Usinternetworking - Stock Purchase Agreement for Series B Preferred Stock

STOCK PURCHASE AGREEMENT





and



USINTERNETWORKING, Inc.





The Parties Hereto



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



December 31, 1998

















TABLE OF CONTENTS





PAGE







ARTICLE 1. DEFINITIONS............................................................................................1



1.1. Definitions................................................................................1

1.2. Accounting Terms; Financial Statements.....................................................6

1.3. Knowledge Standard.........................................................................6

1.4. Other Defined Terms........................................................................6



ARTICLE 2. AUTHORIZATION OF PREFERRED SHARES; PURCHASE AND SALE OF PREFERRED SHARES...............................7



2.1. Preferred Shares...........................................................................7

2.2. Purchase and Sale of Preferred Shares......................................................7

2.3. Closing....................................................................................7

2.4. Fees and Expenses..........................................................................8

2.5 Financial Accounting Positions; Tax Reporting...............................................8



ARTICLE 3. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO PURCHASE THE PREFERRED SHARES........................8



3.1. Representations and Warranties.............................................................8

3.2. Compliance with Terms and Conditions of this Agreement.....................................9

3.3. Delivery of Certificates Evidencing the Shares.............................................9

3.4. Closing Certificates.......................................................................9

3.5. Secretary's Certificates...................................................................9

3.6. Documents..................................................................................9

3.7. Purchase Permitted by Applicable Laws......................................................9

3.8. Consents and Approvals....................................................................10

3.9. Amended and Restated Stockholders'Agreement...............................................10

3.10. Certificate..............................................................................10

3.11. No Material Judgment or Order............................................................10

3.12. Legal Opinion............................................................................10

3.13. Approval of Counsel to the Purchasers....................................................10

3.14. Pro Forma Balance Sheet..................................................................11

3.15. Good Standing Certificates...............................................................11

3.16. No Litigation............................................................................11

3.17. Siebel Systems, Inc. Memorandum of Understanding.........................................11

3.18. SBIC Forms...............................................................................11

3.19. Repayment of Notes.......................................................................12



ARTICLE 4. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE..................................................12









4.1. Representations and Warranties............................................................12

4.2. Compliance with this Agreement............................................................12

4.3. Issuance Permitted by Applicable Laws.....................................................12

4.4. Payment of Purchase Price.................................................................12

4.5. Consents and Approvals....................................................................13

4.6. No Material Judgment or Order.............................................................13



ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................13



5.1. Corporate Existence and Authority.........................................................13

5.2. Corporate Authorization; No Contravention.................................................14

5.3. Governmental Authorization; Third Party Consents..........................................14

5.4. Binding Effect............................................................................14

5.5. Capitalization............................................................................14

5.6. Private Offering..........................................................................16

5.7. Litigation................................................................................16

5.8. Financial Statements......................................................................17

5.9. Title and Condition of Assets.............................................................18

5.10. Contractual Obligations..................................................................18

5.11. Tax Matters..............................................................................18

5.12. Severance Arrangements...................................................................19

5.13. Investment Company/Government Regulations................................................19

5.14. Broker's, Finder's or Similar Fees.......................................................19

5.15. Labor Relations and Employee Matters.....................................................19

5.16. Employee Benefits Matters................................................................19

5.17. Outstanding Borrowings...................................................................20

5.18. Insurance Schedule.......................................................................21

5.19. Solvency.................................................................................21

5.20. No Other Agreements to Sell the Assets or Capital Stock of the Company...................21

5.21. Key Employees............................................................................21

5.22. Compliance with Law......................................................................21

5.23. Software.................................................................................22

5.24. Disclosure...............................................................................24

5.25. No Default or Breach.....................................................................24

5.27. Patents, Trademarks, Etc..................................................................24

5.28. Use of Real Property......................................................................25

5.29. ERISA-Prohibited Transactions............................................................26

5.30. Absence of Certain Changes or Events......................................................26

5.31. Environmental Matters.....................................................................26

5.32. Potential Conflicts of Interest...........................................................27

5.33. Trade Relations...........................................................................27

5.34. Acquisition Agreements....................................................................27

5.35. Location of Assets.........................................................................28

5.36. Regulatory Affiliate......................................................................28

ii ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS......................................................28



6.1. Existence and Authority...................................................................28

6.2. Organization; Authorization; No Contravention.............................................28

6.3. Binding Effect............................................................................29

6.4. Purchase for Own Account..................................................................29

6.5. Financial Condition.......................................................................29

6.6. Receipt of Information....................................................................30

6.7. Broker's, Finder's or Similar Fees........................................................30

6.8. Governmental Authorization; Third Party Consent...........................................30

6.9. Litigation................................................................................30



ARTICLE 7. COVENANTS OF THE COMPANY WITH RESPECT TO THE PERIOD FOLLOWING THE CLOSING............................30



7.1. Reservation of Shares.....................................................................30

7.2. Year 2000.................................................................................31

7.3. Regulatory Compliance.....................................................................31

7.4. Information and Reports for SBIC Purchasers...............................................33

7.5. Financial Statements and Other Information................................................34

7.5. Subsidiaries...............................................................................36

7.6. Notice of Corporate Changes................................................................36

7.7. No Defaults................................................................................36

7.8. Permitted Investments......................................................................37

7.9. Other Information..........................................................................37

7.10. Preservation of Corporate Existence.......................................................37

7.11. Payment of Obligations....................................................................37

7.12. Compliance with Laws......................................................................38

7.13. Inspection................................................................................38

7.14. Insurance.................................................................................38

7.15. Books and Records.........................................................................38

7.16. Use of Proceeds...........................................................................39

7.17. Board Nominees............................................................................39

7.18. Granting of Employee Options..............................................................39

7.19. Business Activities.......................................................................39



ARTICLE 8. INDEMNIFICATION.......................................................................................39



8.1. Indemnification...........................................................................39

8.2. Procedure; Notification...................................................................40

8.3. Amended and Restated Stockholders'Agreement...............................................41



ARTICLE 9. MISCELLANEOUS.........................................................................................41



9.1. Survival of Representations and Warranties................................................41

9.2. Notices...................................................................................42





9.3. Successors and Assigns....................................................................42

9.4. Amendment and Waiver......................................................................42

9.5. Counterparts..............................................................................43

9.6. Headings..................................................................................43

9.7. Governing Law.............................................................................43

9.8. Jurisdiction..............................................................................43

9.9. Severability..............................................................................44

9.10. Rules of Construction....................................................................44

9.11. Entire Agreement.........................................................................44

9.12. Publicity................................................................................44

9.13. Further Assurances.......................................................................44

9.14. Waiver of Jury Trial.....................................................................45

9.15. Obligations of the Purchasers............................................................45











STOCK PURCHASE AGREEMENT





THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of this 31st day of December, 1998, by and among USINTERNETWORKING, Inc., a Delaware corporation (the "Company"), an d the other parties whose names appear on the signature pages hereto (collectively, the "Purchasers").



RECITALS:





A. Upon the terms and subject to the conditions set forth in this Agreement, the Compa ny proposes to issue and sell shares of its 8% Series B Cumulative Convertible Redeemable Preferred Stock ("Series B Preferred Stock", as defined below) to the Purchasers.



B. Upon the terms and subject to the conditions set forth in this Agreement, the Purchasers desire to purchase from the Company shares of the Series B Preferred Stock as set forth on SCHEDULE 1 hereto.



AGREEMENT:





NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto hereby agree as follows:



ARTICLE 1.



1.1. DEFINITIONS.



As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:



"AFFILIATE" means, with respect to any specified Person, any Person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person, whether by contract, through one or more intermediaries , or otherwise.



"AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT" means the Amended and Restated Stockholders' Agreement substantially in the form attached as EXHIBIT B.



"BUSINESS DAY" shall mean a day other than a Saturday or Sunday or any federal holiday.



"CODE" means the Internal Revenue Code of 1986, as amended, or any successor statute thereto.







"COMMISSION" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act (as defined below).



"COMMON STOCK" means the common stock, par value $.001 per share, of the Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted.



"COMPANY PARTIES" means the Company and each of its Subsidiaries.



"CONDITION OF THE COMPANY" means the assets, business, properties, operations, financial condition or prospects of the Company Parties, taken as a whole.



"CONTINGENT OBLIGATION" as applied to any Person, shall mean any direct or indirect liability, contingent or otherwise, of that Person: (i) with respect to any indebtedness, lease, dividend or other obligation of another Per son if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto wi l l be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise li a ble for reimbursement of drawings; or (iii) under any foreign exchange contract, currency swap agreement, interest rate swap agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in curren c y values or interest rates. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (c) any liability of such Person for the obligations of another thr o ugh any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed.



"CONTRACTUAL OBLIGATIONS" shall mean as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound.



"EMPLOYEE PLANS" means all employee benefit plans within the meaning of Section 3(3) of ERISA, in which employees of any Company Party participate or have participated.



"EMPLOYEE STOCK OPTION PLAN" means an employee stock option plan adopted by the Compensation Committee of the Board of Directors of the Company, and approved by







the Board of Directors of the Company, providing for the issuance to certain employees of the Company Parties of options to purchase a certain number of shares of Common Stock at a certain exercise price per share the total number of shares of Common Stoc k which may be issued under all such plans shall not exceed 6.5% of the total number of outstanding shares of common stock calculated on a fully diluted basis, not including the options and shares issuable or issued on exercise of options pursuant to the E mployee Stock Option Plan.



"ENVIRONMENTAL LAWS" shall mean any applicable past, present or future federal, state, territorial, provincial or local law, common law doctrine, rule, order, decree, judgment, injunction, license, permit or reg ulation relating to environmental matters, including those pertaining to land use, air, soil, surface water, ground water (including, without limitation, the protection, cleanup, removal, remediation or damage thereof), public or employee health or safety or any other environmental matter, together with any other laws (federal, state, territorial, provincial or local) relating to emissions, discharges, releases or threatened releases of any pollutant or contaminant including, without limitation, medical, c h emical, biological, biohazardous or radioactive waste and materials, into ambient air, land, surface water, groundwater, personal property or structures, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal , transportation, discharge or handling of any contaminant, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. 9601 ET SEQ.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. 1 8 01 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 ET SEQ.) ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. 1251 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. 2601 ET SE Q.), and the Occupational Safety and Health Act (29 U.S.C. 651 ET SEQ.).



"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.



"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder.



"GAAP" means United States generally accepted accounting principles, in effect from time to time, consistently applied.



"GOVERNMENTAL AUTHORITY" means the government of any nation, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.



"HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant, contaminant, pesticide, petroleum or petroleum product or byproduct radioa ctive substance, solid waste (hazardous or extremely hazardous), special, dangerous or toxic waste, hazardous or toxic substance, chemical or material regulated, listed, referred to, limited or prohibited under any Environmental Law, including without lim itation: (i) friable or damaged asbestos, asbestos-containing material, polychlorinated biphenyls (PCBs), solvents and waste oil; (ii) any





"hazardous substance" as defined under CERCLA or any environmental law, statute, regulation or rule; (iii) any haza rdous waste defined under RCRA or any Environmental Law; and (iv) even if not prohibited, listed, limited or regulated by an Environmental Law, all pollutants, contaminants, hazardous, dangerous or toxic chemical materials, wastes or any other substances, including, without limitation, any industrial process or pollution control waste (whether or not hazardous within the meaning of RCRA) which could pose a hazard to the environment, or the health and safety of any Person or impair the use or value of any p ortion of the property of the Company.



"INDEBTEDNESS" means, as to any Person: (a) all obligations, whether or not contingent, of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, unfunded credit commitments, letters of credit and bankers' acceptances, whether or not matured), (b) all indebtedness, obligations or liabilities of such Person evidenced by notes, bonds, debentures or similar instruments, whethe r matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several, that should be classified as liabilities in accordance with GAAP, including, without limitation, any items so classified on a balance sheet and any reimbursement obligations in respect of letters of credit or obligations in respect of bankers acceptances; (c) all obligations of such Person representing the balance of deferred purchase price of property or services, except trade accounts payab l e and accrued commercial or trade liabilities arising in the ordinary course of business, (d) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, wheth e r periodically or upon the happening of a contingency, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the selle r or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (g) all indeb t edness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (f)) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person, and (h) any Contingent Obligations of such Person.



"LIEN" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), restrict ion, preference or ...