Exhibit 10.17
JOINT VENTURE AGREEMENT
BY AND AMONG
PHOENIX HOUSE INVESTMENTS, L.L.C.,
TOSHIBA CORPORATION,
AND
SMARTDISK CORPORATION
Dated as of February 24, 1998
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT (this "Agreement") dated as of February
24, 1998 ("Effective Date"), is by and among Phoenix House Investments, L.L.C.
("Limited"), a Delaware limited liability corporation controlled by Addison X.
Xxxxxxx; Toshiba Corporation ("Toshiba"), a Japanese corporation; and SmartDisk
Corporation ("Newco"), a Delaware company.
RECITALS
A. Smart Disk Security Corporation ("SDSC"), a Florida corporation, is
currently developing or producing certain products which include an SSFDC reader
and writer device known as Flashpath ("Flashpath"), a smart card reader and
writer known as Smarty ("Smarty"), and computer and a network security product
known as Safeboot ("Safeboot"). Collectively, Flashpath, Smarty, and SafeBoot
are referred to as "SDSC Products." SDSC is wholly owned by Limited.
B. Limited's Certificate of Formation is attached as Exhibit A.
C. Limited and Toshiba desire to establish a long-term business
relationship through Newco. Limited and Toshiba have agreed to establish and
operate Newco upon the terms and conditions herein. Newco will pursue full
research, development and marketing of Flashpath and Smarty upon execution of
this Agreement, and of the remaining SDSC Products as Newco shall determine
after the Closing Date. To this end and subject to the terms and conditions of
this Agreement and the Ancillary Agreements (defined below), Limited will
transfer all of the stock of SDSC to Newco, and Toshiba will contribute capital,
as well as production, engineering and marketing expertise, to Newco.
D. Simultaneously with the execution and delivery of this Agreement,
Newco is executing an Exchangeable Note ("Note") in favor of Toshiba in the
principal amount of $5,000,000 and delivering such Note upon receipt of
$5,000,000 from Toshiba. The Note is exchangeable for common stock of Newco.
E. Limited and Toshiba anticipate that after the initial funding of
Newco, Newco will sell additional shares of its common stock to new third party
investors. Newco, with Toshiba's assistance, will arrange the sale of such
shares to such entities as the parties may agree.
F. Limited and Toshiba intend that Newco shall become a publicly traded
corporation through an initial public offering of common stock ("IPO") within
twenty-four months after the date of this Agreement and that this Agreement
shall be modified to
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accommodate the IPO as set forth herein.
G. Both parties understand the importance of good communication
regardless of the nature or the magnitude of any issue in question, and both
parties will use every effort to act in good faith to expedite all
communications and approval procedures.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
ESTABLISHMENT OF JOINT VENTURE COMPANY;
ANCILLARY AGREEMENTS
1.1 OBJECT OF JOINT VENTURE. Limited and Toshiba hereby associate
themselves as stockholders in a joint venture relationship that shall have as
its principal purpose the expansion of sales worldwide of Flashpath and Smarty
upon the execution of this Agreement, and of the other SDSC Products as Newco
shall determine after the Closing Date. The parties shall pursue this joint
venture relationship through Newco, which will be formed and operated in
accordance with the terms of this Agreement. Subject to the specific terms of
this Agreement, it is intended that Newco will have its own employees,
facilities, equipment and banking arrangements, and that the pricing of its
products and its other policies will be such as to result in reasonable levels
of profitability of Newco as an independent enterprise.
1.2 FORMATION OF NEWCO. Newco is a Delaware corporation with its
principal place of business in Naples, Florida. The parties shall take all steps
necessary to revise Newco's certificate of incorporation and bylaws so as to
reflect the terms and conditions of this Agreement that are inconsistent with
the certificate of incorporation or bylaws or must be reflected in the the
certificate of incorporation or bylaws under Delaware law.
1.3 ANCILLARY AGREEMENTS; FISC; AFFILIATES. Attached to this Agreement
for execution on the Closing Date established under Article 8 below is the
Founders' Subscription Agreement (Exhibit B). The parties shall prepare for
execution on the Closing Date, in form mutually agreeable to Limited and
Toshiba, the Toshiba Technology License Agreement between Toshiba and Newco (the
"Toshiba Technology License Agreement") and the Registration Rights Agreement as
defined in section 7.3 below (collectively, the Founders' Subscription
Agreement, Toshiba Technology License Agreement, and Registration Rights
Agreement shall be referred to as the "Ancillary Agreements"). In this
Agreement, the term "FISC" refers to Xxxxxxx International Systems Corporation,
a Florida corporation controlled by Addison X. Xxxxxxx. For purposes of this
Agreement, "affiliates" means, with respect to an individual, corporation,
company, voluntary associations, partnership, joint venture, limited liability
company, trust, estate, unincorporated organization, governmental entity or
other entity ("person"), any other person which directly or indirectly controls,
is controlled by, or is under common control with such person; and "control"
means the possession, directly or indirectly, of
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the power to cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
1.4 BUSINESS PLAN. Toshiba has prepared a draft business plan for Newco
dated January 13, 1998 (Business Plan SDC-II A-2, Ref: 0013), and Limited has
prepared a draft business plan for Newco dated August 25, 1997. Toshiba and
Limited will use their best efforts to finalize a final joint business plan (the
"Business Plan") as soon as possible. The parties reasonably anticipate that
Newco's operations will track the Business Plan, but they also realize that
amendments to the Business Plan may be necessary from time to time. The parties
will cooperate in good faith to accomplish the same as necessary, subject to
section 3.4.1(o) below.
ARTICLE 2
CAPITALIZATION OF NEWCO
2.1 CAPITALIZATION AND CLASSES OF STOCK. The authorized capital of
Newco shall be represented by 60,000,000 shares of common stock ("Common
Stock"), each having a par value of $0.001. Prior to the IPO, Newco shall issue
no other classes of stock without Toshiba's approval. The stock shall have equal
rights in all respects.
2.2 SUBSCRIPTION FOR STOCK. Limited will transfer all of the issued and
outstanding shares of stock of SDSC to Newco in exchange for thirty million
shares of Common Stock of Newco, while Toshiba shall subscribe for and purchase
respectively the following number of shares of Common Stock on the following
terms and conditions:
2.2.1 TOSHIBA. Toshiba shall (i) purchase 4,950,000 shares of
Common Stock for a total price of Four Million Nine Hundred
Fifty Thousand Dollars ($4,950,000) payable at Closing, and
(ii) exchange the Note at Closing for 5,000,000 shares of
Common Stock.
2.2.2 INDEMNITY. Limited will defend, indemnify and hold
harmless Newco and Toshiba from all claims arising out of or
in connection with the operation of SDSC prior to the date
Limited contributes SDSC's shares to Newco. Limited hereby
indemnifies and agrees to defend and hold Toshiba, Newco and
Newco's affiliates, directors and officers, harmless from and
against any and all loss, liability, damage or expense
(including interest, penalties, and reasonable attorneys' fees
and disbursements)(collectively, the "Damages") based upon,
arising out of or otherwise in respect of (i) any breach or
inaccuracy of any representation or warranty in the Founders'
Subscription Agreement, (ii) any breach or failure to perform
any covenant or agreement in this Agreement, or (iii)
operation or business of SDSC, or the assets or business
transferred to SDSC, in each case as conducted or utilized
prior to the Closing Date, including, without limitation,
arising out or any liability or obligation to employees.
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2.3 NEW THIRD PARTY INVESTORS. The parties intend and agree that Newco
shall initially be a joint venture between Limited and Toshiba. Additional stock
may be sold to such other entities as the parties may agree. The parties
currently anticipate that Newco's stock may be sold to Hitachi, Ltd., at a price
ten percent (10%) or more than that paid by Toshiba under section 2.2.1 above
and that sales to subsequent investors may be at a price twenty percent (20%) or
more than that paid by Toshiba under section 2.2.1 above
2.4 RIGHT TO PURCHASE STOCK. If the parties should agree to cause Newco
to issue additional stock prior to the IPO (except in accordance with Article 5
below or Section 2.3 above), Limited and Toshiba shall have the right to
subscribe for any shares of stock whenever they may be issued in an amount
proportional to the stockholder's ownership interest in Newco immediately prior
to the issuance of such additional stock.
2.5 RESTRICTION ON TRANSFER OF STOCK. Prior to the IPO, neither party
shall have the right to transfer or encumber its stock ownership in Newco
without the other party's prior written consent. The stock certificates issued
by Newco shall bear a legend evidencing this transfer restriction.
2.6 CONTROL OF LIMITED. Notwithstanding anything herein to the
contrary, Xxxxxxx Xxxxxxx agrees to retain control of, and to maintain the
existence and good standing of, Limited.
2.7 POST-CLOSING INVOICES. Toshiba will prepare and submit to Newco
after the Closing Date accurate reports of costs that Toshiba has incurred for
services rendered to Newco prior to the Closing Date. Newco shall reimburse
Toshiba for such costs up to a maximum amount of $1,400,000.
2.8 NEWCO PAYMENT OF SDSC LIABILITIES. The parties acknowledge and
agree that SDSC has a total liability of $5,000,000 and that Newco will pay such
sum immediately after the Closing Date.
2.9 NEWCO REPAYMENT OF OPERATING EXPENSES. The parties acknowledge and
agree that Newco has been incurring operating expenses after January 1, 1998,
and before Toshiba's funding under the Note, which expenses have been covered by
short term operating loans from FISC and its affiliates and which will be repaid
by Newco as soon as possible.
2.10 NO OTHER COMMITMENTS. The parties agree that, except as set forth
in Section 2.2.1, neither Toshiba nor Limited is obligated or committed to
provide any funding or financing to Newco, whether in the form of cash payment,
the provision of guaranties, or otherwise.
ARTICLE 3
MANAGEMENT AND EMPLOYEES OF NEWCO
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3.1 BOARD OF DIRECTORS. The Board of Directors of Newco shall consist
of five (5) Directors, which number shall not be changed without the prior
written consent of Limited and Toshiba. Limited shall have the right to appoint
three (3) directors (the "Limited Directors"), and Toshiba shall have the right
to appoint two (2) directors (the "Toshiba Directors"). Toshiba shall be
entitled at any time and for any or no reason to designate any Toshiba Director
for removal, and Limited shall be entitled at any time and for any or no reason
to designate any Limited Director for removal. Limited and Toshiba agree that
they shall vote their stock acquired hereunder in a manner so as to maintain the
Board constituency described in this Section 3.1. In the event of any vacancy on
the Board of Directors, such vacancy shall be filled in a manner consistent with
this Section 3.1. The parties shall cause any committee of the Board of
Directors of Newco that has three or fewer members to have one Toshiba Director
as a member.
3.2 BOARD MEETINGS. Unless otherwise agreed to in writing by the
parties, the Board of Directors shall meet at least four times per year. To the
extent legally permitted, such meetings may be conducted by telephone.
Reasonable expenses of directors to attend meetings of the Board of Directors
shall be borne by Newco.
3.3 QUORUM OF THE BOARD OF DIRECTORS. The parties hereto agree that all
matters specified in Section 3.4.1 below shall be decided by the Board of
Directors at meetings having a quorum of at least four (4) members. Other
matters shall be decided by a majority vote at any meeting of the Board of
Directors where a majority of the directors are present.
3.4 RESPONSIBILITIES OF THE BOARD OF DIRECTORS; MATTERS FOR BOARD
APPROVAL. The Board of Directors of Newco shall manage the affairs of Newco in
accordance with the bylaws of Newco, applicable laws, and the following
provisions of this Agreement:
3.4.1 Except as provided in the Ancillary Agreements, the
following matters shall require the approval of at least four of the five
Directors:
(a) amending, modifying, granting any waiver with respect to,
terminating or extending any of the certificate of
incorporation or bylaws of Newco, the Ancillary Agreements or
this Agreement;
(b) except pursuant to the Ancillary Agreements and the
Business Plan, Newco or any of its affiliates entering into
any transaction, agreement or understanding with a stockholder
of Newco or any affiliate of such stockholder;
(c) prior to the IPO, declaring any dividend or making any
other distribution to the stockholders, or any repurchase or
redemption by Newco of its securities;
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(d) entering into any merger or consolidation in which Newco
or any material subsidiary is a constituent entity, acquiring
all or substantially all of the assets or securities of
another person (or a division or other business unit of
another person), selling, leasing, exchanging or otherwise
disposing of all or substantially all of the assets or
securities of Newco or any material subsidiary (or a division
or other business unit thereof), consummating any other
business combination, or liquidating, dissolving or winding up
Newco or any material subsidiary, in each case, whether in a
single transaction or a series of related transactions;
(e) except in the ordinary course of business selling,
leasing, exchanging or otherwise disposing of any property,
asset or business, whether in a single transactions or a
series of related transactions, with a value in excess of five
percent (5%) of Newco's annual gross revenues on a
consolidated basis;
(f) Newco or any subsidiary incorporating, forming or
otherwise organizing a subsidiary or any other person;
(g) Newco or any subsidiary commencing or settling any
litigation, arbitration or governmental proceeding which
relates to an amount in excess of five percent (5%) of Newco's
annual gross revenues or is reasonably likely to have a
material impact on Newco or its business;
(h) any material change in the business of Newco or any of its
material subsidiaries not contemplated in the Business Plan;
(i) any issuance or agreement to issue any securities of Newco
or any of its material subsidiaries or any securities or
rights of any kind convertible into or exchangeable for such
securities, or to issue any option, warrant, put, call or
other arrangement of any kind to purchase or otherwise receive
from Newco or such material subsidiary any securities, profit
share or interest, except pursuant to Article 5 (Stock Option
Plan) and Article 7 (IPO) below;
(j) except as contemplated in Articles 5 and 7 below, any
action in connection with the admission of any person as a
stockholder of Newco or any subsidiary, irrespective of
whether any securities or profit share of Newco or any of its
subsidiaries is issued in connection therewith;
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(k) except as contemplated in Articles 5 and 7 below, any
approval or disapproval of any sale or transfer by Newco or
any material subsidiary, as relevant, of any securities,
profit share or interest of Newco or any of its material
subsidiaries;
(l) except as contemplated in Article 7 below, any filing by
Newco of a registration statement under the Securities Act of
1933, as amended;
(m) except as contemplated in Article 5 below, the creation,
or material amendment or modification of an employee stock
option, stock retirement or stock severance plan; or any
issuance or grant of securities, options or interest
thereunder other than options to a director, employee or
consultant of Newco as contemplated by Article 5 below;
(n) electing or removing any of the Chairman, President, Chief
Executive Officer, Chief Operating Officer or Chief Financial
Officer, or any other employee or officer, irrespective of his
or her title, exercising authority similar to that customarily
exercised by any of the foregoing, of Newco or any material
subsidiary;
(o) adopting, or modifying or amending in any material
respect, any annual or long term budget or business plan of
Newco that differs materially from the Business Plan;
(p) except pursuant to the Business Plan, annual budget or
Ancillary Agreements, whether in a single transaction or a
series of related transactions, any of the following items
that exceed the amount of $1,000,000 during the first six
months after the Closing Date or exceed five percent (5%) of
Newco's annual gross revenues after such initial six-month
period: (i) entering into any transaction, agreement or
understanding with any person with a value in excess of the
stipulated amount; (ii) incurring any indebtedness, commitment
or liability for, or the issuance of any guarantee with
respect to, borrowed money in excess of the stipulated amount;
(iii) making any loans, investments or advances to any person
in excess of the stipulated amount; (iv) entering into,
amending, granting any waiver with respect to, terminating or
extending any agreement (or series of related agreements)
which (x) provides for (or, pursuant to its terms, could
reasonably be expected to result in) the payment or receipt by
Newco or a material subsidiary of an amount in excess of the
stipulated amount, (y) has a term in excess of one year, or
(z) provides for (or, pursuant to its terms, could reasonably
be expected to result in) payments to an employee or
consultant, or otherwise hires any employee or consultant, at
a rate in excess of $500,000 per annum; and (v) adopting or
amending any material compensation policies;
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(q) changing the fiscal year;
(r) appointing or changing Newco's independent certified
public accountants (it being agreed that Newco's initial
independent certified public accountants shall be selected
from one of the leading international accounting firms);
(s) adopting or changing any material accounting principles
not in accordance with GAAP;
(t) filing a voluntary petition in bankruptcy or for
reorganization or for the adoption of any plan or arrangement
with creditors or an admission seeking the relief therein
provided under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief
of debtors;
(u) selecting an investment bank for the IPO; provided, that
if the Board cannot agree on an investment bank, then by a
vote of a majority of a quorum the Board may appoint Xxxx
Xxxxx & Sons or any investment bank that is one of the top
five managers or co-managers of IPOs by number of transactions
in the United States in the prior calendar year; or
(v) entering into any options, contingent agreements or other
arrangements which if exercised or consummated in accordance
with their terms would result in an action set forth in
clauses (a) through (u) above.
3.5 MATTERS FOR SHAREHOLDER APPROVAL. The following matters shall
require the approval of seventy-nine point nine percent (79.9%) of Newco's
stockholders:
(a) The adoption, amendment or repeal of any article of the
Certificate of Incorporation or of the bylaws, except in connection with the IPO
as long as any changes are customary for a publicly traded company or are
recommended by Newco's underwriters for the IPO. Such changes in contemplation
of an IPO shall be approved as required by Delaware law.
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(b) A change in the name of Newco.
3.6 CERTAIN SDSC MATTERS. The parties shall cause SDSC to have a board
whose membership is identical to that of Newco. The parties agree that SDSC may
not undertake any of the actions similar to those referred to in Section 3.4.1
without the approval of four directors, including a Toshiba Director. The board
of directors of any subsidiaries of Newco shall be comprised in such manner as
Limited and Toshiba may agree from time to time.
3.7 FINANCIAL STATEMENTS AND ACCOUNTING RECORDS. Newco shall submit
financial statements, including, without limitation, a balance sheet and income
statement, to Limited and Toshiba within forty-five (45) days after the end of
each fiscal quarter for such quarter and within one hundred (100) days after the
end of the fiscal year for such year. Such quarterly and annual statements shall
be (i) prepared in accordance with U.S. generally accepted accounting principles
(GAAP); (ii) in reasonable detail and shall contain such financial data as the
parties may mutually agree are necessary in order to keep each of them advised
of Newco's financial status; and (iii) audited by Newco's independent certified
accountants in the case of the annual financial statements. During office hours
of Newco, Limited and Toshiba shall have full access to all books of account,
records and the like of Newco, and Newco shall furnish to each of Limited and
Toshiba all information concerning the same which such party may reasonably
require in connection with a complete examination thereof.
3.8 EMPLOYEES. Limited (and other entities controlled by Addison X.
Xxxxxxx) and Toshiba anticipate that they will either transfer or second certain
of their employees to Newco on either a permanent or temporary, full-time or
part-time basis. In Toshiba's case, such employees may render their services to
Newco from Toshiba's facilities in Japan. Both parties will discuss such matters
(including English language ability, experience, personality, salary level,
benefits, and participation in the stock option plan) in good faith on a case by
case basis so as to maximize the operating efficiency and profitability of
Newco.
ARTICLE 4
RESOLUTION OF DEADLOCKS
The parties shall diligently and in good faith discuss and try amicably
to resolve all disputes, controversies or differences that arise out of or in
relation to or in connection with this Agreement or the Ancillary Agreements at
meetings of the Board of Directors of the Newco. If Limited and Toshiba are
deadlocked on a particular dispute that requires both parties' approval, they
shall formally state their position in writing to the other party within thirty
(30) days after such deadlock arises, and within fifteen (15) days thereafter
the senior representative of Limited and of Toshiba shall meet in Honolulu,
Hawaii, or some other mutually agreeable location to discuss the matter in good
faith.
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ARTICLE 5
STOCK OPTION PLAN
Newco shall establish a stock option plan permitting the Board of
Directors to grant stock options to directors in their capacity as employees of
Newco, to outside directors, and to consultants and employees of Newco. No more
than 6,818,182 shares of the common stock of Newco (which is equivalent to 12%
of 56,818,182 shares of Common Stock) shall be allocated to the stock option
plan without the consent of four of Newco's directors.
ARTICLE 6
PATENT, TRADEMARK AND COPYRIGHT LICENSES
SmartDiskette Limited ("SDL"), an affiliate of Xxxxxxx Xxxxxxx, has
licensed certain technology to SDSC pursuant to a certain Technology License
Agreement, and Toshiba shall license certain technology to Newco pursuant to the
Toshiba Technology License Agreement. To the extent required by applicable law,
Newco and SDSC shall withhold U.S. income tax from royalty payments. Toshiba
shall timely provide to Newco the IRS form 1001 so that royalty payments to
Toshiba may qualify for the reduced withholding tax rate under the U.S.-Japan
tax treaty.
ARTICLE 7
INITIAL PUBLIC OFFERING
7.1 INITIAL PUBLIC OFFERING. The parties acknowledge and agree that
their goal is for Newco to become a publicly traded corporation by means of an
initial public offering ("IPO") to be conducted within twenty-four months after
the date of this Agreement or such other date thereafter as the parties may
agree pursuant to Section 7.2 below. Newco shall use its best efforts,
consistent with its reasonable business judgment based on prevailing market
conditions, to raise additional equity capital on terms acceptable to Newco
through a public offering of common stock. The IPO shall be for an amount of
equity representing an economic and voting interest of not less than 10% and not
more than such upper limit as Newco's underwriters may determine based upon
consultation with Newco.
7.2 COOPERATION OF LIMITED AND TOSHIBA. Without limiting Section
3.4.1(u) above, Limited shall consult with Toshiba regarding the appointment of
any investment bank for the IPO. Newco, Limited and Toshiba agree to consider in
good faith the reasonable advice of such investment bank in determining the
timing and size of the IPO.
7.3 REGISTRATION RIGHTS AGREEMENT. The parties shall separately agree
upon a registration rights agreement (the "Registration Rights Agreement") with
customary terms and conditions granting Limited and Toshiba registration rights
with regard to their common stock
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ownership in Newco.
7.4 REVISION OF JOINT VENTURE. In connection with the IPO, the parties
agree that the Recitals, Sections 1.2, 2.1, 2.3, 2.4, 2.5, 2.6 Article 3 in its
entirety, and Article 5 shall terminate upon the effectiveness of Newco's
registration statement filed with the SEC.
7.5 TOSHIBA PUT OPTION. If the IPO has not occurred within twenty-four
months of the Effective Date or such other date as the parties may agree in a
writing signed by Limited and Toshiba pursuant to Section 7.2 above, Toshiba may
cause Newco to purchase all of Toshiba's stockholdings in Newco (that is, the
9,950,000 shares of Common Stock acquired hereunder) for the sum of $9,950,000
plus four percent (4%) simple interest per year from the date payment for the
stock was made to Newco by Toshiba in respect of $4,950,000 and the date of this
Agreement in respect of the other remaining $5,000,000. Toshiba's right to put
its shares to Newco shall arise on the second anniversary of the Effective Date
or such other date thereafter as the parties may agree in a writing signed by
Limited and Toshiba pursuant to Section 7.2 above and shall expire 90 days
thereafter. Toshiba shall exercise its right by giving written notice to Newco
within the 90 days.
ARTICLE 8
CLOSING
8.1 CLOSING DATE. The execution of this Agreement shall occur on
February ___, 1998, or such other date as Limited and Toshiba may mutually
agree, and the closing ("Closing Date") shall occur upon the receipt of the
notification specified in section 8.3.3 below.
8.2 CONDITIONS PRECEDENT TO THE CLOSING. All of the obligations of both
Toshiba and Limited hereunder are subject to satisfaction of each of the
following conditions, any or all of which may be waived, in whole or in part, by
the adversely affected party prior to or at the Closing Date:
8.2.1 THIRD-PARTY CONSENTS. The third-party consents described
in Section 8.3 shall have been delivered to Toshiba or
Limited, as the case may be.
8.2.2 NO SUITS, PROCEEDINGS. No suit, action, investigation,
inquiry or proceeding by any person or by any governmental
body, or other legal or administrative proceeding shall have
been instituted or threatened which questions the validity or
legality of the transactions contemplated hereby.
8.2.3 ANCILLARY AGREEMENTS. The Ancillary Agreements shall
have been finalized and ready for execution on the Closing
Date.
8.2.4 REPRESENTATIONS AND COVENANTS. With respect to Toshiba,
the representations and warranties of Limited and Newco
contained in the Founders'
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Subscription Agreement shall be true in all material respects
on and as of the Closing Date with the same force and effect
as though made as of the Closing Date. With respect to
Limited, the representations and warranties of Toshiba
contained in the Founders' Subscription Agreement shall be
true in all material respects on and as of the Closing Date
with the same force and effect as though made as of the
Closing Date. Limited and Newco shall have performed and
complied with all covenants and agreements required by this
Agreement to be performed or complied with on or prior to the
Closing Date.
8.3 THIRD-PARTY CONSENTS. As soon as reasonably possible after this
Agreement has been signed by Limited, Newco and Toshiba, they shall take all
reasonable steps to obtain the requisite approvals, validations, rulings and
consents provided for in this Agreement or made necessary hereby, including
without limitation:
8.3.1 To the extent mandated by applicable law, the Toshiba
Technology License Agreement shall have been approved and
validated by necessary and appropriate agencies of the
Japanese Government.
8.3.2 The Ministry of Finance, or such bank as it may appoint
from time to time, has given any necessary approval for
Toshiba's investment in Newco.
8.3.3 The parties shall have been informed by competent
governmental authorities that, in connection with the
transactions contemplated hereby, no investigation will be
initiated under the Trade Act of 1988 and the rules and
regulations thereunder or, if such investigation is initiated,
that the President of the United States would take no action
to suspend or prohibit such transactions.
8.3.4 All consents with respect to the transfer of the stock
of SDSC shall have been obtained.
With respect to the conditions described above, each party shall use its best
efforts to assist the other parties in filing all notices, applications and
registrations and obtaining all rulings and approvals required by Japanese or
U.S. law to satisfy and comply with said conditions and to inform the other
party of any information required by any government or any administrative
agencies thereof regarding such conditions.
8.4 ACTIONS AT CLOSING; PLACE OF CLOSING. The following actions shall
take place on the Closing Date:
8.4.1 EXECUTION OF ANCILLARY AGREEMENTS. Limited, Toshiba and Newco, as
appropriate, shall execute the Ancillary Agreements.
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8.4.2 TOSHIBA PAYMENT. Toshiba shall tender to Newco the initial
payment of $4,950,000.
8.4.3 EXCHANGE OF NOTE. Toshiba shall cancel the Note and deliver it to
Newco in exchange for Common Stock.
8.4.4 ISSUANCE OF STOCK TO TOSHIBA. Newco shall issue 9,950,000 shares
of Common Stock to Toshiba.
8.4.4 ISSUANCE OF STOCK TO LIMITED. Newco shall issue 30,000,000 shares
of Common Stock to Limited.
The closing shall occur at such location as the parties may mutually agree.
ARTICLE 9
GENERAL PROVISIONS
9.1 NOTICES AND OTHER COMMUNICATIONS. All notices shall be in writing
and delivered by (a) mail, postage prepaid, and either return receipt requested
or certified, (b) personal delivery, or (c) facsimile with confirmation under
either (a) or (b), to such party at the address set forth below, or at such
other address as such party may supply by written notice. Notice shall be
effective on the date it is delivered to the intended recipient to the address
set forth below:
TO: Phoenix House Investments, L.L.C.
c/x Xxxxxxx International Systems Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000-0000
Attention: President
Facsimile: (000) 000-0000
TO: Xx. Xxxxxxx X. Xxxxxxx
c/x Xxxxxxx International Systems Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
TO: SmartDisk Corporation
c/x Xxxxxxx International Systems Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
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with copies to:
Xxxxxxx International Systems Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000-0000
Attention: President
Facsimile: (000) 000-0000
and
Brand Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
TO: Toshiba Corporation
Advanced-I Group
1-1 Shibaura 1-chome
Xxxxxx-xx, Xxxxx 000-00
Xxxxx
Attention: Senior Executive Vice President
with copies to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
9.2 LAW TO GOVERN. All questions and disputes arising out of or in
connection with this Agreement shall be governed by the substantive laws of the
State of Delaware excluding its choice of law principles. THE PARTIES HEREBY
EXCLUDE THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF
GOODS FROM THIS AGREEMENT.
9.3 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement should be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of
15
such provision or the remaining provisions of this Agreement.
9.4 ASSIGNMENT AND SUCCESSION. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, but shall not be assignable by any party other than to a
person or entity acquiring substantially all of its business and assuming all of
its obligations and liabilities, except with the written consent of all of the
other parties.
9.5 ENTIRE AGREEMENT; AMENDMENTS. The terms and conditions contained in
this Agreement and Ancillary Agreements constitute the entire agreement between
the parties hereto and shall supersede all previous communications, either oral
or written, between the parties. No agreement or understanding varying or
extending the same shall be binding upon any party hereto unless in writing
signed by a duly authorized officer or representative thereof in which this
Agreement is expressly referred to. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written agreement signed by Toshiba, Limited and Newco. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that any party
may otherwise have at law or in equity.
9.6 NO PARTNERSHIP. This Agreement shall not create and shall not be
deemed to create a partnership between or among any of the parties hereto.
9.7 FOREIGN RESHIPMENT LIABILITY. THIS AGREEMENT IS EXPRESSLY MADE
SUBJECT TO ANY LAWS, REGULATIONS, ORDERS OR OTHER RESTRICTIONS ON THE EXPORT
FROM THE UNITED STATES OF AMERICA OR JAPAN OF TECHNICAL INFORMATION OR PRODUCTS
WHICH MAY BE IMPOSED FROM TIME TO TIME BY THE GOVERNMENTS OF THE UNITED STATES
OF AMERICA OR JAPAN. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, NEWCO SHALL NOT EXPORT OR REEXPORT, DIRECTLY OR INDIRECTLY, ANY
TECHNICAL INFORMATION OR SDSC PRODUCTS TO ANY COUNTRY OR DESTINATION OR PERMIT
THEIR TRANSHIPMENT TO ANY COUNTRY OR DESTINATION FOR WHICH SUCH GOVERNMENTS OR
ANY AGENCY THEREOF REQUIRES AN EXPORT LICENSE OR OTHER GOVERNMENTAL APPROVAL AT
THE TIME OF EXPORT WITHOUT FIRST OBTAINING SUCH LICENSE OR APPROVAL. LIMITED,
NEWCO AND TOSHIBA SHALL COOPERATE TO OBTAIN ALL SUCH LICENSES AND APPROVALS AS
ARE NECESSARY TO IMPLEMENT THE BUSINESS PLAN.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of
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which together shall constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
signatories.
IN WITNESS WHEREOF, LIMITED AND TOSHIBA ACKNOWLEDGE THEY HAVE EACH READ
THIS AGREEMENT AND HAVE FULLY UNDERSTOOD THE PROVISIONS OF THE AGREEMENT.
THEREFORE, the parties hereto have caused this instrument to be
executed by their duly authorized and empowered officers and representatives as
of the day and year first above written.
PHOENIX HOUSE INVESTMENTS, L.L.C.
By: /s/ ADDISON X. XXXXXXX
------------------------------
Xxxxxxx Xxxxxxx, President
TOSHIBA CORPORATION
By: /s/ X. XXXX
------------------------------
X. Xxxx, Senior Executive Vice President
SMARTDISK CORPORATION
By: /s/ XXXXXXX X. XXXXXXXXX
------------------------------
ADDISON X. XXXXXXX,
with respect to section 2.6 of this Agreement only
/s/ ADDISON X. XXXXXXX
-----------------------------------
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