ASSET PURCHASE AGREEMENT
Exhibit 10.2
THIS ASSET PURCHASE AGREEMENT (“Agreement”), dated as of December 21, 2005, is by and among
bigVAULT STORAGE TECHNOLOGIES, INC., a Delaware corporation (“BVST”), and BIG VAULT, INC., a Nevada
corporation (“BVI” and, together with BVST, collectively, the “Seller”), and XXXX XXXXXXX (“Xxxx”)
and XXXXX XXXXXXX (“Elisa” and, together with Xxxx, the “Shareholders”), and DIGI-DATA CORPORATION,
a Maryland corporation (“Purchaser”).
WITNESSETH:
Seller is in the business of providing remote, internet-based storage vaulting services to end
users and resellers, and related ancillary services (the “Vault Business”).
The parties hereto wish to enter into this Agreement which sets forth the terms and conditions
upon which Purchaser agrees to purchase from the Seller and the Seller agrees to sell to Purchaser,
for the consideration stated herein, all of the assets of the Seller (other than to the extent
specifically set forth herein) free and clear of all liens, liabilities and encumbrances.
In consideration of the foregoing and of the covenants, agreements, conditions,
representations and warranties hereinafter contained, and intending to be legally bound hereby,
Purchaser, the Seller and the Shareholders hereby agree as follows:
1. DEFINITIONS.
Unless otherwise defined below in this Section 1, the various capitalized terms used in this
Agreement shall have the definitions ascribed to them herein. As used in this Agreement, the
following terms shall have the meanings specified in this Section 1:
“Accounts Receivable” means: (1) all trade accounts receivable and other rights to payment
from customers of the Seller and the full benefit of all security for such accounts or rights to
payment, including all trade accounts receivable representing amounts receivable in respect of
services rendered to customers of the Seller; (2) all other accounts or notes receivable of the
Seller and the full benefit of all security for such accounts or notes; and (3) any Claim, remedy
or other right related to any of the foregoing.
“Agreed Liabilities Amount” means $1,500,000.
“Assigned Contracts” means all of the Contracts except for the Excluded Contracts.
“Claim” means an action, suit, proceeding, demand, claim or counterclaim or legal,
administrative or arbitral proceeding or investigation.
“Contract” means all agreements, whether oral or written and whether express or implied
(whether legally binding or not), including contracts, contract rights, promises, commitments,
undertakings, customer accounts, orders, leases, guarantees, warranties and representations and
franchises to which either Seller is a party.
“Copyrights” shall mean all copyrights (whether or not registered), moral rights, and all
registrations and applications for registration thereof, as well as rights to renew copyrights.
“Creditors” means those parties to which either Seller owes any one or more of the liabilities
included in the Agreed Liabilities Amount, as set forth on Schedule 2.2(b)(2).
“Excluded Contracts” shall mean the Contracts not to be assigned by Seller pursuant to this
Agreement, as set forth on Schedule 3.22.
“Governmental Authorities” means all agencies, authorities, bodies, boards, commissions,
courts, instrumentalities, legislatures and offices of any nature whatsoever of any government,
quasi-governmental unit or political subdivision, whether foreign, federal, state, county,
district, municipality, city or otherwise.
“Intellectual Property” shall mean all (i) Patents, (ii) Know-how, (iii) Trademarks, (iv)
Copyrights, (v) Software Programs (including but not limited to “off-the-shelf” shrink-wrap and
click-wrap Software Programs), in each case that are licensed by Seller and/or otherwise used in
the Vault Business as currently operated, and (vi) all other intellectual property rights and
industrial property rights (of every kind and nature throughout the universe and however
designated), whether arising by operation of law, contract, license or otherwise.
“Intellectual Property Rights” means, collectively, any and all known or hereafter known
tangible and intangible rights under patent, trademark, copyright and trade secret laws, and any
other intellectual property, industrial property and proprietary rights worldwide, of every kind
and nature throughout the universe, however designated, whether arising by operation of law,
contract, license or otherwise.
“Key Seller Employees” means the following employees of Seller: Xxxx Xxxxxxx, Xxxxx Xxxxxxx
and Xxxxx Xxxxx.
“Know-how” shall mean any and all product specifications, processes, methods, product designs,
plans, trade secrets, ideas, concepts, inventions, manufacturing, engineering and other manuals and
drawings, physical and analytical, safety, quality control, technical information, data, research
records, all promotional literature, customer and supplier lists and similar data and information,
and any and all other confidential or proprietary technical and business information which are
licensed to or owned by Seller and/or otherwise used in the Vault Business as currently operated.
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“Liability” means any direct or indirect indebtedness, liability, assessment, expense, claim,
loss, damage, deficiency, obligation or responsibility, known or unknown, disputed or undisputed,
joint or several, vested or unvested, executory or not, fixed or unfixed, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured, determinable or undeterminable, accrued or
unaccrued, absolute or not, actual or potential, contingent or otherwise (including but not limited
to any liability under any guarantees, letters of credit, performance credits or with respect to
insurance loss accruals).
“License Agreement” shall have the meaning set forth in Section 11.4.
“Moral Rights” means, collectively, rights to claim authorship of a work, to object to or
prevent any modification of a work, to withdraw from circulation or control the publication or
distribution of a work, and any similar rights, whether existing under judicial or statutory law of
any country or jurisdiction worldwide, or under any treaty or similar legal authority, regardless
of whether such right is called or generally referred to as a “moral right.”
“Patents” shall mean all patents, patent disclosures and patent applications (including,
without limitation, all reissues, divisions, continuations, continuations-in-part, renewals,
re-examinations and extensions of the foregoing) owned by Seller and/or otherwise used in the Vault
Business as currently operated.
“Person” means any individual, corporation, joint venture, partnership, limited partnership,
limited liability company, limited liability partnership, syndicate, trust, association, entity or
government or political subdivision, agency or instrumentality of a government.
“Software Programs” shall have the meaning set forth in Section 3.21(f).
“Tangible Personal Property” means all machinery, equipment, tools, furniture, fixtures and
equipment, computer hardware, supplies, materials, leasehold improvements, automobiles, computing
and telecommunications equipment and other items of tangible personal property, of every kind owned
or leased by the Seller and/or otherwise used in the Vault Business (wherever located and whether
or not carried on the books of the Seller), together with any express or implied warranty by the
manufacturers or sellers or lessors of any item or component part thereof, and all maintenance
records and other documents relating thereto.
“Taxes” means: (1) any and all taxes, fees, levies, duties, tariffs, imposts and other
charges of any kind, imposed by any Governmental Authority or taxing authority, including taxes or
other charges on, measured by, or with respect to income, franchise, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’
compensation, unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration
and documentation fees; and customers’ duties, tariffs and similar charges; (2) any Liability for
the payment of any amounts of the type described in (1) as a result of being a member of an
affiliated, combined, consolidated or unitary group for any taxable period; (3) any
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Liability
for the payment of amounts of the type described in (1) or (2) as a result of being a transferee
of, or a successor in interest to, any Person or as a result of an express or implied obligation to
indemnify any Person; and (4) any and all interest, penalties, additions to tax and additional
amounts imposed in connection with or with respect to any amounts described in (1), (2) or (3).
“Tax Return” means any return, report, statement, form or other documentation (including any
additional or supporting material and any amendments or supplements) filed or maintained, or
required to be filed or maintained, with respect to or in connection with the calculation,
determination, assessment or collection of any Taxes.
“Trademarks” shall mean (i) trademarks, service marks, trade names, trade dress, labels, logos
and all other names and slogans used exclusively with any products or embodying associated goodwill
of the Vault Business related to such products, whether or not registered, and any applications or
registrations therefor, and (ii) any associated goodwill incident thereto, in each case owned by or
licensed to Seller and/or otherwise used in the Vault Business as currently operated.
“Vault Net Revenues” shall mean the gross revenue of the Purchaser actually received by the
Purchaser that is solely and directly attributable to the Vault Business, to the extent that such
revenue is derived from the provision of vault services and/or vault appliances which use the Big
Vault core technology, less the sum of (i) any discount given by Purchaser in compensation for
early payment, (ii) returns, allowances, quantity discounts and credits, (iii) any accounting
reserve amount, as determined in accordance with GAAP, and (iv) shipping and mailing costs, duties,
taxes and insurance.
2. PURCHASE AND SALE OF ASSETS.
2.1 Assets Included.
On the terms and subject to the conditions set forth in this Agreement, and in reliance upon
the covenants, representations and warranties of the Seller and the Shareholders, at the Closing
(as defined in Section 2.3 hereof), Purchaser shall purchase from the Seller, and the
Seller shall sell, assign, transfer and deliver to Purchaser, free and clear of any and all
Liabilities, pledges, liens, obligations, claims, charges, tenancies, security interests,
exceptions or encumbrances whatsoever (collectively, “Liens”), all assets, rights and properties of
the Seller, of every nature, kind and description whatsoever, tangible and intangible, wherever
located and as they exist on the date hereof, other than the assets set forth on Schedule
2.1 and identified thereon as “Excluded Assets” (collectively, the “Assets”). The parties
hereto acknowledge and agree that Schedule 2.1 identifies cash and Accounts Receivable as
Excluded Assets, but as to Accounts Receivable, only to the extent that all goods or services to be
provided with respect thereto have already been provided in full, and Seller hereby represents and
warrants such to be the case with respect to all Accounts Receivable set forth on Schedule 2.1.
The Assets are more
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fully set forth on Schedule 2.1 of the disclosure schedules attached hereto and
include (but are not limited to) the following:
(a) All Tangible Personal Property;
(b) All Accounts Receivable;
(c) All of the Assigned Contracts;
(d) All permits relating to the acquisition or ownership of the Assets or the operation of the
Vault Business;
(e) All data, records, files, manuals, blueprints and other documentation related to the
Seller, the Assets and the operation of the Vault Business, including but not limited to (1)
service and warranty records; (2) sales promotion materials, creative materials, art work,
photographs, public relations and advertising materials, studies, reports, correspondence and other
similar documents and records used in the Vault Business, whether in electronic form or otherwise;
(3) all client and customer lists, telephone numbers and electronic mail addresses with respect to
past, present or prospective clients and customers; (4) all accounting and tax books, ledgers and
records and other financial records relating to the Vault Business and the Assets; (5) all sales
and credit records and brochures relating to the Vault Business, purchasing records and records
relating to suppliers; and (6) subject to applicable Law, copies of all personnel records of all
Seller employees, including the Key Seller Employees.
(f) All of the Seller’s furniture and fixtures, as set forth on Schedule 2.1.2(f)
hereto (the “Furniture and Fixtures”);
(g) All of the Seller’s tools and equipment, as set forth on Schedules 2.1.2(g) hereto
(the “Equipment”);
(h) All of the inventory, merchandise, stores of supplies, spare parts, stock-in-trade and
work in progress, including, without limitation, the items set forth on the Inventory Statement
attached hereto as Schedule 2.1.2(h);
(i) All Intellectual Property owned, developed or used in connection with the Assets or the
Vault Business;
(j) All policies and procedures, methods of delivery of services, trade secrets, disks,
drawings and specifications, market studies, consultants’ reports, prototypes, and all similar
property of any nature, tangible or intangible, used in connection with the Vault Business;
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(k) All goodwill incident to the Vault Business, including the value of the names associated
with the Vault Business that are transferred to Purchaser hereunder and the value of good customer
relations;
(l) All computers, Software Programs, automation systems, accounting systems, master disks of
source codes, and other proprietary information owned or licensed, whether for general business
usage (e.g. accounting, word processing, graphics, spreadsheet analysis, etc.) or specific,
unique-to-the-business usage, and all computer operating, security or programming software, owned
or licensed and used in the operation of the Vault Business;
(m) All tangible and intangible forms, whether or not stored, compiled or memorialized,
electronically, graphically, photographically, or in writing; and
(n) All other intangible assets (including all Claims, contract rights and warranty and
product liability claims against third parties) relating to the Assets or the Vault Business.
2.2. Purchase Price.
(a) Purchase Price Payable. In reliance on the representations and warranties of the
Seller and the Shareholders, and the performance of the covenants and fulfillment of the conditions
set forth in this Agreement, Purchaser will, at the Closing, purchase the Assets from the Seller
and in respect thereof will, subject to the provisions of this Agreement, pay an aggregate purchase
price (“Purchase Price”) to Seller equal to the sum of the amounts set forth in (1) and (2) below.
(1) The Agreed Liability Amount, payable pursuant to the provisions of Section
2.2(b) below; and
(2) The Contingent Quarterly Payment and the Additional Contingent Payment
(collectively, the “Contingent Payment”), if applicable in each case, calculated and payable
in accordance with Sections 2.2(c) and 2.2(d) below.
(b) Payment of Agreed Liability Amount.
(1) Notwithstanding the provisions hereof, including but not limited to the provisions of
Section 2.2(b)(2) hereof, the Seller shall transfer the Assets to the Purchaser at Closing
free and clear of any and all Liens and any and all Liabilities, and (2) the Purchaser shall not,
by virtue of its purchase of the Assets, assume or become responsible for any Liabilities of the
Seller or of any other Person whatsoever. All Liabilities of the Shareholders or either Seller
whatsoever, whether or not disclosed to Purchaser, and whether or not discharged pursuant to the
provisions of Section 2.2(b)(2) hereof or otherwise under this Agreement or the Schedules
attached hereto, shall constitute “Excluded Liabilities.” The Seller and the Shareholders hereby
jointly and severally covenant and agree to indemnify and hold Purchaser harmless with respect
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to
all Excluded Liabilities. If, subsequent to the Closing, any Excluded Liability is asserted
against the Purchaser or any affiliate thereof, then, notwithstanding any provision hereof to the
contrary, the Purchaser shall be permitted to pay, satisfy and discharge such Excluded Liability in
any manner Purchaser determines, in its sole and absolute discretion, and such payment,
satisfaction or discharge shall in no way undermine or diminish the obligations of Seller and
the Shareholder to indemnify the Purchaser with respect thereto. In addition, Purchaser shall be
entitled to the remedy of recoupment with respect to any such payment, satisfaction or discharge of
any Excluded Liability by Purchaser in accordance with the foregoing. Notwithstanding the
foregoing, subsequent to the Closing, Purchaser, rather than Seller or the Shareholders, shall be
responsible for the satisfaction of any obligation owed to a vendor set forth under the heading
“Accounts Payable” on Schedule 2.2(b)(2) attached hereto, but only to the extent that any
such obligation relates to goods or services provided by such vendor to Purchaser subsequent to the
Closing.
(2) At the Closing (as defined in Section 2.3 hereof), the Purchaser shall deposit
cash in the aggregate amount of the Agreed Liabilities Amount with DLA Xxxxx Xxxxxxx Xxxx Xxxx US
LLP (“Escrow Agent”) in an escrow account (the “Agreed Liabilities Escrow”), which the Escrow Agent
shall hold pursuant to the provisions of an escrow agreement (the “Agreed Liabilities Escrow
Agreement”) in such form as may be agreed by the parties hereto prior to Closing and thereafter
attached hereto as Exhibit 2.2(b)(2). Attached hereto as Schedule 2.2(b)(2) is a
list of all Creditors, and the last known amount owed to each such Creditor. Prior to the Closing,
Seller shall update Schedule 2.2(b)(2) to reflect, as to each Creditor, the amount that
such Creditor has agreed to accept in order to fully and completely discharge all obligations of
either Seller in favor of such Creditor, and Seller shall provide evidence to Purchaser, including
payoff letters from each Creditor, in form and substance satisfactory to Purchaser, indicating that
each Creditor has in fact agreed to accept the amount set forth next to its name on such updated
Schedule 2.2(b)(2) to fully and completely discharge all obligations of either Seller in
favor of such Creditor, with the aggregate amount reflected on such updated Schedule
2.2(b)(2) to be equal to or less than the Agreed Liabilities Amount. Notwithstanding the
foregoing, as to each Creditor set forth on Schedule 2.2(b)(2) attached hereto as of the
date hereof under the heading “Accounts Payable”, to the extent that the designated last known
amount owed as of the date hereof set forth on such Schedule 2.2(b)(2) is less than $25,000
(each a “Minor Creditor”), Seller shall not be obligated to update Schedule 2.2(b)(2) as to
such Minor Creditor in accordance with the foregoing, and such Minor Creditor shall not be
satisfied out of the Agreed Liabilities Escrow in accordance with this Section 2.2(b)(2).
However, the liabilities or obligations owed to all such Minor Creditors shall nevertheless
constitute Excluded Liabilities, and the provisions of Section 2.2(b)(1) hereof shall apply with
respect to such items in the same manner as with respect to all Excluded Liabilities. In addition,
to the extent that a Creditor has agreed to accept equity in the Seller in full or in partial
satisfaction of any obligation owed to such Creditor, the updated Schedule 2.2(b)(2) shall
so state, and evidence of such agreement satisfactory to Purchaser shall be provided to Purchaser
prior to Closing. As shall be set forth in further detail in the Agreed Liabilities Escrow
Agreement, at such time as each of the Creditors specified on Schedule 2.2(b)(2) attached
hereto
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(other than the Minor Creditors) presents the Escrow Agent with a duly executed satisfaction
and release (and with respect to Creditors holding recorded Liens, an appropriate instrument of
release), each in such form as is satisfactory to the Purchaser in its sole and absolute
discretion,
the Escrow Agent shall release the amount of cash set forth opposite such Creditor’s name (if
any) on such updated Schedule 2.2(b)(2) to such Creditor. Once a duly executed
satisfaction and release has been received from each of the Creditors (other than the Minor
Creditors), any funds remaining in the Agreed Liabilities Escrow shall be returned to the Seller.
(c) Payment of Contingent Quarterly Payment and Additional Contingent Payment.
(1) Calculation and Payment. The Contingent Quarterly Payment payable by Purchaser to
Seller pursuant to Section 2.2(a)(2) shall be calculated in accordance with this
Section 2.2(c). Not later than sixty (60) days after the close of each calendar quarter
after the Closing Date, the Purchaser shall calculate the Vault Net Revenue for the prior quarter
(each such quarter, a “Measurement Period”). Once the Vault Net Revenue for any Measurement Period
has been calculated, the payment of the Contingent Quarterly Payment with respect to such
Measurement Period shall become due and payable (subject to the provisions of Section
2.2(c)(5)). The Contingent Quarterly Payment payable with respect to each Measurement Period
shall equal the product of the Vault Net Revenue for such Measurement Period and ten percent (10%).
(2) Additional Contingent Payment. In addition to the Contingent Quarterly Payment
described in Section 2.2(c)(1) hereof, Seller may be entitled to additional contingent
payments (each an “Additional Contingent Payment”), as determined pursuant to this Section
2.2(c)(2). Seller shall not be entitled to any Additional Contingent Payment with respect to the
first four (4) quarterly Measurement Periods. After the end of each of the eight (8th),
twelfth (12th), sixteenth (16th) and twentieth (20th) quarterly
Measurement Periods, the Purchaser shall calculate (i) the total Vault Net Revenue for such
quarterly Measurement Period and the immediately preceding three (3) quarterly Measurement Periods
(in each case, the “Current Annual Vault Revenue”), and (ii) the total Vault Net Revenue for the
four (4) quarterly Measurement Periods immediately preceding the four (4) quarterly Measurement
Periods as to which the Current Annual Vault Net Revenue has been calculated (in each case the
“Prior Annual Vault Net Revenue”). The Purchaser shall then determine the excess (if any) of, in
each case, the Current Annual Vault Net Revenue over the Prior Annual Vault Net Revenue (each an
“Annual Increase”). If an Annual Increase exists, Purchaser shall pay to Seller an Additional
Contingent Payment equal to five percent (5%) of any such Annual Increase. To the extent payable
hereunder, each Additional Contingent Payment shall be payable within sixty (60) days of the end of
the eighth (8th), twelfth (12th), sixteenth (16th) or twentieth
(20th) quarterly Measurement Periods, as applicable.
(3) Uncertain Nature of Contingent Quarterly Payment and Additional Contingent
Payments. The Seller and the Shareholders acknowledge and agree that (i)
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Purchaser’s
obligation to pay the Contingent Quarterly Payment and the Additional Contingent Payment pursuant
to the terms hereof shall be contingent upon Purchaser’s attaining Vault Net Revenue with respect
to the relevant Measurement Period and (ii) Purchaser shall have no
obligation to pay to Seller any Contingent Quarterly Payment or Additional Contingent Payment
with respect to any Measurement Period with respect to which the Purchaser does not, for any
reason, achieve a positive Vault Net Revenue. Furthermore, the Purchaser shall have no obligation
whatsoever to make any further Contingent Quarterly Payments or Additional Quarterly Payments
attributable to any period of time after the twentieth (20th) quarterly Measurement
Period (that is, Seller’s right to receive, and Purchaser’s obligation to pay, Contingent Payments
shall terminate on the fifth (5th) anniversary of the Closing Date).
(4) No Standard of Care Imposed on Purchaser; Initial Investment Commitment. The
obligation to pay the Contingent Quarterly Payment and the Additional Contingent Payment shall not
be deemed or otherwise construed to impose any standard of care or duty upon the Purchaser with
respect to its conduct of its business, which may, subject only to the terms of this Section
2.2(c)(4), be conducted by the Purchaser in the exercise of its sole and absolute discretion.
The Purchaser agrees to arrange for up to One Million Dollars ($1,000,000) in funding for the
acquired Vault Business during the period beginning on the Closing Date and ending one (1) year
later to support the operational expenses of its conduct of the Vault Business, which may be in the
form of loans (from its shareholder, any affiliate, or a third party), and/or equity or some
combination (the “Initial Investment Commitment”). Except for the Initial Investment Commitment,
the Purchaser does not agree to provide any financing or invest any certain amount of time, money
or effort with respect to the Vault Business and shall have no duties or obligations to the Seller
or the Shareholders whatsoever with respect to the operation of the Vault Business or the
Purchaser’s other business, all of which shall be conducted in the exercise of the Purchaser’s sole
and absolute discretion.
(5) Escrow of Contingent Quarterly Payments and Additional Contingent Payments. For
each of the first twelve (12) quarterly Measurement Periods, twenty five percent (25%) of the
Contingent Quarterly Payment applicable to each such quarterly Measurement Period, if payable
hereunder, as well as twenty five percent (25%) of any Additional Contingent Payment payable
hereunder with respect to the periods ending with the eight (8th) and the twelfth
(12th) quarterly Measurement Periods, shall be deposited by Purchaser in an escrow
account (the “Contingent Payment Escrow Account”) which the Escrow Agent shall hold pursuant to the
provisions of an escrow agreement (the “Contingent Payment Escrow Agreement”) in such form as
mutually agreed by the parties hereto prior to Closing and attached hereto as Exhibit
2.2(c)(5), in order to secure the indemnification obligations of Seller and the Shareholders
set forth herein, provided, however, that no more than $300,000 in the aggregate shall be deposited
into the Contingent Payment Escrow Account in accordance with the foregoing. The Contingent
Payment Escrow Agreement will provide for 50% of the funds held therein to be released after three
(3) years and the balance to be released after five (5) years (subject to holdback with respect to
claims asserted prior to the release date).
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(6) Application of Contingent Quarterly Payments and Additional Contingent Payments.
In addition to the deposit of a portion of the Contingent Payments otherwise payable hereunder into
the Contingent Payment Escrow pursuant to Section 2.2(c)(5)
hereof, twenty five percent (25%) of all Contingent Payments otherwise payable hereunder shall
be applied to repay any cash advances made by Purchaser to Seller, either prior to or subsequent to
the date hereof, including but not limited to any advances made by Purchaser to Seller pursuant to
the provisions of Section 10 hereof, until such time as all advances shall have been repaid in
full.
(d) Audit of Vault Net Revenues Determination. Promptly following the Purchaser’s
determination of Vault Net Revenue in accordance with the foregoing (which shall be the basis for
initially determining the Contingent Quarterly Payment and, if applicable, the Additional
Contingent Payment, with respect to the relevant Measurement Period), the accountants for the
Purchaser shall review such Vault Net Revenue determination and shall forward the results of such
review to the Purchaser, the Seller and the Shareholders. The Seller and the Shareholders shall
then have the right for ten (10) days to provide written comments and suggested changes to the
Purchaser’s accountants, with a copy to the Purchaser. If after consideration of such written
comments, the parties are not able to agree upon the Vault Net Revenue within an additional ten
(10) day period, then the matter shall be submitted to a reputable accounting firm selected by the
Purchaser’s accountants, and the determination of Vault Net Revenue made by such accounting firm
shall be conclusive and binding upon all parties for all purposes of this Agreement and for all
purposes of the Employment Agreements. If the Vault Net Revenue determined by the Purchaser’s
accountants (or in the event of a dispute, by the selected accounting firm) differ from the Vault
Net Revenue determined by the Purchaser, then the Contingent Quarterly Payment and, if applicable,
the Additional Contingent Payment, made pursuant to Section 2.2(c) with respect to the
relevant Measurement Period based upon the Purchaser’s determination of Vault Net Revenue for such
Measurement Period shall be increased or decreased, as applicable, by applying the formula set
forth in Section 2.2(6) to such re-determined Vault Net Revenue amount. If any change in
the Vault Net Revenue calculation results in an increase in the required payment, then the
Purchaser shall promptly pay such additional amount to the Seller. If any change in the Vault Net
Revenue calculation results in a decrease in the required payment, then the Seller shall promptly
pay the amount of any such decrease to the Purchaser. If in accordance with the foregoing any
dispute as to the Purchaser’s Vault Net Revenue is submitted to another accounting firm and the
Vault Net Revenue as determined by such other accounting firm is not materially different than the
Vault Net Revenue calculated by the Purchaser’s accountants, then the Seller and the Shareholders
shall pay the other accounting firm’s costs and expenses. If the Vault Net Revenue as determined
by such other accounting firm differs from the Vault Net Revenue calculated by the Purchaser’s
accountant by ten percent (10%) or more, then the Purchaser shall pay the other accounting firm’s
costs and expenses.
(e) Purchaser’s Right of Set-Off. In addition to the rights and remedies set forth
elsewhere in this Agreement (including, but not limited to Section 2.2(c)(5) and
Section
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2.2(c)(6)), the Purchaser shall have the right to set off against any payment
otherwise due to Seller hereunder the amount of loss, liability or damages (including reasonable
attorneys’ fees and expert fees) sustained by Purchaser due to the breach by the Seller and/or any
Shareholder of
any representation or warranty or other provision contained in this Agreement, in the
Non-Competition Agreement or in any Employment Agreement, or due to the default by the Seller
and/or any Shareholder under any of the foregoing agreements, including but not limited to amounts
as to which Seller and the Shareholders are required to indemnify the Purchaser under this
Agreement.
(f) Prepaid Items. Liabilities for prepaid items attributable to the Assets, such as
real estate taxes, personal property taxes, rent, fuel, telephone or other utility and service
charges, shall be prorated and allocated between the Seller and Purchaser as of the close of
business on the Closing Date, and the amount of such proration shall be a deduction or addition, as
the case may be, to the Purchase Price.
(g) Allocation of Purchase Price. The Purchaser and the Seller shall, prior to
Closing, agree upon an allocation of the Purchase Price pursuant to Section 1060 of the Code and
the Income Tax Regulations, and, once agreed, such allocation shall be attached as
Exhibit2.2(g). The Purchaser and the Seller agree to reflect such allocation on IRS Form
8594 (Asset Acquisition Statement) under Section 1060, including any required amendments or
supplements thereto (“Form 8594”), and shall jointly prepare such Form 8594 for execution promptly
after Closing. The parties hereto further agree that (a) the agreed upon allocation of the
Purchase Price shall be used in filing all required forms under Section 1060 of the Code and all
tax returns; and (b) they will not take any position inconsistent with such allocation upon any
examination of any such tax return, in any refund claim or in any tax litigation.
2.3 Closing.
(a) Time and Place. Subject to the terms and conditions of this Agreement, the sale
and purchase of the Assets contemplated hereby (the “Closing”) shall take place at the offices of
DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP, 0000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000-0000, within three
(3) days of the satisfaction (or waiver, as applicable), of the conditions to Closing set forth in
Section 8 hereof, or at such other time, date or place as the parties hereto may mutually
agree upon in writing. The time and date of the Closing are herein referred to as the “Closing
Date,” and the term “Closing Date” shall include the date on which the transactions contemplated
hereunder are consummated.
(b) Deliveries by Purchaser to the Seller. At the Closing, Purchaser (or its
designee) shall deliver or cause to be delivered each of the following:
(i) Cash in the amount of the Agreed Liability Amount, payable to the Escrow Agent, as
provided for under Section 2.2(b) hereof;
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(ii) The Employment Agreements (as defined herein), executed by the Purchaser;
(iii) The Agreed Liabilities Escrow Agreement, executed by the Purchaser; and
(iv) The Contingent Payment Escrow Agreement, executed by the Purchaser.
(c) Deliveries by the Seller and the Shareholders. At Closing, the Seller and/or the
Shareholders, as applicable, shall deliver or cause to be delivered to the Purchaser (or its
designee) each of the following:
(i) An Assignment and Xxxx of Sale, in such form as mutually agreed by the parties, executed
by the Seller, selling, assigning, transferring and delivering to Purchaser all of the Assets, free
and clear of any and all Liens;
(ii) A Certificate of the Secretary of each of BVI and BVST showing the signatures of those
officers of BVI and BVST, respectively, authorized to sign this Agreement on behalf of BVI and BVST
and certifying that said signatures are the signatures of said authorized officers;
(iii) A copy of the Articles of Incorporation and By-Laws of each of BVI and BVST, together
with all amendments and supplements thereto, certified by the Secretary of each of BVI and BVST, as
applicable, as being true and complete;
(iv) Good standing certificates of each of BVST and BVI dated no earlier than ten (10)
calendar days prior to the Closing Date, certifying respectively (i) that BVST is in good standing
in the State of Delaware and is qualified to do business in the State of New York; (ii) that BVST
is qualified to do business in all of the other states in which BVST then does business; (iii) that
BVI is in good standing in the State of Nevada and is qualified to do business in the State of New
York; and (iv) that BVI is qualified to do business in all of the other states in which BVI then
does business.
(v) Resolutions of the shareholders and the directors of each of BVI and BVST certified by the
Secretary of each of BVI and BVST as having been duly and validly adopted and as being in full
force and effect on the date hereof, authorizing the execution and delivery by each of BVI and BVST
of this Agreement and other agreements and instruments executed and delivered by BVI and BVST as
provided for herein, and authorizing the performance by BVI and BVST of the transactions
contemplated hereby and thereby;
(vi) A duly executed certificate described in Section 8.1 hereof;
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(vii) Duly executed non-competition agreements from each of the Shareholders, BVI, BVST and
any employee of Seller that is also a shareholder of either Seller in a form satisfactory to
Purchaser, providing for a five (5) year non-compete term (collectively, the “Non-Competition
Agreements”).
(viii) Duly executed employment agreements from each of the Key Seller Employees in a form
satisfactory to Purchaser (collectively, the “Employment Agreements”) which shall provide a minimum
three (3) year term, and shall provide that such Key Employees will participate in the programs
generally offered to the Purchaser’s executive team with respect to performance bonuses, medical
benefits, insurance and the like.
(ix) Duly executed intellectual property assignments from each of the employees, prior
employees, consultants and prior consultants of Seller specified on Schedule 2.3(c)(ix)
attached hereto in a form satisfactory to Purchaser (collectively, the “Intellectual Property
Assignments”).
(x) Duly executed confidentiality agreements from each of Seller’s employees that are offered
and accept employment with the Purchaser (including but not limited to the Key Seller Employees) in
a form satisfactory to Purchaser (collectively, the “Confidentiality Agreements”).
(xi) Duly executed assignments from Seller, assigning all of Seller’s rights in, to and under
the Assigned Contracts to the Purchaser on such terms and conditions as the Purchaser shall in the
exercise of its sole and absolute discretion determine (collectively, the “Contract Assignments”).
(xii) Duly executed written consents from each of the parties to each of the Assigned
Contracts, to the extent such consent is required pursuant to the terms thereof, consenting to the
assignment of the Contracts to the Purchaser, in such form as Purchaser shall in the exercise of
its sole and absolute discretion determine (collectively, the “Consents”).
(xiii) A duly executed assignment of the existing Lease referred to on Schedule 3.20
from Seller to Purchaser, in form and substance satisfactory to Purchaser, and the consent of the
landlord under such Lease to such assignment.
(xiv) An opinion of counsel to the Seller in form and substance satisfactory to Purchaser
covering the items described in Section 8.9 hereof (the “Legal Opinion”).
(xv) A duly executed termination of the Intercompany License Agreement in form and substance
satisfactory to the Purchaser.
(xvi) Evidence satisfactory to the Purchaser that the Retention Program, as defined herein,
has been established.
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(xvii) The Agreed Liabilities Escrow Agreement and the Contingent Payment Escrow Agreement,
duly executed by Seller.
(xviii) A duly executed assignment of Seller’s rights to the Big Vault trademark, and a duly
executed assignment of Seller’s rights to all of the third party software identified on Schedule
3.21(f), in each case, in form and substance satisfactory to the Purchaser.
(xix) All other documents necessary or appropriate, in the opinion of Purchaser, to effectuate
the purchase and sale of the Assets at the Closing, free and clear of all liens, in accordance with
the provisions of this Agreement.
2.4 Further Assurances.
In addition to the actions, documents and instruments specifically required to be taken or
delivered hereby, prior to and after the Closing and without further consideration, the Seller and
the Shareholders shall execute, acknowledge and deliver such other assignments, transfers, consents
and other documents and instruments and take such other actions as Purchaser or its counsel may
reasonably request to complete and perfect the transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE SELLER.
The Seller and the Shareholders hereby jointly and severally represent and warrant to
Purchaser that the following representations and warranties are true and correct in all material
respects on the date hereof and will be true and correct in all material respects on and as of the
Closing Date:
3.1 Organization and Good Standing.
(a) BVST is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and in all other states in which BVST does business, is qualified to do
business in the State of New York and all other states in which BVST does business and has full
corporate power to execute, deliver and perform its obligations under this Agreement.
(b) BVI is a corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and all other states in which BVI does business, is qualified to do business
in the State of New York and all other states in which BVI does business and has full corporate
power to execute, deliver and perform its obligations under this Agreement.
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3.2 Authority and Consents.
The Seller and the Shareholders have full power to enter into and to carry out the terms of
this Agreement. The Seller and its directors have taken all action, corporate and otherwise,
necessary to authorize the execution, delivery and performance of this Agreement, the
completion of the transactions contemplated hereby and the execution and delivery of any and
all instruments necessary or appropriate to effectuate fully the terms and conditions of this
Agreement. Except as set forth on Schedule 3.2, no consent or approval of any third party,
court, governmental agency, other public authority or third party with any actual or alleged
interest in the Seller’s business or the Assets is required as a condition to (a) the
authorization, execution, delivery and performance of this Agreement or any other instruments
necessary to effectuate this Agreement; or (b) the consummation by the Seller of the transactions
contemplated herein. This Agreement has been properly executed and delivered by the Shareholders
and the Seller and constitutes the valid and legally binding obligation of the Shareholders and the
Seller and is enforceable against the Shareholders and the Seller in accordance with its terms.
3.3 Rights of First Refusal; Right of First Negotiation, Etc.
There are no applicable rights of first refusal, rights of first negotiation, rights of first
offer or similar rights of any kind that would require either Seller or the Shareholders to provide
any third party with notice, an opportunity to discuss, negotiate or to engage in any of the
transactions contemplated hereby prior to consummating the transactions contemplated hereby.
3.4 No Conflict.
Neither the execution and delivery of this Agreement nor the carrying out of the transactions
contemplated hereby will result in (a) any violation, termination or modification of, or conflict
with, the articles of incorporation or By-Laws of either Seller or any of the contracts or other
instruments to which either Seller or any of the Shareholders is a party, or of any judgment,
decree or order applicable to either Seller or the Shareholders; or (b) the creation of any Lien on
all or any portion of the Assets.
3.5 Broker’s and Finder’s Fees.
All negotiations relating to this Agreement have been carried on between the parties directly
without the intervention of any person that would give rise to a valid claim against any of the
parties for a brokerage commission, finder’s fee, advisory fee or other like payment (each, a
“Broker’s Fee”). The Seller and the Shareholders shall jointly and severally indemnify and hold
the Purchaser harmless from and against any cost, expense, liability or obligation associated with
any Broker’s Fee payable to any party by virtue of the purchase and sale contemplated by this
Agreement.
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3.6 Litigation and Compliance.
Except as set forth on Schedule 3.6., there is no Claim pending or threatened against
the Assets, either Seller, or the Shareholders; nor is there any valid basis for any such
litigation, arbitration, mediation, investigation or other proceeding relating to the Assets,
either Seller, the Shareholders or the transactions contemplated by this Agreement. Neither Seller
nor the Shareholders are subject to any order of any court, regulatory commission, board or
administrative body entered in any proceeding to which BVST, BVI or either of the Shareholders
is a party or of which any of the foregoing has knowledge. The Seller has complied with and is
currently in compliance with all laws, rules, regulations, orders, ordinances, judgments and
decrees of any governmental authority applicable to the Assets or the Seller’s Vault Business.
3.7 Title and Condition of Assets.
The Seller has good and marketable title to all of the Assets, free and clear of all Liens,
other than the Liens set forth on Schedule 3.7, all of which shall be fully and entirely
discharged by Seller at or prior to the Closing. The Assets are in good operating condition and
repair, and constitute all of the assets necessary to the conduct by the Seller of its Vault
Business in accordance with its past practice.
3.8 Accounts Receivable.
All Accounts Receivable of the Seller reflected in the balance sheet for the most recently
ended period included in the Financial Statements, and all Accounts Receivable that have arisen
since the date of the latest balance sheet of Seller included in the Financial Statements (except
Accounts Receivable that have been collected since such date) are valid and enforceable claims, and
constitute bona fide Accounts Receivable resulting from the provision of services in the ordinary
course of the Seller’s Vault Business. The Accounts Receivable are subject to no valid defense,
offsets, returns, allowances or credits of any kind, and are fully collectible within sixty (60)
days from their due date. Except for the Accounts Receivable, the Seller has not made any loan or
advance to any Person.
3.9 [Reserved.]
3.10 Financial and Full Information.
The Seller has delivered to Purchaser financial statements covering the periods from
until (the “Financial Statements”), copies of which are attached
hereto as Exhibit 3.10. The Financial Statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”), are true, correct and complete in all material
respects, and accurately reflect the financial position of the Seller for the periods set forth
therein. The Seller has provided to Purchaser all information material to the Assets and/or the
Vault Business, and no representation or warranty made in this Agreement or information
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furnished
pursuant hereto to Purchaser, including that set forth in any Schedules or Exhibits hereto,
contains any untrue statement or omits to state any material fact relevant to the Assets or the
Vault Business.
3.11 Absence of Undisclosed Liabilities.
As of the date hereof and as of the Closing Date, the Seller does not have and shall not have
any indebtedness or other liability of any kind whatsoever, absolute or contingent,
that is not either specifically reflected on the Financial Statements or otherwise
specifically disclosed in writing to Purchaser in this Agreement. In addition, all indebtedness
and/or other liabilities whatsoever (including trade payables) of Seller are accurately reflected
on Schedule 2.2(b)(2), and Seller has no indebtedness and/or other liabilities (including
trade payables) whatsoever other than as set forth on Schedule 2.2(b)(2), attached hereto.
3.12 [Reserved.]
3.13 Licenses and Permits.
Schedule 3.13 of the Disclosure Schedules sets forth a complete list of all of the
certificates, licenses, consents, permits or other approvals required of or obtained by the Seller
in connection with the operation of the Vault Business, including all certificates of use and
occupancy (collectively, the “Licenses and Permits”). The Seller has provided the Purchaser with
true and complete copies of all of the Licenses and Permits. All of the Licenses and Permits are
in full force and effect and the Seller is not in violation in any material respect with respect to
any of them. No proceedings are pending or threatened by any applicable authority to revoke or
limit the scope of any of the Licenses and Permits. Other than those listed on Schedule
3.13, there are no Licenses or Permits necessary for the conduct of the Vault Business as it is
currently being conducted. None of the Licenses and Permits would be rendered ineffective or be
required to be reissued as a result of the consummation of the transactions contemplated hereby.
3.14 Business Records.
All business records of the Seller have been provided to Purchaser for review, are complete
and correct in all material respects, and fairly reflect the operations of the Vault Business.
3.15 Insurance.
Set forth on Schedule 3.15 is a true and complete list and description of all
insurance in force on the date hereof with respect to the Assets and/or the Vault Business,
together with a summary description of the hazards insured against. Such policies are in full
force and effect with reputable insurers and copies thereof have been provided to Purchaser. There
are no outstanding unpaid claims under any such policy, and neither the Seller nor the Shareholders
are aware of any notice of cancellation or non-renewal of any such policy. There
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are and have been
no inaccuracies in any application for such policies, nor any failure to pay premiums thereon when
due. Neither the Seller nor the Shareholders have received any notice from any of its insurance
carriers that any insurance premiums will be materially increased in the future or that any
insurance coverage will not be available to the Seller in the future on substantially the same
terms as now in effect. No such insurance policies call for any retrospective premium adjustments.
All such insurance policies are freely assignable by the Seller to Purchaser without the consent
of any party.
3.16 Operation of the Vault Business.
The Assets are sufficient to operate the Vault Business in accordance with past practice. All
of the Assets are in good condition and repair, and have been maintained in accordance with
appropriate manufacturer’s standards.
3.17 Absence of Certain Changes. Since January 1, 2005, except as set forth on
Schedule 3.17, there has not been:
(a) any material adverse change in the Seller’s financial position, results of operations,
manner of conducting business, assets, liabilities or net worth;
(b) any acquisition or disposition by the Seller of any asset or property, or any agreement to
do the same other than in the ordinary and regular course of business;
(c) created, incurred or permitted to exist any Lien on any of the Seller’s assets or
properties;
(d) any material damage, destruction or loss, whether or not covered by insurance;
(e) any change in the Seller’s authorized or issued capital stock; grant of any stock option
or right to purchase shares of capital stock of the Seller; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase, redemption, retirement or
other acquisition by the Seller of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital stock, other than
the issuance of shares of Seller to certain creditors of Seller in lieu of, and in satisfaction of,
all or some portion of the indebtedness of Seller in favor of such creditors, as set forth in
detail on Schedule 3.17(e);
(f) any amendment to the charter or by-laws of the Seller; or
(g) any other event or condition experienced by the Seller of any character which would alone
or in the aggregate with other events or conditions have a material adverse effect on the Seller or
the Vault Business.
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3.18 Employee Matters.
(a) Schedule 3.18 contains a complete and correct list of all Employee Benefit Plans
(as defined below) and any other employee benefit arrangements or payroll practices, including,
without limitation, employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay, severance pay policies,
salary continuation for disability, consulting or other compensation
arrangements, workers’ compensation, retirement, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs,
any plans providing benefits or payments in the event of a change of control, change in ownership,
or sale of a substantial portion (including all or substantially all) of the assets of the Seller,
maintained by the Seller or to which the Seller has contributed or is obligated to make payments,
in each case with respect to any employees (or, if the Seller has any existing liability, former
employees) of the Seller (hereinafter, the “Employee Benefit Plans”). All Employee Benefit Plans
which constitute Employee Pension Plans (as defined below) (hereinafter, the “Employee Pension
Plans”) are separately listed on Schedule 3.18 of the Disclosure Schedules. The Seller and
its ERISA Affiliates do not and have never maintained or participated in any Employee Benefit Plans
which are: (a) subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”) or the minimum funding requirements of Section 412 of the Code; (b) Multiemployer
Plans (as defined below); (c) multiple employer plans subject to Sections 4063 and 4064 of ERISA
(“Multiple Employer Plans”); or (d) plant closing benefit plans. As used in this Agreement, (i)
“Employee Benefit Plan” shall have the meaning ascribed to such term by Section 3(3) of ERISA, (ii)
“Employee Pension Plan” shall have the meaning ascribed to such term by Section 3(2) of ERISA,
(iii) “ERISA Affiliate” shall refer to any trade or business, whether or not incorporated, the
employees of which, together with the employees of the Seller, are treated as employed by a single
employer under Section 414(b), (c), (m) or (o) of the Code, and (iv) “Multiemployer Plans” shall
mean any multiemployer plan as defined in Section 3(37) of ERISA to which the Seller or an ERISA
Affiliate has contributed or is or was obligated to make payments, in each case with respect to any
current or former employees of the Seller or an ERISA Affiliate before the Closing Date.
(b) Except as set forth on Schedule 3.18:
(i) the Employee Pension Plans which are “defined contribution plans” intended to qualify
under Section 401 of the Code are so qualified and the trusts maintained pursuant thereto are
exempt from federal income taxation under Section 501 of the Code, and nothing has occurred with
respect to the operation of such plans which could cause the loss of such qualification or
exemption or the imposition of any material liability, lien, penalty, or Tax under ERISA or the
Code;
(ii) true, correct and complete copies of the following documents, with respect to the
Employee Benefit Plans have been delivered to Purchaser: (A) all plan documents,
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including trust
agreements, insurance policies and service agreements and amendments thereto, (B) the most recent
Forms 5500 and any financial statements attached thereto and those for the prior three years, (C)
the last Internal Revenue Service determination letter, and the applications and supporting
disclosure documents submitted to the Internal Revenue Service with respect to such determination
letter, and all other correspondence or filings with a governmental agency or entity including
without limitation compliance program applications, (D) summary plan descriptions, (E) employee
handbooks or manuals, and (F) the most recent actuarial written descriptions of all non-written
agreements relating to any such plan;
(iii) there are no pending Claims which have been asserted or instituted by or against the
Employee Benefit Plans, against the assets of any of the trusts under such plans or by or against
the plan sponsor, plan administrator, or any fiduciary of the Employee Benefit Plans (other than
routine benefit claims) nor do the Seller and/or the Shareholders have knowledge of facts which
could form the basis for any such Claims;
(iv) all amendments and actions required to bring the Employee Benefit Plans into conformity
in all material respects with all of the applicable provisions of ERISA, the Code and any other
applicable laws (including the rules and regulations thereunder) have been made or taken except to
the extent that such amendments or actions are not required by Law to be made or taken until a date
after the Closing Date and are disclosed on Schedule 3.18 (b)(iv);
(v) the Employee Benefit Plans have been maintained, in form and operation, in all material
respects in accordance with their plan documents and with all provisions of the Code and ERISA
(including rules and regulations thereunder) and other applicable Law, and none of the
Shareholders, the Seller nor any “party in interest” or “disqualified person” with respect to the
Employee Benefits Plans has engaged in a “prohibited transaction” within the meaning of Section
4975 of the Code or Title I, Part 4 or ERISA;
(vi) none of the Employee Benefit Plans contains any provisions which would prohibit the
transactions contemplated by this Agreement or which would give rise to any severance, termination
or other payments or liabilities, including without limitation any acceleration in benefit vesting
or distribution, as a result of the transactions contemplated by this Agreement;
(c) Attached hereto as Schedule 3.18(c) is a complete and correct list of (i) all
employee grievances and (ii) each person who, as of the date set forth in such list, is employed by
the Seller, including each active employee and each employee classified as inactive as a result of
disability, leave of absence, layoff or other absence. With respect to such persons, such list
includes the positions and the current wages for the most recent payroll period. Schedule
3.18(c) also contains a description of all existing severance, accrued vacation obligations or
retiree benefits of any current or former director, officer, employee or consultant of the Seller.
The employment or consulting arrangement of Seller with all such persons are terminable at will.
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The Seller has not made any written or oral agreement with or promise to any employee, officer or
consultant regarding continued employment by the Purchaser after the Closing Date.
(d) The Seller and the Shareholders shall undertake good faith efforts to cause the Seller’s
employees to become employees of the Purchaser subsequent to the Closing, but the parties hereto
acknowledge and agree that, except for the Purchaser’s obligation to employ the Key Seller
Employees pursuant to the Employment Agreements, the Purchaser shall have no obligation whatsoever
to hire any such employee. In furtherance of the obligations of Seller and the Shareholders
pursuant to the foregoing provision, the Seller agrees to offer, at its sole cost
and expense, an incentive/retention program upon terms and conditions satisfactory to the
Purchaser to encourage the Seller’s employees to become and remain employees of the Purchaser
subsequent to the Closing (the “Retention Program”).
3.19 Environmental Matters.
(a) The Seller has not released, emitted, buried or otherwise disposed of Regulated Substances
(as hereinafter defined) on any property. No one else has released, emitted, buried or otherwise
disposed of Regulated Substances on any real property included in the Assets or any real property
the leasehold interest of which is included in the Assets (each a “Property” and together the
“Properties”). No storage tanks, underground or otherwise, are or have been located on any of the
Properties. The Seller has complied with all Environmental Laws (as hereinafter defined)
pertaining to the use, ownership, and operation of the Properties. There are no asbestos
containing materials (“ACM’s”), polychlorinated biphenyls (“PCB’s”) or radioactive substances
located on the Properties. The Seller has not received any notice, demand, suit or information
request pursuant to the Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”) or any comparable state Law with respect to any Property, nor does it have knowledge of
any other party’s receipt of same relating to any of the Properties. None of the Properties is
listed on any regulatory list of contaminated properties, including but not limited to the National
Priorities List promulgated pursuant to CERCLA, the CERCLIS or any federal, state or local
counterpart. The Seller has no existing or potential liability under any Environmental Laws
pertaining to any of the Properties. No environmental approvals, clearances or consents are
required under applicable Law from any governmental entity or authority in order for the Purchaser
and the Seller to consummate the transactions contemplated herein. There are no conditions on any
adjacent properties which threaten any Property. The Seller is not required to have, nor does the
Seller have, any permits or approvals issued under any Environmental Law. The Seller and the
Shareholders have disclosed, prior to the date of this Agreement, the Seller’s waste practices, use
of Regulated Substances and all potentially material environmental matters pertaining to the
Properties, and has disclosed all reports, assessments, remedial action plans or other similar
documents relating to any environmental condition, whether or not material, of the Properties.
(b) As used in this Agreement: (i) “Environmental Law” means any statute, regulation, rule,
code, common law, order or judgment of any applicable federal, state, local or
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foreign jurisdiction
relating to pollution, hazardous substances, hazardous wastes, petroleum or otherwise relating to
protection of the environment, natural resources or human health, including, by way of example and
not by way of limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act (“RCRA”), the Comprehensive Environmental Response Compensation and Liability Act
(“CERCLA”), the Toxic Substances Control Act (“TSCA”), and the Emergency Planning and Community
Right-to-Know Act, all as currently amended; (ii) “Regulated Substances” means any substance
regulated under Environmental Laws, including but not limited to hazardous waste, as defined
pursuant to RCRA, hazardous substances, as defined pursuant to CERCLA, toxic substances as defined
under TSCA, hazardous
materials, as defined under the Hazardous Materials Transportation Act, petroleum and its
fractions, ACM’s and PCB’s; and (iii) “the Seller” includes any predecessors or affiliates of the
Seller.
3.20 Property.
(a) None of the Property is the subject of any lease or other use or occupancy agreement
(whether oral or written) whatsoever, except as set forth on Schedule 3.20 (“Leases”).
(b) All of the Leases are valid and in full force and effect, enforceable against the Seller
and against the other parties thereto, and have not been assigned, modified, supplemented or
amended. The Seller has delivered to the Purchaser true and complete copies of all of the Leases,
all amendments thereto, and all material correspondence related thereto, including all
correspondence pursuant to which any party to any of the Leases declared a default thereunder or
provided notice of the exercise of any option granted to such party under such Lease.
(c) There are no pending or threatened condemnation proceedings, lawsuits or administrative
actions relating to any of the Property or any other matters which do or may adversely effect the
current use, occupancy or value thereof.
(d) The Property and all present uses and operations of the Property comply with all
applicable zoning, land-use, building, fire, labor, safety, subdivision and other governmental
requirements and all deed or other title covenants or restrictions applicable thereto. Neither the
Shareholders nor the Seller has received any notice that any of the Property, or the use, occupancy
or operation thereof violates any governmental requirements or deed or other title covenants or
restrictions.
(e) The Seller has obtained all approvals of governmental authorities (including certificates
of use and occupancy, licenses and permits) required in connection with the current ownership, use,
occupation and operation of the Property. None of the Property is dependent upon or benefit from
any “non-conforming use” or similar zoning classification.
(f) Except as set forth on Schedule 3.20(a), there are no parties other than the
Seller in possession of any of the Property or any portion thereof, and there are no leases,
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subleases, licenses, concessions or other agreements, written or oral, granting to any party or
parties other than the Seller the right of use or occupancy of any of the Property or any portion
thereof other than the Leases. There are no outstanding options or rights of first refusal to
purchase any of the Property, or any portion thereof or interest therein.
3.21 Intellectual Property.
(a) Schedule 3.21(a) contains a true and complete list of the Intellectual Property,
and includes details of all due dates for further filings, maintenance and other payments
or other actions falling due in respect of the Intellectual Property within twelve (12) months
following the Closing Date, and the current status of the corresponding registrations, filings,
applications and payments. All of the registrations and applications arising from or relating to
the Intellectual Property are and remain valid and subsisting, in good standing, with all fees,
payments and filings due as of the Closing Date duly made, and the due dates specified on
Schedule 3.21(a) are accurate and complete in all material respects. All of these
registrations and applications are enforceable. The Seller has delivered correct and complete
copies of all of these registrations and applications, and has made available for review correct
and complete copies of all other written documentation evidencing ownership of each of the
foregoing. The Seller has made all other registrations relating to the Vault Business that it is
required to have made and is in good standing with respect to such registrations with all fees due
as of the Closing duly made.
(b) The Intellectual Property consists solely of items and rights that are: (1) owned by the
Seller; (2) in the public domain; or (3) rightfully used by the Seller pursuant to a valid license,
sublicense, consent or other similar written agreement (the “Licensed Intellectual Property”). The
parties and date of each such agreement regarding the Licensed Intellectual Property are set forth
on Schedule 3.21(b). The Seller has all rights in the Intellectual Property necessary and
sufficient to carry out the Seller’s current activities and proposed activities relating to the
Vault Business (and had all rights necessary to carry out its former activities at the time such
activities were being conducted), including and to the extent required to carry out such
activities, rights to make, use, reproduce, modify, adapt, create derivative works based on,
translate, distribute (directly and indirectly), transmit, display and perform publicly, license,
rent and lease and, as applicable, assign and sell, the Intellectual Property. The Seller has
delivered correct and complete copies of all material license agreements to the Purchaser, and, as
applicable, has made available for review correct and complete copies of all other written
documentation evidencing that the Seller has the necessary and sufficient rights in each of the
foregoing.
(c) The Seller has not infringed upon or misappropriated any Intellectual Property Rights or
personal right of any person anywhere in the world. No Claims or written notice (1) challenging
the validity, effectiveness or ownership by the Seller of any of the Intellectual Property, or (2)
to the effect that the use, distribution, licensing, sublicensing, sale or any other exercise of
rights in any product, service, work, technology or process as now used or
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offered or proposed for
use, licensing, sublicensing, sale or other manner of commercial exploitation by the Seller
infringes or will infringe on any Intellectual Property Rights or personal right of any Person have
been asserted or are threatened by any Person, nor are there any valid grounds for any bona fide
Claim of any such kind. There is and has been no unauthorized use, infringement or
misappropriation of any Intellectual Property by any third party, employee or former employee.
(d) All personnel (including employees, agents, consultants and contractors), who have
contributed to or participated in the conception and/or development of the Intellectual
Property on behalf of the Seller have executed nondisclosure agreements in the form set forth
on Schedule 3.21(d) and either (1) have been a party to a “work-for-hire” and/or other
arrangement or agreements with the Seller in accordance with applicable international, national,
state and local Law that has accorded the Seller full, effective, exclusive and original ownership
of all tangible and intangible property and Intellectual Property Rights thereby arising or
relating thereto, or (2) have executed appropriate instruments of assignment in favor of the Seller
as assignee that have conveyed to the Seller effective and exclusive ownership of all tangible and
intangible property and intellectual property rights thereby arising and related thereto. Prior to
the date hereof, the Seller has provided copies of all such written agreements or provided a
summary of the terms of any such oral agreements to Purchaser.
(e) The Seller is not, nor as a result of the execution or delivery of this Agreement, or
performance of the Seller’s obligations hereunder, will the Seller be, in violation of any license,
sublicense, agreement or instrument relating to the Intellectual Property to which the Seller is a
party or otherwise bound, nor will execution or delivery of this Agreement, or performance of the
Seller’s obligations hereunder, cause the diminution, termination or forfeiture of any Intellectual
Property or any rights therein or thereto.
(f) Schedule 3.21(f) contains a true and complete list of all of the Seller’s computer
software programs, products and services included in the Intellectual Property, including all
program code, databases and documentation, without regard to form of media or storage
(collectively, the “Software Programs”). Except with respect to third party software or technology
licensed by the Seller (to which the Seller holds appropriate and valid licenses providing the
Seller with the rights necessary to conduct the Vault Business as presently conducted or as
anticipated to be conducted), the Seller owns full and unencumbered right and good, valid and
marketable title to such Software Programs free and clear of all Liens.
(g) The source code and system documentation relating to the Software Programs (1) have at all
times been maintained in strict confidence; (2) have been disclosed by the Seller only to employees
who have a “need to know” the contents thereof in connection with the performance of their duties
to the Seller and who have executed the nondisclosure agreements referred to in Section
3.21(d); and (3) have not been disclosed to any third party, except those third parties set
forth on Schedule 3.21(d) who have executed restrictive license and nondisclosure
agreements and/or source code escrow agreements with the Seller. Schedule
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3.21(g)
identifies all agreements pursuant to which source code to the Software Programs has been escrowed
with any third party. The Seller has provided true and complete copies of all such escrow
agreements and such other license and nondisclosure agreements as are identified above, and as
applicable, has made available for review correct and complete copies of all other written
documentation evidencing agreements to release of any source code of the Software Programs to any
third party.
(h) The Software Programs do not contain any open source program code, modules, utilities or
libraries that are covered by open source licenses that require as a condition of use, modification
or redistribution of such Software Program and/or other software programs combined or distributed
with any such Software Program that it be (1) disclosed or distributed in source code form, (2)
licensed for the purpose of making derivative works, or (3) redistributable at no charge subject to
the open source license applicable to such open source program code, modules, utilities or
libraries (collectively, “Open Source Code”). All Software Programs will be scanned for Open
Source Code prior to Closing. If Purchaser determines that any Software Program includes any Open
Source Code, this will need to be remedied to Purchaser’s satisfaction at Seller’s sole cost and
expense prior to and as a condition to Closing.
(i) The Seller has taken all reasonable steps, in accordance with normal industry practice, to
preserve and maintain complete notes and records relating to the Intellectual Property and to cause
the same to be readily understood, identified and available.
(j) The Intellectual Property is free and clear of any and all Liens and nothing shall
interfere with the quiet enjoyment of the Purchaser with respect to the Intellectual Property
following consummation of the transactions contemplated hereby.
(k) Except as set forth on Schedule 3.21(k), the Seller does not owe any royalties,
license fees, guaranteed maintenance fees or other payments to third parties in respect of the
Intellectual Property. All royalties, license fees, guaranteed maintenance fees or other payments
set forth on Schedule 3.21(k) that have accrued, or will accrue, prior to the Closing have
been paid or will be paid prior to Closing. The Seller will not owe any such payments or any
additional payments as a result of the consummation of the transactions contemplated hereby.
(l) The Seller has used its commercially reasonable efforts to regularly scan the Software
Programs and the other items of Intellectual Property with “best-in-class” virus detection
software. The Software Programs and other Intellectual Property contain no “viruses”, Trojan
horses, trap doors, Easter eggs, time bombs, cancel bots or other computer programming routines
that are intended to damage, detrimentally interfere with or surreptitiously intercept with or
expropriate any system, data or personal information. For the purposes of this Agreement, “virus”
means any computer code intentionally designed to disrupt, disable or harm in any manner the
operation of any software or hardware. None of the foregoing contains any worm, bomb, backdoor,
clock, timer, or other disabling device code, or any other design or routine that
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causes any
system, software, data or information to be erased, inoperable, or otherwise incapable of being
used, either automatically or upon command by any party.
(m) The Seller has taken and will continue to take all reasonable measures to protect the
secrecy, confidentiality, and value of all trade secrets and Intellectual Property Rights included
in the Intellectual Property transferred pursuant to this Agreement. Neither the Seller
nor any other party has taken any action or failed to take any action that directly or
indirectly caused any Intellectual Property to enter the public domain or in any way adversely
affect its value to the Purchaser, or its absolute ownership thereof. The Seller acknowledges and
agrees that from and after the Closing, the Purchaser will have a legitimate and continuing
proprietary interest in the protection of trade secrets and non-public confidential information,
knowledge, data and similar information relating to the Intellectual Property and the confidential
information included therein (the “Confidential Information”). The Seller agrees that prior to and
following the Closing it shall secure and maintain the confidentiality of the Confidential
Information in a manner consistent with the importance and value of such information and the
maintenance of the Purchaser’s rights therein, but in no event using less than reasonable efforts.
The Seller shall not use, sell, transfer, publish, disclose or otherwise make available any of the
Confidential Information to any third party. If the Seller is compelled by a duly authorized
subpoena, court order or government authority to disclose any of the Confidential Information, the
Seller shall immediately notify the Purchaser of same prior to disclosure, and fully cooperate with
the appropriate party in seeking a protective order or other appropriate remedy prior to
disclosure.
3.22 Contracts.
(a) Schedule 3.22(a) sets forth a list of all Contracts to which the Seller is a party
or by which the Seller, the Vault Business or any of the Assets is bound as of the date hereof
including:
(1) any Contract for the Seller’s provision of engineering or other services related to the
Vault Business;
(2) any continuing Contract for management or consulting services or services of independent
contractors or subcontractors;
(3) any Contract that expires more than one year after the date of this Agreement and any
Contract that may be renewed at the option of any person other than the Seller so as to expire more
than one year after the date of this Agreement;
(4) any trust indenture, mortgage, promissory note, loan agreement or other Contract for the
borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with GAAP;
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(5) any Contract for capital expenditures in excess of $5,000 in the aggregate;
(6) any Contract limiting the freedom of the Seller to engage in any line of business or to
compete with any other Person, or any confidentiality, secrecy or non-disclosure contract or any
contract that may be terminable as a result of the Seller’s status as a competitor of any party to
such contract;
(7) any Contract pursuant to which the Seller is a lessor of any Tangible Personal Property,
pursuant to which payments in excess of $5,000 remain outstanding;
(8) any Contract with an affiliate;
(9) any agreement of guarantee, support, indemnification, assumption or endorsement of, or any
similar commitment with respect to, the Liabilities of any other Person other than customary
customer agreements made in the ordinary course of the Vault Business;
(10) any employment Contract, arrangement or policy (including any collective bargaining
contract or union agreement) that may not be immediately terminated without financial notifications
or penalty (or any augmentation or acceleration of benefits);
(11) any Contract providing for a joint venture or partnership with any other Person;
(12) any oral contract, true and correct summaries of which have been provided to the Seller;
and
(13) any Contract that is otherwise in any way material to the Assets and/or the Vault
Business and is not described in any of the categories specified in this Section 3.22(a).
(b) The Seller has performed all of the obligations required to be performed by it and is
entitled to all benefits under, and is not alleged to be in default in respect of any Assigned
Contract. Each of the Assigned Contracts is valid and binding and in full force and effect, and
except as disclosed on Schedule 3.22(b), there exists no default or event of default or
event, occurrence, condition or act, with respect to the Seller, or with respect to the other
contracting party, that, with the giving of notice, the lapse of time or the happening of any other
event or condition, would become a default or event of default under any Assigned Contract. The
Seller has not received written or oral notice of cancellation, modification or termination of any
Assigned Contract. Seller does not have actual or constructive notice that one or more of the
parties to any Assigned Contract intends to terminate or alter the provisions thereof by reason of
the transactions contemplated hereby. Since the date of the latest balance sheet of the Seller
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contained in the Financial Statements, except as set forth on Schedule 3.22(b), the Seller
has not waived any right under any Assigned Contract, amended or extended any Assigned Contract or
failed to renew (or received notice of termination or failure to renew with respect to) any
Assigned Contract. True, correct and complete copies of all Assigned Contracts have been delivered
to the Purchaser.
(c) Schedule 3.22(a) denotes with an asterisk all of the Contracts (if any) that will
be Excluded Contracts.
(d) Except as expressly designated on Schedule 3.22(a), none of the Assigned Contracts
was awarded to the Seller as a result of (in whole or in part) the Seller’s status as a
minority-owned or disadvantaged business or similar status.
(e) All of the Assigned Contracts may be assigned to the Purchaser without obtaining the
consent of any party thereto, other than to the extent specifically set forth on Schedule
3.22(e).
3.23 Taxes and Tax Returns.
(a) Except as set forth on Schedule 3.23:
(1) The Seller has timely filed or timely requested extensions to file those Tax Returns that
are currently due or, if not yet due, will timely file or timely request extensions to file all Tax
Returns required to be filed by it for all taxable periods ending on or before the Closing Date and
all such Tax Returns are, or will be when filed, true, correct and complete. Copies of all such
Tax Returns for the periods ending on or after December 31, 2004 have been given to the Purchaser;
(2) The Seller has paid to the appropriate Governmental Authority, or, if payment is not yet
due, will pay, to the appropriate Governmental Authority, or has established, in accordance with
GAAP and consistent with past practice, accruals that are reflected on the Seller’s financial
statements (as provided to the Purchaser hereunder) for the payment of all Taxes imposed on the
Seller or for which the Seller could be liable, whether to taxing authorities or to other persons
(pursuant to a tax sharing agreement or otherwise) for all taxable periods beginning on or before
the Closing Date;
(3) No extension of time has been requested or granted for the Seller to file any Tax Return
that has not yet been filed or to pay any Tax that has not yet been paid;
(4) The Seller has not received notice of a determination by a Governmental Authority that
Taxes are owed by the Seller (such determination to be referred to as a “Tax Deficiency”) that has
not been resolved as of the date of Closing and, to the Seller’s Knowledge, no Tax Deficiency is
proposed or threatened;
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(5) All Tax Deficiencies have been paid or finally settled and all amounts determined by
settlement to be owed have been paid;
(6) Except in the case of a Lien for ad valorem property taxes not yet due and payable, there
is no unpaid Tax (a) that constitutes a Lien upon any of the Assets or (b) for which the Purchaser
would be liable under applicable Law by reason of having acquired the Assets;
(7) There are no presently outstanding waivers or extensions or requests for waiver or
extension of the time within which a Tax Deficiency may be asserted or assessed;
(8) No issue has been raised in any examination, investigation, audit, Claim or proceeding
relating to Taxes (a “Tax Audit”) which, by application of similar principles to any past, present
or future period, would result in a Tax Deficiency for such period and no Claim has ever been made
by a Governmental Authority in a jurisdiction where the Seller does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction;
(9) There are no pending or, to the Seller’s knowledge, threatened, Tax Audits of the Seller;
(10) There are no requests for rulings in respect of any Tax pending between the Seller and
any Governmental Authority;
(11) The Seller has complied with all applicable Laws relating to the withholding and payment
of Taxes and has timely withheld and paid to the proper Governmental Authorities all amounts
required to have been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor or shareholder;
(12) The Seller has disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code;
(13) After the date hereof, no election with respect to Taxes will be made without the written
consent of the Purchaser other than those elections that would not have a material adverse effect
and that are consistent with past practices of the Seller;
(14) None of the Assets of the Seller is property that it is required to be treated as being
owned by any other person pursuant to the “safe harbor lease” provisions of former Section
168(f)(8) of the Code;
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(15) None of the Assets of the Seller directly or indirectly secures any debt, the interest on
which is tax-exempt under Section 103(a) of the Code;
(16) None of the Assets of the Seller is “tax-exempt use property” within the meaning of
Section 168(h) of the Code;
(17) The Seller does not have, and has not had, a permanent establishment in any foreign
country, as defined in any applicable tax treaty or convention between the United States and such
foreign country;
(18) The Seller is not a party to any Tax allocation or Tax sharing agreement; and
(19) The Acquisition is not subject to Tax withholding provisions of the Code.
(b) Schedule 3.23 contains: (1) a schedule of the filing dates of all Tax Returns
required to be filed by the Seller; (2) a description of all past Tax Audits involving the Seller;
(3) a list of all elections made by the Seller relating to Taxes, including whether the Seller has
made an election pursuant to Section 754 of the Code; and (4) a list of the states, territories and
jurisdictions (whether foreign or domestic) to which any Tax is properly payable by the Seller.
Except as set forth on Schedule 3.23, the Seller has retained all supporting and backup
papers, receipts, spreadsheets and other information necessary for: (A) the preparation of all Tax
Returns that have not yet been filed; and (B) the defense of all Tax Audits involving taxable
periods either ending on or during the six years prior to the Closing Date or from which there are
unutilized net operating loss, capital loss or investment tax credit carryovers.
(c) The Seller has collected and remitted to the appropriate Governmental Authority all sales
and use or similar Taxes required to have been collected, including any interest and any penalty,
addition to tax or additional amount unpaid, and has been furnished properly completed exemption
certificates for all exempt transactions. The Seller has collected and/or remitted to the
appropriate Governmental Authority all property Taxes, customs duties, fees, and assessments which
are other than in the nature of income taxes or charge of any kind whatsoever (including Taxes
assessed to real property and water and sewer rents relating thereto), including any interest and
any penalty, addition to tax or additional amount unpaid.
3.24 Solvency.
No insolvency proceeding of any character including bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting, the Seller (other
than as a creditor) or any of the Assets are pending or are being contemplated by the Seller, or
are being threatened against the Seller by any other Person, and the Seller has not made any
assignment for the benefit of creditors or taken any action in contemplation of which
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that would constitute the basis for the institution of such insolvency proceedings.
Immediately after giving effect to the consummation of the transactions contemplated hereby, the
Seller will be able to pay the Excluded Liabilities as they become due; (b) the value of the
remaining assets (if any) of the Seller (calculated at fair market value) will exceed the Excluded
Liabilities; and (c) taking into account all pending and threatened litigation, final judgments
against the Seller in actions for money damages are not reasonably anticipated to be rendered at a
time when, or in amounts such that, the Seller will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum probable amount of such
judgments in any such actions and the earliest reasonable time at which such judgments might be
rendered) as well as all other obligations of the Seller.
4. COVENANTS OF THE SELLER AND THE SHAREHOLDERS.
The Seller and the Shareholders hereby covenant and agree as follows:
4.1 Full Cooperation; Access to Information.
The Seller and the Shareholders shall cooperate in good faith with Purchaser in causing the
transactions that are the subject of this Agreement to be consummated. Seller shall permit
Purchaser and its counsel, accountants, employees and other representatives, prior to Closing, to
make such investigations of Seller’s business, operations, assets, employees, contracts, books,
records and financial information, all as Purchaser deems necessary or advisable in the conduct of
its due diligence investigation into Seller’s business, operations and assets. Seller shall give
to Purchaser and its counsel, accountants, employees and other representatives access, to the
fullest extent possible without unreasonably interfering with Seller’s business operations, to all
of Seller’s personnel, properties, books, contracts, commitments and records, and will promptly
furnish to Purchaser copies of all such documents and records and information with respect to
Seller’s affairs as Purchaser may from time to time in the exercise of its sole and absolute
discretion request. Purchaser shall not be under any obligation to continue with its due diligence
investigation if, at any time, the results of its due diligence investigation are not fully
satisfactory to it for any reason in its sole discretion.
4.2 No Inconsistent Action.
Neither the Seller nor the Shareholders will take any action which is inconsistent with or
impairs the consummation of the transactions contemplated by this Agreement or which would make
inaccurate the representations or warranties made by the Shareholders or the Seller herein.
4.3 Non-Solicitation.
In consideration of the expense and effort that will be expended by Purchaser in its due
diligence investigation, neither the Shareholders nor the Seller, nor their affiliates will,
directly, indirectly or otherwise, solicit or entertain offers from, negotiate with or in any
manner
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encourage, discuss, entertain, accept or consider any proposal of any other person or entity
relating to a disposition (directly or indirectly) of all or any portion of the Assets of the
Seller, the stock of either Seller, or a merger involving either Seller, or the issuance of any
shares of or other equity securities of either Seller, other than as contemplated pursuant to
Section 3.17(e) hereof, at any time during the term of this Agreement, or to raise funds in the
form of debt or equity for use in the Vault Business, until the earlier to occur of March 1, 2006,
or, if applicable, the termination of this Agreement.
4.4 [Reserved].
4.5 Prohibited Actions Pending Closing.
Unless otherwise provided for herein or approved by Purchaser in writing, from the date hereof
until the Closing Date, the Seller and the Shareholders shall cause the Seller not to do or enter
into the following:
(a) amend or otherwise change its Articles of Incorporation, By-Laws or other organizational
documents;
(b) issue or sell, authorize for issuance or sale, grant any options or make any other
agreements with third parties with respect to the Seller’s stock, other than to the extent
specifically contemplated by Section 3.17(e) hereof;
(c) authorize or incur any additional debt for money borrowed, or incur any additional debt,
liability or obligation, other than in favor of Purchaser;
(d) mortgage, pledge or subject to Lien or other encumbrance any of its properties or assets,
or agree to do so;
(e) sell or otherwise dispose of, or agree to sell or dispose of any of its assets or
properties;
(f) amend or terminate any lease, contract, undertaking or other commitment listed in any of
the disclosure schedules annexed hereto to which it is a party, or to take action or fail to take
any action, constituting any event of default thereunder;
(g) assume, guarantee or otherwise become responsible for the obligations of any other party
or agree to do so;
(h) make any change in accounting methods or principles;
(i) compromise or settle any material Claim, other than with the consent of the Purchaser;
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(j) acquire the capital stock or other ownership interests of any other entity or acquire all
or substantially all of the assets of another entity;
(k) take any action prior to the Closing Date which would breach any of the representations
and warranties contained in this Agreement;
(l) take any action or omit to take any action if taking or omitting to take such action could
have a Material Adverse Effect, as defined in Section 8.5 hereof, or
(m) agree to take any of the actions described in this Section 4.5.
4.6 Conduct of Business Pending Closing.
From the date hereof until the Closing Date, the Seller and the Shareholders covenant and
agree to cause the Seller to:
(a) maintain its existence in good standing;
(b) maintain proper business and accounting records;
(c) maintain all insurance on the Assets in effect on the date of this Agreement; and
(d) continue to diligently operate its business in the ordinary course.
4.7 Change of Corporate Name.
Immediately subsequent to the Closing, the Seller acknowledges and agrees that each Seller
shall change its name to something that does not contain the phrase “BigVault” or any derivation
thereof, and thereafter neither the Seller, the Shareholders nor any affiliate shall use such name
or any confusingly similar name at any time subsequent to the Closing.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Seller and the Shareholders, that the
following representations and warranties are true and correct in all material respects on the date
hereof and will be true and correct in all material respects on and as of the Closing Date:
5.1 Organization and Good Standing.
Purchaser is a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland and has full power to carry on its business as it is now being
conducted and to own or hold under lease the properties it now owns or holds under lease.
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5.2 Authority.
Purchaser has full power and authority to enter into this Agreement. Purchaser and its
members, officers and directors have taken all action necessary to authorize the execution,
delivery and performance of this Agreement, the completion of the transactions contemplated hereby
and the execution and delivery of any and all instruments necessary or appropriate to effectuate
fully the terms and conditions of this Agreement. This Agreement has been properly executed and
delivered by Purchaser and (assuming the due authorization, execution and delivery thereof by the
Seller and the Shareholders) constitutes the valid and legally binding obligation of Purchaser and
is enforceable against Purchaser in accordance with its terms.
5.3 No Conflict.
Neither the execution and delivery of this Agreement nor the carrying out of the transactions
contemplated hereby will result in any violation, termination or modification of, or conflict with,
the articles of organization or by-laws of Purchaser or any of the contracts or other instruments
to which Purchaser is a party, or of any judgment, decree or order applicable to Purchaser.
6. INDEMNIFICATION AND SURVIVAL.
6.1 Indemnification by the Seller and the Shareholders. The Seller and the
Shareholders hereby covenant and agree to jointly and severally indemnify and hold harmless the
Purchaser and its respective successors and assigns, at all times from and after the date of
Closing, against and in respect of the following:
(i) any damage or loss resulting from any misrepresentation, breach of warranty or
breach or non-fulfillment of any agreement or covenant on the part of the Seller or either
Shareholder under this Agreement, the Intellectual Property Assignments, the Non-Competition
Agreements or any Employment Agreement, or from any inaccuracy or misrepresentation in or
omission from any certificate or other instrument or document furnished or to be furnished
by or on behalf of the Seller or the Shareholders at Closing;
(ii) any and all losses, interest, penalties, attorneys’ fees, and expenses resulting
from or associated in any way with the Excluded Liabilities;
(iii) any and all losses, interest, penalties, attorneys’ fees and expenses arising
from or associated in any way with the waiver of bulk sales compliance pursuant to
Section 10.13 hereof; and
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(iv) all Claims, assessments, judgments, costs, reasonable attorneys’ fees and expenses
of any nature incident to any of the matters indemnified against pursuant to this
Section 6.1, including, without limitation, all such costs and expenses incurred in
the defense thereof or in the enforcement of any rights of the Purchaser hereunder.
The parties hereto hereby acknowledge and agree that the Contingent Payment Escrow Agreement
will provide that funds held in the Contingent Payment Escrow will be the first (but not the sole)
source of satisfaction of the indemnification obligation of the Seller and the Shareholders
hereunder.
6.2 Indemnification by Purchaser. The Purchaser hereby covenants and agrees to
indemnify and hold harmless the Seller and the Shareholders and their respective successors and
assigns, at all times from and after the date of Closing against and in respect of the following:
(i) any damage or loss resulting from any misrepresentation, breach of warranty or
breach or non-fulfillment of any agreement or covenant on the part of the Purchaser under
this Agreement, or from any inaccuracy or misrepresentation in or omission from any
certificate or other instrument or document furnished or to be furnished by the Purchaser at
Closing; and
(ii) all Claims, assessments, judgments, costs, reasonable attorneys’ fees and expenses
of any nature incident to any of the matters indemnified against pursuant to this
Section 6.2, including, without limitation, all such costs and expenses incurred in
the defense thereof or in the enforcement of any rights of the Seller or the Shareholders
hereunder.
6.3 Notice and Defense. If at any time a party entitled to indemnification hereunder
(the “Indemnitee”) shall receive notice from any third party of any asserted liability, damage,
loss or expense (together, a “Loss”) claimed to give rise to indemnification hereunder, the
Indemnitee shall promptly give notice thereof (“Claims Notice”) to the party obligated to provide
indemnification (the “Indemnitor”) of such Loss. The Claims Notice shall set forth a brief
description of the Loss, and, if known or reasonably estimable, the amount of the Loss that has
been or may be suffered by the Indemnitee. Thereafter, the Indemnitor shall have, at its election,
the right to compromise or defend any such matter at the Indemnitor’s sole cost and expense through
counsel chosen by the Indemnitor and approved by the Indemnitee (which approval shall not
unreasonably be withheld); provided, however, that (i) Indemnitor provides evidence reasonably
satisfactory to Indemnitee that Indemnitor has the financial wherewithal (including but not limited
to funds available in the Contingent Payment Escrow) to satisfy and discharge the Loss in full, and
(ii) any such compromise or defense shall be conducted in a manner which is reasonable and not
contrary to the Indemnitee’s interests, and the Indemnitee shall in all events have a right to veto
any such compromise or defense which is unreasonable or which would jeopardize in any material
respect any assets or business of the Indemnitee or any of its affiliates or increase the potential
liability of, or create a new liability for, the Indemnitee
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or any of its affiliates and, provided further that the Indemnitor shall in all events indemnify
the Indemnitee and its affiliates against any damage resulting from the manner in which such matter
is compromised or defended, including any failure to pay any such claim while such litigation is
pending. In the event that the Indemnitor does so undertake to compromise and defend a claim, the
Indemnitor shall notify the Indemnitee of its intention to do so. Each party agrees in all cases
to cooperate with the defending party and its counsel in the compromise of or defending of any such
liabilities or claims. In addition, the nondefending party shall at all times be entitled to
monitor such defense through the appointment, at its own cost and expense, of advisory counsel of
its own choosing.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER AND THE SHAREHOLDERS.
The obligations of the Seller and the Shareholders under this Agreement are subject only to
the delivery by Purchaser to the Escrow Agent of the Agreed Liabilities Amount, the delivery of the
documents described in Section 2.3(b) hereof and the satisfaction of the condition set
forth below, as Section 7.1:
7.1 Each of the representations and warranties of the Purchaser contained herein and in any
other agreements or instruments provided for herein shall have been true and correct in all
material respects on the date hereof, and shall be true and correct in all material respects for
that period of time between the signing hereof and the Closing Date, and as of the Closing Date as
though made on and as of such date. Purchaser shall deliver to Seller and the Shareholders a
certificate to such effect at the Closing as to the representations and warranties of the
Purchaser.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser to proceed to Closing under this Agreement are subject to the
fulfillment (or, at the option of Purchaser, the waiver) at or prior to the Closing Date of each of
the following conditions:
8.1 Accuracy of Representations and Warranties.
Each of the representations and warranties of the Seller and the Shareholders contained herein
and in any other agreements or instruments provided for herein shall have been true and correct in
all material respects on the date hereof, and shall be true and correct in all material respects
for that period of time between the signing hereof and the Closing Date, and as of the Closing Date
as though made on and as of such date. Each of Seller and the Shareholders shall deliver to
Purchaser a certificate to such effect at the Closing as to the representations and warranties of
the Seller and the Shareholders.
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8.2 Performance of Agreements.
The Shareholders and the Seller shall have performed all obligations and agreements and
complied with all covenants and conditions contained in this Agreement to be performed or complied
with by them at or prior to the Closing.
8.3 No Action or Proceeding.
No claim, action, suit, investigation or other court proceeding shall be pending or threatened
before any court or governmental agency which presents a risk of the restraint or prohibition of
the transactions contemplated by this Agreement or the obtaining of material damages or other
relief in connection therewith.
8.4 Consents and Actions; Contracts.
All requisite regulatory and/or other consents and approvals of third parties, including but
not limited to those set forth on Schedule 3.2 or Schedule 3.22(e), shall have been
obtained and completed. The Seller and the Shareholders shall have provided Purchaser with
evidence satisfactory to Purchaser in its sole and absolute discretion that (i) there are no
applicable rights of first refusal, rights of first negotiation, rights of first offer or similar
rights of any kind that would require Seller or the Shareholders to provide any third party with
notice, an opportunity to discuss, consent, negotiate or to engage in any of the transactions
contemplated hereby prior to consummation by Seller and the Shareholders hereof; or (ii) that any
and all such rights (including any such rights in favor of Vaultrx and Spiderboy) have been waived
by the party possessing such rights.
8.5 No Material Adverse Changes.
There shall not have been any Material Adverse Change in the business, assets or prospects of
the Seller since January 1, 2005. For purposes of this Agreement, “Material Adverse Change” or
“Material Adverse Effect” means any change or effect that is or, so far as can reasonably be
determined, is reasonably likely to be materially adverse to the Vault Business, its prospects or
the Assets.
8.6 Satisfactory Due Diligence Review.
The Purchaser shall have completed its due diligence investigation into the business,
operations and assets of the Seller, the Assets and the Vault Business and determined in the
exercise of its sole and absolute discretion that it is satisfied with the results of such
investigation. If the Purchaser is not satisfied at any time with the results of such
investigation, for any reason or no reason at all, it shall have the option to terminate this
Agreement, without any liability whatsoever to the Seller, the Shareholders or any other party,
upon written notice to the Seller and the Shareholders. The Seller and the Shareholders hereby
acknowledge and agree that, notwithstanding the Purchaser’s due diligence investigation, Purchaser
is relying upon the
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representations and warranties made by the Seller and the Shareholders herein as a material
inducement to the consummation of the transactions described herein, and Purchaser’s due diligence
investigation shall in no way undermine or diminish the representations and warranties made by the
Seller and the Shareholders or the Purchaser’s reliance thereon.
8.7 Ordinary Course of Business.
The Seller shall have operated the Vault Business in a manner consistent with past practice
and shall not have made any payments outside the ordinary course of its business.
8.8 Agreed Liabilities Amount.
The Seller shall have provided Purchaser with an updated Schedule 2.2(b)(2) reflecting
a total amount needed to satisfy all of the Creditors (other than the Minor Creditors) in full of
$1,500,000 or less, together with evidence satisfactory to Purchaser in its sole and absolute
discretion that payment of the Agreed Liabilities Amount to each of the Creditors (other than the
Minor Creditors) in the amount set forth on such updated Schedule 2.2(b)(2) with respect to
each Creditor (other than the Minor Creditors) shall be sufficient in all respects to satisfy fully
and discharge all Liabilities of Seller (other than Liabilities owed to Minor Creditors) and in all
events to enable Seller to transfer title to the Assets to the Purchaser at the Closing free and
clear of any and all Liens.
8.9 Opinion of Counsel Regarding Due Authorization.
The Seller shall have provided Purchaser with an opinion of counsel to the Seller that (i) the
Seller and the Shareholders have full power to enter into and to carry out the terms of this
Agreement; (ii) each Seller and its directors and shareholders have taken all action, corporate and
otherwise, necessary to authorize the execution, delivery and performance of this Agreement, the
completion of the transactions contemplated hereby and the execution and delivery of any and all
instruments necessary or appropriate to effectuate fully the terms and conditions of this
Agreement; (iii) any consent or approval of any court, governmental agency, other public authority
or third party that is required as a condition to (a) the authorization, execution, delivery and
performance of this Agreement or any other instruments necessary to effectuate this Agreement; or
(b) the consummation by the Seller of the transactions contemplated herein has been obtained; and
(iv) this Agreement has been properly executed and delivered by the Shareholders and the Seller and
constitutes the valid and legally binding obligation of the Shareholders and the Seller and is
enforceable against the Shareholders and the Seller in accordance with its terms.
8.10 Evidence of Resolution of Litigation.
The Seller shall have provided Purchaser with evidence satisfactory to Purchaser in its sole
and absolute discretion that all pending or threatened suits, actions, proceedings or litigation
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pending against the Seller have been fully and finally resolved or adjudicated, as the case
may be.
8.11 Termination of Contracts.
The Seller shall have provided Purchaser with evidence satisfactory to Purchaser in its sole
and absolute discretion that each of the following contracts has been terminated: (i) that certain
Technology Licensing and Consulting Agreement dated
by and between BVST and BVI (the
“Intercompany License Agreement”); (ii) the employment agreements to which BVST or BVI or any
employee of either BVST or BVI is a party; and (iii) those contracts identified in Exhibit
8.11 attached hereto.
8.12 Delivery of Ancillary Agreements.
The Seller and the Shareholders shall have furnished to Purchaser fully executed
Non-Competition Agreements, Employment Agreements and Intellectual Property Assignments in
accordance with Section 2.3 hereof.
8.13 Delivery of Lease Agreement.
The Seller and the Shareholders shall have furnished to Purchaser a fully executed assignment
of Lease and consent of Landlord pursuant to Section 2.3(c)(xiii) hereof, a consent of the
Landlord to the sublease of space to Total Computer Care, and a sublease to Total Computer Care,
each in such form as satisfactory to Purchaser in its sole and absolute discretion.
8.14 Other Evidence.
The Seller and the Shareholders shall have furnished to Purchaser such further certificates
and documents evidencing their due action in accordance with this Agreement as Purchaser shall
reasonably request.
9. TERMINATION.
This Agreement may be terminated only as follows:
(a) At any time upon the mutual written consent of the parties hereto;
(b) At any time prior to the Closing by Purchaser by written notice to the Seller and the
Shareholders if Purchaser is not satisfied for any reason with its due diligence review; or
(c) Automatically and without further act if the Closing has not occurred on or prior to
December 31, 2005, as such date may have been extended by the mutual written consent of the parties
hereto.
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In the event of the default by the Seller or the Shareholders hereunder or the breach by the
Seller or the Shareholders of any representation, warranty or covenant contained in this Agreement,
Purchaser shall have all rights available to it at law and/or in equity, including but not limited
to the right to specific performance, notwithstanding the termination of the Agreement in
accordance with this Section 9.
10. CERTAIN CASH ADVANCES
Prior to the date hereof, Purchaser has made available $275,000 of “bridge financing” to the
Seller, $200,000 of which is currently characterized as Advance Fees (as such term is defined in
the License Agreement) under the License Agreement, and $75,000 of which is reflected pursuant to
that certain Promissory Note of even date herewith by Seller in favor of Purchaser. The parties
hereto hereby contemplate that, from and after the date hereof and prior to the Closing Date,
Purchaser may continue to make additional bridge financing available to the Seller, although
Purchaser shall have no obligation to do so. If the transaction that is the subject of this
Agreement proceeds to Closing, all such advances (including the above-described $200,000 and
$75,000, and all additional advances made subsequent to the date hereof) shall be repaid by Seller
in the manner contemplated by Section 2.2(c)(6) hereof. If the transaction that is the
subject of this Agreement does not proceed to Closing on or prior to December 31, 2005 (as such
date may be extended by the mutual, written agreement of the parties hereto), then the Seller shall
be obligated to repay all such advances (other than the above-described $200,000) pursuant to the
provisions of such Promissory Note. The provisions of this Section 10 shall survive any
termination of this Agreement.
11. MISCELLANEOUS.
11.1 Expenses.
Each party to this Agreement shall pay all of its own closing costs and other expenses
relating hereto, including fees and disbursements of its counsel and accountants, whether or not
the transactions contemplated hereby are consummated.
11.2 Taxes.
The Shareholders and the Seller shall bear any and all Taxes of any nature or type whatsoever
that may become due and payable as a result of the consummation of the transactions contemplated
hereby, and the Shareholders and the Seller shall jointly and severally indemnify and hold
Purchaser harmless with respect thereto.
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11.3 Notices.
All notices and other communications hereunder or in connection herewith shall be in writing
and delivered as follows:
If to the Seller or the Shareholders, to:
c/o Mr. Xxxx Xxxxxxx
bigVault Storage Technologies, Inc.
00 Xxxx Xxxxx
Xxxxxxx, XX 00000
bigVault Storage Technologies, Inc.
00 Xxxx Xxxxx
Xxxxxxx, XX 00000
with a copy to:
Xxxx X. XxXxxxxx, Esq.
Lederer, Nojima, Xxxxxxxxxxx, XxXxxxxx & Xxxxxxx, LLP
00 Xxx Xxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Lederer, Nojima, Xxxxxxxxxxx, XxXxxxxx & Xxxxxxx, LLP
00 Xxx Xxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Purchaser, to:
Digi-Data Corporation
0000-X Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
0000-X Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx
With a copy to:
Jordan X. Xxxxxxxxx, Esquire
DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Except as otherwise specifically provided herein, all notices, requests, instructions and
demands which may be given by any party hereto to any other party in the course of the transactions
herein contemplated shall be in writing and shall be served by express mail through the U.S. Postal
Service or similar expedited overnight commercial carrier. Service of such notices, demands and
requests shall be presumed to have occurred on the date that is one (1) day after the date upon
which the item was delivered to the U.S. Postal Service or similar expedited overnight commercial
carrier, provided the item was properly addressed, all postage and shipping charges were prepaid by
the sender and the commercial carrier issued a dated receipt to the sender acknowledging the
commercial carrier’s receipt of the item. All such
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notices, demands and requests shall be addressed as set forth above. Any party may change the
address at which it is to receive notice by like written notice to all other parties hereunder.
11.4 Entire Agreement.
This Agreement (including the exhibits hereto and the lists, schedules and documents delivered
pursuant hereto, which are a part hereof) is intended by the parties to and does constitute the
entire agreement of the parties with respect to the transactions contemplated by this Agreement.
This Agreement supersedes any and all prior understandings, written or oral, between the parties,
including but not limited to that certain Strategic Alliance and License Agreement by and between
Purchaser and BVST dated August 31, 2005 (the “License Agreement”), which shall be deemed
terminated as of the Closing Date, and this Agreement may be amended, modified, waived, discharged
or terminated only by an instrument in writing signed by the party against which enforcement of the
amendment, modification, waiver, discharge or termination is sought.
11.5 Severability.
If any provision of this Agreement shall be declared by any court of competent jurisdiction
illegal, void or unenforceable, the other provisions shall not be effected, but shall remain in
full force and effect.
11.6 Modification and Amendment.
This Agreement may not be modified or amended except by an instrument in writing duly executed
by the parties hereto, and no waiver of compliance of any provision or condition hereof and no
consent provided for herein shall be effective unless evidenced by an instrument in writing duly
executed by the party hereto seeking to be charged with such waiver or consent.
11.7 Time of the Essence.
Time is of the essence in every provision of this Agreement where time is a factor.
11.8 Governing Law; Jurisdiction; Exclusive Venue.
(a) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland, exclusive of the choice of law rules thereof.
(b) Exclusive Venue. The parties hereto agree that exclusive venue for any
litigation, action or proceeding arising from or relating to this Agreement shall lie in the
Circuit Court in and for Baltimore County, Maryland or, if federal diversity jurisdiction then
exists, in
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the United States District Court for the District of Maryland and each of the parties hereto
expressly waives any right to contest such venue for any reason whatsoever.
(c) Waiver of Trial By Jury. EACH OF THE PARTIES HERETO EXPRESSLY WAIVES THE RIGHT TO
A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION, ACTION OR PROCEEDING RELATING TO OR ARISING OUT OF
THIS AGREEMENT.
11.9 Specific Performance.
The parties hereto recognize that if the Shareholders and/or the Seller do not perform under
the provisions of this Agreement or any other agreements or instruments provided for in this
Agreement, then monetary damages alone would not be adequate to compensate the Purchaser for its
injury. The Purchaser shall therefore be entitled, in addition to any remedies that may be
available at law or in equity including, without limitation, monetary damages, to obtain specific
performance of the obligations of the Seller or the Shareholders. If any action is brought by the
Purchaser to specifically enforce this Agreement or any other agreements or instruments provided
for herein, the Shareholders and the Seller shall waive the defense that there is an adequate
remedy at law.
11.10 Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, legatees, beneficiaries, personal representatives and other legal
representatives and assigns, as the case may be. This Agreement may not be assigned by any party
hereto without the prior written consent of each other party hereto; provided, however, that (i)
the Purchaser may assign its rights and obligations hereunder to any affiliate of the Purchaser,
(ii) the Seller may assign its rights to receive the Contingent Payments, subject in all respects
to the provisions of Sections 2.2(c)(5), 2.2(c)(6), and 2.2(e), to any
party without the requirement of the consent of the Purchaser. Other than as set forth above, no
other rights of Seller hereunder may be assigned without the prior written consent of the
Purchaser, which the Purchaser may grant or withhold in the exercise of its sole and absolute
discretion.
11.11 Enumerations and Headings.
The enumerations and headings contained in this Agreement are for convenience of reference
only and shall in no way be held or deemed to define, limit, describe, explain, modify, amplify or
add to the interpretation, construction or meaning of any provision or the scope or intent of this
Agreement, or in any way effect this Agreement.
11.12 Counterparts.
This Agreement may be signed in two or more counterparts, all of which taken together shall be
deemed to constitute one original Agreement.
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11.13 Waiver of Bulk Sales Compliance. Each of the parties hereto waives compliance
with any applicable bulk sales or similar provisions, provided however, that the Shareholders and
the Seller hereby jointly and severally agree to indemnify and hold harmless Purchaser from and
against any and all losses, expenses, claims, liabilities or attorneys fees arising as a result of
such waiver.
11.14 Disclosure. The parties hereto will consult with each other and reach mutual
agreement before issuing any press release or otherwise making any statement or disclosure, oral or
written, with respect to this Agreement or the transactions contemplated hereby; provided, however,
that each party will be permitted to make, without the agreement of the other, such disclosures to
the public or to governmental entities as that party’s counsel reasonably deems necessary to
maintain compliance with applicable laws. Except as provided above, the existence and/or contents
of this Agreement shall not be disclosed by the Shareholders or the Seller without the Purchaser’s
prior written consent.
11.15 Confidentiality. Except as required by law or to carry out the transactions
contemplated by this Agreement (the “Transactions”), neither the Seller, the Shareholders nor the
Purchaser, nor the employees, attorneys, accountants and other agents and representatives of any of
the foregoing (collectively, “Representatives”) will disclose or use any Confidential Information
(as defined below), whether already furnished or to be furnished in the future to any party hereto
or their Representatives in any manner other than in connection with the evaluation and negotiation
of the transactions proposed in this Agreement once executed and delivered. For purposes of this
Agreement, “Confidential Information” means the existence and terms of this Agreement and any
information regarding Purchaser, the Seller or the Shareholders, their affiliates or the
Transactions. Confidential Information does not include information that a party to this Agreement
can demonstrate (i) is generally available to or known by the public other than as a result of
improper disclosure; (ii) is obtained by the disclosing party from a source other than the other
party or its Representatives; or (iii) was in the possession of the other party prior to the date
hereof other than as a result of improper disclosure and was obtained other than in connection with
consideration of the transactions set forth in this Agreement, provided that such source was not
bound by a duty of confidentiality with respect to such information. Upon the written request of
any party, the other party will promptly return any Confidential Information in its possession or
in the possession of its Representatives.
11.16 Survival. All representations and warranties made by the parties in this
Agreement and in any other certificates and documents delivered in connection herewith shall
survive the Closing.
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IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase Agreement under seal
on the date first above written.
| WITNESS: | PURCHASER: | |||||||||
| DIGI-DATA CORPORATION, a Maryland corporation |
||||||||||
| By: | (SEAL) | |||||||||
| Name: | ||||||||||
| Title: | ||||||||||
| SELLER: | ||||||||||
| BigVAULT STORAGE TECHNOLOGIES, INC. a Delaware corporation |
||||||||||
| By: | (SEAL) | |||||||||
Xxxxxx Xxxxx Xx.
|
Name: | Xxxx Xxxxxxx | ||||||||
| Title: | President and CEO | |||||||||
| BIG VAULT, INC., a Nevada corporation |
||||||||||
| By: | (SEAL) | |||||||||
Xxxxxx Xxxxx Xx.
|
Name: | Xxxx Xxxxxxx | ||||||||
| Title: | President and CEO | |||||||||
| SHAREHOLDERS: | ||||||||||
| (SEAL) | ||||||||||
| Xxxxxx Xxxxx Xx. | Xxxx Xxxxxxx | |||||||||
| (SEAL) | ||||||||||
| Xxxxxx Xxxxx Xx. | Xxxxx Xxxxxxx | |||||||||
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AMENDMENT TO ASSET PURCHASE AGREEMENT
AND CONTINGENT PAYMENT ESCROW AGREEMENT
AND CONTINGENT PAYMENT ESCROW AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT AND CONTINGENT PAYMENT ESCROW AGREEMENT
(“Amendment”) is dated March ___, 2008 by and among bigVAULT STORAGE TECHNOLOGIES, INC., a Delaware
corporation (“BVST”); BIG VAULT, INC., a Nevada corporation (“BVI” and, together with BVST, the
“Seller”); XXXX XXXXXXX (“Xxxx”) and XXXXX XXXXXXX (“Elisa” and, together with Xxxx, the
“Shareholders”); DIGI-DATA CORPORATION, a Maryland corporation (“Purchaser”), and DLA PIPER US LLP
(the “Escrow Agent”).
Explanatory Statements:
A. Purchaser, Seller and the Shareholders are parties to that certain Asset Purchase Agreement
dated as of December 21, 2005, as amended by that certain Amendment dated February 23, 2006 (the
“Original Purchase Agreement”), and Purchaser, Seller, the Shareholders and the Escrow Agent are
parties to that certain Contingent Payment Escrow Agreement dated February 23, 2006 (the “Original
Escrow Agreement”).
B. The parties hereto now desire to amend the Original Purchase Agreement and the Original
Escrow Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the Explanatory Statements and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser, Seller, the
Shareholders and the Escrow Agent, intending to be legally bound, hereby amend the Original
Purchase Agreement and the Original Escrow Agreement as follows:
1. Defined Terms. Capitalized and undefined terms used herein shall have the meanings
given to them by the Original Purchase Agreement or the Original Escrow Agreement, as applicable.
2. Partial Release of Escrow Fund. Notwithstanding any provision of the Original
Purchase Agreement or the Original Escrow Agreement to the contrary, Sixty Seven Thousand Dollars
($67,000) of the Escrow Fund is hereby released to iGambit Inc., successor-in-interest to the
Seller, on the date hereof.
3. Effect on Original Agreement; Integration. Except as expressly amended by this
Amendment, the Original Purchase Agreement and the Original Escrow Agreement shall remain
unmodified and in full force and effect. The Original Purchase Agreement and the Original Escrow
Agreement, as amended by this Amendment, reflects the complete and exclusive agreement of the
parties with respect to the subject matter hereof, and merges and supersedes all prior discussions,
representations, negotiations and agreements with respect thereto.
4. Counterparts. This Amendment may be executed by facsimile in one or more
counterparts, each of which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Asset Purchase
Agreement and Contingent Payment Escrow Agreement, intending to be legally bound, as of the day and
year first above written.
| PURCHASER: DIGI-DATA CORPORATION |
||||
| By: | (SEAL) | |||
| Name: | Xxxxxx Xxxxxxxx | |||
| Title: | President & CEO | |||
| SELLER: bigVAULT STORAGE TECHNOLOGIES, INC. |
||||
| By: | (SEAL) | |||
| Name: | Xxxx Xxxxxxx | |||
| Title: | President & CEO | |||
| BIG VAULT, INC. |
||||
| By: | (SEAL) | |||
| Name: | Xxxx Xxxxxxx | |||
| Title: | President & CEO | |||
| SHAREHOLDERS: |
||||
| Xxxx Xxxxxxx | ||||
| Xxxxx Xxxxxxx | ||||
| ESCROW AGENT: DLA PIPER US LLP |
||||
| By: | ||||
| Jordan X. Xxxxxxxxx, Esq. | ||||
2
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AGREEMENT (“Amendment”) is made and entered into effective as
of February ______, 2006, between and among bigVAULT STORAGE TECHNOLOGIES, INC., a Delaware
corporation (“BVST”); BIG VAULT, INC., a Nevada corporation (“BVI” and, together with BVST, the
“Seller”); XXXX XXXXXXX (“Xxxx”) and XXXXX XXXXXXX (“Elisa” and, together with Xxxx, the
“Shareholders”); and DIGI-DATA CORPORATION, a Maryland corporation (“Purchaser”).
Explanatory Statements:
A. Purchaser, Seller and the Shareholders entered into an Asset Purchase Agreement dated as of
December 21, 2005 (the “Original Agreement”) pursuant to which Purchaser agreed to purchase, and
Seller agreed to sell, all of the assets of the Purchaser (other than to the extent specified in
the Agreement), free and clear of all liens, liabilities and encumbrances.
B. Purchaser, Seller and the Shareholders now desire to amend the Original Agreement in the
manner set forth herein.
NOW, THEREFORE, in consideration of the Explanatory Statements and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser, Seller and
the Shareholders, intending to be legally bound, hereby agree to amend the Original Agreement as
follows:
1. Defined Terms. Capitalized and undefined terms used herein shall have the meanings
given to them by the Original Agreement.
2. Post-Initial Investment Commitment Financing. The final sentence of Section
2.2(c)(4) of the Original Agreement is deleted and the following is substituted in its place:
“At any time after the Initial Investment Commitment has been satisfied, Seller may
propose to Purchaser alternative sources of debt and/or equity financing to fund the
continued operations of the Vault Business, and Purchaser shall consider such
proposals in good faith. Notwithstanding the foregoing, Purchaser shall have the
right to determine, in its sole and absolute discretion, whether or not to pursue
any such alternative sources of debt and/or equity or any other source of financing
with respect to the Vault Business, whether on terms more, less or equally favorable
to Purchaser or otherwise. Notwithstanding anything else to the contrary contained
herein, except for the Initial Investment Commitment, this Section 2.2(c)(4)
shall not be deemed to impose (i) any obligation whatsoever on Purchaser to provide
any financing or invest any certain amount of time, money or effort with respect to
the Vault Business; (ii) any duties or obligations to Seller or the Shareholders
whatsoever with respect to the operation of the Vault Business or Purchaser’s other
business, all of which shall be conducted in the
exercise of Purchaser’s sole and
absolute discretion; and/or (iii) to seek or obtain any particular alternative
sources of financing or any other financing.”
3. No Assignment of Certain Agreements. Notwithstanding Section 3.22,
Schedule 3.22(a) and Schedule 3.22(e) of the Original Agreement, Purchaser, Seller
and the Shareholders agree that the following agreements shall not be assigned to Purchaser at the
Closing:
| (i) | License and Distribution Agreement dated August 6, 2004 (the “StrorageCraft License”) by and between Seller and StorageCraft, Inc.; | ||
| (ii) | End User License Agreement from BrowserHawk (Cyscape); and | ||
| (iii) | Software License Agreement from Xythos Software, Inc. dated September 30, 2002. |
Each of the Purchaser, Seller and Shareholder hereby covenants and agrees to cooperate in good
faith subsequent to the Closing in order to determine the manner in which to proceed with respect
to the StorageCraft License.
4. Verizon Contract Related Matters.
| (i) | Additional Representations of Seller and Shareholders. Seller and the Shareholders hereby jointly and severally represent and warrant (i) that the representations and warranties contained in Section 3.22 of the Original Agreement are true and correct in all material respects on the date hereof, and will be true and correct in all material respects on and as of the Closing Date, with respect to that certain Agreement for Reseller Services dated August 11,2003 by and between Verizon Internet Services, Inc. and XXX.Xxx LLC d/b/a/ Verizon Internet Solutions (the “Verizon Agreement”), and (ii) that there are no Verizon Liabilities (as defined below) as of the date hereof and will be no Verizon Liabilities on and as of the Closing Date. | ||
| (ii) | Assumption of Pre-Closing Liabilities. Notwithstanding anything to the contrary contained in the Original Agreement, Purchaser hereby covenants and agrees that it will assume, from and after the date of the Closing, those liabilities of BVST arising from or relating to the Verizon Agreement, to the extent that those liabilities accrued prior to the Closing (the “Verizon Liabilities”). | ||
| (iii) | Indemnification by Seller and Shareholders. Notwithstanding the foregoing, each of the Seller and the Shareholders herby jointly and severally covenant and agree to indemnify and hold Purchaser harmless with respect to the Verizon Liabilities. If, subsequent to the Closing, any Verizon Liability is asserted against Purchaser or any affiliate thereof, |
2
| then, notwithstanding any provisions of the original Agreement, as amended by this Amendment, to the contrary, Purchaser shall be permitted to pay, satisfy and discharge such Verizon Liability in any manner that Purchaser determines, in its sole and absolute discretion, and such payment, satisfaction, or discharge shall in no way undermine or diminish the obligations of Seller and the Shareholders to indemnify Purchaser with respect thereto. In additional, Purchaser shall be entitled to the remedy of recoupment with respect to any such payment, satisfaction or discharge of any Verizon Liability by Purchaser in accordance with the foregoing. | |||
| (iv) | Right of Set-Off. In addition to the rights and remedies set forth elsewhere in the Original Agreement, as amended by this Amendment, Purchaser shall have the right to set-off against any payment otherwise due to Seller under the Original Agreement, as amended hereby, the amount of loss, liability or damages (including reasonable attorneys’ fee and expert fees) sustained by Purchaser due to the breach by the Seller and/or any Shareholder of the representations and warranties set forth in Section 4(i) of this Amendment, or due to any default by the Seller and/or any Shareholder under the Verizon Agreement. | ||
| (v) | Right to Make Claims Against Contingent Payment Escrow Account. In addition to the rights and remedies set forth elsewhere in the Original Agreement, as amended by this Amendment, Purchaser shall be entitled to make claims for indemnity pursuant to the terms of that certain Contingent Payment Escrow Agreement to be entered into between and among Seller, the Shareholders and Purchaser in order to obtain the indemnification set forth in Section 4(iii) of this Amendment. |
5. Termination. Section 9(c) of the Original Agreement is amended and
restated in its entirety to read as follows:
“(c) Automatically and without further act if the Closing has not occurred on
or prior to March 1, 2006, as such date may have been extended by the mutual written
consent of the parties hereto.”
6. Extension of Date for Repayment of Bridge Financing. The final two (2) sentences
of Section 10 of the Original Agreement are deleted and the following is substituted in its
place:
“If the transaction that is the subject of this Agreement does not proceed to
Closing on or prior to March 1, 2006 (as such date may be extended by the mutual,
written agreement of the parties hereto), then the Seller shall be obligated to
repay all such advances (other than the above-described $200,000) pursuant to the
provisions of such Promissory Note. The provisions of this Section 10 shall
survive any termination of this Agreement.”
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7. Purchaser Election to Exit Vault Business. The following new Section 11 is
added to the Original Agreement in place of Section 11 of the Original Agreement, and
Section 11 of the Original Agreement is renumbered as Section 12 and all subsections
of Section 11 are renumbered as the corresponding subsections of Section 12:
“11. CERTAIN RIGHTS OF SELLER UPON PURCHASER’S ELECTION TO EXIT VAULT BUSINESS.
11.1 Exit From Vault Business Without Sale to Third Party.
If, within [five (5)] years from the date of this Agreement, Purchaser elects
(i) to exit the Vault Business subsequent to the Closing, but (ii) not to sell all
or any portion of the Vault Business to a third party, then Purchaser shall provide
written notice (the “Abandonment Notice”) to the Seller stating such election.
Subsequent to the provision of the Abandonment Notice, the Seller shall have the
right, but not the obligation, to purchase the Vault Business under the terms and
conditions of this Section 11.1. The right of the Seller to purchase the
Vault Business pursuant to this Section 11.1 shall be exercisable by written
notice given to Purchaser not later than thirty (30) days after delivery of the
Abandonment Notice (the “Exercise Period”). The purchase price for the Vault
Business pursuant to this Section 11.1 shall be equal to the sum, as of the
date prior to the Re-Purchase Closing, of (u) the Agreed Liabilities Amount, (v) the
amount of the Initial Investment Commitment funded by Purchaser, (w) the sum of the
Contingent Quarterly Payments made by Purchaser to Seller, (x) the sum of the
Additional Contingent Payments made by Purchaser to Seller, (y) the amount of any
investment in the Vault Business funded by Purchaser in excess of the Initial
Investment Commitment (if any), and (z) the then-remaining principal balance, and
all accrued and unpaid interest and other amounts due thereon, of any outstanding
loans made by the Purchaser to the Seller. The purchase price determined in
accordance with this Section 11.1 (the “Re-Purchase Price”) shall be binding
and conclusive upon the parties hereto. The Seller shall pay the Re-Purchase Price
to Purchaser in full in cash upon the closing of such purchase (the “Re-Purchase
Closing”), which shall occur at a location determined by Purchaser not later than
thirty (30) days following determination of the Re-Purchase Price pursuant to this
Section 11.1.
11.2 Exit From Vault Business With Sale to Third Party.
If, within [five (5)] years from the date of this Agreement, Purchaser elects
both (i) to exit the Vault Business subsequent to the Closing and (ii) to sell all
or any portion of the Vault Business to a third party, then Purchaser shall provide
written notice (the “Sale Notice”) to the Seller promptly after making such
election. At any time thereafter, the Seller may submit to Purchaser an offer to
purchase the Vault Business, and Purchaser shall consider such offer, if any, in
good faith. In addition, Purchaser shall keep Seller informed as to the status of
its discussions with third parties regarding the sale of the Vault Business.
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Notwithstanding the foregoing, however, this Section 11.2 shall not be
deemed (i) to create a right of first negotiation, right of first offer, right of
first refusal or any other type of preemptive right whatsoever on the part of the Seller with respect to
the sale of all or any portion of the Vault Business; (ii) create any duty or
obligation on the part of Purchaser to consummate any sale of the Vault Business
with the Seller and/or any third party identified by the Seller; or (iii) create any
duty or obligation on the part of Purchaser not to consummate any sale of the Vault
Business to a third party. For purposes of clarity, Purchaser may at any time
consummate a sale with a third party on the terms and conditions that it, in its
sole and absolute discretion, determines are advisable, regardless of whether those
terms and conditions are more, less or equally as favorable to Purchaser as any
offers submitted to the Purchaser by the Seller.”
8. Retention
Program. Notwithstanding Section 2.3(c)(xvi) and Section
3.18(d) of the Original Agreement, Purchaser acknowledges that the Retention Program will not
have been implemented by Seller at the time of Closing. Seller and the Shareholders hereby
covenant and agree that, promptly after Closing, Seller will implement a Retention Program
containing terms and conditions satisfactory to Purchaser in accordance with Section
3.18(d) of the Original Agreement; and (ii) issuing the incentives set forth in Exhibit
A attached hereto to the individuals set forth thereon.
9. Effective Date. The parties hereto hereby acknowledge and agree that the transfer
of the Assets pursuant to the provisions of the Agreement shall be deemed effective as of 12.01
a.m. on March 1, 2006, provided, however, that the employees of BVI and of BVST who become
employees of Purchaser pursuant to the provisions hereof shall be moved onto Purchaser’s payroll
effective as of 12:01 a.m. on February 27, 2006.
10. Notices. The address of Xxxx X. XxXxxxxx, Esq. for notices and other
communications set forth in Section 11.3 of the Original Agreement is amended to read as follows:
“Xxxx X. XxXxxxxx, Esq.
Lederer, Nojima, Xxxxxxxxxxx, LoPresti & Xxxxxxx, LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000”
Lederer, Nojima, Xxxxxxxxxxx, LoPresti & Xxxxxxx, LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000”
11. References to Original Agreement. The Original Agreement is hereby amended such
that all references to “Agreement” contained therein shall be deemed to refer to the Original
Agreement, as amended by this Amendment. All references contained in the Original Agreement to
Sections of the Original Agreement that have been modified by this Amendment shall hereafter be
deemed to refer to such Sections as so amended.
12. Effect on Original Agreement; Integration. Except as expressly amended by this
Amendment, the Original Agreement shall remain unmodified and in full force and effect. The
Original Agreement, as amended by the Amendment, reflects the complete and exclusive
5
agreement of
the parties with respect to the subject matter hereof, and merges and supersedes all prior
discussions, representations, negotiations and agreements with respect thereto.
13. Counterparts. This Amendment may be executed by facsimile in one or more
counterparts, each of which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
*****
[signatures appear on the following page]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Asset Purchase
Agreement, intending to be legally bound, as of the day and year first above written.
| PURCHASER: DIGI-DATA CORPORATION |
||||
| By: | (SEAL) | |||
| Name: | Xxxxxx Xxxxxxxx | |||
| Title: | President & CEO | |||
| SELLER: bigVAULT STORAGE TECHNOLOGIES, INC. |
||||
| By: | (SEAL) | |||
| Name: | Xxxx Xxxxxxx | |||
| Title: | President & CEO | |||
| BIG VAULT, INC. |
||||
| By: | (SEAL) | |||
| Name: | Xxxx Xxxxxxx | |||
| Title: | President & CEO | |||
| SHAREHOLDERS: |
||||
| Xxxx Xxxxxxx | ||||
| Xxxxx Xxxxxxx | ||||
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