EXH. 10.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 10, 2000
BY AND BETWEEN
FRONT PORCH DIGITAL INC.
AND
STORAGE TECHNOLOGY CORPORATION
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Table of Contents
(Not part of the Agreement)
PAGE NO.
ARTICLE I CERTAIN DEFINITIONS................................................1
ARTICLE II PURCHASE AND SALE OF ASSETS; PURCHASE PRICE.......................8
2.01 Sale of the Acquired Assets.......................................8
2.02 Excluded Assets...................................................9
2.03 Liabilities.......................................................9
2.04 Purchase Price...................................................10
2.05 Purchase Price Adjustment........................................10
2.06 Treatment of Purchase Price......................................11
ARTICLE III CLOSING AND PAYMENT OBLIGATION..................................12
3.01 Closing..........................................................12
3.02 Deliveries by Seller.............................................12
3.03 Deliveries by Purchaser..........................................13
ARTICLE IV ADDITIONAL AGREEMENTS............................................14
4.01 Agreement Not to Compete and to Maintain Confidentiality.........14
4.02 Investigation....................................................16
4.03 Conduct of the Business Pending the Closing......................17
4.04 Taxes, Fees and Expenses.........................................19
4.05 Employees........................................................19
4.06 Purchaser to be Exclusive Provider...............................20
4.07 Maintenance of Books and Records.................................21
4.08 Bulk Sales Law...................................................21
4.09 [Reserved].......................................................21
4.10 Website links....................................................21
4.11 Further Cooperation..............................................21
4.12 Continued Commission Payments by the Seller and Related Matters..21
4.13 Purchaser's Board of Directors...................................23
4.14 Software Escrow Agreement........................................23
4.15 The Seller's Employees...........................................23
4.16 Continuing Use of Information....................................23
4.17 Effect of Release Event..........................................24
4.18 License to use Non-Business Software Products....................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER......................24
5.01 Organization.....................................................24
5.02 Investment Representations.......................................24
5.03 Authorization....................................................25
5.04 Valid and Binding................................................25
5.05 No Violation.....................................................25
5.06 Consents and Approvals...........................................26
5.07 Financial Data...................................................26
5.08 Interim Operations...............................................26
5.09 Undisclosed Liabilities..........................................27
5.10 Taxes............................................................28
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Table of Contents
(Not part of the Agreement)
PAGE NO.
5.11 Condition of Property............................................28
5.12 Contracts and Commitments........................................28
5.13 Intellectual Property and Technology.............................29
5.14 Title to the Acquired Assets.....................................31
5.15 Environmental Matters............................................31
5.16 [Reserved].......................................................32
5.17 Employees and Labor Relations....................................32
5.18 Licenses; Permits................................................33
5.19 Litigation.......................................................33
5.20 Court Orders, Decrees, and Laws..................................33
5.21 [Reserved].......................................................33
5.22 Customers........................................................33
5.23 Post June 2000 Revenue...........................................33
5.24 Broker's Fees....................................................33
5.25 Related-Party Transactions.......................................34
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER......................34
6.01 Corporate Organization; Due Authorization........................34
6.02 Capitalization...................................................34
6.03 Authority and Validity...........................................35
6.04 Financial Statements.............................................35
6.05 Proprietary Rights...............................................35
6.06 Material Contracts and Obligations...............................35
6.07 Consents and Approvals of Governmental Authorities...............36
6.08 No Violation.....................................................36
6.09 Compliance with Other Instruments................................36
6.10 Registration Rights..............................................36
6.11 Board of Directors...............................................36
6.12 Employee Compensation Plans......................................37
6.13 Broker's Fees....................................................37
6.14 Litigation.......................................................37
6.15 Employees of the Seller..........................................37
6.16 Disclosure.......................................................37
6.17 Environmental Matters............................................37
ARTICLE VII CONDITIONS OF CLOSING; CERTAIN COVENANTS........................38
7.01 Conditions Precedent to the Obligations of Purchaser Hereunder...38
7.02 Conditions Precedent to the Obligations of the Seller Hereunder..39
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION....40
8.01 Survival of Representations and Warranties.......................40
8.02 Notice of Damages................................................40
8.03 Agreements to Indemnify..........................................41
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Table of Contents
(Not part of the Agreement)
PAGE NO.
8.04 Conditions of Indemnification of Third Party Claims..............41
8.05 Limitations on Indemnification...................................42
ARTICLE IX TERMINATION......................................................43
9.01 Termination of Agreement.........................................43
9.02 Effect of Termination............................................43
ARTICLE X MISCELLANEOUS PROVISIONS.........................................44
10.01 Expenses.........................................................44
10.02 Notices..........................................................44
10.03 Binding; No Assignment...........................................45
10.04 Severability.....................................................45
10.05 Governing Law; Consent to Jurisdiction and Venue.................45
10.06 Counterparts.....................................................46
10.07 Headings.........................................................46
10.08 Entire Agreement; Amendment; Waiver..............................46
10.09 Third Parties....................................................46
10.10 Publicity........................................................46
10.11 No Presumption...................................................46
10.12 Gender; Tense, Etc...............................................47
10.13 Reference to Days................................................47
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EXHIBITS
--------
Exhibit 3.02(a) Form of Bill of Sale for Tangible Property
Exhibit 3.02(b) Form of Bill of Sale for Intangible Property
Exhibit 3.02(c) Form of Assignment and Assumption Agreement
Exhibit 3.02(h) Form of Transition Services Agreement
Exhibit 3.03(e)(i) Form of Employment Agreement for Dr. Giancarlo Gaggero
Exhibit 3.03(e)(ii) Form of Employment Agreement for Edward Ladd
Exhibit 3.03(h) Form of Registration Rights Agreement
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SCHEDULES
Schedule 1.01(a) Owned Tangible Property
Schedule 1.01(b) Leased Tangible Property
Schedule 1.01(c) Inventory
Schedule 1.01(d) Prepaid Expenses and Deposits
Schedule 1.01(e) Intellectual Property
Schedule 1.01(f) Subsisting Contracts
Schedule 2.03(a) Assumed Liabilities
Schedule 2.04(b) Stock Legends
Schedule 2.05(a) Seller's Closing Statement
Schedule 3.02(i) List of Revenues Invoiced or Invoice Requested
Schedule 4.05 List of Employees
Schedule 5.07 Financial Data
Schedule 5.08 Interim Operations
Schedule 5.12 Contracts & Commitments (Exceptions)
Schedule 5.13 Intellectual Property and Technology
Schedule 5.17(b) Employees and Labor Relations (Employees)
Schedule 6 Purchaser Disclosures
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ASSET PURCHASE AGREEMENT, dated as of October 10, 2000, by and between
FRONT PORCH DIGITAL INC., a Nevada corporation ("Purchaser"), and STORAGE
TECHNOLOGY CORPORATION, a Delaware corporation ("the Seller").
WHEREAS, a discrete business of the Seller is providing media conversion
and other media-related services, including, but not limited to, tape, disk and
optical recovery, duplication, data conversion and archiving services; and
WHEREAS, the Seller desires to sell and Purchaser desires to purchase
substantially all of the assets used and useful in the operation of such
business upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used in this Agreement each of the following terms shall have the
following meaning:
"ACQUIRED ASSETS" shall mean the following assets, properties and rights of
the Seller pertaining to the Business, with such additions thereto or deletions
therefrom as may be permitted by the terms of this Agreement:
(a) the Owned Tangible Property relating to the Business, as listed and
described on SCHEDULE 1.01(a) hereto, and the Seller's rights under all related
warranties;
(b) all of the Seller's interest in the Leased Tangible Property
relating to the Business, as listed and described on SCHEDULE 1.01(b) hereto;
(c) the inventory of the Seller relating to the Business, as listed and
described on SCHEDULE 1.01(c) hereto (the "Inventory");
(d) the prepaid expenses and deposits relating to the Business, as
listed and described on SCHEDULE 1.01(d) hereto;
(e) the Intellectual Property of the Seller relating to the Business
(other than the Non-Business Software Products), as listed and described on
SCHEDULE 1.01(e) hereto, all of the Seller's right, title and interest in, to
and under the Licensed Intellectual Property relating to the Business, as listed
and described on Schedule 1.01(e) hereto and the right to use the Non-Business
Software Products currently used in the Business, as listed and described on
SCHEDULE 1.01(e);
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(f) all of the Seller's rights and interest in, to and under the
Subsisting Contracts relating to the Business, as listed on SCHEDULE 1.01(f),
including without limitation the rights to the revenues described in
subparagraph (k) in this definition of Acquired Assets;
(g) all customer, lead, mailing, circulation, purchaser and all other
lists, correspondence and other files, computerized records and related
documentation used in connection therewith, accounts, books and records relating
to the Business and located at the headquarters of the Business in Houston,
Texas (including without limitation those relating to (x) the Transferred
Employees, (y) the purchase of materials, supplies or services relating to the
Business, and (z) the production and sale of products or services));
(h) all claims (including but not limited to claims under the Seller's
insurance policies), causes of action and choses in action of the Seller arising
primarily from or relating primarily to the Business;
(i) [Reserved]
(j) [Reserved]
(k) all revenues, including development fees, generated by and allocable
to the Business and recognizable by the Seller under accrual-based accounting
procedures from and including July 1, 2000 to and including the Closing Date and
allocable to work performed by the Seller after June 30, 2000, whether from
contracts signed or projects commenced before or after July 1, 2000 or
otherwise; provided, however, that Purchaser shall not be entitled to any
revenues generated prior to the Closing Date by the "Intel Phase II" project;
and
(l) any and all proceeds arising from casualty insurance claims relating
to the Acquired Assets paid to the Seller on or after the date hereof.
"AFFILIATE" shall mean an affiliate of a Person, as the term "affiliate" is
defined in the rules and regulations promulgated under the Securities Act of
1933, as amended.
"AGREEMENT" shall mean this Asset Purchase Agreement and all schedules and
exhibits hereto.
"ASSUMED LIABILITIES" shall have the meaning ascribed to such term in
Section 2.03(a).
"AUDIT" shall mean any audit, assessment of Taxes, any other examination or
claim by any Tax Authority, judicial, administrative or other proceeding or
litigation (including any appeal of any such judicial, administrative or other
proceeding or litigation) relating to Taxes and/or Tax Returns.
"BANKRUPTCY EXCEPTIONS" as such term relates to the enforceability of any
agreement or commitment, shall have the meaning ascribed to such term in Section
5.04.
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"BENEFIT PLANS" shall mean employee benefit plans under Section 3(3) of
ERISA and any other employment, consulting, bonus, deferred compensation,
incentive compensation, severance, termination or post-employment pay,
disability, hospitalization or other medical, dental, vision, life or other
insurance, stock purchase, stock option, stock appreciation, stock award,
pension, profit sharing, 401(k) or retirement plan, agreement or arrangement,
and each other employee benefit plan or arrangement arising out of the
employment or the termination of an employee, former employee, retiree or sales
personnel by the Seller, whether written or oral, tax-qualified under the Code
or non-qualified, whether covered by ERISA or not, maintained or contributed to
by the Seller covering its employees, former employees, retirees or sales
personnel.
"BUSINESS" shall mean the media services business of Seller, the
headquarters of which is located at 5833 Westview Drive, Houston, Texas 77055,
and which includes approximately 20 full-time employees; such business includes
(i) the provision of various services to customers (including the Seller)
relating to data storage media both in the United States and in other countries,
such as conversion of data from one type of media to another, duplication of
data, data refreshing and data archiving, and (ii) the development, use and
support of software and other tools that are used to perform such services.
"CHANGE OF CONTROL" shall mean any of the following events: (i) a merger or
consolidation of Purchaser with or into another company, with respect to which
less than a majority of the outstanding voting power of the surviving or
consolidated company is held by stockholders of Purchaser immediately prior to
such event, (ii) the sale or transfer of all or substantially all of the
properties and assets of Purchaser and its consolidated subsidiaries, (iii) any
purchase by any party (or group of affiliated parties) of shares of capital
stock of Purchaser (either through a negotiated stock purchase or a tender for
such shares), the effect of which is that such party (or group of affiliated
parties) that did not beneficially own a majority of the voting power of the
outstanding shares of capital stock of Purchaser immediately prior to such
purchase beneficially owns at least a majority of such voting power immediately
after such purchase or (iv) the redemption or repurchase of shares representing
a majority of the voting power of the outstanding shares of capital stock of
Purchaser.
"CLOSING" shall have the meaning ascribed to such term in Section 3.01.
"CLOSING DATE" shall have the meaning ascribed to such term in Section
3.01.
"CLOSING STATEMENT" shall mean a statement of Net Assets of the Business,
prepared in accordance with generally accepted accounting principles
consistently applied.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPUTER EQUIPMENT" shall mean the computer equipment, devices and
accessories (including personal computers, workstations, servers, data
processing hardware and related telecommunications equipment, media and tools)
used in the Business.
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"DAMAGES" shall have the meaning ascribed to such term in Section 8.03(a).
"EMPLOYEE" shall have the meaning ascribed to such term in Section 5.17(b).
"ENCUMBRANCE" shall mean any claim, mortgage, pledge, lien, security or
other third party right or interest of any kind whatsoever, conditional sales
agreement, option, encumbrance or charge of any kind affecting real or personal
property.
"ENVIRONMENTAL CLAIMS" shall mean any and all claims, actions, causes of
action, or other written notices by any Person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or civil or criminal penalties) arising out
of or resulting from (i) circumstances forming the basis of any violation of any
Environmental Laws or (ii) any releases of Hazardous Materials at any real or
personal property presently or formerly owned, leased or managed by the Seller
or at any disposal facility which may have received Hazardous Materials
generated by the Seller.
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state, local or
foreign law, treaty, judicial decision, regulation, rule, judgment, order,
decree, injunction, permit or governmental restriction, each as in effect on or
prior to the Closing Date, relating to the environment, safety or health.
"ENVIRONMENTAL PERMITS" shall mean Permits required by Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXCLUDED ASSETS" shall have the meaning ascribed to such term in Section
2.02.
"EXCLUDED BENEFIT PLANS" shall have the meaning ascribed to such term in
Section 2.02(b).
"EXCLUDED LIABILITIES" shall have the meaning ascribed to such term in
Section 2.03(b).
"FINANCIAL DATA" shall have the meaning ascribed to such term in Section
5.07.
"FINANCIAL STATEMENTS" shall have the meaning ascribed to such term in
Section 6.04.
"FRONT PORCH COMMON STOCK" shall have the meaning ascribed to such term in
Section 2.04(b).
"HAZARDOUS MATERIALS" shall include (a) any element, compound, or chemical
that is defined, listed or otherwise classified as a contaminant, pollutant,
toxic pollutant, toxic or
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hazardous substance, extremely hazardous substance or chemical, hazardous waste,
biohazardous or infectious waste, special waste, or solid waste under
Environmental Laws; (b) petroleum, petroleum-based or petroleum-derived
products; (c) polychlorinated biphenyls; (d) any substance exhibiting a
hazardous waste characteristic including but not limited to corrosivity,
ignitability, toxicity or reactivity as well as any radioactive or explosive
materials; and (e) any asbestos-containing materials.
"INTELLECTUAL PROPERTY" shall mean all intellectual property and all rights
therein, whether common law, statutory or otherwise, domestic and foreign, and
all registrations and registration applications for any such rights, including
without limitation:
(a) United States Letter Patent, any patents, reissues, divisions,
continuations, continuations-in-part, reexaminations, renewals, extensions and
substitutes thereof, any applications thereof, and all foreign counterparts
thereof (including, in the case of patent applications, international or
multi-national applications filed in accordance with Chapter II of the Patent
Cooperation Treaty or any other multi-lateral agreement);
(b) service marks, trademarks, trade names, brands, product and service
names, logos and other distinctive identifications used in commerce, whether in
connection with products or services, together with all goodwill related to any
of the foregoing;
(c) copyrights;
(d) computer programs, computer databases, software and related systems
(including, in all cases, both source and object code) and other Technology and
the copyright in any fixations of the Technology; and
(e) Proprietary Information and the copyright in any fixations of the
Proprietary Information.
"INVENTORY" shall have the meaning ascribed to such term in the definition
of Acquired Assets in Article I.
"LEASED TANGIBLE PROPERTY" shall mean Computer Equipment and other
machinery, furniture, equipment and other tangible personal property that is
subject to a leasehold interest held by the Seller.
"LICENSED INTELLECTUAL PROPERTY" shall mean Intellectual Property that the
Seller uses or has the right to use pursuant to Third Party Licenses.
"MATERIAL ADVERSE EFFECT" shall mean an effect on the business, financial
condition or results of operations of the Seller which effect, either
individually or when aggregated with other such effects, is adverse and
material.
"NET ASSETS" shall have the meaning provided such term in Section 2.05(c).
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"NON-BUSINESS SOFTWARE PRODUCTS" shall mean the software owned by the
Seller, including the internal microcode that is imbedded in the Seller's
hardware products, that is licensed by the Seller to others outside of the
Business.
"NON-OWNED INTELLECTUAL PROPERTY" shall mean (a) Licensed Intellectual
Property and (b) Intellectual Property that is publicly available for use
without restriction or obligation of any kind to any other Person.
"OFFERING MEMORANDUM" shall have the meaning provided such term in Section
5.02(d).
"OWNED INTELLECTUAL PROPERTY" shall mean Intellectual Property (i) created
or developed by employees of the Seller or (ii) to which the Seller has
acquired, by purchase, assignment or other transfer the unconditional,
unrestricted, exclusive right to control or prevent any and all use of such
Intellectual Property by others without the consent or approval of or payment
to, any other Person.
"OWNED TANGIBLE PROPERTY" shall mean Computer Equipment and other
machinery, furniture, equipment and other tangible personal property owned by
the Seller.
"PERMIT" shall mean any license, franchise, permit, consent, order,
approval, authorization or registration from, of or with a governmental entity.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization and governmental entity or any department, agency or
political subdivision thereof.
"POST CLOSING PAYMENT" shall have the meaning provided such term in Section
2.05(d).
"PROPRIETARY INFORMATION" shall mean technical, commercial, marketing or
other information, data and material of the kind normally considered to be
confidential or proprietary in nature, including without limitation, any
process, design, formula, know-how, information, invention, trade secret,
Technology, or research, marketing or other data which has not entered the
public domain.
"PURCHASE PRICE" shall have the meaning provided such term in Section 2.04.
"REAL PROPERTY" means the real property subject to the Real Property Lease
and Seller's leasehold interest in such property.
"REAL PROPERTY LEASE" shall have the meaning ascribed to such term in
Section 5.12(b).
"RELATED DOCUMENTS" shall mean all other agreements, instruments, documents
and certificates to be executed and delivered pursuant to this Agreement.
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"RELEASE" shall mean any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, dumping, or disposing of
Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into the
environment in violation of any applicable Environmental Law.
"RELEASE EVENT" shall have the meaning provided such term in Section 4.14.
"REPRESENTATIVES" shall mean, with respect to any Person, such Person's
attorneys, accountants or other agents or employees.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SOFTWARE PRODUCTS" shall mean the computer software programs licensed by
the Seller to others as part of the Business.
"SUBSIDIARY" shall mean with respect to any Person, each entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"SUBSISTING CONTRACT" shall mean any contract, agreement, commitment, lease
or restriction of any kind to which the Seller is a party or by which the Seller
is bound or to which any of the Seller's assets are subject, including without
limitation Third Party Licenses and Benefit Plans.
"TANGIBLE PROPERTY" shall mean the Owned Tangible Property and the Leased
Tangible Property.
"TANGIBLE PROPERTY LEASES" shall mean any Subsisting Contract granting a
right to use Leased Tangible Property.
"TAX" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, wage, employment, excise, utility, communications,
production, occupancy, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, capital levy, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including, without limitation, penalties, additions to tax, and interest
attributable thereto (together with any interest on any such interest, penalties
and additions to tax).
"TAX AUTHORITY" shall mean the Internal Revenue Service ("IRS") and any
other domestic or foreign authority responsible for the administration of any
Taxes.
"TAX LAWS" shall mean the Code, federal, state, county, local or foreign
laws related to Taxes and any regulations or official administrative
pronouncements released thereunder.
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"TAX RETURNS" shall mean all original and amended federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms and
information returns relating to Taxes.
"TAXABLE PERIOD" means any taxable year or any other period that is treated
as a taxable year with respect to which any Tax may be imposed under any
applicable statute, rule or regulation.
"TECHNOLOGY" shall mean all formulae; algorithms; processes; procedures;
designs; ideas; concepts; strategic, business and other plans; research;
inventions and invention disclosure (whether patentable or unpatentable); and
all records of the foregoing, including without limitation, any laboratory
notes; test, engineering and technical data, know-how, proprietary information
and methodologies; trade secrets; technology; communications and associated
peripheral devices and resources; computer software, programs and code, both
object and source, in whatever form and media; databases; specifications,
software manuals and program documentation (including, but not limited to,
functional overviews, screen layouts, record layouts, design specifications,
standard designs, user documentation, feature specifications, code and design
documents, current buy lists (fixed and unfixed) and training material and any
other information reasonably necessary to allow a programmer of ordinary skill
to install, maintain and enhance the relevant source code on a computer server
and transform such source code into an executable form for operation in
accordance with its specification); and other information processing tangible
and intangible items.
"THIRD PARTY LICENSE" shall mean licenses, agreements, obligations or other
commitments under which a Person has granted the Seller a right to use any
Licensed Intellectual Property in connection with the Business but retains one
or more rights to use such Intellectual Property, including without limitation
those Third Party Licenses listed and described on SCHEDULE 1.01(E) hereto.
"TRANSFERRED EMPLOYEE" shall mean any Employee that accepts the offer of
employment by Purchaser on the Closing Date.
ARTICLE II
PURCHASE AND SALE OF ASSETS; PURCHASE PRICE
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2.01 SALE OF THE ACQUIRED ASSETS.
(a) Subject to the terms and conditions of this Agreement, the Seller
shall sell, transfer, convey, assign and deliver to Purchaser, and relinquish
exclusively to Purchaser in perpetuity, the Acquired Assets at the Closing.
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(b) It is the intention of the parties that, from and after the Closing
Date, Purchaser shall:
(i) receive and be entitled to exercise in full all rights and
benefits pertaining to the Acquired Assets and perform all other such
acts in relation thereto as Purchaser, in its sole discretion, deems
advisable; and
(ii) institute and prosecute all suits and proceedings and take
all actions, in its own name or in the name of the Seller, as the case
may be, as Purchaser, in its sole discretion, may deem necessary or
proper to collect, assert or enforce any claim, right or title of any
kind in and to any and all of the Acquired Assets.
2.02 EXCLUDED ASSETS. Except for the assets described in subparagraphs (g),
(k) and (l) of the definition of "Acquired Assets," no tangible or intangible
property of the Seller shall be deemed to be an Acquired Asset unless it is
specifically listed and described as such on a Schedule hereto. All property of
Seller that is not an Acquired Asset shall be referred to herein as the
"Excluded Assets". Without limiting the scope of the Excluded Assets, the
following assets of the Seller, whether or not used by or related to the
Business, shall not be acquired by Purchaser and shall be deemed to be among the
Excluded Assets:
(a) All cash on hand and in banks and other cash items and equivalents
of the Seller;
(b) All Benefit Plans;
(c) The Seller's corporate minute books and other books and records
relating to internal corporate matters, and any other books and records not
solely related to the Business (in each case other than books and records
purchased by Purchaser pursuant to subparagraph (g) of the definition of
"Acquired Assets"); and
(d) Any claims, rights and interest in and to any refunds of federal,
provincial, state or local franchise, income or other taxes or fees of any
nature whatsoever that relate solely to the period up to and including the
Closing.
2.03 LIABILITIES.
(a) ASSUMED LIABILITIES. At Closing, Purchaser shall assume, discharge
and perform (i) the liabilities and obligations of the Seller under the
Subsisting Contracts listed on Schedule 1.01(f), and (ii) the liabilities and
obligations of the Seller listed on SCHEDULE 2.03(a) hereto (collectively, the
"Assumed Liabilities").
(b) EXCLUDED LIABILITIES. Except for the Assumed Liabilities identified
in Section 2.03(a), neither Purchaser nor any of its Affiliates shall assume or
otherwise be liable in respect of, or be deemed to have assumed or otherwise be
liable in respect of, any debt, claim, obligation, or other liability of the
Seller, or any of its Affiliates, including without limitation, all
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Excluded Benefit Plans and other liabilities related to Seller's Employees
and former employees incurred or accrued prior to the Closing (the "Excluded
Liabilities"), regardless or whether such debt, claim, obligation or other
liability is matured or unmatured, contingent or fixed, known or unknown. The
Seller agrees that it shall pay promptly when due any and all Excluded
Liabilities arising out of the Business or the employees thereof not discharged
by it at or prior to Closing.
2.04 PURCHASE PRICE. Subject to Section 2.05, the aggregate purchase price
(the "Purchase Price") for the Acquired Assets shall be the following:
(a) One Hundred Fifty Three Thousand Nine Hundred Fifteen Dollars and
Sixty Three Cents ($153,915.63) shall be paid to the Seller or its designee at
Closing by wire transfer in immediately available funds to such account of the
Seller as shall be designated by the Seller in writing at least two (2) business
days in advance of the Closing; and
(b) 6,040,333 shares of common stock, par value $.001 per share ("Front
Porch Common Stock"), of Purchaser, which shares (i) shall be registered in such
name or names as shall be designated by the Seller in writing at least two (2)
business days in advance of the closing, (ii) shall be issued pursuant to an
exemption from registration under the Securities Act, and (iii) shall contain
the legend or legends set forth on Schedule 2.04(b) hereof.
2.05 PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be subject to
adjustment after the Closing as specified in this Section 2.05:
(a) Attached hereto as SCHEDULE 2.05(a) is a Closing Statement prepared
by the Seller. The Closing Statement prepared by the Seller is hereinafter
referred to as the "Seller's Closing Statement."
(b) Within thirty (30) days following the Closing Date, Purchaser shall
have the right to provide the Seller a Closing Statement (the "Purchaser's
Closing Statement"). The Seller shall provide to Purchaser and its independent
public accountants access to such of its records (including work papers and all
relevant personnel) as may reasonably be required for the preparation of
Purchaser's Closing Statement. If Purchaser does not provide a Closing Statement
in accordance with this Section 2.05(b) or if Purchaser's Closing Statement does
not demonstrate a Post-Closing Payment which is different from that calculated
by using the Seller's Closing Statement, then the Seller's Closing Statement
shall be deemed to be the "Accepted Closing Statement." If Purchaser's Closing
Statement demonstrates a Post-Closing Payment which is different than that
calculated by using the Seller's Closing Statement, then Purchaser and the
Seller, together with Ernst & Young LLP and the Seller's independent public
accountants, shall endeavor to resolve such difference and if a resolution is
reached, such resolution shall determine the Post-Closing Payment and such
resolution shall be reflected on the Accepted Closing Statement. If no
resolution can be reached within thirty (30) days of completion of both
Purchaser's Closing Statement and the Seller's Closing Statement, the Seller and
Purchaser shall promptly select a third independent public accounting firm of
national reputation to arbitrate the dispute, to review the Closing Statements
and to determine the correct Closing Statement. Such determination, which shall
be final and binding on Purchaser and the Seller, shall determine the
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Post-Closing Payment and shall be deemed to be the Accepted Closing
Statement. The fees and expenses of the third independent public accounting firm
shall be shared equally by the Seller and Purchaser.
(c) "Net Assets" shall mean (i) the total assets of the Business
recorded at net book value as of September 29, 2000 (further reduced by
estimated depreciation from such date through the Closing Date) minus (ii) the
total liabilities of the Business recorded at net book value as of the Closing
Date, in each case determined in accordance with generally accepted accounting
principles consistently applied. "Closing Net Assets" shall mean the Net Assets
set forth on the Accepted Closing Statement.
(d) If Closing Net Assets is less than the amount set forth in Section
2.04(a), then the Seller shall pay or cause to be paid to Purchaser, within five
(5) business days after delivery of the Accepted Closing Statement, an aggregate
amount in cash equal to the difference between the amount paid by Purchaser
pursuant to Section 2.04(a) and the Closing Net Assets amount. If Closing Net
Assets is greater than the amount set forth in Section 2.04(a), then Purchaser
shall pay to the Seller, within five (5) business days after delivery of the
Accepted Closing Statement, an aggregate amount in cash equal to the difference
between the amount set forth in Section 2.04(a) and the Closing Net Assets
amount. The amount of such payment from the Seller to Purchaser or from
Purchaser to the Seller, as the case may be, is referred to herein as the
"Post-Closing Payment".
(e) The Purchase Price shall be deemed to have been increased or
decreased, as the case may be, by the amount of the Post-Closing Payment.
(f) The number of shares of Front Porch Common Stock issuable by
Purchaser to the Seller shall be subject to adjustment pursuant to the terms of
paragraph 3 of the letter agreement dated the date hereof between Purchaser and
the Seller.
2.06 TREATMENT OF PURCHASE PRICE.
(a) The Seller and Purchaser shall cooperate with each other to agree
within 45 days following the Closing Date on an allocation of the Purchase Price
among the Acquired Assets and the non-competition covenant set forth in Section
4.01 of this Agreement.
(b) Each of the parties shall report the Tax consequences of the
transactions called for in this Agreement in a manner consistent with the
allocation so agreed upon by the parties. Such allocation shall be followed in
all Tax Returns of Purchaser and the Seller for the taxable year that includes
the Closing Date, and neither Purchaser nor the Seller will take any position
inconsistent with such allocation unless otherwise required by applicable law.
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ARTICLE III
CLOSING AND PAYMENT OBLIGATION
------------------------------
3.01 CLOSING. The consummation of the purchase and sale contemplated by
this Agreement (the "Closing") shall be held at a time, place and manner as the
Seller and Purchaser shall agree following the satisfaction or waiver (by
Purchaser, in the case of the conditions in Section 7.01, and by the Seller, in
the case of the conditions in Section 7.02) of all of the conditions to Closing
set forth in Article VII hereof, or such other time, place and date as may be
mutually agreed upon by the parties hereto. The date of the Closing is sometimes
herein referred to as the "Closing Date".
3.02 DELIVERIES BY THE SELLER. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties and agreements of the
Purchaser contained herein, and in consideration of the Purchase Price, the
Seller agrees to deliver at the Closing the following, all reasonably
satisfactory in form and substance to Purchaser and its legal counsel:
(a) a duly executed bill of sale for the Owned Tangible Property to be
acquired hereunder in the form attached hereto as EXHIBIT 3.02(a);
(b) a duly executed bill of sale and assignment necessary to transfer to
Purchaser the Intellectual Property in the form attached hereto as EXHIBIT
3.02(b);
(c) duly executed assignment and assumption agreements necessary to
transfer to Purchaser the Subsisting Contracts to be acquired hereunder in the
forms attached hereto as EXHIBIT 3.02(c);
(d) all documents of title, if any, necessary to transfer to Purchaser
any of the Owned Tangible Property to be acquired hereunder;
(e) evidence satisfactory to Purchaser that any and all liens on the
Acquired Assets have been released;
(f) all other deeds, endorsements, assignments and other instruments as,
in the reasonable opinion of counsel for Purchaser, are necessary to vest in
Purchaser such right, title and interest in and to any of the Acquired Assets to
which Purchaser is entitled;
(g) [Reserved].
(h) a duly executed transition services agreement in the form attached
hereto as EXHIBIT 3.02(h);
(i) evidence of payment by wire transfer of immediately available funds
in an amount equal to that portion of the revenues described in subparagraph (k)
of the definition "Acquired Assets" which has been invoiced by the Seller (or
for which employees in the
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Business have requested an invoice) prior to the Closing Date, as set forth on
SCHEDULE 3.02(i); and
(j) an opinion of Richard Bland Law Firm, counsel to the Seller, dated
the Closing Date and addressed to Purchaser, in a form reasonably acceptable to
Purchase and its legal counsel.
3.03 DELIVERIES BY PURCHASER. Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties and agreements of the
Seller contained herein, and in consideration of the Acquired Assets, Purchaser
agrees to deliver at the Closing the following, all reasonably satisfactory in
form and substance to the Seller and its legal counsel:
(a) the wire transfer described in Section 2.04(a) hereof;
(b) a certificate or certificates for the shares of Front Porch Common
Stock described in Section 2.04(b) hereof;
(c) a duly executed assignment and assumption agreement necessary to
transfer to Purchaser the Subsisting Contracts in the form attached hereto as
EXHIBIT 3.02(c);
(d) such other assignment, transfer and assumption documents and
instruments as in the opinion of counsel of the Seller may be reasonably
required to effectuate the terms of this Agreement and to comply with the terms
hereof;
(e) duly executed employment agreements for Dr. Giancarlo Gaggero and
Edward Ladd in the form attached hereto as EXHIBITS 3.03(e)(i) and (ii);
(f) an opinion of Pryor Cashman Sherman & Flynn LLP, counsel to the
Purchaser, dated the Closing Date and addressed to the Seller, in a form
reasonably acceptable to the Seller and its legal counsel;
(g) a duly executed transition services agreement in the form attached
hereto as EXHIBIT 3.02(h); and
(h) a duly executed registration rights agreement in the form attached
hereto as EXHIBIT 3.03(h).
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ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
4.01 AGREEMENT NOT TO COMPETE AND TO MAINTAIN CONFIDENTIALITY.
(a) For good and valuable consideration and in furtherance of the sale
of the Acquired Assets and the Business to Purchaser hereunder, in order to
insure that Purchaser obtains the benefits it reasonably expects to obtain
hereunder and to more effectively protect the value and goodwill of the Acquired
Assets and the Business, the Seller covenants and agrees that, except as
provided in Sections 4.06, 4.12, 4.14 and 4.17 below, for the period commencing
on the Closing Date and ending on the fifth (5th) anniversary of the Closing
Date, neither the Seller nor any of its Affiliates (collectively, the
"Restricted Parties"), without the prior written consent of the Chief Executive
Officer of Purchaser, its successor or assignee, will:
(i) directly or indirectly own, manage, operate or
control, or participate with another Person in the ownership,
management, operation or control of, any business or division or
line of any business anywhere in the world which engages in a
business similar to or competitive with the Business; PROVIDED,
HOWEVER, that it will not be deemed a breach of this clause if the
Restricted Parties collectively own beneficially or of record in the
aggregate less than five percent (5%) of the issued and outstanding
capital stock of a privately held company or ten percent (10%) of
the issued and outstanding capital stock of a company whose stock is
publicly traded on a national securities exchange or actively traded
in a recognized over-the-counter market, and PROVIDED FURTHER,
HOWEVER, that the design, development, manufacture and/or marketing
of (a) the Seller's current hardware or software products not
included in the Business (and future versions thereof and
enhancements thereto) and/or (b) hardware or software products that
facilitate or enable customers to manage their data storage media
and thereby reduce or diminish their future need for the services
provided by the Business, shall not be deemed to be a business
similar to or competitive with the Business; or
(ii) induce or attempt to persuade any customer of the
Business to terminate such relationship in order to enter into any
similar relationship on behalf of any other business in competition
with the Business; or
(iii) induce or attempt to persuade any Business Person
(as defined below) to terminate or to refuse to enter into an
agreement under which such Business Person performs or would perform
services as an employee, consultant, agent or otherwise for
Purchaser in support of the Business. For purposes of this clause
(iii), "Business Person" shall mean any natural person (A) who is an
employee of the Seller on the Closing Date or within sixty (60) days
prior thereto and who becomes employed in the Business by Purchaser
or an Affiliate of Purchaser in connection with the transactions
contemplated hereby, (B) who, at the time of the prohibited contact,
is an employee of Purchaser or an Affiliate of Purchaser engaged in
the Business, or (C) who is (or was at any time within sixty (60)
days prior to the prohibited contact by a Restricted Party) an
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employee, consultant or free-lance worker engaged in the Business
for or on behalf of Purchaser or an Affiliate of Purchaser.
Notwithstanding the foregoing provisions of this clause (iii), the
Seller shall have the right to engage in the following activities:
(A) soliciting applications for employment through generalized
advertising or other means not specifically directed at a Business
Person, (B) communicating in any way, including making an employment
or consulting offer, with a Business Person in cases in which such
Business Person initiates contact with the Seller regarding a
possible employment or consulting position or (C) communicating in
any way, including making an employment or consulting offer, with a
Business Person who was not at any time during the sixty (60) days
immediately preceding such communication an employee, consultant or
free-lance worker engaged in the Business for or on behalf of
Purchaser or an Affiliate of Purchaser.
(b) The Seller hereby expressly acknowledges that the Acquired Assets
include Proprietary Information of the Seller related to the Business. The
Seller agrees that all such Proprietary Information is confidential and/or
proprietary and that a substantial portion of the Purchase Price is being paid
for such Proprietary Information and that it represents a substantial investment
having significant economic and commercial value to Purchaser, and constitutes a
substantial part of the value to Purchaser of the Business and the Acquired
Assets. The Seller acknowledges that Purchaser would be irreparably damaged if
any of the Proprietary Information of the Business was disclosed to, or used or
exploited on behalf of, any Person or entity other than Purchaser or its
Affiliates. Accordingly, the Seller covenants and agrees that the Restricted
Parties shall not, without the prior written consent of the Chief Executive
Officer of Purchaser, disclose, use or exploit any such Proprietary Information,
whether for the benefit of such Restricted Party, any other Restricted Party or
of any third party or otherwise, except that a Restricted Party may use or
exploit a particular item of such Proprietary Information if and to the extent
(but only if and to the extent) that such item:
(i) is or becomes publicly known or generally known in
the industry through no act of such Restricted Party;
(ii) is required to be disclosed to (or by order of) a
governmental agency or a court of law or otherwise as required by
law; PROVIDED that prior to any such disclosure, notice of such
requirement of disclosure is given to Purchaser and Purchaser is
afforded the reasonable opportunity to object to such disclosure; or
(iii) is used as permitted in Section 4.16.
(c) The Seller hereby expressly acknowledges that money damages will be
impossible to calculate and may not adequately compensate Purchaser in
connection with an actual or threatened breach by any Restricted Party of any of
the provisions of this Section 4.01. Accordingly, the Seller hereby expressly
waives, and to cause each other Restricted Party to waive, all rights to raise
the adequacy of Purchaser's remedies at law as a defense if Purchaser seeks to
enforce by injunction or other equitable relief the due and proper performance
and observance of the provisions of this Section 4.01. In addition, and subject
to Section 10.14 of this Agreement, Purchaser shall be entitled to pursue any
other available remedies at law or
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equity, including the recovery of money damages, in respect of the actual or
threatened breach of the provisions of this Section 4.01; provided, however,
that Purchaser's exclusive remedy for the use by a Restricted Party of
intangible Proprietary Information included among the Acquired Assets (i.e. an
idea, concept, algorithm, method, process, etc.) for a purpose that does not
cause the Seller to be in violation of Section 4.01(a)(i) (other than a use that
constitutes or results in (i) an infringement of a patent or copyright owned by
Purchaser or (ii) the disclosure of such Proprietary Information to a third
party) shall be an injunction restraining such Restricted Party from further use
of such Proprietary Information.
(d) The Seller and Purchaser acknowledge and recognize that each of the
covenants contained in this Section 4.01 are integral to the sale to Purchaser
of the Acquired Assets and the Business, that without the protection of such
covenants Purchaser would not have entered into this Agreement, that the
consideration paid by Purchaser as set forth in Section 2.04 hereof and the
allocation of the consideration bears no relationship to the damages Purchaser
may suffer in the event of any breach of such covenants, and that such covenants
contain limitations as to time, geographical area and/or scope of activity to be
restrained which are reasonable and necessary to protect Purchaser's business
interests and the value of the Business and the Acquired Assets. If this Section
4.01 shall nevertheless for any reason be held to be excessively broad as to
time, duration, geographical scope, activity or subject, the parties shall agree
to amend this Section 4.01 so that it will be enforceable to the fullest extent
compatible with applicable laws that shall then apply.
4.02 INVESTIGATION. (a) Each party agrees to cooperate fully with the other
party and to give to such party, its officers, employees, auditors, legal
counsel, representatives and agents reasonable access during normal business
hours to all such information, documents, premises and employees as such party
considers necessary or advisable for purposes of its investigation of the
business of the other party; PROVIDED, HOWEVER, that any such access shall be
conducted at the investigating party's expense, at a reasonable time and under
the supervision of the personnel of the party being investigated. The parties
agree to consult with each other in an effort to establish procedures designed
to implement the provisions of this Section 4.02 in order to minimize disruption
to their respective businesses. The parties acknowledge that they entered into a
letter of intent dated August 15, 2000 (the "Letter of Intent"), and agree that
with respect to Proprietary Information of the Seller, the obligations of
Purchaser and its Affiliates to maintain such Proprietary Information in
confidence pursuant to the Letter of Intent (the "Confidential Obligations")
shall terminate upon the Closing to the extent such Proprietary Information is
included in the Acquired Assets but shall continue in full force and effect as
to all other of the Seller's Proprietary Information. Notwithstanding anything
to the contrary contained in the Letter of Intent, Purchaser and its respective
Affiliates may disclose Proprietary Information of the Seller to the extent such
Proprietary Information:
(i) is or becomes publicly known or generally known in
the industry through no act of Purchaser or its Affiliates or
Representatives;
(ii) is required to be disclosed to or by order of a
governmental agency or a court of law or otherwise as required by
law; provided that prior to
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any such disclosure notice of such requirement of disclosure is
provided to the Seller, and the Seller is afforded the
reasonable opportunity to object to such disclosure; or
(iii) is required to be disclosed to Purchaser's
Representatives working on this transaction.
The Seller hereby agrees with respect to Proprietary Information of
Purchaser that has been or may be disclosed to the Seller prior to the
Closing Date to maintain such Proprietary Information in confidence
pursuant to the Letter of Intent in the same manner as Purchaser is
obligated to do so with respect to Proprietary Information of the Seller
pursuant to this Section 4.02.
4.03 CONDUCT OF THE BUSINESS PENDING THE CLOSING. The Seller agrees that
from the date hereof through the Closing Date, the Business will be conducted
only in the usual and ordinary course consistent with past practice, and, except
as may be permitted by this Agreement, or approved in writing in advance by
Purchaser, the Seller agrees as follows:
(a) The Seller will, so far as it is within its power to do so, carry on
the Business substantially in the same manner as heretofore conducted, and the
Seller shall not institute any new methods of acquisition, production,
marketing, distribution, sale, lease, license, management, operation, or engage
in any transaction or activity, enter into any agreement or make any commitment,
except in the ordinary course of business and consistent with past practice.
(b) The Seller shall not institute any new methods of accounting
relating to the Business.
(c) The Seller shall use commercially reasonable efforts to preserve the
Business intact, to protect and preserve the Seller's assets, and preserve its
relationships with licensors, suppliers, distributors, customers, contractors
and employees.
(d) Except as otherwise specifically permitted pursuant to this
Agreement, the Seller shall not, with respect to the Business:
(i) (A) Borrow or agree to borrow any funds or (B)
incur, or assume or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability (absolute or
contingent), in the case of (A) or (B) that would be an Assumed
Liability, except in the case of clause (B) obligations and
liabilities incurred in the ordinary course of business and
consistent with past practice;
(ii) Permit or allow any of the Acquired Assets to be
subjected to any Encumbrance of any kind or description (except
Encumbrances created by law);
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(iii) Dispose of or permit to lapse any rights to the
use of any Intellectual Property included among the Acquired Assets
(and the Seller shall take all commercially reasonable actions in
respect of any infringement of any Intellectual Property of which it
has knowledge), or dispose of or, except in the ordinary course of
business, disclose to any Person any trade secret, formula, process
or know-how not theretofore a matter of public knowledge relating to
the Business;
(iv) Make any single capital expenditure or future
commitment relating to the Business in excess of $20,000 for
additions to property, plant or equipment or make aggregate capital
expenditures or future commitments in excess of $50,000 for
additions to property, plant or equipment; provided, however, that
this restriction shall not apply to expenditures required to fulfill
obligations to customers of the Business;
(v) Sell, transfer or lease (other than in the ordinary
course of business consistent with past practices) any of the
Acquired Assets to, or enter into any agreement or arrangement with,
any Affiliate of the Seller;
(vi) Grant or extend any power of attorney or act as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any Person;
(vii) Other than in the ordinary course of business
consistent with past practice, distribute any property to any
employee of the Seller engaged in the Business;
(viii) Grant to any officer or employee engaged in the
Business any increase in compensation or benefits, other than
increases in compensation or benefits for employees in the ordinary
course of business consistent with past practice;
(ix) Pay any pension, retirement allowance or other
employee benefit not required by any Benefit Plan of the Seller in
existence on the date hereof;
(x) Adopt, agree to adopt, or make any announcement
regarding (i) the adoption of any new pension, retirement or other
employee benefit plan, policy or program that applies only to
employees of the Business, or (ii) adoption of any amendments to any
Benefit Plan of the Seller in existence on the date hereof that
applies only to employees of the Business, unless otherwise required
by applicable law; or
(xi) Agree, whether in writing or otherwise, to do any
of the foregoing.
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(e) From the date hereof through the Closing Date, the Seller shall give
prompt written notice to Purchaser of any material casualty losses or damages
with respect to the Acquired Assets (whether or not any such loss or damage
shall have been covered by insurance) and, if such loss is insured, the Seller
shall promptly notify the carrier and make a claim;
(f) No contract or commitment will be entered into, and no purchase of
supplies and no sale of any of the Seller's assets will be made, by or on behalf
of the Seller in respect of the Business, except (i) normal contracts or
commitments for the purchase of, and normal purchases of, supplies or inventory
or for the sale of inventory, in each case made in the ordinary course of
business and consistent with past practice, and (ii) other contracts,
commitments, purchases or sales in the ordinary course of business and
consistent with past practice.
(g) The Seller shall maintain insurance on the Acquired Assets
consistent with past practices and the Acquired Assets shall be used, operated,
maintained and repaired in the ordinary course of business consistent with past
practice.
(h) The Seller shall not do any act or omit to do any act, or permit any
act or omission to act (to the extent the Seller has control over such act or
omission), which will cause a breach of any material contract or commitment of
the Seller arising out of or relating to the Business or which would cause the
breach by the Seller of any representation, warranty, covenant or agreement made
hereunder.
(i) The Seller shall duly comply in all material respects with all laws
applicable to it and its properties, operations, business and employees
comprising the Business.
4.04 TAXES, FEES AND EXPENSES. In addition to the Purchase Price, all
sales, use, transfer, and purchase taxes and fees, if any, arising out of the
transfer of the Acquired Assets pursuant to this Agreement shall be paid by
Purchaser.
4.05 EMPLOYEES. (a) Purchaser shall extend offers of employment (contingent
upon the Closing) to the Employees listed on Schedule 4.05 on such terms as
Purchaser shall determine in its sole discretion, it being understood that the
Seller shall be responsible for, and shall indemnify and hold harmless (as set
forth in Article VIII) Purchaser from and against, any severance, termination,
accrued vacation, "golden parachute" or other similar obligations with respect
to any Employees, whether or not such Employee accepts employment with the
Purchaser, whether pursuant to corporate policy, any Benefit Plans (as defined
in Section 5.21(a) hereof), or by law (domestic or foreign), including without
limitation any liabilities arising under the Workers Adjustment and Retraining
Notification Act ("WARN") and whether or not pursuant to individual agreement or
commitment or group plan. No agreement, understanding or arrangement entered
into by a Transferred Employee and the Seller shall prohibit or restrict a
Transferred Employee from disclosing to Purchaser Proprietary Information of the
Seller that is included in the Acquired Assets.
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(b) [Reserved].
(c) Purchaser shall not assume any obligation or liability for and the
Seller shall remain responsible for any and all obligations and liabilities to
the Employees, former Employees and Transferred Employees of the Seller related
to any employment or service performed or otherwise, which were incurred or
accrued prior to the Closing whether payable prior to or after the Closing.
4.06 PURCHASER TO BE EXCLUSIVE PROVIDER. (a) Until the fifth (5th)
anniversary of the Closing Date, the Seller agrees that Purchaser shall be the
exclusive provider to the Seller and its Affiliates of, and Purchaser agrees
that it shall provide to the Seller and its Affiliates on terms at least as
favorable as those available to any other of Purchaser's resellers of the
services that comprise the Business of comparable size and magnitude (but in no
event greater than 90% of Purchaser's market prices for end users), all services
that comprise the Business, whether for the internal purposes of the Seller or
for third parties and whether domestic or foreign. In addition, during such
period, the Seller and Purchaser agree that Purchaser shall be the exclusive
provider (either directly or as a subcontractor of the Seller) to Seller's and
its Affiliates' customers of all services that comprise the Business with
respect to all third-party Business opportunities and contracts generated by the
Seller's or its Affiliates' sales force or through the Seller's or its
Affiliates' sales and marketing efforts (a "Sales Opportunity"). The Seller
agrees that it will cause its and its Affiliates' sales force to quote pricing
for each Sales Opportunity only in accordance with Purchaser's then-applicable
pricing terms, and Purchaser agrees that it will provide the services
contemplated in each Sales Opportunity on terms at least as favorable as those
available to any other of Purchaser's resellers of the services that comprise
the Business of comparable size and magnitude (but in no event greater than 90%
of Purchaser's market prices for end users). Notwithstanding the foregoing, the
Seller and Purchaser shall mutually agree upon procedures for the implementation
of, and the compensation of Seller's sales force with respect to, this Section
4.06 and Section 4.12.
(b) Until the fifth (5th) anniversary of the Closing Date, Purchaser
agrees that it will not, without the Seller's prior written consent (which
consent shall not be unreasonably withheld), (A) sell all or substantially all
of the assets comprising the Business, or (B) agree to a Change of Control, in
either case, without obtaining from the purchaser of such assets or the Person
obtaining such control its agreement to abide by the provisions of Sections
4.06(a), 4.12, 4.13 and 4.14 (including the escrow agreement executed pursuant
to Section 4.14).
(c) If and to the extent Purchaser is unable to provide services to the
Seller or its customers in accordance with Section 4.06(a) for a period of
fifteen (15) days after notice thereof is given to Purchaser by the Seller, the
Seller shall have the right to provide such services either directly or through
a competitor of Purchaser. For that purpose, and for that purpose only, Seller
shall retain an object code only non-transferrable license to the software tools
used in the Business for data conversion, which Purchaser will update from time
to time with any improvements made by Purchaser to such software tools;
PROVIDED, HOWEVER, that Seller shall make no use of such software tools except
as provided pursuant to this Section 4.06(c).
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(d) The Seller shall have the right from time to time to conduct
reasonable audits of Purchasers books and records during normal business hours
for the purpose of verifying Purchaser's compliance with the pricing provisions
of Section 4.06(a).
4.07 MAINTENANCE OF BOOKS AND RECORDS. Each of the parties hereto shall
preserve, until at least the fifth (5th) anniversary of the Closing Date, all
pre-closing records possessed or to be possessed by such party relating to the
Business. After the Closing Date and up until at least the fifth (5th)
anniversary of the Closing Date, upon any reasonable request from a party hereto
or its representatives, the party holding such records shall (x) provide to the
requesting party or its representatives reasonable access to such records during
normal business hours and (y) permit the requesting party or its representatives
to make copies of such records, in each case at no cost to the requesting party
or its representatives (other than for reasonable out-of-pocket expenses). Such
records may be sought under this Section 4.07 for any reasonable purpose,
including, without limitation, to the extent reasonably required in connection
with the audit, accounting, tax, litigation, federal securities disclosure or
other similar needs of the party seeking such records.
4.08 BULK SALES LAW. Purchaser hereby waives compliance by the Seller with
the provisions of all applicable state bulk sales laws, and the Seller warrants
and agrees to pay and discharge when due all claims of creditors which could be
asserted against Purchaser by reason of such noncompliance to the extent that
such liabilities arise before the Closing, and agrees to protect, defend, save
harmless and indemnify Purchaser from and against any and all such claims and
demands pursuant to the procedures set forth in Article VIII hereof which shall
apply thereto in all respects.
4.09 [Reserved].
4.10 WEBSITE LINKS. The parties agree to cooperate with each other to
provide reasonable and appropriate links between their respective internet web
sites.
4.11 FURTHER COOPERATION. Each of the Seller and Purchaser shall cooperate,
and use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
the execution and delivery by each of the individuals named in Section 3.03(e)
hereof of the respective employment agreements required thereby.
4.12 CONTINUED COMMISSION PAYMENTS BY THE SELLER AND RELATED MATTERS. In
order to enhance the synergy between the businesses of Purchaser and the Seller,
until the fifth (5) anniversary of the Closing Date:
(a) The Seller shall continue to pay commissions to its sales force on
revenue derived from transactions in which the Seller subcontracts the media
services portion of such transactions to Purchaser. Commissions payable for
media services revenues sold by the Seller shall be comparable to commissions
payable for the hardware and software products sold by the
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Seller in such transactions, and such media services revenues shall count
toward the quotas established for the Seller's sales force.
(b) [Reserved].
(c) The Seller shall provide Purchaser with information and contacts to
enable Purchaser to apply to be a value added reseller ("VAR") of the Seller. If
the Purchaser qualifies as a VAR, the Seller shall make equipment available to
Purchaser for resale to the end customer on the same basis as such equipment is
made available to the Seller's other VARs.
(d) The Seller shall sell newly-developed products to Purchaser for use
by Purchaser solely in the development and delivery of media services. The price
for such products shall be the Seller's standard cost for such products plus
15%. Such products shall be delivered to Purchaser on a priority basis to the
Seller's VAR customers and may not be resold without the prior written consent
of the Seller.
(e) For transactions in which Purchaser contracts directly with a
customer and the Seller's sales force plays a significant role in procuring the
transaction, Purchaser shall pay to the Seller a commission equal to 10% of the
media services revenues involved in such transaction, exclusive of media
products and the Seller's hardware and software. The Seller shall then pay
commissions to its sales force based on the commissions paid by Purchaser to the
Seller, as provided in subparagraph (a) above.
(f) The parties agree to cooperate in creating appropriate
communications to the Seller's sales force that explain the new relationship
between the parties and the above elements of that relationship. The Seller
shall distribute these communications under executive sponsorship.
(g) The Seller shall sell to Purchaser Imation media at a price equal to
the Seller's direct cost (which includes any shipping, handling and sales taxes
and the like) plus 1% to cover the Seller's indirect costs of providing
Purchaser such media. The parties agree that the Seller shall have the right to
review its indirect costs from such sales on an annual basis. If the Seller
shall determine that the then-agreed price to Purchaser of Imation media is an
amount less than the Seller's direct and indirect costs for such sales, the
parties shall negotiate in good faith to adjust the purchase price to Purchaser
of Imation media to an amount sufficient to enable the Seller to recoup such
costs of providing Purchaser such media.
(h) If following the Closing any customer of the Business notifies
either the Seller or Purchaser that it does not desire to have its customer
contract assigned to Purchaser hereunder, the Seller shall agree to continue to
perform the services to be provided under such contract and the services to be
furnished under such contract shall be performed by Purchaser as a subcontractor
of the Seller. In such event, Seller shall pay to Purchaser promptly upon
receipt all revenues received in respect of such contract (but excluding
revenues included in the Seller's payment to Purchaser pursuant to Section
3.02(i)).
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4.13 PURCHASER'S BOARD OF DIRECTORS. As soon as practicable after the
Closing Date, Purchaser shall take such action as may be necessary to confer
upon the Seller the right, so long as the Seller beneficially owns at least ten
percent (10%) of the outstanding Front Porch Common Stock, to appoint a
representative to serve on Purchaser's Board of Directors.
4.14 SOFTWARE ESCROW AGREEMENT. Within 60 days after the Closing Date,
Purchaser shall deposit in escrow a copy of the then-current version of the
software described in Schedule 1.01(e), in both source code and object code
form, pursuant to a software escrow agreement that the parties shall execute as
soon as reasonably practicable after the Closing Date. Such software escrow
agreement shall (i) have a term of five (5) years, (ii) contain customary terms
and (iii) provide, among other things, for (a) the release of the escrowed
software to the Seller upon Purchaser's bankruptcy, Purchaser's repudiation of
its further obligations under Section 4.06 or, except as permitted by Section
4.06(b), Purchaser's exiting all or substantially all of the Business (a
"Release Event"), (b) the grant to the Seller effective upon a Release Event of
a non-exclusive license to use the escrowed software to provide the services
comprising the Business and (c) Purchaser to update the escrowed software
annually.
4.15 The SELLER'S EMPLOYEES. Purchaser agrees that for the five-year period
commencing on the Closing Date it will not induce or attempt to persuade any
Seller Business Person (as defined below) to terminate or to refuse to enter
into an agreement under which such Seller Business Person performs or would
perform services as an employee, consultant, agent or otherwise for the Seller.
For purposes of this Section 4.15, "Seller Business Person" shall mean any
natural person who, at the time of the prohibited contact or within the sixty
(60) days immediately prior thereto, is an employee, consultant or free-lance
worker of the Seller. Notwithstanding the foregoing provisions of this Section
4.15, Purchaser shall have the right to engage in the following activities: (a)
soliciting applications for employment through generalized advertising or other
means not specifically directed at a Seller Business Person, (b) communicating
in any way, including making an employment or consulting offer, with a Seller
Business Person in cases in which such Seller Business Person initiates contact
with Purchaser regarding a possible employment or consulting position or (c)
communicating in any way, including making an employment or consulting offer,
with a Seller Business Person who was not at any time during the sixty (60) days
immediately preceding such communication an employee, consultant or free-lance
worker of the Seller.
4.16 CONTINUING USE OF INFORMATION. The parties acknowledge that (a)
certain Proprietary Information included among the Acquired Assets may be
currently used by or available for use by the Seller outside the Business and
(b) certain Proprietary Information included among the Excluded Assets may be
currently used or available for use in the Business. The parties further
acknowledge that it would be a hardship to identify and purge all such
Proprietary Information. Accordingly, the parties agree that after the Closing
Date, each party shall have a nonexclusive right to use such Proprietary
Information belonging to the other for the same or similar purposes for which
such Proprietary Information was used prior to the Closing Date; PROVIDED,
HOWEVER, that a party shall not have the right under this Section 4.16 (i) to
use any Intellectual Property belonging to the other party other than
Proprietary Information, (ii) to
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infringe a copyright or patent belonging to the other party or (iii) disclose
any of such Proprietary Information to a third party.
4.17 EFFECT OF RELEASE EVENT. The Seller's obligations under Sections
4.01(a), 4.06 and 4.12 shall terminate upon the occurrence of a Release Event.
4.18 LICENSE TO USE NON-BUSINESS SOFTWARE PRODUCTS. Purchaser shall at the
Seller's request, execute one or more of the Seller' standard license agreements
covering the Non-Business Software Products acquired by Purchaser hereunder;
provided, however, that Purchaser shall not be obligated to pay any license or
other fees or costs for the use of such Non-Business Software Products.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
-------------
As a material inducement to Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, the Seller represents and
warrants to Purchaser as follows:
5.01 ORGANIZATION. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Seller has all requisite corporate power and authority to enable it to own,
lease or otherwise hold the Acquired Assets and to carry on the Business as
presently conducted. The Seller is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the Business or the
ownership, leasing or holding of its properties relating to or used by the
Business makes such qualification necessary.
5.02 INVESTMENT REPRESENTATIONS.
(a) The Seller hereby confirms that the shares of Front Porch Common
Stock issued to the Seller hereunder will be acquired for investment for the
Seller's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part of such shares in contravention of applicable
law, and that the Seller has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Seller does not have
any contract, undertaking, agreement or arrangement with any Person to sell,
transfer or grant participation to such Person or to any third Person in or with
respect to any of such shares.
(b) The Seller is, and upon the acquisition of the shares of Front Porch
Common Stock issued by the Seller hereunder will be, an "accredited investor"
within the meaning of Rule 501 of Regulation D of the Rules and Regulations of
the Securities and Exchange Commission under the Securities Act. The Seller
acknowledges that it can bear the economic risk of the investment made hereunder
and has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the investment in the shares of
Front Porch Common Stock issued to it hereunder.
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(c) The Seller understands that the shares of Front Porch Common Stock
issued to the Seller pursuant to this Agreement are "restricted securities"
within the meaning of Rule 144 under the Securities Act ("Rule 144") inasmuch as
they will be acquired from Purchaser in a transaction not involving a public
offering and that under the federal securities laws and applicable regulations
such shares may be resold without registration under the Securities Act only in
certain limited circumstances. In this connection, the Seller represents that it
is familiar with Rule 144 and understands the resale limitations imposed thereby
and by the Securities Act. The Seller understands that the certificate
evidencing such shares will bear an appropriate legend restricting transfers.
(d) The Seller believes it has received or had an opportunity to review
all the information it considers necessary or appropriate for deciding whether
to accept as partial consideration for the transfer of the Acquired Assets the
shares of Front Porch Common Stock to be issued to the Seller hereunder,
including, without limitation, all reports and other information, including
exhibits, filed by Purchaser with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended, prior to the date hereof, and a
copy of Seller's Confidential Private Placement Memorandum dated May 5, 2000, as
supplemented by Supplement No. 1 thereto dated October 6, 2000 (the "Offering
Memorandum"). The Seller further represents that it has had the opportunity to
ask questions and receive answers from Purchaser regarding such shares and the
business, properties, prospects and financial condition of Purchaser.
5.03 AUTHORIZATION. The Seller has all requisite power and authority to
enter into this Agreement and each Related Document to which it is a party and
to consummate the transactions contemplated hereby and thereby. All acts and
other proceedings required to be taken by the Seller to authorize the execution,
delivery and performance of this Agreement and each Related Document to which it
is a party, and the consummation of the transactions contemplated hereby and
thereby have been duly and properly taken.
5.04 VALID AND BINDING. This Agreement constitutes (and, when executed and
delivered at Closing, each Related Document, to the extent that the Seller is a
party thereto, will constitute) a valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except that (i)
such enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limiting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought ((i) and (ii) collectively, the "Bankruptcy
Exceptions").
5.05 NO VIOLATION. The execution and delivery of this Agreement and each
Related Document by the Seller, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
does not and will not conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a
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material benefit under or result in the creation of any Encumbrance of any
kind upon any of the Acquired Assets under, any provision of (i) the Certificate
of Incorporation or By-laws of the Seller, (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment or loan or other
agreement to which the Seller is a party or by which any of its properties or
assets are bound, or (iii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Seller or the property or assets of the
Seller, except in the case of clauses (ii) and (iii) for any such violations,
breaches, defaults, rights of termination, cancellation or acceleration or
requirements which, individually or in the aggregate would not have a Material
Adverse Effect or would not adversely affect the ability of the Seller to
consummate the transactions contemplated by this Agreement.
5.06 CONSENTS AND APPROVALS. Except as set forth in a Subsisting Contract
acquired hereunder, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority or any
court or other tribunal, and no consent or waiver of any party to any Subsisting
Contract acquired hereunder is required to be obtained by the Seller in
connection with the execution, delivery and performance of this Agreement and
each Related Document or the consummation of the transactions contemplated
hereby or thereby.
5.07 FINANCIAL DATA. The Seller has furnished to Purchaser complete copies
of unaudited statements of assets and liabilities of the Business as of December
31, 1999 and June 30, 2000 and unaudited statements of revenues and direct costs
of the Business for the twelve (12) month period ended December 31, 1999 and the
six (6) month periods ended June 27, 1999 and June 30, 2000 (collectively, the
"Financial Data"), copies of which are attached hereto as SCHEDULE 5.07. The
Financial Data have been prepared by the Seller on the basis of the books and
records maintained by the Seller in the ordinary course of business in a manner
consistently used and applied throughout the periods involved. The books and
records of the Seller to which the Financial Data relate fully and fairly
reflect bona fide transactions set forth therein.
5.08 INTERIM OPERATIONS. (a) Except as set forth on SCHEDULE 5.08 or in the
Financial Data, since December 31, 1999:
(i) the Business has been conducted by the Seller only
in the ordinary and usual course consistent with past practices.
(ii) with respect to activities, events, assets and
matters relating solely to the Business, the Seller has not:
(A) suffered any Material Adverse Effect;
(B) paid, discharged or satisfied any claims,
liabilities or obligations (absolute, accrued,
contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary and usual
course of business and consistent with past practice of
liabilities and obligations reflected or reserved
against in the Financial
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Data or incurred in the ordinary and usual
course of business and consistent with past practice;
(C) canceled any debts owing to the Seller or
waived any claims or rights other than in the ordinary
and usual course of business and consistent with past
practices;
(D) sold, transferred, or otherwise disposed of,
any of its assets, except in the ordinary and usual
course of business and consistent with past practice;
(E) made any change in any method of accounting
or accounting practice;
(F) written down or written up the value of any
inventory, increased inventory levels in excess of
historical levels for comparable periods or written off
as uncollectible any notes or accounts receivable, other
than in the ordinary course of business consistent with
past practice;
(G) [reserved];
(H) made any material change in the manner in
which products or services have been developed or
marketed, except in the ordinary course of business
consistent with past practice;
(I) granted to any officer or employee engaged
in the Business any increase in compensation or
benefits, other than increases of compensation or
benefits to employees in the ordinary course of business
and consistent with past practice;
(J) disposed of, failed to take reasonable steps
to protect, or permitted to lapse, any rights for the
use of, any of the Seller's rights for the use of its
Intellectual Property used primarily in the Business, or
disposed of, failed to take reasonable steps to protect,
or disclosed to any Person any Proprietary Information
of the Seller related primarily to, or used primarily
in, the Business, other than in the ordinary and usual
course of business and consistent with past practices;
or
(K) suffered or agreed to take any of the
actions set forth in this subparagraph (ii).
(iii) None of the material assets of the Business have
been affected in any way as a result of fire, explosion or other
casualty (whether or not covered by insurance).
5.09 UNDISCLOSED LIABILITIES. The Seller does not have any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
arising out of the Business, except for liabilities or obligations (i) disclosed
in the Financial Data, (ii) arising in the ordinary course of business
consistent with past practice under, or set forth in, any Subsisting Contract
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listed on SCHEDULE 1.01(f) or (iii) incurred in the ordinary course of
business consistent with past practice since December 31, 1999.
5.10 TAXES. There are no liens for Taxes on the Acquired Assets, and no
assessment of Taxes is proposed against Seller which could result in a lien for
Taxes imposed upon the Acquired Assets.
5.11 CONDITION OF PROPERTY. To the knowledge of the Seller, all material
Tangible Property included within the Acquired Assets is in good operating
condition and repair, reasonable wear and tear excepted, and none of such
material Tangible Property is in need of maintenance or repairs except for
ordinary, routine maintenance or replacement.
5.12 CONTRACTS AND COMMITMENTS. (a) Except as set forth in SCHEDULE 5.12
hereto, SCHEDULE 1.01(f) lists all Subsisting Contracts that are material to, or
arise solely out of, the Business. Except as set forth in SCHEDULE 5.12 hereto,
(i) all such Subsisting Contracts constitute valid and binding agreements of the
Seller and, to the knowledge of the Seller, each other party thereto,
enforceable in accordance with their terms (subject to the Bankruptcy
Exceptions), (ii) with respect to such Subsisting Contracts there are no
existing defaults by the Seller or, to the knowledge of the Seller, by any other
party thereto and there is no event which (whether with or without notice, lapse
of time or the happening or occurrence of any other event) would constitute a
default under such Subsisting Contracts by the Seller or, to the knowledge of
the Seller, by any other party thereto, (iii) the Seller is not restricted by
agreement from carrying on in any geographical location the Business as
conducted on the date hereof and to be conducted on the Closing Date and (iv)
there are no negotiations pending or in progress to revise any such Subsisting
Contract.
(b) Except for the commercial lease agreement executed by the
landlord on December 8, 1996, by and between the Seller, as tenant, and Post Oak
Service Center Joint Venture, as landlord, as amended by the addenda dated (or
executed by landlord on) August 9, 1999 and April 24, 2000 (collectively, the
"Real Property Lease"), a copy of which has been previously delivered to
Purchaser, the Seller is not a party to any agreement relating to the Business
with respect to any real property. The Real Property Lease is in full force and
effect, has not been modified since April 24, 2000, and is binding and
enforceable in accordance with its terms, subject only to the Bankruptcy
Exceptions. With respect to the Real Property Lease, (i) all rental and other
charges payable pursuant to the terms and conditions thereof have been paid and
no rent has been paid in advance more than 30 days; (ii) there are no charges,
offsets or defenses against the enforcement by any lessor thereunder of any
agreement, covenant or condition on the part of the Seller to be performed or
observed pursuant to the terms thereof; (iii) there are no actions or
proceedings pending or, to the knowledge of the Seller, threatened by any
landlord thereunder; and (iv) the lessor to the Real Property Lease holds a
deposit in the amount of $7,115 as a security deposit for the Seller's account.
There are no parties occupying or in possession of all or any portion of the
Real Property other than the Seller, whether as lessees, tenants at will,
trespassers or otherwise. To the Seller's knowledge, the continued maintenance,
operation or use of the Real Property, any tract or portion thereof or any
interest therein in the same manner as heretofore will not violate any zoning,
building or other federal, provincial,
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state, or municipal law, ordinance, regulation or restriction and the current
use of the Real Property and all parts thereof as aforesaid does not violate any
restrictive covenants of record affecting the Real Property. To the Seller's
knowledge, all licenses, permits and authorizations required by any governmental
authority with respect to the Real Property have been obtained, have been
validly issued and are in full force and effect. To the Seller's knowledge, no
other party is in material default under the Real Property Lease. The Seller has
the full legal power and authority to assign its rights under the Real Property
Lease to Purchaser subject to obtaining the applicable consent as provided in
the Real Property Lease. The Real Property (including the improvements thereon)
is available for immediate use in the conduct and operation of the Business.
(c) Except with respect to Third Party Licenses relating to
shrinkwrap general purpose software, (i) each Third Party License included
within the Acquired Assets is a valid, legally binding agreement, enforceable
against the Seller, and to the knowledge of the Seller, each other party thereto
in accordance with its terms, subject to the Bankruptcy Exceptions, and (ii)
each Third Party License included within the Acquired Assets is in full force
and effect and, with respect to each, there is no default by the Seller or, to
the knowledge of the Seller, any other party thereto, and there is no event
which, whether with or without notice, lapse of time, or the occurrence of any
other event would constitute a default by the Seller or, to the knowledge of the
Seller, any other party thereto.
5.13 INTELLECTUAL PROPERTY AND TECHNOLOGY. Except as set forth on SCHEDULE
5.13, Schedule 1.01(e) sets forth a true, complete and correct list of all
Intellectual Property, including Technology, of the Seller that is material to,
or used solely in, the Business, including the Software Products and the
Non-Business Software Products, and all other computer software, programs and
code (other than shrinkwrap general purpose software) owned by or licensed to
the Seller and used in the Business, including an indication in each case of
which is Owned Intellectual Property, which is Licensed Intellectual Property
and which are Non-Business Software Products. Except as set forth on SCHEDULE
5.13:
(a) The Seller owns all legally enforceable right, title and
interest to all Intellectual Property included within the Acquired Assets
(except for Non-Owned Intellectual Property), free and clear of all Encumbrances
and without obligation to pay any royalties, license fees or other amounts to
any other Person.
(b) [Reserved].
(c) To the knowledge of the Seller, there is no unauthorized use,
disclosure, infringement or misappropriation by any third party, including any
employee or former employee of the Seller, of any Intellectual Property of the
Seller set forth on SCHEDULE 1.01(e), or of any right of any third party in such
Intellectual Property licensed by or through the Seller. The Seller has no
agreement to indemnify any individual or entity against any charge of
infringement of any of such Intellectual Property, other than indemnification
provisions normal and usual for the Seller's industry contained in purchase
orders, license agreements or other agreements arising in the ordinary course of
business. The Seller has not received (nor does the Seller have any
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knowledge of) any notice, claim or allegation from any Person questioning the
right of the Seller to unconditionally use, possess, transfer, convey or
otherwise dispose of any of such Intellectual Property (other than the Licensed
Intellectual Property) or questioning the right of the Seller to use any of such
Licensed Intellectual Property. There is no interference, opposition,
cancellation, reexamination or other contest, proceeding, action, suit, hearing,
investigation, charge, complaint, demand, notice, claim, dispute nor any claim
of infringement, misappropriation or other violation by the Seller of any
Intellectual Property listed on SCHEDULE 1.01(e) or other proprietary rights of
any other Person pending or, to the knowledge of the Seller, threatened against
the Seller. No governmental agency or authority has disputed the Seller's right
to obtain or continue registration of any Intellectual Property set forth in
SCHEDULE 1.01(e) where the Seller has applied for such registration, except
where such dispute has been resolved in favor of issuing or continuing such
registration. To the Seller's knowledge, the Seller's use of the Owned
Intellectual Property listed on SCHEDULE 1.01(e), past and present, and the
Seller's use of the Licensed Intellectual Property listed on SCHEDULE 1.01(e),
past and present, has not and does not violate, interfere with or infringe upon
the rights of any other Person nor does such use by the Seller constitute a
breach of any agreement, obligation, promise or commitment by which the Seller
may be bound or constitute a violation of any laws, regulations, ordinances,
codes or statutes in any jurisdiction.
(d) Except as provided in the Subsisting Contracts acquired
hereunder, no licenses or other rights have been granted by the Seller, and the
Seller has no obligation to grant any licenses or other rights, with respect to
any Intellectual Property set forth on SCHEDULE 1.01(e). No claims have been
made by or against the Seller for any violation or infringement by others of any
rights with respect to any of such Intellectual Property.
(e) [Reserved].
(f) To the Seller's knowledge, all statements and representations
made by the Seller in any pending applications, filings or registrations for the
Intellectual Property set forth in SCHEDULE 1.01(e) were true in all material
respects as of the time they were made. To the Seller's knowledge, no registered
copyright, trademark, service mark or patent included within such Intellectual
Property has lapsed, expired or been abandoned or canceled, or is subject to any
injunction, judgment, order, decree, ruling or charge or is subject to any
pending or threatened oppositions, cancellations, interferences or other
proceedings before the United States Patent and Trademark Office, the Trademark
Trials and Appeals Board, the United States Copyright Office or in any other
registration authority in any country.
(g) [Reserved].
(h) [Reserved].
(i) The Seller has taken commercially reasonable actions to protect
against the existence of (A) any protective, encryption, security or lock-out
devices which might in any way interrupt, discontinue or otherwise adversely
affect the Technology included within the Acquired Assets or Purchaser's use
thereof; and (B) any so-called computer viruses, worms, trap
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or back doors, Trojan horses or any other instructions, codes, programs, data or
materials which could improperly, wrongfully and/or without the authorization of
Purchaser, interfere with the operation or use of such Technology.
(j) The Seller has taken commercially reasonable security measures
to maintain the Proprietary Information acquired hereunder (including without
limitation source code included therein) as confidential and proprietary, and to
protect against the loss, theft or unauthorized use of such Proprietary
Information. To the knowledge of the Seller, all use, disclosure or
appropriation of such Proprietary Information by or to a third party has been
pursuant to the terms of an agreement between the Seller and such third party.
To the knowledge of the Seller, all use, disclosure or appropriation by the
Seller of such Proprietary Information not owned by the Seller has been pursuant
to the terms of an agreement between the Seller and the owner of such
Proprietary Information, or is otherwise lawful.
5.14 TITLE TO THE ACQUIRED ASSETS. The Seller has good and marketable title
to, a valid leasehold interest in or a valid right to use the Acquired Assets,
free and clear of all Encumbrances, except for (i) properties and assets
disposed of in the ordinary course of business since December 31, 1999, (ii)
Encumbrances for Taxes not yet due and payable or Encumbrances for Taxes which
are being contested in good faith, and (iii) Encumbrances which are not material
to the value of the properties or assets encumbered and which do not impair in
any material respect the current use or operation of such properties and assets.
The Seller owns, or has a valid leasehold or other interest in, all assets
necessary for the conduct of the Business as presently conducted by the Seller,
and all such assets (except for the Seller's corporate support assets relating
to sales, marketing, procurement, accounting, administrative, human resources
and other support functions which are generally provided to the Business as well
as other operations of the Seller) are included within the Acquired Assets.
5.15 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. (i) The Seller is in compliance with all applicable
Environmental Laws; (ii) the Seller has not received any written communication
from any Person that alleges that the Seller is not in compliance with
applicable Environmental Laws; and (iii) there have not been any Releases of
Hazardous Materials by the Seller or, to the knowledge of the Seller, by any
non-Affiliate of the Seller, at any property currently or formerly owned or
operated by the Seller that occurred during the period of the Seller's ownership
or operation of such property.
(b) ENVIRONMENTAL PERMITS. The Seller has all Environmental Permits
necessary for the conduct and operation of the Business, and all such permits
are in good standing or, where applicable, a renewal application has been timely
filed and is pending agency approval, and the Seller is in compliance with all
terms and conditions of all such Environmental Permits and is not required to
make any expenditure in order to obtain or renew any Environmental Permits.
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(c) ENVIRONMENTAL CLAIMS. There are no Environmental Claims pending or,
to the knowledge of the Seller, threatened against the Seller, or against any
real or personal property or operation that the Seller owns, leases or manages.
5.16 [Reserved].
5.17 EMPLOYEES AND LABOR RELATIONS. (a) (i) There is no labor strike or
work stoppage or lockout actually pending, or, to the knowledge of the Seller,
threatened, against or materially affecting the Business; during the past three
years there has not been any such action actually pending against the Seller
relating to the Business; and, to the knowledge of the Seller, there has not
been any such action threatened against or materially affecting the Business;
(ii) none of the employees of the Seller engaged in the Business is represented
by a union or subject to a collective bargaining agreement and, to the knowledge
of the Seller, no union organizational campaign is in progress with respect to
such employees, and no question concerning representation exists respecting such
employees; and (iii) with respect to the Business, the Seller is in compliance
in all material respects with all applicable laws respecting employment and
employment practices terms and conditions of employment and wages and hours and
is not engaged in any unfair labor practice. There are no agreements or
arrangements between the Seller and an individual consultant, former consultant,
employee or former employee obligating the Seller to make any payment to any
such individual that is conditioned upon the successful completion of the
transactions contemplated by this Agreement.
(b) SCHEDULE 5.17(b) hereto contains the names of all persons employed
by the Seller in the Business as of September 30, 2000 (the "Employees") and
lists which employees are exempt or non-exempt part-time or temporary employees,
salary, commission, bonus entitlement and profit sharing arrangements both
contractual and discretionary, an indication of which employees are on
short-term or long-term disability, date of commencement of employment, and
description of their function in the Business.
(c) [Reserved].
(d) [Reserved].
(e) The Seller is not in breach of any material terms of employment of
any of the Employees nor so far as the Seller is aware is any Employee in breach
of any material term of his or her employment relationship.
(f) As of the date hereof, none of the Employees has given or received
notice of termination of his or her employment.
(g) None of the Employees is the subject of any material disciplinary
action by the Seller nor to the Seller's knowledge is any Employee engaged in
any grievance procedure.
(h) None of the Acquired Assets is subject to any lien under Section
302(f) of ERISA or Section 412(n) of the Code.
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5.18 LICENSES; PERMITS. There are no approvals, authorizations,
certifications, consents, variances, permissions, licenses, or permits to or
from, or filings, notices, or recordings to or with, federal, state or local
governmental authorities, in each case that is material to the conduct of the
Business and relates solely to the Business.
5.19 LITIGATION. As of the date hereof, there is no action, proceeding or
investigation pending or, to the knowledge of the Seller, threatened:
(i) which relates directly to, or arises directly out
of, the Business; or
(ii) which questions or challenges the validity of, or
seeks damages or equitable relief on the basis of, this Agreement or
any action taken or to be taken by the Seller pursuant to this
Agreement or in connection with the transactions contemplated
hereby.
5.20 COURT ORDERS, DECREES, AND LAWS. There is no outstanding or, to the
knowledge of the Seller, threatened order, writ, injunction, or decree of any
court, governmental agency, or arbitration tribunal against the Seller involving
or relating to the Business. The Seller is not in violation of any applicable
federal, state or local law, regulation, ordinance, zoning requirement,
governmental restriction, order, judgment or decree affecting, involving or
relating to the Business, and the Seller has not received any notices of any
allegation of any such violation. The foregoing shall be deemed to include laws
and regulations relating to the federal patent, copyright, and trademark laws,
state trade secret and unfair competition laws, and to all other applicable
laws, including equal opportunity, wage and hour, and other employment matters,
and antitrust and trade regulations, safety (including OSHA), building, zoning
or health laws, ordinances and regulations.
5.21 [Reserved].
5.22 CUSTOMERS. No customer of the Business has notified the Seller in
writing of an intention on its part to terminate such customer's currently
outstanding agreement for services with the Seller as they relate to the
Business. The Seller has not taken any actions specifically intended to lead to
the termination of any such Person's agreement with the Seller as it relates to
the Business.
5.23 POST JUNE 2000 REVENUE. SCHEDULE 3.02(i) sets forth a list of all
invoices issued by the Seller (or requested to be issued by employees of the
Business) for the revenues described in subparagraph (k) of the definition of
Acquired Assets.
5.24 BROKER'S FEES. Neither the Seller nor anyone acting on its behalf has
made any commitment or done any other act which would create any liability for
any brokerage, finder's or similar fee or commission which is conditioned upon
the successful completion of the transactions contemplated by this Agreement.
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5.25 RELATED-PARTY TRANSACTIONS. The Seller is not party to any contract,
agreement, license, lease, or arrangement with, or any other commitment to,
directly or indirectly, (1) any Affiliate of the Seller; (2) any officer or
salaried employee of the Seller; (3) any corporation, trust, or other entity in
which any such officer or salaried employee has a material equity or
participating interest; or (4) any partnership in which any such officer or
salaried employee has a partnership or participating interest, in each case,
relating to or involving the Business, except, in each instance, for existing
compensation arrangements under a Benefit Plan.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
As a material inducement to the Seller to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser hereby represents and
warrants to the Seller as follows:
6.01 CORPORATE ORGANIZATION . Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada,
with full power to own or lease its properties and to conduct its business in
the manner and in the places where such properties are owned or leased or such
business is conducted by it. Except as listed on Schedule 6, Purchaser has no
subsidiaries or affiliated companies and does not otherwise directly or
indirectly control any other business entity.
6.02 CAPITALIZATION. The authorized capital stock of Purchaser consists of
50,000,000 shares of Front Porch Common Stock, of which 19,810,768 shares will
be issued and outstanding, fully paid and non-assessable immediately prior to
the Closing, and 5,000,000 shares of preferred stock, par value $.001 per share,
of which no shares will be issued and immediately prior to the Closing.
Purchaser has received and intends to accept subscriptions for 2,007,050 shares
of Front Porch Common Stock received in connection with the offering described
in the Offering Memorandum. There are 3,150,000 shares of Front Porch Common
Stock reserved for issuance upon the exercise of outstanding warrants
exercisable at $0.50 per share and 800,000 shares of Front Porch Common Stock
reserved for issuance upon the exercise of outstanding warrants exercisable at
$1.00 per share. There are 6,000,000 shares of Front Porch Common Stock reserved
for issuance to employees, consultants or directors pursuant to the 2000 Equity
Incentive Plan of Purchaser (the "Equity Incentive Plan"). There are options to
purchase 25,000 shares of Front Porch Common Stock pursuant to the Equity
Incentive Plan presently outstanding. There are no other options, warrants,
conversion privileges, preemptive rights, rights of first refusal or other
rights presently outstanding to purchase any of the authorized but unissued
capital stock of Purchaser. To Purchaser's knowledge, except as set forth on
Schedule 6, there are no agreements among shareholders of Purchaser concerning
the purchase or sale of securities of Purchaser. Purchaser has not reserved for
issuance any shares of capital stock except as set forth herein or on Schedule
6.
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6.03 AUTHORITY AND VALIDITY. All corporate action on the part of Purchaser,
its officers, directors and shareholders necessary for the issuance of the
shares of Front Porch Common Stock to be issued to the Seller hereunder and the
performance of Purchaser's obligations hereunder has been taken or will be taken
prior to the Closing. Such shares, when issued, sold and delivered in accordance
with the terms hereof and for the consideration expressed herein, will be duly
and validly issued, fully paid and nonassessable and will be free and clear of
any preemptive or similar rights and any liens or encumbrances caused or created
by Purchaser. Purchaser has the requisite power and authority to enter into this
Agreement and each Related Document to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and each Related Document to which it
is a party have been duly authorized by all necessary corporate action of
Purchaser and no other action on the part of Purchaser is required in connection
therewith. This Agreement and each Related Document to which Purchaser is a
party constitutes, or when executed and delivered will constitute, a valid and
binding obligation of Purchaser enforceable against Purchaser in accordance with
its terms, subject only to the Bankruptcy Exceptions.
6.04 FINANCIAL STATEMENTS. Purchaser's unaudited financial statements at
and for the period ended June 30, 2000 (the "Financial Statements") have been
duly filed as part of Purchaser's quarterly reports filed with the Securities
and Exchange Commission under the Exchange Act. The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. The Financial Statements fairly present the financial position of the
Purchaser as of the respective dates and the results of operations for the
respective periods covered by the Financial Statements. Since June 30, 2000,
there have been no changes in the condition (financial or otherwise) of
Purchaser which, either individually or in the aggregate, materially and
adversely affected the business, prospects, condition, affairs, operations,
properties or assets of the Purchaser, except as set forth on Schedule 6. Since
June 30, 2000, Purchaser has not entered into any material transaction that is
not reflected in the Financial Statements or listed on Schedule 6.
6.05 PROPRIETARY RIGHTS. To the knowledge of Purchaser, Purchaser owns or
has a valid right to use the patents, patent rights, trademarks, trade names,
brand names, inventions, processes, formulae, licenses, permits, copyrights and
other intellectual property rights necessary for the operation of Purchaser's
business as presently conducted. Purchaser has no obligation to compensate any
Person for the use of any such patents or other rights, and has granted to no
Person any license or other rights to use in any manner any such patents or
other rights of Purchaser, whether requiring the payment of royalties or not.
6.06 MATERIAL CONTRACTS AND OBLIGATIONS.All agreements, contracts,
liabilities and other obligations to which Purchaser is a party or by which it
is bound, except such as individually may not involve more than fifty thousand
dollars ($50,000) and collectively not aggregate more than two hundred thousand
dollars ($200,000), are listed on Schedule 6. All of such agreements and
contracts are valid and binding agreements of Purchaser and, to the knowledge of
Purchaser, each other party thereto, and enforceable in accordance with their
terms in all material respects, subject to the Bankruptcy Exceptions.
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6.07 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental authority is required to be obtained by Purchaser in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except for informational
filings with the Securities and Exchange Commission and the Bureau of Economic
Analysis of the United States Department of Commerce.
6.08 NO VIOLATION. The execution and delivery by Purchaser of this
Agreement and each Related Document to which Purchaser is a party, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the terms hereof and thereof, does not and will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Encumbrance of any kind upon any of the properties or assets
of Purchaser under, any provision of (i) the Certificate of Incorporation or
By-laws of Purchaser, (ii) any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment or loan or other agreement to which
Purchaser is a party or by which any of its properties or assets are bound, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Purchaser or its property or assets.
6.09 COMPLIANCE WITH OTHER INSTRUMENTS. Purchaser is not in violation,
breach or default (whether or not declared) of any term of its Certificate of
Incorporation or Bylaws, or of any material term or provision of any mortgage,
indenture, loan agreement, contract, agreement or instrument to which Purchaser
is a party or by which its property is bound, or, to its knowledge, of any
provision of any state or Federal judgment, decree, order, statute, rule or
regulation applicable to or binding upon Purchaser; provided, however, that
Purchaser makes no representation with respect to any statute, rule or
regulation the violation or breach of which will not have any material adverse
effect on Purchaser's assets, business, prospects, affairs, operations or
financial condition, in each case taken as a whole. To Purchaser's knowledge, no
employee of Purchaser is in violation of (a) any term of any employment
contract, patent or other proprietary information disclosure agreement or any
other contract or agreement relating to the right of any such employee to be
employed by Purchaser because of the nature of the business conducted or
proposed to be conducted by Purchaser or for any other reason or (b) any
statutory law (including governmental rules and regulations) or common law
principle in the areas of unfair competition, trade secrets or proprietary
information that would prohibit the use of information used or proposed to be
used by Purchaser.
6.10 REGISTRATION RIGHTS. Except as set forth in Schedule 6, Purchaser is
not under any obligation to register under the Securities Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
6.11 BOARD OF DIRECTORS. Except as set forth in SCHEDULE 6, there exist no
agreements or arrangements with respect to the nomination or election of
directors of Purchaser.
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6.12 EMPLOYEE COMPENSATION PLANS. Except as set forth in SCHEDULE 6,
Purchaser is not party to or bound by any currently effective employment
contracts, deferred compensation agreements, bonus plans, incentive plans,
retirement agreements or other employee compensation agreement, except oral
employment agreements, offer letters or arrangements terminable by Purchaser at
will.
6.13 BROKER'S FEES. Neither Purchaser nor anyone acting on its behalf has
made any commitment or done any other act which would create any liability for
any brokerage, finder's or similar fees or commissions in connection with the
transactions contemplated by this Agreement.
6.14 LITIGATION. There is no litigation or governmental or administrative
proceeding or investigation pending or, to Purchaser's knowledge, threatened
against Purchaser or any of its Affiliates which, either in any case or in the
aggregate, would prevent or hinder the consummation of the transactions
contemplated by this Agreement or which would have any material adverse effect
on Purchaser's assets, business, prospects, affairs, operations or financial
condition, in each case taken as a whole, or which questions the validity of
this Agreement or any action taken or to be taken in connection herewith.
6.15 EMPLOYEES OF THE SELLER. Purchaser does not have any agreement with
any current employee of the Seller that provides for (i) having such employee of
the Seller decline an offer of employment from Purchaser in connection with this
Agreement for the purpose of rendering such employee eligible to receive
severance payments or other termination benefits from the Seller, and (ii) the
subsequent hiring of such employee by Purchaser.
6.16 DISCLOSURE. Purchaser has filed, on a timely basis, all reports
required to be filed by Purchaser under the Exchange Act. The reports filed by
Purchaser under the Securities Act did not, on the dates such reports were
filed, include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
6.17 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. (i) Purchaser is in compliance with all applicable
Environmental Laws; (ii) Purchaser has not received any written communication
from any Person that alleges that Purchaser is not in compliance with applicable
Environmental Laws; and (iii) there have not been any Releases of Hazardous
Materials by Purchaser or, to the knowledge of Purchaser, by any non-Affiliate
of Purchaser, at any property currently or formerly owned or operated by
Purchaser that occurred during the period of Purchaser's ownership or operation
of such property.
(b) ENVIRONMENTAL PERMITS. Purchaser has all Environmental Permits
necessary for the conduct and operation of Purchaser's business, and all such
permits are in good standing or, where applicable, a renewal application has
been timely filed and is pending agency approval, and Purchaser is in compliance
with all terms and conditions of all such Environmental
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Permits and are not required to make any expenditure in order to obtain or renew
any Environmental Permits.
(c) ENVIRONMENTAL CLAIMS. There are no Environmental Claims pending or,
to the knowledge of Purchaser, threatened against Purchaser, or against any real
or personal property or operation that Purchaser owns, leases or manages.
6.18 CONFLICTS OF INTEREST. Except as set forth in Schedule 6, to the
knowledge of Purchaser, no officer or director of Purchaser or any of its
Affiliates has, either directly or indirectly, (a) an interest in any
corporation, partnership, proprietorship, association or other person or entity
which furnishes or sells services or products to Purchaser or which purchases
services or products from Purchaser or whose services or products are similar to
those furnished or sold by Purchaser, or (b) a beneficial interest in any
contract, agreement or commitment to which Purchaser may be bound. To the
knowledge of Purchaser, none of the officers of Purchaser owns, directly or
indirectly, of record or beneficially, more than one percent (1%) of the
outstanding voting securities (which will include any security or option
convertible into or exercisable for voting securities) of any corporation with
which Purchaser does business, nor is any officer of Purchaser a general partner
or limited partner in a partnership with which Purchaser does business in which
he has a direct or indirect interest in more than one percent (1%) of the
profits of such partnership.
ARTICLE VII
CONDITIONS OF CLOSING; CERTAIN COVENANTS
----------------------------------------
7.01 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER HEREUNDER. All
obligations of Purchaser hereunder with respect to the purchase and sale of the
Acquired Assets are subject to the fulfillment to the satisfaction of Purchaser
and its legal counsel, prior to or at the Closing, of each of the following
conditions, except to the extent that Purchaser may waive any one or more
thereof:
(a) The representations and warranties contained in Article V of this
Agreement, the schedules hereto and in each Related Document delivered by the
Seller pursuant hereto or in connection with the transactions contemplated
hereby shall be true, complete and accurate in all material respects as of the
date when made and at and as of the Closing Date as though such representations
and warranties were made at and as of such date, except for representations and
warranties that speak as of a specific date or time, which need only be true and
correct as of such date or time.
(b) The Seller shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing.
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(c) No suit, action, investigation, inquiry or other proceeding by any
governmental body or other Person or legal or administrative proceeding shall
have been instituted or, to the knowledge of Purchaser, threatened, which seeks
to restrain, enjoin, prevent the consummation or otherwise restrict the
transactions contemplated by this Agreement or which questions the validity or
legality of the transactions contemplated hereby.
(d) From the date of this Agreement to the Closing Date, the Business
shall not have suffered any Material Adverse Effect.
(e) [Reserved].
(f) The Seller shall have delivered to Purchaser, or cause to be
delivered to Purchaser, the other items required to be delivered to Purchaser in
accordance with Section 3.02 hereof.
(g) The Seller shall have furnished Purchaser with such certificates to
evidence compliance with the conditions set forth in this Section 7.01 as may
reasonably be requested by Purchaser or its legal counsel.
7.02 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER HEREUNDER. All
obligations of the Seller hereunder with respect to the purchase and sale of the
Acquired Assets and the other agreements hereunder are subject to the
fulfillment to the satisfaction of the Seller and its legal counsel, prior to or
at the Closing, of each of the following conditions, except to the extent that
the Seller may waive any one or more thereof:
(a) The representations and warranties contained in Article VI hereof,
the schedules hereto, and in each Related Document to be delivered by Purchaser
pursuant hereto or in connection with the transactions contemplated hereby shall
be true, complete and accurate in all material respects as of the date when made
and at and as of the Closing Date as though such representations and warranties
were made at and as of such date, except for representations and warranties that
speak as of a specific date or time, which need only be true and correct as of
such date or time.
(b) Purchaser shall have performed and complied in all material respects
with all agreements, obligations and conditions required by this Agreement to be
performed or complied with by Purchaser on or prior to the Closing.
(c) No suit, action, investigation, inquiry or other proceeding by any
governmental body or other Person or legal or administrative proceeding shall
have been instituted or, to the knowledge of the Seller, threatened which seeks
to restrain, enjoin, prevent the consummation of or otherwise restrict the
transactions contemplated by this Agreement or which questions the validity or
legality of the transactions contemplated hereby.
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(d) Purchaser shall have delivered to the Seller, or cause to be
delivered to the Seller, the payments and other items required to be delivered
to the Seller in accordance with Section 3.03 hereof.
(e) Purchaser shall have furnished the Seller with such certificates of
Purchaser to evidence compliance with the conditions set forth in this Section
7.02 as may reasonably be requested by the Seller or its legal counsel.
(f) From the date of this Agreement to the Closing Date, the Purchaser's
business shall not have suffered any Material Adverse Effect.
(g) Purchaser shall have completed the private offering of its shares as
contemplated by the private placement memorandum and supplement thereto
described in Section 5.02(d), which offering shall have resulted in gross
proceeds of at least $5,500,000.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
-------------------------------
8.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any party hereto in this Agreement or in the attached
Schedules or in any exhibit or certificate delivered pursuant hereto shall
survive the Closing hereunder and any investigation at any time made by or on
behalf of any other party through the third anniversary of the Closing Date,
except with respect to Sections 5.01 and 6.01 ("Organization"), 5.02
("Investment Representations"), 6.02 ("Capitalization"), 5.03 and 6.03
("Authorization"/"Authority and Validity"), 5.04 ("Valid and Binding"), 6.04
("Financial Statements"), 5.05 ("No Violation"), 5.06 ("Consents and
Approvals"), 5.10 ("Taxes"), 5.15 ("Environmental"), 6.07 ("Consents and
Approvals of Governmental Authorities"), 6.08 ("No Violation") and 6.17
("Environmental"), which shall survive until the expiration of the statute of
limitations applicable thereto. No investigation by either party shall relieve
the other party from any liability for any misrepresentation, misleading
statement or omission made in this Agreement or in connection with the
transactions contemplated hereby.
8.02 NOTICE OF DAMAGES. A party seeking indemnity hereunder (the
"Indemnified Party") will give the party from whom indemnity is sought hereunder
(the "Indemnitor") prompt notice (hereinafter, the "Indemnification Notice") of
any demands, claims, actions or causes of action (collectively, "Claims")
asserted against the Indemnified Party. Failure to give such notice shall not
relieve the Indemnitor of any obligations which the Indemnitor may have to the
Indemnified Party under this Article VIII, except to the extent that such
failure has prejudiced the Indemnitor under the provisions for indemnification
contained in this Agreement. For purposes of this Article VIII, Purchaser, on
the one hand, and the Seller, on the other hand, shall be deemed to be the
"Indemnified Party" or the "Indemnitor", as the case may be.
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8.03 AGREEMENTS TO INDEMNIFY.
(a) Subject to the terms and conditions of this Article VIII, the Seller
covenants and agrees to indemnify, defend and hold harmless Purchaser and its
Affiliates (including any officer, director, stockholder, partner, member,
employee, agent or representative of any thereof) (a "Purchaser Affiliate") from
and against all assessments, losses, damages, liabilities, costs and expenses,
including without limitation interest, penalties and reasonable fees and
expenses of legal counsel (collectively, "Damages") imposed upon or incurred by
a Purchaser or any Purchaser Affiliate arising out of, in connection with or
resulting from:
(i) any breach of any representation or warranty of, or
nonfulfillment of any covenant or agreement of, the Seller contained
in or made pursuant to this Agreement or any Related Document to
which the Seller is a party;
(ii) any and all Excluded Liabilities; and
(iii) any and all claims made by creditors of the Seller
relating to the provisions of any "bulk sales" laws of any state or
other jurisdiction that be applicable to the transactions
contemplated hereby.
(b) Subject to the terms and conditions of this Article VIII, Purchaser
covenants and agrees to indemnify, defend and hold harmless the Seller and its
Affiliates (including any successor or assigns, officer, director, stockholder,
partner, member, employee, agent or representative thereof) from and against all
Damages imposed upon or incurred by such indemnified party arising out of or in
connection with or resulting from:
(i) any breach of any representation or warranty of, or
nonfulfillment of any covenant or agreement of, Purchaser contained
in or made pursuant to this Agreement or any Related Document to
which Purchaser is a party; and
(ii) any and all Assumed Liabilities.
(c) The Indemnitor shall reimburse an Indemnified Party promptly after
delivery of an Indemnification Notice certifying that the Indemnified Party has
incurred Damages after compliance with the terms of this Article VIII, PROVIDED,
HOWEVER, that the Indemnitor shall have the right to contest any such Damages or
its obligations to indemnify therefor in accordance with the terms of this
Agreement.
8.04 CONDITIONS OF INDEMNIFICATION OF THIRD PARTY CLAIMS. The obligations
and liabilities of an Indemnitor under Section 8.03 hereof with respect to
Damages resulting from Claims by Persons not party to this Agreement shall be
subject to the following terms and conditions:
(a) Promptly after delivery of an Indemnification Notice in respect of a
Claim and subject to paragraph (c) of this Section 8.04, the Indemnitor may
elect, by written notice to
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the Indemnified Party, to undertake the defense thereof with counsel reasonably
satisfactory to the Indemnified Party, at the sole cost and expense of
Indemnitor. If the Indemnitor chooses to defend any claim, the Indemnified Party
shall cooperate with all reasonable requests of the Indemnitor and shall make
available to the Indemnitor any books, records or other documents within its
control that are necessary or appropriate for such defense.
(b) In the event that the Indemnitor, within a reasonable time after
receipt of an Indemnification Notice, does not so elect to defend such Claim,
the Indemnified Party will have the right (upon further notice to the
Indemnitor) to undertake the defense, compromise or settlement of such Claim for
the account of the Indemnitor, subject to the right of the Indemnitor to assume
the defense of such Claim pursuant to the terms of paragraph (a) of this Section
8.04 at any time prior to settlement, compromise or final determination thereof,
PROVIDED, that the Indemnitor reimburses in full all costs of the Indemnified
Party (including reasonable attorney's fees and expenses) incurred by it in
connection with such defense prior to such assumption.
(c) Anything in this Section 8.04 to the contrary notwithstanding, (i)
if the Indemnified Party reasonably believes there is a reasonable probability
that a Claim may materially and adversely affect the Indemnified Party, the
Indemnified Party shall have the right to participate in the defense, compromise
or settlement of such Claim, provided that the Indemnitor shall not be liable
for expenses of separate counsel of the Indemnified Party engaged for such
purpose, (ii) no person who has undertaken to defend a Claim under Section
8.04(a) hereof shall, without written consent of all Indemnified Parties, settle
or compromise any Claim or consent to entry of any judgment which does not
include as an unconditional term thereof the release by the claimant or the
plaintiff of all Indemnified Parties from all liability arising from events
which allegedly give rise to such Claim.
8.05 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding anything to the contrary provided elsewhere in this
Agreement, the obligations of any Indemnitor under this Agreement to indemnify
any Indemnified Party with respect to any Claim pursuant to Section 8.03 shall
be of no force and forever barred unless the Indemnified Party has given the
Indemnitor notice of such claim prior to the third anniversary of the Closing
Date, provided that there shall be no time limit for Claims made for a breach of
the representations and warranties contained in Sections 5.01 and 6.01
("Organization"), 5.02 ("Investment Representations"), 6.02 ("Capitalization"),
5.03 and 6.03 ("Authorization"/"Authority and Validity"), 5.04 ("Valid and
Binding"), 6.04 ("Financial Statements"), 5.05 ("No Violation"), 5.06 ("Consents
and Approvals"), 5.10 ("Taxes"), 5.15 ("Environmental"), 6.07 ("Consents and
Approvals of Governmental Authorities"), 6.08 ("No Violation") and 6.17
("Environmental") other than the statute of limitations applicable thereto. In
any event, the parties shall fully cooperate with each other and their
respective counsel in accordance with Section 8.04 in connection with any such
litigation, defense, settlement or other attempted resolution.
(b) Notwithstanding the reference in certain representations and
warranties in Articles V and VI to exceptions set forth in a specific Schedule
number, such representations and
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warranties shall be deemed to be qualified by all information fairly disclosed
in all Schedules attached hereto, except to the extent a party has acted in bad
faith in failing to include an exception in the proper Schedule.
ARTICLE IX
TERMINATION
-----------
9.01 TERMINATION OF AGREEMENT. The parties may terminate this Agreement
prior to the Closing as follows:
(a) Purchaser and the Seller may terminate this Agreement by mutual
written consent;
(b) Purchaser may terminate this Agreement by giving written notice to
the Seller if the Closing shall fail to occur by reason of the failure of any
condition precedent under Section 7.01 hereof (unless the failure results
primarily from a breach by Purchaser of any representation, warranty or covenant
contained in this Agreement);
(c) the Seller may terminate this Agreement by giving written notice to
Purchaser if the Closing shall not have occurred by reason of the failure of any
condition precedent under Section 7.02 hereof (unless the failure results
primarily from a breach by the Seller of any representation, warranty or
covenant contained in this Agreement);
(d) either Purchaser or the Seller may terminate this Agreement on 20
days written notice if the other party is in material breach of this Agreement
and such breach is not cured within such 20 day period; or
(e) either Purchaser or the Seller may terminate this Agreement upon
written notice if the Closing shall not have occurred on or prior to October 15,
2000.
9.02 EFFECT OF TERMINATION. If either Purchaser or the Seller terminates
this Agreement pursuant to Section 9.01, (a) each of Purchaser and the Seller
will redeliver to the party furnishing the same or destroy all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof;
(b) neither the Seller nor Purchaser shall make or issue, or cause to be made or
issued, any announcement or written statement concerning termination of this
Agreement or the transactions contemplated hereby for dissemination to the
general public without the prior written consent of the other parties except as
required by law or legal process; and (c) this Agreement shall become wholly
void and of no force or effect, without any liability or further obligation on
the part of the Seller or Purchaser or any director, officer, or principal
thereof, except for liabilities of one party hereto to another arising from a
breach of this Agreement prior to termination in accordance with Section 9.01
(including without limitation the breach of a
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representation or covenant that results in the failure of the Closing to occur)
and except that the provisions set forth in this Section 9.02 shall survive such
termination.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.01 EXPENSES. Except as otherwise provided herein, the Seller shall pay
all expenses incurred by or on behalf of the Seller, and Purchaser shall pay all
expenses incurred by or on behalf of Purchaser, in each case in connection with
this Agreement or any transaction contemplated by this Agreement, whether or not
such transaction shall be consummated, including without limitation all fees of
its or their respective legal counsel and accountants.
10.02 NOTICES. All notices, requests, demands, consents or waivers and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given if delivered by hand or by telecopy
(with immediate confirmation), one business day after being sent if by
nationally recognized overnight courier or if mailed, then four days after being
sent by certified or registered mail, return receipt requested with postage
prepaid:
(i) If to the Seller:
Storage Technology Corporation
One StorageTek Drive
Louisville, CO 80028
Attention: Robert S. Kocol, Corporate Vice
President and Chief Financial Officer
Telecopy: (303) 673-4151
with a copy to:
Storage Technology Corporation
One StorageTek Drive
Louisville, CO 80028-4309
Attention: Jeffrey M. Dumas, General Counsel
Telecopy: (303) 673-4151
(ii) If to Purchaser, to:
Front Porch Digital Inc.
1810 Chapel Avenue West, Suite 130
Cherry Hill, NJ 08002
Attention: Chief Executive Officer
Telecopy: (856) 663-3503
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with a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Eric M. Hellige, Esq.
Telecopy: (212) 326-0806
or, in each case, to such other Person or address as any party shall furnish to
the other parties in writing.
10.03 BINDING; NO ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
either party without the prior written consent of the other party; PROVIDED,
HOWEVER, that Purchaser may assign all or part of this Agreement and its rights
hereunder, without the consent of the Seller, (a) to an Affiliate now existing
or formed hereafter or (b) with respect to any of the Acquired Assets acquired
by Purchaser hereunder, from and after the Closing to a Person, not a party to
this Agreement, who acquires substantially all of the assets of such party and
who assumes all of the obligations of such party hereunder.
10.04 SEVERABILITY. If in any jurisdiction, any provision of this Agreement
or its application to any party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without affecting the validity
or enforceability of such provision in any other jurisdiction or its application
to other parties or circumstances. In addition, if any one or more of the
provisions contained in this Agreement shall for any reason in any jurisdiction
be held to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and reducing it, so as
to be enforceable to the extent compatible with the applicable law of such
jurisdiction as it shall then appear.
10.05 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.
(a) All of the terms, conditions, and other provisions of this
Agreement shall be interpreted and governed by reference to the laws of the
State of Delaware, and any dispute arising therefrom and the remedies available
shall be determined in accordance with such laws without giving effect to the
principles of conflicts of law.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits to the non-exclusive jurisdiction of any Delaware state
or federal court sitting in Wilmington, Delaware in any action or proceeding
arising out of or relating to this Agreement, any other agreement or document
delivered pursuant hereto or any transaction contemplated hereby. Each of the
parties hereto hereby irrevocably waives, to the fullest extent it or he may
effectively do
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so, the defense of an inconvenient forum to the maintenance of such action or
proceeding. Each of the parties hereto also irrevocably and unconditionally
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process by certified mail to such party and its
or his counsel at their respective addresses specified in Section 10.02. Each of
the parties hereto further irrevocably and unconditionally agrees that a final
judgment in any such action or proceeding (after exhaustion of all appeals or
expiration of the time for appeal) shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
10.06 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.07 HEADINGS. The title of this Agreement and the headings of the
Sections and Articles of and the Schedules to this Agreement are for reference
purposes only and shall not be used in construing or interpreting this
Agreement.
10.08 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement and each
Related Document delivered pursuant to the terms hereof, sets forth the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and supersedes all prior agreements, promises, covenants,
arrangements, representations or warranties, whether oral or written, by any
party hereto or any officer, director, employee or representative of any party
hereto. No modification or waiver of any provision of this Agreement shall be
valid unless it is in writing and signed by the party to be charged therewith.
The waiver of breach of any term or condition of this Agreement shall not be
deemed to constitute a waiver of any other breach of the same or any other term
or condition.
10.09 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person other than the parties hereto and their
successors or assigns any rights or remedies under or by reason of this
Agreement.
10.10 PUBLICITY. From the date hereof through the Closing Date, no party
hereto shall make any announcement of the transactions contemplated hereby
without the prior written consent of the other party hereto. From and after the
Closing Date, except as otherwise required by law, the neither the Seller nor
Purchaser shall make any announcement, issue any press release or disseminate
information to the press or any third party regarding this Agreement or the
transactions contemplated by this Agreement without the prior written consent of
the other party hereto.
10.11 NO PRESUMPTION. The Seller and Purchaser have each participated in
the negotiation and drafting of this Agreement and have each been represented
throughout to its satisfaction by legal counsel of its choosing. In the event
any ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto
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and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
10.12 GENDER; TENSE, ETC. Where the context or construction requires,
all words applied in the plural shall be deemed to have been used in the
singular, and vice versa; the masculine shall include the feminine and neuter,
and vice versa; and the present tense shall include the past and future tense,
and vice versa.
10.13 REFERENCE TO DAYS. All references to days in this Agreement shall
be deemed to refer to calendar days, unless otherwise specified.
10.14 LIMITATION OF REMEDY. In no event shall either party be liable to
the other for any special, consequential, incidental or indirect damages
(including without limitation damages based on lost profits, lost opportunity or
the like) based on any claim arising under this Agreement, whether such
agreement is based on contract, tort or any other legal theory. This limitation
shall not apply to a party's obligation to indemnify against third party claims
as set forth in Section 8.04.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York, all on the day and year first
above written.
PURCHASER:
FRONT PORCH DIGITAL INC.
By: /s/ TIM PETRY
----------------------------
Name: Tim Petry
Title: Chief Financial Officer
SELLER:
STORAGE TECHNOLOGY CORPORATION
By: /s/ MARK D. MCGREGOR
----------------------------
Name: Mark D. McGregor
Title: Vice President and
Corporate Treasurer
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