EXHIBIT 10.1
STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MANAGEDSTORAGE INTERNATIONAL, INC.
AND
FRONT PORCH DIGITAL INC.
Dated as of July 31, 2002
TABLE OF CONTENTS
PAGE
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RECITALS......................................................................1
ARTICLE I PURCHASE AND SALE OF THE SUBSIDIARY SHARES, THE SELLER SOFTWARE,
THE OTHER SOFTWARE AND THE SELLER TRADEMARKS............................1
SECTION 1.1. PURCHASE AND SALE OF THE SUBSIDIARY SHARES................1
SECTION 1.2. PURCHASE AND SALE OF THE SELLER SOFTWARE, THE OTHER
SOFTWARE AND SELLER TRADEMARKS............................1
SECTION 1.3. CONSIDERATION.............................................2
SECTION 1.4. LOCK-UP AGREEMENT.........................................3
SECTION 1.5. REGISTRATION RIGHTS.......................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER...........................3
SECTION 2.1. ORGANIZATION; AUTHORITY; BINDING AGREEMENT................3
SECTION 2.2. NO CONFLICT; FILINGS AND CONSENT..........................4
SECTION 2.3. SELLER SOFTWARE...........................................4
SECTION 2.4. ORGANIZATION AND QUALIFICATION; ORGANIZATIONAL
DOCUMENTS; BOOKS AND RECORDS..............................6
SECTION 2.5. CAPITALIZATION; OWNERSHIP OF SHARES;
SUBSIDIARIES..............................................6
SECTION 2.6. GOOD TITLE TO SUBSIDIARIES SHARES.........................7
SECTION 2.7. FINANCIAL STATEMENTS......................................7
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS......................7
SECTION 2.9. ACCOUNTS RECEIVABLE; PAYABLES.............................7
SECTION 2.10. OWNERSHIP OF THE ASSETS...................................8
SECTION 2.11. CONTRACTS.................................................8
SECTION 2.12. LITIGATION................................................9
SECTION 2.13. COMPLIANCE WITH LAWS......................................9
SECTION 2.14. TAXES AND ASSESSMENTS.....................................9
SECTION 2.15. EMPLOYMENT MATTERS.......................................11
SECTION 2.16. TRANSACTIONS WITH RELATED PARTIES........................11
SECTION 2.17. BROKERS..................................................11
SECTION 2.18. HSR......................................................11
SECTION 2.19. ENVIRONMENTAL MATTERS....................................11
SECTION 2.20. INVESTMENT IN PURCHASER COMMON STOCK.....................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................12
SECTION 3.1. ORGANIZATION AND QUALIFICATION...........................12
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS..................12
SECTION 3.3. AUTHORITY................................................12
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...............13
SECTION 3.5. CAPITALIZATION...........................................13
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SECTION 3.6. ISSUANCE OF PURCHASER STOCK..............................13
SECTION 3.7. SEC FILINGS..............................................14
SECTION 3.8. FINANCIAL STATEMENTS.....................................14
SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS.....................14
SECTION 3.10. INTELLECTUAL PROPERTY....................................14
SECTION 3.11. AGREEMENTS...............................................15
SECTION 3.12. LITIGATION...............................................15
SECTION 3.13. COMPLIANCE WITH LAWS.....................................15
SECTION 3.14. TAXES AND ASSESSMENTS....................................15
SECTION 3.15. BROKERS..................................................16
SECTION 3.16. HSR......................................................16
SECTION 3.17. ENVIRONMENTAL MATTERS....................................16
ARTICLE IV COVENANTS.........................................................16
SECTION 4.1. APPOINTMENT OF DIRECTORS.................................16
SECTION 4.2. TAX FILING AND COOPERATION PROVISIONS....................17
SECTION 4.3. CONSIDERATION ALLOCATION.................................18
SECTION 4.4. REVENUES ................................................18
SECTION 4.5. CERTAIN TERMINATION COSTS................................19
SECTION 4.6. GUARANTY.................................................19
SECTION 4.7. INCREASE IN AUTHORIZED CAPITAL STOCK.....................19
SECTION 4.8. CONVERSION OF CERTAIN DEBT TO EQUITY.....................19
ARTICLE V CLOSING DELIVERIES.................................................19
SECTION 5.1. DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER...........20
SECTION 5.2. DOCUMENTS TO BE DELIVERED AT CLOSING BY PURCHASER........20
ARTICLE VI INDEMNIFICATION; ARBITRATION.....................................21
SECTION 6.1. INDEMNIFICATION..........................................21
SECTION 6.2. ARBITRATION..............................................22
ARTICLE VII MISCELLANEOUS AND GENERAL........................................23
SECTION 7.1. EXPENSES.................................................23
SECTION 7.2. PRESS RELEASES...........................................23
SECTION 7.3. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC..........23
SECTION 7.4. ASSIGNMENT AND BINDING EFFECT............................24
SECTION 7.5. DEFINITIONS..............................................24
SECTION 7.6. NOTICES..................................................26
SECTION 7.7. AMENDMENT................................................27
SECTION 7.8. GOVERNING LAW............................................27
SECTION 7.9. NO BENEFIT TO OTHERS.....................................27
SECTION 7.10. SEVERABILITY.............................................28
SECTION 7.11. SECTION HEADINGS.........................................28
SECTION 7.12. SCHEDULES AND EXHIBITS...................................28
SECTION 7.13. COUNTERPARTS.............................................28
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STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT (this "Agreement") dated as of July
31, 2002, by and between MANAGEDSTORAGE INTERNATIONAL, INC., a Delaware
corporation ("Seller"), and FRONT PORCH DIGITAL INC., a Nevada corporation
("Purchaser").
RECITALS
WHEREAS, Seller owns all of the outstanding shares of capital stock
(the "Subsidiary Shares") of ManagedStorage International France, a French
SOCIETE PAR ACTIONS SIMPLIFIEE (the "Company");
WHEREAS, Seller intends to sell, and the Purchaser intends to purchase,
the Subsidiary Shares;
WHEREAS, Seller owns that certain Software as more particularly
described on EXHIBIT A-1 hereto (the "Seller Software") and EXHIBIT A-2 hereto
(the "Other Software") and the trademarks listed on EXHIBIT B hereto (the
"Seller Trademarks"), and is a party to that certain Software License Agreement
(the "StorageTek Agreement") dated March 29, 2000 between Seller and Storage
Technology Corporation ("StorageTek") and the US Reseller Agreements (as
hereinafter defined);
WHEREAS, Seller intends to sell, and Purchaser intends to purchase, the
Seller Software, the Other Software and the Seller Trademarks and Seller intends
to assign, and Purchaser intends to assume, the StorageTek Agreement and the US
Reseller Agreements;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
ARTICLE I
PURCHASE AND SALE OF THE SUBSIDIARY SHARES, THE SELLER SOFTWARE, THE OTHER
SOFTWARE AND THE SELLER TRADEMARKS
SECTION 1.1. PURCHASE AND SALE OF THE SUBSIDIARY SHARES. Upon the terms
and subject to the conditions of this Agreement, at the Closing (defined in
Section 7.5), Seller agrees to sell, convey, assign and transfer to Purchaser,
and Purchaser agrees to purchase, the Subsidiary Shares, free and clear of all
Encumbrances (as defined in Section 7.5 hereof).
SECTION 1.2. PURCHASE AND SALE OF THE SELLER SOFTWARE, THE OTHER
SOFTWARE AND SELLER TRADEMARKS. Upon the terms and subject to the conditions of
this Agreement, at the Closing, Seller agrees to sell, convey, assign, transfer
and deliver to Purchaser, and Purchaser agrees to purchase, the Seller
Trademarks, the Seller Software, and the Other Software, in each case, free and
clear of all Encumbrances other than the rights granted under the StorageTek
Agreement, the agreements set forth on SCHEDULE 1.2(A) (the "Reseller
Agreements" and the last two agreements listed thereon referred to herein as the
"US Reseller Agreements") and the agreements set forth on SCHEDULE 1.2(B) (the
"End-User Contracts") and the terms of the Oracle Partner Agreement dated
February 4, 2002 between Oracle France SAS and the Company (the "Oracle
Agreement") and the License Agreement dated September 10, 1999 between Merger
Technologies, Inc. and StorageTek, as amended and assigned to the Company by
that certain letter agreement dated July 5, 2000 (as amended, the Merge
Agreement").
SECTION 1.3. CONSIDERATION.
(a) INITIAL CONSIDERATION. Upon the terms and subject to the
conditions of this Agreement, in consideration of the sale, conveyance,
assignment and transfer of the Subsidiary Shares, the Seller Software, the Other
Software and the Seller Trademarks to Purchaser, at the Closing, Purchaser
agrees to (i) issue and deliver to Seller 5,000,000 shares of common stock, par
value $.001 per share, of Purchaser (the "Purchaser Common Stock"); (ii) issue
and deliver to Seller a warrant in the form attached hereto as EXHIBIT C for the
purchase of 1,750,000 shares of Purchaser Common Stock at a price of $2.00 per
share, exercisable immediately and expiring on July 31, 2012; and (iii) issue
and deliver to Seller a warrant in the form attached hereto as EXHIBIT D for the
purchase of 1,750,000 shares of Purchaser Common Stock at a price of $4.00 per
share, exercisable immediately and expiring on July 31, 2012 (the warrants
described in clauses (ii) and (iii) are collectively referred to herein as the
"Warrants").
(b) EARN-OUT. Purchaser agrees to issue and deliver Additional
Shares (as hereinafter defined) to Seller upon the terms and subject to the
conditions of this Section 1.3(b). As used herein, "Additional Shares" means
such number of shares of Purchaser Common Stock equal to (x) 2,500,000 if,
during the period from the date hereof through December 31, 2002 (the "Earn-Out
Period"), Revenues (as hereinafter defined) equal or exceed US$1,000,000 or (y)
2,500,000 multiplied by (Revenues/US$1,000,000) if, during the Earn-Out Period,
Revenues are less than US$1,000,000. As used herein, "Revenues" means that
portion of the gross revenue of Purchaser and the Company (or any successor
entities or the resultant entity if such entities are combined) or of any
assignee, transferee, licensee, or purchaser of the Seller Software or Other
Software, determined in accordance with US or French generally accepted
accounting principles ("GAAP"), as applicable, applied on a consistent basis, in
each case attributable to the Seller Software or Other Software, software
development related to the Seller Software or Seller Software and hardware sales
related to the Seller Software or Other Software, including any amounts that
become due during the Earn-Out Period from customers existing prior to the
Earn-Out Period (regardless of whether such amounts are billed and/or collected
during the Earn-Out Period or at any other time) and, with respect to any
agreement (whether written or otherwise) entered into during the Earn-Out
Period, any amounts to be received thereunder (regardless of whether such
amounts are billed and/or collected during the Earn-Out Period or at any other
time) over the life of such agreement (for example, if an agreement entered into
on August 1, 2002 provides for a monthly payment to the Company of US$5000 for
12 months, US$60,000 would be included in Revenues in connection with such
agreement). Purchaser shall prepare a monthly report (each a "Report") of the
Revenues for each month during the Earn-Out Period and deliver it to Seller
within 30 days following the last day of each month during the Earn-Out Period.
Purchaser shall, and shall cause the Company or any successor or combined
entity, to act in good faith and use its commercially reasonable efforts to (i)
satisfy all obligations under any
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agreements giving rise to Revenues that are in existence at the commencement of
the Earn-Out Period and (ii) enter into agreements giving rise to Revenues
during the Earn-Out Period and in no event delay entry into any such agreements
to circumvent the obligation to issue Additional Shares to Seller hereunder.
Purchaser shall give Seller and its representatives full access at all
reasonable times to the books and records of Purchaser and the Company
(including accountants' work papers) relating to the Seller Software or Other
Software in order to verify the Revenues. Within 30 days (the "Response Period")
following the receipt of the Report for December 2002 (the "December Report"),
which report shall specify the total Revenues for the Earn-Out Period and the
number of Additional Shares to be issued to Seller, Seller shall notify
Purchaser in writing of any dispute regarding the December Report, the Revenues
and/or the Additional Shares, which notice shall set forth in reasonable detail
the basis for such dispute. If Seller fails to notify Purchaser of any such
dispute during the Response Period, the December Report and the Revenues and the
Additional Shares set forth therein shall be deemed to be accepted by Seller and
Purchaser shall issue the number of Additional Shares specified in the December
Report within ten Business Days after the expiration of the Response Period. In
the event that Seller notifies Purchaser of a dispute during the Response
Period, Purchaser shall issue the Additional Shares specified in the December
Report within ten Business Days after receipt of such notice and Purchaser and
Seller shall cooperate in good faith to resolve the dispute as promptly as
possible. If Seller and Purchaser are unable to resolve the dispute within 15
Business Days of Seller's delivery of the notice of dispute, then the dispute
shall be submitted to an arbitration pursuant to Section 6.2 hereof.
SECTION 1.4. LOCK-UP AGREEMENT. At the Closing, Seller and Purchaser
shall enter into a Lock-Up Agreement in the form attached hereto as EXHIBIT E
(the "Lock-Up Agreement").
SECTION 1.5. REGISTRATION RIGHTS. At the Closing, Seller and Purchaser
shall enter into the Registration Rights Agreement attached hereto as EXHIBIT F
(the "Registration Rights Agreement").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that the following
representations and warranties are true and correct as of the date hereof:
SECTION 2.1. ORGANIZATION; AUTHORITY; BINDING AGREEMENT. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The execution and delivery of this Agreement and the
Seller Ancillary Documents (as defined in Section 5.1 hereof) by Seller and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate and stockholder
action and no other corporate proceedings on the part of Seller are necessary to
authorize this Agreement or the Seller Ancillary Documents or to consummate the
transactions contemplated hereby or thereby. Each of this Agreement and the
Seller Ancillary Documents has been duly executed and delivered by Seller and,
assuming the due authorization, execution and delivery by Purchaser, constitutes
a legal, valid and binding obligation of Seller, enforceable in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to
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or affecting creditors' rights generally and by the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or law).
SECTION 2.2. NO CONFLICT; FILINGS AND CONSENTS. The execution and
delivery of this Agreement and the Seller Ancillary Documents by Seller does
not, and the performance by Seller of its obligations under this Agreement and
the Seller Ancillary Documents will not, (i) conflict with or violate the
certificate of incorporation of Seller or the bylaws of Seller or the equivalent
organizational documents of the Company, (ii) conflict with or violate any Law
(as defined in Section 7.5 hereof) applicable to Seller or the Company or their
respective Assets (as defined in Section 7.5 hereof) in any material respect, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Seller or the Company is a party or by
which Seller or the Company is bound or by which any of their respective Assets
is subject except, with respect to clause (iii), for such breaches or defaults
that, either individually or in the aggregate, would not have a Material Adverse
Effect (as defined in Section 7.5 hereof) on Seller or the Company or create or
perfect any Lien or otherwise have any effect on Purchaser's use of or ownership
interest in, the Seller Software or Other Software. The execution and delivery
of this Agreement and the Seller Ancillary Documents by Seller does not, and the
performance of this Agreement and the Seller Ancillary Documents by Seller will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Entity (as defined in Section 7.5 hereof)
by Seller or the Company.
SECTION 2.3. SELLER SOFTWARE.
(a) Except for the Oracle Software (as defined in SCHEDULE
2.3(D)) and the Merge Software (as defined in SCHEDULE 2.3(D), the Company does
not own or license any Intellectual Property other than pursuant to its license
to the Seller Software and the Other Software. The Company's license to the
Seller Software and the Other Software shall be terminated as of the Closing.
Except for the Oracle Software and the Merger Software, the Seller Software and
the Other Software is the only Software currently sold, licensed or marketed by
the Company in the operation of its Business.
(b) The Seller owns all right, title and interest in and with
respect to the Seller Software and any Intellectual Property of which Seller and
Company are aware that covers or is embodied by the Seller Software, free and
clear of any Encumbrances other than the rights granted under the StorageTek
Agreement, the Reseller Agreements and the End-User Contracts and the terms of
the Oracle Agreement and the Merge Agreement and no royalties or other payments
are due to any Person or entity with respect thereof.
(c) With respect to the Seller Software (i) the Seller has
made available to the Purchaser true and complete copies of all Software
Documentation with respect thereto, (ii) the Software Documentation includes the
source code, system documentation, statements of principles of operation, and
schematics for all Seller Software, as well as any pertinent commentary or
explanation that may be necessary to render such materials understandable and
usable by a trained computer programmer and to support all current and prior
releases of the Seller Software; (iii) the Software Documentation also includes
any program (including
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compilers), "workbenches," tools, and higher level (or "proprietary") languages
used for the maintenance and implementation of the Seller Software; and (iv) the
Seller Software performs in all material respects in accordance with the
specifications for the most recent release of the Seller Software.
(d) Except as set forth on SCHEDULE 2.3(D), Seller is not a
party to any third party licenses pursuant to which a Person has granted to
Seller a right to use any Intellectual Property in connection with the Seller
Software.
(e) Seller has filed a Trademark application with the United
States Patent and Trademark Office on April 30, 2002 (number 76402613) (the
"Trademark Application") but has no other pending applications for or
registrations or grants of Copyrights, Trademarks or Patents used in connection
with the Seller Software. All statements and representations made by Seller with
respect to the Trademark Application were true in all material respects as of
the time they were made.
(f) Neither the Company nor the Seller has granted,
transferred or assigned to any Person any right or interest in, and no third
party has the right to use or exploit, or to Seller's Knowledge is using or
exploiting, any of, the Seller Software or the Software Documentation, except
pursuant to a valid and enforceable contract with the Company or the Seller
which has been disclosed to the Purchaser.
(g) Except as set forth on SCHEDULE 2.3(G), there are no
contracts with respect to the marketing, distribution, licensing, or promotion
of the Seller Software or any Software Documentation related to the Seller
Software by any independent salesperson, distributor, sublicensor, or other
remarketer or sales organization.
(h) Seller has taken commercially reasonable actions to
protect against the existence of (A) any protective, encryption, security or
lock-out devices which might in any way interrupt, discontinue or otherwise
adversely affect the Seller Software or the Purchaser's use thereof; and (B) any
so-called computer viruses, worms, trap or back doors, trojan horses or any
other instructions, codes, programs, data or materials which could improperly or
wrongfully interfere with the operation or use of the Seller Software.
(i) Seller has taken all actions which a reasonably prudent
person would take to maintain the source code of the Seller Software as
confidential and proprietary, to protect against the loss, theft or unauthorized
use of such source code, and to protect and preserve the confidentiality of the
Trade Secrets of Seller relating to the Seller Software. To the Knowledge of
Seller, no third party, other than StorageTek, possesses a copy of the source
code for the Seller Sofware.
(j) To the Knowledge of Seller, there is no misappropriation,
misuse or infringement of the Seller Software by any third party. To the
Knowledge of Seller, the use by Seller of the Seller Software in the conduct of
its business as currently conducted does not infringe any Intellectual Property
rights of any third party. There is no claim, suit, action or proceeding pending
or, to Seller's Knowledge, threatened against Seller related to the Seller
Software (i) alleging any infringement of any third party's Intellectual
Property rights or (ii)
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challenging the ownership, use, validity or enforceability of the Seller
Software. Seller has not entered into any consent, indemnification, forbearance
to xxx or settlement agreement with any Person relating to the Seller Software
or the Intellectual Property of any third party.
(k) To the extent developed by Seller's employees, agents,
consultants, free-xxxxx workers and independent contractors, all right, title
and interest in the Seller Software, and any updates, upgrades or other
modifications thereto, and any Intellectual Property covering or embodied by the
Seller Software or such updates, upgrades or other modifications, has been
transferred to Seller either by operation of law or pursuant to a valid and
binding written agreement between Seller and such employee, agent, consultant,
free-xxxxx worker or contractor.
(l) THE SELLER SOFTWARE IS PROVIDED "AS IS" AND, EXCEPT AS
PROVIDED IN THIS SECTION 2.3, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE SELLER SOFTWARE OR THE USE THEREOF WHETHER
ARISING FROM COURSE OF DEALING, USAGE OR TRADE OR STATUTORY PROVISIONS. SELLER
HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT.
SECTION 2.4. ORGANIZATION AND QUALIFICATION; ORGANIZATIONAL DOCUMENTS;
BOOKS AND RECORDS. The Company is an entity duly organized, validly existing and
in good standing under the laws of France. The Company has the requisite power
and authority to carry on its business as now being conducted and to own or hold
under lease and operate its Assets. The Company is duly qualified to conduct its
business, and is in good standing, in each jurisdiction in which the ownership
or leasing of its Assets or the nature of its activities in connection with the
conduct of its business makes such qualification necessary except where the
failure to be so qualified and in good standing would not have a Material
Adverse Effect on the Company. Seller has previously made available to Purchaser
complete and correct copies of the Company's organizational documents, as
amended to date (the "Company Charter Documents"). Such Company Charter
Documents are in full force and effect. The minute books of the Company, which
have been made available to Purchaser, are complete and correct in all material
respects.
SECTION 2.5. CAPITALIZATION; OWNERSHIP OF SHARES; SUBSIDIARIES. The
authorized and outstanding capital stock of the Company consists of 15, 816,989
shares (the "Outstanding Shares"), which constitutes the "Subsidiary Shares."
All of the Subsidiary Shares are owned of record by Seller. There are no
outstanding options, warrants or other rights, or any agreements, arrangements
or commitments of any character relating to the issued or unissued capital stock
of the Company, or any obligation of the Company to issue or sell any shares of
capital stock of, or other equity interests in, the Company, including any
securities directly or indirectly convertible into or exercisable or
exchangeable for any capital stock or other equity securities of the Company.
The Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) on any matter. There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or make any investment (in the form of a
loan, capital contribution or otherwise) in any other Person. All of the shares
of capital stock of the Company, have been duly authorized and validly issued in
accordance with applicable laws and are fully paid and non-assessable and not
subject to
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preemptive rights. No shares of the capital stock of the Company have been
reserved for any purpose. The Company has no Subsidiaries or any equity interest
in any Person.
SECTION 2.6. GOOD TITLE TO SUBSIDIARY SHARES. The stock transfer form
to be executed and delivered by Seller to Purchaser pursuant to Section 5.1(a)
hereof will be a valid and binding obligation of the Seller, enforceable in
accordance with its terms, and will effectively vest in Purchaser good, valid
and marketable title to the Subsidiary Shares to be transferred to Purchaser
pursuant to this Agreement, free and clear of all Encumbrances.
SECTION 2.7. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 2.7 are
the unaudited financial statements of the Company for the fiscal years ended
December 31, 2000 and December 31, 2001 and the fiscal quarter ended March 31,
2002 (collectively, the "Seller Financial Statements"). The Seller Financial
Statements present fairly, in all material respects, the financial condition of
the Company for the respective periods indicated and have been prepared in
accordance with French GAAP applied on a consistent basis.
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
on SCHEDULE 2.8, since March 31, 2002, there has not been: (a) any occurrence
which has had or would reasonably be expected to have a Material Adverse Effect
on the Company; (b) any damage, destruction or loss (whether or not covered by
insurance) in excess of $25,000 in the aggregate; (c) any forgiveness or
cancellation of debts or claims owed to, or by, the Company in excess of $25,000
in the aggregate, or termination, abandonment or waiver of any material rights,
(d) any increase in the compensation or benefits payable or to become payable by
the Company to any employees of the Company; (e) any discharge or satisfaction
of any Encumbrance or payment of any liability or obligation by the Company
other than current liabilities in the Ordinary Course of Business (as defined in
Section 7.5 hereof) or Encumbrances that are not material, (f) any dividend or
distribution in respect of, or any redemption or repurchase of, the Company's
capital stock; (g) any material liability (absolute or contingent, matured or
unmatured) incurred except current liabilities incurred in the Ordinary Course
of Business; (h) any mortgage, pledge or Encumbrance (other than Permitted
Encumbrances (as defined in Section 7.5 hereof)) placed on any of the Company's
Assets, (i) any sale, exchange, transfer or other disposition of any of the
Company's Assets except in the Ordinary Course of Business, (j) any write-down
the value of any of the Company's Assets or any write-off of any accounts
receivable as uncollectible, except write downs and write-offs in the Ordinary
Course of Business, none of which, individually or in the aggregate, is
material; (k) any entry into transactions other than in the Ordinary Course of
Business; (l) any change in any method of accounting or accounting practice
except as required by concurrent changes in generally accepted accounting
principles in France; or (m) any agreement to do any of the foregoing.
SECTION 2.9. ACCOUNTS RECEIVABLE; PAYABLES.
(a) The Company has, in the aggregate, not less than
US$1,000,000 of cash, accounts receivable, VAT tax refund receivables for the
years 2000 and 2001, and other refunds, entitlements or government grants that
mature or are payable prior to December 31, 2002; provided that Seller makes no
representation or warranty with respect to the collectibility of any such
accounts receivable, refunds, entitlements or grants and Purchaser Losses (as
defined in Section 6.1(a) hereof) shall not include any failure to collect any
such accounts receivable,
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refunds, entitlements or grants. All accounts receivable of the Company have
arisen in the Ordinary Course of Business in arms-length transactions for goods
actually sold and services actually performed or to be performed. The Company
has available in its records copies of invoices and of all existing contracts
with respect to all such accounts receivable. SCHEDULE 2.9(A) sets forth a
complete statement of the trade accounts receivable of the Company outstanding
as of July 23, 2002; provided that Seller makes no representation or warranty
with respect to the collectibility of any such trade accounts receivable and
Purchaser Losses (as defined in Section 6.1(a) hereof) shall not include any
failure to collect any such trade accounts receivable.
(b) SCHEDULE 2.9(B) identifies all trade accounts payable of
the Company outstanding as of July 23, 2002.
SECTION 2.10. OWNERSHIP OF THE ASSETS.
(a) The Company owns and has good title to the Assets it
purports to own and such Assets are free and clear of all Encumbrances other
than Permitted Encumbrances. No Person has an option to purchase, right of first
refusal, right to use or other similar right with respect to all or any part of
any Assets owned by the Company other than in the Ordinary Course of Business.
(b) The Company does not own any real property. The only lease
for real property to which the Company is a party is the Lease dated as of May
28, 2000 by and between SCI Montana 99 and the Company for the premises at
"Immeuble Couronne II" 14 rue Xxxxxxx Xxxxxxxxx, Toulouse (the "Lease"). With
respect to the Lease, (i) the Lease is in full force and effect and is binding
and enforceable in accordance with its terms; (ii) all rental and other charges
payable pursuant to the terms and conditions of the Lease have been paid and no
rent has been paid in advance more than thirty (30) days; (iii) there are no
charges, offsets or defenses against the enforcement by the lessor thereunder of
any agreement, covenant or condition on the part of the Company to be performed
or observed pursuant to the terms of the Lease; (iv) there are no defaults by
the Company of any agreement, covenant or condition on the part of the Company
to be performed or observed pursuant to the terms of the Lease; (v) there are no
actions or proceedings pending or, to Seller's Knowledge, threatened, by the
lessor under the Lease; (vi) except for the security deposits identified on
SCHEDULE 2.10(B), the lessor does not hold any deposits for the Company's
accounts on the Lease; (vii) the sale of the Company to the Purchaser is not
prohibited under the Lease or require the consent of the lessor; and (viii)
there are no defaults by the lessor of any agreement, covenant or condition on
the part of the lessor to be performed or observed pursuant to the terms of the
Lease. The current expiration date and remaining options to extend the Lease as
well as minimum monthly rent and additional rent due under the Lease are as set
forth on SCHEDULE 2.10(b).
SECTION 2.11. CONTRACTS. SCHEDULE 2.11 lists each agreement that is
material to the Company (each a "Material Contract"). Each Material Contract is
valid, in full force and effect and enforceable in accordance with its terms
(except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in
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equity or law)). The Company has not breached any such Material Contract or any
other contract, agreement or instrument to which the Company is a party or by
which the Company or any of its assets is bound, the effect of which could have
a Material Adverse Effect on the Company, and neither the Company nor, to
Seller's Knowledge, any third party, is in default under any such Material
Contract, contract or instrument, the effect of which would have a Material
Adverse Effect on the Company. To Seller's Knowledge, there exists no condition
or event which, after notice or lapse of time or both, would constitute any such
breach, termination or default. Except as set forth on SCHEDULE 2.11, the
Company is not a party to any agreement for the borrowing or lending of money
with respect to its business or a party to any guaranty agreement. Except as set
forth on SCHEDULE 2.11, the Company is not a party to any agreement that limits
the right of the Company to engage in, or to compete with any person in, any
business, including any agreement containing exclusivity provisions restricting
the geographical area in which, or the method by which, any business may be
conducted by the Company.
SECTION 2.12. LITIGATION. There is no action, suit, investigation,
claim, arbitration or litigation pending or, to Seller's Knowledge, threatened
against or involving the Seller Software, the Other Software, the Seller
Trademarks or the Company or its Assets, at law or in equity, or before or by
any court, arbitrator or Governmental Entity. None of the Company, its Assets,
the Subsidiary Shares, the Other Software or the Seller Software is subject to
any judgment, writ, order, injunction, award or decree of any court, judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any Governmental Entity. None of the Seller Software, the Other Software,
the Seller Trademarks, the Subsidiary Shares or any Assets of the Company have
been taken or expropriated by any federal, state, provincial, municipal or other
Governmental Entity nor has any notice or proceeding with respect thereto been
given or commenced, nor does Seller have Knowledge of any intent or proposal by
any Governmental Entity to give any such notice or commence any such proceeding.
SECTION 2.13. COMPLIANCE WITH LAWS. The Company is in compliance with
all Laws applicable to its Assets and its business and operations, except for
such noncompliance as would not have a Material Adverse Effect on the Company.
SECTION 2.14. TAXES AND ASSESSMENTS.
(a) The Company has timely filed with the appropriate taxing
authorities all Tax Returns required to be filed. The Tax Returns filed are
complete and accurate in all material respects. All Taxes due and payable by the
Company (whether or not shown on any Tax Return) have been paid. No claim has
ever been made by an authority in a jurisdiction where the Company does not file
Tax Returns that the Company is or may be subject to taxation by that
jurisdiction.
(b) The unpaid Taxes of the Company (i) did not, as of March
31, 2002, exceed the reserve for liabilities for Taxes (excluding any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the face of the balance sheets contained in the
financial statements (rather than in any notes thereto), and (ii) will not
exceed that reserve as adjusted for operations and transactions through the date
of Closing in accordance with the past custom and practice of the Company in
filing its Tax Returns.
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(c) To the Knowledge of Seller, no deficiencies for Taxes of
the Company have been claimed, proposed or assessed by any taxing or other
governmental authority with respect to any period for which said deficiency
would not be barred by the applicable period of limitations. Except as set forth
on SCHEDULE 2.14(C), the Company has received no notice of any pending or
threatened audits, assessments or other actions for or relating to any liability
in respect of Taxes of the Company, and there are no matters under discussion
with any governmental authorities with respect to Taxes that are likely to
result in an additional liability for Taxes with respect to the Company. There
are no outstanding agreements or waivers by the Company that extend the
statutory period of limitations applicable to any Taxes or Tax Returns.
(d) There are no Encumbrances for Taxes on any of the
Company's Assets other than liens securing taxes, assessments and governmental
charges not yet due and payable as of the date of Closing.
(e) All elections with respect to Taxes affecting the Company
or the assets of the Company are set forth on SCHEDULE 2.14(E).
(f) Except as set forth in SCHEDULE 2.14(F), (i) the Company
is not party to any Tax-sharing agreements or similar arrangements (including
indemnity arrangements) with respect to or involving the Company or the Assets
of the Company; and (ii) and, after the date of Closing, neither the Company nor
the Assets of the Company shall be bound by any such Tax-sharing agreements or
similar arrangements or have any liability thereunder for amounts due in respect
of periods prior to the date of Closing.
(g) The Company (i) is not a partner for Tax purposes with
respect to any joint venture, partnership, or other arrangement or contract
which is treated as a partnership for Tax purposes, (ii) does not own a single
member limited liability company which is treated as a disregarded entity, (iii)
is not a shareholder of a "controlled foreign corporation" as defined in Section
957 of the Internal Revenue Code of 1986, as amended (the "Code"), (or any
similar provision of state, local or foreign law) and (iv) is not a "foreign
personal holding company" as defined in Section 552 of the Code (or any similar
provision of state, local or foreign law).
(h) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(i) The Company does not own a "United States real property
interest" within the meaning of Section 897(c)(1) of the Code.
(j) The Company has no liability for the Taxes of any Person
(other than Taxes of the Company) (i) as a transferee or successor, or (ii) by
contract.
(k) The Company has never participated in or cooperated with
an international boycott within the meaning of Section 999 of the Code, and has
never been requested to participate in or cooperate with such a boycott.
(l) The Company has never engaged in a trade or business
within the United States for purposes of the Code.
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SECTION 2.15. EMPLOYMENT MATTERS. SCHEDULE 2.15(A) sets forth a true
and complete list of (a) all directors of the Company, (b) all officers (with
office held) of the Company, (c) all consultants and independent contractors
retained by the Company currently or during the last fiscal year and (d) all
employees of the Company, including each such employee's job title, remuneration
and duration of employment period. The Company is not a party to, and none of
its employees is subject to, any employment agreement or collective bargaining
agreement or other union contract, other than as disclosed in SCHEDULE 2.15(B).
The Company is in compliance in all material respects with applicable federal,
state and local laws affecting labor, employment and employment practices,
including terms and conditions of employment and wages and hours. SCHEDULE
2.15(C) sets forth a true and complete list of all employees terminated by the
Company within the past 12 months. Neither Purchaser, the Company nor the Assets
will be subject to any claim by any Person listed on SCHEDULE 2.15(D) for
"severance payment" or any other payment by reason of anything done by the
Company prior to or after the Closing. SCHEDULE 2.15 (E) list each employee
benefit plan applicable to the Company's employees to which the Company has
contributed or under which it has any material liability.
SECTION 2.16. TRANSACTIONS WITH RELATED PARTIES. Except as set forth on
SCHEDULE 2.16, neither Seller nor, to Seller's Knowledge, any officer or
director of the Company or any Person known by the Company to be an Affiliate
(as defined in Section 7.5 hereof) of any of them, is currently a party to any
transaction or agreement with the Company, including, without limitation, any
agreement providing for the employment of, furnishing of services by, rental of
Assets from or to, or otherwise requiring payments to, Seller or any such
officer, director or Affiliate.
SECTION 2.17. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its officers, directors,
stockholders or Affiliates.
SECTION 2.18. HSR. Seller is its own ultimate parent entity as the term
"ultimate parent entity" is defined under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and its implementing
regulations. Seller's total assets are, and will be at the time of closing, less
than $100 million as determined in accordance with the HSR Act and its
implementing regulations. Seller's annual net sales for the year ended December
31, 2001 were less than $100 million as determined in accordance with the HSR
Act and its implementing regulations.
SECTION 2.19. ENVIRONMENTAL MATTERS. To Seller's Knowledge, the
Company's current and previous use of the real property subject to the Lease is
in material compliance with all applicable Environmental Laws (including
obtaining and compliance with all permits and approvals required thereunder).
Neither the Company nor the Seller has received and the Seller is not aware of
any other Person receiving any notice of any administrative, judicial or private
party investigation, proceeding or action with respect to violations, alleged or
proven, of applicable Environmental Laws by the Company or otherwise involving
such real property. For the purposes hereof, "Environmental Laws" shall mean all
applicable local, state, federal or foreign statutes and regulations relating to
the protection of human health or the environment, as the foregoing are enacted
and in effect prior to the Closing.
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SECTION 2.20. INVESTMENT IN PURCHASER COMMON STOCK.
(a) Seller is an "accredited investor" as defined in Rule
501(a)(3) under the Securities Act of 1933, as amended (the "Securities Act").
(b) Seller is acquiring the shares of Purchaser Common Stock
to be issued to it hereunder for investment for its own account, and not for the
account of any other Person, and not with a view to, or for sale in connection
with, any distribution, assignment, or resale of any part thereof in violation
of the Securities Act. Seller understands that the shares of Purchaser Common
Stock to be issued to it hereunder have not been, and will not be, registered in
the United States under the Securities Act by reason of a specific exemption
from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Seller's representations as expressed herein.
(c) Seller has made independent investigation of Purchaser and
related matters as (i) Seller deems to be necessary or advisable in connection
with the Seller's acceptance of the shares of Purchaser Common Stock to be
issued to it hereunder and (ii) the Seller believes to be necessary in order to
reach an informed decision as to the advisability of accepting the shares of
Purchaser Common Stock to be issued to it hereunder
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that the
following representations and warranties are true and correct as of the date
hereof:
SECTION 3.1. ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. Purchaser has the requisite power and authority to carry on its
business as now being conducted and to own, lease and operate its Assets and to
perform the terms of this Agreement and the transactions contemplated hereby.
Purchaser is duly qualified to conduct its business, and is in good standing, in
each jurisdiction where the ownership or leasing of its Assets or the nature of
its activities in connection with the conduct of its business makes such
qualification necessary except where the failure to be so qualified and is in
good standing would not have a Material Adverse Effect on Purchaser.
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS. Purchaser has
previously made available to Seller complete and correct copies of its
certificate of incorporation and bylaws, as amended to date (together, the
"Purchaser Charter Documents"). Such Purchaser Charter Documents are in full
force and effect.
SECTION 3.3. AUTHORITY. The execution and delivery of this Agreement
and the Purchaser Ancillary Documents (as defined in Section 5.2 hereof) by
Purchaser and the consummation by Purchaser of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Purchaser are
necessary to authorize this Agreement or the Purchaser Ancillary Documents or to
consummate the transactions contemplated hereby or thereby. No proceedings
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are required on the part of the stockholders of Purchaser to authorize this
Agreement or the Purchaser Ancillary Documents or to consummate the transactions
contemplated hereby or thereby. Each of this Agreement and the Purchaser
Ancillary Documents has been duly executed and delivered by Purchaser and,
assuming the due authorization, execution and delivery by Seller, constitutes a
legal, valid and binding obligation of Purchaser, enforceable in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and by the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law).
SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution
and delivery of this Agreement and the Purchaser Ancillary Documents by
Purchaser does not, and the performance by Purchaser of its obligations under
this Agreement and the Purchaser Ancillary Documents will not, (i) conflict with
or violate the Purchaser Charter Documents, (ii) conflict with or violate any
Law applicable to Purchaser or its Assets in any material respect, or (iii)
result in any breach of or constitute a default under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Purchaser is a party or by which Purchaser is
bound, or by which any of its Assets is subject except, with respect to clause
(iii), for such breaches or defaults that, either individually or in the
aggregate, would not have a Material Adverse Effect on Purchaser. The execution
and delivery of this Agreement and the Purchaser Ancillary Documents by
Purchaser does not, and the performance of this Agreement and the Purchaser
Ancillary Documents by Purchaser will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity other than required filings with the Securities and Exchange Commission
(the "SEC") and the filing and recordation with the French tax authorities of a
duly executed short-form stock purchase agreement (the "Short-Form Stock
Purchase Agreement") in the form attached hereto as EXHIBIT G and payment of
applicable duties within 30 days after the date hereof.
SECTION 3.5. CAPITALIZATION. The authorized capital stock of Purchaser
consists of 50,000,000 shares of common stock, $.001 par value per share (the
"Purchaser Common Stock"), of which 27,260,965 shares are issued and outstanding
and of which 21,133,746 shares are reserved for issuance, and 5,000,000 shares
of Preferred Stock, par value $0.01 per share, none of which is issued and
outstanding. Except as set forth on SCHEDULE 3.5, there are no (i) options,
warrants or other agreements obligating Purchaser to issue or sell any shares of
capital stock of, or other equity interests in Purchaser; (ii) outstanding
obligations of Purchaser to repurchase, redeem or otherwise acquire any shares
of its capital stock or (iii) outstanding obligations of Purchaser to register
with the SEC any shares of its capital stock. All of the issued and outstanding
shares of Purchaser capital stock have been duly authorized and validly issued
in accordance with applicable laws and are fully paid and non-assessable and not
subject to preemptive rights.
SECTION 3.6. ISSUANCE OF PURCHASER COMMON STOCK. The shares of
Purchaser Common Stock to be issued and delivered at the Closing will be duly
and validly issued, fully paid and non-assessable, free and clear of all
Encumbrances. The shares of Purchaser Common Stock to be issued upon exercise of
the Warrants and pursuant to Section 1.3(b) hereof will,
-13-
when issued, be duly and validly issued, fully paid and non-assessable, free and
clear of all Encumbrances.
SECTION 3.7. SEC FILINGS. The reports filed by Purchaser with the SEC
(a) comply as to form in all material respects and were prepared in accordance
of the requirements of the Securities Exchange Act of 1934, as amended, and (b)
did not, at the time they were filed, contain any untrue statements of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Except as set forth on
SCHEDULE 3.7 or disclosed or contemplated in Purchaser's SEC reports, since the
date of Purchaser's last periodic report filed with the SEC, Purchaser has
incurred no liabilities, contingent or absolute, matured or unmatured and
Purchaser has no Knowledge of any basis for such liabilities except current
liabilities incurred in the Ordinary Course of Business, and there has been no
event that has resulted in, or development that would reasonably be expected to
result in, a Material Adverse Effect on Purchaser.
SECTION 3.8. FINANCIAL STATEMENTS. The reports filed by Purchaser with
the SEC include: (a) the audited balance sheet of Purchaser as of December 31,
2001 and the audited statements of operations and cash flows for the year then
ended and (b) the unaudited balance sheet of Purchaser as of March 31, 2002, and
the unaudited statement of operations and cash flows for the quarter then ended
(collectively, the "Seller Financial Statements"). The Seller Financial
Statements referred to in this Section 3.8 present fairly, in all material
respects, the financial condition of Purchaser as of the respective dates and
the results of operations and cash flows for the respective periods indicated
and have been prepared in accordance with generally accepted accounting
principles in the United States (except for the absence of required footnotes in
any unaudited statements) applied on a consistent basis.
SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
or contemplated in the reports filed by Purchaser with the SEC, since March 31,
2002, there has not been: (a) an occurrence which has had or would reasonably be
expected to have a Material Adverse Effect on Purchaser, (b) any declaration,
setting aside or payment of any dividend on, or other distribution (whether in
cash, stock or property) in respect of any of Purchaser's capital stock, or any
purchase, redemption or other acquisition by Purchaser of any of Purchaser's
capital stock or any other securities of Purchaser or any options, warrants,
calls or rights to acquire any such shares or other securities except for
repurchases from employees following their termination pursuant to the terms of
their pre-existing stock option or purchase agreements, (c) any split,
combination or reclassification of any of Purchaser's capital stock, or (d) any
material change by Purchaser in its accounting methods, principles or practices,
except as required by concurrent changes in generally accepted accounting
principles in the United States.
SECTION 3.10. INTELLECTUAL PROPERTY. Purchaser is the sole and
exclusive owner of or has exclusive rights to use its Intellectual Property. To
Purchaser's Knowledge, there is no misappropriation, misuse or infringement of
Purchaser's Intellectual Property by any third party. To Purchaser's Knowledge,
the use by Purchaser of its Intellectual Property in the conduct of its business
as currently conducted does not infringe any Intellectual Property rights of any
third party. There is no claim, suit, action or proceeding pending or, to
Purchaser's Knowledge, threatened against Purchaser related to its Intellectual
Property (i) alleging any infringement of
-14-
any third party's Intellectual Property rights or (ii) challenging the
ownership, use, validity or enforceability of Purchaser's Intellectual Property.
Purchaser has not entered into any consent, indemnification, forbearance to xxx
or settlement agreement with any Person relating to its Intellectual Property or
the Intellectual Property of any third party.
SECTION 3.11. AGREEMENTS. To Purchaser's Knowledge, each Purchaser
Material Contract (as hereinafter defined) is now valid, in full force and
effect and enforceable in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws of general applicability relating to the
effects of creditors' rights generally and by the application of general
principles of equity (whether applied in equity or law)). Purchaser has not
breached any Purchaser Material Contract, the effect of which would have a
Material Adverse Effect on Purchaser, and neither Purchaser nor to the Knowledge
of Purchaser, any third party, is in default under any such Purchaser Material
Contract, the effect of which would have a Material Adverse Effect on Purchaser.
To the Knowledge of Purchaser, there exists no condition or event which, after
notice or lapse of time or both, would constitute any such breach, termination
or default. As used herein, "Purchaser Material Contracts" means all agreements
that would be required to be filed by Purchaser with the SEC pursuant to Item
601(10) of Regulation S-K if Purchaser were to file an annual report on Form
10-K on the date of this Agreement.
SECTION 3.12. LITIGATION. Except as set forth on SCHEDULE 3.12, there
is no action, suit, investigation, claim, arbitration or litigation pending or,
to the Knowledge of Purchaser, threatened against or involving Purchaser, its
Assets or the business and operations of Purchaser, at law or in equity, or
before or by any court, arbitrator or Governmental Entity. Except as set forth
on SCHEDULE 3.12, Purchaser is not operating under nor is it or its capital
stock or Assets subject to, any judgment, writ, order, injunction, award or
decree of any court, judge, justice or magistrate, including any bankruptcy
court or judge, or any order of, or by, any Governmental Entity. Except as set
forth on SCHEDULE 3.12, no property or Assets of Purchaser has been taken or
expropriated by any federal, state, provincial, municipal or other Governmental
Entity nor has any notice or proceeding with respect thereto been given or
commenced nor is Purchaser aware of any intent or proposal to give any such
notice or commence any such proceeding.
SECTION 3.13. COMPLIANCE WITH LAWS. Purchaser is in compliance with all
Laws applicable to its Assets and its business and operations, except for such
noncompliance as would not have a Material Adverse Effect on Purchaser.
SECTION 3.14. TAXES AND ASSESSMENTS.
(a) Except for Purchaser's Tax Returns for its 2001 fiscal
year (the "2001 Tax Returns") for which Purchaser has timely filed an extension
to file such Tax Returns, Purchaser has timely filed with the appropriate taxing
authorities all Tax Returns required to be filed. The Tax Returns filed are
complete and accurate in all material respects. All Taxes due and payable by
Purchaser (whether or not shown on any Tax Return) have been paid other than
Taxes due in respect of the 2001 Tax Returns. No claim has ever been made by an
authority in a jurisdiction where Purchaser does not file Tax Returns that
Purchaser is or may be subject to taxation by that jurisdiction.
-15-
(b) The unpaid Taxes of Purchaser (i) did not, as of March 31,
2002, exceed the reserve for liabilities for Taxes (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the balance sheets contained in the financial
statements (rather than in any notes thereto), and (ii) will not exceed that
reserve as adjusted for operations and transactions through the date of Closing
in accordance with the past custom and practice of the Company in filing its Tax
Returns.
(c) Except as set forth on SCHEDULE 3.14, to the Knowledge of
Purchaser, no deficiencies for Taxes of Purchaser have been claimed, proposed or
assessed by any taxing or other governmental authority with respect to any
period for which said deficiency would not be barred by the applicable period of
limitations. Except as set forth on SCHEDULE 3.14. Purchaser has received no
notice of any pending or threatened audits, assessments or other actions for or
relating to any liability in respect of Taxes of Purchaser, and there are no
matters under discussion with any governmental authorities with respect to Taxes
that are likely to result in an additional liability for Taxes with respect to
Purchaser. There are no outstanding agreements or waivers by Purchaser that
extend the statutory period of limitations applicable to any Taxes or Tax
Returns.
(d) There are no Encumbrances for Taxes on any of Purchaser's
Assets other than liens securing taxes, assessments and governmental charges not
yet due and payable as of the date of Closing.
SECTION 3.15. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or any of its officers, directors,
stockholders or Affiliates.
SECTION 3.16. HSR. Purchaser is its own ultimate purchaser entity as
the term "ultimate purchaser entity" as defined under the HSR Act and its
implementing regulations. Purchaser's total assets are, and will be at the time
of Closing, less than $100 million as determined in accordance with the HSR Act
and its implementing regulations. Purchaser's annual net sales for the year
ended December 31, 2001 were less than $100 million as determined in accordance
with the HSR Act and its implementing regulations.
SECTION 3.17. ENVIRONMENTAL MATTERS. To Purchaser's Knowledge, its
current and previous use of the real property it leases and/or owns is in
material compliance with all applicable Environmental Laws (including obtaining
and compliance with all permits and approvals required thereunder). Purchaser
has not received and is not aware of any other Person receiving any notice of
any administrative, judicial or private party investigation, proceeding or
action with respect to violations, alleged or proven, of applicable
Environmental Laws by Purchaser or otherwise involving such real property.
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ARTICLE IV
COVENANTS
SECTION 4.1. APPOINTMENT OF DIRECTORS. As soon as practicable after the
Closing, Purchaser shall appoint Xxxxxx X. Xxxxxxx III and Xxxx XxXxxxxx to the
Purchaser's Board of Directors and such individuals (or their successors as
specified by Seller) shall remain on the Purchaser's Board of Directors until
such time when Seller no longer holds at least 1,000,000 shares of Purchaser
Common Stock.
SECTION 4.2. TAX FILING AND COOPERATION PROVISIONS.
(a) Seller shall prepare and timely file all Tax Returns with
respect to the Company or in respect of its businesses, assets or operations
that are required to be filed prior to the date of Closing, and shall pay any
Taxes with respect thereto (whether or not shown on such Tax Returns). Such Tax
Returns will, to the extent permitted by applicable Tax law, be prepared on a
basis consistent with past practice.
(b) Purchaser shall prepare and file all Tax Returns for all
periods ending on or prior to the date of Closing which are not required to be
filed before the date of Closing. Purchaser shall permit Seller to review and
comment on each such Tax Return prior to filing and shall make such revisions to
such Tax Returns as are reasonably requested by Seller. Not later than five
business days prior to the due date for the payment of Taxes with respect to
such Tax Returns, Seller shall pay Purchaser for Taxes of the Company with
respect to such periods, except to the extent that such Taxes are reflected in
the reserve for Tax liability shown on the face of the balance sheet of the
Company on the date of Closing.
(c) Purchaser shall prepare and file any Tax Returns of the
Company for periods which begin before the date of Closing and end after the
date of Closing. Not later than five business days prior to the due date for the
payment of such Taxes with respect to such Tax Returns, Seller shall pay
Purchaser an amount equal to the portion of such Taxes which relates to the
portion of such period ending on the date of Closing, except to the extent that
such Taxes were previously paid or are reflected in the reserve for Tax
liability shown on the face of the balance sheet of the Company on the date of
Closing. In the case of any Taxes that are imposed on a periodic basis and are
payable for such a period that includes (but does not end on) the date of
Closing, the portion of such Tax that relates to the portion of such period
ending on the date of Closing shall (i) in the case of any Taxes other than
Taxes based on or related to income or receipts, be deemed to be the amount of
such Tax for the entire period multiplied by a fraction the numerator of which
is the number of days in the period ending on the date of Closing and the
denominator of which is the entire number of days in the period, and (ii) in the
case of any Tax based on or related to income or receipts be deemed equal to the
amount which would be payable if the relevant period ended on the date of
Closing.
(d) Seller shall be entitled to an amount equal to any refunds
(including any interest paid thereon) or credits of Taxes attributable to
taxable periods ending (or deemed to end pursuant to Section 4.2(c)) on or
before the date of Closing to the extent that such Taxes were actually paid by
Seller. Purchaser shall promptly notify Seller in writing of any Tax refund(s)
received by or payable to the Company after the date of Closing in respect of
periods ending before or on the date of Closing. Purchaser and the Company, as
the case may be, shall be entitled to any refunds (including any interest paid
thereon) or credits of Taxes attributable to taxable periods beginning (or
deemed to begin pursuant to Section 4.2(c)) after the date of Closing. Seller
shall promptly notify Purchaser in writing of any Tax refund(s) in respect of
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such periods, to the extent that Seller receives notice of such refund(s).
Purchaser shall, or shall cause the Company promptly to, forward to or reimburse
Seller for any refunds (including any interest paid thereon) or credits due
Seller after receipt thereof, and Seller shall promptly forward to Purchaser or
reimburse Purchaser for any refunds (including any interest paid thereon) or
credits due Purchaser after receipt thereof. Purchaser and Seller agree that the
Company shall not carry back in respect of any Tax Return any item of loss,
deduction or credit which arises in respect of any taxable period ending after
the date of Closing to any taxable period ending on or before the date of
Closing.
(e) The Company, Purchaser and Seller shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 4.2 and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Purchaser, Seller and the Company agree (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the date of Closing until the expiration of the
statute of limitations (and, to the extent notified by the Company or Purchaser,
any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
Purchaser and Seller, as the case may be, shall allow the other party to take
possession of such books and records.
(f) Purchaser, Seller and the Company further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
SECTION 4.3. CONSIDERATION ALLOCATION. Purchaser and the Seller agree
to allocate the consideration received for the Subsidiary Shares, the Seller
Software, the Other Software and the Seller Trademarks as set forth on EXHIBIT H
hereto (the " Consideration Allocation"). After the Closing Date, neither
Purchaser nor Seller shall (i) take any position in any Tax Return, report, or
form or (ii) reach any settlement or agreement in respect of any Audit that, in
either case, is inconsistent with the Consideration Allocation, unless such
inconsistency is mandated by applicable Law. If such inconsistency is mandated
by applicable law, the party taking such position shall provide timely and
reasonable notice to the other party of such inconsistency and its effect on the
Consideration Allocation.
SECTION 4.4. REVENUES. It is the intention of the parties that the
Purchaser shall receive all rights to and receive the benefit of the Revenues
(as defined in Section 1.3(b) hereof) and the accounts receivable giving rise
thereto. Accordingly, Seller agrees to immediately turn over to Purchaser any
and all such accounts receivable which are received or collected by Seller after
the date of Closing.
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SECTION 4.5. CERTAIN TERMINATION COSTS. In connection with certain
termination agreements Seller agrees to pay to each of the individuals
identified on SCHEDULE 4.5 the amount specified opposite such individual's name
pursuant to the payment schedule described. Seller also agrees to pay (i) to
Roderik Van Nieukerken any severance he might receive in connection with the
termination of his employment with the Company and (ii) the Company's reasonable
legal costs incurred in connection with such termination, to the extent that any
such severance and legal costs in the aggregate do not exceed US$70,000;
provided that Seller shall have the right to participate in or assume control of
any legal action related to such termination and; provided, further, that
neither Purchaser nor the Company may settle with Roderik Van Nieukerken without
Seller's written consent (which consent shall not be unreasonably withheld or
delayed).
SECTION 4.6. GUARANTY. Seller currently guarantees the Company's
obligations under its lease with B.N.P. Xxxxxxx Lease Group (the "BNP Lease").
Purchaser agrees to use its best efforts to replace Seller as guarantor of the
Company's obligations under the BNP Lease and to have Seller released as a
guarantor under the BNP Lease effective as of the date hereof. Purchaser hereby
agrees to perform all of the obligations of the Company under the BNP Lease from
and after the date hereof and further agrees to indemnify, defend and hold
harmless Seller from and against all claims, losses, liabilities and demands
arising on or the date hereof that are asserted against Seller to the extent
resulting from or attributable to Seller's guaranty of the BNP Lease.
SECTION 4.7. INCREASE IN AUTHORIZED CAPITAL STOCK. As soon as
practicable after the date hereof, Purchaser shall take, and shall cause its
stockholders to take, all necessary actions, including but not limited to
amending Purchaser's certificate of incorporation, to increase the number of
authorized shares of Purchaser Common Stock to at least 65,000,000. Purchaser
shall reserve 6,000,000 of such shares of Purchaser Common Stock for issuance in
connection with Section 1.3(b) hereof and the terms of the Warrants.
SECTION 4.8. INTERCOMPANY INDEBTEDNESS. All of the Company's
outstanding indebtedness to Seller shall be deemed to have been converted (the
"Conversion") into capital stock of the Company (the "Conversion Shares")
immediately prior to the Closing. The parties hereto shall cooperate and take
all reasonable actions to document the Conversion. If, after the date hereof,
the number of Conversion Shares is calculated to be greater than 15,316,989, any
such shares in excess of 15,316,989 shall be deemed to be "Subsidiary Shares"
transferred to Purchaser hereunder such that, after given effect to the
Conversion, Purchaser shall own of record all of the outstanding capital stock
of the Company. If, after the date hereof, the number of Conversion Shares is
calculated to be less than 15,316,989, the share transfer form referred to in
Section 5.1(a) hereof and the stock registry of the Company shall be modified to
reflect the actual number of Outstanding Shares. The parties hereto agree that
Seller shall not be deemed to have breached Section 2.5 hereof if there is any
post-Closing adjustment to the Outstanding Shares in connection with the
Conversion.
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ARTICLE V
CLOSING DELIVERIES
SECTION 5.1. DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER. At the
Closing, Seller shall deliver to Purchaser the following:
(a) a share transfer form in respect of the Subsidiary Shares,
signed by Seller and completed in the name of Purchaser;
(b) the Company's share registry;
(c) an executed copy of the Short-Form Stock Purchase
Agreement;
(d) letters of resignation of the officers of the Company;
(e) an executed copy of the Lock-Up Agreement;
(f) an assignment and assumption agreement with respect to the
Seller Software, the Other Software, the Seller Trademarks, StorageTek Agreement
and the US Reseller Agreements (the "Assignment and Assumption Agreement");
(g) an executed copy of the Registration Rights Agreement (the
documents in clauses 5.1 (a), (c), (e), (f) and (g) collectively referred to as
the "Seller Ancillary Documents");
(h) a certificate of Good Standing (or the equivalent thereof)
of each of the Company and the Seller issued by their respective jurisdiction of
formation, dated within 30 days of the Closing; and
(i) A certificate of Seller, dated as of the Closing, executed
by the Secretary of Seller certifying that the resolutions, as attached to such
certificate, were duly adopted by such Seller's board of directors, authorizing
and approving the execution of this Agreement and all other agreements to be
expected and delivered by Seller hereunder or in connection herewith and the
consummation of the transactions contemplated hereby and thereby and that such
resolutions remain in full force and effect.
SECTION 5.2. DOCUMENTS TO BE DELIVERED AT CLOSING BY PURCHASER. At the
Closing, Purchaser shall deliver to Seller the following:
(a) an executed copy of the Short-Form Stock Purchase
Agreement;
(b) a certificate representing 5,000,000 shares of Purchaser
Common Stock;
(c) executed copies of the Warrants;
(d) an executed copy of the Lock-Up Agreement;
(e) an executed copy of the Assignment and Assumption
Agreement;
(f) an executed copy of the Registration Rights Agreement (the
documents in clauses 5.2 (a), (c), (d), (e) and (f) collectively referred to as
the "Purchaser Ancillary Documents");
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(g) a certificate of Good Standing (or the equivalent thereof)
of Purchaser issued by its jurisdiction of formation, dated within 30 days of
the Closing; and
(h) A certificate of Purchaser, dated as of the Closing,
executed by the Secretary of Purchaser certifying that the resolutions, as
attached to such certificate, were duly adopted by such Seller's board of
directors, authorizing and approving the execution of this Agreement and all
other agreements to be expected and delivered by Purchaser hereunder or in
connection herewith and the consummation of the transactions contemplated hereby
and thereby and that such resolutions remain in full force and effect.
ARTICLE VI
INDEMNIFICATION; ARBITRATION
SECTION 6.1. INDEMNIFICATION.
(a) Purchaser and its officers, directors and Affiliates (the
"Purchaser Indemnified Parties") shall be indemnified and held harmless by the
Seller against all claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys' fees and expenses of investigation
(hereinafter individually a "Purchaser Loss" and collectively "Purchaser
Losses") incurred by the Purchaser Indemnified Parties directly or indirectly as
a result of: (i) any inaccuracy of a representation or warranty of Seller
contained in this Agreement or (ii) any failure by Seller to perform or comply
with any covenant contained in this Agreement; provided that no Purchaser
Indemnified Party shall be entitled to receive indemnification payments under
clause (i) above with respect to any Purchaser Loss (other than those incurred
as a result of any inaccuracy of a representation or warranty contained in
Section 2.3(c)(iv) of this Agreement) unless and until the aggregate deductible
amount of the Purchaser Losses (excluding those incurred as a result of any
inaccuracy of a representation or warranty contained in Section 2.3(c)(iv) of
this Agreement)exceeds US$25,000; and PROVIDED FURTHER that no Purchaser
Indemnified Party shall be entitled to receive indemnification payments under
clause (i) above with respect to any inaccuracy of a representation or warranty
contained in Section 2.3(c)(iv) of this Agreement unless and until the aggregate
deductible amount of the Purchaser Losses incurred as a result of any inaccuracy
of a representation or warranty of Seller contained in Section 2.3(c)(iv) of
this Agreement exceeds US$50,000; and PROVIDED FURTHER that, Seller's aggregate
liability for all Purchaser Losses incurred as a result of any inaccuracy of a
representation or warranty contained in Section 2.3(c)(iv) of this Agreement
shall not exceed US$150,000 and Seller's aggregate liability for all Purchaser
Losses, including those incurred as a result of any inaccuracy of a
representation or warranty contained in Section 2.3(c)(iv) of this Agreement,
shall not exceed US$1,875,000; and PROVIDED FURTHER that, in determining the
amount of any Purchaser Losses suffered by any Purchaser Indemnified Party which
give rise to liability of Seller hereunder, there shall have been taken into
account (x) the amount of any tax benefits actually realized by such Purchaser
Indemnified Party attributable to such Purchaser Losses or derived therefrom in
any period to and including the end of the taxable year following the year in
which the Loss was incurred; and (y) the amount of any insurance benefits
actually realized by such Purchaser Indemnified Party attributable to such
Purchaser Losses or derived therefrom. The exclusive remedy of the Purchaser
Indemnified Parties with respect to any and all Purchaser Losses shall be the
return of shares of Purchaser Common Stock issued to Seller hereunder and any
such returned shares shall each be deemed to have a value of US$0.375.
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(b) Seller and its officers, directors and Affiliates (the
"Seller Indemnified Parties") shall be indemnified and held harmless by
Purchaser against all claims, losses, liabilities, damages, deficiencies, costs
and expenses, including reasonable attorneys' fees and expenses of investigation
(hereinafter individually a "Seller Loss" and collectively "Seller Losses")
incurred by the Seller Indemnified Parties directly or indirectly as a result
of: (i) any inaccuracy of a representation or warranty of Purchaser contained in
this Agreement or (ii) any failure by Purchaser to perform or comply with any
covenant contained in this Agreement; PROVIDED that the Seller Indemnifies
Parties shall not be entitled to receive indemnification payments with respect
to any Seller Loss under (i) above unless and until the aggregate deductible
amount of the Seller Losses incurred by any Seller Indemnified Parties exceeds
US$25,000; and PROVIDED FURTHER that, Purchaser's aggregate liability for all
Seller Losses shall not exceed US$1,875,000, and PROVIDED FURTHER that, in
determining the amount of any Seller Losses suffered by any Seller Indemnified
Party which give rise to liability of Purchaser hereunder, there shall have been
taken into account (x) the amount of any tax benefits actually realized by such
Seller Indemnified Party attributable to such Seller Losses or derived therefrom
in any period to and including the end of the taxable year following the year in
which the Seller Loss was incurred; and (y) the amount of any insurance benefits
actually realized by such Seller Indemnified Party attributable to such Seller
Losses or derived therefrom.
(c) Notwithstanding anything to the contrary herein, Seller's
indemnification obligations for Purchaser Losses incurred by the Purchaser
Indemnified Parties directly or indirectly as a result of any inaccuracy of a
representation or warranty of Seller contained in this Agreement shall terminate
on July 31, 2003; provided that Seller's indemnification obligations for
Purchaser Losses incurred by the Purchaser Indemnified Parties directly or
indirectly as a result of any inaccuracy of a representation or warranty of
Seller contained in Section 2.6, 2.10, 2.14, 2.15 or 2.19 of this Agreement
shall terminate on December 31, 2003. Notwithstanding anything to the contrary
herein, Purchaser's indemnification obligations for Seller Losses incurred by
the Seller Indemnified Parties directly or indirectly as a result of any
inaccuracy of a representation or warranty of Purchaser contained in this
Agreement shall terminate on July 31, 2003.
(d) Notwithstanding anything to the contrary herein, the
existence of this Article VI and of the rights and restrictions set forth herein
do not limit any legal remedy for claims based on fraud.
(e) Any claim for the recovery of Seller Losses or Purchaser
Losses shall be made by giving notice thereof in accordance with Section 7.6
and, in the case of Purchaser Losses and Seller Losses incurred directly or
indirectly as a result of any inaccuracy of a representation or warranty herein,
such notice shall be given prior to July 31, 2003; provided that in the case of
Purchaser Losses incurred directly or indirectly as a result of any inaccuracy
of a representation or warranty contained in Section 2.6, 2.10, 2.14, 2.15 or
2.19 of this Agreement such notice shall be given prior to December 31, 2003.
SECTION 6.2 ARBITRATION. Any dispute, controversy or claim
arising out of or relating to this Agreement (a "Dispute"), shall be settled by
binding arbitration. Any such arbitration proceeding shall be conducted by one
arbitrator mutually agreeable to Seller and Purchaser. In the event that within
45 days after submission of any Dispute to arbitration, Seller
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and Purchaser cannot mutually agree on one arbitrator, Seller and Purchaser
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The arbitrator or arbitrators, as the case may be,
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgment of the arbitrator or majority of the three arbitrators, as
the case may be, to discover relevant information from the opposing parties
about the subject matter of the Dispute. The arbitrator or a majority of the
three arbitrators, as the case may be, shall rule upon motions to compel or
limit discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the same extent as a competent court of law or
equity, should the arbitrators or a majority of the three arbitrators, as the
case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator or a majority of the three
arbitrators, as the case may be, shall be binding and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrator(s). Judgment upon any award
rendered by the arbitrator(s) may be entered in any court having jurisdiction.
Any such arbitration shall be held in New York City under the rules then in
effect of Judicial Arbitration and Mediation Services. The substantially
non-prevailing party shall pay all expenses relating to the arbitration,
including without limitation, the respective expenses of each party, the fees of
each arbitrator and applicable administrative fees.
ARTICLE VII
MISCELLANEOUS AND GENERAL
SECTION 7.1. EXPENSES. Each party hereto shall pay its own expenses
incidental to the preparation of this Agreement, the carrying out of the
provisions of this Agreement and the consummation of the transactions
contemplated hereby; provided that Purchaser shall pay all transfer taxes in
connection with the transfer of the Subsidiary Shares, the Seller Software, the
Other Software, the US Reseller Agreements and the Seller Trademarks, including
any and all taxes under French law.
SECTION 7.2. PRESS RELEASES. Purchaser and Seller shall collaborate
with respect to issuing a press release announcing the transactions contemplated
by this Agreement; PROVIDED that Purchaser retains the right to issue any press
release that in Purchaser's judgment is required by any Law.
SECTION 7.3. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This
Agreement and the other agreements referred to or contemplated herein and the
letter agreement dated June 18, 2002 concerning confidentiality (the
"Confidentiality Agreement") set forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby, and, except as set
forth in this Agreement, such other agreements and the Exhibits hereto and the
Confidentiality Agreement, there are no representations or warranties, express
or implied, made by any party to this Agreement with respect to the subject
matter of this Agreement and the Confidentiality Agreement. Except for the
matters set forth in the Confidentiality Agreement, any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement and the
agreements referred to or contemplated herein.
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SECTION 7.4. ASSIGNMENT AND BINDING EFFECT. This Agreement may not be
assigned by either party hereto without the prior written consent of the other
party. All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
SECTION 7.5. DEFINITIONS.
As used in this Agreement the terms set forth below shall have
the following meanings:
(a) "Affiliate" of a Person means any other Person who
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common Control with such Person. "Control" means the
possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(b) "Assets" means assets of every kind and everything that is
or may be available for the payment of liabilities (whether inchoate, tangible
or intangible), including, without limitation, real and personal property.
(c) "Business" means, with respect to any Person, the business
of such Person as currently conducted.
(c) "Business Day" means a day other than Saturday or Sunday
or a day on which banks are required or authorized to close in the States of
Colorado, New Jersey, Nevada or Delaware.
(d) "Closing" means the closing of the transactions
contemplated by this Agreement on the date hereof following the execution of
this Agreement.
(e) "Copyrights" mean U.S. and foreign registered copyrights
and U.S. and foreign unregistered copyrights in materials that are material to
the conduct of the business (including those in computer software and
databases), and all registrations and applications to register the same.
(f) "Encumbrances" mean Liens, security interests, deeds of
trust, encroachments, reservations, orders of Governmental Entities, decrees,
judgments, contract rights, claims or equity of any kind.
(g) "Governmental Entity" means any United States or other
national, state, municipal or local government, domestic or foreign, any
subdivision, agency, entity, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority.
(h) "Intellectual Property" means all of the following:
Trademarks, Patents, Patent Applications, Copyrights, Software, Know-How, and
Trade Secrets.
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(i) "Know-How" means the information reasonably necessary to
utilize the Intellectual Property to conduct the Business.
(j) "Knowledge" means, with respect to any Person, the actual
knowledge of any of the officers of such Person as of the date hereof.
(k) "Laws" mean all foreign, federal, state and local
statutes, laws, ordinances, regulations, rules, resolutions, orders,
determinations, writs, injunctions, awards (including, without limitation,
awards of any arbitrator), judgments and decrees applicable to the specified
Persons.
(l) "Lien" means any mortgage, pledge, lien, security
interest, conditional or installment.
(m) "Material Adverse Effect" means, with respect to any
Person, a material adverse impact or effect (other than arising in connection
with any impact or effect on the applicable industry or market generally) on (a)
the business, operations, assets, liabilities, or condition (financial or
otherwise) of such Person which effect either individually or when aggregated
with other such effects, is adverse and material.
(n) "Ordinary Course of Business" means all actions taken by a
Person if: (i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; (ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and (iii) such action is similar in nature and magnitude to
actions customarily taken in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business and the same
stage of development as such Person.
(o) "Patent Applications" mean all U.S. and foreign patent
applications, and any and all provisionals, divisions, continuations,
continuations-in-part, reissues, reexaminations, extensions thereof, any
counterparts claiming priority therefrom and like statutory rights.
(p) "Patents" mean issued U.S. and foreign patents, and any
and all divisions, continuations, continuations-in-part, reissues,
reexaminations, and extensions thereof, any counterparts claiming priority
therefrom and like statutory rights.
(q) "Permitted Encumbrances" mean (i) Liens for Taxes not yet
due or which are being contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance with generally
accepted accounting principles in the United States or France; (ii) such minor
encumbrances, easements or reservations of, or rights of others for, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning restrictions as to the use of real properties, which do not materially
interfere with the use, occupation and enjoyment of the property subject to the
Lien by and in connection with the applicable business; (iii) Liens incurred in
the Ordinary Course of Business in connection with workers' compensation,
unemployment insurance and other types of social security; and (iv) Liens that
do not materially detract from the value or impair the use of the Asset in
question.
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(r) "Person" means any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity or
government agency or authority.
(s) "Software" means a set of statements or instructions to be
used directly or indirectly in a computer to bring about certain results.
(t) "Software Documentation" shall mean all records, technical
and descriptive materials, documentation and procedures (including computerized
records, if any) existing and relating to the creation, acquisition, design,
development, programming, enhancement, modification, translation or other
manipulation, operation, use or maintenance of any Software
(u) "Subsidiary" of a Person means any corporation,
partnership, joint venture or other entity in which such Person (i) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (ii) is a general partner.
(v) "Tax" means any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer,
stamp or environmental tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
governmental authority.
(w) "Tax Return" means any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
(x) "Trademarks" mean U.S. and foreign registered trademarks,
service marks, trade names and logos and U.S. and foreign unregistered
trademarks, service marks, trade names and logos that are material to the
conduct of the Business and all registrations and applications to register the
same.
(y) "Trade Secrets" mean trade secrets as defined in the
Uniform Trade Secrets Act including business information as defined by
applicable local Law.
SECTION 7.6. NOTICES. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or by nationally recognized overnight courier
or sent to the party by facsimile transmission (promptly followed by a hard-copy
delivered in accordance with this Section 7.6) or by registered or certified
mail (return receipt requested), with postage and registration or certification
fees thereon prepaid, addressed to the party at its address set forth below:
If to Seller:
ManagedStorage International, Inc.
00000 Xxxxxxx Xxx, Xxxxx 000
-00-
Xxxxxxxxxx, XX 00000
Facsimile number: 000-000-0000
Attn: Xxxx Guest, Esq.
with a copy to:
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Facsimile number: 000-000-0000
Attn: Xxxxxxx Xxxxxx, Esq.
If to Purchaser:
Front Porch Digital, Inc.
00000 Xxxxxxx Xxx, Xxxxx 000
Xx. Xxxxxx, Xxx Xxxxxx 00000
Facsimile number: 000-000-0000
Attn: Xxx Xxxxx
with a copy to:
Xxxxx Xxxxxxx Xxxxxxx Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile number: 212-326-0806
Attn: Xxxx Xxxxxxx, Esq.
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telecopied or mailed.
SECTION 7.7. AMENDMENT. Any amendment, modification or revision of this
Agreement and any waiver of compliance or consent with respect hereto shall be
effective only if in a written instrument executed by the parties hereto.
SECTION 7.8. GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Colorado as
applied to contracts made and fully performed in such state.
SECTION 7.9. NO BENEFIT TO OTHERS. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto, and their respective successors and assigns, and they shall
not be construed as conferring, and are not intended to confer, any rights on
any other Person.
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SECTION 7.10. SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other terms and provisions of the
Agreement shall remain in full force and effect. Upon such determination, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
give effect to the original intent of the parties to the fullest extent
permitted by applicable law.
SECTION 7.11. SECTION HEADINGS. All section headings are for
convenience only and shall in no way modify or restrict any of the terms or
provisions hereof.
SECTION 7.12. SCHEDULES AND EXHIBITS. All Schedules and Exhibits
referred to herein are intended to be and hereby are specifically made a part of
this Agreement
SECTION 7.13. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and the Company
and Purchaser may become a party hereto by executing a counterpart hereof. This
Agreement and any counterpart so executed shall be deemed to be one and the same
instrument.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MANAGED STORAGE INTERNATIONAL, INC.
AND
FRONT PORCH DIGITAL INC.
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have duly executed this Stock and Asset Purchase Agreement
as of the date first above written.
MANAGEDSTORAGE INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Its: Chief Executive Officer
FRONT PORCH DIGITAL INC.
By: /s/ Xxx Xxxxx
----------------------------------
Its: Chief Executive Officer
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