EXHIBIT 4.1
__________________________________
ASSET ACQUISITION AGREEMENT
__________________________________
DATED AS OF DECEMBER 21, 2001
among
Phoenix Technologies Ltd.,
StorageSoft, Inc.
StorageSoft Solutions, Inc.,
StorageSoft BV,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇
TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS ........................................................... 1
SECTION 1.1. Certain Defined Terms .................................................. 1
ARTICLE II ACQUISITION OF ASSETS ......................................................... 4
SECTION 2.1. Assets to Be Acquired .................................................. 4
SECTION 2.2. Liabilities Assumed and Excluded ....................................... 4
SECTION 2.3. Purchase Price ......................................................... 6
SECTION 2.4. Closing ................................................................ 6
SECTION 2.5. Closing Deliveries by Seller and the Stockholders ...................... 6
SECTION 2.6. Closing Deliveries by Purchaser ........................................ 7
SECTION 2.7. Delivery of the Purchased Assets ....................................... 7
SECTION 2.8. Unassignable Assets .................................................... 7
SECTION 2.9. Adjustment to Purchase Price ........................................... 7
SECTION 2.10. Allocation of Purchase Price ........................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS ................. 9
SECTION 3.1. Organization and Good Standing of Seller ............................... 9
SECTION 3.2. Authorization and Validity ............................................. 9
SECTION 3.3. Capitalization ......................................................... 10
SECTION 3.4. No Conflict ............................................................ 10
SECTION 3.5. Consents ............................................................... 10
SECTION 3.6. Title to Purchased Assets .............................................. 11
SECTION 3.7. Seller Contracts ....................................................... 11
SECTION 3.8. Litigation ............................................................. 11
SECTION 3.9. Intellectual Property Assets ........................................... 12
SECTION 3.10. Compliance with Laws ................................................... 13
SECTION 3.11. Tax Matters ............................................................ 13
SECTION 3.12. Employees .............................................................. 15
SECTION 3.13. Pension and Employee Benefit Matters ................................... 15
SECTION 3.14. Brokers ................................................................ 17
SECTION 3.15. Insurance .............................................................. 17
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SECTION 3.16. Employee Confidentiality Agreements .................................... 18
SECTION 3.17. Financial Information .................................................. 18
SECTION 3.18. No Undisclosed Liabilities ............................................. 18
SECTION 3.19. Absence of Certain Changes ............................................. 18
SECTION 3.20. Accounts Receivable .................................................... 20
SECTION 3.21. Inventories ............................................................ 20
SECTION 3.22. Restrictions on Business Activities .................................... 20
SECTION 3.23. Interested Party Transactions .......................................... 20
SECTION 3.24. Fair Consideration; No Fraudulent Conveyance ........................... 21
SECTION 3.25. Provisions for Liabilities ............................................. 21
SECTION 3.26. Customers and Suppliers ................................................ 21
SECTION 3.27. No Commitments Regarding Future Products ............................... 21
SECTION 3.28. Representations Complete ............................................... 22
SECTION 3.29. Complete Copies of Materials ........................................... 22
SECTION 3.30. Shares Entirely for Own Account ........................................ 22
SECTION 3.31. General Solicitation ................................................... 22
SECTION 3.32. Disclosure of Information .............................................. 22
SECTION 3.33. Financial Sophistication ............................................... 22
SECTION 3.34. Exemption from Registration Requirements ............................... 22
SECTION 3.35. Restricted Securities .................................................. 23
SECTION 3.36. Further Limitations on Disposition ..................................... 23
SECTION 3.37. Legends ................................................................ 23
SECTION 3.38. Accredited Investor .................................................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS ............................... 23
SECTION 4.1. Power, Authorization and Validity ...................................... 23
SECTION 4.2. Title to Stock ......................................................... 24
SECTION 4.3. No Violation ........................................................... 24
SECTION 4.4. Acknowledgment ......................................................... 24
SECTION 4.5. Shares Entirely for Own Account ........................................ 25
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(continued)
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SECTION 4.6. General Solicitation.............................. 25
SECTION 4.7. Disclosure of Information......................... 25
SECTION 4.8. Financial Sophistication; Economic Risk........... 25
SECTION 4.9. Title to Stock.................................... 25
SECTION 4.10. Exemption from Registration Requirements.......... 26
SECTION 4.11. Restricted Securities............................. 26
SECTION 4.12. Further Limitations on Disposition................ 26
SECTION 4.13. Legends........................................... 26
SECTION 4.14. Accredited Investor............................... 26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER................. 27
SECTION 5.1. Organization and Good Standing of Purchaser....... 27
SECTION 5.2. Authorization and Validity........................ 27
SECTION 5.3. No Conflict....................................... 27
SECTION 5.4. Consents.......................................... 27
SECTION 5.5. Litigation........................................ 28
SECTION 5.6. Brokers........................................... 28
SECTION 5.7. Sufficient Assets................................. 28
SECTION 5.8. SEC Reports....................................... 28
SECTION 5.9. Purchaser Stock Validly Issued.................... 28
ARTICLE VI COVENANTS................................................... 29
SECTION 6.1. Conduct of Business Prior to the Closing.......... 29
SECTION 6.2. Consent of Third Parties.......................... 29
SECTION 6.3. Access to Information............................. 29
SECTION 6.4. Further Actions................................... 29
SECTION 6.5. Permits........................................... 29
SECTION 6.6. Public Announcements.............................. 29
SECTION 6.7. Books and Records................................. 30
SECTION 6.8. Certain Notifications............................. 30
SECTION 6.9. Commercially Reasonable Efforts................... 30
SECTION 6.10. Regulatory and Other Authorizations; Consents..... 30
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SECTION 6.11. No Other Bids..................................... 30
SECTION 6.12. Tax Returns....................................... 30
SECTION 6.13. Post-Closing Access to Information................ 31
SECTION 6.14. Post-Closing Cooperation.......................... 31
SECTION 6.15. No Post-Closing Retention of Copies............... 31
SECTION 6.16. Post-Closing Actions.............................. 31
SECTION 6.17. Non-Competition Agreement......................... 31
SECTION 6.18. Maintenance of Insurance.......................... 33
SECTION 6.19. Bulk Sales........................................ 33
SECTION 6.20. Registration of Non-Escrow Shares................. 33
SECTION 6.21. Procedures for Sale of Shares Under
Registration Statement............................ 36
ARTICLE VII EMPLOYEE MATTERS............................................ 36
SECTION 7.1. Offers to Employees............................... 36
SECTION 7.2. Employee Obligations of Seller.................... 37
ARTICLE VIII TAX MATTERS................................................. 38
SECTION 8.1. Transaction Taxes................................. 38
SECTION 8.2. Other Taxes....................................... 38
SECTION 8.3. Straddle Period................................... 38
ARTICLE IX CONDITIONS TO PURCHASER'S OBLIGATIONS....................... 39
SECTION 9.1. Representations and Warranties True;
Performance; Certificate.......................... 39
SECTION 9.2. Consents.......................................... 39
SECTION 9.3. No Proceedings or Litigation...................... 39
SECTION 9.4. Documents......................................... 39
SECTION 9.5. Governmental Filings.............................. 40
SECTION 9.6. No Material Adverse Effect........................ 40
SECTION 9.7. Termination of Benefit Plans...................... 40
SECTION 9.8. Legal Opinions.................................... 40
SECTION 9.9. Board and Shareholder Approval.................... 40
SECTION 9.10. Escrow Agreement.................................. 40
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SECTION 9.11. Employment Agreements .................................................. 40
SECTION 9.12. Acceptance of Employment ............................................... 40
SECTION 9.13. Non-Competition Agreements ............................................. 40
SECTION 9.14. Tax Certificate ........................................................ 41
SECTION 9.15. Gateway ................................................................ 41
SECTION 9.16. Line of Credit ......................................................... 41
ARTICLE X CONDITIONS TO SELLER'S OBLIGATIONS ............................................. 41
SECTION 10.1. Representations and Warranties True; Performance ....................... 41
SECTION 10.2. No Proceeding or Litigation ............................................ 41
SECTION 10.3. Documents .............................................................. 42
SECTION 10.4. Governmental Filings ................................................... 42
ARTICLE XI ESCROW AND INDEMNIFICATION ..................................................... 42
SECTION 11.1. Survival of Representations and Warranties ............................. 42
SECTION 11.2. Indemnification ........................................................ 42
SECTION 11.3. Third Party Claims ..................................................... 43
SECTION 11.4. Damages Threshold ...................................................... 44
SECTION 11.5. Escrow Period .......................................................... 45
SECTION 11.6. Claims Upon Escrow Fund ................................................ 45
SECTION 11.7. Exclusive Remedy ....................................................... 46
ARTICLE XII TERMINATION .................................................................... 47
SECTION 12.1. Termination of Agreement ............................................... 47
SECTION 12.2. Procedure and Effect of Termination .................................... 47
ARTICLE XIII GENERAL PROVISIONS ............................................................. 47
SECTION 13.1. Expenses ............................................................... 47
SECTION 13.2. Notices ................................................................ 47
SECTION 13.3. Headings; Disclosure ................................................... 48
SECTION 13.4. Severability ........................................................... 48
SECTION 13.5. Entire Agreement ....................................................... 49
SECTION 13.6. Assignment ............................................................. 49
SECTION 13.7. No Third-Party Beneficiaries ........................................... 49
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SECTION 13.8. Amendment; Waiver ...................................................... 49
SECTION 13.9. Governing Law; Jurisdiction and Venue .................................. 49
SECTION 13.10. Counterparts ........................................................... 49
SECTION 13.11. Performance Guaranty by Stockholders ................................... 50
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Exhibits and Schedules
Exhibits
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A Form of Assignment and Assumption Agreement and ▇▇▇▇ of Sale
B Form of Escrow Agreement
C-1 Form of Employment Agreement
C-2 Form of Non-Competition Agreement
D-1 Form of Intellectual Property Assignment
D-2 Form of Patent Assignment
D-3 Form of Trademark Assignment
E Forms of Opinion from Seller's Counsel
Schedules
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1 Intangible Assets
2 Tangible Assets
3 Seller Disclosure Letter
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This ASSET ACQUISITION AGREEMENT (this "Agreement") is made and entered
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into as of December 21, 2001 (the "Effective Date"), by and among Phoenix
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Technologies Ltd., a Delaware corporation ("Purchaser"), StorageSoft, Inc., a
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Colorado corporation ("StorageSoft"), StorageSoft Solutions, Inc., a Wisconsin
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corporation ("W Subsidiary"), StorageSoft BV, a Netherlands corporation
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("Netherlands Subsidiary"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
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StorageSoft, W Subsidiary and Netherlands Subsidiary are together referred to
herein as "Seller."
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W I T N E S S E T H:
WHEREAS, Seller desires to sell and assign to Purchaser, and Purchaser
desires to purchase and acquire from Seller, substantially all of the assets,
properties and business of Seller, all upon the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, and for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agreement, the
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following terms shall have the following meanings:
"Affiliate" shall have that meaning ascribed to such term by Rule 405
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promulgated under the U.S. Securities Act of 1933, as amended.
"Ancillary Agreements" means, collectively, the Assignment and Assumption
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Agreement, the Intellectual Property Assignment Agreements, the Employment
Agreements, the Non-Competition Agreement and the Escrow Agreement.
"Assignment and Assumption Agreement" means the Assignment and Assumption
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Agreement and ▇▇▇▇ of Sale substantially in the form of Exhibit A.
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"Assumed Liabilities" means liabilities of Seller under (i) the Seller
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Contracts to the extent that such liabilities relate to the operation of
Seller's business transferred hereby after the Closing, other than liabilities
attributable to any failure by Seller to comply with the terms thereof, and (ii)
the following categories of liabilities as set forth on the Seller Balance
Sheet, as of the Closing Date, regardless of amount: Accounts Payable, Deferred
Revenue, Advance Royalty Payments, Accrued Payroll Taxes, Other Current
Liabilities and no other liabilities.
"Brookfield Lease" means that certain real property lease between
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StorageSoft and Opus Network, LLC dated June 15, 1999, including addendum for
additional space for Suites 350 and 230.
"Effective Balance Sheet" means the balance sheet to be used in calculating
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the Purchase Price Adjustment (as defined in Section 2.9 below).
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"Encumbrance" means any pledge, lien, collateral assignment, security
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interest, mortgage, deed of trust, title retention, conditional sale or other
security arrangement, or adverse claim of title or ownership, other than those,
which do not materially detract from or interfere with the ownership of the
properties subject thereto, and other than Taxes not yet due and payable.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
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amended, and the rulings and regulations promulgated thereunder.
"Escrow Agreement" means an Escrow Agreement substantially in the form of
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Exhibit B hereto.
"Excluded Assets" means those assets listed in Section 2.2(b) of the Seller
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Disclosure Letter.
"Employees" means those employees and consultants listed on Section 3.12(a)
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of the Seller Disclosure Letter hereto.
"GAAP" shall have the meaning set forth in Section 3.17.
----
"Governmental Entity" means any court, or any federal, state, municipal or
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other governmental authority, department, commission, board, agency or other
instrumentality (domestic or foreign).
"Intangible Assets" means, collectively, the Seller Intellectual Property
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Assets, including without limitation the intangible assets, properties and
rights of Seller listed on Schedule 1 hereto.
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"Intellectual Property Assignment Agreements" means the Intellectual
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Property Assignment, the Patent Assignment, and the Trademark Assignment each
substantially in the form attached hereto as ▇▇▇▇▇▇▇▇ ▇-▇, ▇-▇, ▇-▇, and the
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Domain Name Assignment, in form reasonably satisfactory to Purchaser and Seller,
respectively.
"Intellectual Property Assets" has the meaning set forth in Section 3.9
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hereof.
"Internal Revenue Code" means the U.S. Internal Revenue Code of 1986, as
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amended, and, where the context permits a reference to a section of the Code,
shall be deemed to include the Treasury regulations (final and temporary)
promulgated thereunder and the administrative pronouncements issued by the
Internal Revenue Service relating thereto.
"Louisville Lease" means that certain real property lease between W
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Subsidiary and Great Lake Reit, L.P., dated March 14, 2001.
"Material Adverse Effect" with respect to a Person means any event, change
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or effect that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations or results of operations
of such Person. The term "Material Adverse Effect" shall not include any change
or development involving or resulting from: (i) prospective change arising out
of any proposed or adopted legislation or regulation, or any other proposal or
enactment by any governmental, regulatory or administrative authority; or (ii)
the announcement or other disclosure (formal or informal) of the existence of
the terms of this Agreement or the transactions contemplated herein.
"Person" means any individual, partnership, limited liability company,
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firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Purchased Assets" shall have the meaning given such term in Section
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2.1(a).
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"Purchaser Balance Sheet" means the balance sheet of Seller's business
-----------------------
transferred hereby as of the close of business on the Closing Date, prepared by
Purchaser in accordance with GAAP, consistently applied (which will reflect any
necessary modification of the Seller Balance Sheet suggested by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or otherwise to reflect compliance with GAAP, subject to Seller's right to
object to any such modification pursuant to Section 2.9(b) hereof), and
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delivered to Seller after the Closing Date.
"Seller Balance Sheet" means the unaudited balance sheet of Seller's
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business transferred hereby, as of August 31, 2001 and delivered to Purchaser
and included in the Seller Disclosure Letter.
"Seller Contracts" means all the leases, licenses, agreements, contracts,
----------------
understandings, arrangements, commitments and purchase orders used in or related
to Seller's business, including without limitation those listed in Section 3.7
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of the Seller Disclosure Letter hereto; provided that those agreements listed in
Section 2.2(b) to the Seller Disclosure Letter shall not be Seller Contracts.
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"Seller's Disclosure Letter" means Seller's Disclosure Letter dated as of
--------------------------
the Effective Date, which is being delivered to Purchaser concurrently with the
execution of this Agreement, and set forth in Schedule 3.
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"Seller Intellectual Property Assets" has the meaning set forth in Section
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3.9 hereof.
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"Seller's or Purchaser's knowledge" or "Knowledge of Purchaser or Seller":
--------------------------------- --------------------------------
A particular fact or other matter shall be deemed to be within "Seller's
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knowledge" or "Purchaser's knowledge," or similar phrases, as the case may be,
--------- ---------------------
if in the case of Purchaser or Seller, any officer (which shall include each
Stockholder), or, in the case of Seller, any director-level employee, is or
should have been aware of such fact or other matter after due and diligent
inquiry.
"StorageSoft Capital Stock" means all of the issued and outstanding shares
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of capital stock of StorageSoft, as described in Section 3.3 of the Seller
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Disclosure Letter.
"Stockholders" means ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, each
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of whom is a "Stockholder."
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"Tangible Assets" means all tangible personal property and leases of and
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interests in tangible personal property of Seller, including without limitation,
the items listed on Schedule 2 hereto.
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ARTICLE II
ACQUISITION OF ASSETS
SECTION 2.1. Assets to Be Acquired.
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(a) Purchased Assets. Subject to the terms and conditions of this
----------------
Agreement, at the Closing, Seller shall sell, assign, transfer, convey and
deliver (or cause to be sold, assigned, transferred, conveyed and delivered) to
Purchaser and Purchaser shall purchase and accept from Seller, free and clear of
all Encumbrances, all right, title and interest in and to all of the assets,
properties and business (other than the Excluded Assets) owned, held or used by
Seller (collectively, the "Purchased Assets"), including without limitation:
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(i) the Intangible Assets;
(ii) the Tangible Assets;
(iii) the Louisville Lease and the Brookfield Lease;
(iv) all raw materials, work-in-progress, finished goods, supplies
and other inventories of Seller (the "Inventories");
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(v) all of Seller's rights under the Seller Contracts;
(vi) all books, records, files and papers (other than the stock book
or minute book) whether in hard copy or electronic format, including without
limitation, business plans, financial and business projections, engineering
information, sales and promotional literature, marketing materials, manuals and
data, sales and purchase correspondence, lists of present, former and
prospective suppliers or customers, personnel and employment records and any
information relating to Taxes imposed on or with respect to the Purchased
Assets;
(vii) all rights, claims, causes of action and rights of set-off
against any third party, except for claims with regard to Excluded Assets; and
(viii) all accounts receivable, notes receivable and other receivables;
(ix) all prepaid expenses including, but not limited to, Taxes,
leases and rentals;
(x) the goodwill associated with the foregoing.
(b) Excluded Assets. Section 2.2(b) of the Seller Disclosure Letter
--------------- --------------
contains a list of the Excluded Assets. Notwithstanding any provision to the
contrary set forth herein, the Excluded Assets shall be excluded from the
Purchased Assets.
SECTION 2.2. Liabilities Assumed and Excluded.
--------------------------------
(a) At the Closing, Purchaser shall assume and be responsible for the
payment, performance, and discharge of the Assumed Liabilities.
(b) Except for the Assumed Liabilities, Purchaser shall not assume or
otherwise become obligated to pay, perform or discharge any liabilities, debts
or obligations of Seller and Seller shall retain, and shall be solely
responsible and liable for paying, performing and discharging when due, all of
Seller's liabilities other than the Assumed Liabilities. Such liabilities
(except to the extent they are specifically included in the definition of
Assumed Liabilities) for which Seller shall be solely responsible include,
without limitation, the following:
(i) any liability relating to or arising out of the ownership or
operation of the business or the Purchased Assets prior to the Closing;
(ii) any liability for breaches by Seller on or prior to the Closing
Date (as defined below) of any contact or any other instrument, contract or
purchase order or any liability for payments or amounts due under any Seller
Contract or any other instrument, contract or purchase order on or prior to the
Closing Date;
(iii) any liability or obligation for Taxes attributable to or imposed
upon Seller or any of its direct or indirect subsidiaries, or attributable to or
imposed upon the Purchased Assets for any period (or portion thereof) through
the Closing Date, including, without limitation, any Taxes attributable to or
arising from the transactions contemplated by this Agreement (other than the
Transaction Taxes as set forth in Section 8.1);
(iv) any liability or obligation for or in respect of any loan, other
indebtedness for money borrowed, or account payable of Seller or any of its
direct or indirect subsidiaries, including any such liabilities owed to
Affiliates of Seller;
(v) any liability or obligation arising as a result of any legal or
equitable action or judicial or administrative proceeding initiated at any time,
to the extent relating to any action or omission on or prior to the Closing Date
by or on behalf of Seller or any of its direct or indirect subsidiaries,
including, without limitation, any liability for infringement of intellectual
property rights, breach of product warranty, injury or death caused by products,
or violations of federal or state securities or other laws;
(vi) any liability or obligation arising on or prior to the Closing
Date out of any Seller Employee Plan or any other employee related obligation;
(vii) any liability or obligation for making payments of any kind
(including as a result of the sale of Purchased Assets or as a result of the
termination of employment by Seller of employees, or other claims arising out of
the terms and conditions of employment with Seller, or for vacation or severance
pay or otherwise) to employees of Seller or in respect of payroll taxes for
employees of Seller;
(viii) any liability or obligation set forth on the Seller Balance
Sheet included in the Financial Statements (as such term is defined in Section
3.17);
(ix) any liability of Seller incurred in connection with the making
or performance of this Agreement and the transactions contemplated hereby (other
than the Transaction Taxes set forth in Section 8.1);
(x) any liability of Seller arising out of the violation of or
failure to comply with any laws or regulations, including without limitation,
environmental laws or regulations;
(xi) any costs or expenses of Seller incurred in connection with
shutting down, deinstalling and removing equipment not purchased by Purchaser,
and the costs associated with all contracts and agreements not assumed by
Purchaser;
(xii) any liability or obligation for or in respect of any automobile
lease of Seller; and
(xiii) any amounts owed by Seller to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ or
any other employee of Seller.
SECTION 2.3. Purchase Price.
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(a) Purchase Price. Subject to the performance by Seller of all of its
--------------
obligations under this Agreement (including delivering all documents required to
be delivered) at the Closing (as hereinafter defined), in consideration of the
acquisition of the Purchased Assets under Section 2.1, Purchaser agrees (i) to
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deliver to Seller (a) the sum of Four Million Eight Hundred Thousand Dollars
($4,800,000) in cash in immediately available funds (the "Immediate Cash
--------------
Portion") and (b) certificates representing shares of Purchaser's Common Stock
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with a value of Six Million Dollars ($6,000,000) (the "Purchaser Stock"), which
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value shall be determined by dividing such dollar value by the per share price
determined by calculating the simple average of the closing price of Purchaser
Stock on the NASDAQ Stock Market for the five (5) trading days ending on the day
prior to the Closing Date (the "Valuation Method"), and (ii) to deliver to ▇▇▇▇▇
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Fargo Bank, National Association (or such other institution selected by
Purchaser with the reasonable consent of Seller) (the "Escrow Agent") One
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Million Two Hundred Thousand Dollars ($1,200,000) (the "Escrow Consideration")
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for a period beginning on the date of the Closing of this Agreement and ending
on the one-year anniversary of the Closing Date ("Escrow Period") in accordance
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with the terms and conditions of the Escrow Agreement to be executed at Closing.
The Immediate Cash Portion, the Escrow Consideration and the Purchaser Stock are
together referred to herein as the "Purchase Price", which Purchase Price shall
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be subject to adjustment as set forth in Section 2.9 hereof.
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SECTION 2.4. Closing. Subject to the terms and conditions of this
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Agreement, the sale, purchase and transfer of the Purchased Assets and the
assumption of the Assumed Liabilities shall take place at a closing (the
"Closing"). The Closing shall occur as soon as reasonably practicable upon
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fulfillment or waiver of the closing conditions set forth in Article II (the
"Closing Date") at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, 400
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. local time.
SECTION 2.5. Closing Deliveries by Seller and the Stockholders. At the
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Closing, Seller and the Stockholders shall deliver or cause to be delivered to
Purchaser:
(a) duly executed (and, with respect to the Intellectual Property
Assignment Agreements, notarized) counterparts of each Ancillary Agreement to
which Seller or any Stockholder is a party;
(b) any assignments, and any required Consents, duly executed by parties
having the authority to so assign or consent to assign; and
(c) all other items required to be delivered by Seller or any Stockholder
at the Closing pursuant to Article IX of this Agreement, any other provision
hereof or any Ancillary Agreement.
SECTION 2.6. Closing Deliveries by Purchaser. At the Closing, Purchaser
--------------------------------
shall deliver or cause to be delivered to StorageSoft:
(a) payment of the Immediate Cash Consideration by wire transfer of
immediately available funds in accordance with Section 2.3(a) hereof;
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(b) certificates representing the Purchaser Stock in accordance with
Section 2.3(a) hereof;
(c) executed counterparts of each Ancillary Agreement to which Purchaser is
a party; and
(d) all other items required to be delivered by Purchaser at the Closing
pursuant to Article X of this Agreement or any other provision hereof or any
Ancillary Agreement.
SECTION 2.7. Delivery of the Purchased Assets. Seller shall make available
--------------------------------
the Purchased Assets to Purchaser on the Closing Date at the locations where the
Purchased Assets are located on the Effective Date.
SECTION 2.8. Unassignable Assets. Notwithstanding any other provision of
-------------------
this Agreement or any of the Ancillary Agreements, to the extent that any of the
Seller Contracts or any other assets constituting part of the Purchased Assets
are not assignable or otherwise transferable to Purchaser without the consent,
approval or waiver of another party thereto or any third party (including any
governmental agency), or if such assignment or transfer would constitute a
breach thereof or a violation of any applicable law or agreement with any third
party, then neither this Agreement nor such Ancillary Agreements shall
constitute an assignment or transfer (or an attempted assignment or transfer)
thereof until such consent, approval or waiver of such party or parties has been
duly obtained; provided that, with respect to the consents, approvals or waivers
--------
which Seller is unable to obtain, Seller shall provide to Purchaser the benefits
of the applicable Seller Contacts or assets as if they were assigned or
transferred to Purchaser. With respect to each Seller Contract whose assignment
or transfer to Purchaser requires the consent, approval or waiver of another
party thereto or any third party, Seller shall use its commercially reasonable
efforts to obtain such consent, approval or waiver of such other party or
parties or such third party to such assignment or transfer as promptly as
practicable. Purchaser agrees to cooperate with Seller and supply relevant
information to such party or parties or such third party in order to assist
Seller in its obligations under this Section.
SECTION 2.9. Adjustment to Purchase Price.
----------------------------
(a) Seller has delivered to Purchaser the Seller Balance Sheet. Following
the Closing Date, and in any event not later than thirty (30) days thereafter,
Purchaser shall deliver to Seller the Purchaser Balance Sheet. The Purchaser
Balance Sheet shall attach Purchaser's calculation of the Purchase Price
Adjustment in accordance with the provisions of this Section 2.9. Seller and its
advisors shall be entitled to review all work papers and other supporting
documentation used by Purchaser in or relevant to the creation of the Purchaser
Balance Sheet.
(b) The Purchaser Balance Sheet shall become the Effective Balance Sheet
for purposes of calculating the Purchase Price Adjustment under this Section 2.9
thirty (30) days after delivery thereof to Seller unless Seller within such time
period delivers written notice to Purchaser (the "Objection Notice") of its
----------------
disagreement as to the value of any item included in the Purchaser Balance Sheet
or in Purchaser's calculation of the Purchase Price Adjustment. Any Objection
Notice shall specify in reasonable detail the nature of such disagreement and
the basis and supporting evidence for Seller's position with respect to the
disputed items. Seller and Purchaser shall attempt in good faith to resolve any
disagreement for a period of 30 days following the date of the Notice and
develop an Effective Balance Sheet. If they are unable to do so within such
period, they shall submit the disputed items to a nationally-recognized
accounting firm not affiliated with either Purchaser or Seller (the
"Arbitrator"), whose decision with respect to the matters disputed in the
----------
Objection Notice shall be final and binding. The Arbitrator shall render its
decision with respect to such matters within 20 days after such matters are
submitted to the Arbitrator and deliver the Effective Balance Sheet to Purchaser
and Seller at such time. Seller and Purchaser shall each provide promptly all
information and documents within their respective possession that the
Arbitrator, in its sole discretion, deems necessary in order to make its
decision with respect to the disputed matters. The fees and expenses of the
Arbitrator shall be borne equally by Seller and Purchaser.
(c) Within five (5) business days after the Effective Balance Sheet is
finally determined, the Purchase Price Adjustment (as described below) shall be
paid by Purchaser or Seller, as appropriate, to the other party or an account or
accounts designated by such party, in immediately available funds. The Purchase
Price Adjustment shall be equal to any difference in Working Capital between the
Seller Balance Sheet and the Effective Balance Sheet. For this purpose, Working
Capital shall mean Total Current Assets minus Total Current Liabilities, as set
forth on the Seller Balance Sheet and the Effective Balance Sheet, on a
consolidated basis after eliminating intercompany transactions or obligations as
set forth on the respective balance sheets; provided, that the amount of the
Note Payable to Stockholders shall not be included in such calculation, and
provided further, that the amount of the Line of Credit shall be reflected in
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both the Seller Balance Sheet and the Effective Balance Sheet. Notwithstanding
the foregoing, neither Purchaser nor Seller, as the case may be, shall be liable
to the other party for any Purchase Price Adjustment unless and until it is
determined in accordance with Section 2.9(b) that the amount of such Purchase
Price Adjustment exceeds $100,000, in which case, such party shall only be
liable for the Purchase Price Adjustment in excess of $100,000. In order to
facilitate the payment of the Purchase Price Adjustment, the Stockholders agree
to maintain at least $100,000 in cash or liquid assets in bank accounts of
StorageSoft not subject to any Encumbrance until the Purchase Price Adjustment
is paid in full.
SECTION 2.10. Allocation of Purchase Price. For purposes of complying with
----------------------------
the requirements of Section 1060 of the Code and the regulations thereunder the
Purchase Price shall be allocated among the Purchased Assets consistent with the
methodology in accordance with GAAP, to be mutually agreed in good faith and set
forth in writing by Purchaser and Seller prior to the Closing. Purchaser and
Seller agree to each prepare and file on a timely basis with the Internal
Revenue Service (and applicable state tax authorities) substantially identical
and supplemental Internal Revenue Service Forms 8594 (and corresponding state
tax forms) consistent with the methodology agreed to for allocating the Purchase
Price, and which gives effect to any Purchase Price Adjustment as described
above. If any Tax authority challenges such allocation, the party
receiving notice of such challenge shall give the other prompt written notice
thereof and the parties shall cooperate in order to preserve the effectiveness
of such allocation.
SECTION 2.11. Securities Act Exemption. The Purchaser Stock to be issued to
------------------------
StorageSoft pursuant to this Agreement shall not be registered under the
Securities Act of 1933, as amended ("Securities Act"), in reliance upon the
--------------
exemption contained in Section 4(2) of the Securities Act and in reliance upon
the representations and warranties of Seller and each Stockholder contained in
Article III and Article IV below.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
STOCKHOLDERS
For purposes of this Article III, "Seller" means each of StorageSoft
and W Subsidiary. Seller and each of the Stockholders hereby represents and
warrants to Purchaser that, except as expressly set forth in the Seller's
Disclosure Letter, all of the following statements, representations and
warranties are true and correct as of the Effective Date:
SECTION 3.1. Organization and Good Standing of Seller. Seller is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Seller has the requisite corporate power
and authority and all necessary government approvals to own, lease and operate
its properties and to carry on its business as now being conducted and as
proposed to be conducted, except where the failure to have such power, authority
and governmental approvals would not, individually or in the aggregate, have a
Material Adverse Effect on Seller. Seller is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect on Seller's business transferred hereby. W Subsidiary and
Netherlands Subsidiary are the only subsidiaries of StorageSoft. StorageSoft is
the owner of all outstanding shares of capital stock of W Subsidiary and
Netherlands Subsidiary, and all such shares are duly authorized, validly issued,
fully paid and nonassessable. All of the outstanding shares of capital stock of
W Subsidiary and Netherlands Subsidiary are owned by StorageSoft free and clear
of all Encumbrances. Other than StorageSoft's ownership of 100% of the equity of
W Subsidiary and Netherlands Subsidiary, Seller does not directly or indirectly
own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business association or entity.
SECTION 3.2. Authorization and Validity. The execution and delivery of this
--------------------------
Agreement and the Ancillary Agreements and the performance of all obligations of
Seller hereunder and thereunder, has been duly and validly authorized by all
necessary corporate action on the part of Seller (including without limitation
approval of the transactions contemplated hereby by the stockholders of
StorageSoft) and no other act or proceeding on the part of or on behalf of
Seller by or on behalf of its stockholders is necessary to approve the execution
and delivery of this Agreement, the Ancillary Agreements and such other
agreements and instruments, the performance by Seller of its obligations
hereunder or thereunder and the consummation of the transactions
contemplated hereby and thereby. This Agreement has been, and at the Closing the
Ancillary Agreements will be, duly executed and delivered by Seller and, as
applicable, the Stockholders. This Agreement constitutes, and, upon Seller's
execution of each of the other Ancillary Agreements, each of the other Ancillary
Agreements will constitute, assuming the due authorization, execution and
delivery by Purchaser, a legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
of general application, now or hereafter in effect, affecting enforcement of
creditors' rights generally; and (b) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies. This Agreement and the transactions it contemplates have been approved
and adopted by unanimous vote of the Stockholders and all requirements for
approval of such transactions as required by law or the charter documents of
Seller, have been satisfied.
SECTION 3.3. Capitalization. The authorized capital stock of StorageSoft
--------------
consists of 19,000 shares of Common Stock, of which there were issued and
outstanding as of the Effective Date 19,000 shares of Common Stock. There are no
other outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or voting
securities. All outstanding shares of the StorageSoft Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof, and are not subject to preemptive rights or rights of
first refusal created by statute, the Articles of Incorporation or Bylaws of
StorageSoft or any agreement to which StorageSoft is a party or by which it is
bound. All outstanding shares of the StorageSoft Capital Stock were issued in
compliance with all applicable federal and state securities laws. Except as set
forth in Section 3.3 of the Seller Disclosure Letter, there are no options,
-----------
warrants, calls, rights, commitments, agreements or arrangements of any
character to which Seller is a party or by which Seller is bound relating to the
issued or unissued capital stock of Seller or obligating Seller to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Seller or obligating
Seller to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no contracts, commitments or agreements relating to
voting, purchase or sale of the StorageSoft Capital Stock between or among
Seller and any of the Stockholders.
SECTION 3.4. No Conflict. The execution, delivery and performance of this
-----------
Agreement and the Ancillary Agreements by Seller and the Stockholders (with
respect to those agreements to which they are a party) and the consummation of
the transactions contemplated hereby and thereby, subject to obtaining the
Consents set forth in Section 3.5 of the Seller Disclosure Letter, do not and
-----------
will not (a) result in a violation or default in any material respect of any
provision of Seller's Articles of Incorporation or bylaws (a true and correct
copy of which has been delivered to Purchaser), or any judgment, order, writ or
decree applicable to Seller, (b) constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a breach, violation or
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any of the Seller Contracts or (c) result in
the creation of any Encumbrance on any of the Purchased Assets.
SECTION 3.5. Consents. No consent, approval, order or authorization of or
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registration, qualification, designation, declaration or filing with, any
governmental entity on the part of Seller is required in connection with the
consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, except for where the failure to obtain
such consents, approvals, orders or authorizations or to make such
registrations, qualifications, designations, declarations or filings would not
prevent or materially delay consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements. Section 3.5 of the Seller
Disclosure Letter sets forth a true and complete list of each and every
instrument pursuant to which the consent or approval of any third party or
Governmental Entity is required in order for Seller to assign or transfer to
Purchaser any of the Purchased Assets or any rights or obligations under Seller
Contracts. Such consents and approvals as specified in Section 3.5 of the
-----------
Disclosure Schedule are referred to herein as the "Consents".
--------
SECTION 3.6. Title to Purchased Assets.
----------------
(a) Purchased Assets. Seller owns all of the Purchased Assets and has good
----------------
and marketable title in and to all of the Purchased Assets, free and clear of
all Encumbrances whatsoever. Title to all of the Purchased Assets is freely
transferable from Seller to Purchaser free and clear of all Encumbrances, except
for the lien on the Purchased Assets of StorageSoft relating to StorageSoft's
line of credit, issued by ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Credit, which line of credit
shall be paid in full by Seller, the lien released, and evidence thereof
provided to Purchaser no later than two business days prior to the Closing Date.
Purchaser shall reimburse Seller for the amount of such repayment up to
$400,000.
(b) Sufficiency of Assets. The Purchased Assets include all the assets and
---------------------
rights that are necessary and sufficient to conduct the business of Seller as of
the Effective Date. Other than the consents listed in Section 3.5 of the Seller
-----------
Disclosure Letter, no licenses or other consents from, or payments to, any other
Person are or will be necessary for Purchaser to operate the business of Seller
being transferred hereby and use the Purchased Assets in substantially the
manner in which Seller has operated the same.
SECTION 3.7. Seller Contracts. Section 3.7 of the Seller Disclosure Letter
---------------- -----------
contains a comprehensive list of all Seller Contracts, all of which are valid,
in full force and effect, and enforceable in accordance with their respective
terms (except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally and as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies). Neither
Seller nor, to Seller's knowledge, any other party to any Seller Contract, is in
breach or default in performance of any of their respective obligations
thereunder, and no event exists which, with the giving of notice or lapse of
time or both, would constitute a breach, default or event of default on the part
of Seller or, to Seller's knowledge, on the part of any other party. As of the
Effective Date, no party has made a payment to Seller under the Seller Contracts
in consideration of performance to be done by Purchaser after the Closing Date.
SECTION 3.8. Litigation. There is no private or governmental action, suit,
----------
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to Seller's knowledge, threatened against
Seller or any of its properties (including without limitation the Purchased
Assets) or any of its officers or directors (in their capacities as such) that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the business of Seller to be transferred hereby.
There is no judgment, decree or order against Seller or, to Seller's knowledge,
any of its directors or officers, that could prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on the business
of Seller transferred hereby. All litigation to which Seller is a party (or, to
the knowledge of Seller, threatened to become a party) is disclosed in Section
3.8 of the Seller Disclosure Letter.
SECTION 3.9. Intellectual Property Assets.
----------------------------
(a) As used herein, the term "Intellectual Property Assets" shall mean all
----------------------------
worldwide intellectual property rights, including, without limitation, patents,
trademarks, service marks and copyrights, Internet domain names and
registrations and applications therefor with respect to any of the foregoing,
trade names, know-how, trade secrets, computer software programs and proprietary
information. As used herein, "Seller Intellectual Property Assets" shall mean
-----------------------------------
the Intellectual Property Assets used or owned by Seller.
(b) Except as set forth in Section 3.9(b) of the Seller Disclosure Letter,
--------------
Seller owns, or is licensed or otherwise possesses legally enforceable rights to
use all Intellectual Property Assets that are used in or are material to the
business of Seller as currently conducted, without conflict with the rights of
others.
(c) Except as disclosed in Section 3.9(c) of the Seller Disclosure Letter,
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no claims (i) are currently pending or, to the knowledge of Seller, are
threatened by any person with respect to the Seller Intellectual Property
Assets, or (ii) are, to the knowledge of Seller, currently pending or threatened
by any person with respect to the Intellectual Property Assets of a third party
(the "Third Party Intellectual Property Assets") to the extent arising out of
----------------------------------------
any use, reproduction or distribution of such Third Party Intellectual Property
Assets by or through Seller.
(d) Except as disclosed in Section 3.9(d) of the Seller Disclosure Letter,
the manufacture, reproduction, import, sale, licensing or use of any product,
system or method now used, sold or licensed or proposed for use, sale, license
by Seller does not infringe on any Third Party Intellectual Property Assets.
(e) Section 3.9(e) of the Seller Disclosure Letter sets forth a list of (i)
-----------
all patents and patent applications owned by Seller and/or each of its
subsidiaries worldwide; (ii) all trademark and service ▇▇▇▇ registrations and
all trademark and service ▇▇▇▇ applications and all trade names owned by, and
all material common law trademarks, material trade dress and material slogans
claimed by, Seller and/or each of its subsidiaries worldwide; (iii) all
copyright registrations and copyright applications owned by Seller worldwide;
(iv) all Internet domain name registrations and applications owned by Seller
and/or each of its subsidiaries worldwide; and (v) all licenses to which Seller
is a party in which Seller is (A) a licensor with respect to any of the patents,
trademarks, service marks, trade names or copyrights listed in Section 3.9(e) of
--------------
the Seller Disclosure Letter; or (B) a licensee of any other person's patents,
trade names, trademarks, service marks or copyrights material to Seller except
for any licenses of software programs that are commercially available "off the
shelf." Except as disclosed in Section 3.9(e)(v) of Seller Disclosure Letter,
-----------------
Seller has made all necessary filings, recordations and fee payments to protect
and maintain its interest in the patents, patent applications, trademark and
service ▇▇▇▇ registrations, trademark and service ▇▇▇▇ applications, copyright
registrations and copyright applications, domain name registrations and
applications and has taken all actions necessary to protect and maintain its
interest in all material
common law trademarks, material trade dress, material slogans, all trade names
and licenses, set forth in Section 3.9(e) of Seller Disclosure Letter.
--------------
(f) To the knowledge of Seller, except as set forth in Sections 3.9(e)(v)
------------------
or 3.9(f) of Seller Disclosure Letter: (i) each patent, patent application,
------
trademark or service ▇▇▇▇ registration, and trademark or service ▇▇▇▇
application and copyright registration or copyright application of Seller and/or
each of its subsidiaries is valid and subsisting and (ii) each material license
of Seller Intellectual Property Assets listed on Section 3.9(e) of Seller
--------------
Disclosure Letter is valid, subsisting and enforceable.
(g) Except as set forth in Section 3.9(g) of Seller Disclosure Letter, to
--------------
Seller's knowledge, there is no unauthorized use, infringement or
misappropriation of any of Seller's Intellectual Property Assets by any third
party, including any employee, former employee, independent contractor or
consultant of Seller which would be reasonably expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(h) Section 3.9(h) of Seller Disclosure Letter sets forth any Third Party
--------------
Intellectual Property Assets which are used in or are material to the business
of Seller. Except as set forth in Section 3.9(h) of Seller Disclosure Letter,
--------------
Seller possesses a retail license for each of the Third Party Intellectual
Property Assets used by Seller and all of the license, royalty or other fees
accrued to date with respect to such Third Party Intellectual Property Assets
have been fully paid.
(i) Except for the Third Party Intellectual Property, all products,
methods, creations and inventions used, practiced, made, sold and offered for
sale by Seller have been authored or invented solely by Seller's Employees who
have assigned to Seller all right, title and interest in and to such products,
methods, creations and inventions and the associated Intellectual Property
Assets.
SECTION 3.10. Compliance with Laws. Seller has complied in all respects
--------------------
with and has not received any notices of violation with respect to, any federal,
state or local statute, law or regulation applicable to any of the Purchased
Assets, except for such violations and failures to comply that would not (a) be
reasonably expected, individually or in the aggregate, to result in a Material
Adverse Effect or (b) prevent or materially delay the consummation of the
transactions contemplated in this Agreement or the Ancillary Agreements, or
otherwise prevent or materially delay Seller from performing its obligations
under this Agreement or the Ancillary Agreements.
SECTION 3.11. Tax Matters.
-----------
(a) For purposes of this Section 3.11 and other provisions of this
------------
Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however denominated,
-----
including any interest, penalties or other additions to tax that may become
payable in respect thereof, (A) imposed by any federal, territorial, state,
local or foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including but not limited to, federal,
state and foreign income taxes), payroll and employee withholding taxes,
unemployment insurance contributions, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
withholding taxes, business license taxes, occupation taxes, real and personal
property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
are required to be paid, withheld or collected, (B) any liability for the
payment of amounts referred to in (A) as a result of being a member of any
affiliated, consolidated, combined or unitary group, or (C) any liability for
amounts referred to in (A) or (B) as a result of any obligations to indemnify
another person.
(ii) The term "Returns" shall mean all reports, estimates, declarations
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of estimated tax, information statements and returns required to be filed in
connection with any Taxes, including information returns with respect to backup
withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of Seller relating to
the Purchased Assets have been duly filed on a timely basis and such Returns are
true, complete and correct. All Taxes shown to be payable on such Returns or on
subsequent assessments with respect thereto, have been paid in full on a timely
basis, and no other Taxes are payable by the Seller with respect to items or
periods covered by such Returns (whether or not shown on or reportable on such
Returns). Seller has (or by the Closing Date will have) duly and timely paid all
Taxes required to be paid by it on or before the Closing Date that are or may
become payable by Purchaser or chargeable as a lien upon the Purchased Assets.
Seller has withheld and paid over all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. There are no liens on any of the Purchased
Assets with respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that Seller is contesting in good faith through appropriate
proceedings.
(c) No audit of the Returns of or including Seller by a government or
taxing authority is in process, threatened or, to the Seller's knowledge,
pending (either in writing or orally, formally or informally). No deficiencies
exist or have been asserted (either in writing or orally, formally or
informally) or are expected to be asserted with respect to Taxes of Seller, and
Seller has not received notice (either in writing or orally, formally or
informally) nor does it expect to receive notice that it has not filed a Return
or paid Taxes required to be filed or paid. Seller is not a party to any action
or proceeding for assessment or collection of Taxes, nor has such event been
asserted or threatened (either in writing or orally, formally or informally)
against Seller or its assets.
(d) Seller is and has always been an "S corporation" within the meaning of
Section 1361(a) of the Code and for purposes of the income tax law of each State
in which Seller has filed income tax returns or otherwise has a taxable nexus.
(e) Seller is not, nor has it been, a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Purchaser
will not be required to deduct or withhold any consideration or amount paid to
Seller pursuant to Section 1445(a) of the Code in connection with the
transactions contemplated by this Agreement. Seller has not entered into any
compensatory agreements with respect to the performance of services which
payment thereunder would result in an excise tax to the recipient of such
payment pursuant to Section 4999 of the Code.
SECTION 3.12. Employees.
---------
(a) Section 3.12(a) of the Seller Disclosure Letter sets forth a
comprehensive list of all employees and consultants working for Seller (each, an
"Employee" and collectively, the "Employees") and, for each Employee, the annual
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base salary of such Employee effective as of the Effective Date, their current
status as exempt or non-exempt, all bonuses, profit sharing, or commissions
accrued or payable, any special compensatory or reimbursement arrangements, comp
time or other arrangements with such Employees and any other compensatory
agreements between such Employee and Seller.
(b) No collective bargaining agent or employee association represents
Employees with respect to Seller's employment of Employee.
(c) There has not been for a period of twenty-four (24) consecutive months
prior to the Effective Date, nor is there existing or, to the knowledge of
Seller, threatened, any strike, slowdown, picketing, or work stoppage against or
effecting Seller.
(d) Seller is in material compliance with all laws relating to employment
that are applicable to the Employees;
(e) Set forth in Section 3.12(e) of the Seller Disclosure Letter is a
---------------
complete and accurate list of all Employees currently on leave and in receipt of
short-term disability ("STD") benefits along with their STD commencement date
---
and expected date of return to work;
(f) Set forth in Section 3.12(f) of the Seller Disclosure Letter is a
---------------
complete and accurate list of all Employees currently on leave and in receipt of
long-term disability ("LTD") benefits along with their LTD commencement date and
---
expected date of return to work;
(g) Set forth in Section 3.12(g) of the Seller Disclosure Letter is a
---------------
complete and accurate list of all Employees currently on leave and in receipt of
applicable workers' compensation benefits along with, if applicable, their leave
commencement date and expected date of return to work; and
(h) There are no outstanding assessments, penalties, fines, levies,
charges, surcharges or other amounts due or owing pursuant to any applicable
workers' safety and insurance laws in respect of Seller or the Employees and no
audit is currently being performed pursuant to any applicable workers' safety
and insurance law.
SECTION 3.13. Pension and Employee Benefit Matters.
------------------------------------
(a) Section 3.13 of the Seller Disclosure Letter lists, with respect to
------------
Seller and any trade or business (whether or not incorporated) which is treated
as a single employer with Seller (an "ERISA Affiliate") within the meaning of
---------------
Section 414(b), (c), (m) or (o) of the Code, (i) all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), (ii) each loan to a non-officer employee in excess of
-----
$1,000, loans to officers and directors and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
contracts and agreements relating to employment that provide for annual
compensation in excess of $100,000 per year and all severance
agreements, with any of the directors, officers or employees of Seller (other
than, in each case, any such contract or agreement that is terminable by Seller
at will or without penalty or other adverse consequence), (iv) all bonus,
pension, profit sharing, savings, deferred compensation or incentive plans,
programs or arrangements, (v) other fringe or employee benefit plans, programs
or arrangements that apply to senior management of Seller and that do not
generally apply to all employees, and (vi) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Seller of greater than $5,000 remain for the
benefit of, or relating to, any present or former employee, consultant or
director of Seller (together, the "Seller Employee Plans").
---------------------
(b) Seller has furnished to Purchaser a copy of the governing instrument
for each of the written Seller Employee Plans and related plan documents
(including trust documents, insurance policies or contracts, employee booklets,
summary plan descriptions and other authorizing documents, and, to the extent
still in its possession, any material employee communications relating thereto)
and has, with respect to each Seller Employee Plan which is subject to ERISA
reporting requirements, provided copies of the Form 5500 reports filed for the
last three plan years. Any Seller Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
favorable determination letter as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986; may
rely on an opinion letter issued to a prototype plan sponsor with respect to a
standardized plan adopted by Seller in accordance with the requirements for such
reliance; or has applied to the Internal Revenue Service for such a
determination letter (or has time remaining to apply for such a determination
letter) prior to the expiration of the requisite period under applicable
Treasury Regulations or Internal Revenue Service pronouncements in which to
apply for such determination letter and to make any amendments necessary to
obtain a favorable determination with respect to all periods since the date of
adoption of such Seller Employee Plan. Seller has also furnished Purchaser with
the most recent Internal Revenue Service determination letter issued with
respect to each such the Seller Employee Plan, and nothing has occurred since
the issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any the Seller Employee Plan subject to Code
Section 401(a) that could not be rendered through the procedures under Rev.
Proc. 2001-17 that would not entail a Material Adverse Effect.
(c) Except as set forth in Section 3.13(c) of the Seller Disclosure Letter,
---------------
(i) none of Seller Employee Plans promises or provides retiree medical or other
retiree welfare or life insurance benefits to any person; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
----------------------
Section 4975 of the Code, and not exempt under Section 408 of ERISA or Section
4975 of the Code, with respect to any Seller Employee Plan, which could
reasonably be expected to have, in the aggregate, a Material Adverse Effect;
(iii) each Seller Employee Plan has been administered in accordance with its
terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), except as would
not have, in the aggregate, a Material Adverse Effect, and Seller and each ERISA
Affiliate have performed all obligations required to be performed by them under,
are not in any material respect in default, under or violation of, and have no
knowledge of any material default or violation by any other party to, any of the
Seller Employee Plans, except as would not, in the aggregate, have a Material
Adverse Effect; (iv) neither Seller nor any ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980D of the Code or Title I of
ERISA with respect to any of the Seller Employee Plans; (v) all material
contributions required to be made by Seller or any ERISA Affiliate to any Seller
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Seller Employee Plan for the
current plan years; and (vi) none of The Seller Employee Plans is subject to
Title IV of ERISA or Section 412 of the Code. With respect to each Seller
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Seller has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Seller Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the best
knowledge of Seller is threatened, against or with respect to any such the
Seller Employee Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither Seller nor ERISA Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
------------------
(d) Seller has complied with (i) the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the regulations thereunder or any similar applicable state
-----
law, (ii) the applicable requirements of the Health Insurance Portability
Amendments Act ("HIPAA") and the regulations thereunder and (iii) the applicable
-----
requirements of the Family Medical Leave Act of 1993 and the regulations
thereunder or any similar applicable state law.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or other service provider of
Seller or any ERISA Affiliate to severance benefits or any other payment
(including, without limitation, unemployment compensation, golden parachute or
bonus), or (ii) accelerate the time of payment or vesting of any such benefits,
or increase the amount of compensation due any such employee or service
provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Seller or other ERISA Affiliate
relating to, or change in participation or coverage under, any Seller Employee
Plan which would materially increase the expense of maintaining such Plan above
the level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Financial Statements.
SECTION 3.14. Brokers. Other than McDonald Investments Inc. and ▇▇▇▇
-------
▇▇▇▇▇▇▇▇▇, the fees and expenses of which shall be paid by Seller, neither
Seller, nor any of its affiliates, has employed any broker, finder, investment
banker or agent, incurred or agreed to pay any brokerage fee, finder's fee or
commission with respect to the transactions contemplated by this Agreement, or
dealt with anyone purporting to act in the capacity of a broker, finder,
investment banker or agent with respect thereto.
SECTION 3.15. Insurance. Section 3.15 of the Seller Disclosure Letter
--------- ------------
contains a list of all insurance policies maintained by the Seller for the
benefit of or in connection with the Purchased Assets and each such policy will
be maintained in full force and effect up to the Closing Date. The Seller is not
in default of any material obligation pursuant to any of these insurance
policies. All premiums payable under all such policies and bonds have been paid
and the Seller is otherwise in full compliance with the material terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage).
SECTION 3.16. Employee Confidentiality Agreements. Any and all employees
-----------------------------------
and consultants, including all prior employees, of Seller who have or who have
had reasonable access to, or knowledge of, any secret, confidential, or
proprietary information or to inventions, have executed written confidentiality
agreements with Seller pursuant to which such employees and consultants have
agreed to maintain in confidence secret, confidential or proprietary information
learned or acquired in the scope of their employment, and any and all such
employees, including all such prior employees and consultants, have executed a
specific assignment of any title, shop right or license for any inventions or
Intellectual Property Assets created by them during the course of their
employment to Seller and that all Purchased Assets created by any employee or
consultant have been by employees or contractors under work-for-hire, as
understood under common law.
SECTION 3.17. Financial Information.
---------------------
Section 3.17 of the Seller Disclosure Letter includes a true, correct and
------------
complete copy of Seller's (i) unaudited financial statements (balance sheet,
income statement, statement of operations) for each of the fiscal years ended
December 31, 1999 and December 31, 2000, respectively, (ii) the Seller Balance
Sheet, and (iii) the unaudited financial statements (balance sheet and income
statements) for the fiscal quarters ended March 30, 2001, June 30, 2001 and
September 30, 2001, respectively (collectively, the "Financial Statements"). The
--------------------
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except that the unaudited financial statements
----
do not have notes thereto) applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements accurately set out and
describe the financial condition and operating results of the StorageSoft and
its consolidated subsidiaries as of the dates, and for the periods, indicated
therein, subject to normal year-end audit adjustments. Seller maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
SECTION 3.18. No Undisclosed Liabilities. Seller does not have any
--------------------------
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, in excess of $10,000 individually or in the aggregate,
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required by GAAP to be reflected in the Financial Statements which (i) has
not been reflected in the Seller Balance Sheet included in the Financial
Statements, or (ii) has not arisen in the ordinary course of the Seller's
business since August 31, 2001.
SECTION 3.19. Absence of Certain Changes. Except as set forth in Section
-------------------------- -------
3.19 of the Seller Disclosure Letter, since August 31, 2001 there has not been,
----
occurred or arisen any:
(a) transaction by Seller except in the ordinary course of business as
conducted on that date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws of
Seller;
(c) capital expenditure or commitment by Seller, in any individual amount
exceeding $2,500 or in the aggregate, exceeding $5,000;
(d) (d) destruction of, damage to, or loss of any assets (including,
without limitation, intangible assets), business or customer of Seller (whether
or not covered by insurance) which could constitute a Material Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies in making
or reversing accruals) by Seller;
(g) revaluation by Seller of any of their respective assets;
(h) declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of Seller, or any direct or
indirect redemption, purchase or other acquisition by Seller of any of its
capital stock;
(i) increase in the salary or other compensation payable or to become
payable by Seller to any officers, directors, Employees of Seller, except in the
ordinary course of business consistent with past practice, or the declaration,
payment, or commitment or obligation of any kind for the payment by Seller of a
bonus or other additional salary or compensation to any such person except as
otherwise contemplated by this Agreement, or, the establishment of any bonus,
insurance, deferred compensation, pension, retirement, profit sharing, stock
option (including without limitation, the granting of stock options, stock
appreciation rights, performance awards), stock purchase or other employee
benefit plan;
(j) sale, lease, license or other disposition of any of the assets or
properties of Seller, except in the ordinary course of business and not in
excess of $10,000 in the aggregate;
(k) termination or material amendment of any material contract, agreement
or license (including any distribution agreement) to which Seller is a party or
by which it is bound;
(l) loan by Seller to any person or entity, or guaranty by Seller of any
loan, except for (i) travel or similar advances made to employees in connection
with their employment duties in the ordinary course of business, consistent with
past practices and (ii) trade payables not in excess of $5,000 in the aggregate
and in the ordinary course of business, consistent with past practices;
(m) waiver or release of any right or claim of Seller, including any
write-off or other compromise of any account receivable of the Seller, in excess
of $1,000 in the aggregate;
(n) commencement or notice or threat of commencement of any lawsuit or
proceeding against or, to Seller's or Seller's officers' or directors'
knowledge, investigation of Seller or their respective affairs;
(o) notice of any claim of ownership by a third party of the Seller
Intellectual Property Assets or of infringement by Seller of any third party's
Intellectual Property Assets;
(p) issuance or sale by Seller of any of its shares of capital stock, or
securities exchangeable, convertible or exercisable therefor, or of any other of
its securities;
(q) change in pricing or royalties set or charged by Seller to its
customers or licensees or in pricing or royalties set or charged by persons who
have licensed Intellectual Property Assets to Seller;
(r) any event or condition of any character that has or could reasonably
be expected to have a Material Adverse Effect on Seller or on the Purchased
Assets; or
(s) agreement by Seller or any officer or employee of either on behalf of
such entity to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Purchaser and its representatives
regarding the transactions contemplated by this Agreement).
SECTION 3.20. Accounts Receivable.
-------------------
(a) Seller has made available to Purchaser a list of all accounts
receivable of Seller reflected on the Financial Statements ("Accounts
--------
Receivable") along with a range of days elapsed since invoice.
----------
(b) All Accounts Receivable of Seller arose in the ordinary course of
business and are carried at values determined in accordance with GAAP
consistently applied. No person has any lien on any of such Accounts Receivable
and no request or agreement for deduction or discount has been made with respect
to any of such Accounts Receivable.
SECTION 3.21. Inventories. The inventories shown on the Financial
-----------
Statements or thereafter acquired by Seller consist of items of a quantity and
quality usable or salable in the ordinary course of business. Since August 31,
2001, Seller has continued to replenish inventories in a normal and customary
manner consistent with past practices. The Seller has not received written or
oral notice that it will experience in the foreseeable future any difficulty in
obtaining, in the desired quantity and quality and at a reasonable price and
upon reasonable terms and conditions, the raw materials, supplies or component
products required for the manufacture, assembly or production of its products.
The values at which inventories are carried reflect the inventory valuation
policy of Seller, which is consistent with its past practice and in accordance
with GAAP applied on a consistent basis. Since August 31, 2001, due provision
has been made on the books of Seller in the ordinary course of business
consistent with past practices to provide for all slow-moving, obsolete, or
unusable inventories at their estimated useful scrap values and such inventory
reserves are adequate to provide for such slow-moving, obsolete or unusable
inventory and inventory shrinkage. As of August 31, 2001, the inventory of
Seller in the distribution channel does not exceed an aggregate of $10,000.
SECTION 3.22. Restrictions on Business Activities. There is no agreement,
-----------------------------------
judgment, injunction, order or decree binding upon the Seller which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current or future business practice of the Seller, any acquisition of
property of Sell or the overall conduct of business by Seller as currently
conducted or as proposed to be conducted by Seller. Seller has not entered into
any agreement under which Seller is restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
SECTION 3.23. Interested Party Transactions. Except as set forth in Section
----------------------------- -------
3.23 of the Seller Disclosure Letter, Seller is not indebted to any director,
----
officer, employee or agent of the Seller (except for amounts currently due as
normal salaries and in reimbursement of ordinary expenses actually and
reasonably incurred on behalf of Seller), and no such person is indebted to
Seller. Except as set forth in Section 3.23 of the Seller Disclosure Letter,
------------
none of the Seller's
officers or directors, or any members of their immediate families, are, directly
or indirectly, indebted to Seller or have any direct or indirect ownership
interest in any firm or corporation with which Seller is affiliated or with
which Seller has a business relationship, or any firm or corporation which
competes with Seller except that officers, directors and/or stockholders of
Seller may own stock in (but not exceeding one percent of the outstanding
capital stock of) any publicly traded companies that may compete with Seller.
Except as set forth in Section 3.23 of the Seller Disclosure Letter, none of
------------
Seller's officers nor directors of any members of their immediate families are,
directly or indirectly, interested in any material contract with Seller. Seller
is not a guarantor or indemnitor or any indebtedness of any other person, firm
or corporation.
SECTION 3.24. Fair Consideration; No Fraudulent Conveyance. The sale of the
--------------------------------------------
Purchased Assets pursuant to this Agreement is made in exchange for fair and
equivalent consideration. Seller is not now insolvent and will not be rendered
insolvent by the sale, transfer and assignment of the Purchased Asset pursuant
to the terms of this Agreement. Seller is not entering into this Agreement or
any of the other agreements referenced in this Agreement with the intent to
defraud, delay or hinder its creditors and the consummation of the transactions
contemplated by this Agreement, and the other agreements referenced in this
Agreement, will not have any such effect. The transactions contemplated in this
Agreement or any agreements referenced in this Agreement will not constitute a
fraudulent conveyance, or otherwise give rise to any right of any creditor of
Seller to any of the Purchased Asset after the Closing.
SECTION 3.25. Provisions for Liabilities. Seller has made reasonable
--------------------------
provisions for the payment of all its material liabilities when due.
SECTION 3.26. Customers and Suppliers. As of the date hereof, no customer
-----------------------
which individually accounted for more than 10% of Seller's gross revenues during
the 12-month period preceding the date hereof, and no supplier of Seller, has
canceled or otherwise terminated, or made any written threat to Seller to cancel
or otherwise terminated its relationship with Seller, or has at any time on or
after August 31, 2001 decreased materially its services or supplies to Seller in
the case of any such supplier, or its usage of the services or products of
Seller in the case of such customer, and to Seller's knowledge, no such supplier
or customer intends to cancel or otherwise terminate its relationship with
Seller or to decrease materially its services or supplies to Seller or its usage
of the services or products of Seller, as the case may be. From and after the
date hereof, no customer which individually accounted for more than 10% of
Seller's gross revenues during the 12-month period preceding the Closing Date,
has canceled or otherwise terminated, or made any written threat to Seller to
cancel or otherwise terminate, for any reason, including without limitation the
consummation of the transactions by this Agreement, its relationship with
Seller, and to Seller's knowledge, no such customer intends to cancel or
otherwise terminate its relationship with Seller or to decrease materially its
usage of the services or products of Seller. Seller has not knowingly breached,
so as to provide a benefit to Seller that was not intended by the parties, any
agreement with, or engaged in any fraudulent conduct with respect to, any
customer or supplier of Seller.
SECTION 3.27. No Commitments Regarding Future Products. Except as set forth
----------------------------------------
in Section 3.27 of the Seller Disclosure Letter, Seller has made no sales to
customers that are contingent upon providing future enhancements of existing
products, to add features not presently available on existing products or to
otherwise enhance the performance of its existing products (other than beta or
similar arrangements pursuant to which Seller's customers from time to time test
or evaluate products). The products Seller has delivered to customers
substantially comply with
published specifications for such products and Seller has not received material
complaints from customers about its products that remain unresolved. Section
-------
3.27 of the Seller Disclosure Letter accurately sets forth a complete list of
----
products in development (exclusive of mere enhancements to and additional
features for existing products).
SECTION 3.28. Representations Complete. None of the representations or
------------------------
warranties made by Seller or any Stockholder in this Agreement or in any
attachment hereto, including the Seller Disclosure Letter, or certificate
furnished by Seller pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain at the Closing Date any
untrue statement of a material fact, or omits or will omit at the Closing Date
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading.
SECTION 3.29. Complete Copies of Materials. Seller has delivered or made
----------------------------
available true and complete copies of each document which has been requested by
Purchaser or its counsel in connection with their legal and accounting review of
Seller.
SECTION 3.30. Shares Entirely for Own Account. This Agreement is made with
-------------------------------
Seller in reliance upon Seller's representation to Purchaser, which by Seller's
execution of this Agreement Seller hereby confirms, that any Purchaser Stock
received by Seller hereunder will be acquired for investment for Seller's own
account, not as a nominee or agent, and that Seller has no present intention of
selling, granting any participation in, or otherwise distributing such Purchaser
Stock, except to the Stockholders in accordance with the terms of this Agreement
and applicable federal and state securities laws.
SECTION 3.31. General Solicitation. The offer and sale of the Purchaser
--------------------
Stock by Purchaser to Seller was not accompanied by the publication of any
advertisement.
SECTION 3.32. Disclosure of Information. Seller believes it has received
-------------------------
all the information it considers necessary or appropriate for deciding whether
to acquire the Purchaser Stock. Seller further represents that he has had an
opportunity to ask questions and receive answers from Purchaser regarding the
terms and conditions of the offering of the shares of Purchaser Stock.
SECTION 3.33. Financial Sophistication. By reason of the Seller's business
------------------------
or financial experience or together with Seller's professional advisor or
advisors, Seller is capable of evaluating the merits and risks of his investment
in the Purchaser Stock, has the ability to protect his own interests in this
transaction and is financially capable of bearing the economic risk of their
investment, including a total loss of this investment.
SECTION 3.34. Exemption from Registration Requirements. Seller understands
----------------------------------------
that the Purchaser Stock has not been, and until such time as the Registration
Statement (as defined in Section 6.20 below) is declared effective, will not be,
------------
registered under the Securities Act, in reliance upon the exemption contained in
Section 4(2) of the Securities Act and Regulation D promulgated thereunder from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
Seller's representations as expressed herein.
SECTION 3.35. Restricted Securities. Seller understands that the shares of
---------------------
Purchaser Stock are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from Purchaser in a
transaction not involving a public offering and that under such laws and
applicable regulations such Purchaser Stock may be resold without registration
under the Securities Act, only in certain limited circumstances. In this
connection, Seller represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
SECTION 3.36. Further Limitations on Disposition. Without in any way
----------------------------------
limiting the representations set forth above, Seller further agrees not to make
any disposition of all or any portion of the Purchaser Stock unless and until:
(a) there is then in effect a "Registration Statement" under the
Securities Act covering such proposed disposition, and such disposition is made
in accordance with such Registration Statement; or
(b) an exemption from registration under the Securities Act is available
and, if reasonably requested by Purchaser, Seller shall have furnished Purchaser
with an opinion of counsel, reasonably satisfactory to Purchaser, that such
disposition will not require registration under the Securities Act.
SECTION 3.37. Legends. Seller understands that certificates for the
-------
Purchaser Stock, and any securities issued in respect thereof or exchange
therefor, may bear one or more restrictive legends including, but not limited
to, the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT."
(b) Any legend required by the securities laws of any State.
SECTION 3.38. Accredited Investor. StorageSoft is a corporation, not formed
-------------------
for the purpose of acquiring the Purchaser Stock, with total assets in excess of
$5 million, and is an "accredited investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby represents and warrants to Purchaser, as to
himself, that, except as expressly set forth in the Seller Disclosure Letter,
all of the following statements, representations and warranties are true and
correct as of the Effective Date:
SECTION 4.1. Power, Authorization and Validity. The Stockholder has all
---------------------------------
requisite legal power and authority to enter into and perform its obligations
under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved and authorized by all
necessary action, by or on behalf of such Stockholder. This Agreement and any
other agreement to be entered into by such Stockholder has been duly executed
and delivered by such Stockholder and this and any other agreement to be entered
into under the terms of this Agreement constitutes a valid and binding
obligation of the Stockholder enforceable against him in accordance with its
terms, subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief and equitable remedies. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to the Stockholder in
connection with the execution and delivery of this Agreement by the Stockholder
or the consummation by the Stockholder of the transactions contemplated hereby.
SECTION 4.2. Title to Stock. The Stockholder is the sole registered and
--------------
beneficial owner of the shares of the StorageSoft Capital Stock reflected next
to such Stockholder's name in the Seller Disclosure Letter and has good, valid
and marketable title to such shares of StorageSoft Capital Stock free and clear
of all Encumbrances. The Stockholder is not party to any voting trust, agreement
or arrangement affecting the exercise of voting rights of shares of StorageSoft
Capital Stock. There is no action, proceeding, claim or, to the Stockholder's
knowledge, investigation against the Stockholder or the Stockholder's assets,
properties or, as applicable, any of the Stockholder's respective officers or
directors, pending or, to the Stockholder's knowledge, threatened, at law or in
equity, or before any court, arbitrator or other tribunal, or before any
administrative law judge, hearing officer or administrative agency relating to
or in any other manner impacting upon the shares of StorageSoft Capital Stock
held by such Stockholder.
SECTION 4.3. No Violation. The execution, delivery and performance of this
------------
Agreement, and the consummation of the transactions contemplated by this
Agreement do not and will not conflict with or result in a violation of, or
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default or
result in the creation or imposition of any Encumbrance upon any of the
Stockholder's shares of StorageSoft Capital Stock under, (a) any instrument,
indenture, lease, mortgage or other agreement or contract to which the
Stockholder is a party or to which such Stockholder or any of such Stockholder's
assets or properties may be subject or (b) any federal, state, local or foreign
judgment, writ, decree, order, ordinance, statute, rule or regulation applicable
to the Stockholder or the Stockholder's assets or properties. No consent or
approval is required to be obtained by the Stockholder from any third party or
any Governmental Entity in order to effect the Purchase, this Agreement or any
of the transactions contemplated hereby.
SECTION 4.4. Acknowledgment. The Stockholder hereby acknowledges that the
--------------
Stockholder has read this Agreement and the other documents applicable to such
Stockholder to be delivered in connection with the consummation of the
transactions applicable to such Stockholder contemplated hereby and has made an
independent examination of the transactions contemplated hereby (including the
tax consequences thereof). The Stockholder acknowledges that the Stockholder has
had an opportunity to consult with and has relied solely upon the advice, if
any, of the Stockholder's legal counsel, financial advisors, or accountants with
respect to the transactions contemplated hereby to the extent the Stockholder
has deemed necessary, and has not been advised or directed by Purchaser, Seller
or their respective legal counsel or other advisors in respect of any
such matters and has not relied on any such parties in connection with this
Agreement and the transactions contemplated hereby.
SECTION 4.5. Shares Entirely for Own Account. This Agreement is made with
-------------------------------
the Stockholder in reliance upon the Stockholder's representation to Purchaser,
which by such Stockholder's execution of this Agreement such Stockholder hereby
confirms, that any Purchaser Stock distributed by StorageSoft to the Stockholder
will be acquired for investment for such Stockholder's own account, not as a
nominee or agent, and that such Stockholder has no present intention of selling,
granting any participation in, or otherwise distributing such Purchaser Stock
except in accordance with applicable federal and state securities laws.
SECTION 4.6. General Solicitation. The offer and sale of the Purchaser
--------------------
Stock by Purchaser was not accompanied by the publication of any advertisement.
SECTION 4.7. Disclosure of Information. The Stockholder believes it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to acquire the Purchaser Stock. The Stockholder has received a copy of
(i) Purchaser's Form 10-K Annual Report for the year ended September 30, 2001;
(ii) Purchaser's Proxy Statement for such fiscal year; and (iii) this Asset
Acquisition Agreement, including the Schedules and Exhibits thereto. The
Stockholder acknowledges that he has had the opportunity to ask questions of and
receive answers from Purchaser and its officers and to obtain such information
concerning the business and prospects of Purchaser, the terms of this Asset
Acquisition Agreement, and the offering of the Purchaser Stock as he deems
necessary prior to making his investment decision in the Purchaser Stock.
SECTION 4.8. Financial Sophistication; Economic Risk. By reason of the
---------------------------------------
Stockholders' business or financial experience or together with the
Stockholder's professional advisor or advisors, the Stockholder is capable of
evaluating the merits and risks of his investment in the Purchaser Stock, has
the ability to protect his own interests in this transaction and is financially
capable of bearing the economic risk of their investment, including a total loss
of this investment. The Stockholder is able to bear the economic risk, including
a complete loss in value, of the investment in the Purchaser Stock.
SECTION 4.9. Title to Stock. The Stockholder is the sole registered and
--------------
beneficial owner of the shares of the StorageSoft Capital Stock reflected next
to such Stockholder's name in the Seller Disclosure Letter and has good, valid
and marketable title to such shares of StorageSoft Capital Stock free and clear
of all Encumbrances. The Stockholder has never owned, or had any other right to
acquire, shares of StorageSoft Capital Stock other than those listed opposite
his name in the Seller Disclosure Letter and has never transferred any shares of
StorageSoft Capital Stock. The Stockholder is not party to any voting trust,
agreement or arrangement affecting the exercise of voting rights of shares of
StorageSoft Capital Stock. There is no action, proceeding, claim or, to the
Stockholder's knowledge, investigation against the Stockholder or the
Stockholder's assets, properties or, as applicable, any of the Stockholder's
respective officers or directors, pending or, to the Stockholder's knowledge,
threatened, at law or in equity, or before any court, arbitrator or other
tribunal, or before any administrative law judge, hearing officer or
administrative agency relating to or in any other manner impacting upon the
shares of StorageSoft Capital Stock held by such Stockholder.
SECTION 4.10. Exemption from Registration Requirements. The Stockholder
----------------------------------------
understands that the Purchaser Stock has not been, and until such time as the
Registration Statement is declared effective, will not be, registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the
exemption contained in Section 4(2) of the Securities Act and Regulation D
promulgated thereunder from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Stockholder's representations as expressed
herein.
SECTION 4.11. Restricted Securities. The Stockholder understands that the
--------------------
shares of Purchaser Stock are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from Purchaser in a
transaction not involving a public offering and that under such laws and
applicable regulations such Purchaser Stock may be resold without registration
under the Securities Act, only in certain limited circumstances. In this
connection, the Stockholder represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
SECTION 4.12. Further Limitations on Disposition. Without in any way
----------------------------------
limiting the representations set forth above, the Stockholder further agrees not
to make any disposition of all or any portion of the Purchaser Stock unless and
until:
(a) there is then in effect a "Registration Statement" under the
Securities Act covering such proposed disposition, and such disposition is made
in accordance with such Registration Statement; or
(b) an exemption from registration under the Securities Act is available
and, if reasonably requested by Purchaser, the Stockholder shall have furnished
Purchaser with an opinion of counsel, reasonably satisfactory to Purchaser, that
such disposition will not require registration under the Securities Act.
SECTION 4.13. Legends. Stockholder understands that certificates for the
-------
Purchaser Stock, and any securities issued in respect thereof or exchange
therefor, may bear one or more restrictive legends including, but not limited
to, the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT."
(b) Any legend required by the securities laws of any State.
SECTION 4.14. Accredited Investor. Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇
-------------------
▇▇▇▇▇▇▇▇ represents that he is an "accredited investor" within the meaning of
Rule 501(a) of Regulation D under the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that, except as set
forth in the Purchaser's Disclosure Letter, all of the following statements,
representations and warranties are true, accurate and correct:
SECTION 5.1. Organization and Good Standing of Purchaser. Purchaser is a
-------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes qualification necessary, except for such failures to be so
qualified and in good standing would not prevent or materially delay the
consummation of the transactions contemplated in this Agreement or the Ancillary
Agreements, or otherwise prevent or materially delay Purchaser from performing
its obligations under this Agreement or the Ancillary Agreements. Purchaser has
all requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby.
SECTION 5.2. Authorization and Validity. The execution and delivery of
--------------------------
this Agreement and the Ancillary Agreements and the performance of all
obligations of Purchaser hereunder and thereunder, has been duly and validly
authorized by all necessary corporate action on the part of Purchaser and no
other act or proceeding on the part of or on behalf of Purchaser by or on behalf
of its shareholders is necessary to approve the execution and delivery of this
Agreement, the Ancillary Agreements and such other agreements and instruments,
the performance by Purchaser of its obligations hereunder or thereunder and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been, and at the Closing the other Ancillary Agreements will be, duly
executed and delivered by Purchaser. This Agreement constitutes, and, upon
Purchaser's execution of each of the other Ancillary Agreements, each of the
other Ancillary Agreements will constitute, assuming the due authorization,
execution and delivery by Seller, a legal, valid and binding obligation of
Purchaser enforceable against Purchaser in accordance with its terms, except (a)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application, now or hereafter in effect, affecting
enforcement of creditors' rights generally; and (b) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
SECTION 5.3. No Conflict. The execution, delivery and performance of this
-----------
Agreement and the Ancillary Agreements by Purchaser and the consummation of the
transactions contemplated hereby and thereby do not and will not (a) result in a
violation or default in any material respect of any provision of Purchaser's
charter documents or any judgment, order, writ or decree applicable to
Purchaser, or (b) constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a breach, violation or default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material contract of Purchaser.
SECTION 5.4. Consents. No consent, approval, order or authorization of or
--------
registration, qualification, designation, declaration or filing with, any
Governmental Entity on the part of Purchaser is required in connection with the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, except for where the failure to obtain such
consents, approvals, orders or authorizations or to make such registrations,
qualifications, designations, declarations or filings would not prevent or
materially delay consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements.
SECTION 5.5. Litigation. There is no claim, action, suit, arbitration,
----------
mediation, investigation or other proceeding of any nature pending or, to
Purchaser's knowledge, threatened, at law or in equity, by way of arbitration or
before any court, governmental department, commission, board or agency that
could adversely affect, contest or challenge Purchaser's authority, right or
ability to purchase or receive any of the Purchased Assets from Seller hereunder
or otherwise perform Purchaser's obligations under this Agreement or any of the
Ancillary Agreements.
SECTION 5.6. Brokers. Neither Purchaser nor any of its affiliates has
-------
employed any broker, finder or agent, incurred or agreed to pay any brokerage
fee, finder's fee or commission with respect to the transactions contemplated by
this Agreement, or dealt with anyone purporting to act in the capacity of a
broker, finder or agent with respect thereto.
SECTION 5.7. Sufficient Assets. Purchaser has sufficient funds available
-----------------
to it to deliver the Purchase Price and to pay and perform all other obligations
undertaken by Purchaser hereunder, and to consummate the transactions
contemplated hereby.
SECTION 5.8. SEC Reports.
-----------
(a) Since September 30, 1999, Purchaser has timely filed all reports,
registration statements, proxy statements or information statements and all
other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (collectively, the
"Purchaser Reports"). Purchaser has not taken any actions or omitted to take any
actions which would disqualify Purchaser from registering its securities using
Form S-3 under the Securities Act. Purchaser has heretofore made available to
Seller and the Stockholders true copies of all the Purchaser Reports, together
with all exhibits thereto.
(b) All of the financial statements included in the Purchaser Reports
fairly present the consolidated financial position of Purchaser and its
subsidiaries as of the dates mentioned therein and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods then
ended in conformity with generally accepted accounting principles (subject to
any exceptions as to consistency specified therein or as may be indicated in the
notes thereto or in the case of the unaudited statements, as may be permitted by
Form 10-Q of the SEC and subject, in the case of unaudited statements, to
normal, recurring audit adjustments). As of their respective dates, the
Purchaser Reports complied in all material respects with all applicable rules
and regulations promulgated by the SEC and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.9. Purchaser Stock Validly Issued. The shares of Purchaser Stock
------------------------------
that are to be issued by Purchaser hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable, and will
be free of restrictions on transfer, other than restrictions on transfer under
this Agreement and under applicable state and federal securities laws.
ARTICLE VI
COVENANTS
SECTION 6.1. Conduct of Business Prior to the Closing. Seller agrees that,
----------------------------------------
from the Effective Date and continuing until the earlier of the Closing Date or
the termination of this Agreement according to its terms, Seller will carry on
its business in the ordinary course and consistent with Seller's past practice
except for such actions of Seller as may be contemplated by this Agreement or
agreed to by Purchaser. Without limiting the foregoing, during the period
described in the preceding sentence, except in the ordinary course and
consistent with Seller's past practice or as agreed to by Purchaser, Seller
agrees not to take any of the actions described in Section 3.19 hereof.
------------
SECTION 6.2. Consent of Third Parties. Seller shall use its commercially
------------------------
reasonable efforts to obtain the Consents listed in Section 3.5 of the Seller
-----------
Disclosure Letter.
SECTION 6.3. Access to Information. From the Effective Date until the
---------------------
earlier of the Closing Date or the termination of this Agreement according to
its terms, Seller will afford to the representatives of Purchaser, including its
counsel and auditors, during normal business hours, access to any and all of the
Purchased Assets such that Purchaser may have a reasonable opportunity to make a
full investigation of the Purchased Assets in advance of the Closing Date as it
shall reasonably desire, and the Seller will confer with representatives of
Purchaser and will furnish to Purchaser, either orally or by means of such
records, documents, and memoranda as are available or reasonably capable of
preparation, such information as Purchaser may reasonably request, and Seller
will furnish to Purchaser's auditors all consents and authority that they may
reasonably request in connection with any such examination.
SECTION 6.4. Further Actions. Each of the parties hereto shall, at its own
---------------
expense, execute and deliver such documents and other papers and take such
further actions as may be required to carry out the provisions of this
Agreement, the Escrow Agreement and the Ancillary Agreements, to cause the
conditions to Closing set forth in Article IX and Article X to be fulfilled as
promptly as possible, and to give effect to the transactions contemplated by
this Agreement and the Ancillary Agreements.
SECTION 6.5. Permits. Seller will use its commercially reasonable efforts
-------
to assist Purchaser in obtaining any licenses, permits or authorizations
required for carrying on Seller's business but which are not transferable.
SECTION 6.6. Public Announcements. On and prior to the Closing Date,
--------------------
Purchaser and Seller shall advise and confer with each other prior to the
issuance of any reports, statements or releases concerning this Agreement
(including the exhibits hereto) and the transactions contemplated hereby.
Neither Purchaser nor Seller will make any public disclosure prior to the
Closing or with respect to such matters unless both parties agree on the text
and timing of such public disclosure, except as may be required by law, court
process, securities exchange listing agreement or the rules of the National
Association of Securities Dealers. Following the execution of this Agreement,
the parties shall issue a joint press release approved by both parties
announcing the transactions contemplated hereby.
SECTION 6.7. Books and Records. If, in order to properly prepare
-----------------
documents required to be filed with governmental authorities (including Tax
authorities) or its financial statements, it is necessary that any party hereto
or any successors be furnished with additional information relating to the
Purchased Assets, and such information is in the possession of any other party
hereto, such party agrees to use its good faith efforts to promptly furnish such
information to the party needing such information, at the cost and expense of
the party being furnished such information. From and after the Effective Date
and continuing after the Closing, each party shall cooperate with the other
party and provide at the expense of the requesting party, all information that
may be required to enable such party to comply with all applicable laws, rules
and regulations, and any governmental filing requirements, with respect to
reporting and reflecting the transactions contemplated by this Agreement and the
Ancillary Agreements.
SECTION 6.8. Certain Notifications. At all times prior to the Closing,
---------------------
Seller and Purchaser shall promptly notify the other party in writing of the
occurrence of any event which will result, or has a reasonable prospect of
resulting, in the failure to satisfy any of the conditions specified in Article
IX or Article X of this Agreement.
SECTION 6.9. Commercially Reasonable Efforts. Each party hereto shall use
-------------------------------
its commercially reasonable efforts (i) to cause to be fulfilled and satisfied
all of the conditions to the Closing set forth in Article IX and Article X
below, (ii) to cause to be performed all of the matters required of it at the
Closing and (iii) to cause the Seller Contracts to be assigned to Purchaser.
SECTION 6.10. Regulatory and Other Authorizations; Consents. Each party
---------------------------------------------
hereto will use its commercially reasonable efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Entities that
may be or become necessary for the execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and the Ancillary
Agreements and will cooperate fully with the other party in promptly seeking to
obtain all such authorizations, consents, orders and approvals. The parties
hereto will not take any action that will have the effect of delaying, impairing
or impeding the receipt of any required approvals.
SECTION 6.11. No Other Bids. Until the earlier to occur of (a) the Closing
-------------
or (b) the termination of this Agreement pursuant to its terms, Seller shall
not, and Seller shall not authorize any of its officers, directors, employees or
other representatives to, directly or indirectly, (i) initiate, solicit or
encourage (including by way of furnishing information regarding Seller's
business or the Purchased Assets) any inquiries, or make any statements to third
parties which may reasonably be expected to lead to any proposal concerning the
sale of Seller or the Purchased Assets (whether by way of merger, purchase of
capital shares, purchase of assets or otherwise), or (ii) negotiate, engage in
any substantive discussions, or enter into any agreement, with any Person
concerning the sale of Seller or the Purchased Assets (whether by way of merger,
purchase of capital shares, purchase of assets or otherwise).
SECTION 6.12. Tax Returns. Seller shall, to the extent that failure to do
-----------
so could adversely affect its business or the Purchased Assets following
Closing, (a) continue to file in a timely manner all returns and reports
relating to Taxes, and such returns and reports shall be true, correct and
complete and shall be subject to the review and consent of Purchaser which
consent shall not be unreasonably withheld, and (b) be responsible for and pay
when due any and all Taxes (other than Transaction Taxes pursuant to Section
8.1).
SECTION 6.13. Post-Closing Access to Information. If, after the Closing
----------------------------------
Date, in order properly to operate the business or prepare documents or reports
required to be filed with governmental authorities or Purchaser's financial
statements, it is necessary that Purchaser obtain additional information within
the possession of Seller or any of the Stockholders relating to the Purchased
Assets or Seller's business, Seller and the Stockholders will furnish such
information to Purchaser. Such information shall include, without limitation,
all agreements between Seller and any Person relating to the Seller's business.
SECTION 6.14. Post-Closing Cooperation. Seller agrees that, if reasonably
------------------------
requested by Purchaser, it will cooperate with Purchaser, at Purchaser's
expense, in enforcing the terms of any agreements between Seller and any third
party involving the business, including without limitation terms relating to
confidentiality and the protection of intellectual property rights. In the event
that Purchaser is unable to enforce its intellectual property rights against a
third party as a result of a rule or law barring enforcement of such rights by a
transferee of such rights, Seller agrees to reasonably cooperate with Purchaser
by assigning to Purchaser such rights as may be required by Purchaser to enforce
its intellectual property rights in its own name. If such assignment still does
not permit Purchaser to enforce its intellectual property rights against the
third party, Seller agrees to initiate proceedings against such third party in
Seller's name, provided that Purchaser shall be entitled to participate in such
proceedings and provided further that Purchaser shall be responsible for the
expenses of such proceedings.
SECTION 6.15. No Post-Closing Retention of Copies. Immediately after the
-----------------------------------
Closing, Seller and each of the Stockholders shall deliver to Purchaser copies
of Purchased Assets in its or his possession that are in addition to copies
delivered to Purchaser as part of the Closing, whether such copies are in paper
or electronic form.
SECTION 6.16. Post-Closing Actions. Subsequent to the Closing Date, Seller
--------------------
shall, from time to time, execute and deliver, upon the request of Purchaser,
all such other and further materials and documents and instruments of
conveyance, transfer or assignment as may reasonably be requested by Purchaser
to effect, record or verify the transfer to, and vesting in Purchaser, of
Seller's right, title and interest in and to the Purchased Assets, free and
clear of all Encumbrances, in accordance with the terms of this Agreement.
Subsequent to the Closing Date, Seller shall promptly dividend the Purchaser
Stock to the Stockholders.
SECTION 6.17. Non-Competition Agreement.
-------------------------
(a) In consideration of the Purchaser entering into this Agreement,
(i) Seller undertakes that for three (3) years after the Closing Date
it will not participate, assist or otherwise be directly or indirectly involved
or concerned, financially or otherwise, as a member, shareholder (provided that
this restriction shall not apply to ownership of one (1) percent or less of the
equity securities of any company whose securities are publicly traded),
unitholder, director, consultant, adviser, contractor, principal, agent,
manager, beneficiary, partner, associate, trustee, financier or otherwise in (A)
any business or activity which is the same as or substantially similar to its
business or the business of Seller, each as currently conducted (a "Restricted
----------
Business") including, without limitation, the development, marketing or
--------
licensing of personal computer software of any of the following types: (i) hard
drive/disk utilities, (ii) hardware diagnostics, (iii) hard drive/disk
diagnostics; (iii) hard drive/disk imaging, cloning or replication,
(iv) application deployment, (v) protected area storage, back-up, diagnostics or
restoration/reconstruction, (vi) BIOS Extensions for hard drive support, (vii)
multicasting data to clients across a network and (viii) remote boot
capabilities in any country in the world, (B) any activity which designs,
manufactures, distributes, services or markets a product conflicting with the
Restricted Business, or (C) any other activity competitive with the Restricted
Business, as long as Purchaser or any of its affiliates or their successors
shall carry on the Restricted Business during the three year non-competition
period; and
(ii) Seller undertakes that for two (2) years after the Closing Date
it will not:
(1) solicit, canvass, induce or encourage directly
or indirectly any employee of Purchaser to leave the employment of Purchaser;
(2) solicit, canvass, approach or accept any offer
from any person or entity who was at any time during the 24 months immediately
preceding the Closing Date a customer or supplier of Seller with a view to
establishing a relationship with or obtaining the patronage of that person or
entity in a Restricted Business; or
(3) interfere or seek to interfere, directly or
indirectly, with any relationship between Purchaser and any client, customer,
employee or supplier of the Seller.
(b) If any of the separate and independent covenants and restraints
referred to in clause (a) of this Section 6.17 are or become invalid or
unenforceable for any reason then that invalidity or unenforceability will not
affect the validity or enforceability of any other separate and independent
covenants and restraints.
(c) If any prohibition or restriction contained in clause (a) of this
Section 6.17 is judged to go beyond what is reasonable in the circumstances, but
would be judged reasonable if that activity was deleted or that period or area
was reduced, then the prohibitions or restrictions apply with that activity
deleted or period or area reduced by the minimum amount necessary.
(d) Seller acknowledges that:
(i) the prohibitions and restrictions contained in clause (a) of
this Section 6.17 are reasonable and necessary; and
(ii) Seller has received valuable consideration for agreeing to the
covenants in clause (a) of this Section 6.17.
(e) Seller and Purchaser acknowledge and agree that it will be difficult
to compute the amount of damage or loss to Purchaser if Seller violated any of
their agreements under this Section 6.17, that Purchaser will be without an
adequate legal remedy if Seller violated the provisions of this Section 6.17,
and that any such violation may cause substantial irreparable injury and damage
to Purchaser not fully compensable by monetary damages. Therefore, Seller and
Purchaser agree that in the event of any violation by Seller of this Section
6.17, Purchaser shall be entitled (i) to recover from Seller monetary damages,
(ii) to obtain specific performance, injunctive or other equitable relief, of
either a preliminary or permanent type, and (iii) to seek any other available
rights or remedies at law or in equity which may be exercised concurrently with
the rights granted hereunder.
SECTION 6.18. Maintenance of Insurance. Seller shall continue to maintain
------------------------
in full force and effect until the Closing Date all policies of insurance in
effect with respect to the Purchased Assets or duly renew the same upon similar
terms and conditions.
SECTION 6.19. Bulk Sales. Seller and Purchaser expressly waive compliance
----------
with any and all applicable bulk sales laws in connection with the transactions
contemplated in this Agreement and the Ancillary Agreements.
SECTION 6.20. Registration of Non-Escrow Shares.
---------------------------------
(a) Registrable Shares; Holder. For purposes of this Agreement,
--------------------------
"Registrable Shares" shall mean the Shares of Purchaser Stock issued to
------------------
StorageSoft pursuant to Section 2.3 and "Holder" shall mean, upon StorageSoft's
----------- ------
dividend of the Purchaser Stock, without additional consideration, to the
Stockholders (and to no other Person) under the terms hereof, the Stockholders.
(b) Required Registration. Purchaser shall prepare and file with the U.S.
---------------------
Securities and Exchange Commission (the "Commission") a registration statement
----------
on Form S-3 (or such successor or other appropriate form that Purchaser is
eligible to use) under the Securities Act with respect to the Registrable Shares
(the "Registration Statement") by the date that is ten (10) business days after
----------------------
the Closing Date and shall effect all such registrations, qualifications and
compliances in connection therewith as any selling Holder may reasonably request
and that would permit or facilitate the public sale of such Holder's Registrable
Shares (provided, however, that Purchaser shall not be required in connection
-------- -------
therewith to qualify to do business or to file a general consent to service of
process in any such state or jurisdiction), in each case so that such
Registration Statement and all other such registrations, qualifications and
compliances may become effective as soon as possible thereafter, but in any
event no later than 30 days after the filing thereof, or as soon as practicable
thereafter in the event such Registration Statement becomes subject to review by
the staff of the Commission.
(c) Effectiveness; Trading Window; Suspension Right.
-----------------------------------------------
(i) Purchaser will use its commercially reasonable efforts to maintain
the effectiveness of the Registration Statement and other applicable
registrations, qualifications and compliances for one (1) year from the Closing
Date (the "Registration Effective Period"), and from time to time will amend or
-----------------------------
supplement the Registration Statement and the prospectus contained therein as
and to the extent necessary to comply with the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and any applicable state
------------
securities statute or regulation, subject to the following limitations and
qualifications.
(ii) Following the date on which the Registration Statement is first
declared effective and subject to the restrictions set forth in Section 6.22
------------
below, the Holders will be permitted (subject in all cases to Section 6.21
------------
below) to offer and sell Registrable Shares under the Registration Statement
during the Registration Effective Period in the manner described in the
Registration Statement; provided that the Registration Statement remains
--------
effective and has not been suspended; provided, however, that such offers and
-------- -------
sales may only occur during the period that begins at the close of business on
the second full trading day following the date of public disclosure of the
Purchaser's financial results for a particular fiscal quarter or year and ending
on the close of business
on the later of (i) 30 days after such date, and (ii) the 15th day of the third
month of the next fiscal quarter.
(iii) Notwithstanding any other provision of this Section 6.20,
------------
Purchaser shall have the right pursuant to its ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy, at any
time to require that all Holders suspend further open market offers and sales of
Registrable Shares whenever, and for such period of time as there is material
undisclosed information or events with respect to Purchaser the disclosure of
which would be seriously detrimental to the Purchaser; provided, however, that
-------- -------
Purchaser shall also suspend further open market offers and sales of its shares
by those persons or entities then subject to Purchaser's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy.
Purchaser will promptly give the Holders notice of any such suspension.
(d) Expenses. Purchaser shall bear all costs and expenses for purposes of
--------
this Section 6.20, including, without limitation, printing expenses (including a
reasonable number of prospectuses for circulation by the selling Holders),
reasonable legal fees and disbursements of counsel for Purchaser and one counsel
for the selling Holders (up to $5,000), "blue sky" expenses, accounting fees and
--------
filing fees, but shall not include underwriting commissions or similar charges,
legal fees and disbursements of other counsel for the selling Holders.
(e) Indemnification.
---------------
(i) To the extent permitted by law, Purchaser will indemnify and hold
harmless each Holder, any underwriter (as defined in the Securities Act) for
such Holder, its officers, directors, stockholders or partners and each person,
if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (A) any untrue statement or alleged
---------
untrue statement of a material fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (B) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (C) any violation or alleged
violation by Purchaser of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and Purchaser will pay to each
such Holder, underwriter or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 6.20(e)(i) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of Purchaser; nor shall
Purchaser be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon (a) a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in the Registration Statement by any
such Holder, or (b) a Violation that would not have occurred if such Holder had
delivered to the purchaser the version of the Prospectus most recently provided
by Purchaser to the Holder as of the date of such sale.
(ii) To the extent permitted by law, each selling Holder, severally
and not jointly, will indemnify and hold harmless Purchaser, each of its
directors, each of its officers who has signed
the Registration Statement, each person, if any, who controls Purchaser within
the meaning of the Securities Act, any underwriter, any other Holder selling
securities pursuant to the Registration Statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages, or
liabilities to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation (which includes without limitation the
failure of the Holder to comply with the prospectus delivery requirements under
the Securities Act, and the failure of the Holder to deliver the most current
prospectus provided by Purchaser prior to such sale), in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in the Registration Statement or such Violation is caused by the Holder's
failure to deliver to the purchaser of the Holder's Registrable Shares a
prospectus (or amendment or supplement thereto) that had been made available to
the Holder by Purchaser; and each such Holder will pay any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 6.20(e)(ii) in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 6.20(e)(ii) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which consent
shall not be unreasonably withheld. The aggregate indemnification and
contribution liability of each Holder under this Section 6.20(e)(ii) shall not
exceed the net proceeds received by such Holder in connection with sale of
shares pursuant to the Registration Statement.
(iii) Each person entitled to indemnification under this Section
6.20(e) (the "Section 6.20 Indemnified Party") shall give notice to the party
------------------------------
required to provide indemnification (the "Section 6.20 Indemnifying Party")
-------------------------------
promptly after such Section 6.20 Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought and shall permit the Section 6.20
Indemnifying Party to assume the defense of any such claim and any litigation
resulting therefrom, provided that counsel for the Section 6.20 Indemnifying
Party who conducts the defense of such claim or any litigation resulting
therefrom shall be approved by the Section 6.20 Indemnified Party (whose
approval shall not unreasonably be withheld), and the Section 6.20 Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Section 6.20 Indemnified Party to give notice as
provided herein shall not relieve the Section 6.20 Indemnifying Party of its
obligations under this Section 6.20 unless the Section 6.20 Indemnifying Party
is materially prejudiced thereby. No Section 6.20 Indemnifying Party, in the
defense of any such claim or litigation, shall (except with the consent of each
Section 6.20 Indemnified Party) consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Section 6.20 Indemnified Party of a release
from all liability in respect to such claim or litigation. Each Section 6.20
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Section 6.20 Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(iv) To the extent that the indemnification provided for in this
Section 6.20(e) is held by a court of competent jurisdiction to be unavailable
to an Section 6.20 Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to herein, then the Section 6.20 Indemnifying Party,
in lieu of indemnifying such Section 6.20 Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Section 6.20 Indemnified Party
as a result of such loss, liability, claim, damage or expense in such proportion
as is appropriate to reflect the relative
fault of the Section 6.20 Indemnifying Party on the one hand and of the Section
6.20 Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations. The relative fault of the
Section 6.20 Indemnifying Party and of the Section 6.20 Indemnified Party shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Section 6.20 Indemnifying
Party or by the Section 6.20 Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(f) Current Public Information. Until the earlier of the first anniversary
--------------------------
of the Closing Date or the date all shares of Purchaser Stock subject to this
Section 6.20 have been sold, Purchaser will timely file all reports required to
be filed by it under the Exchange Act, and the rules and regulations adopted by
the Commission thereunder, all to the extent required to enable such Holders to
sell their shares pursuant to Rule 144 and the Registration Statement.
SECTION 6.21. Procedures for Sale of Shares Under Registration Statement.
----------------------------------------------------------
(a) Delivery of Prospectus. For any offer or sale of any of the Registrable
----------------------
Shares by a Holder in a transaction that is not exempt under the Securities Act,
the Holder, in addition to complying with any other federal securities laws,
shall deliver a copy of the final prospectus (or amendment of or supplement to
such prospectus) of Purchaser covering the Registrable Shares in the form
furnished to the Holder by Purchaser to the purchaser of any of the Registrable
Shares on or before the settlement date for the purchase of such Registrable
Shares.
(b) Copies of Prospectuses. Purchaser shall, upon the effectiveness of the
----------------------
Registration Statement and within two (2) trading days following any request,
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Shares, such prospectus shall
not as of the date of delivery to the Holder include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances under which they were made.
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.1. Offers to Employees. Purchaser will make offers of employment
-------------------
to all of Seller's employees other than those named on a list that has been
delivered by Seller and agreed to by Purchaser. The employees to whom offers
shall be made will be determined by Purchaser in its sole discretion. The offers
shall be at wage and benefit rates substantially the same as each employee's
most recent wages and benefits with Seller, and for employment commencing on the
first business day after the Closing Date. Seller agrees that, from the
Effective Date and continuing until the earlier of the Closing Date or the
termination of this Agreement according to its terms, Seller will provide
Purchaser with reasonable access to and the opportunity to meet and interview
each Employee.
SECTION 7.2. Employee Obligations of Seller.
------------------------------
(a) Seller and any subsidiaries thereof shall be liable for and
shall hold Purchaser and its affiliates harmless from, any and all liabilities
with respect to: (i) the employment by Seller or termination of employment by
Seller of any past, current or future employee or consultant of Seller or any of
its affiliates (collectively, "Seller Employees"); provided, that, subject to
----------------
the accuracy of Seller's representations and warranties herein, Purchaser, not
Seller, shall be liable for claims against Seller by a current employee of
Seller for wrongful termination of employment as a direct result of the
termination of employment by Seller of such employee solely because of the
consummation of the transactions contemplated hereby; (ii) any claims of
discrimination under state or federal law arising from a Seller Employee's
employment or service with or termination by Seller; (iii) any withholding or
employment and or wage Taxes with respect to any Seller Employees which accrue
or become payable during the period of such Seller Employee's employment or
service with Seller or any affiliate of Seller or arise out of the termination
of such person's employment with Seller or any affiliate of Seller; (iv) any
other claims or obligations arising out of the terms and conditions of
employment by Seller or any of its affiliates of any Seller Employee, whether
for salary, wages, bonuses, profit sharing, commissions, severance, vacation
pay, sick pay or otherwise; or (v) any duties or obligations of Seller or
administrators under any existing or future Seller Employee Plan. Seller shall
be responsible for filing all employment Tax returns with respect to Seller
Employees attributable to periods of employment or service with Seller or any
affiliate of Seller.
(b) Seller shall pay to all Seller Employees any liability for
accrued vacation, sick leave or similar accrued benefits with respect to such
Employees attributable to periods of employment or service with Seller,
consistent with Seller's policies and applicable law, shall make such payment
within the statutory time period therefore, and shall provide evidence to
Purchaser of such payment no later than two (2) business days prior to the
Closing Date; provided, however, that Purchaser shall on the Closing Date,
reimburse Seller with respect to Seller's actual payments of (i) bonuses with
respect to Seller's fiscal quarter ended December 31, 2001 up to a maximum
amount of $25,000, (ii) with respect to Seller's payment of its insurance
premiums or termination payments in connection with the termination of health
insurance plans up to a maximum of $30,000, (iii) with respect to Seller's
required payment of accrued vacation or other paid time off to Seller Employees
(other than ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, for which Purchaser
shall not be responsible) up to a maximum of $50,000 and (iv) severance
obligations for Employees not offered employment by Purchaser up to a maximum
amount of $100,000. Purchaser shall also reimburse Seller in the amount of
$355,000 with respect to Seller's payments to ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇ in full settlement of Seller's outstanding stock option obligations.
(c) Seller agrees to comply with the provisions of any statute or
regulation regarding termination of employment, plant closing or layoffs and to
perform all obligations required by Seller with respect to the cessation of any
operations of its business or the termination, re-assignment, re-location or
change in position of any Employee in connection with the transactions
contemplated hereby.
(d) Employee Obligations of Purchaser. Seller shall cause all Seller
---------------------------------
Employee Plans to terminate immediately prior to the Closing. Purchaser shall be
responsible for providing continuation coverage to Seller Employees terminated
in connection with the instant transaction as well as their beneficiaries and to
individuals who were beneficiaries under the Regulations under IRC Section 4980
B ("COBRA") and immediately prior to the Closing.
ARTICLE VIII
TAX MATTERS
SECTION 8.1. Transaction Taxes. Purchaser shall be responsible for,
-----------------
and shall defend, indemnify and hold harmless Seller from and against any and
all excise, value added, registration, stamp, property, documentary, transfer,
sales, use and similar Taxes, levies, charges and fees incurred, or that may be
payable to any taxing authority, in connection with, the transactions
contemplated by this Agreement or the Ancillary Agreements (collectively,
"Transaction Taxes"). To the extent Seller is required to remit such Taxes to
-----------------
the applicable taxing authority, Purchaser shall pay such Taxes to Seller within
ten (10) business days of Seller's request therefor, provided that such request
shall not be made more than ten (10) business days prior to the due date thereof
and that such request shall be accompanied by proper itemization and
documentation of such Taxes. Seller and Purchaser shall use all commercially
reasonable efforts to cooperate in order to minimize the Transaction Taxes and
any Taxes to be paid or withheld in connection with the transactions
contemplated by this Agreement or the Ancillary Agreements. The liability for
Transaction Taxes shall not be reflected on the Seller Balance Sheet, the
Purchaser Balance Sheet or the Effective Balance Sheet.
SECTION 8.2. Other Taxes. Notwithstanding anything herein to the
-----------
contrary, except as set forth in Section 8.1, Seller is and shall remain solely
responsible for all Taxes incurred by Seller (including, but not limited to,
Taxes for which Purchaser may become liable by reason of acquiring the Purchased
Assets) in periods or portions on or prior to the Closing Date ("Pre-Closing
-----------
Period"). Purchaser shall be solely responsible for all Taxes incurred by
------
Purchaser (including, but not limited to, Taxes for which Seller may become
liable by reason of having owned the Purchased Assets) in periods or portions
thereof beginning after the Closing Date ("Post-Closing Period"). Seller and
-------------------
Purchaser shall cooperate concerning all Tax matters relating to this division
of responsibility, including, but not limited to, the filing of Tax returns and
other governmental filings associated therewith.
SECTION 8.3. Straddle Period. In the case of Taxes that are payable
---------------
with respect to a taxable period that begins before the Closing Date and ends
after the Closing Date, the portion of any such Tax that is allocable to the
portion of the period ending on the Closing Date shall be:
(a) in the case of Taxes that are either (x) based upon or related
to income or receipts, sales, payroll or similar operating results or (y)
imposed in connection with any sale or other transfer or assignment of property
(other than the Transaction Taxes), deemed equal to the amount which would be
payable if the taxable year ended with the Closing Date; and
(b) in the case of Taxes imposed on a periodic basis with respect to
the Purchased Assets, deemed to be the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period) multiplied by a fraction the
numerator of which is the number of calendar days in the period ending on the
Closing Date and the denominator of which is the number of calendar days in the
entire period.
ARTICLE IX
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived by Purchaser in writing, except as
otherwise provided by law:
SECTION 9.1. Representations and Warranties True; Performance;
------------------------------------------------
Certificate.
-----------
(a) The representations and warranties of Seller and each
Stockholder contained in this Agreement shall be true and correct in all
material respects as of the Closing Date with the same effect as though such
representations and warranties had been made or given again at and as of the
Closing Date;
(b) Seller and each Stockholder shall have performed and complied
with all of its agreements, covenants and conditions required by this Agreement
to be performed or complied with by them prior to or on the Closing Date;
(c) The conditions set forth in this Article IX have been fulfilled
or satisfied, unless otherwise waived in writing by Purchaser; and
(d) Purchaser shall have received a certificate (the "Secretary's
-----------
Certificate of Seller"), dated as of the Closing Date, signed and verified by an
---------------------
officer of Seller on behalf of Seller certifying to the matters set forth in
Sections 9.1(a), 9.1(b) and 9.1(c) above.
SECTION 9.2. Consents. All Consents shall have been obtained;
--------
provided that obtaining the consent of Caldera under its DOS license agreement
--------
with StorageSoft shall not be a condition to the Closing.
SECTION 9.3. No Proceedings or Litigation.
----------------------------
(a) No preliminary or permanent injunction or other order shall have
been issued by any Governmental Entity, nor shall any statute, rule, regulation
or executive order be promulgated or enacted by any Governmental Entity which
prevents the consummation of the transactions contemplated by this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced and be pending against any of the
parties, or any of their respective Affiliates, associates, officers or
directors, seeking to prevent transactions contemplated by this Agreement,
including, without limitation, the sale of the Purchased Assets or asserting
that the sale of the Purchased Assets would be illegal or create liability for
damages or which may have a Material Adverse Effect on Seller's business or the
Purchased Assets.
SECTION 9.4. Documents. This Agreement, the exhibits and schedules
---------
attached hereto, the Ancillary Agreements, and any other instruments of
conveyance and transfer and all other documents to be delivered by Seller and
each Stockholder at the Closing and all actions of Seller and each Stockholder
required by this Agreement and the Ancillary Agreements, or incidental
thereto, and all related matters, shall be in form and substance reasonably
satisfactory to Purchaser and Purchaser's counsel and shall be in full force and
effect.
SECTION 9.5. Governmental Filings. The parties shall have made any
--------------------
required filing with governmental entities in connection with this Agreement and
the exhibit agreements, and any approvals related thereto shall have been
obtained or any applicable waiting periods shall have expired. If a proceeding
or review process by a Governmental Entity is pending in which a decision is
expected, Purchaser shall not be required to consummate the transactions
contemplated by this Agreement until such decision is reached or rendered,
notwithstanding Purchaser's legal ability to consummate the transactions
contemplated by this Agreement prior to such decision being reached or rendered.
SECTION 9.6. No Material Adverse Effect. Since the date of this
--------------------------
Agreement, there shall not have occurred any event or condition having a
Material Adverse Effect on the financial condition or results of operations of
Seller.
SECTION 9.7. Termination of Benefit Plans. Seller shall have provided
----------------------------
Purchaser with evidence, reasonably satisfactory to Purchaser, as to the
termination of all benefit plans and payments owing by Seller relating to all
Employees. Seller shall have obtained acknowledgements, in form reasonably
acceptable to Purchaser, of the termination of all of Seller's outstanding stock
options, including without limitation those held by ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇.
SECTION 9.8. Legal Opinions. Purchaser shall have received legal
--------------
opinions from each of Strategic Law Partners, LLP and ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC, each legal counsel to Seller, dated the Closing Date, in
a form satisfactory to Purchaser, addressing the matters described in Exhibit E
---------
hereto.
SECTION 9.9. Board and Shareholder Approval. The approval of this
------------------------------
Agreement and the transactions it contemplates by the Boards of Directors of
Seller and the Stockholders has not been rescinded and remains in full force and
effect.
SECTION 9.10. Escrow Agreement. Purchaser and Seller shall have
----------------
entered into an Escrow Agreement in substantially the form attached hereto as
Exhibit B, and such agreement shall remain in full force and effect.
---------
SECTION 9.11. Employment Agreements. Purchaser shall have entered into
---------------------
employment agreements, in the form attached hereto as Exhibit C-1, with each of
-----------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, which agreements shall remain in full force and
effect.
SECTION 9.12. Acceptance of Employment. 80% of Seller's Product
------------------------
Development and Technical Services Employees to whom Purchaser has made offers
of employment shall have accepted offers of employment from Purchaser. Seller
shall have obtained releases of claims, in form reasonably satisfactory to
Purchaser, from the Employees of Seller who do not receive offers of employment
from Purchaser or who are terminated prior to the Closing Date.
SECTION 9.13. Non-Competition Agreements. Purchaser shall have entered
--------------------------
into non-competition agreements, in the form attached here to as Exhibit C-2,
-----------
with Purchaser and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, which
agreements shall remain in full force and effect.
SECTION 9.14. Tax Certificate. Seller shall have delivered to Purchaser
---------------
affidavits or certificates necessary to exempt the transactions contemplated
hereby from application of Section 1445 of the Code, in form reasonably
satisfactory to Purchaser.
SECTION 9.15. Gateway. Purchaser and Gateway, Inc. shall have entered into
-------
a Patent License agreement, on terms reasonably satisfactory to Purchaser, with
respect to U.S. Patent Number 5,966,732 entitled: "Method and apparatus for
adding to the reserve area of a disk drive."
SECTION 9.16. Line of Credit. Seller shall have repaid any outstanding
--------------
balances on its line of credit, caused the related lien against the Purchased
Assets to have been removed, and provided evidence of the same to Purchaser no
later than two business days prior to the Closing.
ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in writing by Seller, except as
otherwise provided by law:
SECTION 10.1. Representations and Warranties True; Performance.
------------------------------------------------
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had been
made or given again at and as of the Closing Date;
(b) Purchaser shall have performed and complied with all of its agreements,
covenants and conditions required by this Agreement to be performed or complied
with by them prior to or on the Closing Date;
(c) The conditions set forth in this Article X have been fulfilled or
satisfied, unless otherwise waived by Seller.
(d) Seller shall have received a certificate (the "Secretary's Certificate
-----------------------
of Purchaser"), dated as of the Closing Date, signed and verified by an officer
------------
of Purchaser on behalf of Purchaser certifying to the matters set forth in
Sections 10.1(a), 10.1(b) and 10.1(c) above.
SECTION 10.2. No Proceeding or Litigation.
---------------------------
(a) No preliminary or permanent injunction or other order shall have been
issued by any Governmental Entity, nor shall any statute, rule, regulation or
executive order be promulgated or enacted by any Governmental Entity which
prevents the consummation of the transactions contemplated by this Agreement.
(b) No suit, action, claim, proceeding or investigation before any
Governmental Entity shall have been commenced and be pending against any of the
parties, or any of their respective Affiliates, associates, officers or
directors, seeking to prevent the sale of the Purchased Assets or asserting that
the sale of the Assets would be illegal or create liability for damages.
SECTION 10.3. Documents. This Agreement, any other instruments of
---------
conveyance and transfer and all other documents to be delivered by Purchaser to
Seller at the Closing and all actions of Purchaser required by this Agreement
and the Ancillary Agreements or incidental thereto, and all related matters,
shall be in form and substance reasonably satisfactory to Seller and Seller's
counsel.
SECTION 10.4. Governmental Filings. The parties shall have made any filing
--------------------
required with Governmental Entities, and any approvals shall have been obtained
or any applicable waiting periods shall have expired. If a proceeding or review
process by a governmental entity is pending in which a decision is expected,
Seller shall not be required to consummate the transactions contemplated by this
Agreement until such decision is reached or rendered, notwithstanding Seller's
legal ability to consummate the transactions contemplated by this Agreement
prior to such decision being reached or rendered.
ARTICLE XI
ESCROW AND INDEMNIFICATION
SECTION 11.1. Survival of Representations and Warranties. All covenants to
------------------------------------------
be performed prior to the Closing Date, and all representations and warranties
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the consummation of the transactions contemplated hereby and
continue until the one-year anniversary of the Closing Date (the "Escrow
------
Termination Date"); provided that if any claims for indemnification have been
----------------
asserted with respect to any such representations, warranties and covenants
prior to the Escrow Termination Date, the representations, warranties and
covenants on which any such claims are based shall continue in effect until
final resolution of any claims. All covenants to be performed after the Closing
Date shall continue indefinitely. As used in this Article XI, the term
"Purchaser Indemnitees" means and includes Purchaser and any present or future
---------------------
officer, director, employee, affiliate, stockholder or agent of Purchaser and
its successors and assigns. As used in this Article XI, the term "Seller
------
Indemnities" means and includes Seller and any present or future officer,
-----------
director, employee, affiliate, stockholder or agent of Seller and its successors
and assigns and the Stockholders.
SECTION 11.2. Indemnification.
---------------
(a) Indemnification by Seller. After the Closing, Seller and Stockholders
-------------------------
agree, subject to the other terms, conditions and limitations of this Agreement,
to indemnify the Purchaser Indemnitees against, and to hold the Purchaser
Indemnitees harmless from, all losses, costs, damages, liabilities, fees
(including without limitation attorneys' fees) and expenses (collectively, the
"Damages") arising out of, resulting from, caused by or attributable to:
-------
(i) the failure of any representation or warranty of Seller or
Stockholder, as applicable, contained in this Agreement (including any Schedule
or Exhibit hereto), to be true and correct as of the Effective Date or the
failure of any representation or warranty contained in the Ancillary Agreements
or the Secretary's Certificate of Seller to be delivered pursuant to Section
9.1(d) hereof, to be true and correct as of the Closing Date;
(ii) the breach or violation by Seller or Stockholder of any covenant
or agreement of Seller or Stockholder, as applicable, contained in this
Agreement (including any Schedule or Exhibit hereto) or the Ancillary Agreements
(other than the Employment Agreements);
(iii) except for the Assumed Liabilities, the operation or use of the
Purchased Assets or the operation of the business transferred hereby at any time
or times on or prior to the Closing Date;
(iv) any liabilities and costs associated with the failure by Seller
to comply with any applicable bulk sales laws, including, but not limited to
Taxes associated therewith; or
(v) any liability for Taxes arising from or relating to the
Purchased Assets and related business for the Pre-Closing Period (except for the
Transaction Taxes pursuant to Section 8.1 hereof).
(b) Indemnification by Purchaser. After the Closing, Purchaser agrees,
----------------------------
subject to the other terms, conditions and limitations of this Agreement, to
indemnify the Seller Indemnitees against, and to hold the Seller Indemnitees
harmless from, all Damages arising out of, resulting from, caused by or
attributable to:
(i) the failure of any representation or warranty of Purchaser
contained in this Agreement (including any Schedule or Exhibit hereto), to be
true and correct as of the Effective Date or the failure of any representation
or warranty contained in the Ancillary Agreements or the Secretary's Certificate
of Purchaser to be delivered pursuant to Section 10.1(d) hereof, to be true and
correct as of the Closing Date;
(ii) the breach or violation by Purchaser of any covenant or
agreement of Purchaser contained in this Agreement (including any Schedule or
Exhibit hereto) or the Ancillary Agreements;
(iii) the Assumed Liabilities or claims made for obligations arising
after the Closing Date that have been assumed by Purchaser hereunder;
(iv) the operation or use of the Purchased Assets or the operation of
the business transferred hereby at any time or times by Purchaser after the
Closing Date; or
(v) any liability for Taxes arising from or relating to the0
Purchased Assets and related business for the Post-Closing Period (including the
Transaction Taxes pursuant to Section 8.1 hereof).
SECTION 11.3. Third Party Claims.
------------------
(a) As used herein, an "Indemnified Party" means a Purchaser Indemnitee
-----------------
seeking indemnification pursuant to Section 11.2(a) hereof or a Seller
---------------
Indemnitee seeking indemnification pursuant to Section 11.2(b) hereof. The
---------------
Indemnified Party agrees to give the other party ("Indemnitor") prompt written
----------
notice of any event, or any claim, action, suit, demand, assessment,
investigation, arbitration or other proceeding by or in respect of a third party
(a "Third Party Claim") of which it has knowledge, for which such Indemnified
-----------------
Party is entitled to indemnification under this Article XI (including in any
case copies of any summons, complaint or other pleading
which may have been served on it and any written claim, demand, invoice, billing
or other document evidencing or asserting the same). No delay on the part of an
Indemnified Party in giving the Indemnitor notice of a Third Party Claim shall
relieve the Indemnitor from any obligation hereunder unless the Indemnitor is
prejudiced thereby.
(b) Within twenty days of delivery of such written notice, the Indemnitor
may, at the expense of the Indemnitor, elect to take all necessary steps
properly to contest any Third Party Claim or to prosecute such Third Party Claim
to conclusion or settlement satisfactory to the Indemnitor. If the Indemnitor
makes the foregoing election, an Indemnified Party will have the right to
participate at its own expense in all proceedings. If the Indemnitor does not
make such election, an Indemnified Party shall be free to handle the prosecution
or defense of any such Third Party Claim, will take all necessary steps to
contest the Third Party Claim or to prosecute such Third Party Claim to
conclusion or settlement satisfactory to such Indemnified Party, and will notify
the Indemnitor of the progress of any such Third Party Claim, will permit the
Indemnitor, at the sole cost of the Indemnitor, to participate in such
prosecution or defense and will provide the Indemnitor with reasonable access to
all relevant information and documentation relating to the Third Party Claim and
the prosecution or defense thereof. In any case, the party not in control of the
Third Party Claim will cooperate with the other party in the conduct of the
prosecution or defense of such Third Party Claim. Notwithstanding the foregoing,
if an Indemnified Party is offered a written settlement proposal by a third
party that has as its sole component the payment of money by the Indemnified
Party and the Indemnitor recommends to the Indemnified Party in writing that it
accept such settlement proposal (the "Sanctioned Settlement") and the
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Indemnified Party refuses to accept such settlement proposal, in such event if
the ultimate settlement terms agreed to by the Indemnified Party with such third
party or the final monetary damages award against the Indemnified Party (either,
a "Final Settlement Amount"), is greater than the amount of the Sanctioned
-----------------------
Settlement, the Indemnified Party shall be responsible for the differential
between the Final Settlement Amount and the Sanctioned Settlement and the
Indemnitor's liability shall be limited to the amount specified in the
Sanctioned Settlement.
SECTION 11.4. Damages Threshold.
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(a) Limits on Seller Indemnification. Notwithstanding the foregoing,
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Purchaser Indemnitees may not receive any amount of the Escrow Consideration
from the Escrow Fund unless and until a certificate signed by an officer of
Purchaser (an "Officer's Certificate") identifying Damages in the aggregate
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amount in excess of $100,000 has been delivered to the Escrow Agent and such
amount is determined pursuant to this Article XI to be payable, in which case
Purchaser shall receive Escrow Consideration equal in value to the full amount
of such Damages without deduction. In determining the amount of any Damages
attributable to a breach, any materiality standard contained in a
representation, warranty or covenant of Seller or Stockholder shall be
disregarded. Neither Seller nor the Stockholders shall be required to provide
indemnification under Article XI hereof in excess of an aggregate ceiling
(excluding interest and the costs of enforcing Seller's obligations under this
Article XI, including legal fees, and excluding the costs of obtaining any tax
benefits or insurance proceeds related to the Damages) equal to $1,200,000 (the
amount deposited into the Escrow Fund at Closing); provided, that any
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calculation of Damages to be paid under this Article XI shall be net of any
related tax benefit to Purchaser after taking the indemnification payment into
account, and net of any insurance proceeds received by Purchaser in satisfaction
of such Damages.
(b) Limits on Purchaser Indemnification. Notwithstanding the foregoing,
-----------------------------------
Purchaser shall not be required to provide indemnification under Article XI
hereof unless and until the aggregate Damages for which one or more Seller
Indemnitees seeks indemnification thereunder exceeds an aggregate of $100,000,
in which event Purchaser shall be liable to indemnify the Seller Indemnitees for
the aggregate Damages without deduction. In determining the amount of any
Damages attributable to a breach, any materiality standard contained in a
representation, warranty or covenant of Purchaser shall be disregarded.
Purchaser shall not be required to provide indemnification under Section 11.2(b)
in excess of an aggregate ceiling (excluding interest and the costs of enforcing
Purchaser's obligations under this Article XI, including legal fees, and
excluding the costs of obtaining any tax benefits or insurance proceeds related
to the Damages) equal to $1,200,000; provided, that any calculation of Damages
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to be paid under this Article XI shall be net of any related tax benefit to
Seller or the Stockholders after taking the indemnification payment into
account, and net of any insurance proceeds received by Seller or the
Stockholders in satisfaction of such damages.
SECTION 11.5. Escrow Period. Subject to the following requirements, the
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Escrow Consideration shall be retained by the Escrow Agent until the Escrow
Termination Date. Upon the Escrow Termination Date, the Escrow Agent shall
deliver to StorageSoft all remaining Escrow Consideration; provided, however,
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that amounts held by the Escrow Agent, which, in the reasonable judgment of
Purchaser, subject to the objection of the Escrow Agent and the subsequent
arbitration of the claim in the manner provided in the Escrow Agreement, is
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate delivered to the Escrow Agent prior to the Escrow Termination Date
with respect to facts and circumstances existing on or prior to the Escrow
Termination Date shall remain in the possession of the Escrow Agent until such
claims have been resolved. As soon as all such claims have been resolved, any
remaining amounts held by the Escrow Agent not required to satisfy such claims
shall be distributed to StorageSoft.
SECTION 11.6. Claims Upon Escrow Fund.
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(a) All claims for indemnification against the Escrow Fund by the Purchaser
or any other Indemnified Person pursuant to this Article XI shall be made in
accordance with the provisions of the Escrow Agreement. Upon receipt by Escrow
Agent at any time on or before the Escrow Termination Date of an Officer's
Certificate of Purchaser: (i) stating that Purchaser Indemnitee has paid or
reasonably anticipates that it will have to pay or incur Damages in excess of
$100,000, and (ii) specifying in reasonable detail the individual items of
Damages included in the amount so stated, the date each such item was paid or
incurred, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
Escrow Agent shall, subject to the provisions of Section 11.6(c) below, deliver
to Purchaser Indemnitee out of the Escrow Fund, as promptly as practicable, cash
or other assets held in the Escrow Fund in an amount equal to such Damages.
(b) Objections to Claims. At the time of delivery of any Officer's
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Certificate to Escrow Agent, a duplicate copy of such certificate shall be
delivered to Seller and for a period of 30 days after receipt of the Officer's
Certificate, Escrow Agent shall make no delivery to Purchaser Indemnitee from
the Escrow Fund pursuant to Section 11.6(a) hereof unless Escrow Agent shall
have received written authorization from Seller to make such delivery. After the
expiration of such 30 day period, Escrow Agent shall make delivery from the
Escrow Fund in accordance with Section 11.6(a) hereof, provided that no such
payment or delivery may be made if Seller shall object
in a written statement to the claim made in the Officer's Certificate, and such
statement shall have been delivered to Escrow Agent and Purchaser prior to the
expiration of such 30 day period.
(c) Resolution of Conflicts; Arbitration.
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(i) In case Seller shall object in writing to any claim or claims
made in any Officer's Certificate, Seller and Purchaser shall attempt in good
faith to agree upon the rights of the respective parties with respect to each of
such claims within 45 days after Escrow Agent's receipt of Seller's written
objection to the claim pursuant to Section 11.6(b) (the "Negotiation Period").
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If Seller and Purchaser should so agree during the Negotiation Period, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to Escrow Agent. Escrow Agent shall be entitled
to rely on any such memorandum and distribute the Escrow Consideration and any
interest from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement has been reached by the end of the
Negotiation Period, either Purchaser or Seller may demand arbitration of the
matter unless the amount of the Damages is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced until such amount
is ascertained by settlement or a non-appealable decision of a court of
competent jurisdiction or both parties agree to arbitration; and in either such
event the matter shall be settled by arbitration conducted by a single
arbitrator, selected by mutual agreement of the parties or otherwise in
accordance with the then prevailing rules of the American Arbitration
Association as adopted by the State of California. The arbitration shall be
conducted in the City of San Jose, California. The written decision of the
arbitrator as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 11.6(c) hereof, Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance therewith. The arbitrator shall award
reimbursement to the prevailing party in the arbitration of its reasonable
expenses of the arbitration (including costs and reasonable attorneys' fees).
The award of the arbitrator shall be the sole and exclusive monetary remedy of
the parties and shall be enforceable in any court of competent jurisdiction.
Notwithstanding the foregoing, any party shall be entitled to seek injunctive
relief or other equitable remedies from any court of competent jurisdiction.
SECTION 11.7. Exclusive Remedy. Notwithstanding anything to the contrary
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herein, if the Closing shall occur, the right of indemnity under this Article XI
(together with the limitations thereto set forth in this Article XI) shall, in
the absence of fraud, be the sole and exclusive remedy of each of the parties
hereto for damages against any of the other parties hereto and any other remedy
available at law against any of the other parties hereto, in respect to any
misrepresentation, breach of representation or warranty, breach of covenant or
any agreement by any party under this Agreement or the Ancillary Agreements.
Further, notwithstanding anything to the contrary herein, if the Closing shall
occur, none of Seller or any Stockholder shall have any liability under this
Article XI except to the extent of the Escrow Fund established pursuant to the
Escrow Agreement. Notwithstanding anything to the contrary herein, nothing in
this Article XI shall restrict or limit the rights of the parties to damages or
other remedies, in contract, at law or otherwise, if the Closing does not occur.
ARTICLE XII
TERMINATION
SECTION 12.1. Termination of Agreement. This Agreement may be terminated at
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any time prior to the Closing:
(a) By mutual written consent of Purchaser and Seller;
(b) By either Purchaser or Seller, if the other party goes into
liquidation, has an application or order made for its winding up or dissolution,
has a resolution passed or steps taken to pass a resolution for its winding up
or dissolution, becomes unable to pay its debts as and when they fall due, or
has a receiver, receiver and manager, administrator, liquidator, provisional
liquidator, official manager or administrator appointed to it or any of its
assets; or
(c) By Purchaser or Seller if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; or
(d) By Purchaser or Seller if the Closing does not occur by February 28,
2002.
SECTION 12.2. Procedure and Effect of Termination. In the event of
-----------------------------------
termination of this Agreement by any or all of the parties pursuant to Section
12.1, written notice shall be given to each other party specifying the provision
of Section 12.1, pursuant to which such termination is made and shall become
void and there shall be no liability on the part of Purchaser or Seller (or
their respective officers, directors, partners or Affiliates), except as a
result of any breach of this Agreement by such party.
ARTICLE XIII
GENERAL PROVISIONS
SECTION 13.1. Expenses. Except as otherwise provided herein, all costs and
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expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.
SECTION 13.2. Notices. All notices, requests, claims, demands and other
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communications hereunder shall be in writing and shall be given or made by
delivery in person, by courier service, by telecopy (confirmed in writing), or
by registered or certified mail (postage prepaid, return receipt requested), and
shall be deemed to have been duly given or made upon actual delivery, or if
mailed by registered or certified mail, on the third business day following
deposit in the mails, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Seller:
StorageSoft Corporation
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Attention: President and CEO
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Strategic Law Partners, LLP
Biltmore Tower
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: 213) 213-7301
(b) if to Purchaser:
Phoenix Technologies Ltd.
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Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(c) if to a Stockholder, to such Stockholder in care of StorageSoft at its
address listed above.
SECTION 13.3. Headings; Disclosure. The headings contained in this
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Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 13.4. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 13.5. Entire Agreement. This Agreement, the Ancillary Agreements,
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and the Non-Disclosure Agreement dated August 16, 2001 between Purchaser and
StorageSoft, constitute the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings with respect to the subject matter hereof, both
written and oral.
SECTION 13.6. Assignment. This Agreement shall not be assigned by
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Purchaser or Seller without the prior written consent of the non-assigning
party; provided, however, that Purchaser may assign all or a portion of its
rights and obligations hereunder to one or more affiliates that control or are
under common control with Purchaser, and provided further, that any such
assignment shall not relieve Purchaser of its obligations hereunder; and
provided further, that after the Closing Date, Seller may assign its rights and
obligations to the Stockholders, jointly and severally, upon the liquidation of
Seller. Any purported assignment not permitted by this Section shall be void.
SECTION 13.7. No Third-Party Beneficiaries. This Agreement is for the sole
----------------------------
benefit of the parties hereto and their permitted assigns and nothing herein,
express or implied, is intended to or shall confer upon any other person or
entity, including but not limited to any Employee, any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
No statement, reference or disclosure set forth in this Agreement, the Ancillary
Agreements or the exhibits or schedules thereto constitutes an admission
(express or implied) of any liability or obligation of the parties hereto to any
third party, nor an admission (express or implied) against any such party's
interests. Notwithstanding the above, the Indemnified Persons shall be
third-party beneficiaries of this Agreement.
SECTION 13.8. Amendment; Waiver. This Agreement may not be amended or
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modified except by an instrument in writing signed by Seller and Purchaser.
Waiver of any term or condition of this Agreement shall only be effective if in
writing and shall not be construed as a waiver of any subsequent breach or
waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement.
SECTION 13.9. Governing Law; Jurisdiction and Venue. This Agreement shall
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be governed by, and construed in accordance with, the internal laws of the State
of California. Each party irrevocably consents to submit to the exclusive
jurisdiction of any federal or state court located in the State of California,
County of Santa ▇▇▇▇▇, for any lawsuits, actions or proceedings with respect to
this Agreement or the transactions contemplated hereby.
SECTION 13.10. Counterparts. This Agreement may be executed in one or more
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counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 13.11. Performance Guaranty by Stockholders. Each of the
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Stockholders, jointly and severally, hereby guaranties each and every obligation
of Seller under this Agreement. Each of the Stockholders agrees to use his
commercially reasonable efforts to cause Seller to perform each and every
obligation of Seller under this Agreement. With respect to Seller's and the
Stockholders' obligations hereunder that arise after the Closing Date,
Purchaser's right of indemnity under Article XI (together with the limitations
thereto set forth in Article XI) and only to the extent of the Escrow Fund
pursuant to the Escrow Agreement shall, in the absence of fraud, be the sole and
exclusive remedy of Purchaser in respect of the guarantee obligations of each
Stockholder pursuant to this Section 13.11.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
Phoenix Technologies Ltd.
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
StorageSoft, Inc.
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
StorageSoft Solutions, Inc.
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
StorageSoft B V
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
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