Document:

EXHIBIT
10.13

 

STOCK
PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”) dated as of November 15,
2004 (the “Agreement Date”) is
between Kintera, Inc., a Delaware corporation (“Buyer”), and Intuit Inc., a Delaware corporation (“Seller”).

 

W
I T N E S S E T H:

 

WHEREAS, Seller is the record and beneficial
owner of the Shares (as defined below) and desires to sell the Shares to Buyer,
and Buyer desires to purchase the Shares from Seller, upon the terms and
subject to the conditions hereinafter set forth; and

 

WHEREAS, Buyer and Seller have determined
that the sale of the Shares to Buyer is in the best interests of their
respective companies and stockholders and have agreed to effect the
transactions provided for herein upon the terms and conditions of this
Agreement.

 

The parties hereto agree as follows:

 

ARTICLE 1
DEFINITIONS

 

The following terms, as used herein (except
as otherwise specified in Article 8, have the following meanings:

 

“AF Employees”
means employees of Seller who provide substantially all of their services to
the Company and its Subsidiaries.

 

“Affiliate”
means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with such Person; provided,
however,  that neither the
Company nor any Subsidiary shall be considered an Affiliate of Seller.

 

“Benefit Arrangement”
means any employment, severance or similar contract or
arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers’ compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits) that
(i) is not an Employee Plan, (ii) is entered into, maintained, administered or
contributed to, as the case may be, by Seller, any of Seller’s Affiliates, the
Company or any Subsidiary, and (iii) covers any employee or former employee of
Seller who has provided substantial services to the Company or any Subsidiary
employed in the United States.

 

“Buyer Ancillary
Agreements” means all agreements (other than this
Agreement) and documents to which Buyer is or will be a party that are required
to be executed pursuant to this Agreement.

 

 

“Closing Date” means
the date of the Closing.

 

“Code” means
the United States Internal Revenue Code of 1986, as amended.

 

“Common Stock” means
the common stock, par value $0.001 per share, of the Company.

 

“Company” means
American Fundware Holding Company, Inc., a Delaware corporation.

 

“Employee Plan” means
any “employee benefit plan”, as defined in Section 3(3) of ERISA, that (i)
is subject to any provision of ERISA, (ii) is maintained, administered or
contributed to by Seller, any of Seller’s Affiliates, the Company or any
Subsidiary, and (iii) covers any employee or former employee of Seller who has
provided substantial services to the Company or any Subsidiary.

 

“Environmental Laws”
means any and all statutes, laws, regulations and rules, in each case as in
effect on the Agreement Date, that have as their principal purpose the
protection of the environment.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended and the
rules and regulations promulgated thereunder.

 

“ERISA Affiliate”
of any entity means any other entity which, together with such entity, would be
treated as a single employer under Section 414 of the Code.

 

“GAAP”
means United States generally accepted accounting principles.

 

“Intellectual
Property Right” means any trademark, service mark,
trade name, mask work, invention, patent, trade secret, copyright, know-how
(including any registrations or applications for registration of any of the
foregoing), rights in Internet or World Wide Web domain names or URLs with any
governmental or quasi-governmental authority, including Internet domain name
registrars, or any other similar type of proprietary intellectual property
right.

 

“IRS”
means the United States Internal Revenue Service.

 

“Knowledge.”  Seller shall be deemed to have “Knowledge” of a
particular fact or other matter if:  (a)
any of Sasan Goodarzi, Jill Ward and Dave Merenbach has actual knowledge of such fact or other
matter; or (b) any of Sasan
Goodarzi, Jill Ward and Dave Merenbach would have had actual knowledge of such
fact following a reasonable inquiry.  For
purposes of the foregoing sentence, reasonable inquiry means that such persons
shall have inquired of those persons charged with primary responsibility for
the relevant subject matter within the Company, including, without limitation,
reasonable inquiry of Michael Potts, Janice Groth and Lisa Van der Veer.  Buyer
shall be deemed to have “Knowledge” of a particular fact or other matter
if:  (a) either of Harry Gruber or Dennis
Berman has actual knowledge of such fact or other matter; or (b) either of Harry Gruber or Dennis Berman
would have had actual knowledge of such fact following a reasonable
inquiry.  For purposes

 

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of the foregoing sentence, reasonable inquiry means that such persons
shall have inquired of those persons charged with primary responsibility for
the relevant subject matter within Buyer.

 

“Lien” means,
with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest or encumbrance in respect of such property or asset.

 

“Material Adverse
Effect,” when used with reference to any Person, means
any event, change, violation, inaccuracy, circumstance or effect (regardless of
whether such events or changes are inconsistent with the representations or
warranties made by such Person in this Agreement) that is or is reasonably
likely to be, individually or in the aggregate, materially adverse to the
condition (financial or otherwise), properties, business, assets (including
intangible assets), operations or results of operations of such Person and its
subsidiaries, taken as whole, except any such event, change, violation,
inaccuracy, circumstance or effect resulting from or arising in connection with
(i) changes or conditions affecting the industry generally in which such
Person operates, (ii) changes in economic or political (and, solely for
purposes of Sections 9.01(b), 9.02(b) and 9.02(c), regulatory) conditions
generally, (iii) the announcement or pendency of the transactions
contemplated hereby (including, without limitation, any cancellation of or
delays in customer orders, any reduction in sales, any disruption in supplier,
distributor, partner or similar relationships or any loss of AF Employees),
(iv) with respect to the Company, any failure by the Company or any
Subsidiary to meet internal projections or forecasts or revenue or earnings
predictions for any period ending (or for which revenues or earnings are
released) on or after the Agreement Date, (v) with respect to the Company,
attrition with respect to AF Employees, (vi) with respect to the Company,
the payment of any amounts due, or the provision of any other benefits, to any
AF Employees under employment contracts, non-competition agreements, employee
benefit plans, severance arrangements or other arrangements in existence as of
the Agreement Date and set forth in the Seller Disclosure Letter, or
(vii) with respect to the Company, compliance with the terms of, or the
taking of any action required by, this Agreement or any effect on the Company
resulting from actions not taken by the Company due to a prior written consent
to take such action not being provided by Buyer following a written request
from the Company to Buyer to take such action.

 

“Multiemployer Plan” means
each Employee Plan that is a multiemployer plan, as defined in Section 3(37)
of ERISA.

 

“Person” means
an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.

 

“Seller Ancillary
Agreements” means all agreements (other than this
Agreement) and documents to which Seller is or will be a party that are
required to be executed pursuant to this Agreement.

 

“Seller Common Stock”
means the common stock, par value $0.01 per share, of
Seller.

 

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“Shares” means
all of the issued and outstanding shares of Common Stock.

 

“Subsidiary” means
any entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
the Company.

 

“Tax”
means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated or other tax of any kind, including interest, penalty
or addition thereto, whether disputed or not.

 

“Title IV Plan” means
each Employee Plan subject to Title IV of ERISA, other than any Multiemployer
Plan.

 

ARTICLE 2

PURCHASE AND SALE

 

SECTION 2.01. 
Purchase and Sale.  Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Buyer, and Buyer agrees
to purchase from Seller, the Shares at the Closing (as defined in Section 2.02).  The purchase price for the Shares is
$11,037,500 in cash (as adjusted pursuant to Section 2.03, the “Purchase Price”).  The Purchase Price shall be paid as provided
in Section 2.02.

 

SECTION 2.02. 
Closing.  Subject to Section 2.03, the
closing (the “Closing”) of the
purchase and sale of the Shares hereunder shall take place at the offices of
Fenwick & West LLP, 801 California Street, Mountain View, California, as
soon as possible, but in no event later than two business days, after
satisfaction of the conditions set forth in Article 9, or at such other
time or place as Buyer and Seller may agree. 
At the Closing:

 

(a)                                  Buyer shall deliver
to Seller the Purchase Price in immediately available funds by wire transfer to
an account of Seller designated by Seller, by notice to Buyer not later than
two business days prior to the Closing Date (or if not so designated, then by
certified or official bank check payable in immediately available funds to the
order of Seller in such amount).

 

(b)                                 Seller shall deliver
to Buyer certificates for the Shares duly endorsed or accompanied by stock
powers duly endorsed in blank, with any required transfer stamps affixed
thereto.

 

SECTION 2.03.  Purchase
Price Adjustment.  Subject to Section 6.06, if
Seller shall not have obtained, by 5:00 p.m. Pacific time on November 19,
2004, either (a) the Ericsson Assignment and the Ericsson Release or (b) the
New Ericsson Sublease and the Ericsson Release, then the condition set forth in
Section 9.02(n) may be satisfied by either party’s election, prior to December 15,
2004, to reduce the Purchase Price to $11,022,500 (the “Election”); provided, however,
that, if either Buyer or Seller makes the Election, the Closing is consummated
and, within 45 days after the Closing, Buyer enters into any lease or sublease
covering the same premises as the premises covered by the Ericsson Sublease,
then (i) the Purchase Price shall be

 

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increased to
$11,037,500, (ii) Buyer shall, within one business day after entering into any
such lease or sublease, notify Seller in writing of such fact, and (iii) Buyer
shall, within five business days after Buyer has entered into any such lease or
sublease, deliver to Seller $15,000 in immediately available funds by wire
transfer to an account of Seller designated by Seller, by notice to Buyer not
later than two business days after Buyer has provided Seller with the written notice
described in the foregoing clause (i) (or if not so designated, then by
certified or official bank check payable in immediately available funds to the
order of Seller in such amount).  In
addition to the foregoing, if either Buyer or Seller makes the Election and all
other conditions set forth in Sections 9.02 and 9.03 are satisfied or waived,
then, within the later of forty-eight (48) hours after Buyer’s demand to Seller
(including Buyer’s delivery of a written copy of such demand to Jon Katz at jon_katz@intuit.com
and Buyer’s telephone notice of such demand to Jon Katz at 650-944-3965) and
one full business day after Buyer’s demand to Seller (including Buyer’s
delivery of a written copy of such demand to Jon Katz at jon_katz@intuit.com
and Buyer’s telephone notice of such demand to Jon Katz at 650-944-3965),
Seller shall relocate all equipment and other assets of the Company and its
Subsidiaries (collectively, the “Equipment”)
from the premises covered by the Ericsson Sublease to the premises covered by
the Master Sublease; provided, however, that the foregoing
obligation of Seller shall not include the installation of any equipment or the
undertaking of any build-outs or renovations to the premises covered by the
Master Sublease; provided, further, that risk of loss and damage
to the Equipment, solely as a result of Seller’s relocation of such Equipment,
shall be on Seller until such Equipment is relocated to the premises covered by
the Master Sublease.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as set forth in the letter addressed
to Buyer from Seller and dated as of the Agreement Date, including all
Schedules thereto, which has been delivered by Seller to Buyer concurrently
with the parties’ execution of this Agreement (the “Seller Disclosure Letter”), Seller represents and warrants
to Buyer as of the Agreement Date and as of the Closing Date that:

 

SECTION 3.01. 
Corporate Existence and
Power.  Each of Seller and the
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not have a Material Adverse Effect on the Company.  The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction listed on
Schedule 3.01 of the Seller Disclosure Letter where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.

 

SECTION 3.02. 
Corporate Authorization.  The execution, delivery and
performance by Seller of this Agreement and the Seller Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby are within
Seller’s corporate powers and have been duly authorized by all necessary
corporate action on the part of Seller. 
This Agreement and the Seller Ancillary Agreements constitute legal,
valid and binding

 

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agreements of Seller, subject only to the effect, if any, of
(i) applicable bankruptcy and other similar laws affecting the rights of
creditors generally, (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies, and (iii) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities.

 

SECTION 3.03. 
Governmental
Authorization.  The execution,
delivery and performance by Seller of this Agreement and the Seller Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby require no action by or in respect of, or filing with, any governmental
body, agency or official other than (i) compliance with any applicable
requirements of United States federal and state securities laws and (ii) any
such action or filing as to which the failure to make or obtain would not be
material to Seller’s ability to consummate the transactions contemplated hereby
or to perform its obligations under this Agreement and the Seller Ancillary
Agreements.

 

SECTION 3.04.  Noncontravention. 
The execution, delivery and performance by Seller of this
Agreement and the Seller Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) violate
the certificate of incorporation or bylaws of Seller, the Company or any
Subsidiary, (ii) assuming compliance with the matters referred to in Section 3.03,
violate any applicable law, rule, regulation, judgment, injunction, order or
decree, or (iii) require any consent or other action by any Person under,
constitute a material default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Seller or the
Company or any Subsidiary or to a material loss of any benefit to which Seller
or the Company or any Subsidiary is entitled under any provision of any
agreement or other instrument binding upon Seller or the Company or any
Subsidiary, except, in the case of clause (ii), as to matters that would not
have a Material Adverse Effect on the Company.

 

SECTION 3.05.  Capitalization.

 

(a)                                  The authorized
capital stock of the Company consists of 1,000 shares of Common Stock.  There are outstanding 100 shares of Common
Stock.

 

(b)                                 All outstanding shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable, are not subject to any preemptive right,
right of first refusal, right of first offer or right of rescission, and have
been offered, issued, sold and delivered by the Company in compliance with (i)
all registration or qualification requirements (or applicable exemptions
therefrom) of all applicable securities laws (including the Securities Act of
1933, as amended (the “Securities Act”),
and any state “blue sky” securities law), (ii) all other applicable laws, and
(iii) all requirements set forth in applicable agreements or instruments
binding on the Company, as applicable. 
Except as set forth on Schedule 3.05(b) of the Seller
Disclosure Letter, there are no outstanding (i) shares of capital stock or
voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, or (iii) options or other rights to acquire from the Company, or other
obligation of the Company to issue, any shares of capital stock, voting
securities or securities convertible into or exchangeable for shares of capital
stock or voting securities of the Company (the items in

 

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clauses 3.05(b)(i), 3.05(b)(ii) and 3.05(b)(iii) being referred to
collectively as the “Company Securities”).  There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any
Company Securities.

 

SECTION 3.06.  Ownership of Shares. 
Seller is the record and beneficial owner of the Shares, free
and clear of any Lien, and will transfer and deliver to Buyer at the Closing
valid title to the Shares, free and clear of any Lien.

 

SECTION 3.07. 
Subsidiaries.

 

(a)                                  Each Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, consents
and approvals the absence of which would not have a Material Adverse Effect on
the Company.  All Subsidiaries and their
respective jurisdictions of incorporation and foreign qualifications are
identified on Schedule 3.07(a) of the Seller Disclosure Letter.

 

(b)                                 All of the outstanding
capital stock or other voting securities of each Subsidiary is owned by the
Company, directly or indirectly, free and clear of any Lien.  There are no outstanding (i) securities of
the Company or any Subsidiary convertible into or exchangeable for shares of
capital stock or voting securities of any Subsidiary or (ii) options or other
rights to acquire from the Company or any Subsidiary, or other obligation of
the Company or any Subsidiary to issue, any shares of capital stock, voting
securities or securities convertible into or exchangeable for shares of capital
stock or voting securities of any Subsidiary (the items in clauses 3.07(b)(i)
and 3.07(b)(ii) being referred to collectively as the “Subsidiary Securities”).  There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.

 

SECTION 3.08. 
Financial Statements.  Attached hereto as Schedule 3.08
of the Seller Disclosure Letter are (1) the unaudited consolidated balance
sheets as of July 31, 2004 and July 31, 2003 of the Company and the
Subsidiaries and the related unaudited consolidated statements of income for
the fiscal years ended July 31, 2004 and July 31, 2003 and (2) the
unaudited consolidated balance sheets as of September 30, 2004 and October 31,
2004 (the “Balance Sheet Date” and
such balance sheet the “Balance Sheet”)
of the Company and the Subsidiaries and the related unaudited consolidated
statements of income for the two-month period ended September 30, 2004 and
the three-month period ended October 31, 2004 (the items described in
clauses (1) and (2), collectively, the “Financial
Statements”).  The Financial
Statements (x) are derived from and in accordance with the books and
records of the Company and the Subsidiaries and (y) fairly and accurately
present, in conformity with GAAP applied on a consistent basis (except for any
absence of notes thereto), the consolidated financial position of the Company
and the Subsidiaries as of the dates thereof and their consolidated results of
operations for the periods then ended. 
The Company and the Subsidiaries do not have any liabilities either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with GAAP), and whether due or to become due, other
than (i) liabilities identified as such in the “liabilities” category of the
Financial Statements, (ii) liabilities specifically described in this Agreement
or the Seller

 

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Disclosure Letter, and (iii) liabilities incurred in the ordinary
course of business, consistent with past practices, provided that if any such
liability was incurred before the Balance Sheet Date it is not required under
GAAP to be reflected in the Financial Statements.

 

SECTION 3.09. 
Absence of Certain
Changes.  Since July 31,
2004, the business of the Company and its Subsidiaries has been conducted in
the ordinary course consistent with past practices and there has not been:

 

(a)                                  any event, occurrence
or development which has had a Material Adverse Effect on the Company;

 

(b)                                 any declaration,
setting aside or payment of any dividend or other distribution with respect to
any shares of capital stock of the Company, or any repurchase, redemption or
other acquisition by the Company or any Subsidiary of any outstanding shares of
capital stock or other securities of the Company or any Subsidiary;

 

(c)                                  any amendment of any
material term of any outstanding security of the Company or any Subsidiary;

 

(d)                                 any incurrence,
assumption or guarantee by the Company or any Subsidiary of any indebtedness
for borrowed money other than in the ordinary course of business consistent
with past practices;

 

(e)                                  any making of any
loan, advance or capital contributions to or investment in any Person other
than loans, advances, capital contributions or investments made in the ordinary
course of business consistent with past practices;

 

(f)                                    any transaction or
commitment made, or any contract or agreement entered into, by the Company or
any Subsidiary relating to its assets or business, other than transactions and
commitments in the ordinary course of business consistent with past practices
and those contemplated by this Agreement;

 

(g)                                 any change in any
method of accounting or accounting practice by the Company or any Subsidiary,
except for any such change required by reason of a concurrent change in GAAP;

 

(h)                                 any change in the
terms of its accounts receivable or any action that directly caused any
acceleration in the payment, collection or generation of its accounts
receivable or discounts, except in the ordinary course of business consistent
with past practices;

 

(i)                                     any purchase,
license, sale, assignment or other disposition or transfer, or any agreement or
other arrangement for the material purchase, license, sale, assignment or other
disposition or transfer, of any of its assets, properties or goodwill (other
than purchases of raw materials, sales of inventory and licenses granted, in
each case in the ordinary course of business consistent with past practices);

 

(j)                                     any damage,
destruction or loss affecting business or any assets or properties, whether or
not covered by insurance;

 

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(k)                                  any liability
incurred by it to any of its officers, directors or stockholders, except for
normal and customary compensation and expense allowances payable to officers in
the ordinary course of business, consistent with past practices; or

 

(l)                                     any (i)
employment, deferred compensation, severance, retirement or other similar
agreement entered into with any director of the Company or any Subsidiary or
any AF Employee (or any amendment to any such existing agreement), (ii) grant
of any severance or termination pay to any director of the Company or any
Subsidiary or any AF Employee, or (iii) change in compensation or other
benefits payable to any director of the Company or any Subsidiary or any AF
Employee pursuant to any bonus, pension, insurance, severance or retirement
plans or policies thereof.

 

SECTION 3.10. 
Insurance Coverage.  Seller has made available to Buyer
a list of all insurance policies and fidelity bonds relating to the directors
of the Company or any Subsidiary or the AF Employees or the assets, business or
operations of the Company and the Subsidiaries (such policies and bonds,
collectively, the “Insurance Policies”).  Such Insurance Policies are listed in Schedule 3.10
of the Seller Disclosure Letter (together with the name of the insurer under
such policy or bond, the type of policy or bond, the coverage amount and any
applicable deductibles).  The Company and
the Subsidiaries are in compliance with the terms of such Insurance Policies,
and all Insurance Policies are in full force and effect.  Seller has no Knowledge of any threatened
termination of, or material premium increases with respect to, any Insurance
Policy.  There are no material claims by
Seller, in each case relating to the AF Employees or the assets, business or
operations of the Company and the Subsidiaries, pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights.

 

SECTION 3.11.  Intercompany
Accounts.  Since the Balance Sheet Date,
there has not been any accrual of liability by the Company or any Subsidiary to
Seller or any of its Affiliates or other transaction between the Company or any
Subsidiary and Seller and any of its Affiliates, except in the ordinary course
of business of the Company and the Subsidiaries consistent with past practices
or as provided in Schedule 3.11 of the Seller Disclosure Letter.

 

SECTION 3.12.  Material
Contracts.

 

(a)                                  Schedule 3.12
of the Seller Disclosure Letter sets forth a list of each of the following
written or oral contracts, agreements, arrangements, commitments or
undertakings to which the Company or any Subsidiary is a party or to which the
Company, any Subsidiary or any of their respective assets or properties are
bound:

 

(i)                                     any
lease (whether of real or personal property) providing for annual rentals of
$25,000 or more that cannot be terminated on not more than 30 days’ notice
without payment by the Company or any Subsidiary of any material penalty;

 

(ii)                                  any
agreement for the purchase of materials, supplies, goods, services, equipment
or other assets providing for either (A) annual payments by the Company and the
Subsidiaries of $25,000 or more
(excluding any default payments) or (B) aggregate

 

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payments after
the Closing Date by the Company and the Subsidiaries of $100,000 or more
(excluding any default payments), in each case that cannot be terminated on not
more than 60 days’ notice without payment by the Company or any Subsidiary of
any material penalty;

 

(iii)                               any
dealer, distributor, OEM (original equipment manufacturer), VAR (value added
reseller), sales representative or similar agreement under which any third
party is authorized to sell, sublicense, lease, distribute, market or take
orders for any product, service or technology of the Company or the
Subsidiaries or to provide training or other services to the customers of the
Company or the Subsidiaries;

 

(iv)                              any
contract, agreement or binding commitment pursuant to which the Company or any
Subsidiary grants to any third party any rights or license in or to the Company
Intellectual Property Rights, other than end user licenses for the Company
Products (as defined in Section 3.16(e)) granted by the Company or any
Subsidiary in the ordinary course of business (pursuant to the Company’s
standard end user license agreement, a copy of which has been provided to
Buyer, or a similar agreement containing substantially similar terms, and
licenses to third party software distributed by the Company or any Subsidiary
pursuant to the agreements between the Company or any Subsidiary and such third
parties identified in this Section 3.12(a)(iv)), and/or pursuant to which
any third party grants to the Company or any Subsidiary any rights or license
in or to the Company Intellectual Property Rights, other than licenses for
generally available commercial software, each with an individual acquisition
cost of $5,000 or less;

 

(v)                                 any
material partnership, joint venture or other similar agreement or arrangement;

 

(vi)                              any
agreement relating to the acquisition or disposition of any business (whether
by merger, sale of stock, sale of assets or otherwise);

 

(vii)                           any
agreement relating to indebtedness for borrowed money or the deferred purchase
price of property (in either case, whether incurred, assumed, guaranteed or
secured by any asset), except any such agreement (A) with an aggregate
outstanding principal amount not exceeding $25,000 or (B) entered into
subsequent to the Agreement Date as permitted by Section 3.09(d);

 

(viii)                        any
agreement that limits the freedom of the Company or any Subsidiary to compete
in any line of business or with any Person or in any area;

 

(ix)                                any
agreement with Seller or any of its Affiliates or any director or officer of
Seller or any of its Affiliates;

 

(x)                                   any
consulting or similar agreement under which the Company or any Subsidiary provides
any advice or services to a third party for annual compensation of $50,000 per
year or more;

 

(xi)                                any
contract, agreement, arrangement or undertaking with, or

 

10

 

commitment to,
any labor union or collective bargaining unit;

 

(xii)                             any
contract, agreement, arrangement or commitment to extend loans or credit to one
or more of the AF Employees or to consultants or independent contractors who
provide services to the Company or the Subsidiaries;

 

(xiii)                          any
other contract, agreement, arrangement, commitment or undertaking that involves
a current or future commitment by the Company or the Subsidiaries in excess of
$50,000; and

 

(xiv)                         any other
agreement, commitment, arrangement or plan not made in the ordinary course of
business that is material to the Company and the Subsidiaries, taken as a
whole.

 

(b)                                 Each agreement,
contract, plan, lease, arrangement or commitment required to be disclosed
pursuant to this Section 3.12 (each, a “Material
Agreement”) is a valid and binding agreement of the Company or a
Subsidiary, as the case may be, and is in full force and effect, and none of
the Company, any Subsidiary or, to Seller’s Knowledge, any other party thereto
is in default or breach in any respect under the terms of any such Material
Agreement, except for any such defaults or breaches which would not have a
Material Adverse Effect on the Company.

 

SECTION 3.13. 
Litigation.  There is no action, suit,
investigation or proceeding pending against or, to Seller’s Knowledge,
threatened against Seller, the Company or any Subsidiary or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official.

 

SECTION 3.14. 
Compliance with Laws and Court
Orders.  Neither the Company nor
any Subsidiary is in material violation of any applicable law, rule,
regulation, judgment, injunction, order or decree.

 

SECTION 3.15.  Properties.  The Company and the Subsidiaries
have good and valid title to, or in the case of leased properties and assets
have valid leasehold interests in, all properties and assets (whether real,
personal, tangible or intangible) reflected on the Balance Sheet or acquired
after the Balance Sheet Date, except for properties and assets sold since the
Balance Sheet Date in the ordinary course of business consistent with past
practices or where the failure to have such good title or valid leasehold
interests would not have a Material Adverse Effect on the Company.  To Seller’s Knowledge, such properties and
assets are sufficient for the operation of the Company’s and the Subsidiaries’
business as currently conducted.  Schedule 3.15
of the Seller Disclosure Letter sets forth a list of all computer hardware
(including servers) included in such properties and assets.  None of such properties or assets is subject
to any Lien, except:

 

(a)                                  Liens disclosed on Schedule 3.15(a)
of the Seller Disclosure Letter;

 

(b)                                 Liens disclosed on the
Balance Sheet or notes thereto;

 

(c)                                  Liens for taxes,
assessments and similar charges that are not yet due or are

 

11

 

being contested in good faith;

 

(d)                                 mechanic’s,
materialman’s, carrier’s, repairer’s and other similar Liens arising or
incurred in the ordinary course of business or that are not yet due and payable
or are being contested in good faith;

 

(e)                                  Liens
incurred in the ordinary course of business that are not material; or

 

(f)                                    other
Liens which would not have a material diminution in the value of such property
or asset.

 

SECTION 3.16. 
Intellectual Property.

 

(a)                                  The Company and/or
the Subsidiaries own, have independently developed or, to Seller’s Knowledge,
have a valid right or license to use all Intellectual Property Rights currently
used in the conduct of the Company’s and each Subsidiary’s business (such
Intellectual Property Rights being collectively referred to as the “Company Intellectual Property Rights”).  “Company
Owned Intellectual Property Rights” means Company Intellectual
Property Rights that are owned or licensed exclusively to the Company.  To Seller’s Knowledge, the Company
Intellectual Property Rights are sufficient in all material respects for the
conduct of the Company’s and the Subsidiaries’ business as now conducted.

 

(b)                                 Schedule 3.16(b)
of the Seller Disclosure Letter sets forth a list of all licenses, sublicenses
and other agreements as to which the Company or any Subsidiary is a party and
pursuant to which the Company or any Subsidiary grants to any Person any rights
to use any Company Intellectual Property Right, other than end user licenses
for the Company Products (as defined in Section 3.16(e)) granted by the
Company or any Subsidiary in the ordinary course of business.

 

(c)                                  No Company Owned
Intellectual Property Right is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use thereof by the Company or any
Subsidiary or restricting the licensing thereof by the Company or any
Subsidiary to any Person, except for any judgment, injunction, order, decree or
agreement which would not reasonably be expected to have a Material Adverse
Effect on the Company.

 

(d)                                 Neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated by this Agreement will, in accordance with their
terms:  (i) constitute a material
breach of or material default under any contract governing any Company
Intellectual Property Right; or (ii) cause any material restriction on the
Company’s or any Subsidiary’s right to use, or the forfeiture or termination of
(or give rise to a right of forfeiture or termination of), any Company
Intellectual Property Right.  There are
no royalties, honoraria, fees or other payments payable by the Company or the
Subsidiaries to any Person (other than salaries payable to AF Employees not
contingent on or related to use of their work product) as a result of the
ownership, use, possession, license-in, sale, marketing, advertising or
disposition of any Company Intellectual Property Rights by the Company or the
Subsidiaries and none will become payable as a result of the consummation of
the transactions contemplated by this Agreement or the Buyer Ancillary
Agreements.

 

12

 

(e)                                  Since May 31,
2002 (the “Acquisition Date”),
neither the development, manufacture, marketing, license, sale or distribution
of any product or service currently manufactured, marketed, licensed, sold,
distributed or provided by the Company or any Subsidiary (collectively, the “Company Products”) violates any contract
between the Company, or any Subsidiary, and any other Person or, to the
Knowledge of the Seller, infringes or misappropriates any Intellectual Property
Right of any third party, and, to the Knowledge of the Seller, prior to the
Acquisition Date, neither the development, manufacture, marketing, license,
sale or distribution of any Company Products violates any contract between the
Company or any Subsidiary, and any other Person or, to the Knowledge of the
Seller, infringes or misappropriates any Intellectual Property Right of any
third party. There is no pending or, to Seller’s Knowledge, threatened claim or
litigation contesting the validity, ownership or right of the Company to
exercise any Company Intellectual Property Right or to use, develop,
manufacture, market, license, sell or distribute any Company Product.  Since the Acquisition Date, and to Seller’s
Knowledge prior to the Acquisition Date, the Company has not received any
notice asserting that any Company Intellectual Property Right or Company
Product conflicts with the rights of any other Person nor, to Seller’s
Knowledge, is there any legitimate basis for any such assertion.

 

(f)                                    Schedule 3.16(f)
of the Seller Disclosure Letter contains a true and complete list of
(i) all worldwide registrations made by or on behalf of the Company or any
Subsidiary of any patents, copyrights, mask works, trademarks, service marks,
rights in Internet or World Wide Web domain names or URLs with any governmental
or quasi-governmental authority, including Internet domain name registrars, and
(ii) all applications, registrations, filings and other formal written
governmental actions made or taken pursuant to applicable laws by the Company
or any Subsidiary to secure, perfect or protect its interest in Company
Intellectual Property Rights, including all patent applications, copyright
applications and applications for registration of trademarks and service marks.

 

(g)                                 Since the Acquisition
Date, and to Seller’s Knowledge prior to the Acquisition Date, neither the
Company nor any or any Subsidiary nor any other Person acting on their behalf
has disclosed or delivered to any other Person, or permitted the disclosure or
delivery to any escrow agent or other Person of, any source code for any
Company Products.  No event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time, or both) will, or would reasonably be expected to, result in the
disclosure or delivery by the Company, or any Subsidiary or any Person acting
on their behalf, to any other Person of any source code for any Company
Products.

 

(h)                                 To the Knowledge of
the Seller, no current or former employee, consultant or independent contractor
of the Company or the Subsidiaries: (i) is in material violation of any term or
covenant of any employment contract, patent disclosure agreement, invention
assignment agreement, non-disclosure agreement, non-competition agreement or
any other contract, agreement, arrangement, commitment or undertaking with any
other party by virtue of such employee’s, consultant’s or independent
contractor’s being employed by, or performing services for, the Company or the
Subsidiaries or using trade secrets or proprietary information of others
without permission; or (ii) has developed any technology, software, or other
copyrightable, patentable or otherwise proprietary work for the Company or the
Subsidiaries that is subject to any agreement under which such employee,
consultant, or independent contractor has assigned or otherwise granted to any
other Person any rights (including Intellectual Property Rights) in or

 

13

 

to such technology, software or other copyrightable, patentable or
other proprietary work.

 

(i)                                     The Company and
the Subsidiaries have taken all commercially reasonable and appropriate steps
to protect, preserve and maintain the secrecy and confidentiality of the
confidential information of the Company and the Subsidiaries and to preserve
and maintain all interests and proprietary rights in the Company Intellectual
Property Rights.  All current and former
officers, employees, consultants and independent contractors of the Company and
the Subsidiaries have executed and delivered an agreement regarding the
protection of such proprietary information and the assignment of inventions to
the Company and the Subsidiaries (provided that the foregoing representation
shall be qualified to Seller’s Knowledge as to former officers, employees,
consultants and independent contractors who were employed by the Company and its
Subsidiaries prior to the Acquisition Date); and true, correct and complete
copies have been provided to the Buyer. 
No current or former employee, officer, director, consultant or
independent contractor of the Company or any Subsidiary has any right, license,
claim or interest whatsoever in or with respect to any Company Owned
Intellectual Property Rights (provided that the foregoing representation shall
be qualified to Seller’s Knowledge as to former employees, officers, directors,
consultants or independent contractors who were employed by the Company or any
Subsidiary prior to the Acquisition Date).

 

SECTION 3.17. 
Finders’ Fees.  Except for Seven Hills Partners,
LLC, whose fees will be paid by Seller, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Seller, the Company or any Subsidiary who might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.

 

SECTION 3.18. 
Employees.

 

(a)                                  Schedule 3.18(a)
of the Seller Disclosure Letter sets forth a true and complete list, as of November 14,
of the names, titles, hourly rates or annual salaries (including the date and
amount of last rate or salary increase), stock option grants and other
compensation of all AF Employees.

 

(b)                                 Neither the Company
nor its Subsidiaries has any current labor disputes or has had, since the
Acquisition Date, any material labor disputes or claims of unfair labor
practices.  There are no claims of unfair
labor practices pending or, to Seller’s Knowledge, threatened.  There is no strike, labor dispute, material
slowdown or work stoppage pending or, to Seller’s Knowledge, threatened against
the Company.  The Company is not now nor
has it ever been since the Acquisition Date subject to any union organizing
activities or collective bargaining activities.

 

(c)                                  Subject to Buyer’s
compliance with Section 6.05, (i) within the past year, neither the
Company nor any Subsidiary has incurred, solely as a result of the actions of
Seller, the Company or any Subsidiary prior to the Closing, any liability or
obligation under the Worker Adjustment and Retraining Notification Act (“WARN”) or any similar state or local law
that remains unsatisfied and (ii) no terminations of AF Employees prior to the
Agreement Date, in and of themselves, result in unsatisfied liability or
obligation under WARN or any similar state or local law.

 

14

 

SECTION 3.19.  Employee
Benefit Plans.

 

(a)                                  Schedule 3.19(a)
of the Seller Disclosure Letter includes a description and complete listing of
each of the Employee Plans in which AF Employees participate.

 

(b)                                 Neither Seller nor any
ERISA Affiliate, including, but not limited to, the Company or any of its
Subsidiaries, sponsors (i) a Multiemployer Plan, (ii) a Title IV Plan, or (iii)
a plan which has a trust described in Section 501(c)(9) of the Code.

 

(c)                                  Except as set forth
on Schedule 3.19(c) of the Seller Disclosure Letter, there are no
Benefit Arrangements in which AF Employees participate or intercompany
agreements that obligate the Company or any Subsidiary to pay or provide
severance to the AF Employees.

 

(d)                                 Neither the Company
nor any Subsidiary has any current or projected liability in respect of
post-employment or post-retirement health or medical or life insurance benefits
for retired, former or current AF Employees or employees of the Company or any
Subsidiary, except as required by Section 4980B of the Code (“COBRA”).

 

(e)                                  The Company granted
compensatory stock options for its common stock (the “Company Options”) to certain of the employees of the Company
and its Subsidiaries prior to the acquisition of the Company and its
Subsidiaries by Seller.  The Company
Options were assumed by Seller at the time Seller acquired the Company and its
Subsidiaries and were converted into options for shares of Seller Common
Stock.  With the exception of the
exercise price per share, the assumed Company Options remain subject to the
terms and conditions of the option grant agreements and stock compensation plan
documents pursuant to which the assumed Company Options were granted.  Schedule 3.19(e) of the Seller
Disclosure Letter identifies each of these assumed Company Options outstanding
as of September 30, 2004.

 

SECTION 3.20. 
Customers.  Schedule 3.20(a) of
the Seller Disclosure Letter sets forth the total number of clients on annual
maintenance contracts with the Company or any Subsidiary as of November 12,
2004.  Since July 31, 2004,
neither the Company nor any Subsidiary has received any material
complaints from its clients concerning the Company’s or any Subsidiary’s
products or services.  Set forth on Schedule 3.20(b)
of the Seller Disclosure Letter is the name of each client who has, since August 10,
2004 through November 12, 2004, terminated its annual maintenance contract
with the Company or any Subsidiary or given written notice to the Company or
any Subsidiary of the termination of, or of the intent to terminate, its annual
maintenance contract with the Company or any Subsidiary.

 

SECTION 3.21.  No
Misrepresentation.  No
representation or warranty by Seller in this Agreement, the Seller Disclosure
Letter or any written document or certificate executed and delivered by Seller
to Buyer pursuant to this Agreement contains or will when delivered contain any
untrue statement of a material fact or omits or will when delivered omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not materially
misleading.  Seller has made available to
Buyer or its representatives true and complete copies of all documents which
are set forth on the Seller Disclosure Letter.

 

15

 

SECTION 3.22.  Lease. 
To Seller’s Knowledge, (i) the lease agreement dated as of July 9,
2003 by and between Crown Media International, LLC (“Crown”) and Seller (the “Master
Sublease”) is in full force and effect and (ii) no event has
occurred that with the giving of notice or the passage of time would constitute
a default under the Master Sublease.

 

ARTICLE 4
REPRESENTATIONS AND
WARRANTIES OF BUYER

 

Buyer
represents and warrants to Seller as of the Agreement Date and as of the
Closing Date that:

 

SECTION 4.01.  Corporate
Existence and Power.  Buyer is
a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not have a Material
Adverse Effect on Buyer.

 

SECTION 4.02.  Corporate
Authorization.  The execution,
delivery and performance by Buyer of this Agreement and the Buyer Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby are within Buyer’s corporate powers and, except for any required
approval by Buyer’s stockholders, have been duly and validly authorized by all
necessary corporate action on the part of Buyer.  This Agreement and the Buyer Ancillary
Agreements constitute legal, valid and binding agreements of Buyer, subject
only to the effect, if any, of (i) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (iii) the enforceability of provisions requiring indemnification in
connection with the offering, issuance or sale of securities.

 

SECTION 4.03.  Governmental
Authorization.  The execution,
delivery and performance by Buyer of this Agreement and the Buyer Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby require no action by or in respect of, or filing with, any governmental
body, agency or official other than (i) compliance with any applicable
requirements of United States federal and state securities laws and
(ii) any such action or filing as to which the failure to make or obtain
would not be material to Buyer’s ability to consummate the transactions
contemplated hereby or to perform its obligations under this Agreement and the
Buyer Ancillary Agreements.

 

SECTION 4.04. 
Noncontravention.  The execution, delivery and
performance by Buyer of this Agreement and the Buyer Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate the certificate of incorporation or bylaws of Buyer, (ii)
assuming compliance with the matters referred to in Section 4.03, violate any applicable law,
rule, regulation, judgment, injunction, order or decree, or (iii) require any
consent or other action by any Person under, constitute a default under, or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of Buyer or to a loss of any benefit to which Buyer is
entitled under any provision of any agreement or other instrument binding upon
Buyer, except, in the case of clauses (ii)

 

16

 

and (iii), as to matters that would not be material to Buyer’s ability
to consummate the transactions contemplated hereby or to perform its
obligations under this Agreement and the Buyer Ancillary Agreements.

 

SECTION 4.05. 
Financing.  Buyer has, or will have prior to
the Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Purchase Price
and any other amounts to be paid by it hereunder.

 

SECTION 4.06. 
Purchase for Investment.  Buyer is purchasing the Shares for
investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. 
Buyer (either alone or together with its advisors) has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in the Shares and is
capable of bearing the economic risks of such investment.

 

SECTION 4.07.  Litigation.  There is no action, suit,
investigation or proceeding pending against or, to Buyer’s Knowledge,
threatened against Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.

 

SECTION 4.08. 
Finders’ Fees.  There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee or
commission from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.

 

SECTION 4.09. 
Employees.  Buyer has made a written offer of
employment to each person identified on Schedule 3.18(a)(i) of the
Seller Disclosure Letter (all such employees, collectively, the “Offerees”).  Such written offers of employment provide the
Offerees with annual salaries, wages and other compensation and employee
benefits as set forth in the offer letters delivered to the Offerees on November 10,
2004 (the “Offer Letters”), true,
correct and complete copies of which were delivered to Seller on November 12,
2004.

 

SECTION 4.10.  Inspections;
No Other Representations.  Buyer
is an informed and sophisticated purchaser experienced in the evaluation and
purchase of companies such as the Company and the Subsidiaries as contemplated
hereunder.  Buyer has undertaken such
investigation and has been provided with and has evaluated such documents and
information as it has deemed necessary to enable it to make an informed and
intelligent decision with respect to the execution, delivery and performance of
this Agreement and the Buyer Ancillary Agreements.  Buyer acknowledges that Seller has given
Buyer complete and open access to the key AF Employees and to the documents and
facilities of the Company and the Subsidiaries. 
Buyer agrees to accept the Shares and the Company in the condition they
are in on the Closing Date based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or
on behalf of or imputed to Seller, except as expressly set forth in this
Agreement.  Without limiting the
generality of the foregoing, Buyer acknowledges that Seller makes no
representation or warranty with respect

 

17

 

to (i) any projections, estimates or budgets delivered to or made
available to Buyer of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Company and the Subsidiaries or the future business
and operations of the Company and the Subsidiaries or (ii) any other
information or documents made available to Buyer or its counsel, accountants or
advisors with respect to the Company or the Subsidiaries or their respective
businesses or operations, except as expressly set forth in this Agreement.

 

ARTICLE 5
COVENANTS OF SELLER

 

Seller agrees
that:

 

SECTION 5.01.  Conduct of the
Company.  From the Agreement
Date until the Closing Date, Seller shall cause the Company and each Subsidiary
to conduct its businesses in the ordinary course consistent with the past
practices of such businesses since July 31, 2004 and to use commercially
reasonable efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of the AF
Employees.  Without limiting the
generality of the foregoing, from the Agreement Date until the Closing Date,
except as disclosed on Schedule 5.01, Seller will not, without
Buyer’s prior written consent, permit the Company or any Subsidiary to:

 

(a)                                  adopt
any change in its certificate of incorporation or bylaws;

 

(b)                                 merge
or consolidate with any other Person or acquire a material amount of assets from any other Person;

 

(c)                                  sell,
lease, license or otherwise dispose of any material assets or property, except
(i) pursuant to existing contracts or commitments or (ii) in the ordinary
course consistent with past practices;

 

(d)                                 incur
any liability as guarantor or surety with respect to any obligation except for
the endorsement of checks and other negotiable instruments in the ordinary course
consistent with past practices, which are not material in amount;

 

(e)                                  incur
any liability other than in the ordinary course consistent with past practices
or incur any indebtedness for borrowed money;

 

(f)                                    make
any loan, advance or capital contribution to, or invest in, any Person other
than travel loans or advances made in the ordinary course consistent with past
practices, and which are not material in amount;

 

(g)                                 place
any Lien on any of its properties or grant any Lien with respect to any of its assets;

 

(h)                                 declare,
set aside or pay any dividend on, or make any other distribution in respect of,
its capital stock, split, combine or recapitalize its capital stock or directly
or indirectly redeem, purchase or otherwise acquire its capital stock;

 

18

 

(i)                                     enter
into, amend, relinquish, terminate or not renew any Material Agreement, in each
case other than in the ordinary course consistent with past practices;

 

(j)                                     enter
into any agreement, contract, plan, lease, arrangement or commitment which
could be characterized as a Material Agreement if entered into prior to the
Agreement Date, in each case other than in the ordinary course consistent with
past practices;

 

(k)                                  pay
any bonus, royalty, increased salary, severance or special remuneration or
incur any liability to any AF Employee or to any consultant or independent
contractor who provides services to the Company or any Subsidiary (except as is
already accrued or pursuant to existing agreements, contracts, plans, leases,
arrangements or commitments disclosed on the Seller Disclosure Letter) or amend
any existing or enter into any new employment, consulting or severance
agreement with any such person;

 

(l)                                     increase
or modify any bonus, pension, insurance or other employee benefit plan, payment
or arrangement (excluding the grant of stock options, restricted stock awards
or stock appreciation rights) made to, for or with any of the AF Employees or
consultants or independent contractors who provide services to the Company or
any Subsidiary; or

 

(m)                               agree
or commit to do any of the foregoing.

 

SECTION 5.02.  Access to
Information; Confidentiality.

 

(a)                                  From
the Agreement Date until the Closing Date, Seller will (i) give, and will cause
the Company and each Subsidiary to give, Buyer, its counsel, financial
advisors, auditors and other authorized representatives reasonable access to
the offices, properties, books and records of the Company and the Subsidiaries
and to the books and records of Seller relating to the Company and the
Subsidiaries, (ii) furnish, and will cause the Company and each Subsidiary to
furnish, to Buyer, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to the Company or any Subsidiary as such Persons may
reasonably request, and (iii) instruct the AF Employees and the counsel and
financial advisors of Seller, the Company or any Subsidiary to cooperate with
Buyer in its investigation of the Company or any Subsidiary.  Any investigation pursuant to this Section 5.02
shall be conducted in such manner as not to interfere unreasonably with the
conduct of the business of Seller, the Company or any Subsidiary.  Notwithstanding the foregoing, Buyer shall
not have access to personnel records of the Company and the Subsidiaries
relating to individual performance or evaluation records, medical histories or
other information which in Seller’s good faith opinion is sensitive or the
disclosure of which could subject Seller, the Company or any Subsidiary to risk
of liability.

 

(b)                                 On
and after the Closing Date, upon prior written notice to Seller, Seller will
afford promptly to Buyer and its agents reasonable access to its properties,
books, financial and other records, information, employees and auditors, in
each case relating to the Company or any Subsidiary and to the extent
reasonable and necessary in connection with any audit, investigation, dispute
or litigation involving to the operation of the Company or any Subsidiary prior
to the Closing; provided, however,  that any such access by Buyer shall be conducted during
Seller’s normal business hours and shall not unreasonably interfere with the
conduct

 

19

 

of the business of Seller; provided, further,
that Buyer and its agents shall be required to execute Seller’s standard
non-disclosure agreement prior to accessing such properties, books, financial
and other records, information, employees and auditors.  Buyer shall bear all of the out-of-pocket
costs and expenses (including, without limitation, attorneys’ fees, but
excluding reimbursement for general overhead, salaries and employee benefits)
reasonably incurred in connection with the foregoing.  This Section 5.02(b) shall not apply to
any investigation, dispute or litigation, in each case that is between Buyer
and Seller.

 

(c)                             Seller
confirms that it has entered into that certain Mutual Nondisclosure Agreement
(NDA) dated August 20, 2004 between Buyer and Seller (the “NDA”) and that Seller is bound by, and
will abide by, the provisions of the NDA. 
If this Agreement is terminated, the NDA will remain in full force and
effect, and all copies of documents containing confidential information of a
disclosing party will be returned by the receiving party to the disclosing
party or be destroyed, as provided in the NDA.

 

(d)                            If,
after the Closing Date, Seller locates or obtains any originals or copies of
the Company’s or any Subsidiary’s customer data (including customer prospects) (“Customer Data”) that were not previously
delivered to Buyer pursuant to Section 9.02(h), then Seller shall notify
Buyer of such Customer Data and shall thereafter, at Buyer’s direction, either
destroy such Customer Data or promptly deliver such Customer Data to Buyer
without retaining any copy thereof; provided, however, that,
notwithstanding the foregoing, Seller may retain Customer Data solely for the
purpose of complying with its obligations under Section 5.05; provided,
further, that Seller shall comply with its privacy policy as in effect
on the Agreement Date with respect to any Customer Data that it retains
pursuant to the foregoing proviso.

 

SECTION 5.03.  Notices
of Certain Events.  Seller
shall promptly notify Buyer of:

 

(a)                                  any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated
by this Agreement;

 

(b)                                 any
notice or other communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this Agreement or
relating to the Company or its operations;

 

(c)                                  any
actions, suits, claims, investigations or proceedings commenced relating to
Seller, the Company or any Subsidiary that, if pending on the Agreement Date,
would have been required to have been disclosed pursuant to Section 3.13;
and

 

(d)                                 any
event, change or circumstance that has or can reasonably be expected to have a
Material Adverse Effect on the Company.

 

SECTION 5.04.  Cooperation.

 

(a)                                  Third Party Consents.  Seller will use all reasonable efforts to
obtain such written consents, assignments, waivers and authorizations or other
certificates from third parties and give such notices to third parties, in each
case that are required to consummate the transactions provided for herein and
to keep in effect and avoid the breach, violation or termination of any

 

20

 

Material Agreement; provided, however,
that reasonable efforts by Seller shall not include (a) the payment of any
amounts by Seller to any such third party or (b) the amendment of any
provision of, or waiver of any rights under, any agreement, contract, plan,
lease, arrangement or commitment between Seller or any Subsidiary, on the one hand,
and any such third party, on the other hand.

 

(b)                                 AF Employees.  On or
before the Closing, Seller shall (and shall cause the Company to) (i) surrender
or terminate any and all credit cards issued by or on behalf of the Company and
(ii) ensure that signatory authority for all current AF Employees and directors
of the Company, with respect to the Company’s bank and investment accounts,
shall have been terminated.  Seller shall
take all actions necessary to ensure that the vesting of all outstanding Company
Options held by the AF Employees is accelerated in full immediately prior to
the Closing.  On the Closing Date, Seller
shall assign to Buyer the agreements listed on Schedule 5.04(b).  Seller shall retain and pay for all
obligations arising on or prior to the Closing Date (and whether or not
submitted as an expense on or prior to the Closing Date) for accrued but unpaid
salaries, benefits, severance, retention or stay bonuses or other payments to
any AF Employees, consultants or independent contractors, including, without
limitation:  (x) any and all retention
bonuses granted to Lisa Van de Veer, Scott Bechler, Rhonda Shuptrine, Joe
Straub, Christopher Brewer, Earl Bridges, Gene Hindman and Brian Perrine
pursuant to the agreements listed on Schedules 3.09(l)(2)(b) through (i)
of the Seller Disclosure Letter; (y) any and all severance payments payable to
Michael Potts pursuant to the agreements listed on Schedules 3.09(l)(2)(j)
through (l) of the Seller Disclosure Letter; and (z) any obligations
arising from Seller’s, the Company’s or any Subsidiary’s tuition reimbursement
program and adoption program and Seller’s Executive Deferred Compensation Plan.

 

(c)                                  Master Sublease.

 

(i)                                     Throughout
the term of the Master Sublease, (A) Seller shall fully perform all of its
obligations under the Master Sublease and (B) Seller shall not, by its action
or failure to act, become in default under the Master Sublease.  Seller shall not, without Buyer’s prior
written consent, terminate the Master Sublease prior to the expiration of the
term of the Master Sublease.

 

(ii)                                  At
any time prior to the termination of the Master Sublease, Buyer may propose to
terminate any and all obligations and liabilities under the Master Sublease by
delivering to Seller a cash payment, and Seller agrees to negotiate in good
faith with Seller with respect thereto (subject to the written consent of High
Pointe I Development Group, LLC (“High Pointe”)
and Crown).

 

(iii)                               In
the event that Buyer wishes to sublease to a third party all or any portion of
the leased premises under the Master Sublease, Seller shall use commercially
reasonable efforts to cooperate with Buyer to consummate such sublease
(including participating in negotiations with High Pointe and Crown to
effectuate such sublease), and Seller shall not unreasonably withhold its
approval to such sublease.

 

(iv)                              From
the Agreement Date until 5:00 pm Pacific time on November 19, 2004, Seller
will, in good faith, cooperate with Buyer in Buyer’s efforts to have its

 

21

 

proposed
changes to the Sublease Consent, as set forth on Schedule 5.04(c)(iv)
(“Buyer’s Proposed Consent”),
accepted by High Pointe and Crown.  For
purposes of the foregoing, Seller’s good faith cooperation with Buyer will not
include (A) Seller’s payment of any amount to any Person or (B) Seller’s
acceptance of any terms or conditions that would adversely affect Seller.  If both High Pointe and Crown agree to accept
(x) Buyer’s Proposed Consent or (y) Buyer’s Proposed Consent with such changes
thereto that are accepted by both Buyer and Seller (“Buyer’s Revised Proposed Consent”), then Buyer’s Proposed
Consent or Buyer’s Revised Proposed Consent, as applicable, will replace the
Sublease Consent as Exhibit E attached hereto.

 

(d)                                 Ericsson Sublease.  From the Agreement Date until the earlier of
the Closing and the termination of this Agreement in accordance with Article 11,
Seller will use commercially reasonable efforts to either (i) effectively
assign to Buyer all of Seller’s rights and obligations under that certain
Sublease Agreement dated August 22, 2003 by and between the Intuit Inc.
and Ericsson (the “Ericsson Sublease”),
with such assignment (such assignment, the “Ericsson
Assignment”) to include a full release in favor of Seller from
Ericsson and High Pointe (such release, the “Ericsson
Release”), or (ii) terminate the Ericsson Sublease and replace it
with a new sublease between Ericsson and Buyer, executed and delivered by
Ericsson to Buyer, for the premises covered by the Ericsson Sublease and upon
substantially similar terms (including rental rate) as the Ericsson Sublease
(such new sublease, the “New Ericsson
Sublease”), with such New Ericsson Sublease to include the Ericsson
Release.  Notwithstanding anything herein
to the contrary, Buyer shall not be required to assume any liabilities of
Seller relating to periods prior to the Closing as part of the Ericsson
Release.

 

(e)                                  Trademarks; Tradenames.  Seller
shall not use the trademark or trade name “Intuit FundWare” or any trademark or
trade name confusingly similar to the foregoing for any purpose other than as
permitted under “fair use” exceptions as that term is interpreted under federal
trademark law (for example, the right to use the name to describe Seller’s
historical operations in its securities law filings).  For the avoidance of doubt, nothing in this
Agreement shall be construed as any granting to Seller or any of its Affiliates
any right or license, either express or implied, to use the trademark or trade
name “Intuit FundWare” or any trademark or trade name confusingly similar to
the foregoing, and Seller agrees that it shall not use any such trademark or
trade name as a corporate, trade or business name of any operating Affiliate of
Seller, or to identify or brand any product or service of Seller or any of its
Affiliates, or for any other branding or promotional purpose whatsoever.

 

SECTION 5.05.  Non-Solicitation.  For a period of one year after the Closing,
Seller shall not (and shall not direct other Persons to), without Buyer’s prior
written consent:  (i) directly or
indirectly, separately or in association with other Persons, interfere with,
impair, disrupt or damage the business of the Company or any Subsidiary by
hiring or soliciting to hire for employment any individual listed on Schedule 5.05(a)
attached hereto; provided, however, that the foregoing shall not
prohibit Seller (or other Persons acting pursuant to Seller’s direction) from
hiring or soliciting to hire for employment any such individual through general
advertisements to the public; provided, further, that the
foregoing shall not prohibit Seller (or other Persons acting pursuant to Seller’s
direction) from hiring or soliciting to hire for employment any such individual
if such individual ceases to be employed by Buyer, the Company or any
Subsidiary prior to the time of such hiring or solicitation; and (ii) directly
offer

 

22

 

to any customer of the Company or any of its
Subsidiaries listed on Schedule 5.05(b) attached hereto (any such
customer, a “Customer”) or any
value added reseller (VAR) listed on Schedule 5.05(c) attached
hereto (any such value added reseller, a “Value
Added Reseller”; all such Customers and Value Added Resellers,
collectively, the “Non-Solicit Persons”),
through a targeted communication sent to such Customer at such Customer’s
current mailing address or current email address as set forth on Schedule 5.05(b)
attached hereto or to such Value Added Reseller at such Value Added Reseller’s
current mailing address or current email address as set forth on Schedule 5.05(c)
attached hereto, any accounting application software substantially similar to
the Company’s Fundware product that is specifically designed for or targeted to
nonprofit organizations (a “Similar Product”)
or directly promote a Similar Product to any value added reseller (VAR) through
an outbound telephone call; provided, however, that the foregoing
shall not prohibit Seller (or other Persons acting pursuant to Seller’s
direction) from directly offering, through a targeted communication, a Similar
Product to up to 5% of such Non-Solicit Persons so long as any such targeted
communication is made using knowledge that Seller has obtained independently of
Seller’s ownership of the Company.

 

ARTICLE 6

COVENANTS OF BUYER

 

Buyer agrees
that:

 

SECTION 6.01.  Confidentiality.  Buyer confirms that it has entered
into the NDA and that Buyer is bound by, and will abide by, the provisions of
the NDA.  If this Agreement is
terminated, the NDA will remain in full force and effect, and all copies of
documents containing confidential information of a disclosing party will be
returned by the receiving party to the disclosing party or be destroyed, as
provided in the NDA.

 

SECTION 6.02.  Access.  On
and after the Closing Date, upon prior written notice to Buyer, Buyer will, and
will cause its subsidiaries to, afford promptly to Seller and its agents
reasonable access to their respective properties, books, financial and other
records, information, employees and auditors, in each case relating to the
Company or any Subsidiary (or any successor to their business, properties or
assets) and to the extent reasonable and necessary in connection with any
audit, investigation, dispute or litigation involving to the operation of the
Company or any Subsidiary prior to the Closing; provided, however,  that any such access by Seller shall be
conducted during Buyer’s normal business hours and shall not unreasonably
interfere with the conduct of the business of Buyer; provided, further,
that Seller and its agents shall be required to execute Buyer’s standard
non-disclosure agreement prior to accessing such properties, books, financial
and other records, information, employees and auditors.  Seller shall bear all of the out-of-pocket
costs and expenses (including, without limitation, attorneys’ fees, but
excluding reimbursement for general overhead, salaries and employee benefits)
reasonably incurred in connection with the foregoing.  This Section 6.02 shall not apply to any
investigation, dispute or litigation, in each case that is between Buyer and
Seller.

 

SECTION 6.03.  Trademarks;
Tradenames.  After the
Closing, Buyer shall not, and shall not permit the Company or its Subsidiaries
to, use any of the marks or names set forth on Schedule 6.03; provided,
however, that Buyer may use the FundWare mark alone or in

 

23

 

combination with other marks, so long as it is
not used in combination with the INTUIT mark or any other mark, name or
designation that is confusingly similar to any mark, name or designation
adopted or used by Seller.  This Section 6.03
shall not prohibit Buyer from fair use (as that term is interpreted under
federal trademark law) of the name “Intuit” (for example, the right to use the
name “Intuit” to describe Buyer’s acquisition of the Company pursuant to this
Agreement).

 

SECTION 6.04.  Privacy.  Promptly
after the Agreement Date, Seller will send a communication, a copy of which is
attached hereto as Exhibit A, to all customers of the Company, notifying
them of the pending change of control. 
Buyer shall use its commercially reasonable efforts to ensure that its
first communication following the Closing that involves the use of any customer
information for marketing purposes shall be by means of an email that provides
the following:  (i) a statement that
Buyer’s privacy policy is to comply with all applicable legal requirements; and
(ii) an opportunity to opt out of any further use of their customer information
for email solicitations by Buyer.  Buyer
agrees that it shall use its commercially reasonable efforts to make such email
communication no later than ten business days following the Closing.

 

SECTION 6.05.  Wages
and Employee Benefit Plans.  Buyer
shall not withdraw any Offer Letter prior to the Closing.  Upon the Closing, the Offerees shall cease to
be employees of Seller.

 

SECTION 6.06.  Ericsson
Sublease.  From the Agreement
Date until the earlier of the Closing and the termination of this Agreement in
accordance with Article 11, Buyer will, in good faith, cooperate with
Seller in Seller’s efforts to obtain either (i) the Ericsson Assignment and the
Ericsson Release or (ii) the New Ericsson Sublease and the Ericsson Release.

 

ARTICLE 7

COVENANTS OF BUYER AND SELLER

 

Buyer and
Seller agree that:

 

SECTION 7.01.  Efforts; Further Assurances.  Subject to the terms and conditions of
this Agreement, Buyer and Seller will use commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.  Seller and Buyer agree, and Seller, prior to
the Closing, and Buyer, after the Closing, agree to cause the Company and each
Subsidiary, to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
necessary or desirable in order to consummate or implement expeditiously the
transactions contemplated by this Agreement.

 

SECTION 7.02. Certain Filings. Seller and Buyer shall
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or
authority is required or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in each case in
connection with the consummation of the transactions contemplated by this
Agreement, and (ii) in taking

 

24

 

such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.

 

SECTION 7.03.  Public
Announcements.  The parties
agree to consult with each other before making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange, will not make any such public statement prior to such
consultation; provided, however, that Buyer and Seller have
consulted with each other regarding the issuance of press releases relating to
the transactions contemplated hereby, copies of which is attached hereto as Exhibit
B-1 and Exhibit B-2 (the “Approved
Press Releases”), and Buyer and Seller agree that the Approved Press
Releases may be issued by Buyer and Seller, as applicable, promptly after the
execution and delivery of this Agreement by Buyer and Seller.

 

SECTION 7.04.  Intercompany
Accounts.  At the Closing, all
intercompany accounts, and the obligations relating thereto, between Seller or
its Affiliates, on the one hand, and the Company or any Subsidiary, on the
other hand, as of the Closing shall be terminated.

 

ARTICLE 8

TAX MATTERS

 

SECTION 8.01.  Tax
Definitions.  The following
terms, as used in this Article 8, have the following meanings:

 

“Affiliate”
means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.

 

“Federal Tax” means
any Tax imposed under Subtitle A of the Code.

 

“Final
Determination” means (i) with respect to Federal
Taxes, a “determination” as defined in Section 1313(a) of the Code and,
with respect to Taxes other than Federal Taxes, any final determination of
liability in respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a period for the
filing of claims for refunds, amended returns or appeals from adverse
determinations) or (ii) the payment of Tax by Buyer, Seller or any of their
Affiliates, whichever is responsible for payment of such Tax under applicable
law, with respect to any item disallowed or adjusted by a Taxing Authority,
provided that such responsible party determines that no action should be taken
to recoup such payment and the other party agrees.

 

“Post-Closing
Tax Period” means any Tax period ending after the
close of business on the Closing Date.

 

“Pre-Closing
Tax Period” means any Tax period ending on or before
the close of business on the Closing Date.

 

“Seller
Group” means, with respect to federal income Taxes,
the affiliated group of

 

25

 

corporations (as defined in Section 1504(a)
of the Code) of which Seller is a member and, with respect to state income or
franchise Taxes, the consolidated, combined or unitary group of which Seller or
any of its Affiliates is a member.

 

“Subsidiary”
of a specified entity means any entity of which the specified entity (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions of such other entity.

 

“Tax Asset”
means any net operating loss, net capital loss, investment tax credit, foreign
tax credit, charitable deduction or any other credit or tax attribute which
could reduce Taxes (including, without limitation, deductions and credits
related to alternative minimum taxes).

 

“Tax Benefit” means
an adjustment which makes allowable to Buyer, any of its Affiliates or,
effective upon the Closing, the Company or any Subsidiary of the Company any
deduction, amortization, exclusion from income or other allowance which would
not, but for such adjustment, be allowable.

 

“Tax Return” means
any return, declaration, report, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.

 

“Taxing
Authority” means any governmental authority (domestic
or foreign) responsible for the imposition of Taxes.

 

SECTION 8.02. Tax
Representations.  Seller
represents and warrants to Buyer that as of May 31, 2002 through the Closing
Date, subject to the exceptions stated in Schedule 8.02 of the
Seller Disclosure Letter, and subject to other exceptions that are not material
individually or in the aggregate:

 

(a)                                  the
Company and each of its Subsidiaries have prepared and timely filed with the
appropriate Taxing Authorities all material Tax Returns required to be filed
through the date of this Agreement, taking into account any extension of time
to file granted to, or obtained on behalf of, the Company or its Subsidiaries;

 

(b)                                 the
Company and each of its Subsidiaries have timely paid all material Taxes due
through the date of this Agreement and have made adequate provision for any
Taxes attributable to any taxable period (or portion thereof) ending on or
prior to the date of this Agreement that are not yet due;

 

(c)                                  any
material deficiencies or assessments asserted in writing against the Company or
any of its Subsidiaries by any Taxing Authority through the date of this
Agreement have been paid or fully reserved or settled;

 

(d)                                 to
Seller’s Knowledge, neither the Company nor any of its Subsidiaries is
presently under examination or audit by any Taxing Authority;

 

26

 

(e)                                  no
extension of the period for assessment or collection of any Tax is currently in
effect with respect to the Company or any of its Subsidiaries;

 

(f)                                    none
of the assets of the Company or any of its Subsidiaries is “tax-exempt use
property” (as defined in Section 168(h)(1) of the Code) or may be treated
as owned by any other Person pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954 (as in effect immediately prior to the enactment of the
Tax Reform Act of 1986);

 

(g)                                 the
Company and each of its Subsidiaries organized under the laws of a state within
the United States is a member of the Seller Group and files its United States
federal income Tax Return on a consolidated basis with Seller pursuant to Section 1501
of the Code;

 

(h)                                 neither
the Company nor any of its Subsidiaries are parties to, or bound by, any tax
indemnity, tax sharing or tax allocation agreement or arrangement;

 

(i)                                     there
is no unresolved claim by a Taxing Authority in any jurisdiction where the
Company and its Subsidiaries do not file Tax Returns that the Company or its
Subsidiaries is, or may be, subject to taxation by such jurisdiction;

 

(j)                                     no
payment will, or may, be made by the Company and its Subsidiaries to any
employee, former employee, officer, director or agent thereof which payment
will be characterized as an “excess parachute payment” within the meaning of Section 280G(b)(1)
of the Code; and

 

(k)                                  none
of the Company and its Subsidiaries (i) has engaged in a transaction that, as
of the date of entering into a binding contract to engage in such transaction,
was a “listed transaction” as defined in Treasury Regulation Section 1.6011-4(b)(2),
(ii) has been the “distributing corporation” (within the meaning of Section 355(c)(2)
of the Code) with respect to a transaction described in Section 355 of the
Code within the three (3) year period ending as of the Agreement Date, or (iii)
owns any interest in real property in the State of New York or in any other
jurisdiction in which a tax is imposed on the transfer of a controlling
interest in any entity that owns any interest in real property.

 

SECTION 8.03.  Filing of Tax Returns.

 

(a)                                  Seller will file (or cause to be filed) all necessary
consolidated United States federal income Tax Returns of the Seller Affiliated
Group and all necessary Combined Income Tax Returns for all taxable periods
beginning on or before the Closing Date. 
Seller will file (or cause to be filed) all necessary Separate Tax
Returns with respect to the Company and its Subsidiaries for all taxable
periods ending on or before the Closing Date. 
Seller will pay for its own account or the account of one or more of its
Affiliates (i) any United States federal income Taxes with respect to such
federal income Tax Returns, (ii) any United States or state, local or other
governmental income or franchise Taxes with respect to such Combined Income Tax
Returns (“Combined Income
Taxes”), and (iii) any United States or state,
local or other governmental Taxes other than Combined Income Taxes or Taxes
described in clause (i) above (“Separate
Taxes”) with respect to such Separate Tax
Returns.  To the extent permitted by
applicable law and regulations, the taxable year of the Company and each of its
Subsidiaries will

 

27

 

terminate on the Closing Date for all
United States or state, local and other governmental income and franchise Tax
purposes.

 

(b)                                 Promptly, but no later than 180 days after the
Closing Date (but, in any event, no later than 30 days prior to the due date
(without extensions) of the relevant Tax Return), Buyer or the Company will
provide Seller with the necessary information relating to the Company and its
Subsidiaries and, where necessary, authorization for Seller to prepare such Tax
Returns and to pay such federal income Taxes, Combined Income Taxes and
Separate Taxes.  Buyer or the Company
will prepare such information in a manner consistent with past practice, and
Seller will prepare such Tax Returns in a manner consistent with past practice.

 

(c)                                  Except as
described in Sections 8.03(a) and 8.03(b), Buyer or the Company will file (or
cause to be filed) all necessary United States or state, local and other
governmental Tax Returns with respect to the Company and all of its
Subsidiaries for all taxable periods. 
Buyer or the Company will pay (or cause to be paid) for its own account
or the account of one or more of its Affiliates any Taxes due with respect to
such Tax Returns; provided, however, that, with respect to any taxable
period of the Company or any of its Subsidiaries that begins on or before the
Closing Date and ends after the Closing Date (a “Straddle Period”), Seller shall reimburse Buyer or the
Company for any such Taxes paid that are attributable to the pre-Closing
portion of that Straddle Period.  Such
reimbursement by Seller shall occur by wire transfer on the later of (A) the
third day prior to the due date for payment of such Taxes to the government and
(B) the fifteenth business day after Buyer has provided to Seller (i) written
notice that such Taxes have been or soon will be paid by Buyer, the Company or
any of its Subsidiaries and (ii) a detailed calculation of the Straddle Period
Taxes and the pre-Closing portion thereof; provided, however,
that, if Seller’s failure to pay such Taxes results from insufficiency of the
detailed calculation, no interest will be due from Seller.  The detailed calculation shall be sufficient
to allow Seller to make a determination as to the accuracy of the
calculation.  Buyer and Seller will
endeavor in good faith to resolve any differences with respect to such
calculation.

 

(d)                                 For purposes
of this Agreement, income, deductions and other items in respect of a Straddle
Period will be allocated between the pre-Closing portion of such Straddle
Period and the post-Closing portion of such Straddle Period based on an actual
closing of the books of such entity as of the end of the Closing Date.

 

SECTION 8.04.  Tax
Covenants.

 

(a)                                  Buyer
covenants that it will not cause or permit the Company or any Subsidiary or
Affiliate of Buyer to (i) take any action on the Closing Date other than in the
ordinary course of business, including, without limitation, the distribution of
any dividend or the effectuation of any redemption, that could give rise to any
Tax liability of the Seller Group or any loss of Seller or the Seller Group
under this Agreement or (ii) make or change any Tax election, amend any Tax
Return, take any Tax position on any Tax Return, take any action, omit to take
any action or enter into any transaction, in each case that results in any
increased Tax liability or reduction of any Tax Asset of Seller in respect of
any Pre-Closing Tax Period.  Buyer agrees
that Seller is to have no liability for any Tax resulting from any action,
referred to in the preceding sentence, of the Company, Buyer or any Affiliate
of Buyer on the Closing Date.

 

28

 

(b)                                 Buyer and
Seller agree to report all transactions not in the ordinary course of business
occurring on the Closing Date after Buyer’s purchase of the Shares on Buyer’s
Tax Returns to the extent permitted by Treasury Regulations Section 1.1502-76(b)(1)(ii)(B)
and any similar state, local and foreign law provisions.

 

(c)                                  All
transfer, documentary, sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be borne and paid by Buyer, and Buyer will, at its own expense,
file all necessary Tax Returns and other documentation with respect to all such
Taxes and fees, and, if required by applicable law, Seller will, and will cause
its Affiliates to, join in the execution of any such Tax Returns and other
documentation.

 

SECTION 8.05.  Control.

 

(a)                                  Seller
will have the exclusive right to file any amended Tax Returns and to control
any audit or other administrative or judicial proceeding with respect to the
consolidated United States federal income Tax liability of the Seller
Affiliated Group and/or the Tax liability of Seller or an Affiliate of Seller
under any Combined Income Tax Return and the portion of any other audit or
other administrative or judicial proceeding regarding any other matter that may
result in any Tax liability with respect to which Seller provides
indemnification under this Agreement.

 

(b)                                 Except as provided in Section 8.05(a),
Buyer will have the exclusive right to control any audit or other
administrative or judicial proceeding with respect to the Tax liability of the
Company or any of its Subsidiaries.

 

SECTION 8.06.  Refunds.

 

(a)                                  Seller
will be entitled to any refunds (including interest paid therewith) in respect
of any Tax liability of the Company or any of its Subsidiaries in respect of a
taxable period (or the portion thereof) ending on or prior to the Closing Date.

 

(b)                                 Seller
will be entitled to any refunds (including interest paid therewith) in respect
of any Tax liability of the Company or any of its Subsidiaries in respect of a
pre-Closing portion of any Straddle Period.

 

(c)                                  Except as provided in
Section 8.06(a) and Section 8.06(b), Buyer will be entitled to any
refunds (including interest paid therewith) in respect of any Tax Liability of
the Company or any of its Subsidiaries.

 

SECTION 8.07.  Tax Benefits.

 

(a)                                  Buyer
agrees to pay to Seller any Tax Benefit received by the Company, any Subsidiary
of the Company, Buyer or any Affiliate of Buyer from the use in any
Post-Closing Tax Period of a carryforward of any Tax Asset of the Company or
any Subsidiary of the Company from a Pre-Closing Tax Period.  Such Tax Benefit shall be considered equal to
the excess of (i) the amount of Taxes that would have been payable by the
Company, any Subsidiary of the Company, Buyer or any Affiliate of Buyer over
(ii) the amount of Taxes actually payable by the Company, any Subsidiary of the
Company, Buyer or any Affiliate of Buyer. 
Payment of the amount of such Tax Benefit shall be made within 90 days
of the filing of the applicable Tax

 

29

 

Return
for the taxable year in which the Tax Asset is utilized.  If, subsequent to the payment by Buyer to
Seller of any such amount, there shall be (A) a Final Determination which
results in a disallowance or a reduction of the Tax Asset so carried forward or
(B) a reduction in the amount of the Tax Benefit realized by the Company, any
Subsidiary of the Company, Buyer or any Affiliate of Buyer as a result of any
other Tax Asset that arises in a Post-Closing Tax Period, Seller shall repay to
Buyer, within 90 days of such event described in clause (A) or (B) (an “Event” or,
collectively, the “Events”), any amount which would
not have been payable to Seller pursuant to this Section 8.07(a) had the
amount of the Tax Benefit been determined in light of the Events.

 

(b)                                 Any amount paid to or
by Seller under this Section 8.07 will be treated as an adjustment to the
Purchase Price unless a Final Determination causes any such amount to not
constitute an adjustment to the Purchase Price for Tax purposes.  In such event, Buyer or Seller, as the case
may be, shall pay an amount that reflects the hypothetical Tax consequences of
the receipt or accrual of such payment, using the maximum statutory rate (or
rates, in the case of an item that affects more than one Tax) applicable to the
recipient of such payment for the relevant year, reflecting, for example, the
effect of deductions available for interest paid or accrued and Taxes such as
state and local income Taxes.

 

SECTION 8.08.  Interest.  In the event that any payment
required to be made under this Agreement is made after the date on which such
payment is due, interest will accrue on such amount from (but not including)
the due date of the payment to (and including) the date such payment is
actually made at the rate designated from time to time in Section 6621(a)(2)
of the Code, compounded on a daily basis.

 

SECTION 8.09.  Tax Cooperation.

 

(a)                                  Seller
and Buyer will furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information and assistance relating to the
Company or its Subsidiaries or their respective assets or businesses (including
access to books and records) as is reasonably necessary for the filing of all
Tax Returns, the making of any election related to Taxes, the preparation for
any audit by any Taxing Authority, and the prosecution or defense of any claim,
suit or proceeding relating to any Taxes or Tax Return.  Seller and Buyer will cooperate with each
other in the conduct of any audit or other proceeding related to Taxes and all
other Tax matters relating to the Company or its Subsidiaries or their
respective assets or businesses, and each will execute and deliver such powers
of attorney and other documents as are necessary to carry out the intent of
this Agreement.  The party requesting
cooperation under this Section 8.09 will reimburse the other party for any
actual out-of-pocket expenses incurred in furnishing such cooperation.

 

(b)                                 Seller and Buyer will
report to the other any written communication from or with the IRS that relates
in any way to the characterization of the Purchase or any related transaction.

 

SECTION 8.10.  Section 338 Elections.

 

(a)                                  Buyer
and Seller shall join in filing an election under Section 338(h)(10) of
the Code (the “Section 338(h)(10) Election”)
with respect to the actual or deemed acquisition by Buyer of the Company and
each of its U.S. Subsidiaries and will treat such acquisition as a

 

30

 

deemed
sale of all of the assets of the Company and each such Subsidiary (“Deemed Asset Sale Treatment”).

 

(b)                                 Prior
to the Closing Date, Buyer shall advise Seller of all material filings and
schedules that are required to perfect the Deemed Asset Sale Treatment
(collectively, the “Identified Elections”).  Seller shall execute, or cause any necessary
Subsidiary of Seller to execute, any Identified Election prepared and requested
by Buyer that is necessary to achieve Deemed Asset Sale Treatment.  Buyer shall provide to Seller any information
in the possession of Buyer or any of its Subsidiaries that is required to be
set forth on any Identified Election.

 

(d)                                 Seller
will pay any Taxes for all taxable periods ending on or before the Closing
Date, and for the portion of any Straddle Period ending as of the end of the
Closing Date, attributable to the making of the Section 338(h)(10)
Election and other elections or filings under this Section 8.10.

 

(e)                                  Within
180 days after the Closing Date, Buyer will provide to Seller copies of IRS
Forms 8023 and 8883 and any required exhibits thereto (collectively, the “Asset Acquisition Statements”) with Buyer’s proposed
allocation of the Purchase Price (together with any assumed liabilities).  Within 15 days after Seller’s receipt of the
Asset Acquisition Statements, Seller will propose in writing to Buyer any
changes to the Asset Acquisition Statements (“Seller
Proposal”).  In the event that
Seller does not deliver a Seller Proposal to Buyer within such 15-day period,
Seller will be deemed to have agreed to, and accepted, the Asset Acquisition
Statements.  If Seller delivers a Seller
Proposal to Buyer within such 15-day period, Buyer and Seller will endeavor in
good faith to resolve any differences with respect to the Asset Acquisition
Statements within 15 days after Buyer’s receipt of such Seller Proposal.

 

(f)                                    If
after working in good faith to resolve any differences with respect to the
Asset Acquisition Statements as described in the last sentence of Section 8.10(e),
Buyer and Seller are unable to resolve any differences that, in the aggregate,
are material in relation to the Purchase Price, then any remaining disputed
matters shall be determined by an independent accounting firm of national
standing (the “Allocation Arbiter”) selected by
Buyer and Seller, which firm shall not be the regular accounting firm of either
Buyer or Seller.  Within 15 days after
its appointment, the Allocation Arbiter will determine (based solely on
presentations by Buyer and Seller and not by independent review) only those
matters in dispute and will issue a written report as to those matters and the
resulting allocation of Purchase Price, which report shall be conclusive and
binding on Buyer and Seller.  The fees
and costs of the Allocation Arbiter shall be borne equally by Buyer and
Seller.  For the avoidance of doubt, this
provision shall apply to any dispute regarding the Asset Acquisition
Statements.

 

(g)                                 Buyer
and Seller and their respective Subsidiaries shall file any required Tax
Returns consistent with the Deemed Asset Sale Treatment.  Buyer and Seller shall file all Tax Returns
and reports consistent with the allocation of Purchase Price provided in the
Asset Acquisition Statements (as may be modified by the mutual agreement of
Buyer and Seller as provided in Section 8.10(f)) or, if applicable, the
determination of the Allocation Arbiter.

 

31

 

ARTICLE 9

CONDITIONS TO CLOSING

 

SECTION 9.01.  Conditions
to Obligations of Buyer and Seller.  The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:

 

(a)                                  No
provision of any applicable law or regulation, and no judgment, injunction,
order or decree, shall prohibit the consummation of the Closing.

 

(b)                                 All
material actions by or in respect of or material filings with any governmental
body, agency, official or authority required to permit the consummation of the
Closing shall have been taken, made or obtained, except for any such actions or
filings the failure to take, make or obtain would not reasonably be expected to
have a Material Adverse Effect on the Company or Buyer.

 

SECTION 9.02.  Conditions
to Obligation of Buyer.  The
obligation of Buyer to consummate the Closing is subject to the satisfaction of
the following further conditions:

 

(a)                                  Seller
shall have performed in all material respects all of its obligations hereunder
required to be performed by it on or prior to the Closing Date, and Buyer shall
have received a certificate signed by a duly authorized officer of Seller to
the foregoing effect.

 

(b)                                 The
representations and warranties of Seller contained in this Agreement shall be
true and correct (without giving effect to any limitation as to materiality or
Material Adverse Effect set forth therein), in each case on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date (except for any such representations and
warranties that, by their terms, speak only as of a specific date or dates, in
which case such representations and warranties need only to be true and correct
on and as of such specified date or dates), except where the failure of such
representations and warranties to be true and correct (without giving effect to
any limitation as to materiality or Material Adverse Effect set forth therein)
would not, individually or in the aggregate, result in a Material Adverse
Effect on the Company, and Buyer shall have received a certificate signed by a
duly authorized officer of Seller to the foregoing effect.

 

(c)                                  There
will not have been any Material Adverse Effect on the Company since the
Agreement Date, whether or not resulting from a breach in any representation,
warranty or covenant contained herein, and Buyer shall have received a
certificate signed by a duly authorized officer of Seller to the foregoing
effect.

 

(d)                                 Seller
shall have received all consents, authorizations or approvals from the
governmental agencies referred to in Section 3.03 and from the third
parties set forth on Schedule 9.02(d), and no such consent,
authorization or approval shall have been revoked.

 

(e)                                  Seller
shall have executed and delivered to Buyer a counterpart of the License
Agreement substantially in the form of Exhibit C attached hereto
(the “License Agreement”).

 

32

 

(f)                                    Seller
shall have executed and delivered to Buyer a counterpart of the Transition
Services Agreement substantially in the form of Exhibit D attached
hereto (the “Transition Services Agreement”).

 

(g)                                 Each
of High Pointe I Development Group, LLC and Crown Media International, LLC
shall have executed and delivered to Buyer a counterpart of the Consent to
Sublease in substantially the form of Exhibit E attached hereto
(the “Sublease Consent”).

 

(h)                                 Seller
shall have delivered to Buyer all originals and copies of the following items
that are, as of the Closing, in the possession or control of Seller:  (i) the Company’s and each Subsidiary’s books
of account, financial and other records that are on the Company’s or any
Subsidiary’s local information systems; (ii) the Company’s and each Subsidiary’s
customer data (including customer prospects); and (iii) the Company’s personnel
records relating to those AF Employees who become employees of Buyer upon the
Closing and the Company’s corporate records; provided, however,
that, notwithstanding the foregoing, Seller shall be permitted to retain copies
(and, where reasonably necessary, originals) of all such records that are
reasonably necessary in order for Seller to comply with its tax and financial
reporting obligations and/or other regulatory or legal compliance obligations,
including any tax or accounting audit; provided, further, that,
notwithstanding the foregoing, Seller may retain Customer Data solely for the
purpose of complying with its obligations under Section 5.05.  Notwithstanding anything herein to the
contrary, but without limiting the parties’ obligations under the Transition
Services Agreement, Seller shall be permitted to retain all financial
information of the Company and its Subsidiaries that is in its Oracle
enterprise system (the “Oracle Information”)
and, until March 15, 2005, Seller will work in good faith with Buyer to
respond to Buyer’s reasonable requests for reports or extracts of raw data
queries generated from the Oracle Information, in each case that are necessary
for the operations of the Company and its Subsidiaries.

 

(i)                                     Seller’s
outside legal counsel, Fenwick & West LLP, shall have delivered to Buyer a
legal opinion, dated the Closing Date, as to the matters set forth in Exhibit
F attached hereto.

 

(j)                                     Seller
shall have delivered to Buyer a complete list, as of a date no more than two
business days prior to the Closing Date, of the current customers and clients
of the Company and its Subsidiaries, including the respective names, addresses
and contact persons for such customers and clients.

 

(k)                                  All
persons holding the position of a director or officer (or comparable position)
of the Company or any of its Subsidiaries, in office immediately prior to the
Closing, will have resigned in writing from such positions effective as of the
Closing.

 

(l)                                     Seller
shall have paid all retention bonuses due to AF Employees under the agreements
listed on Schedules 3.09(l)(2)(b) through (i) of the Seller
Disclosure Letter.

 

(m)                               Seller shall have transferred or assigned to
Buyer (at no cost to Buyer) the rights to use each copy of software set forth
on Schedule 9.02(m) that is validly licensed to the Company or any
Subsidiary for the use of an employee of the Company or any Subsidiary as of
the Agreement Date, subject to the terms of the license agreements applicable
to such software

 

33

 

(such transfer or assignment, the “Software
Assignment”).

 

(n)                                 Subject
to Section 6.06, Seller shall have obtained either (i) the Ericsson
Assignment and the Ericsson Release or (ii) the New Ericsson Sublease and the
Ericsson Release; provided, however, that the foregoing condition
may be satisfied in the manner set forth in Section 2.03; provided,
further, that, if the foregoing condition is satisfied in the manner set
forth in Section 2.03, the actual relocation of all Equipment from the
premises covered by the Ericsson Sublease to the premises covered by the Master
Sublease pursuant to Section 2.03 shall not be a condition to the
obligation of Buyer to consummate the Closing.

 

SECTION 9.03.  Conditions to Obligation of Seller.  The obligation of Seller to
consummate the Closing is subject to the satisfaction of the following further
conditions:

 

(a)                                  Buyer shall have
performed in all material respects all of its obligations hereunder required to
be performed by it on or prior to the Closing Date, and Seller shall have
received a certificate signed by a duly authorized officer of Buyer to the
foregoing effect.

 

(b)                                 The representations
and warranties of Buyer contained in this Agreement shall be true and correct
(without giving effect to any limitation as to materiality or Material Adverse
Effect set forth therein), in each case on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except for any such representations and warranties that, by their
terms, speak only as of a specific date or dates, in which case such
representations and warranties need only to be true and correct on and as of
such specified date or dates), except where the failure of such representations
and warranties to be true and correct (without giving effect to any limitation
as to materiality or Material Adverse Effect set forth therein) would not,
individually or in the aggregate, result in a Material Adverse Effect on Buyer,
and Seller shall have received a certificate signed by a duly authorized
officer of Buyer to the foregoing effect.

 

(c)                                  Buyer shall have
received all consents, authorizations or approvals from the governmental
agencies referred to in Section 4.03, and no such consent, authorization
or approval shall have been revoked.

 

(d)                                 Buyer shall have
executed and delivered to Seller a counterpart of the License Agreement.

 

(e)                                  Buyer shall have
executed and delivered to Seller a counterpart of the Transition Services
Agreement.

 

(f)                                    Each of High Pointe
I Development Group, LLC and Crown Media International, LLC shall have executed
and delivered to Seller a counterpart of the Sublease Consent.

 

ARTICLE 10
SURVIVAL;
INDEMNIFICATION

 

SECTION 10.01.  Survival.  The representations and warranties
of the parties hereto contained in this Agreement shall survive the Closing
until the first anniversary of the Closing

 

34

 

Date; provided, however,  that
(i) the representations and warranties contained in Section 8.02 shall
survive until expiration of the statute of limitations applicable to the
matters covered thereby (giving effect to any waiver, mitigation or extension
thereof) and (ii) any Indemnified Party (as defined in Section 10.03) will
be entitled to seek recovery for fraud or willful misconduct in connection with
this Agreement until the expiration of the applicable statute of
limitations.  All covenants of the
parties contained in this Agreement will survive according to their respective
terms.  Notwithstanding the preceding two
sentences, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought under this Agreement shall survive the time at
which it would otherwise terminate pursuant to the preceding two sentences if
notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time.

 

SECTION 10.02.  Indemnification.

 

(a)                                  Indemnification by Seller.  Seller hereby indemnifies Buyer and its
Affiliates against and agrees to hold each of them harmless from any and all
damage, loss, liability and expense (including reasonable expenses of
investigation and reasonable attorneys’ fees and expenses in
connection with any action, suit or proceeding) (“Damages”)  incurred or suffered by Buyer or any of
its Affiliates arising out of (i) any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by Seller pursuant to this
Agreement, (ii) United States federal income Taxes of the Company and each
of its Subsidiaries for all taxable periods ending on or before the Closing
Date (except for any Damages as may result from any action outside the ordinary
course of business taken with respect to the Company or any of its
Subsidiaries, or their respective assets or businesses, on the Closing Date but
after the Closing, other than such Damages arising as a result of the parties’
election under Section 338(h)(10) of the Code), (iii) United States
federal income Taxes of any member of the Seller Affiliated Group for any
period during which the Company or any of its Subsidiaries was a member of such
group, including United States federal income Taxes imposed pursuant to
Treasury Regulations Section 1.1502-6 (except for any Damages as may
result from any action outside the ordinary course of business taken with
respect to the Company or any of its Subsidiaries, or their respective assets
or businesses, on the Closing Date but after the Closing, other than such
Damages arising as a result of the parties’ election under Section 338(h)(10)
of the Code), (iv) Combined Income Taxes and Separate Taxes for all
taxable periods (or the portion thereof) ending on or before the Closing Date,
including, in the case of Separate Taxes, the pre-closing portion of any
Straddle Period beginning before and ending after the Closing Date, except for
any Damages as may result from any action outside the ordinary course of
business taken with respect to the Company or any of its Subsidiaries, or their
respective assets or businesses, on the Closing Date but after the Closing,
other than such Damages arising as a result of the parties’ elections of, or
reporting of, Deemed Asset Sale Treatment, and (v) any failure by Seller
to pay any Taxes for all taxable periods ending on or before the Closing Date,
and for the portion of any Straddle Period ending as of the end of the Closing
Date, attributable to the making of the Section 338(h)(10) Elections and
other elections or filings under Section 8.10(a); provided, however,
that (i) Seller shall not be liable under this Section 10.02(a) unless the
aggregate amount of Damages with respect to all matters referred to in this Section 10.02(a)
exceeds $100,000 (the “Seller Basket”),
in which event Buyer and its Affiliates may make claims for all Damages
(including the first $100,000

 

35

 

thereof), and (ii) Seller’s maximum liability
under this Section 10.02(a) shall not exceed an amount equal to 15% of the
Purchase Price (as adjusted in accordance with Section 2.03), except in
the case of fraud or willful misconduct or in connection with any
misrepresentation or breach of warranty in Section 8.02 or the breach of
any of Seller’s covenants and agreements contained in Section 2.03 and Article 8.  In no event shall Seller’s liability under
this Section 10.02 exceed an amount equal to the Purchase Price (as
adjusted in accordance with Section 2.03). 
Notwithstanding anything herein to the contrary, (i) neither the Seller
Basket nor the limitations set forth in this Section 10.02(a) shall apply
to the breach of any of Seller’s covenants and agreements contained in Section 2.03
and (ii) the Seller Basket shall not apply in the case of any breach by Seller
of its covenants and agreements contained in Sections 5.04(b) and 5.04(c).

 

(b)                                 Indemnification by Buyer.  Buyer hereby indemnifies Seller and its
Affiliates against and agrees to hold each of them harmless from any and all
Damages incurred or suffered by Seller or any of its Affiliates arising out of
(i) any misrepresentation or breach of warranty, covenant or agreement
made or to be performed by Buyer pursuant to this Agreement, (ii) any Tax
resulting from any action, referred to in Section 8.04(a), of the Company,
Buyer or any Affiliate of Buyer on the Closing Date, (iii) Taxes imposed
on the Company or any Subsidiary for all taxable periods (or the portion
thereof) beginning after the Closing Date, (iv) any action outside the ordinary
course of business taken with respect to the Company or any of its
Subsidiaries, or their respective assets or businesses, on the Closing Date but
after the Closing, other than such Damages arising as a result of the parties’
election under Section 338(h)(10) of the Code or as a result of the
parties’ elections of, or reporting of, Deemed Asset Sale Treatment, and
(v) the operation of the business of the Company and its Subsidiaries
after the Closing; provided, however,  that (a) Buyer shall not be liable under clause
(i), (ii), (iii) or (iv) unless the aggregate amount of Damages with respect to
all matters referred to in clauses (i), (ii), (iii) and (iv) exceeds $100,000
(the “Buyer Basket”), in which
event Seller and its Affiliates may make claims for all Damages (including the
first $100,000 thereof), and (ii) Buyer’s maximum liability under clauses (i),
(ii), (iii) and (iv) shall not exceed an amount equal to 15% of the Purchase
Price (as adjusted in accordance with Section 2.03), except in the case of
fraud or willful misconduct or in connection with the breach of any of Buyer’s
representations in Section 8.02 or any of Buyer’s covenants and agreements
contained in Section 2.03 and Article 8.  In no event shall Buyer’s liability under
clauses (i), (ii), (iii) and (iv) exceed an amount equal to the Purchase Price
(as adjusted in accordance with Section 2.03).  Notwithstanding anything herein to the
contrary, (i) neither the Buyer Basket nor the limitations set forth in this Section 10.02(b)
shall apply to the breach of any of Buyer’s covenants and agreements contained
in Section 2.03 and (ii) the Buyer Basket shall not apply in the case of
any breach by Buyer of its covenants and agreements contained in Sections 6.02
and 6.03.

 

SECTION 10.03.  Notice of Claim; Third Party Claims.

 

(a)                                  The
party seeking indemnification under Section 10.02 (the “Indemnified Party”) agrees to give prompt
notice (a “Notice of Claim”) to
the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim or the
commencement of any suit, action
or proceeding (any such claim, suit, action or proceeding, a “Claim”) in respect of which indemnity may
be sought under Section 10.02

 

36

 

and will provide the Indemnifying Party with
such information relating thereto that the Indemnifying Party may reasonably
request.  Each Notice of Claim will
contain the following:  (i) a
statement that the Indemnified Party has incurred or suffered Damages in an
aggregate stated amount arising from such Claim (which amount may be the amount
of damages claimed by a third party in a Third Party Claim (as defined in Section 10.03(b)));
and (ii) a brief description, in reasonable detail (to the extent
reasonably available to the Indemnified Party), of the facts, circumstances or
events giving rise to the alleged Damages based on the Indemnified Party’s good
faith belief thereof, including the identity and address of any third-party
claimant (to the extent reasonably available to the Indemnified Party) and
copies of any formal demand or complaint, the amount of Damages, the date each
such item was incurred or suffered and the specific nature of the breach to
which such item is related.  The failure
to promptly notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations hereunder, except to the extent such failure shall
have adversely prejudiced the Indemnifying Party.

 

(b)                                 The
Indemnified Party will defend any Claim asserted by any third party (“Third Party Claim”), and the costs and
expenses incurred by the Indemnified Party in connection with such defense
(including the reasonable fees of attorneys, other professionals and experts
and court or arbitration costs) will be included in the Damages for which the
Indemnified Party may seek indemnification pursuant to a Claim made by such
Indemnified Party hereunder.  If such
Third Party Claim relates solely to monetary damages and not for injunctive,
equitable or other non-monetary relief, then the Indemnifying Party may, with
the Indemnified Party’s prior written consent (or if the Indemnified Party
continues to fail to actively and diligently defend a Third Party Claim after
the Indemnifying Party provides thirty (30) days’ notice of such failure),
assume the defense of (and, subject to this Section 10.03, settle) such
claim and shall not, as long as it diligently conducts such defense (subject to
a 30-day period, after receipt of notice from the Indemnified Party that the
Indemnifying Party is not diligently conducting such defense, during which it
may cure any failure to diligently conduct such defense), be liable to the
Indemnified Party for any fees of the Indemnified Party’s counsel or any other
expenses with respect to the defense of such claim incurred after the
assumption of such defense; provided, however, that this Section 10.03(b)
shall not apply in the event that the parties’ insurance policies prohibit such
action.

 

(c)                                  The
party that is not defending a Third Party Claim (the “Non-Defending Party”) will have the right to participate at
its own expense in all proceedings.  Each
party shall cooperate, and cause their respective Affiliates to cooperate, in
the defense or prosecution of any Third Party Claim and shall furnish or cause
to be furnished such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials or appeals, as may be
reasonably requested in connection therewith.

 

(d)                                 The
party that is defending a Third Party Claim shall obtain the prior written
consent of the Non-Defending Party (which shall not be unreasonably withheld)
before entering into any settlement of such Third Party Claim; provided,
however, that such consent by the Indemnifying Party will not be deemed
to be an acceptance of the related Claim by the Indemnified Party for
indemnification pursuant to Section 10.02 for the amount of such
settlement.

 

37

 

SECTION 10.04.  Calculation of Damages.

 

(a)                                  The amount of any
Damages payable under Section 10.02 by the Indemnifying Party shall be net
of any amounts actually recovered by the Indemnified Party under applicable
insurance policies.

 

(b)                                 The Indemnifying Party
shall not be liable under Section 10.02 for any Damages for lost profits.

 

(c)                                  The right to
indemnification, payment of damages or other remedy based on the
representations, warranties, covenants and obligations of the Indemnifying
Party contained herein will not be affected by any investigation or diligence
conducted by the Indemnified Party with respect to, or any knowledge acquired
(or capable of being acquired) by the Indemnified Party, at any time whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any
such representation, warranty, covenant or obligation.

 

SECTION 10.05.  Resolution of Notice of Claim.  Each Notice of Claim delivered by
an Indemnified Party to an Indemnifying Party will be resolved as follows:

 

(a)                                  If, within 20
calendar days after a Notice of Claim is received by the Indemnifying Party,
the Indemnifying Party does not contest such Notice of Claim in writing to the
Indemnified Party as provided in Section 10.05(b), then the Indemnifying
Party will be conclusively deemed to have consented to the recovery by the
Indemnified Party of the full amount of the Damages specified in the Notice of
Claim and, without further notice, to have stipulated to the entry of a final
judgment for damages against the Indemnifying Party for such amount in any
court having jurisdiction over the matter where venue is proper.

 

(b)                                 If the Indemnifying
Party gives the Indemnified Party written notice contesting all or any portion
of a Notice of Claim (a “Contested
Claim”) within the 20-day period specified in Section 10.05(a),
then such Contested Claim will be resolved by either (i) a written
settlement agreement executed by the Indemnifying Party and the Indemnified
Party or (ii) in the absence of such a written settlement agreement, by
binding arbitration between Indemnifying Party and the Indemnified Party in
accordance with the terms and provisions of Section 10.05(c).

 

(c)                                  Any Contested Claim
that is not resolved in accordance with Section 10.05(b)(i) will be
submitted to mandatory, final and binding arbitration before J.A.M.S./ENDISPUTE
or its successor (“J.A.M.S.”), pursuant to the United States
Arbitration Act, 9 U.S.C. Section 1 et. seq., and any such
arbitration will be conducted in Santa Clara County, California.  If J.A.M.S. ceases to provide arbitration
service, then the term “J.A.M.S.” as used in this Agreement will thereafter
mean and refer to the American Arbitration Association (“AAA”).  Either the Indemnifying Party or the
Indemnified Party may commence the arbitration process called for by this
Agreement by filing a written demand for arbitration with J.A.M.S. and giving a
copy of such demand to the other party. 
The arbitration will be conducted in accordance with the provisions of
J.A.M.S’ Streamlined Arbitration Rules and Procedures in effect at the time of
filing of the demand for arbitration (or, if J.A.M.S. then means the AAA, the
commercial arbitration rules of the AAA then in effect), subject to the
provisions of this Section 10.05(c).

 

38

 

The parties will cooperate with J.A.M.S. and
with each other in promptly selecting a single arbitrator from J.A.M.S.’ panel
of neutrals and in scheduling the arbitration proceedings in order to fulfill
the provisions, purposes and intent of this Agreement.  The parties covenant that they will
participate in the arbitration in good faith and that they will share in its
costs in accordance with Section 10.05(c)(i).  The provisions of this Section 10.05(c)
may be enforced by any court of competent jurisdiction.  Subject to the provisions of Section 10.05(c)(vii),
judgment upon the Final Award (as defined below) or any other final finding
rendered by the arbitrator in the arbitration may be entered in any court
having competent jurisdiction.

 

(i)                                     Payment of Costs.  The Indemnifying Party and the Indemnified
Party will bear the expense of deposits and advances required by the arbitrator
in equal proportions, but either party may advance such amounts, subject to
recovery as an addition or offset to any award. 
The arbitrator will determine in the Final Award the party who is the
prevailing party and the party who is not the prevailing party (the “Non-Prevailing Party”).  The Non-Prevailing Party will pay all
reasonable costs, fees and expenses related to the arbitration, including,
without limitation, reasonable fees and expenses of attorneys, accountants and
other professionals incurred by the prevailing party, the fees of the
arbitrator and the administrative fee of the arbitration proceedings.  If such an award would result in manifest
injustice, however, the arbitrator may apportion such costs, fees and expenses
between the parties in such a manner as the arbitrator deems just and
equitable.

 

(ii)                                  Burden of Proof. 
Except as may be otherwise expressly provided herein, for any
Contested Claim submitted to arbitration, the burden of proof will be as it
would be if the Claim were litigated in a judicial proceeding governed
exclusively by the internal laws of the State of California applicable to
contracts executed and entered into within the State of California, without
regard to the principles of choice of law or conflicts of law of any jurisdiction.

 

(iii)                               Award. 
Upon the conclusion of any arbitration proceedings hereunder, the
arbitrator will render findings of fact and conclusions of law and a final
written arbitration award setting forth the basis and reasons for any decision
reached (the “Final Award”)
and will deliver such documents to the Indemnifying Party and the Indemnified
Party, together with a signed copy of the Final Award.  Subject to the provisions of Section 10.05(c)(vii),
the Final Award will constitute a conclusive determination of all issues in
question, binding upon the Indemnifying Party and the Indemnified Party, and
will include an affirmative statement to such effect.  To the extent that the Final Award determines
that an Indemnified Party has actually incurred Damages in connection with the
Contested Claim through the date of the Final Award (“Incurred Damages”), the Final Award will set forth and
award to such Indemnified Party the amount of such Incurred Damages.  In addition, the Final Award will set forth
and award to the Indemnified Party an additional amount of Damages equal to the
reasonably foreseeable amount of alleged Damages that the arbitrator determines
(based on the evidence submitted by the parties in the arbitration) is
reasonably likely to be incurred by such Indemnified Party as a result of the
facts giving rise to the Contested Claim (“Estimated
Damages”), which amount of Estimated Damages may include the amount
of damages claimed by a third party in an action brought against the
Indemnified Party based on

 

39

 

alleged facts which, if true, would give rise
to Damages.

 

(iv)                              Timing. 
The Indemnifying Party, the Indemnified Party and the arbitrator will
conclude each arbitration pursuant to this Section 10.05(c) as promptly as
possible for the Contested Claim being arbitrated.

 

(v)                                 Terms of Arbitration. 
The arbitrator chosen in accordance with these provisions
will not have the power to alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of this Agreement.

 

(vi)                              Exclusive Remedy.  Following the Closing Date, except as
specifically otherwise provided herein, arbitration conducted in accordance
with this Agreement will be the sole and exclusive remedy of the parties for any
Claim made pursuant to Article 10.

 

(vii)                           Treatment of Damages. Upon issuance and delivery of the
Final Award as provided in Section 10.05(c)(iii), the Indemnified Party
will immediately be entitled to recover (A) the amount of any Incurred
Damages determined and awarded to the Indemnified Party under such Final Award
and (B) the amount of any Estimated Damages determined and awarded to the
Indemnified Party under such Final Award, and such Incurred Damages and
Estimated Damages will be deemed to be owed to the Indemnified Party for
purposes of this Agreement.  Both
Incurred Damages and Estimated Damages owed to Indemnified Parties are deemed
to be Damages for purposes of this Agreement.

 

(d)                                 If a Claim (including
a Contested Claim) is settled by a written settlement agreement executed by the
Indemnifying Party and the Indemnified Party (a “Settled Claim”), then the parties will resolve such Settled
Claim as provided in such settlement agreement.

 

SECTION 10.06.  Assignment of Claims. 
If the Indemnified Party receives any payment from an
Indemnifying Party in respect of any Damages pursuant to Section 10.02 and
the Indemnified Party could have recovered all or a part of such Damages from a
third party (a “Potential Contributor”)
based on the underlying Claim asserted against the Indemnifying Party, the
Indemnified Party shall assign such of its rights to proceed against the
Potential Contributor as are necessary to permit the Indemnifying Party to
recover from the Potential Contributor the amount of such payment.

 

SECTION 10.07.  Exclusivity.  Except as specifically set forth
in this Agreement, the Indemnified Party waives any rights and claims the
Indemnified Party may have against the Indemnifying Party, whether in law or in
equity, relating to the transactions contemplated hereby.  The rights and claims waived by the
Indemnified Party include, without limitation, claims for contribution or other
rights of recovery arising out of or relating to any Environmental Law, claims
for breach of contract, breach of representation or warranty, negligent
misrepresentation and all other claims for breach of duty.  After the Closing, Section 10.02 will
provide the exclusive remedy for any misrepresentation, breach of warranty,
covenant or other agreement (other than those contained in
Sections 5.02(b) and 6.02) or other claim arising out of this Agreement or
the transactions contemplated hereby

 

40

 

and thereby, except for any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of the NDA, the License Agreement, the Transition Services
Agreement or the Sublease Consent; provided, however, that the
foregoing shall not prohibit Buyer or Seller from seeking and obtaining
temporary and permanent injunctive relief or specific performance in the case
of any breach by the other party hereto of such other party’s obligations
contained in Sections 5.02(b), 5.04(c), 6.02, 6.03 and 6.04.

 

ARTICLE 11

TERMINATION

 

SECTION 11.01.  Grounds
for Termination.  This
Agreement may be terminated at any time prior to the Closing:

 

(a)                                  by
mutual written agreement of Seller and Buyer;

 

(b)                                 by
either Seller or Buyer if the Closing shall not have been consummated on or
before December 15, 2004; or

 

(c)                                  by
either Seller or Buyer if consummation of the transactions contemplated hereby
would violate any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction.

 

The party desiring to terminate this
Agreement pursuant to clause (b) or (c) above shall give notice of such
termination to the other party.

 

SECTION 11.02.  Effect of
Termination.  If this Agreement is
terminated as permitted by Section 11.01, such termination shall be
without liability of either party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) to the other party
to this Agreement; provided, however,  that if such termination shall result from the willful (i)
failure of either party to fulfill a condition to the performance of the
obligations of the other party or (ii) failure to perform a covenant of this
Agreement, such party shall be fully liable for any and all Damages incurred or
suffered by the other party as a result of such failure without regard to the
proviso and other limitations set forth in Section 10.02(a) or Section 10.02(b),
as applicable.  The provisions of
Sections 5.02(c), 6.01, 12.03, 12.05, 12.06, 12.07, 12.13 and 12.14 shall
survive any termination hereof pursuant to Section 11.01.

 

ARTICLE 12
MISCELLANEOUS

 

SECTION 12.01.  Notices.  All notices and other
communications required or permitted under this Agreement will be in writing
and will be either hand delivered in person, sent by facsimile, sent by
certified or registered first-class mail, postage pre-paid, or sent by
nationally recognized express courier service. 
Such notices and other communications will be effective upon receipt if
hand delivered or sent by facsimile (with confirmation of receipt and provided the
sender receives a machine-generated confirmation of successful transmission and
reasonably promptly following such transmission sends such notice or
communication via U.S. mail or overnight courier), seventy two (72) hours after
mailing if sent by mail, and one day after

 

41

 

dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may notify the other
party in accordance with this Section 12.01:

 

if to Buyer,
to:

 

Kintera, Inc.

9605 Scranton Road, Suite 240

San Diego, CA 92121

Attention:  Harry Gruber, Chief Executive
Officer

Fax:  (858) 795-3010

Phone:  (858) 795-3000

 

with a copy to:

 

Morrison &
Foerster LLP

3811 Valley Centre Drive, Suite 500

San Diego, CA 92130

Attention:  Scott M. Stanton

Fax:  (858) 720-5125

Phone:  (858) 720-5141

 

if to Seller,
to:

 

Intuit Inc.

M/S 2700 C

2632 Marine Way

Mountain View, CA 94043

Attention:  General Counsel

Fax:  (650) 944-6622

Phone:  (650) 944-6000

 

with a copy to:

 

Fenwick &
West LLP

801 California Street

Mountain View, CA 94041

Attention:  Mark A. Leahy

Fax:  (650) 938-5200

Phone:  (650) 988-8500

 

SECTION 12.02.  Amendments and Waivers.  Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement, and in the case of a waiver, by the party against whom the waiver is
to be effective.  No failure or delay by
any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege.  Except as otherwise provided
herein, the

 

42

 

rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.

 

SECTION 12.03.  Expenses.  All
costs and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such cost or expense.

 

SECTION 12.04.  Successors and Assigns.  The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however,  that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.

 

SECTION 12.05.  Governing Law.  This Agreement shall be governed by and
construed in accordance with the law of the State of California, without regard
to the conflicts of law rules of such state.

 

SECTION 12.06.  Jurisdiction.  Subject
to Section 10.05, each of the parties hereto (a) submits to the
jurisdiction of any state or federal court sitting in Santa Clara County,
California in any action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, (b) agrees that all
claims in respect of the action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any other court.  Each of the
parties hereto waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto.  Any party may make service on another party
by sending or delivering a copy of the process to the party to be served at the
address and in the manner provided for giving of notices in Section 12.01.  Nothing in this Section 12.06, however,
will affect the right of any party to serve legal process in any other manner
permitted by law.

 

SECTION 12.07.  WAIVER OF JURY TRIAL. 
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

SECTION 12.08.  Counterparts; Third Party Beneficiaries.  This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.  This Agreement shall become
effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto.  No
provision of this Agreement is intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.

 

SECTION 12.09.  Entire Agreement. 
This Agreement, including the Exhibits and Schedules hereto,
constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.

 

43

 

SECTION 12.10.  Captions.  The captions herein are included
for convenience of reference only and shall be ignored in the construction or
interpretation hereof.

 

SECTION 12.11.  Seller
Disclosure Letter.  The
parties acknowledge and agree that (i) the Seller Disclosure Letter may include
certain items and information solely for informational purposes for the convenience
of Buyer and (ii) the disclosure by Seller of any matter in the Seller
Disclosure Letter shall not be deemed to constitute an acknowledgment by Seller
that the matter is required to be disclosed by the terms of this Agreement or
that the matter is material.  If any Schedule included
in the Seller Disclosure Letter discloses an item or information in such a way
as to make its relevance to the disclosure required by another Schedule included
in the Seller Disclosure Letter readily apparent, the matter shall be deemed to
have been disclosed in such other Schedule, notwithstanding the omission of an
appropriate cross-reference to such other Schedule.

 

SECTION 12.12.  Severability.  If any provision of this
Agreement, or the application thereof, is for any reason held to any extent to
be invalid, illegal or unenforceable, then the remainder of this Agreement and
the application thereof will nevertheless remain in full force and effect so
long as the economic and legal substance of the transactions contemplated by
this Agreement are not affected in any manner materially adverse to any party
hereto.  Upon such determination that any
provision is invalid, illegal or unenforceable, the parties agree to replace
such provision with a valid, legal and enforceable provision that will achieve,
to the maximum extent legally permissible, the economic, business and other
purposes of such provision.

 

SECTION 12.13.  Attorneys’
Fees.  Should suit be brought
to enforce or interpret any part of this Agreement, the prevailing party will
be entitled to recover, as an element of the costs of suit and not as damages,
reasonable attorneys’ fees to be fixed by the court (including costs, expenses
and fees on any appeal).  The prevailing
party will be entitled to recover its costs of suit, regardless of whether such
suit proceeds to final judgment.

 

SECTION 12.14.  Construction.  The parties hereto agree that they
have been represented by legal counsel during the negotiation and execution of
this Agreement and the other agreements, certificates and documents
contemplated by this Agreement and, therefore, waive the application of any
law, regulation, holding or rule of construction providing that ambiguities in
an agreement, certificate or document will be construed against the party
drafting such agreement, certificate or document.  Each reference herein to a law, statute,
regulation, document, agreement or contract will be deemed in each case to
include all amendments thereto.  When a
reference is made in this Agreement to Exhibits, Sections or Articles, such
reference will be to an Exhibit, a Section or an Article, respectively, to
this Agreement unless otherwise indicated.

 

SECTION 12.15.  No Joint
Venture.  Nothing contained in
this Agreement will be deemed or construed as creating a joint venture or
partnership between any of the parties hereto. 
Except as otherwise specified herein: 
(a) no party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party; (b) no party will
have the power to control the activities and operations of any other and their
status is, and at all times will continue to be, that of independent
contractors with respect to each other; (c) no party will have any power
or authority to bind or commit any other party; and (d) no party will hold
itself out as having any

 

44

 

authority or relationship in contravention of
this Section 12.15.

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

45

 

IN WITNESS
WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

 

 

	
   

  	
  KINTERA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry E.
  Gruber

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Harry E. Gruber, M.D.

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTUIT INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brad
  Henske

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Brad Henske

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President and

  Chief Financial Officer

  
						

 

 

[SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENTExhibit
10.1

 

2004 Salaried
Employee Performance Incentive Award Program

 

The 2004 Salaried Employee performance
Incentive Award Program is available to all salaried employees.  Under the program, an individual’s bonus is
determined based on a combination of company performance and individual
performance.

 

The portion attributable to the company’s
performance is determined quarterly for each participant based on target levels
of revenue growth and EBIT (earnings before interest and taxes)
performance.  The quarterly targets for
revenue growth and EBIT are set at the beginning of the plan year and are the
same for all participants.  If either
revenue growth or EBIT does not exceed a minimum level, no bonus will be
awarded under the program.  The bonus
amounts based on company performance are paid after the end of the quarter.

 

An additional 50% of the quarterly amounts
paid to each participant based on company performance for the first and second
half of the year also establish the “target individual bonus” that may be
earned based on individual performance. 
Individual performance is assessed at mid-year and again at year end,
and each participant is assigned an overall individual performance score.  Each individual performance score corresponds
to a predetermined percentage (ranging from 0% to 180%) of the target
individual bonus that will be awarded to the individual.  The bonus amounts based on individual
performance are paid semiannually.

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