relating to employment
of Sellers’ Employees which Purchaser may be required to satisfy by any
applicable law or governmental regulation; (d) any claim or liability against
Sellers relating to infringement of Intellectual Property rights; (e) any
obligations under any existing employment agreement of Sellers; (f) any
indemnification obligations of Sellers to former or current officers and
directors; (g) any amounts payable to any employees for, or in the nature of
termination pay, severance, in respect of employment with Sellers prior to the
Closing; and (h) any liability arising out of or in connection with the Worker
Adjustment and Retraining Act (the “WARN Act”) or any similar state law. For
purposes of clarification and notwithstanding anything to the contrary contained
herein, the Parties acknowledge that Purchaser shall be responsible for any
sales tax, if any, owing as a result of the transactions contemplated by this
Agreement.

 

3.3    Escrow Agreement.    Concurrently herewith, Purchaser shall deposit
$705,000 in immediately available funds (the “Purchase Deposit”) with Kronish
Lieb Weiner & Hellman, LLP, counsel to the Sellers, which Purchase Deposit shall
be held in escrow pursuant to the terms of an Escrow Agreement, in substantially
the form as attached hereto as Exhibit 3.3 (the “Escrow Agreement”) among the
Parties and Kronish Lieb Weiner & Hellman LLP. The Purchase Deposit and interest
thereon, if any, less taxes thereon, if any, shall be a credit toward

 

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the Cash Purchase Price.

 

3.4    Adjustments to Purchase Price.

 

(a)  The Cash Purchase Price shall be adjusted at Closing as follows: (i) to the
extent Purchaser is required to make any Cure Payments, the Cash Purchase Price
shall be reduced, dollar for dollar, by the amount of such Cure Payments; and
(ii) to the extent the Measurement Net Worth calculated as of the Closing Date
(the “Closing Measurement Net Worth”), (calculated in the same manner and
applying the same methodology as the Measurement Net Worth Base Amount is
calculated on Schedule 3.4(a), provided, however, for purposes of this
calculation, only the applicable Assets and Assumed Liabilities shall be
considered), is less than $201,506 (the “Negative Adjustment Threshold”), the
Cash Purchase Price shall be reduced, dollar for dollar, by the difference
between the Negative Adjustment Threshold and the Closing Measurement Net Worth;
and (iii) to the extent the Closing Measurement Net Worth is greater than
$246,285 (the “Positive Adjustment Threshold”), the Cash Purchase Price shall be
increased, dollar for dollar, by the difference between the Closing Measurement
Net Worth and the Positive Adjustment Threshold.

 

(b)  On the Closing Date, Sellers shall prepare and deliver to Purchaser their
good faith calculation (based on commercially reasonable estimates after
reasonable inquiry) of the Closing Measurement Net Worth (the “Preliminary
Measurement”).

 

(c)  Within thirty (30) days after Closing, Purchaser shall prepare and deliver
to Sellers its good faith calculation of the Closing Measurement Net Worth. If
Purchaser does not deliver to Sellers the foregoing calculation within thirty
(30) days of the Closing, Sellers shall prepare such calculation within fifteen
(15) days thereafter, and Sellers’ calculation shall be

 

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final, binding and conclusive on Purchaser and all parties in interest in
Sellers’ bankruptcy cases. In the event that Sellers in good faith reasonably
disagree with Purchaser’s determination of the Cash Purchase Price adjustment,
Sellers shall notify Purchaser in writing within ten (10) Business Days after
receipt of Purchaser’s calculation of the Cash Purchase Price adjustment setting
forth in reasonable detail the basis for such dispute. If Sellers do not provide
such notice within such period, then the determination of the Cash Purchase
Price adjustment by Purchaser shall be final, binding and conclusive upon
Sellers and all parties in interest in Sellers’ Bankruptcy cases. If Sellers do
provide such notice, Purchaser and Sellers shall attempt in good faith to
reconcile their differences and any resolution by them as to any disputed amount
shall be final, binding and conclusive upon all parties in interest in Sellers’
bankruptcy cases. If Purchaser and Sellers fail to reach a resolution within ten
(10) days after Purchaser’s receipt of Sellers’ written notice of dispute,
either Purchaser or Sellers may submit the items in dispute to the Bankruptcy
Court, on appropriate notice, for determination. In the event that the
Bankruptcy Court determines that either Sellers’ or Purchaser’s determination of
the Cash Purchase Price as adjusted by the Closing Measurement Net Worth or
Sellers’ or Purchaser’s objection to such calculation is frivolous, then the
other Party may be entitled to an award of reimbursement of its reasonable
attorneys’ fees and costs expended in connection with the submission of the
dispute to the Bankruptcy Court.

 

(d)  As security for any adjustment to the Cash Purchase Price which may be due
Purchaser or Sellers pursuant to Section 3.4(a) and Section 3.4(c), the monies
shall be disbursed as followed:

 

(i)  90% of the Cash Purchase Price as adjusted in accordance with

 

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Section 3.4(a) using the Preliminary Measurement shall be paid to Sellers on the
Closing Date; and

 

(ii)  20% of the Cash Purchase Price as adjusted in accordance with Section
3.4(a) using the Preliminary Measurement shall remain in escrow with Escrow
Agent until a final determination of the Cash Purchase Price has been made
pursuant to Section 3.4(c).

 

In the event the amount required to remain in escrow pursuant to clause (ii)
above exceeds the Purchase Deposit then being held under the Escrow Agreement,
then Purchaser shall deposit at Closing the amount of such deficiency with the
escrow agent. In the event the amount required to remain in escrow pursuant to
clause (ii) above is less than the Purchase Deposit then being held under the
Escrow Agreement, then such excess amount shall be disbursed to Sellers at
Closing and shall be a credit (pursuant to Section 3.3) against the Cash
Purchase Price to be paid at Closing to Sellers in accordance with clause (i)
above.

 

 

ARTICLE 4

 

COVENANTS

 

4.1    Access.    Upon receipt of reasonable advance notice, Sellers and the UK
Subsidiaries will afford to Purchaser and its authorized representatives, at
Purchaser’s sole expense and risk, reasonable access from the date hereof
through the earlier of the Closing Date or the date of termination of this
Agreement, during normal business hours, to Sellers’ and the UK Subsidiaries
offices, properties, books and records and will furnish to Purchaser such
additional information as Purchaser may reasonably request, to the extent that
such access and

 

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disclosure would not violate the terms of any agreement to which Sellers or the
UK Subsidiaries are bound, any Legal Requirement, result in any loss of
attorney-client or other privilege or significantly disrupt Sellers’ or the UK
Subsidiaries’ operations.

 

4.2    Financial Information of Purchaser.    Except as may otherwise be
provided in the Warrant, beginning with the first full calendar reporting
quarter after Closing and so long as the Creditor’s Trust shall hold the Warrant
or any securities issued pursuant to any exercise of the Warrant including any
replacement Warrant issued pursuant to Section 4.17 of this Agreement, Purchaser
shall deliver to the Creditor’s Trust the following as soon as practicable and
in any event within 60 days after the end of each quarterly period (other than
the last quarterly period) in each fiscal year, statements of income, cash flow
and changes in financial position of Purchaser for such quarterly period and for
the period from the beginning of the current fiscal year to the end of such
quarterly period and a balance sheet of the Purchaser and its subsidiaries as at
the end of such quarterly period, prepared in accordance with GAAP (without
footnotes) as fairly presenting the financial condition of Purchaser and its
subsidiaries, subject to the changes resulting from year-end adjustments; and as
soon as practicable and in any event within 90 days after the end of each fiscal
year, consolidated statements of income, cash flow and changes in financial
position of Purchaser for such year, and a consolidated balance sheet of the
Purchaser as at the end of such year, in each case audited for Purchaser by
independent public accountants selected by Purchaser, whose report shall state
that financial statements present fairly the results of operations and cash
flows of the Purchaser and its subsidiaries, prepared in accordance with GAAP
(without footnotes). The obligation to provide financial statements which are
audited shall only be applicable if Purchaser, in its sole discretion, has had

 

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its financial statements audited. In all other cases, Purchaser may provide
financial statements, prepared in accordance with GAAP, fairly presenting the
financial condition of Purchaser and its subsidiaries. No beneficiary of the
Creditor’s Trust or assignee thereof shall receive copies of Purchaser’s
financial statements unless they have executed a confidentiality agreement in a
form acceptable to the Purchaser.

 

4.3    Employment Matters.    Certain key employees of Sellers are listed on
Schedule 4.3(a) attached hereto (the “Key Employees”). Purchaser shall offer
employment to the Key Employees on the terms and subject to the conditions of an
offer letter or an employment agreement to be provided to the Key Employees by
Purchaser. Sellers shall be responsible for providing all notices and other
communications to employees of Sellers which may be required under the WARN Act
or any similar state law. Schedule 4.3(b) is a list of all employees of Sellers
as of March 31, 2003 (the “Sellers’ Employees”). At Closing, Purchaser shall
offer at-will employment to at least 75% of Sellers’ Employees on terms
substantially similar to the terms of employment, including benefits, as
currently offered to such employees by Sellers. With respect to non-solicitation
and confidentiality provisions in favor of Sellers, relating to any Employee not
retained by Purchaser as of the Closing Date, Purchasers shall grant Sellers a
non-exclusive right to enforce any such provisions.

 

4.4    Conduct of Business by Sellers Pending Purchase.    Sellers covenant and
agree that, between the date hereof and the Closing, Sellers shall not, and
shall cause the UK Subsidiaries not to, take any action except in the ordinary
course of business and in a manner consistent with past practice since the
Petition Date, subject to the requirements of the Bankruptcy Code or as
otherwise directed by the Bankruptcy Court. Sellers shall use, and shall

 

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cause UK Subsidiaries to use, commercially reasonable efforts to preserve the
Business substantially intact, to keep available the services of the present
officers and to preserve the present relationships of Sellers or the UK
Subsidiaries with customers, clients and other persons having business
relationships with Sellers or the UK Subsidiaries regarding the Business. By way
of amplification and not limitation, except as expressly provided for in this
Agreement, Sellers covenant that, between the date hereof and the Closing, they
shall not, and shall cause the UK Subsidiaries to not, except in the ordinary
course of business and in a manner consistent with past practices, directly or
indirectly, do any of the following without the prior written consent of
Purchaser, which consent will not be unreasonably withheld, delayed or
conditioned:

 

(a)  (i) sell, pledge, dispose of, or encumber any of the Assets or the UK
Assets except sales with respect to any asset surplus to the Business which in
the aggregate do not have a gross book value in excess of $50,000; (ii) enter
into any material contract or agreement; (iii) authorize any single capital
expenditure in excess of $50,000.00 or capital expenditures in the aggregate in
excess of $100,000.00; or (iv) enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
Section 4.4(a);

 

(b)  take any action with respect to materially increasing the compensation or
other remuneration of any officer, director, stockholder or employee of, or
independent contractor or consultant to, the Sellers or the UK Subsidiaries, pay
any bonuses to any of its employees or with respect to any increase of benefits
payable under their severance or termination pay policies in effect on the date
hereof except pursuant to that certain Bankruptcy Court order dated November 14,
2002 (Docket No. 218);

 

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(c)   make any payments, under any employee benefit plan or otherwise to any
employee of, or independent contractor or consultant to, Sellers or the UK
Subsidiaries, enter into any employee benefit plan, any employment or consulting
agreement, grant or establish any new awards under any such existing employee
benefit plan or agreement, or adopt or otherwise amend any of the foregoing;

 

(d)   take any action, or make any change in, their methods of management,
distribution, marketing, accounting or operating (including practices relating
to payment of trade accounts or to other payments) or relating to writing down
or failing to write down (in accordance with its past practices consistently
applied) or writing up the value of any inventory or other assets of Sellers or
the UK Subsidiaries;

 

(e)   take any action or enter into any agreement or make any change in the
billing or collection of the Accounts Receivable or the UK Accounts Receivable
and unbilled claims (other than in the ordinary course of business and
consistent with past practices), including discounting or writing off any of the
Accounts Receivable or the UK Accounts Receivable or work in progress for early
payment, or granting any other deduction or discount thereon or accelerating the
collection thereof;

 

(f)   except as specifically permitted herein, take any action to incur, assume,
increase or guarantee prior to Closing any indebtedness for borrowed money from
banks or other financial institutions or cancel, without payment in full, any
notes, loans or other receivables due Sellers or the UK Subsidiaries;

 

(g)   loan or advance monies to any person under any circumstance whatsoever
except travel advances or other reasonable expense advances to employees of
Sellers or the UK

 

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Subsidiaries made in the ordinary course of business and consistent with past
practice;

 

(h)  change any existing bank accounts or lock box arrangements of Sellers or
the UK Subsidiaries, except for deposits, withdrawals, or changes of signatories
in the ordinary course of business;

 

(i)  waive any material rights of Sellers or the UK Subsidiaries or settle any
material claim involving Sellers or the UK Subsidiaries;

 

(j)  do any act or omit to do any act which would cause a breach of any material
contract, commitment or obligation of Sellers or the UK Subsidiaries;

 

(k)  terminate without cause any officer or integral employee of Sellers or the
UK Subsidiaries; or

 

(l)  draw on Sellers’ DIP Facility other than to fund Sellers’ operations.

 

4.5    Allocation of Purchase Price Among Purchased Assets.    Purchaser shall,
within 30 days after the Closing Date, prepare and deliver to Sellers a schedule
(the “Allocation Schedule“) allocating the Purchase Price and the Assumed
Liabilities among the Assets in accordance with Treasury Regulation 1.1060-1 (or
any comparable provisions of state or local Tax Law) or any successor provision.
To the extent permitted by Legal Requirements, Purchaser and Sellers each shall
report and file all tax returns (including amended tax returns and claims for
refund) and shall cooperate in the filing of any forms (including Form 8594)
consistent with the Allocation Schedule, and shall take no tax position contrary
thereto or therewith (including in any audits or examinations by any taxing
authority or any other proceedings).

 

4.6    Public Announcements.    Sellers and Purchaser agree that, except to the
extent necessary to comply with the requirements of (a) any Legal Requirement,
or (b) the rules,

 

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regulations or orders of any other governmental entity, no press release or
similar public announcement or communication shall, prior to or
contemporaneously with the Closing, be made or caused to be made concerning the
terms of this Agreement or the transactions contemplated hereby unless approved
in advance by Sellers and Purchaser; provided, that with respect to any press
release or similar public announcement or communication permitted hereby,
Sellers on the one hand and Purchaser on the other hand agree that each shall
give notice and consult with each other prior to issuing any such press release
or otherwise making such a public announcement or communication.

 

4.7    Transaction Expenses.

 

(a)  Except in the event that Sellers pay to Purchasers the Break-Up Fee, all of
the expenses incurred by Purchaser in connection with the authorization,
negotiation, preparation, execution and performance of this Agreement and the
other agreements referred to herein and the consummation of the transactions
contemplated hereby, including, all fees and expenses of agents,
representatives, brokers, counsel and accountants for Purchaser, shall be paid
by Purchaser. All expenses incurred by the Sellers in connection with the
authorization, negotiation, preparation, execution and performance of this
Agreement and the other agreements referred to herein and the consummation of
the transactions contemplated hereby, including, all fees and expenses of
agents, representatives, brokers, counsel and accountants, shall be paid by the
Sellers.

 

(b)  Sellers agree to indemnify, defend and hold harmless Purchaser and its
respective partners, members, directors, officers, shareholders and employees,
successors, assigns and representatives from and against any damages, claims,
liabilities, losses, costs and

 

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expenses arising out of or resulting from any brokerage or finders’ fees or
agents’ commissions or other similar payments arising by, through or under
Sellers in connection with the purchase or sale of the Assets.

 

(c)  Purchaser agrees to indemnify, defend and hold harmless Sellers and their
respective partners, members, directors, officers, shareholders and employees,
successors, assigns and representatives from and against any damages, claims,
liabilities, losses, costs and expenses arising out of or resulting from any
brokerage or finders’ fees or agents’ commissions or other similar payments
arising by, through or under Purchaser in connection with the purchase or sale
of the Assets

 

4.8    Access to Books and Records.    Upon receipt of reasonable advance
notice, from the Closing Date until the second anniversary of the Closing Date,
Purchaser shall preserve all of the records and books, customer records, and any
other records of Sellers and UK Subsidiaries that Purchaser shall own and make
them available, during normal business hours, to Sellers’ designees, counsel,
accountants, and others authorized by them for inspection and the making of
copies thereof, to the extent that such access and disclosure would not violate
the terms of any agreement to which Purchaser is bound or any Legal Requirement,
result in any loss of attorney-client or other privilege, or significantly
disrupt Purchaser’s operations.

 

4.9    Change of Corporate Names.    As soon as practicable following the
Closing Date, but in no event later than 5 Business Days after the Closing,
Sellers shall, to the extent applicable, file all necessary certificates to
change their name, to a name which does not include either the word “Interliant”
or any words which would suggest, convey or denote that the Sellers are in a
business involving e-mail messaging, managed messaging, web hosting, application

 

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hosting or any other business similar to the Business.

 

4.10    Insurance Policies.    Sellers’ and the UK Subsidiaries insurance
policies are listed on Schedule 4.10 hereto (“Insurance Policies”). The
Insurance Policies will not be cancelled or the coverage reduced on or prior to
thirty (30) days following the Closing. If requested in writing by Purchaser,
Sellers shall use commercially reasonable efforts to have those Insurance
Policies that are transferable or continuable (other than Directors’ & Officers’
Liability Insurance) transferred to or continued with Purchasers. On or before
the Closing Date, Sellers will have obtained and fully paid for Directors’ &
Officers’ Liability Insurance to cover officers and directors of the Sellers and
the Subsidiaries for a period of not less than 3 years after the Closing Date
and having a limit of $3,000,000 or such other limit as may be mutually agreed
upon by the Parties.

 

4.11    Bankruptcy.    Within 5 Business Days of the date hereof, Sellers shall
file a motion scheduling: (i) a hearing on Sellers’ application for entry of an
order substantially in the form annexed hereto as Exhibit 4.11 (the “Procedures
Order”) approving and authorizing the Break-Up Fee and the Bidding Procedures
(as defined therein) all as more fully set forth in the Procedures Order; and
(ii) a hearing on Sellers’ application to authorize the sale of the Assets and
Business pursuant to this Agreement to Purchaser or such other entity which may
make a higher or better offer.

 

4.12    Selection of Contracts.    At any time, on or before the third Business
Day prior to the auction held pursuant to the Procedures Order, Purchaser may
notify Sellers which of the Executory Contracts Purchaser chooses not to accept
an assignment in connection with the transactions contemplated by this
Agreement.

 

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4.13    Adequate Assurance.    Purchaser agrees that at each court hearing held
with respect to a motion to either assign and/or assume and assign the Executory
Contracts in accordance with the Bankruptcy Code, at which a non-debtor party to
an Executory Contract objects to such assignment or assumption and assignment,
Purchaser shall use commercially reasonable efforts to demonstrate, and provide
adequate assurance of, its ability to provide performance under such Executory
Contracts.

 

4.14    Financing.    On or before the Outside Date, Purchaser will have all
funds necessary to pay the Cash Purchase Price.

 

4.15    Transition.    To the extent Purchaser has space available, in its
discretion, Purchaser shall provide Sellers, at no cost to Sellers, reasonable
office space and use of facilities, systems and equipment, including data
connectivity, email and telephone, to allow Sellers to complete the wind-down of
Sellers’ estate in Bankruptcy and to fulfill their post-closing obligations
contemplated by this Agreement.

 

4.16    DIP Financing.    On the Closing Date, Purchaser shall have either fully
satisfied the payment obligations of Sellers under Sellers’ DIP Facility or
Purchaser shall have entered into an agreement with the lender of Sellers’ DIP
Facility (Access Capital, Inc.) permitting the assumption and assignment of
Sellers’ rights and obligations under Sellers’ DIP Facility.

 

4.17    Transfer of Warrant.    If, following the Closing, Purchaser transfers
substantially all of the Assets to an affiliate, then a new warrant shall be
issued by such affiliate on identical terms as the Warrant, mutatis mutandis and
such affiliate shall agree to be bound by the terms of this Section 4.17.

 

4.18    Capitalization of Purchaser.    On or before the deadline for submitting
bids,

 

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Purchaser shall provide Sellers with information on the capitalization of
Purchaser (proposed or actual).

 

4.19    Competition and Solicitation.    For a period of 5 years from the
Closing Date, Sellers shall not compete in the Business or solicit any of
Sellers’ Employees employed by Purchaser on the Closing Date while such employee
is employed by Purchaser on a full-time basis.

 

 

ARTICLE 5

 

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

In order to induce the Purchaser to enter into this Agreement and consummate the
transactions contemplated hereby, Sellers and, where indicated, the UK
Subsidiaries, represent and warrant to the Purchaser, as follows:

 

5.1    Organization and Authority of Sellers and UK Subsidiaries.    Each
Seller, subject to any pre-petition payments to any governmental entity which
have not been paid, and each UK Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state or other
jurisdiction of its incorporation. Each Seller, subject to any pre-petition
payments to any governmental entity which have not been paid, and each UK
Subsidiary is duly qualified as a foreign corporation in all jurisdictions in
which the conduct of its business or the ownership of its properties requires
such qualification (and Schedule 5.1 lists all the such jurisdictions where
Sellers and the UK Subsidiaries would be so qualified), except where the failure
to so qualify would not reasonably be expected to have, individually or in the
aggregate, a

 

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Material Adverse Effect. Sellers and the UK Subsidiaries have all necessary
corporate power and authority to own, lease and operate their properties and
conduct the Business as it is currently being conducted. Sellers (with the
exception of Interliant) and the UK Subsidiaries constitute all of the wholly
and partially owned subsidiaries of Interliant.

 

5.2    Corporate Power and Authority; Due Authorization.    Subject to the entry
of the Sale Approval Order, each of Sellers and the UK Subsidiaries have full
corporate power and authority to execute and deliver this Agreement and each of
the Transaction Documents to which Sellers and the UK Subsidiaries are or shall
be a party and to consummate the transactions contemplated hereby. “Transaction
Documents” means each of the agreements, documents and instruments referenced in
this Agreement to be executed and delivered by Sellers, the UK Subsidiaries and
Purchaser. Subject to the entry of the Sale Approval Order, this Agreement and
each of the Transaction Documents constitutes, or shall constitute when executed
and delivered, a valid and binding agreement of Sellers and the UK Subsidiaries
in each case enforceable in accordance with its terms (except as may be limited
by bankruptcy, insolvency or similar laws of general application).

 

5.3    Title to Assets.    Sellers have good, valid and marketable title to the
Assets. The UK Subsidiaries have good, valid and marketable title to the UK
Subsidiary Assets. Each of Sellers and the UK Subsidiaries have a valid and
enforceable leasehold interest in all of the Assets and UK Subsidiary Assets,
respectively, which are subject to leases. Each of Sellers and the UK
Subsidiaries have a valid and enforceable license with respect to any licensed
Asset or licensed UK Subsidiary Asset as the case may be. Following the entry of
the Sale Approval Order and as of the Closing, the Assets shall be transferred
to Purchaser free and clear of all

 

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Claims, other than the Assumed Liabilities.

 

5.4    No Conflict; Required Consents.    Except as set forth on Schedule 5.4,
the execution and delivery by Sellers of this Agreement and the Transaction
Documents, and the consummation by Sellers of the transactions contemplated
thereby do not and shall not (a) require, other than the approval of the
Bankruptcy Court, the consent, approval or action of, or any filing with or
notice to, any corporation, firm, person or other entity or any public,
governmental or judicial authority foreign or domestic; (b) violate the terms of
any instrument, License and Permit, document or agreement to which Sellers or
the UK Subsidiaries are parties, or by which any Seller or any UK Subsidiary or
the property of any Seller or the UK Subsidiaries are bound, or be in conflict
with, result in a breach of or constitute (upon the giving of notice or lapse of
time or both) a default under any such instrument, document or agreement of any
Seller or any UK Subsidiary, or result in the creation of any lien upon any of
the property or assets of a Seller; (c) violate any order, writ, injunction,
decree, judgment, ruling, law, rule or regulation of any federal, state, county,
municipal, or foreign court or governmental authority applicable to Sellers, the
UK Subsidiaries, the Business, the Assets or the UK Subsidiary Assets, except to
the extent the provisions of the Bankruptcy Code may be applicable. Sellers and
the UK Subsidiaries are not subject to, or parties to, any mortgage, lien,
lease, agreement, contract, instrument, order, judgment or decree or any other
restriction of any kind or character which would prevent or hinder in any way
the continued operation of the Business after the Closing on substantially the
same basis as theretofore operated.

 

5.5    Compliance with Laws.    Sellers and the UK Subsidiaries are in
compliance with all applicable laws, orders, rules and regulations of all
governmental bodies and agencies, foreign

 

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and domestic, except where such noncompliance has and shall have, individually
or in the aggregate, no Material Adverse Effect. Sellers and the UK Subsidiaries
have not received written notice of any noncompliance with the foregoing.

 

5.6    Licenses and Permits.    Sellers and the UK Subsidiaries hold and are in
compliance with all licenses and permits listed on Schedule 2.1(e) attached
hereto, and to Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, such list,
together with the foreign qualifications listed on Schedule 5.1, constitutes all
of the licenses, permits, certification, variances, approvals and authorizations
of governmental agencies necessary or required or available for the use,
ownership, or operation of the Assets, the UK Subsidiary Assets and the
operation of the Business (collectively, the “Licenses and Permits”). Neither
Sellers nor the UK Subsidiaries have received written notice of any violations
in respect of any such Licenses and Permits. No proceeding is pending and to
Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, no proceeding is
threatened, which seeks revocation or limitation of any such Licenses and
Permits. Other than the foreign qualifications listed on Schedule 5.1, all of
Sellers’ Licenses and Permits are assignable to Purchaser.

 

5.7    Financial Information.    Attached hereto as Schedule 5.7(a) are true,
correct and complete copies of the consolidated balance sheet of Sellers and the
UK Subsidiaries as of February 28, 2003 and consolidated income and cash flow
statements of Sellers and the UK Subsidiaries for the periods ended February 28,
2003 and December 31, 2002, respectively (the “Consolidated Financial
Statements”). The Sellers represent that the Consolidated Financial Statements
are true, correct and complete in all material respects, have been prepared by
Sellers or Sellers’ accountants in accordance with GAAP, and fairly present the
financial condition of

 

29

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Sellers and the UK Subsidiaries at the respective dates thereof and the results
of their operations for the periods then ended. There have been no material
changes to the Consolidated Financial Statements since the dates thereof, except
resulting from the operation of the Business in the ordinary course. Attached
hereto as Schedule 5.7(b) are true correct and complete copies of the
consolidated balance sheet of the UK Subsidiaries as of February 28, 2003 and
consolidated income and cash flow statements of the UK Subsidiaries for the
periods ended February 28, 2003 and December 31, 2002, respectively (the “UK
Subsidiaries’ Financial Statements”). The UK Subsidiaries’ Financial Statements
have been prepared consistent with United States GAAP and reflect all claims
against, and all debts and liabilities of, the UK Subsidiaries, whether fixed or
contingent and such statements of income and cash flow of the UK Subsidiaries
fairly present the result of operations for the periods covered thereby. Except
to the extent reflected or reserved against in the Consolidated Financial
Statements and the UK Subsidiaries’ Financial Statements, neither Sellers nor
the UK Subsidiaries have any liabilities or obligation of any nature, whether
accrued, absolute, known or unknown, contingent or otherwise that would be
required to be reflected or reserved against on a balance sheet prepared in
accordance with United States GAAP other than those named in the ordinary course
which would not have an Material Adverse Effect.

 

5.8    Sufficiency of Assets.    The Assets and UK Subsidiary Assets constitute
all of the assets, tangible and intangible, required in the operation of the
Business since the Petition Date, subject only to additions and deletions in the
ordinary course of business and subject to sales before the date hereof of
assets or aspects of the Sellers’ Business which may have been sold by Sellers
pursuant to, and in accordance with, Bankruptcy Court orders entered after
notice and a hearing held pursuant to, inter alia, section 363 of the Bankruptcy
Code.

 

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5.9    Assumed Liabilities.    Schedule 1.5 sets forth by category, vendor
and/or payee and amount only those current, post-petition liabilities of Sellers
incurred in the ordinary course of business as of February 28, 2003 and the
long-term portion of Sellers’ liability to GATX, but excluding the Excluded
Liabilities. To Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, the
Closing of the transactions contemplated hereunder and the sale and transfer of
the Assets and the Business will not result in the acceleration of any Assumed
Liability. The aggregate of the Assumed Liabilities and the balance sheet
liabilities of the UK Subsidiaries (other than intercompany liabilities) (which
balance sheets shall be prepared in accordance with US GAAP) shall not exceed
$5,766,000.

 

5.10    Tax Returns and Payments.    To Sellers’ Knowledge and the UK
Subsidiaries’ Knowledge, the Sellers and the UK Subsidiaries have filed all tax
returns required by law to be filed on or before the date of this Agreement and
shall timely file all tax returns required by law to be filed on or prior to the
Closing. To the best of Sellers’ Knowledge and the UK Subsidiaries’ Knowledge,
all such returns are true, correct and complete in all respects, and all amounts
shown as owing thereon have been paid, except as set forth on Schedule 5.10.
Except as set forth on Schedule 5.10, neither Sellers nor the UK Subsidiaries
have received a notice of taxes due from any governmental authority; and, except
as set forth on Schedule 5.10, there are no pending or threatened audits,
investigations or claims or relating to any liability in respect of taxes.

 

5.11    Fixed Assets.    In the aggregate, the Fixed Assets set forth on
Schedule 2.1(a) and the fixed assets of the UK Subsidiaries, set forth on
Schedule 5.11 include substantially all of the furniture, fixtures and equipment
owned, leased, or used in the operation of the Business. Except

 

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as otherwise set forth on Schedule 2.1(a) or Schedule 5.11, all of the Fixed
Assets necessary to operate the Business on the date hereof, are in good working
order, ordinary wear and tear excepted, for purposes of operating the Business
as Sellers and the UK Subsidiaries are operating it as of the date hereof.

 

5.12    Contracts.    Schedule 2.1(b) sets forth a true and substantially
complete list of all non-debtor parties to the Executory Contracts to which
Sellers are parties and which may be assumed in accordance with this Agreement.
No non-debtor party to a material Executory Contract has been omitted from
Schedule 2.1(b).

 

5.13    Intellectual Property.    Except as set forth on Schedule 2.1(d):

 

(a)  Sellers own, on an exclusive basis for all material Sellers Intellectual
Property, all of Sellers’ Intellectual Property. Sellers possess all right,
title and interest in and to the Sellers’ Intellectual Property. Subject to
entry of the Sale Approval Order, Sellers shall own Sellers’ Intellectual
Property free and clear of any Claim, license or other restriction, and all
registered patents, trademarks, service marks and copyrights listed on Schedule
2.1(d) as the same relates to Sellers’ Intellectual Property are valid and
subsisting and in full force and effect;

 

(b)  the UK Subsidiaries, on an exclusive basis for all material UK
Subsidiaries’ Intellectual Property, possess all right, title and interest in
and to the UK Subsidiaries’ Intellectual Property, free and clear of any Claim,
license or other restriction, and all registered patents, trademarks, service
marks and copyrights listed on Schedule 2.1(d), as the same relates to the UK
Subsidiaries’ Intellectual Property are valid and subsisting and in full force
and effect;

 

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(c)  for all applications listed on Schedule 2.1(d), as the same relates to
Sellers’ Intellectual Property, one of Sellers either is the applicant or has
the right to require (without further expense, cost or fee) the applicant to
transfer ownership of the application and the registration once it issues, to
Sellers;

 

(d)  for all applications listed on Schedule 2.1(d), as the same relates to the
UK Subsidiaries’ Intellectual Property, one the UK Subsidiaries either is the
applicant or has the right to require (without further expense, cost or fee) the
applicant to transfer ownership of the application and the registration once it
issues, to the UK Subsidiaries;

 

(e)  Sellers’ Intellectual Property and UK Subsidiaries’ Intellectual Property
are all the Intellectual Property that is necessary for the ownership,
maintenance and operation of the Assets and UK Assets and the conduct of the
Business as it is presently conducted; and Sellers and the UK Subsidiaries have
the right to use all of Sellers’ Intellectual Property and UK Subsidiaries’
Intellectual Property respectively, in all jurisdictions in which the Business
is presently conducted; and the consummation of the transactions contemplated
hereby will not alter or impair any such rights or the rights of Purchaser or
the UK Subsidiaries to continue to use all of Sellers’ Intellectual Property and
UK Subsidiaries Intellectual Property respectively, in all jurisdictions in
which the Business is presently conducted;

 

(f)  Sellers and UK Subsidiaries have not, interfered with, infringed upon,
misappropriated or otherwise come into conflict with the rights of third parties
in any Intellectual Property, and have not received any charge, complaint,
claim, demand or notice, in writing so alleging (including any claim that
Sellers and UK Subsidiaries must

 

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license or refrain from using any Intellectual Property rights of any third
party) and to Sellers’ Knowledge and the UK Subsidiaries’ Knowledge the
continued operation of the Business as presently conducted does not and will
not, interfere with, infringe upon, misappropriate or otherwise come into
conflict with the rights of any third parties in any Intellectual Property, and
to Sellers’ Knowledge and the UK Subsidiaries Knowledge there is no basis for
such claim;

 

(g)  to Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, no third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Sellers and UK Subsidiaries Intellectual Property;

 

(h)  no action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand has been made, is pending, or, to Sellers’ Knowledge or UK
Subsidiaries’ Knowledge, is threatened which challenges the legality, validity,
enforceability, use or ownership of any Sellers’ Intellectual Property and UK
Subsidiaries’ Intellectual Property, and to Sellers’ Knowledge and the UK
Subsidiaries Knowledge there is no basis for such action; and

 

(i)  Sellers and the UK Subsidiaries have obtained valid and effective work made
for hire agreements and assignments from all of their employees, former
employees (or persons they currently intend to hire), independent contractors
and former independent contractors (collectively, the “Inventors”) of all such
Inventors’ rights in any Sellers and the UK Subsidiaries’ Intellectual Property
(i) developed by such Inventors while employed by or under contract with Sellers
and UK Subsidiaries or (ii) developed by such Inventors while not employed by
Sellers and UK Subsidiaries, which Sellers and

 

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UK Subsidiaries reasonably believe they need or will need in order to conduct
the Business as it has been conducted and continues to be.

 

Sellers and UK Subsidiaries have taken all reasonable action to maintain and
preserve the Sellers’ Intellectual Property and the UK Subsidiaries’
Intellectual Property, including entering into valid and effective
confidentiality/non-disclosure agreements with all third parties to whom they
disclose or have disclosed any confidential information or trade secrets which
are Sellers’ Intellectual Property and UK Subsidiaries’ Intellectual Property,
and making all filings and all payments of all maintenance and similar fees for
any of Sellers’ Intellectual Property listed on Schedule 2.1(d) and UK
Subsidiaries’ Intellectual Property listed on Schedule 2.1(d). Upon the
consummation of the transactions contemplated hereby and following the entry of
the Sale Approval Order, and except as set forth on Schedule 2.1(d), Purchaser
shall have the exclusive right to own and use the Sellers Intellectual Property
and the UK Subsidiaries shall retain the exclusive right to own and use the UK
Intellectual Property necessary to conduct the Business as it is presently being
conducted.

 

5.14    Litigation.    Except as set forth on Schedule 5.14, there is no action,
proceeding or investigation pending before any court, tribunal or governmental
body, and to Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, there is no
such action, proceeding or investigation threatened against or involving Sellers
or the UK Subsidiaries relating to the Assets or the operation of the Business.
Except as set forth on Schedule 5.14, there is no action, proceeding or
investigation pending before any court, tribunal or governmental body, and to
Sellers’ Knowledge and to the UK Subsidiaries’ Knowledge, there is no such
action, proceeding or investigation threatened before any court, tribunal or
governmental body seeking to restrain or

 

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prohibit or to obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement, or which is
reasonably likely to adversely affect the Business, the Assets, or Sellers’
ability to consummate the transactions contemplated by this Agreement and the
Transaction Documents.

 

5.15    Insurance.    Sellers and the UK Subsidiaries maintain property, fire,
casualty, worker’s compensation, general liability insurance and other forms of
insurance relating to the Assets and the UK Subsidiary Assets and the operation
of the Business against risks of the kind customarily insured against and in
amounts customarily insured (and, where appropriate, in amounts not less than
the replacement cost of said Assets and UK Subsidiary Assets). Neither the
Sellers nor the UK Subsidiaries have received any notification, cancellation,
modification, or denial of renewal of such policies, and all such policies of
Sellers, except any directors’ and officers’ liability policies, are assignable
to Purchaser.

 

5.16    Benefit Plans and ERISA.

 

(a)  Except as set forth on Schedule 5.16(a), the Sellers do not currently
maintain any employee benefit plans subject to Title IV of the Employee
Retirement Income Fund of 1974, as amended from time to time (“ERISA”) nor have
they maintained any such plan since their respective dates of incorporation.
None of the Sellers is a contributing employer to a multiemployer plan as
defined in section 3(37) of ERISA. The Sellers have no liability or obligation
arising under Title IV of ERISA and, to Sellers’ Knowledge, there is no basis
for liability.

 

(b)  Except as set forth on Schedule 5.16(b) Sellers have complied in all
respects with all requirements of all applicable laws relating to employment
practices,

 

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terms and conditions of employment, immigration, wages, hours and other similar
legislation. Assuming performance by Purchaser of its covenant in Section 4.3
hereof, the WARN Act will not apply to the transactions contemplated by this
Agreement and if it does, the Sellers have complied in all respects thereto.

 

(c)  Sellers are not parties to any collective bargaining agreement and no
employee of the Sellers is a member of any union certified with the Sellers as a
bargaining agent.

 

5.17    Environmental.

 

(a)  Except as may be set forth in Schedule 5.17:

 

(i) The Sellers and the UK Subsidiaries are conducting and have at all times
conducted the Business and operations in material compliance with all applicable
statutes, laws, rules, regulations, ordinances, permits, orders, decrees or
other obligations lawfully imposed by any governmental authority, foreign or
domestic, in effect at the relevant times pertaining to protection of the
environment, the treatment, emission and discharge of gaseous, particulate and
effluent pollutants and the generation, manufacture, production, refinement,
processing, use, handling, storage, treatment, removal, transport, transloading,
cleanup, decontamination, discharge and disposal of Hazardous Substances (as
hereinafter defined), including, without limitation, those statutes, laws, rules
and regulations set forth below (collectively, “Environmental Laws”), and, to
Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, no proceedings are
pending or threatened against the Sellers or the UK Subsidiaries with respect to
the foregoing

 

37

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matters;

 

(ii)  Sellers have not received any written notice that they are considered to
be a potentially responsible party with respect to any site listed or proposed
to be listed on the National Priorities List pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Sections 9601, et seq. (“CERCLA”), or any registry or inventory of
hazardous waste or similar sites maintained by any state of the United States of
America or under any similar Environmental Law, and to Sellers’ Knowledge and
the UK Subsidiaries’ Knowledge, they will not be so named;

 

(iii)  To Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, there are no
conditions (including, without limitation, the presence of any Hazardous
Substance in, on or about any such property or the migration of any Hazardous
Substance from or across any such property) existing on any of the properties
currently or formerly owned, leased, or occupied by the Sellers or the UK
Subsidiaries that require remedial action, removal or closure by the Sellers or
the UK Subsidiaries under any Environmental Laws;

 

(iv)  No claim, demand, or action has been made and to Sellers’ Knowledge and
the UK Subsidiaries’ Knowledge, no claim, demand or action is threatened against
or upon the Sellers, UK Subsidiaries or any person or entity from whom or to
whom the Sellers and the UK Subsidiaries have at any time leased any real
property, based upon or relating to alleged damage to health caused by any
Hazardous Substance, and to Sellers’ Knowledge and the UK

 

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Subsidiaries’ Knowledge, no such claim, demand or action will be made or taken;

 

(v)  Neither the Sellers nor the UK Subsidiaries have not been charged in
writing with improperly generating, manufacturing, producing, refining,
processing, using, handling, storing, treating, removing, transporting,
discharging or disposing a Hazardous Substance, and to Sellers’ Knowledge and
the UK Subsidiaries’ Knowledge, no such charge is pending; and

 

(vi)  To Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, there have been
no environmental inspections, investigations, studies, tests, reviews or other
analyses conducted in relation to any property currently or formerly owned or
leased by the Sellers or the UK Subsidiaries during the time that the Sellers or
the UK Subsidiaries have owned or leased such property, and to Sellers’
Knowledge and the UK Subsidiaries’ Knowledge, none are pending.

 

(b)  For purposes of this Agreement, “Hazardous Substance” will mean (x) any
flammable, ignitable, corrosive, reactive, radioactive or explosive substance or
material, hazardous waste, toxic substance or related material, (y) any other
substance or material defined or designated as a hazardous or toxic substance,
material or waste by applicable federal, state or local laws or regulations
(including, without limitation, any Environmental Laws) currently in effect, and
(z) such other substances, materials and wastes that are regulated under
applicable federal, state or local laws or regulations, and will include,
without limitation:

 

(i)  those substances included within the definitions of “hazardous substances”,
“hazardous materials”, “toxic substances” or “solid waste” in

 

39

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CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et
seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and in the regulations promulgated pursuant to said Environmental Laws;

 

(ii)  those substances listed in the United States Department of Transportation
Table (49 CFR 172,101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and
amendments thereto); and

 

(iii)  any material, waste or substance that is, in whole or in part, (w)
petroleum, (x) asbestos, (y) polychlorinated biphenyls or (z) designated as a
“hazardous substance” pursuant to Section 311 of the Clean Water Act (33 U.S.C.
Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33
U.S.C. Section 1317), or Section 112 or other Section of the Clean Air Act, as
amended.

 

5.18    Employees.    There is no labor strike, lockout or work stoppage
pending, nor to Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, is there
any such labor strike, lockout or work stoppage threatened against or involving
Sellers or the UK Subsidiaries. Except as set forth on Schedule 5.18, neither
Sellers nor UK Subsidiaries are parties to any contract for the employment of
any employee. To Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, neither
the Sellers nor the UK Subsidiaries have received notice from any Sellers’
Employee or an employee of the UK Subsidiaries, of such employee’s intention to
resign or retire except as set forth on Schedule 5.18. The Purchaser has been
provided with a list of the true, correct and complete information regarding the
current base salary or wages, anticipated bonus to be

 

40

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received for fiscal year 2003 and accrued vacation pay with respect to current
employees of Sellers and the UK Subsidiaries. None of the Key Employees have
terminated their employment or have given notice of an intent to terminate their
employment. Sellers and the UK Subsidiaries have withheld all amounts required
by law or contract to be withheld from the wages or salaries of their employees
and are not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing or for payment to any trust or other
fund or to any authority with respect to unemployment compensation, Social
Security or other benefits for employees. Neither the Sellers nor the UK
Subsidiaries have engaged in any unfair labor practice or illegally
discriminated on the basis of race, age, sex or otherwise in their employment
conditions or practices with respect to their employees or employee benefits.

 

5.19    Accounts Receivable.    Except as may otherwise be set forth on Schedule
2.1(c), the Accounts Receivable and the UK Accounts Receivable have arisen in
the ordinary course of the Business and represent valid and binding obligations
owing to Sellers’ and/or the UK Subsidiaries. The Accounts Receivable and the UK
Accounts Receivable result from bona fide transactions in the ordinary course
and provide for payment terms that are normal and customary in the industry. To
Sellers’ Knowledge and the UK Subsidiaries’ Knowledge, none of such Accounts
Receivable or the UK Accounts Receivable is, or at the Closing Date will be,
subject to any recoupment, counterclaim or setoff. Except as set forth on
Schedule 5.19, there has been no material change in the amount of the Accounts
Receivable since February 28, 2003 to the date hereof. Sellers have established
adequate and sufficient reserves in accordance with GAAP to cover all doubtful
or uncollectible accounts receivable.

 

5.20    Customers.    Except as set forth on Schedule 5.20, since January 29,
2003, Sellers

 

41

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and the UK Subsidiaries have not received any notification, either orally or in
writing from any customer from whom the Sellers and the UK Subsidiaries derive
more than 2% of their aggregate annualized revenue based on the first quarter of
2003. Except as set forth on Schedule 5.20, to Sellers’ Knowledge and the UK
Subsidiaries’ Knowledge, no customer from whom the Sellers and the UK
Subsidiaries derive more than 2% of their aggregate annualized revenue based on
the first quarter of 2003, on a consolidated basis, has terminated its
relationship, indicated an intent to terminate its relationship, has materially
reduced its relationship or indicated an intent to materially reduce its
relationship with either Sellers or the UK Subsidiaries.

 

 

ARTICLE 6

 

REPRESENTATIONS AND WARRANTIES

OF THE PURCHASER

 

In order to induce Sellers to enter into this Agreement and consummate the
transactions contemplated hereby, the Purchaser represents and warrant to
Sellers as follows:

 

6.1    Organization of the Purchaser.    The Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware and has
the corporate power and authority to own its property and to carry on its
business as now being conducted by it.

 

6.2    Corporate Power and Authority; Due Authorization.    The Purchaser has
full corporate power and authority to execute and deliver this Agreement and
each of the other Transaction Documents to which the Purchaser is or shall be a
party and to consummate the transactions contemplated hereby and thereby. Prior
to the Closing, the Board of Directors of the Purchaser shall have duly approved
and authorized the execution and delivery of this Agreement and each of the
Transaction Documents and the consummation of the transactions contemplated

 

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hereby and thereby, and no other corporate proceedings on the part of the
Purchaser are necessary to approve and authorize the execution and delivery of
this Agreement and Transaction Documents and the consummation of the
transactions contemplated hereby and thereby. This Agreement and the Transaction
Documents constitute, or shall constitute when executed and delivered, a valid
and binding agreement of the Purchaser, enforceable against the Purchaser in
accordance with its terms.

 

6.3    No Conflict; Consents.    The execution and delivery by the Purchaser of
this Agreement, the Transaction Documents and the consummation by the Purchaser
of the transactions contemplated hereby and thereby do not and shall not (a)
require the consent, approval or action of, or any filing or notice to, any
corporation, firm, person or other entity or any public, governmental or
judicial authority; (b) violate the terms of any instrument, document or
agreement to which the Purchaser is a party, or by which the Purchaser or the
property of the Purchaser is bound, or be in conflict with, result in a breach
of or constitute (upon the giving of notice or lapse of time, or both) a default
under any such instrument, document or agreement; (c) violate the Purchaser’s
Articles of Incorporation or Bylaws; or (d) violate any order, writ, injunction,
decree, judgment, ruling, law or regulation of any federal, state, county,
municipal, or foreign court or governmental authority applicable to the
Purchaser, or the business or assets of the Purchaser, and relating to the
transactions contemplated herein.

 

6.4    Brokers Fees and Expenses.    The Purchaser has not retained or utilized
the services of any broker, finder, or intermediary, or paid or agreed to pay
any fee or commission to any other person or entity for or on account of the
transactions contemplated hereby, or had any communications with any person or
entity which would obligate Sellers to pay any such fees or

 

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commissions.

 

6.5    Financial Capacity.    Purchaser has or as of Closing shall have all
funds necessary to consummate this Agreement, the Transaction Documents and all
transactions contemplated herein and therein.

 

6.6    Issuance of Securities.    At the Closing, the Warrant (including the
underlying shares of Common Stock) will be duly authorized and, when issued and
paid for in accordance with the terms thereof, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Claims and shall not be
subject to preemptive rights or similar rights of stockholders. The Purchaser
has reserved from its duly authorized capital stock the maximum number of shares
of common stock issuable upon exercise of the Warrant.

 

6.7    Capitalization.    The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Purchaser as of the Closing Date (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Purchaser) is set
forth in Schedule 6.7 (which shall be delivered as of the Closing Date and
reflects the capitalization as of the Closing Date). All outstanding shares of
capital stock, will be duly authorized, validly issued, fully paid and
nonassessable and will be issued in compliance with all applicable securities
laws on the Closing Date. Except as disclosed on Schedule 6.7, as of the Closing
Date, there are no outstanding options, warrant, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
giving any person or entity any right to subscribe for or acquire, any shares of
common stock, or contracts, commitments, understandings or arrangements by which
the Purchaser is or may become bound to issue

 

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additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as set forth on Schedule 6.7,
as of the Closing Date, there are no anti-dilution or price adjustment
provisions contained in any security issued by the Purchaser (or in any
agreement providing rights to security holders) and the issue and sale of the
Warrant will not obligate the Purchaser to issue shares of common stock or other
securities to any person or entity and will not result in a right of any holder
of Purchaser securities to adjust the exercise, conversion, exchange or reset
price under such securities.

 

 

ARTICLE 7

 

[Intentionally Omitted]

 

 

ARTICLE 8

 

CONDITIONS TO OBLIGATIONS OF

THE PURCHASER TO CLOSE

 

Each and every obligation of the Purchaser under this Agreement to be performed
on or prior to the Closing shall be subject to the fulfillment, on or prior to
the Closing, of each of the following conditions, unless and to the extent any
such condition is expressly waived in writing by the Purchaser:

 

8.1    Representations and Warranties True at Closing.    The representations
and warranties of Sellers and the UK Subsidiaries contained in this Agreement
shall be true and correct as of the Closing Date as if made on and as of such
date except (a) to the extent such representations and warranties expressly
speak as of an earlier date such as “the date hereof” or

 

45

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“the date of this Agreement” (in which case such representations and warranties
shall be true and correct as of such earlier date), or (b) where the failure of
such representations and warranties to be true and correct shall not have a
Material Adverse Effect.

 

8.2    Obligations Performed.    Sellers and the UK Subsidiaries shall have
performed, completed and complied in all respects with all agreements,
conditions, covenants and the obligations required by this Agreement to be
performed, complied with or completed by them prior to or at the Closing, except
where the failure to so comply would not have a Material Adverse Effect.

 

8.3    Consents.    Sellers shall have obtained and delivered to Purchaser
written consents, if any, of all persons or entities set forth on Schedule 8.3
whose consent is required to consummate the transactions contemplated herein,
and all of such consents shall remain in full force and effect at and as of the
Closing.

 

8.4    Closing Deliveries.    Sellers shall have delivered to Purchaser each of
the following, together with any additional items which Purchaser may reasonably
request to effect the transactions contemplated herein:

 

(a)  a certificate of an officer of Sellers and the UK Subsidiaries certifying
as to the matters set forth in Sections 8.1 and 8.2 hereof;

 

(b)  a General Conveyance, Bill of Sale, Assignment and Assumption Agreement in
substantially the form of Exhibit 8.4(b) hereof (the “Conveyance Agreement”);

 

(c)  forms of the corporate name change documents reasonably satisfactory to
Purchaser;

 

(d)  copies of the those Insurance Policies that are to be assigned to or

 

46

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continued with Purchaser following Closing and proof that such Insurance
Policies have been paid in full through such dates;

 

(e)  assignment agreements in a form or forms reasonable satisfactory to
Purchaser to transfer the Intellectual Property to Purchaser;

 

(f)  written consents, if any, from all parties whose consent to the
transactions contemplated herein are required;

 

(g)  copies of Sellers’ corporate minute books;

 

(h)  a duly executed copy of the Creditor’s Trust Agreement;

 

(i)  a certificate from the trustee of the Creditor’s Trust to the Purchaser
regarding the Creditor Trust’s status as required by any applicable securities
laws; and

 

(j)  stock certificates representing all of the issued and outstanding shares in
Interliant UK Holdings Limited and all ancillary documents necessary to effect a
transfer of such shares to Purchaser.

 

8.5    No Challenge.    There shall not be any pending or threatened action,
proceeding or investigation before any court or administrative agency by any
government agency, foreign or domestic, or any pending action by any other
person, challenging, or seeking damages in connection with, the acquisition by
the Purchaser of the Assets or the ability of the Purchaser to own and operate
the Assets or the Business or which action or proceeding would have a Material
Adverse Effect.

 

8.6    No Investigations of Sellers or Business.    As of the Closing Date there
shall be no pending or threatened investigation by any municipal, state or
federal government agency or regulatory body with respect to Sellers, the UK
Subsidiaries, the Assets or the Business, except

 

47

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to the extent that such investigations would not have a Material Adverse Effect.

 

8.7    Schedule Supplements.    Sellers shall have provided Purchaser with
supplements to Schedules, if any are applicable, dated as of the Closing Date,
with all material changes through such date duly noted thereon, which supplement
shall have no effect on whether the conditions set forth in Section 8.1 have
been fulfilled, and shall not be, and are not intended to be a cure for any
breach thereof.

 

8.8    Legality.    No foreign, federal or state statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of making the transactions contemplated herein illegal
or otherwise prohibiting the consummation of the transactions contemplated
herein.

 

8.9    Bankruptcy Court Approval.    The Bankruptcy Court shall have entered (a)
the Procedures Order in substantially the form as annexed hereto as Exhibit 4.11
and (b) the Sale Approval Order in substantially the form as annexed hereto as
Exhibit 8.9. The Sale Approval Order shall have become a Final Order.

 

8.10    Insurance.    Sellers shall have obtained and fully paid for a
directors’ and officers liability insurance policy providing for defense and
indemnification coverage for a period of not less than three (3) years form the
Closing Date, in accordance with Section 4.10.

 

8.11    Obligation Regarding Closing Conditions.    Sellers and the UK
Subsidiaries shall use commercially reasonable efforts to ensure that the
conditions set forth Article 8 shall be satisfied on or prior to the Outside
Date.

 

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ARTICLE 9

 

CONDITIONS TO SELLERS’ OBLIGATIONS

 

Each and every obligation of Sellers under this Agreement to be performed on or
prior to the Closing, shall be subject to the fulfillment, on or prior to the
Closing, of each of the following conditions unless and to the extent any such
condition is specifically waived in writing by Sellers:

 

9.1    Representations and Warranties True at Closing. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects as of the Closing Date as if made on and as such date
except (a) to the extent such representations and warranties expressly speak as
of an earlier date such as “the date hereof” or “the date of this Agreement” (in
which case such representations and warranties shall be true and correct as of
such earlier date), or (b) where the failure of such representations and
warranties to be true and correct in all material respects as of the Closing
Date shall not materially hinder the ability of Purchaser to fulfill Purchaser’s
obligations under this Agreement.

 

9.2    Bankruptcy Court Approval.    The Bankruptcy Court shall have entered (a)
the Procedures Order in substantially the form as annexed hereto as Exhibit 4.11
and (b) the Sale Approval Order in substantially the form as annexed hereto as
Exhibit 8.9.

 

9.3    Obligations Performed. Purchaser shall have performed, completed and
complied in all material respects with all agreements, conditions, covenants and
obligations required by this Agreement to be performed, complied with or
completed by them prior to or at the Closing.

 

9.4    Consents.    Purchaser shall have obtained and delivered to Sellers
written consents

 

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of all persons and entities whose consent, if any, is required to consummate the
transactions contemplated herein, and all of such consents shall remain in full
force and effect at and as of the Closing, except were such consent would not
have a material adverse effect on Purchaser’s ability to consummate the
Transactions.

 

9.5    Closing Deliveries.    The Purchaser shall have delivered to the Sellers
each of the following, together with any additional items which the Sellers may
reasonably request to effect the transactions contemplated herein:

 

(a)  a secretary’s certificate certifying as to the corporate resolution of the
Board of Directors of the Purchaser authorizing the transactions contemplated
herein and the execution, delivery and performance of this Agreement and the
Transaction Documents by the Purchaser;

 

(b)  a certificate of the President of the Purchaser certifying as to the
matters set forth in Sections 9.1 and 9.3 hereof;

 

(c)  payment of the Cash Purchase Price in the manner set forth in Section 3.1;

 

(d)  the Warrant, issued to the Creditor Trust;

 

(e)  the Conveyance Agreement duly executed by the Purchaser;

 

(f)  an opinion of counsel to Purchaser substantially in the form of Exhibit 9.5
attached hereto; and

 

(g)  a duly executed copy of the Creditor’s Trust Agreement.

 

9.6    No Challenge.    There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency, foreign or domestic, or any pending action by any other
person, challenging or seeking damages in

 

50

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connection with, the acquisition by the Purchaser of the Business or the Assets
pursuant to the transactions contemplated herein or the ability of the Purchaser
to own and operate the Business or the Assets or which action or proceeding
would have a Material Adverse Effect.

 

9.7    Legality.    No foreign, federal or state statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of making the transactions contemplated herein illegal
or otherwise prohibiting the consummation of the transactions contemplated
herein.

 

9.8    Obligation Regarding Closing Conditions.    Purchaser shall use
commercially reasonable efforts to ensure that the conditions set forth in
Article 9 shall be satisfied on or prior to the Outside Date.

 

 

ARTICLE 10

 

TERMINATION

 

10.1    Termination.    This Agreement may be terminated at any time prior to
the Closing as follows:

 

(a)  by mutual written consent of the Purchaser and Sellers;

 

(b)  by either Purchaser or Sellers if an Alternative Transaction is approved by
the Bankruptcy Court;

 

(c)  by Sellers on or after the Outside Date in the event (i) Sellers are not in
breach of their covenants set forth in this Agreement and none of the
representations and warranties of Sellers or the UK Subsidiaries shall have
become and continue to be untrue, in a

 

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manner that would cause the conditions set forth in Sections 8.1 or 8.2 not to
be satisfied, and (ii) there shall have been (x) a material breach of
Purchaser’s representations and warranties in this Agreement, or (y) a material
failure by Purchaser to perform its covenants in this Agreement;

 

(d)  by Purchaser on or after the Outside Date in the event (i) Purchaser is not
in breach of its covenants set forth in this Agreement and none of its
representations and warranties shall have become and continue to be untrue, in a
manner that would cause the conditions set forth in Sections 9.1 and 9.3 not to
be satisfied, and (ii) there shall have been (x) a material breach of the
representations and warranties of Sellers or the UK Subsidiaries in this
Agreement, or (y) a material failure by Sellers or the UK Subsidiaries to
perform their covenants in this Agreement, which breach or failure shall have a
Material Adverse Effect;

 

(e)  by Purchaser if the Sale Order is not a Final Order on or before the
Outside Date;

 

(f)  by Purchaser as permitted under Section 11.1(b);

 

(g)  by Purchaser if a Material Adverse Effect shall have occurred at any time;

 

(h)  by Purchaser or Sellers if any permanent injunction, decree or judgment by
any governmental entity preventing the consummation of the transactions
contemplated hereby shall have become final and non-appealable; or

 

(i)  by either party after the Outside Date if neither party is in breach.

 

Prior to the exercise of a termination right under subsections (c), (d) or (g)
of this Section, the exercising Party shall give the other Party written notice
of its intent to terminate, including the basis thereof and the notified party
shall have five business days to cure any breach or event which gave rise to the
right of termination (if curable), as the case may be. If such notice is

 

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given within five days of the Outside Date, the Outside Date shall be deemed to
be five days from the date of delivery of the notice. There is no right to
terminate if the Party in receipt of notice cures the breach or breaches within
the 5 day cure period.

 

10.2    Effect of Termination.    In the event of the termination of this
Agreement, this Agreement shall forthwith become void, and thereafter no Party
hereto shall have any further obligation or liability hereunder. Notwithstanding
the foregoing terms of this Section 10.2:

 

(a) if this Agreement is terminated pursuant to 10.1(c) under the circumstances
entitling Sellers to withdraw the Purchase Deposit from the Escrow Account,
Purchaser’s sole liability and obligation hereunder shall be the Purchase
Deposit, and such amount shall constitute liquidated damages;

 

(b) in the event Purchaser or Sellers terminates this Agreement in accordance
with Section 10.1(b), Purchaser shall be entitled to the Break-up Fee in
accordance with Section 10.3 and Sellers’ liability hereunder shall not exceed
the Break-up Fee, and such amount shall constitute liquidated damages; and

 

(c) in the event that Purchaser terminates this Agreement in accordance with
Section 10.1(d), Purchaser shall have the remedies available to it at law or in
equity.

 

10.3    Break-Up Fee.    If either the Purchaser or the Sellers terminate this
Agreement, pursuant to section 10.1(b) hereof the Purchaser shall be entitled to
be paid the Break-Up Fee. The terms and conditions of the payment of the
Break-Up Fee shall also be governed by the Procedures Order. The parties agree
that the Break-Up Fee is a reasonable estimate of Purchaser’s costs, expenses
and loss of business opportunity and is fair consideration to induce Purchaser
to enter into this Agreement. It is an express condition of this Agreement that
the

 

53

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Procedures Order shall specifically approve and provide for the payment of the
Break-Up Fee as set forth herein and therein.

 

10.4    Survival.    All of the representations and warranties contained in this
Agreement and delivered at the Closing shall expire on the Closing Date.

 

 

ARTICLE 11

 

MISCELLANEOUS PROVISIONS

 

11.1    Risk of Loss.    The risk of loss relating to the Assets and the
Business prior to the Closing shall be with Sellers. In the event that a loss or
damage which constitutes a Material Adverse Effect occurs between the date
hereof and the Closing in respect of Assets or the Business, then Purchaser
shall have the option of either (a) proceeding to close this Agreement with an
assignment of any insurance proceeds which may be paid or payable to reflect
such loss or damage or (b) terminating this Agreement.

 

11.2    Severability.    If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and/or shall be modified
to conform with such laws, without invalidating the remaining provisions hereto.

 

11.3    Modification.    This Agreement may be amended, modified or superseded,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by the Parties
hereto or, in the case of a waiver, by or on behalf of the Party waiving
compliance. The failure of either Party at any time or times to require
performance of any provisions hereof shall in no manner affect the right at a
later time to

 

54

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enforce the same. No waiver by either Party of any condition, or of any breach
of any term, covenant, representation or warranty contained in this Agreement,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of any breach of any other term, covenant, representation or
warranty.

 

11.4    Assignment, Survival and Binding Agreement.    The terms and conditions
hereof shall survive the Closing as provided herein and shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns.

 

11.5    Jointly Drafted.    This Agreement shall be deemed jointly drafted by
the parties and no provision, term, condition or representation shall be
construed against a party by reason of its having drafted this Agreement.

 

11.6    Execution.    This Agreement may be executed in one or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

 

11.7    Notices.    All notices, request, demands or other communications
hereunder shall be in writing and shall be given by (a) personal delivery; (b)
telecopy (with confirmation of receipt); (c) nationally recognized overnight
delivery service; or (d) by registered or certified mail, first class

 

55

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postage prepaid, return receipt requested, addressed as follows:

 

If to the Sellers:

 

Interliant, Inc.

Two Manhattanville Road

Purchase, NY 10577

Attn: Bruce Klein, Senior Vice President and General Counsel.

Telecopy: (914) 694-1346

 

With a copy to:

 

Kronish Lieb Weiner & Hellman, LLP

1114 Avenue of the Americas

New York, NY 10036

Attn: Cathy Hershcopf, Esq.

Telecopy: (212) 479-6297

 

If to the Purchaser:

 

Pequot Capital Management, Inc.

500 Nyack Farm Road

Westport, CT 06880

Attn: Aryeh Davis, Esq. and Amber Tencic

Telecopy: (203) 557-5563

Telecopy: (212) 651-3481

 

With a copy to:

 

Angel & Frankel, P.C.

460 Park Avenue

New York, NY 10022-1906

Attn: Laurence May, Esq.

Telecopy: (212) 752-8393

 

or to such other address as any party may have furnished to the other in writing
in accordance with this Section 11.7. Notices shall be effective upon receipt.

 

11.8    Entire Agreement; No Third Party Beneficiaries.    This Agreement,
together with the Exhibits and Schedules attached hereto, constitutes the entire
agreement and supersedes

 

56

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any and all other prior or contemporaneous agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof and is not intended to confer upon any person other than the
Sellers and the Purchaser any rights or remedies hereunder.

 

11.9    Further Assurances.    The Parties agree to execute and deliver, both
before and after the Closing, any additional information, documents or
agreements contemplated hereby and/or necessary or appropriate to effect and
consummate the transactions contemplated hereby; provided, that no such
instrument or document shall expand a Party’s liability beyond that contemplated
in this Agreement.

 

11.10    Governing Law and Submission to Jurisdiction.    Except as otherwise
expressly provided herein, this Agreement shall be governed by and construed
under the laws of the State of New York except to the extent such laws are
superceded by the Bankruptcy Code and without regard to principles of conflict
of law. The Parties agree that the court having jurisdiction over the Bankruptcy
Case shall have exclusive jurisdiction to resolve any controversy or claim
arising out of or relating to this Agreement or any other agreement entered into
by the Parties in connection herewith, or the breach hereof or thereof, and each
of the Parties hereby consents to the personal jurisdiction of such court (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection, including, but not limited to, any objection to the laying of
venue or on the grounds of forum non conveniens, which any of them may now or
hereafter have to the bringing of such action or proceeding in such
jurisdictions. Each Party hereby irrevocably consents to the service of process
of any of the aforesaid courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to

 

57

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the other parties to such action or proceeding

 

11.11    Acknowledgements.

 

(a)  Any and all duties and obligations which either Party may have to the other
are limited to those expressly stated in this Agreement. Neither the duties nor
obligations of any Party, nor the rights of any Party, shall be expanded beyond
the express terms of this Agreement on the basis of any legal or equitable
principle or on any other basis whatsoever. Neither any equitable or legal
principle nor any implied obligation of good faith or fair dealing nor any other
matter requires either Party to incur, suffer or perform any act, condition or
obligation contrary to the express terms of this Agreement, which define the
outer limit of what may be expected or required from either Party under any and
all circumstances, whether existing or not and whether foreseeable or
unforeseeable. The Parties acknowledge that it would be unfair to increase any
of the obligations of any Party under this Agreement on the basis of any implied
obligation or otherwise.

 

(b)  Without in any manner limiting the generality of Section 11.10(a) or any
other provision of this Agreement, neither Sellers or Purchaser is or shall be
deemed to be in a relationship of partners or joint venturers with each other by
virtue of this Agreement or otherwise; nor shall they be an agent,
representative, trustee or fiduciary of, or have any fiduciary obligations to,
the other.

 

 

 

[Signatures on following page]

 

58

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

   

SELLERS:

 

INTERLIANT, INC.

 

By:_____________________________________

Its:_____________________________________

         

INTERLIANT ACQUISITION CORP.

 

By:_____________________________________

Its:_____________________________________

         

INTERLIANT ASSOCIATION SOLUTIONS, INC.

 

By:_____________________________________

Its:_____________________________________

         

INTERLIANT CONSULTING AND PROFESSIONAL

SERVICES, INC.

 

By:_____________________________________

Its:_____________________________________

         

INTERLIANT INTERNATIONAL, INC.

 

By:_____________________________________

Its:_____________________________________

         

INTERLIANT SERVICES, INC.

 

By:_____________________________________

Its:_____________________________________

--------------------------------------------------------------------------------

 

    

INTERLIANT TEXAS, INC.

 

By:_____________________________________

Its:_____________________________________

           

THE JACOBSON CONSULTING GROUP, INC.

 

By:_____________________________________

Its:_____________________________________

           

RSP INSURANCE AGENCY, INC.

 

By:_____________________________________

Its:_____________________________________

           

SL SUCCESSOR CORP.

 

By:_____________________________________

Its:_____________________________________

           

SOFT LINK HOLDING CORP.

 

By:_____________________________________

Its:_____________________________________

           

TP SUCCESSOR CORP.

 

By:_____________________________________

Its:_____________________________________

--------------------------------------------------------------------------------

 

   

PURCHASER:

 

I Acquisition, Inc.

 

By: Harold Kahn

Its: President

--------------------------------------------------------------------------------

 

   

UK SUBSIDIARIES:

 

Interliant UK Limited

 

By:_____________________________________

Its:_____________________________________

         

Interliant UK Holdings Limited

 

By:_____________________________________

Its:_____________________________________

 

--------------------------------------------------------------------------------

 

Execution Copy

 

LIST OF EXHIBITS

 

Name of Exhibit

--------------------------------------------------------------------------------

  

Exhibit

--------------------------------------------------------------------------------

Creditor Trust Agreement

  

1.21

Warrant Terms

  

1.61

Escrow Agreement

  

3.3

Procedures Order

  

4.11

Conveyance Agreement

  

8.4(b)

Sale Approval Order

  

8.9

Opinion Letter of Buyer’s Counsel

  

9.5

 

--------------------------------------------------------------------------------

Execution Copy

 

LIST OF SCHEDULES

 

Name of Schedule

--------------------------------------------------------------------------------

  

Schedule

--------------------------------------------------------------------------------

Current liabilities of Sellers incurred in the ordinary course of business as of
February 28, 2003

  

1.5

UK Contracts

  

1.55

Domestic Fixed Assets

  

2.1(a)

Third Parties to Executory Contracts

  

2.1(b)

Accounts Receivable and UK Accounts Receivable as of February 28, 2002

  

2.1(c)

Intellectual Property

  

2.1(d)

Licenses and Permits

  

2.1(e)

Deposits

  

2.1(f)

Scheduled Vendors

  

2.1(k)

Claims of the Sellers’ estate in Bankruptcy, not related to the Assets or the
Business

  

2.2

Measurement Net Worth

  

3.4(a)

Key Employees

  

4.3(a)

Sellers’ Employees

  

4.3(b)

Insurance Policies of Sellers

  

4.10

Foreign Qualifications

  

5.1

--------------------------------------------------------------------------------

 

Name of Schedule

--------------------------------------------------------------------------------

  

Schedule

--------------------------------------------------------------------------------

No Conflict; Required Consents

  

5.4

Consolidated Financial Statements

  

5.7(a)

UK Subsidiaries’ Financial Statements

  

5.7(b)

Taxes

  

5.10

Fixed Assets of UK Subsidiaries

  

5.11

Litigation

  

5.14

Employee Benefit Plans

  

5.16(a)

Exceptions to Compliance with Employee Obligations

  

5.16(b)

Environmental Compliance

  

5.17

Employment Agreements; Notice of Resignation

  

5.18

Accounts Receivable Exceptions

  

5.19

Notices of Customer Termination

  

5.20

Capitalization of Purchaser (to be delivered at Closing)

  

6.7

Required Consents

  

8.4