-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L1zZdhZc9FIKbMfiIrguuDS9HTsJzLmxPrMAEESbVgelXw91nojJvzVwSk8qVEgV /1gP4QmKhB/s91T60oQWAQ== 0000930413-02-002522.txt : 20020814 0000930413-02-002522.hdr.sgml : 20020814 20020813193534 ACCESSION NUMBER: 0000930413-02-002522 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020731 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRONT PORCH DIGITAL INC CENTRAL INDEX KEY: 0001025707 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 860793960 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-32913 FILM NUMBER: 02731307 BUSINESS ADDRESS: STREET 1: 1810 CHAPEL AVE W STREET 2: SUITE 130 CITY: CHERRY HILL STATE: NJ ZIP: 08002 BUSINESS PHONE: 8566333500 MAIL ADDRESS: STREET 1: 1810 CHAPEL AVE W STREET 2: SUITE 130 CITY: CHERRY HILL STATE: NJ ZIP: 08002 FORMER COMPANY: FORMER CONFORMED NAME: LITIGATION ECONOMICS INC DATE OF NAME CHANGE: 19961022 FORMER COMPANY: FORMER CONFORMED NAME: EMPIRE COMMUNICATIONS CORP DATE OF NAME CHANGE: 19980327 8-K 1 c25326_8k.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------------- DATE OF REPORT: JULY 31, 2002 (Date of earliest event reported) FRONT PORCH DIGITAL INC. (Exact name of Registrant as specified in its charter) NEVADA (State or other jurisdiction of incorporation) 333-16031 86-0793960 (Commission File No.) (I.R.S. Employer Identification No.) 20000 HORIZON WAY SUITE 120 MT. LAUREL, NEW JERSEY 08054 (Address of principal executive offices; zip code) (856) 439-9950 (Registrant's telephone number, including area code) NOT APPLICABLE (Former Name or Former Address, if changed Since Last Report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On July 31, 2002, Front Porch Digital Inc., a Nevada corporation (the "Company"), acquired all the outstanding shares of capital stock (the "Shares") of ManagedStorage International France, a French SOCIETE PAR ACTIONS SIMPLIFEE (the "MSI France"), and certain assets of ManagedStorage International, Inc., a Delaware corporation ("ManagedStorage"), pursuant to a Stock and Asset Purchase Agreement dated as of July 31, 2002 (the "Purchase Agreement"), between the Company and ManagedStorage. The consideration paid by the Company pursuant to the Purchase Agreement consisted of (a) 5,000,000 shares of common stock, par value $.001 per share, of the Company (the "Company Common Stock"); (ii) a warrant for the purchase of up to 1,750,000 shares of Company Common Stock at a price of $2.00 per share, exercisable immediately and expiring on July 31, 2012; and (iii) a warrant for the purchase of up to 1,750,000 shares of Company Common Stock at a price of $4.00 per share, exercisable immediately and expiring on July 31, 2012. In addition, the Company agreed to issue and deliver up to 2,500,000 additional shares of Company Common Stock pursuant to the terms of an earn-out as more fully described in Section 1.3(b) of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, the Company acquired from ManagedStorage (i) all of the issued and outstanding shares of capital stock of MSI France and (ii) certain software and related intellectual property rights, including DIVArchive, a software solution designed to assist media, entertainment and medical companies in the preservation, management and accessing of digital content consisting of large digital data files. DIVArchive is an advanced digital content management and archiving software that is integrateable with a variety of broadcast and medical systems, including archive systems for medical PACS vendors, such as Kodak. Numerous global entertainment companies and broadcast facilities currently utilize DIVArchive, including newsrooms, centralized broadcast operations, show business channels, television stations and sports event broadcasters. DIVArchive enables video servers and asset management systems to archive to a common storage. The Company's VAST workflow automation and transcoding software adds searchability and format independence, considerably enhancing the value of shared storage. The Company's architecture features its single capture, multi-repurpose process that simplifies digital content archiving. By using DIVArchive, broadcasters and cable multiple systems operators (MSOs) will be able to treat their shared storage as a shared archive, completing the transition from a videotape based production and distribution to a more efficient data and server based environment. The Company believes DIVArchive will significantly strengthen its software and service offerings to the medical community as well. DIVArchive integrates with newer patient record systems while the Company's DICOM Data Mover facilitates the automated migration of these records. The combination of these technologies delivers a complete data migration and content management solution to medical facilities that will allow them to quickly and easily adopt a more comprehensive and powerful records archive system that complies with the new HIPAA legislation. MSI France (which the Company intends to re-name "Front Porch Digital International S.A.S.") sells, licenses, customizes, installs and services DIVArchive, and currently services over 30 installations of DIVArchive for its top-tier global clients. MSI France is headquartered in Toulouse, France and has over 25 full-time employees. For the first six months of 2002, MSI France had revenues from the sale of DIVArchive and related hardware of approximately $1,500,000. At August 1, 2002, MSI France had positive working capital of approximately $700,000. Pursuant to the Purchase Agreement, ManagedStorage entered into a Lock-Up Agreement with the Company whereby, subject to certain exceptions, ManagedStorage agreed not sell, assign, transfer, pledge or otherwise dispose of any Company Common Stock owned or acquired by it or any interest therein prior to July 31, 2003, except as expressly permitted by the Lock-Up Agreement. In connection with the transaction, ManagedStorage was granted certain demand registration rights with respect to the shares of Company Common Stock acquired by ManagedStorage pursuant to the terms of the Purchase Agreement. ITEM 5. OTHER INFORMATION On August 2, 2002, each of Thomas P. Sweeney III, Chief Executive Officer of ManagedStorage, and Paul McKnight, Chief Financial Officer of ManagedStorage, was elected to the Board of Directors of the Company to fill vacancies on the Board. Mr. Sweeney was also elected Chairman of the Board of Directors of the Company and Mr. McKnight was also appointed Chief Financial Officer of the Company. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Financial statements, if any, required by this item will be filed by amendment within sixty (60) days from the date hereof. (b) PRO FORMA FINANCIAL INFORMATION. Pro forma financial information, if any, required by this item will be filed by amendment within sixty (60) days from the date hereof. (c) The Company hereby furnishes the following exhibits: 10.1 Stock and Asset Purchase Agreement dated as of July 31, 2002 between the Company and ManagedStorage. 10.2 Registration Rights Agreement dated as of July 31, 2002 between the Company and ManagedStorage. 2 10.3 Lock-Up Agreement dated as of July 31, 2002 between the Company and ManagedStorage. 10.4 Warrant dated July 31, 2002 to purchase up to 1,7500,000 shares of Company Common Stock at an exercise price of $2.00 per share. 10.5 Warrant dated July 31, 2002 to purchase up to 1,750,000 shares of Company Common Stock at $4.00 per share. 99.1 Joint Press Release dated August 1, 2002 issued by the Company and ManagedStorage. 99.2 Press Release dated August 7, 2002 issued by the Company. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: August 12, 2002 FRONT PORCH DIGITAL INC. (Registrant) By: /s/ Don Maggi ------------------------------- Name: Don Maggi Title: Chief Executive Officer 3 EX-10.1 3 c25326_ex10-1.txt STOCK AND ASSET PURCHASE AGREEMENT EXHIBIT 10.1 STOCK AND ASSET PURCHASE AGREEMENT BY AND BETWEEN MANAGEDSTORAGE INTERNATIONAL, INC. AND FRONT PORCH DIGITAL INC. Dated as of July 31, 2002 TABLE OF CONTENTS PAGE ---- RECITALS......................................................................1 ARTICLE I PURCHASE AND SALE OF THE SUBSIDIARY SHARES, THE SELLER SOFTWARE, THE OTHER SOFTWARE AND THE SELLER TRADEMARKS............................1 SECTION 1.1. PURCHASE AND SALE OF THE SUBSIDIARY SHARES................1 SECTION 1.2. PURCHASE AND SALE OF THE SELLER SOFTWARE, THE OTHER SOFTWARE AND SELLER TRADEMARKS............................1 SECTION 1.3. CONSIDERATION.............................................2 SECTION 1.4. LOCK-UP AGREEMENT.........................................3 SECTION 1.5. REGISTRATION RIGHTS.......................................3 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER...........................3 SECTION 2.1. ORGANIZATION; AUTHORITY; BINDING AGREEMENT................3 SECTION 2.2. NO CONFLICT; FILINGS AND CONSENT..........................4 SECTION 2.3. SELLER SOFTWARE...........................................4 SECTION 2.4. ORGANIZATION AND QUALIFICATION; ORGANIZATIONAL DOCUMENTS; BOOKS AND RECORDS..............................6 SECTION 2.5. CAPITALIZATION; OWNERSHIP OF SHARES; SUBSIDIARIES..............................................6 SECTION 2.6. GOOD TITLE TO SUBSIDIARIES SHARES.........................7 SECTION 2.7. FINANCIAL STATEMENTS......................................7 SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS......................7 SECTION 2.9. ACCOUNTS RECEIVABLE; PAYABLES.............................7 SECTION 2.10. OWNERSHIP OF THE ASSETS...................................8 SECTION 2.11. CONTRACTS.................................................8 SECTION 2.12. LITIGATION................................................9 SECTION 2.13. COMPLIANCE WITH LAWS......................................9 SECTION 2.14. TAXES AND ASSESSMENTS.....................................9 SECTION 2.15. EMPLOYMENT MATTERS.......................................11 SECTION 2.16. TRANSACTIONS WITH RELATED PARTIES........................11 SECTION 2.17. BROKERS..................................................11 SECTION 2.18. HSR......................................................11 SECTION 2.19. ENVIRONMENTAL MATTERS....................................11 SECTION 2.20. INVESTMENT IN PURCHASER COMMON STOCK.....................12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................12 SECTION 3.1. ORGANIZATION AND QUALIFICATION...........................12 SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS..................12 SECTION 3.3. AUTHORITY................................................12 SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS...............13 SECTION 3.5. CAPITALIZATION...........................................13 -i- SECTION 3.6. ISSUANCE OF PURCHASER STOCK..............................13 SECTION 3.7. SEC FILINGS..............................................14 SECTION 3.8. FINANCIAL STATEMENTS.....................................14 SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS.....................14 SECTION 3.10. INTELLECTUAL PROPERTY....................................14 SECTION 3.11. AGREEMENTS...............................................15 SECTION 3.12. LITIGATION...............................................15 SECTION 3.13. COMPLIANCE WITH LAWS.....................................15 SECTION 3.14. TAXES AND ASSESSMENTS....................................15 SECTION 3.15. BROKERS..................................................16 SECTION 3.16. HSR......................................................16 SECTION 3.17. ENVIRONMENTAL MATTERS....................................16 ARTICLE IV COVENANTS.........................................................16 SECTION 4.1. APPOINTMENT OF DIRECTORS.................................16 SECTION 4.2. TAX FILING AND COOPERATION PROVISIONS....................17 SECTION 4.3. CONSIDERATION ALLOCATION.................................18 SECTION 4.4. REVENUES ................................................18 SECTION 4.5. CERTAIN TERMINATION COSTS................................19 SECTION 4.6. GUARANTY.................................................19 SECTION 4.7. INCREASE IN AUTHORIZED CAPITAL STOCK.....................19 SECTION 4.8. CONVERSION OF CERTAIN DEBT TO EQUITY.....................19 ARTICLE V CLOSING DELIVERIES.................................................19 SECTION 5.1. DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER...........20 SECTION 5.2. DOCUMENTS TO BE DELIVERED AT CLOSING BY PURCHASER........20 ARTICLE VI INDEMNIFICATION; ARBITRATION.....................................21 SECTION 6.1. INDEMNIFICATION..........................................21 SECTION 6.2. ARBITRATION..............................................22 ARTICLE VII MISCELLANEOUS AND GENERAL........................................23 SECTION 7.1. EXPENSES.................................................23 SECTION 7.2. PRESS RELEASES...........................................23 SECTION 7.3. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC..........23 SECTION 7.4. ASSIGNMENT AND BINDING EFFECT............................24 SECTION 7.5. DEFINITIONS..............................................24 SECTION 7.6. NOTICES..................................................26 SECTION 7.7. AMENDMENT................................................27 SECTION 7.8. GOVERNING LAW............................................27 SECTION 7.9. NO BENEFIT TO OTHERS.....................................27 SECTION 7.10. SEVERABILITY.............................................28 SECTION 7.11. SECTION HEADINGS.........................................28 SECTION 7.12. SCHEDULES AND EXHIBITS...................................28 SECTION 7.13. COUNTERPARTS.............................................28 -ii- STOCK AND ASSET PURCHASE AGREEMENT STOCK AND ASSET PURCHASE AGREEMENT (this "Agreement") dated as of July 31, 2002, by and between MANAGEDSTORAGE INTERNATIONAL, INC., a Delaware corporation ("Seller"), and FRONT PORCH DIGITAL INC., a Nevada corporation ("Purchaser"). RECITALS WHEREAS, Seller owns all of the outstanding shares of capital stock (the "Subsidiary Shares") of ManagedStorage International France, a French SOCIETE PAR ACTIONS SIMPLIFIEE (the "Company"); WHEREAS, Seller intends to sell, and the Purchaser intends to purchase, the Subsidiary Shares; WHEREAS, Seller owns that certain Software as more particularly described on EXHIBIT A-1 hereto (the "Seller Software") and EXHIBIT A-2 hereto (the "Other Software") and the trademarks listed on EXHIBIT B hereto (the "Seller Trademarks"), and is a party to that certain Software License Agreement (the "StorageTek Agreement") dated March 29, 2000 between Seller and Storage Technology Corporation ("StorageTek") and the US Reseller Agreements (as hereinafter defined); WHEREAS, Seller intends to sell, and Purchaser intends to purchase, the Seller Software, the Other Software and the Seller Trademarks and Seller intends to assign, and Purchaser intends to assume, the StorageTek Agreement and the US Reseller Agreements; NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows: ARTICLE I PURCHASE AND SALE OF THE SUBSIDIARY SHARES, THE SELLER SOFTWARE, THE OTHER SOFTWARE AND THE SELLER TRADEMARKS SECTION 1.1. PURCHASE AND SALE OF THE SUBSIDIARY SHARES. Upon the terms and subject to the conditions of this Agreement, at the Closing (defined in Section 7.5), Seller agrees to sell, convey, assign and transfer to Purchaser, and Purchaser agrees to purchase, the Subsidiary Shares, free and clear of all Encumbrances (as defined in Section 7.5 hereof). SECTION 1.2. PURCHASE AND SALE OF THE SELLER SOFTWARE, THE OTHER SOFTWARE AND SELLER TRADEMARKS. Upon the terms and subject to the conditions of this Agreement, at the Closing, Seller agrees to sell, convey, assign, transfer and deliver to Purchaser, and Purchaser agrees to purchase, the Seller Trademarks, the Seller Software, and the Other Software, in each case, free and clear of all Encumbrances other than the rights granted under the StorageTek Agreement, the agreements set forth on SCHEDULE 1.2(A) (the "Reseller Agreements" and the last two agreements listed thereon referred to herein as the "US Reseller Agreements") and the agreements set forth on SCHEDULE 1.2(B) (the "End-User Contracts") and the terms of the Oracle Partner Agreement dated February 4, 2002 between Oracle France SAS and the Company (the "Oracle Agreement") and the License Agreement dated September 10, 1999 between Merger Technologies, Inc. and StorageTek, as amended and assigned to the Company by that certain letter agreement dated July 5, 2000 (as amended, the Merge Agreement"). SECTION 1.3. CONSIDERATION. (a) INITIAL CONSIDERATION. Upon the terms and subject to the conditions of this Agreement, in consideration of the sale, conveyance, assignment and transfer of the Subsidiary Shares, the Seller Software, the Other Software and the Seller Trademarks to Purchaser, at the Closing, Purchaser agrees to (i) issue and deliver to Seller 5,000,000 shares of common stock, par value $.001 per share, of Purchaser (the "Purchaser Common Stock"); (ii) issue and deliver to Seller a warrant in the form attached hereto as EXHIBIT C for the purchase of 1,750,000 shares of Purchaser Common Stock at a price of $2.00 per share, exercisable immediately and expiring on July 31, 2012; and (iii) issue and deliver to Seller a warrant in the form attached hereto as EXHIBIT D for the purchase of 1,750,000 shares of Purchaser Common Stock at a price of $4.00 per share, exercisable immediately and expiring on July 31, 2012 (the warrants described in clauses (ii) and (iii) are collectively referred to herein as the "Warrants"). (b) EARN-OUT. Purchaser agrees to issue and deliver Additional Shares (as hereinafter defined) to Seller upon the terms and subject to the conditions of this Section 1.3(b). As used herein, "Additional Shares" means such number of shares of Purchaser Common Stock equal to (x) 2,500,000 if, during the period from the date hereof through December 31, 2002 (the "Earn-Out Period"), Revenues (as hereinafter defined) equal or exceed US$1,000,000 or (y) 2,500,000 multiplied by (Revenues/US$1,000,000) if, during the Earn-Out Period, Revenues are less than US$1,000,000. As used herein, "Revenues" means that portion of the gross revenue of Purchaser and the Company (or any successor entities or the resultant entity if such entities are combined) or of any assignee, transferee, licensee, or purchaser of the Seller Software or Other Software, determined in accordance with US or French generally accepted accounting principles ("GAAP"), as applicable, applied on a consistent basis, in each case attributable to the Seller Software or Other Software, software development related to the Seller Software or Seller Software and hardware sales related to the Seller Software or Other Software, including any amounts that become due during the Earn-Out Period from customers existing prior to the Earn-Out Period (regardless of whether such amounts are billed and/or collected during the Earn-Out Period or at any other time) and, with respect to any agreement (whether written or otherwise) entered into during the Earn-Out Period, any amounts to be received thereunder (regardless of whether such amounts are billed and/or collected during the Earn-Out Period or at any other time) over the life of such agreement (for example, if an agreement entered into on August 1, 2002 provides for a monthly payment to the Company of US$5000 for 12 months, US$60,000 would be included in Revenues in connection with such agreement). Purchaser shall prepare a monthly report (each a "Report") of the Revenues for each month during the Earn-Out Period and deliver it to Seller within 30 days following the last day of each month during the Earn-Out Period. Purchaser shall, and shall cause the Company or any successor or combined entity, to act in good faith and use its commercially reasonable efforts to (i) satisfy all obligations under any -2- agreements giving rise to Revenues that are in existence at the commencement of the Earn-Out Period and (ii) enter into agreements giving rise to Revenues during the Earn-Out Period and in no event delay entry into any such agreements to circumvent the obligation to issue Additional Shares to Seller hereunder. Purchaser shall give Seller and its representatives full access at all reasonable times to the books and records of Purchaser and the Company (including accountants' work papers) relating to the Seller Software or Other Software in order to verify the Revenues. Within 30 days (the "Response Period") following the receipt of the Report for December 2002 (the "December Report"), which report shall specify the total Revenues for the Earn-Out Period and the number of Additional Shares to be issued to Seller, Seller shall notify Purchaser in writing of any dispute regarding the December Report, the Revenues and/or the Additional Shares, which notice shall set forth in reasonable detail the basis for such dispute. If Seller fails to notify Purchaser of any such dispute during the Response Period, the December Report and the Revenues and the Additional Shares set forth therein shall be deemed to be accepted by Seller and Purchaser shall issue the number of Additional Shares specified in the December Report within ten Business Days after the expiration of the Response Period. In the event that Seller notifies Purchaser of a dispute during the Response Period, Purchaser shall issue the Additional Shares specified in the December Report within ten Business Days after receipt of such notice and Purchaser and Seller shall cooperate in good faith to resolve the dispute as promptly as possible. If Seller and Purchaser are unable to resolve the dispute within 15 Business Days of Seller's delivery of the notice of dispute, then the dispute shall be submitted to an arbitration pursuant to Section 6.2 hereof. SECTION 1.4. LOCK-UP AGREEMENT. At the Closing, Seller and Purchaser shall enter into a Lock-Up Agreement in the form attached hereto as EXHIBIT E (the "Lock-Up Agreement"). SECTION 1.5. REGISTRATION RIGHTS. At the Closing, Seller and Purchaser shall enter into the Registration Rights Agreement attached hereto as EXHIBIT F (the "Registration Rights Agreement"). ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Purchaser that the following representations and warranties are true and correct as of the date hereof: SECTION 2.1. ORGANIZATION; AUTHORITY; BINDING AGREEMENT. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The execution and delivery of this Agreement and the Seller Ancillary Documents (as defined in Section 5.1 hereof) by Seller and the consummation by Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate and stockholder action and no other corporate proceedings on the part of Seller are necessary to authorize this Agreement or the Seller Ancillary Documents or to consummate the transactions contemplated hereby or thereby. Each of this Agreement and the Seller Ancillary Documents has been duly executed and delivered by Seller and, assuming the due authorization, execution and delivery by Purchaser, constitutes a legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to -3- or affecting creditors' rights generally and by the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law). SECTION 2.2. NO CONFLICT; FILINGS AND CONSENTS. The execution and delivery of this Agreement and the Seller Ancillary Documents by Seller does not, and the performance by Seller of its obligations under this Agreement and the Seller Ancillary Documents will not, (i) conflict with or violate the certificate of incorporation of Seller or the bylaws of Seller or the equivalent organizational documents of the Company, (ii) conflict with or violate any Law (as defined in Section 7.5 hereof) applicable to Seller or the Company or their respective Assets (as defined in Section 7.5 hereof) in any material respect, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Seller or the Company is a party or by which Seller or the Company is bound or by which any of their respective Assets is subject except, with respect to clause (iii), for such breaches or defaults that, either individually or in the aggregate, would not have a Material Adverse Effect (as defined in Section 7.5 hereof) on Seller or the Company or create or perfect any Lien or otherwise have any effect on Purchaser's use of or ownership interest in, the Seller Software or Other Software. The execution and delivery of this Agreement and the Seller Ancillary Documents by Seller does not, and the performance of this Agreement and the Seller Ancillary Documents by Seller will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity (as defined in Section 7.5 hereof) by Seller or the Company. SECTION 2.3. SELLER SOFTWARE. (a) Except for the Oracle Software (as defined in SCHEDULE 2.3(D)) and the Merge Software (as defined in SCHEDULE 2.3(D), the Company does not own or license any Intellectual Property other than pursuant to its license to the Seller Software and the Other Software. The Company's license to the Seller Software and the Other Software shall be terminated as of the Closing. Except for the Oracle Software and the Merger Software, the Seller Software and the Other Software is the only Software currently sold, licensed or marketed by the Company in the operation of its Business. (b) The Seller owns all right, title and interest in and with respect to the Seller Software and any Intellectual Property of which Seller and Company are aware that covers or is embodied by the Seller Software, free and clear of any Encumbrances other than the rights granted under the StorageTek Agreement, the Reseller Agreements and the End-User Contracts and the terms of the Oracle Agreement and the Merge Agreement and no royalties or other payments are due to any Person or entity with respect thereof. (c) With respect to the Seller Software (i) the Seller has made available to the Purchaser true and complete copies of all Software Documentation with respect thereto, (ii) the Software Documentation includes the source code, system documentation, statements of principles of operation, and schematics for all Seller Software, as well as any pertinent commentary or explanation that may be necessary to render such materials understandable and usable by a trained computer programmer and to support all current and prior releases of the Seller Software; (iii) the Software Documentation also includes any program (including -4- compilers), "workbenches," tools, and higher level (or "proprietary") languages used for the maintenance and implementation of the Seller Software; and (iv) the Seller Software performs in all material respects in accordance with the specifications for the most recent release of the Seller Software. (d) Except as set forth on SCHEDULE 2.3(D), Seller is not a party to any third party licenses pursuant to which a Person has granted to Seller a right to use any Intellectual Property in connection with the Seller Software. (e) Seller has filed a Trademark application with the United States Patent and Trademark Office on April 30, 2002 (number 76402613) (the "Trademark Application") but has no other pending applications for or registrations or grants of Copyrights, Trademarks or Patents used in connection with the Seller Software. All statements and representations made by Seller with respect to the Trademark Application were true in all material respects as of the time they were made. (f) Neither the Company nor the Seller has granted, transferred or assigned to any Person any right or interest in, and no third party has the right to use or exploit, or to Seller's Knowledge is using or exploiting, any of, the Seller Software or the Software Documentation, except pursuant to a valid and enforceable contract with the Company or the Seller which has been disclosed to the Purchaser. (g) Except as set forth on SCHEDULE 2.3(G), there are no contracts with respect to the marketing, distribution, licensing, or promotion of the Seller Software or any Software Documentation related to the Seller Software by any independent salesperson, distributor, sublicensor, or other remarketer or sales organization. (h) Seller has taken commercially reasonable actions to protect against the existence of (A) any protective, encryption, security or lock-out devices which might in any way interrupt, discontinue or otherwise adversely affect the Seller Software or the Purchaser's use thereof; and (B) any so-called computer viruses, worms, trap or back doors, trojan horses or any other instructions, codes, programs, data or materials which could improperly or wrongfully interfere with the operation or use of the Seller Software. (i) Seller has taken all actions which a reasonably prudent person would take to maintain the source code of the Seller Software as confidential and proprietary, to protect against the loss, theft or unauthorized use of such source code, and to protect and preserve the confidentiality of the Trade Secrets of Seller relating to the Seller Software. To the Knowledge of Seller, no third party, other than StorageTek, possesses a copy of the source code for the Seller Sofware. (j) To the Knowledge of Seller, there is no misappropriation, misuse or infringement of the Seller Software by any third party. To the Knowledge of Seller, the use by Seller of the Seller Software in the conduct of its business as currently conducted does not infringe any Intellectual Property rights of any third party. There is no claim, suit, action or proceeding pending or, to Seller's Knowledge, threatened against Seller related to the Seller Software (i) alleging any infringement of any third party's Intellectual Property rights or (ii) -5- challenging the ownership, use, validity or enforceability of the Seller Software. Seller has not entered into any consent, indemnification, forbearance to sue or settlement agreement with any Person relating to the Seller Software or the Intellectual Property of any third party. (k) To the extent developed by Seller's employees, agents, consultants, free-lance workers and independent contractors, all right, title and interest in the Seller Software, and any updates, upgrades or other modifications thereto, and any Intellectual Property covering or embodied by the Seller Software or such updates, upgrades or other modifications, has been transferred to Seller either by operation of law or pursuant to a valid and binding written agreement between Seller and such employee, agent, consultant, free-lance worker or contractor. (l) THE SELLER SOFTWARE IS PROVIDED "AS IS" AND, EXCEPT AS PROVIDED IN THIS SECTION 2.3, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE SELLER SOFTWARE OR THE USE THEREOF WHETHER ARISING FROM COURSE OF DEALING, USAGE OR TRADE OR STATUTORY PROVISIONS. SELLER HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. SECTION 2.4. ORGANIZATION AND QUALIFICATION; ORGANIZATIONAL DOCUMENTS; BOOKS AND RECORDS. The Company is an entity duly organized, validly existing and in good standing under the laws of France. The Company has the requisite power and authority to carry on its business as now being conducted and to own or hold under lease and operate its Assets. The Company is duly qualified to conduct its business, and is in good standing, in each jurisdiction in which the ownership or leasing of its Assets or the nature of its activities in connection with the conduct of its business makes such qualification necessary except where the failure to be so qualified and in good standing would not have a Material Adverse Effect on the Company. Seller has previously made available to Purchaser complete and correct copies of the Company's organizational documents, as amended to date (the "Company Charter Documents"). Such Company Charter Documents are in full force and effect. The minute books of the Company, which have been made available to Purchaser, are complete and correct in all material respects. SECTION 2.5. CAPITALIZATION; OWNERSHIP OF SHARES; SUBSIDIARIES. The authorized and outstanding capital stock of the Company consists of 15, 816,989 shares (the "Outstanding Shares"), which constitutes the "Subsidiary Shares." All of the Subsidiary Shares are owned of record by Seller. There are no outstanding options, warrants or other rights, or any agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company, or any obligation of the Company to issue or sell any shares of capital stock of, or other equity interests in, the Company, including any securities directly or indirectly convertible into or exercisable or exchangeable for any capital stock or other equity securities of the Company. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) on any matter. There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any shares of its capital stock or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person. All of the shares of capital stock of the Company, have been duly authorized and validly issued in accordance with applicable laws and are fully paid and non-assessable and not subject to -6- preemptive rights. No shares of the capital stock of the Company have been reserved for any purpose. The Company has no Subsidiaries or any equity interest in any Person. SECTION 2.6. GOOD TITLE TO SUBSIDIARY SHARES. The stock transfer form to be executed and delivered by Seller to Purchaser pursuant to Section 5.1(a) hereof will be a valid and binding obligation of the Seller, enforceable in accordance with its terms, and will effectively vest in Purchaser good, valid and marketable title to the Subsidiary Shares to be transferred to Purchaser pursuant to this Agreement, free and clear of all Encumbrances. SECTION 2.7. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 2.7 are the unaudited financial statements of the Company for the fiscal years ended December 31, 2000 and December 31, 2001 and the fiscal quarter ended March 31, 2002 (collectively, the "Seller Financial Statements"). The Seller Financial Statements present fairly, in all material respects, the financial condition of the Company for the respective periods indicated and have been prepared in accordance with French GAAP applied on a consistent basis. SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on SCHEDULE 2.8, since March 31, 2002, there has not been: (a) any occurrence which has had or would reasonably be expected to have a Material Adverse Effect on the Company; (b) any damage, destruction or loss (whether or not covered by insurance) in excess of $25,000 in the aggregate; (c) any forgiveness or cancellation of debts or claims owed to, or by, the Company in excess of $25,000 in the aggregate, or termination, abandonment or waiver of any material rights, (d) any increase in the compensation or benefits payable or to become payable by the Company to any employees of the Company; (e) any discharge or satisfaction of any Encumbrance or payment of any liability or obligation by the Company other than current liabilities in the Ordinary Course of Business (as defined in Section 7.5 hereof) or Encumbrances that are not material, (f) any dividend or distribution in respect of, or any redemption or repurchase of, the Company's capital stock; (g) any material liability (absolute or contingent, matured or unmatured) incurred except current liabilities incurred in the Ordinary Course of Business; (h) any mortgage, pledge or Encumbrance (other than Permitted Encumbrances (as defined in Section 7.5 hereof)) placed on any of the Company's Assets, (i) any sale, exchange, transfer or other disposition of any of the Company's Assets except in the Ordinary Course of Business, (j) any write-down the value of any of the Company's Assets or any write-off of any accounts receivable as uncollectible, except write downs and write-offs in the Ordinary Course of Business, none of which, individually or in the aggregate, is material; (k) any entry into transactions other than in the Ordinary Course of Business; (l) any change in any method of accounting or accounting practice except as required by concurrent changes in generally accepted accounting principles in France; or (m) any agreement to do any of the foregoing. SECTION 2.9. ACCOUNTS RECEIVABLE; PAYABLES. (a) The Company has, in the aggregate, not less than US$1,000,000 of cash, accounts receivable, VAT tax refund receivables for the years 2000 and 2001, and other refunds, entitlements or government grants that mature or are payable prior to December 31, 2002; provided that Seller makes no representation or warranty with respect to the collectibility of any such accounts receivable, refunds, entitlements or grants and Purchaser Losses (as defined in Section 6.1(a) hereof) shall not include any failure to collect any such accounts receivable, -7- refunds, entitlements or grants. All accounts receivable of the Company have arisen in the Ordinary Course of Business in arms-length transactions for goods actually sold and services actually performed or to be performed. The Company has available in its records copies of invoices and of all existing contracts with respect to all such accounts receivable. SCHEDULE 2.9(A) sets forth a complete statement of the trade accounts receivable of the Company outstanding as of July 23, 2002; provided that Seller makes no representation or warranty with respect to the collectibility of any such trade accounts receivable and Purchaser Losses (as defined in Section 6.1(a) hereof) shall not include any failure to collect any such trade accounts receivable. (b) SCHEDULE 2.9(B) identifies all trade accounts payable of the Company outstanding as of July 23, 2002. SECTION 2.10. OWNERSHIP OF THE ASSETS. (a) The Company owns and has good title to the Assets it purports to own and such Assets are free and clear of all Encumbrances other than Permitted Encumbrances. No Person has an option to purchase, right of first refusal, right to use or other similar right with respect to all or any part of any Assets owned by the Company other than in the Ordinary Course of Business. (b) The Company does not own any real property. The only lease for real property to which the Company is a party is the Lease dated as of May 28, 2000 by and between SCI Montana 99 and the Company for the premises at "Immeuble Couronne II" 14 rue Michael Labrousse, Toulouse (the "Lease"). With respect to the Lease, (i) the Lease is in full force and effect and is binding and enforceable in accordance with its terms; (ii) all rental and other charges payable pursuant to the terms and conditions of the Lease have been paid and no rent has been paid in advance more than thirty (30) days; (iii) there are no charges, offsets or defenses against the enforcement by the lessor thereunder of any agreement, covenant or condition on the part of the Company to be performed or observed pursuant to the terms of the Lease; (iv) there are no defaults by the Company of any agreement, covenant or condition on the part of the Company to be performed or observed pursuant to the terms of the Lease; (v) there are no actions or proceedings pending or, to Seller's Knowledge, threatened, by the lessor under the Lease; (vi) except for the security deposits identified on SCHEDULE 2.10(B), the lessor does not hold any deposits for the Company's accounts on the Lease; (vii) the sale of the Company to the Purchaser is not prohibited under the Lease or require the consent of the lessor; and (viii) there are no defaults by the lessor of any agreement, covenant or condition on the part of the lessor to be performed or observed pursuant to the terms of the Lease. The current expiration date and remaining options to extend the Lease as well as minimum monthly rent and additional rent due under the Lease are as set forth on SCHEDULE 2.10(b). SECTION 2.11. CONTRACTS. SCHEDULE 2.11 lists each agreement that is material to the Company (each a "Material Contract"). Each Material Contract is valid, in full force and effect and enforceable in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in -8- equity or law)). The Company has not breached any such Material Contract or any other contract, agreement or instrument to which the Company is a party or by which the Company or any of its assets is bound, the effect of which could have a Material Adverse Effect on the Company, and neither the Company nor, to Seller's Knowledge, any third party, is in default under any such Material Contract, contract or instrument, the effect of which would have a Material Adverse Effect on the Company. To Seller's Knowledge, there exists no condition or event which, after notice or lapse of time or both, would constitute any such breach, termination or default. Except as set forth on SCHEDULE 2.11, the Company is not a party to any agreement for the borrowing or lending of money with respect to its business or a party to any guaranty agreement. Except as set forth on SCHEDULE 2.11, the Company is not a party to any agreement that limits the right of the Company to engage in, or to compete with any person in, any business, including any agreement containing exclusivity provisions restricting the geographical area in which, or the method by which, any business may be conducted by the Company. SECTION 2.12. LITIGATION. There is no action, suit, investigation, claim, arbitration or litigation pending or, to Seller's Knowledge, threatened against or involving the Seller Software, the Other Software, the Seller Trademarks or the Company or its Assets, at law or in equity, or before or by any court, arbitrator or Governmental Entity. None of the Company, its Assets, the Subsidiary Shares, the Other Software or the Seller Software is subject to any judgment, writ, order, injunction, award or decree of any court, judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any Governmental Entity. None of the Seller Software, the Other Software, the Seller Trademarks, the Subsidiary Shares or any Assets of the Company have been taken or expropriated by any federal, state, provincial, municipal or other Governmental Entity nor has any notice or proceeding with respect thereto been given or commenced, nor does Seller have Knowledge of any intent or proposal by any Governmental Entity to give any such notice or commence any such proceeding. SECTION 2.13. COMPLIANCE WITH LAWS. The Company is in compliance with all Laws applicable to its Assets and its business and operations, except for such noncompliance as would not have a Material Adverse Effect on the Company. SECTION 2.14. TAXES AND ASSESSMENTS. (a) The Company has timely filed with the appropriate taxing authorities all Tax Returns required to be filed. The Tax Returns filed are complete and accurate in all material respects. All Taxes due and payable by the Company (whether or not shown on any Tax Return) have been paid. No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction. (b) The unpaid Taxes of the Company (i) did not, as of March 31, 2002, exceed the reserve for liabilities for Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets contained in the financial statements (rather than in any notes thereto), and (ii) will not exceed that reserve as adjusted for operations and transactions through the date of Closing in accordance with the past custom and practice of the Company in filing its Tax Returns. -9- (c) To the Knowledge of Seller, no deficiencies for Taxes of the Company have been claimed, proposed or assessed by any taxing or other governmental authority with respect to any period for which said deficiency would not be barred by the applicable period of limitations. Except as set forth on SCHEDULE 2.14(C), the Company has received no notice of any pending or threatened audits, assessments or other actions for or relating to any liability in respect of Taxes of the Company, and there are no matters under discussion with any governmental authorities with respect to Taxes that are likely to result in an additional liability for Taxes with respect to the Company. There are no outstanding agreements or waivers by the Company that extend the statutory period of limitations applicable to any Taxes or Tax Returns. (d) There are no Encumbrances for Taxes on any of the Company's Assets other than liens securing taxes, assessments and governmental charges not yet due and payable as of the date of Closing. (e) All elections with respect to Taxes affecting the Company or the assets of the Company are set forth on SCHEDULE 2.14(E). (f) Except as set forth in SCHEDULE 2.14(F), (i) the Company is not party to any Tax-sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving the Company or the Assets of the Company; and (ii) and, after the date of Closing, neither the Company nor the Assets of the Company shall be bound by any such Tax-sharing agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the date of Closing. (g) The Company (i) is not a partner for Tax purposes with respect to any joint venture, partnership, or other arrangement or contract which is treated as a partnership for Tax purposes, (ii) does not own a single member limited liability company which is treated as a disregarded entity, (iii) is not a shareholder of a "controlled foreign corporation" as defined in Section 957 of the Internal Revenue Code of 1986, as amended (the "Code"), (or any similar provision of state, local or foreign law) and (iv) is not a "foreign personal holding company" as defined in Section 552 of the Code (or any similar provision of state, local or foreign law). (h) The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. (i) The Company does not own a "United States real property interest" within the meaning of Section 897(c)(1) of the Code. (j) The Company has no liability for the Taxes of any Person (other than Taxes of the Company) (i) as a transferee or successor, or (ii) by contract. (k) The Company has never participated in or cooperated with an international boycott within the meaning of Section 999 of the Code, and has never been requested to participate in or cooperate with such a boycott. (l) The Company has never engaged in a trade or business within the United States for purposes of the Code. -10- SECTION 2.15. EMPLOYMENT MATTERS. SCHEDULE 2.15(A) sets forth a true and complete list of (a) all directors of the Company, (b) all officers (with office held) of the Company, (c) all consultants and independent contractors retained by the Company currently or during the last fiscal year and (d) all employees of the Company, including each such employee's job title, remuneration and duration of employment period. The Company is not a party to, and none of its employees is subject to, any employment agreement or collective bargaining agreement or other union contract, other than as disclosed in SCHEDULE 2.15(B). The Company is in compliance in all material respects with applicable federal, state and local laws affecting labor, employment and employment practices, including terms and conditions of employment and wages and hours. SCHEDULE 2.15(C) sets forth a true and complete list of all employees terminated by the Company within the past 12 months. Neither Purchaser, the Company nor the Assets will be subject to any claim by any Person listed on SCHEDULE 2.15(D) for "severance payment" or any other payment by reason of anything done by the Company prior to or after the Closing. SCHEDULE 2.15 (E) list each employee benefit plan applicable to the Company's employees to which the Company has contributed or under which it has any material liability. SECTION 2.16. TRANSACTIONS WITH RELATED PARTIES. Except as set forth on SCHEDULE 2.16, neither Seller nor, to Seller's Knowledge, any officer or director of the Company or any Person known by the Company to be an Affiliate (as defined in Section 7.5 hereof) of any of them, is currently a party to any transaction or agreement with the Company, including, without limitation, any agreement providing for the employment of, furnishing of services by, rental of Assets from or to, or otherwise requiring payments to, Seller or any such officer, director or Affiliate. SECTION 2.17. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its officers, directors, stockholders or Affiliates. SECTION 2.18. HSR. Seller is its own ultimate parent entity as the term "ultimate parent entity" is defined under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and its implementing regulations. Seller's total assets are, and will be at the time of closing, less than $100 million as determined in accordance with the HSR Act and its implementing regulations. Seller's annual net sales for the year ended December 31, 2001 were less than $100 million as determined in accordance with the HSR Act and its implementing regulations. SECTION 2.19. ENVIRONMENTAL MATTERS. To Seller's Knowledge, the Company's current and previous use of the real property subject to the Lease is in material compliance with all applicable Environmental Laws (including obtaining and compliance with all permits and approvals required thereunder). Neither the Company nor the Seller has received and the Seller is not aware of any other Person receiving any notice of any administrative, judicial or private party investigation, proceeding or action with respect to violations, alleged or proven, of applicable Environmental Laws by the Company or otherwise involving such real property. For the purposes hereof, "Environmental Laws" shall mean all applicable local, state, federal or foreign statutes and regulations relating to the protection of human health or the environment, as the foregoing are enacted and in effect prior to the Closing. -11- SECTION 2.20. INVESTMENT IN PURCHASER COMMON STOCK. (a) Seller is an "accredited investor" as defined in Rule 501(a)(3) under the Securities Act of 1933, as amended (the "Securities Act"). (b) Seller is acquiring the shares of Purchaser Common Stock to be issued to it hereunder for investment for its own account, and not for the account of any other Person, and not with a view to, or for sale in connection with, any distribution, assignment, or resale of any part thereof in violation of the Securities Act. Seller understands that the shares of Purchaser Common Stock to be issued to it hereunder have not been, and will not be, registered in the United States under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Seller's representations as expressed herein. (c) Seller has made independent investigation of Purchaser and related matters as (i) Seller deems to be necessary or advisable in connection with the Seller's acceptance of the shares of Purchaser Common Stock to be issued to it hereunder and (ii) the Seller believes to be necessary in order to reach an informed decision as to the advisability of accepting the shares of Purchaser Common Stock to be issued to it hereunder ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby represents and warrants to Seller that the following representations and warranties are true and correct as of the date hereof: SECTION 3.1. ORGANIZATION AND QUALIFICATION. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. Purchaser has the requisite power and authority to carry on its business as now being conducted and to own, lease and operate its Assets and to perform the terms of this Agreement and the transactions contemplated hereby. Purchaser is duly qualified to conduct its business, and is in good standing, in each jurisdiction where the ownership or leasing of its Assets or the nature of its activities in connection with the conduct of its business makes such qualification necessary except where the failure to be so qualified and is in good standing would not have a Material Adverse Effect on Purchaser. SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS. Purchaser has previously made available to Seller complete and correct copies of its certificate of incorporation and bylaws, as amended to date (together, the "Purchaser Charter Documents"). Such Purchaser Charter Documents are in full force and effect. SECTION 3.3. AUTHORITY. The execution and delivery of this Agreement and the Purchaser Ancillary Documents (as defined in Section 5.2 hereof) by Purchaser and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Purchaser are necessary to authorize this Agreement or the Purchaser Ancillary Documents or to consummate the transactions contemplated hereby or thereby. No proceedings -12- are required on the part of the stockholders of Purchaser to authorize this Agreement or the Purchaser Ancillary Documents or to consummate the transactions contemplated hereby or thereby. Each of this Agreement and the Purchaser Ancillary Documents has been duly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery by Seller, constitutes a legal, valid and binding obligation of Purchaser, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law). SECTION 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and delivery of this Agreement and the Purchaser Ancillary Documents by Purchaser does not, and the performance by Purchaser of its obligations under this Agreement and the Purchaser Ancillary Documents will not, (i) conflict with or violate the Purchaser Charter Documents, (ii) conflict with or violate any Law applicable to Purchaser or its Assets in any material respect, or (iii) result in any breach of or constitute a default under any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Purchaser is a party or by which Purchaser is bound, or by which any of its Assets is subject except, with respect to clause (iii), for such breaches or defaults that, either individually or in the aggregate, would not have a Material Adverse Effect on Purchaser. The execution and delivery of this Agreement and the Purchaser Ancillary Documents by Purchaser does not, and the performance of this Agreement and the Purchaser Ancillary Documents by Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity other than required filings with the Securities and Exchange Commission (the "SEC") and the filing and recordation with the French tax authorities of a duly executed short-form stock purchase agreement (the "Short-Form Stock Purchase Agreement") in the form attached hereto as EXHIBIT G and payment of applicable duties within 30 days after the date hereof. SECTION 3.5. CAPITALIZATION. The authorized capital stock of Purchaser consists of 50,000,000 shares of common stock, $.001 par value per share (the "Purchaser Common Stock"), of which 27,260,965 shares are issued and outstanding and of which 21,133,746 shares are reserved for issuance, and 5,000,000 shares of Preferred Stock, par value $0.01 per share, none of which is issued and outstanding. Except as set forth on SCHEDULE 3.5, there are no (i) options, warrants or other agreements obligating Purchaser to issue or sell any shares of capital stock of, or other equity interests in Purchaser; (ii) outstanding obligations of Purchaser to repurchase, redeem or otherwise acquire any shares of its capital stock or (iii) outstanding obligations of Purchaser to register with the SEC any shares of its capital stock. All of the issued and outstanding shares of Purchaser capital stock have been duly authorized and validly issued in accordance with applicable laws and are fully paid and non-assessable and not subject to preemptive rights. SECTION 3.6. ISSUANCE OF PURCHASER COMMON STOCK. The shares of Purchaser Common Stock to be issued and delivered at the Closing will be duly and validly issued, fully paid and non-assessable, free and clear of all Encumbrances. The shares of Purchaser Common Stock to be issued upon exercise of the Warrants and pursuant to Section 1.3(b) hereof will, -13- when issued, be duly and validly issued, fully paid and non-assessable, free and clear of all Encumbrances. SECTION 3.7. SEC FILINGS. The reports filed by Purchaser with the SEC (a) comply as to form in all material respects and were prepared in accordance of the requirements of the Securities Exchange Act of 1934, as amended, and (b) did not, at the time they were filed, contain any untrue statements of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Except as set forth on SCHEDULE 3.7 or disclosed or contemplated in Purchaser's SEC reports, since the date of Purchaser's last periodic report filed with the SEC, Purchaser has incurred no liabilities, contingent or absolute, matured or unmatured and Purchaser has no Knowledge of any basis for such liabilities except current liabilities incurred in the Ordinary Course of Business, and there has been no event that has resulted in, or development that would reasonably be expected to result in, a Material Adverse Effect on Purchaser. SECTION 3.8. FINANCIAL STATEMENTS. The reports filed by Purchaser with the SEC include: (a) the audited balance sheet of Purchaser as of December 31, 2001 and the audited statements of operations and cash flows for the year then ended and (b) the unaudited balance sheet of Purchaser as of March 31, 2002, and the unaudited statement of operations and cash flows for the quarter then ended (collectively, the "Seller Financial Statements"). The Seller Financial Statements referred to in this Section 3.8 present fairly, in all material respects, the financial condition of Purchaser as of the respective dates and the results of operations and cash flows for the respective periods indicated and have been prepared in accordance with generally accepted accounting principles in the United States (except for the absence of required footnotes in any unaudited statements) applied on a consistent basis. SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed or contemplated in the reports filed by Purchaser with the SEC, since March 31, 2002, there has not been: (a) an occurrence which has had or would reasonably be expected to have a Material Adverse Effect on Purchaser, (b) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of any of Purchaser's capital stock, or any purchase, redemption or other acquisition by Purchaser of any of Purchaser's capital stock or any other securities of Purchaser or any options, warrants, calls or rights to acquire any such shares or other securities except for repurchases from employees following their termination pursuant to the terms of their pre-existing stock option or purchase agreements, (c) any split, combination or reclassification of any of Purchaser's capital stock, or (d) any material change by Purchaser in its accounting methods, principles or practices, except as required by concurrent changes in generally accepted accounting principles in the United States. SECTION 3.10. INTELLECTUAL PROPERTY. Purchaser is the sole and exclusive owner of or has exclusive rights to use its Intellectual Property. To Purchaser's Knowledge, there is no misappropriation, misuse or infringement of Purchaser's Intellectual Property by any third party. To Purchaser's Knowledge, the use by Purchaser of its Intellectual Property in the conduct of its business as currently conducted does not infringe any Intellectual Property rights of any third party. There is no claim, suit, action or proceeding pending or, to Purchaser's Knowledge, threatened against Purchaser related to its Intellectual Property (i) alleging any infringement of -14- any third party's Intellectual Property rights or (ii) challenging the ownership, use, validity or enforceability of Purchaser's Intellectual Property. Purchaser has not entered into any consent, indemnification, forbearance to sue or settlement agreement with any Person relating to its Intellectual Property or the Intellectual Property of any third party. SECTION 3.11. AGREEMENTS. To Purchaser's Knowledge, each Purchaser Material Contract (as hereinafter defined) is now valid, in full force and effect and enforceable in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general applicability relating to the effects of creditors' rights generally and by the application of general principles of equity (whether applied in equity or law)). Purchaser has not breached any Purchaser Material Contract, the effect of which would have a Material Adverse Effect on Purchaser, and neither Purchaser nor to the Knowledge of Purchaser, any third party, is in default under any such Purchaser Material Contract, the effect of which would have a Material Adverse Effect on Purchaser. To the Knowledge of Purchaser, there exists no condition or event which, after notice or lapse of time or both, would constitute any such breach, termination or default. As used herein, "Purchaser Material Contracts" means all agreements that would be required to be filed by Purchaser with the SEC pursuant to Item 601(10) of Regulation S-K if Purchaser were to file an annual report on Form 10-K on the date of this Agreement. SECTION 3.12. LITIGATION. Except as set forth on SCHEDULE 3.12, there is no action, suit, investigation, claim, arbitration or litigation pending or, to the Knowledge of Purchaser, threatened against or involving Purchaser, its Assets or the business and operations of Purchaser, at law or in equity, or before or by any court, arbitrator or Governmental Entity. Except as set forth on SCHEDULE 3.12, Purchaser is not operating under nor is it or its capital stock or Assets subject to, any judgment, writ, order, injunction, award or decree of any court, judge, justice or magistrate, including any bankruptcy court or judge, or any order of, or by, any Governmental Entity. Except as set forth on SCHEDULE 3.12, no property or Assets of Purchaser has been taken or expropriated by any federal, state, provincial, municipal or other Governmental Entity nor has any notice or proceeding with respect thereto been given or commenced nor is Purchaser aware of any intent or proposal to give any such notice or commence any such proceeding. SECTION 3.13. COMPLIANCE WITH LAWS. Purchaser is in compliance with all Laws applicable to its Assets and its business and operations, except for such noncompliance as would not have a Material Adverse Effect on Purchaser. SECTION 3.14. TAXES AND ASSESSMENTS. (a) Except for Purchaser's Tax Returns for its 2001 fiscal year (the "2001 Tax Returns") for which Purchaser has timely filed an extension to file such Tax Returns, Purchaser has timely filed with the appropriate taxing authorities all Tax Returns required to be filed. The Tax Returns filed are complete and accurate in all material respects. All Taxes due and payable by Purchaser (whether or not shown on any Tax Return) have been paid other than Taxes due in respect of the 2001 Tax Returns. No claim has ever been made by an authority in a jurisdiction where Purchaser does not file Tax Returns that Purchaser is or may be subject to taxation by that jurisdiction. -15- (b) The unpaid Taxes of Purchaser (i) did not, as of March 31, 2002, exceed the reserve for liabilities for Taxes (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets contained in the financial statements (rather than in any notes thereto), and (ii) will not exceed that reserve as adjusted for operations and transactions through the date of Closing in accordance with the past custom and practice of the Company in filing its Tax Returns. (c) Except as set forth on SCHEDULE 3.14, to the Knowledge of Purchaser, no deficiencies for Taxes of Purchaser have been claimed, proposed or assessed by any taxing or other governmental authority with respect to any period for which said deficiency would not be barred by the applicable period of limitations. Except as set forth on SCHEDULE 3.14. Purchaser has received no notice of any pending or threatened audits, assessments or other actions for or relating to any liability in respect of Taxes of Purchaser, and there are no matters under discussion with any governmental authorities with respect to Taxes that are likely to result in an additional liability for Taxes with respect to Purchaser. There are no outstanding agreements or waivers by Purchaser that extend the statutory period of limitations applicable to any Taxes or Tax Returns. (d) There are no Encumbrances for Taxes on any of Purchaser's Assets other than liens securing taxes, assessments and governmental charges not yet due and payable as of the date of Closing. SECTION 3.15. BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Purchaser or any of its officers, directors, stockholders or Affiliates. SECTION 3.16. HSR. Purchaser is its own ultimate purchaser entity as the term "ultimate purchaser entity" as defined under the HSR Act and its implementing regulations. Purchaser's total assets are, and will be at the time of Closing, less than $100 million as determined in accordance with the HSR Act and its implementing regulations. Purchaser's annual net sales for the year ended December 31, 2001 were less than $100 million as determined in accordance with the HSR Act and its implementing regulations. SECTION 3.17. ENVIRONMENTAL MATTERS. To Purchaser's Knowledge, its current and previous use of the real property it leases and/or owns is in material compliance with all applicable Environmental Laws (including obtaining and compliance with all permits and approvals required thereunder). Purchaser has not received and is not aware of any other Person receiving any notice of any administrative, judicial or private party investigation, proceeding or action with respect to violations, alleged or proven, of applicable Environmental Laws by Purchaser or otherwise involving such real property. -16- ARTICLE IV COVENANTS SECTION 4.1. APPOINTMENT OF DIRECTORS. As soon as practicable after the Closing, Purchaser shall appoint Thomas P. Sweeney III and Paul McKnight to the Purchaser's Board of Directors and such individuals (or their successors as specified by Seller) shall remain on the Purchaser's Board of Directors until such time when Seller no longer holds at least 1,000,000 shares of Purchaser Common Stock. SECTION 4.2. TAX FILING AND COOPERATION PROVISIONS. (a) Seller shall prepare and timely file all Tax Returns with respect to the Company or in respect of its businesses, assets or operations that are required to be filed prior to the date of Closing, and shall pay any Taxes with respect thereto (whether or not shown on such Tax Returns). Such Tax Returns will, to the extent permitted by applicable Tax law, be prepared on a basis consistent with past practice. (b) Purchaser shall prepare and file all Tax Returns for all periods ending on or prior to the date of Closing which are not required to be filed before the date of Closing. Purchaser shall permit Seller to review and comment on each such Tax Return prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by Seller. Not later than five business days prior to the due date for the payment of Taxes with respect to such Tax Returns, Seller shall pay Purchaser for Taxes of the Company with respect to such periods, except to the extent that such Taxes are reflected in the reserve for Tax liability shown on the face of the balance sheet of the Company on the date of Closing. (c) Purchaser shall prepare and file any Tax Returns of the Company for periods which begin before the date of Closing and end after the date of Closing. Not later than five business days prior to the due date for the payment of such Taxes with respect to such Tax Returns, Seller shall pay Purchaser an amount equal to the portion of such Taxes which relates to the portion of such period ending on the date of Closing, except to the extent that such Taxes were previously paid or are reflected in the reserve for Tax liability shown on the face of the balance sheet of the Company on the date of Closing. In the case of any Taxes that are imposed on a periodic basis and are payable for such a period that includes (but does not end on) the date of Closing, the portion of such Tax that relates to the portion of such period ending on the date of Closing shall (i) in the case of any Taxes other than Taxes based on or related to income or receipts, be deemed to be the amount of such Tax for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on the date of Closing and the denominator of which is the entire number of days in the period, and (ii) in the case of any Tax based on or related to income or receipts be deemed equal to the amount which would be payable if the relevant period ended on the date of Closing. (d) Seller shall be entitled to an amount equal to any refunds (including any interest paid thereon) or credits of Taxes attributable to taxable periods ending (or deemed to end pursuant to Section 4.2(c)) on or before the date of Closing to the extent that such Taxes were actually paid by Seller. Purchaser shall promptly notify Seller in writing of any Tax refund(s) received by or payable to the Company after the date of Closing in respect of periods ending before or on the date of Closing. Purchaser and the Company, as the case may be, shall be entitled to any refunds (including any interest paid thereon) or credits of Taxes attributable to taxable periods beginning (or deemed to begin pursuant to Section 4.2(c)) after the date of Closing. Seller shall promptly notify Purchaser in writing of any Tax refund(s) in respect of -17- such periods, to the extent that Seller receives notice of such refund(s). Purchaser shall, or shall cause the Company promptly to, forward to or reimburse Seller for any refunds (including any interest paid thereon) or credits due Seller after receipt thereof, and Seller shall promptly forward to Purchaser or reimburse Purchaser for any refunds (including any interest paid thereon) or credits due Purchaser after receipt thereof. Purchaser and Seller agree that the Company shall not carry back in respect of any Tax Return any item of loss, deduction or credit which arises in respect of any taxable period ending after the date of Closing to any taxable period ending on or before the date of Closing. (e) The Company, Purchaser and Seller shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Section 4.2 and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Purchaser, Seller and the Company agree (i) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning before the date of Closing until the expiration of the statute of limitations (and, to the extent notified by the Company or Purchaser, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, Purchaser and Seller, as the case may be, shall allow the other party to take possession of such books and records. (f) Purchaser, Seller and the Company further agree, upon request, to use their best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby). SECTION 4.3. CONSIDERATION ALLOCATION. Purchaser and the Seller agree to allocate the consideration received for the Subsidiary Shares, the Seller Software, the Other Software and the Seller Trademarks as set forth on EXHIBIT H hereto (the " Consideration Allocation"). After the Closing Date, neither Purchaser nor Seller shall (i) take any position in any Tax Return, report, or form or (ii) reach any settlement or agreement in respect of any Audit that, in either case, is inconsistent with the Consideration Allocation, unless such inconsistency is mandated by applicable Law. If such inconsistency is mandated by applicable law, the party taking such position shall provide timely and reasonable notice to the other party of such inconsistency and its effect on the Consideration Allocation. SECTION 4.4. REVENUES. It is the intention of the parties that the Purchaser shall receive all rights to and receive the benefit of the Revenues (as defined in Section 1.3(b) hereof) and the accounts receivable giving rise thereto. Accordingly, Seller agrees to immediately turn over to Purchaser any and all such accounts receivable which are received or collected by Seller after the date of Closing. -18- SECTION 4.5. CERTAIN TERMINATION COSTS. In connection with certain termination agreements Seller agrees to pay to each of the individuals identified on SCHEDULE 4.5 the amount specified opposite such individual's name pursuant to the payment schedule described. Seller also agrees to pay (i) to Roderik Van Nieukerken any severance he might receive in connection with the termination of his employment with the Company and (ii) the Company's reasonable legal costs incurred in connection with such termination, to the extent that any such severance and legal costs in the aggregate do not exceed US$70,000; provided that Seller shall have the right to participate in or assume control of any legal action related to such termination and; provided, further, that neither Purchaser nor the Company may settle with Roderik Van Nieukerken without Seller's written consent (which consent shall not be unreasonably withheld or delayed). SECTION 4.6. GUARANTY. Seller currently guarantees the Company's obligations under its lease with B.N.P. Parabas Lease Group (the "BNP Lease"). Purchaser agrees to use its best efforts to replace Seller as guarantor of the Company's obligations under the BNP Lease and to have Seller released as a guarantor under the BNP Lease effective as of the date hereof. Purchaser hereby agrees to perform all of the obligations of the Company under the BNP Lease from and after the date hereof and further agrees to indemnify, defend and hold harmless Seller from and against all claims, losses, liabilities and demands arising on or the date hereof that are asserted against Seller to the extent resulting from or attributable to Seller's guaranty of the BNP Lease. SECTION 4.7. INCREASE IN AUTHORIZED CAPITAL STOCK. As soon as practicable after the date hereof, Purchaser shall take, and shall cause its stockholders to take, all necessary actions, including but not limited to amending Purchaser's certificate of incorporation, to increase the number of authorized shares of Purchaser Common Stock to at least 65,000,000. Purchaser shall reserve 6,000,000 of such shares of Purchaser Common Stock for issuance in connection with Section 1.3(b) hereof and the terms of the Warrants. SECTION 4.8. INTERCOMPANY INDEBTEDNESS. All of the Company's outstanding indebtedness to Seller shall be deemed to have been converted (the "Conversion") into capital stock of the Company (the "Conversion Shares") immediately prior to the Closing. The parties hereto shall cooperate and take all reasonable actions to document the Conversion. If, after the date hereof, the number of Conversion Shares is calculated to be greater than 15,316,989, any such shares in excess of 15,316,989 shall be deemed to be "Subsidiary Shares" transferred to Purchaser hereunder such that, after given effect to the Conversion, Purchaser shall own of record all of the outstanding capital stock of the Company. If, after the date hereof, the number of Conversion Shares is calculated to be less than 15,316,989, the share transfer form referred to in Section 5.1(a) hereof and the stock registry of the Company shall be modified to reflect the actual number of Outstanding Shares. The parties hereto agree that Seller shall not be deemed to have breached Section 2.5 hereof if there is any post-Closing adjustment to the Outstanding Shares in connection with the Conversion. -19- ARTICLE V CLOSING DELIVERIES SECTION 5.1. DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER. At the Closing, Seller shall deliver to Purchaser the following: (a) a share transfer form in respect of the Subsidiary Shares, signed by Seller and completed in the name of Purchaser; (b) the Company's share registry; (c) an executed copy of the Short-Form Stock Purchase Agreement; (d) letters of resignation of the officers of the Company; (e) an executed copy of the Lock-Up Agreement; (f) an assignment and assumption agreement with respect to the Seller Software, the Other Software, the Seller Trademarks, StorageTek Agreement and the US Reseller Agreements (the "Assignment and Assumption Agreement"); (g) an executed copy of the Registration Rights Agreement (the documents in clauses 5.1 (a), (c), (e), (f) and (g) collectively referred to as the "Seller Ancillary Documents"); (h) a certificate of Good Standing (or the equivalent thereof) of each of the Company and the Seller issued by their respective jurisdiction of formation, dated within 30 days of the Closing; and (i) A certificate of Seller, dated as of the Closing, executed by the Secretary of Seller certifying that the resolutions, as attached to such certificate, were duly adopted by such Seller's board of directors, authorizing and approving the execution of this Agreement and all other agreements to be expected and delivered by Seller hereunder or in connection herewith and the consummation of the transactions contemplated hereby and thereby and that such resolutions remain in full force and effect. SECTION 5.2. DOCUMENTS TO BE DELIVERED AT CLOSING BY PURCHASER. At the Closing, Purchaser shall deliver to Seller the following: (a) an executed copy of the Short-Form Stock Purchase Agreement; (b) a certificate representing 5,000,000 shares of Purchaser Common Stock; (c) executed copies of the Warrants; (d) an executed copy of the Lock-Up Agreement; (e) an executed copy of the Assignment and Assumption Agreement; (f) an executed copy of the Registration Rights Agreement (the documents in clauses 5.2 (a), (c), (d), (e) and (f) collectively referred to as the "Purchaser Ancillary Documents"); -20- (g) a certificate of Good Standing (or the equivalent thereof) of Purchaser issued by its jurisdiction of formation, dated within 30 days of the Closing; and (h) A certificate of Purchaser, dated as of the Closing, executed by the Secretary of Purchaser certifying that the resolutions, as attached to such certificate, were duly adopted by such Seller's board of directors, authorizing and approving the execution of this Agreement and all other agreements to be expected and delivered by Purchaser hereunder or in connection herewith and the consummation of the transactions contemplated hereby and thereby and that such resolutions remain in full force and effect. ARTICLE VI INDEMNIFICATION; ARBITRATION SECTION 6.1. INDEMNIFICATION. (a) Purchaser and its officers, directors and Affiliates (the "Purchaser Indemnified Parties") shall be indemnified and held harmless by the Seller against all claims, losses, liabilities, damages, deficiencies, costs and expenses, including reasonable attorneys' fees and expenses of investigation (hereinafter individually a "Purchaser Loss" and collectively "Purchaser Losses") incurred by the Purchaser Indemnified Parties directly or indirectly as a result of: (i) any inaccuracy of a representation or warranty of Seller contained in this Agreement or (ii) any failure by Seller to perform or comply with any covenant contained in this Agreement; provided that no Purchaser Indemnified Party shall be entitled to receive indemnification payments under clause (i) above with respect to any Purchaser Loss (other than those incurred as a result of any inaccuracy of a representation or warranty contained in Section 2.3(c)(iv) of this Agreement) unless and until the aggregate deductible amount of the Purchaser Losses (excluding those incurred as a result of any inaccuracy of a representation or warranty contained in Section 2.3(c)(iv) of this Agreement)exceeds US$25,000; and PROVIDED FURTHER that no Purchaser Indemnified Party shall be entitled to receive indemnification payments under clause (i) above with respect to any inaccuracy of a representation or warranty contained in Section 2.3(c)(iv) of this Agreement unless and until the aggregate deductible amount of the Purchaser Losses incurred as a result of any inaccuracy of a representation or warranty of Seller contained in Section 2.3(c)(iv) of this Agreement exceeds US$50,000; and PROVIDED FURTHER that, Seller's aggregate liability for all Purchaser Losses incurred as a result of any inaccuracy of a representation or warranty contained in Section 2.3(c)(iv) of this Agreement shall not exceed US$150,000 and Seller's aggregate liability for all Purchaser Losses, including those incurred as a result of any inaccuracy of a representation or warranty contained in Section 2.3(c)(iv) of this Agreement, shall not exceed US$1,875,000; and PROVIDED FURTHER that, in determining the amount of any Purchaser Losses suffered by any Purchaser Indemnified Party which give rise to liability of Seller hereunder, there shall have been taken into account (x) the amount of any tax benefits actually realized by such Purchaser Indemnified Party attributable to such Purchaser Losses or derived therefrom in any period to and including the end of the taxable year following the year in which the Loss was incurred; and (y) the amount of any insurance benefits actually realized by such Purchaser Indemnified Party attributable to such Purchaser Losses or derived therefrom. The exclusive remedy of the Purchaser Indemnified Parties with respect to any and all Purchaser Losses shall be the return of shares of Purchaser Common Stock issued to Seller hereunder and any such returned shares shall each be deemed to have a value of US$0.375. -21- (b) Seller and its officers, directors and Affiliates (the "Seller Indemnified Parties") shall be indemnified and held harmless by Purchaser against all claims, losses, liabilities, damages, deficiencies, costs and expenses, including reasonable attorneys' fees and expenses of investigation (hereinafter individually a "Seller Loss" and collectively "Seller Losses") incurred by the Seller Indemnified Parties directly or indirectly as a result of: (i) any inaccuracy of a representation or warranty of Purchaser contained in this Agreement or (ii) any failure by Purchaser to perform or comply with any covenant contained in this Agreement; PROVIDED that the Seller Indemnifies Parties shall not be entitled to receive indemnification payments with respect to any Seller Loss under (i) above unless and until the aggregate deductible amount of the Seller Losses incurred by any Seller Indemnified Parties exceeds US$25,000; and PROVIDED FURTHER that, Purchaser's aggregate liability for all Seller Losses shall not exceed US$1,875,000, and PROVIDED FURTHER that, in determining the amount of any Seller Losses suffered by any Seller Indemnified Party which give rise to liability of Purchaser hereunder, there shall have been taken into account (x) the amount of any tax benefits actually realized by such Seller Indemnified Party attributable to such Seller Losses or derived therefrom in any period to and including the end of the taxable year following the year in which the Seller Loss was incurred; and (y) the amount of any insurance benefits actually realized by such Seller Indemnified Party attributable to such Seller Losses or derived therefrom. (c) Notwithstanding anything to the contrary herein, Seller's indemnification obligations for Purchaser Losses incurred by the Purchaser Indemnified Parties directly or indirectly as a result of any inaccuracy of a representation or warranty of Seller contained in this Agreement shall terminate on July 31, 2003; provided that Seller's indemnification obligations for Purchaser Losses incurred by the Purchaser Indemnified Parties directly or indirectly as a result of any inaccuracy of a representation or warranty of Seller contained in Section 2.6, 2.10, 2.14, 2.15 or 2.19 of this Agreement shall terminate on December 31, 2003. Notwithstanding anything to the contrary herein, Purchaser's indemnification obligations for Seller Losses incurred by the Seller Indemnified Parties directly or indirectly as a result of any inaccuracy of a representation or warranty of Purchaser contained in this Agreement shall terminate on July 31, 2003. (d) Notwithstanding anything to the contrary herein, the existence of this Article VI and of the rights and restrictions set forth herein do not limit any legal remedy for claims based on fraud. (e) Any claim for the recovery of Seller Losses or Purchaser Losses shall be made by giving notice thereof in accordance with Section 7.6 and, in the case of Purchaser Losses and Seller Losses incurred directly or indirectly as a result of any inaccuracy of a representation or warranty herein, such notice shall be given prior to July 31, 2003; provided that in the case of Purchaser Losses incurred directly or indirectly as a result of any inaccuracy of a representation or warranty contained in Section 2.6, 2.10, 2.14, 2.15 or 2.19 of this Agreement such notice shall be given prior to December 31, 2003. SECTION 6.2 ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement (a "Dispute"), shall be settled by binding arbitration. Any such arbitration proceeding shall be conducted by one arbitrator mutually agreeable to Seller and Purchaser. In the event that within 45 days after submission of any Dispute to arbitration, Seller -22- and Purchaser cannot mutually agree on one arbitrator, Seller and Purchaser shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator. The arbitrator or arbitrators, as the case may be, shall set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the parties an opportunity, adequate in the sole judgment of the arbitrator or majority of the three arbitrators, as the case may be, to discover relevant information from the opposing parties about the subject matter of the Dispute. The arbitrator or a majority of the three arbitrators, as the case may be, shall rule upon motions to compel or limit discovery and shall have the authority to impose sanctions, including attorneys' fees and costs, to the same extent as a competent court of law or equity, should the arbitrators or a majority of the three arbitrators, as the case may be, determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. The decision of the arbitrator or a majority of the three arbitrators, as the case may be, shall be binding and conclusive upon the parties to this Agreement. Such decision shall be written and shall be supported by written findings of fact and conclusions which shall set forth the award, judgment, decree or order awarded by the arbitrator(s). Judgment upon any award rendered by the arbitrator(s) may be entered in any court having jurisdiction. Any such arbitration shall be held in New York City under the rules then in effect of Judicial Arbitration and Mediation Services. The substantially non-prevailing party shall pay all expenses relating to the arbitration, including without limitation, the respective expenses of each party, the fees of each arbitrator and applicable administrative fees. ARTICLE VII MISCELLANEOUS AND GENERAL SECTION 7.1. EXPENSES. Each party hereto shall pay its own expenses incidental to the preparation of this Agreement, the carrying out of the provisions of this Agreement and the consummation of the transactions contemplated hereby; provided that Purchaser shall pay all transfer taxes in connection with the transfer of the Subsidiary Shares, the Seller Software, the Other Software, the US Reseller Agreements and the Seller Trademarks, including any and all taxes under French law. SECTION 7.2. PRESS RELEASES. Purchaser and Seller shall collaborate with respect to issuing a press release announcing the transactions contemplated by this Agreement; PROVIDED that Purchaser retains the right to issue any press release that in Purchaser's judgment is required by any Law. SECTION 7.3. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This Agreement and the other agreements referred to or contemplated herein and the letter agreement dated June 18, 2002 concerning confidentiality (the "Confidentiality Agreement") set forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and, except as set forth in this Agreement, such other agreements and the Exhibits hereto and the Confidentiality Agreement, there are no representations or warranties, express or implied, made by any party to this Agreement with respect to the subject matter of this Agreement and the Confidentiality Agreement. Except for the matters set forth in the Confidentiality Agreement, any and all previous agreements and understandings between or among the parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement and the agreements referred to or contemplated herein. -23- SECTION 7.4. ASSIGNMENT AND BINDING EFFECT. This Agreement may not be assigned by either party hereto without the prior written consent of the other party. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. SECTION 7.5. DEFINITIONS. As used in this Agreement the terms set forth below shall have the following meanings: (a) "Affiliate" of a Person means any other Person who directly or indirectly through one or more intermediaries controls, is controlled by or is under common Control with such Person. "Control" means the possession of the power, directly or indirectly, to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. (b) "Assets" means assets of every kind and everything that is or may be available for the payment of liabilities (whether inchoate, tangible or intangible), including, without limitation, real and personal property. (c) "Business" means, with respect to any Person, the business of such Person as currently conducted. (c) "Business Day" means a day other than Saturday or Sunday or a day on which banks are required or authorized to close in the States of Colorado, New Jersey, Nevada or Delaware. (d) "Closing" means the closing of the transactions contemplated by this Agreement on the date hereof following the execution of this Agreement. (e) "Copyrights" mean U.S. and foreign registered copyrights and U.S. and foreign unregistered copyrights in materials that are material to the conduct of the business (including those in computer software and databases), and all registrations and applications to register the same. (f) "Encumbrances" mean Liens, security interests, deeds of trust, encroachments, reservations, orders of Governmental Entities, decrees, judgments, contract rights, claims or equity of any kind. (g) "Governmental Entity" means any United States or other national, state, municipal or local government, domestic or foreign, any subdivision, agency, entity, commission or authority thereof, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority. (h) "Intellectual Property" means all of the following: Trademarks, Patents, Patent Applications, Copyrights, Software, Know-How, and Trade Secrets. -24- (i) "Know-How" means the information reasonably necessary to utilize the Intellectual Property to conduct the Business. (j) "Knowledge" means, with respect to any Person, the actual knowledge of any of the officers of such Person as of the date hereof. (k) "Laws" mean all foreign, federal, state and local statutes, laws, ordinances, regulations, rules, resolutions, orders, determinations, writs, injunctions, awards (including, without limitation, awards of any arbitrator), judgments and decrees applicable to the specified Persons. (l) "Lien" means any mortgage, pledge, lien, security interest, conditional or installment. (m) "Material Adverse Effect" means, with respect to any Person, a material adverse impact or effect (other than arising in connection with any impact or effect on the applicable industry or market generally) on (a) the business, operations, assets, liabilities, or condition (financial or otherwise) of such Person which effect either individually or when aggregated with other such effects, is adverse and material. (n) "Ordinary Course of Business" means all actions taken by a Person if: (i) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; (ii) such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority); and (iii) such action is similar in nature and magnitude to actions customarily taken in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business and the same stage of development as such Person. (o) "Patent Applications" mean all U.S. and foreign patent applications, and any and all provisionals, divisions, continuations, continuations-in-part, reissues, reexaminations, extensions thereof, any counterparts claiming priority therefrom and like statutory rights. (p) "Patents" mean issued U.S. and foreign patents, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations, and extensions thereof, any counterparts claiming priority therefrom and like statutory rights. (q) "Permitted Encumbrances" mean (i) Liens for Taxes not yet due or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with generally accepted accounting principles in the United States or France; (ii) such minor encumbrances, easements or reservations of, or rights of others for, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning restrictions as to the use of real properties, which do not materially interfere with the use, occupation and enjoyment of the property subject to the Lien by and in connection with the applicable business; (iii) Liens incurred in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance and other types of social security; and (iv) Liens that do not materially detract from the value or impair the use of the Asset in question. -25- (r) "Person" means any individual, corporation, partnership, limited partnership, limited liability company, trust, association or entity or government agency or authority. (s) "Software" means a set of statements or instructions to be used directly or indirectly in a computer to bring about certain results. (t) "Software Documentation" shall mean all records, technical and descriptive materials, documentation and procedures (including computerized records, if any) existing and relating to the creation, acquisition, design, development, programming, enhancement, modification, translation or other manipulation, operation, use or maintenance of any Software (u) "Subsidiary" of a Person means any corporation, partnership, joint venture or other entity in which such Person (i) owns, directly or indirectly, 50% or more of the outstanding voting securities or equity interests or (ii) is a general partner. (v) "Tax" means any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value-added, transfer, stamp or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any governmental authority. (w) "Tax Return" means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. (x) "Trademarks" mean U.S. and foreign registered trademarks, service marks, trade names and logos and U.S. and foreign unregistered trademarks, service marks, trade names and logos that are material to the conduct of the Business and all registrations and applications to register the same. (y) "Trade Secrets" mean trade secrets as defined in the Uniform Trade Secrets Act including business information as defined by applicable local Law. SECTION 7.6. NOTICES. Any notice, request, demand, waiver, consent, approval, or other communication which is required or permitted to be given to any party hereunder shall be in writing and shall be deemed given only if delivered to the party personally or by nationally recognized overnight courier or sent to the party by facsimile transmission (promptly followed by a hard-copy delivered in accordance with this Section 7.6) or by registered or certified mail (return receipt requested), with postage and registration or certification fees thereon prepaid, addressed to the party at its address set forth below: If to Seller: ManagedStorage International, Inc. 12303 Airport Way, Suite 250 -26- Broomfield, CO 80021 Facsimile number: 720-566-5001 Attn: Reed Guest, Esq. with a copy to: Hogan & Hartson L.L.P. 1470 Walnut, Suite 200 Boulder, CO 80302-5341 Facsimile number: 720-406-5301 Attn: Patrick Perrin, Esq. If to Purchaser: Front Porch Digital, Inc. 20000 Horizon Way, Suite 120 Mt. Laurel, New Jersey 08054 Facsimile number: 856-439-9960 Attn: Don Maggi with a copy to: Pryor Cashman Sherman Flynn LLP 410 Park Avenue New York, New York 10022 Facsimile number: 212-326-0806 Attn: Eric Hellige, Esq. or to such other address or Person as any party may have specified in a notice duly given to the other party as provided herein. Such notice, request, demand, waiver, consent, approval or other communication will be deemed to have been given as of the date so delivered, telecopied or mailed. SECTION 7.7. AMENDMENT. Any amendment, modification or revision of this Agreement and any waiver of compliance or consent with respect hereto shall be effective only if in a written instrument executed by the parties hereto. SECTION 7.8. GOVERNING LAW. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of Colorado as applied to contracts made and fully performed in such state. SECTION 7.9. NO BENEFIT TO OTHERS. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto, and their respective successors and assigns, and they shall not be construed as conferring, and are not intended to confer, any rights on any other Person. -27- SECTION 7.10. SEVERABILITY. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of the Agreement shall remain in full force and effect. Upon such determination, the parties hereto shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the parties to the fullest extent permitted by applicable law. SECTION 7.11. SECTION HEADINGS. All section headings are for convenience only and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 7.12. SCHEDULES AND EXHIBITS. All Schedules and Exhibits referred to herein are intended to be and hereby are specifically made a part of this Agreement SECTION 7.13. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and the Company and Purchaser may become a party hereto by executing a counterpart hereof. This Agreement and any counterpart so executed shall be deemed to be one and the same instrument. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -28- STOCK AND ASSET PURCHASE AGREEMENT BY AND BETWEEN MANAGED STORAGE INTERNATIONAL, INC. AND FRONT PORCH DIGITAL INC. SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have duly executed this Stock and Asset Purchase Agreement as of the date first above written. MANAGEDSTORAGE INTERNATIONAL, INC. By: /s/ Thomas P. Sweeney ---------------------------------- Its: Chief Executive Officer FRONT PORCH DIGITAL INC. By: /s/ Don Maggi ---------------------------------- Its: Chief Executive Officer -29- EX-10.2 4 c25326_ex10-2.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated as of July 31, 2002, between FRONT PORCH DIGITAL, INC., a corporation organized under the laws of Nevada (the "Company"), and MANAGEDSTORAGE INTERNATIONAL, INC., a corporation organized under the laws of Delaware, ("MSI") or any party to whom this Agreement is assigned in accordance with its terms. W I T N E S S E T H: - - - - - - - - - - WHEREAS, on the date hereof, the Company has agreed to issue to MSI shares of Common Stock (as defined herein) and warrants to purchase shares of Common Stock pursuant to the terms of a Stock and Asset Purchase Agreement dated as of July 31, 2002 (the "Purchase Agreement") between the Company and MSI; and WHEREAS, as a condition to the consummation of the transactions contemplated by the Purchase Agreement, the Company has agreed to provide certain registration rights pursuant to the terms of this Agreement; NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. For purposes of this Agreement, capitalized terms used herein shall have the meanings set forth in the preambles hereto and in this Section 1. 1.1 "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.2 "COMMON STOCK" shall mean the common stock, par value $.001 per share, of the Company or, in the case of a conversion, reclassification or exchange (or any other adjustment or readjustment under Section 4 of the Warrants) of such shares of such Common Stock, shares of the stock issued or issuable in respect of such shares of Common Stock, and all provisions of this Agreement shall be applied appropriately thereto and to any stock resulting therefrom. 1.3 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute enacted hereafter, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. 1.4 "EXISTING RIGHTS AGREEMENTS" shall mean (i) the warrant agreements originally dated as of October 10, 2000 between the Company and the Original Warrantholders for the purchase of an aggregate of 3,950,000 shares of Common Stock and any warrant agreement executed and delivered by the Company upon the registration or transfer of any warrants evidenced by such warrant agreements, (ii) the Registration Rights Agreement dated as of October 10, 2000 between the Company and Storage Technology Corporation; (iii) the Registration Rights Agreement dated as of October 10, 2000 between the Company and Equity Pier LLC; [(iv) the warrant agreement between the Company and Equity Pier LLC dated February 28, 2001 for the purchase of up to 3,324,696 shares of Common Stock] and (v) the 7% Convertible Secured Notes by the Company in favor of each of Rice Opportunity Fund LLC and Irl Nathan. 1.5 "FORM S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the Commission which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the Commission. 1.6 "HOLDER" shall mean any holder of Registrable Securities; provided, however, that any Person who acquires any of the Registrable Securities in a distribution pursuant to a registration statement filed by the Company under the Securities Act or pursuant to a public sale under Rule 144 under the Securities Act or any similar or successor rule shall not be considered a Holder. 1.7 "INITIAL PUBLIC OFFERING" shall mean the first time at which an offering, whether primary or secondary, of Common Stock or options, warrants or other securities convertible into or exchangeable or exercisable for Common Stock, is registered pursuant to an effective registration statement (other than a registration statement on Form S-4 or Form S-8 or any successor forms thereto) filed by the Company under the Securities Act. An Initial Public Offering will be deemed to be consummated on the date such registration is declared effective by the Commission. 1.8 "INITIATING HOLDERS" shall mean Holders representing (on a fully diluted basis) at least twenty-five percent (25%) of the total number of Registrable Securities. 1.9 "ORIGINAL WARRANTHOLDERS" shall mean Navesink Venture Partners LLC, Hawke Company Ltd, Tillgrove Investments Ltd, Madona Resources Ltd and Donald Maggi. 1.10 "PERSON" shall mean any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. 1.11 "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a registration effected by preparing and filing a registration statement with the Commission in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement by the Commission. 2 1.12 "REGISTRABLE SECURITIES" shall mean (i) the Warrant Shares and (ii) the shares of Common Stock issued to MSI pursuant to the Purchase Agreement; provided, however, that such shares of Common Stock shall only be treated as Registrable Securities hereunder if and so long as they have not been sold in a registered public offering or have not been sold to the public pursuant to Rule 144 under the Securities Act or any similar or successor rule; provided, further, that the Company shall not be require to register the Warrants. 1.13 "REGISTRATION EXPENSES" shall mean all expenses incurred by the Company in compliance herewith, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, the fees and expenses of counsel for all Holders and Other Stockholders that offer securities being sold pursuant to the Existing Rights Agreements, and the expense of any "comfort letters" or special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company). 1.14 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute enacted hereafter, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. 1.15 "SELLING EXPENSES" shall mean all underwriting discounts and commissions applicable to the sale of Registrable Securities. 1.16 "WARRANTS" shall mean the warrants issued to MSI pursuant to the Purchase Agreement. 1.17 "WARRANT SHARES" shall mean the shares of Common Stock issued or issuable upon exercise of the Warrants (and any other or additional shares, securities or property that may hereafter be issuable upon exercise of the Warrants) as such number may be adjusted in accordance with the terms of the Warrants. 2. REQUESTED REGISTRATION. 2.1 REQUEST FOR REGISTRATION. At any time after the earlier of (i) consummation of an Initial Public Offering or (ii) January 31, 2003 (such date being hereinafter referred to as the "Demand Date"), if the Company shall receive from Initiating Holders a written request that the Company effect any registration with respect to Registrable Securities, the Company will: (a) promptly give written notice of the proposed registration to all other Holders; and (b) as soon as practicable, use its best efforts to effect such registration (including, without limitation, the execution of an undertaking to file post- effective amendments, appropriate qualification under the blue sky or other state securities laws requested by Initiating Holders and appropriate compliance with applicable regulations issued under the Securities Act) as may be so requested and 3 as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request given within thirty (30) days after receipt of such written notice from the Company; provided, that the Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 2: (i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder; (ii) less than ninety (90) calendar days after the effective date of any registration declared or ordered effective other than a registration on Form S-3 or Form S-8; (iii) if, while a registration request is pending pursuant to this Section 2, the Company determines, in the good faith judgment of the Board of Directors of the Company, with the advice of counsel, that the filing of a registration statement would require the disclosure of non-public material information the disclosure of which would have a material adverse effect on the Company or would otherwise materially adversely affect a financing, acquisition, disposition, merger or other significant transaction, the Company shall deliver a certificate to such effect signed by its President to the proposed selling Holders and the Company shall not be required to effect a registration pursuant to this Section 2 until the earlier of (A) three (3) days after the date upon which such material information is disclosed to the public or ceases to be material or (B) 90 days after the Company makes such good faith determination; provided, however, that the Company shall not utilize this right more than once in any twelve month period; or (iv) except as set forth in Section 2.5, after the second such registration pursuant to this Section 2.1 has been declared or ordered effective. Subject to the foregoing clauses (i), (ii), (iii) and (iv), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders. 2.2 ADDITIONAL SHARES TO BE INCLUDED. The registration statement filed pursuant to the request of the Initiating Holders may, subject to the provisions of Sections 2.4 4 below, include (a) other securities of the Company (the "Additional Shares") which are held by (i) officers or directors of the Company who, by virtue of agreements with the Company, are entitled to include their securities in any such registration or (ii) other Persons who, by virtue of agreements with the Company, including, but not limited to, the Existing Rights Agreements, are entitled to include their securities in any such registration (the "Other Stockholders"), and (b) securities of the Company being sold for the account of the Company. 2.3 UNDERWRITING. (a) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2 and the Company shall include such information in the written notice to other Holders referred to in Section 2.1 above. The right of any Holder to registration pursuant to this Section 2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein and subject to the limitations provided herein. A Holder may elect to include in such underwriting all or a part of the Registrable Securities he holds. (b) The Company shall (together with all Holders, officers, directors and Other Stockholders proposing to distribute their securities through such underwriting) negotiate and enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders, which underwriter(s) shall be reasonably acceptable to the Company. 2.4 LIMITATIONS ON SHARES TO BE INCLUDED. Notwithstanding any other provision of this Section 2, if the representative of the underwriters advises the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, first the Additional Shares and any securities being sold for the account of the Company shall be excluded from such registration pursuant to the priorities set forth hereinbelow and, if a limitation on the number of shares is still required, the number of shares that may be included in the registration and underwriting shall be allocated among all Holders, including Initiating Holders, in proportion, as nearly practicable, to the respective amounts of Registrable Securities which they have requested to be included in such registration statement. If the Company or any Holder, officer, director or Other Stockholder who has requested inclusion in such registration as provided above disapproves of the terms of any such underwriting, such Person may elect to withdraw such Person's Registrable Securities or Additional Shares therefrom by written notice to the Company and the underwriter and the Initiating Holders. Any Registrable Securities or other securities excluded shall also be withdrawn from such registration. No Registrable Securities or Additional Shares excluded from such registration by reason of such underwriters' marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with this Section 2.4, the Company or underwriter or underwriters selected as provided above may round the number of Registrable Securities of any Holder which may be included in such registration to the nearest 100 shares. If pursuant to this Section 2.4 any Additional Shares or securities being sold for the account of the Company shall be excluded from registration, then the number of shares of such securities that are entitled to be included in the 5 registration and underwriting shall be allocated as follows: first, to the Company for securities being sold for its own account; and thereafter, among all officers, directors and Other Stockholders, in each case in proportion, as nearly as practicable, to the respective amounts of Additional Shares which they had requested to be included in such registration at the time of filing the registration statement. 2.5 ADDITIONAL DEMAND REGISTRATION. If with respect to the last registration permitted to be exercised by the Holders of Registrable Securities under Section 2.1, the Holders are unable to register all of their Registrable Securities because of the operation of Section 2.4 hereof, such Holders shall be entitled to require the Company to effect one additional registration to afford the Holders an opportunity to register all such Registrable Securities. Such additional registration shall again be subject to the provisions of this Section 2. 3. RESERVED. 4. EXPENSES OF REGISTRATION. All Registration Expenses and Selling Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2 of this Agreement shall be borne as follows: fifty percent (50%) by the Company and fifty percent (50%) by the selling Holders pro rata in accordance with the number of shares sold such selling Holders. 5. REGISTRATION PROCEDURES. 5.1 In the case of each registration effected by the Company pursuant to this Agreement, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof and will, at its expense: (a) use its best efforts to keep such registration effective for a period of 180 days or until the Holder or Holders have completed the distribution described in the registration statement relating thereto, whichever first occurs; provided, however, that the Company will keep such registration effective for longer than 180 days if the costs and expenses associated with such extended registration are borne by the selling Holders; and provided, further, that in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 180-day period shall, at the cost and expense of the Company, be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Securities Act, permits an offering on a continuous or delayed basis, and provided, further, that applicable rules and regulations under the Securities Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (y) includes any prospectus required by Section 10(a)(3) of the Securities Act or (z) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information otherwise required to be included in such post-effective 6 amendment covered by (y) and (z) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement; (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (c) Furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request; (d) Notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing; (e) List all such Registrable Securities registered in such registration on each securities exchange or automated quotation system on which the Common Stock of the Company is then listed; (f) Provide a transfer agent and registrar for all Registrable Securities and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; (g) Make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement, and any attorney or accountant retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers and directors to supply all information reasonably requested by any such seller, underwriter, attorney or accountant in connection with such registration statement; 7 (h) Furnish to each selling Holder upon request a signed counterpart, addressed to each such selling Holder, of (i) an opinion of counsel for the Company, dated the effective date of the registration statement in form reasonably acceptable to the Company and such counsel, and (ii) "comfort" letters signed by the Company's independent public accountants who have examined and reported on the Company's financial statements included in the registration statement, to the extent permitted by the standards of the American Institute of Certified Public Accountants, covering such matters as are customarily covered in opinions of issuer's counsel and accountants' "comfort" letters delivered to underwriters in underwritten public offerings of securities; (i) Furnish to each selling Holder upon request a copy of all documents filed with and all correspondence from or to the Commission in connection with any such offering; and (j) Make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. 5.2 It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that the Holders proposing to register Registrable Securities shall furnish to the Company such information regarding themselves, the Registrable Securities held by them, and their intended method of distribution of such Registrable Securities as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company. 5.3 In connection with the preparation and filing of each registration statement under this Agreement, the Company will give the Holders on whose behalf such Registrable Securities are to be registered and their underwriters, if any, and their respective counsel and accountants, the opportunity to review such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each such Holder such access to the Company's books and records and such opportunities to discuss the business of the Company with its officers, its counsel and the independent public accountants who have certified the Company's financial statements, as shall be necessary, in the opinion of such Holders or such underwriters or their respective counsel, in order to conduct a reasonable and diligent investigation within the meaning of the Securities Act. 6. INDEMNIFICATION. 8 6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify each Holder, each of its officers, directors and partners, and each Person controlling such Holder, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each Person who controls any underwriter, against all claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors and partners, and each Person controlling such Holder, each such underwriter and each Person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission made in reliance upon and based upon written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. 6.2 INDEMNIFICATION BY THE HOLDERS. Each Holder will, if Registrable Securities held by him are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company (other than such Holder) or such underwriter within the meaning of the Securities Act and the rules and regulations thereunder, each other such Holder and each of their officers, directors and partners, and each Person controlling such Holder or other stockholder, against all claims, losses, damages, expenses and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, each of its directors and officers, each underwriter or control Person, each other Holder and each of their officers, directors and partners and each Person controlling such Holder or other stockholder for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein. 6.3 NOTICES OF CLAIMS, PROCEDURES, ETC. Each party entitled to indemnification under this Section 6 (the "Indemnified Party") shall give notice to the party required to provide 9 indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at the Indemnified Party's sole expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 6 unless such failure is prejudicial to the ability of Indemnifying Party to defend such claim or action. Notwithstanding the foregoing, such Indemnified Party shall have the right to employ its own counsel in any such litigation, proceeding or other action if (i) the employment of such counsel has been authorized by the Indemnifying Party, in its sole and absolute discretion, or (ii) the named parties in any such claims (including any impleaded parties) include any such Indemnified Party and the Indemnified Party and the Indemnifying Party shall have been advised in writing (in suitable detail) by counsel to the Indemnified Party either (A) that there may be one or more legal defenses available to such Indemnified Party which are different from or additional to those available to the Indemnifying Party, or (B) that there is a conflict of interest by virtue of the Indemnified Party and the Indemnifying Parties having common counsel, in any of which events, the legal fees and expenses of a single counsel for all Indemnified Parties with respect to each such claim, defense thereof, or counterclaims thereto shall be borne by Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall cooperate to the extent reasonably required and furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. 7. INFORMATION BY HOLDER. Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. 8. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to register securities granted by the Company under this Agreement may be transferred or assigned by a Holder to a transferee or assignee of any Registrable Securities; provided that the Company is given written notice at or prior to the time of said transfer or assignment, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned; and provided further that the transferee or assignee of such rights assumes in writing the obligations of a Holder under this Agreement to the Company and other Holders in effect at the time of transfer under all effective agreements. 10 9. EXCHANGE ACT COMPLIANCE. So long as the Company remains subject to the reporting requirements of the Exchange Act, the Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and will take all actions reasonably necessary to enable holders of Registrable Securities to sell such securities without registration under the Securities Act within the limitation of the provisions of (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, if applicable or (c) any similar rules or regulations hereunder adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. 10. NO CONFLICT OF RIGHTS. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders in this Agreement. Without limiting the generality of the foregoing, the Company will not hereafter enter into any agreement with respect to its securities which grants or modifies any existing agreement with respect to its securities to grant to the holder of its securities in connection with an incidental registration of such securities equal or higher priority to the rights granted to the Holders under Section 2 of this Agreement. 11. LOCKUP AGREEMENT. In consideration for the Company agreeing to its obligations hereunder, the Holders of Registrable Securities agree in connection with any registration of the Company's securities other than pursuant to the terms hereof that, upon the request of the Company, not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any Registrable Securities without the prior written consent of the Company for such period of time (not to exceed 60 days) from the effective date of such registration as the Company may specify; provided, however, that all holders of 5% or more of the Company's securities and all directors and officers shall be subject to the restrictions set forth in this Section 11. 12. BENEFITS OF AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns, legal representatives and heirs. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any other Person. 13. COMPLETE AGREEMENT. This Agreement constitutes the complete understanding among the parties with respect to its subject matter and supersedes all existing agreements and understandings, whether oral or written, among them. No alteration or modification of any provisions of this Agreement shall be valid unless made in writing and signed, on the one hand, by the Holders of a majority of the Registrable Securities then outstanding and, on the other, by the Company. 14. SECTION HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 11 15. NOTICES. All notices, offers, acceptances and other communications required or permitted to be given or to otherwise be made to any party to this Agreement shall be deemed to be sufficient if contained in a written instrument delivered by hand, first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, if to the Company, at 20000 Horizon Way, Suite 120, Mt. Laurel, New Jersey 08054, Attention: Chief Executive Officer, with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park Avenue, New York, New York 10022, Attention: Eric M. Hellige, Esq., and if to any Holder, at the address of such Holder as set forth in the stock transfer books of the Corporation. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any party may change the address to which each such notice or communication shall be sent by giving written notice to the other parties of such new address in the manner provided herein for giving notice. 16. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without giving effect to the provisions, policies or principles thereof respecting conflict or choice of laws. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts each of which shall be deemed an original but all of which taken together shall constitute one and the same agreement. 18. SEVERABILITY. Any provision of this Agreement which is determined to be illegal, prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, prohibition or unenforceability without invalidating the remaining provisions hereof which shall be severable and enforceable according to their terms and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 12 IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first set forth above. FRONT PORCH DIGITAL, INC. By: /s/Don Maggi ---------------------------------- Name: Don Maggi Title: Chief Executive Officer MANAGEDSTORAGE INTERNATIONAL, INC. By: /s/Thomas P. Sweeney ---------------------------------- Name: Thomas P. Sweeney Title: Chief Executive Officer 13 EX-10.3 5 c25326_ex10-3.txt LOCK-UP AGREEMENT EXHIBIT 10.3 LOCK-UP AGREEMENT LOCK-UP AGREEMENT (the "Agreement") dated as of July 31, 2002, by and among FRONT PORCH DIGITAL INC., a Delaware corporation (the "Company"), and MANAGEDSTORAGE INTERNATIONAL, INC. ("MSI"), a Delaware corporation. W I T N E S S E T H - - - - - - - - - - WHEREAS, on the date hereof, the Company has agreed to issue to MSI shares of Common Stock and warrants to purchase shares of Common Stock pursuant to the terms of a Stock and Asset Purchase Agreement dated as of July 31, 2002 (the "Purchase Agreement") between the Company and MSI; and WHEREAS, as a condition to the consummation of the transactions contemplated by the Purchase Agreement the Company and MSI desire to provide for certain restrictions on the transfer of such shares by MSI; NOW THEREFORE, in consideration of the premises and the mutual covenants of the parties hereto, it is hereby agreed as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 DEFINITIONS. Whenever used in this Agreement, unless otherwise defined or the subject matter or context dictates, the following terms shall have these respective meanings: (a) "Affiliate" shall have the meaning ascribed to it in Rule 12(b)(2) promulgated under the Securities Exchange Act of 1934, as amended. (b) "Agreement" means this Lock-up Agreement, any agreement which is supplementary to or in amendment or confirmation of this Agreement, and any schedules hereto or thereto. (c) "Disposition" shall have the meaning assigned in Section 2.1. (d) "Person" means any individual, estate, trust, partnership, joint venture, limited liability company, association, firm, corporation, company or other entity. (e) "Senior Secured Convertible Notes" mean the Senior Secured Convertible Notes of MSI issued from time to time after the date hereof. (f) "Shares" mean, the shares of Common Stock, $.001 par value, of the Company, as well as: (i) any shares into which shares then authorized may be converted, reclassified, redesignated, subdivided, consolidated or otherwise changed; (ii) any shares of the Company or any successor or other body corporate which may be received by the holders of shares on a merger, amalgamation or other reorganization of or including the Company; and (iii) any securities which may now or hereinafter be convertible or exercisable into such shares. (g) "Transfer" shall have the meaning assigned in Section 2.1. 1.2 EXTENDED MEANINGS. Words importing the singular number include the plural and vice versa and words importing gender include all genders. ARTICLE II DISPOSITION OF SHARES 2.1 RESTRICTION ON TRANSFER OF SHARES. (a) Except as provided in Section 2.1(b), prior to July 31, 2003, MSI may not sell, assign, transfer, mortgage, alienate, pledge, hypothecate, create or permit to exist a security interest in or lien on, place in trust or in any other way encumber or otherwise dispose of (any of the foregoing shall constitute a "Transfer," and the consummation of such being a "Disposition") any Shares now owned or hereafter acquired or any interest therein except as expressly permitted by the terms and provisions of this Agreement. The Company shall have no obligation to recognize or accede to any Disposition or to register any Transfer of Shares on its books unless such Disposition is effected in accordance with the terms and provisions of this Agreement. No Person who purports to be a holder of Shares acquired in violation of the terms and provisions of this Agreement shall be entitled to any rights with respect to such Shares, including any rights to vote such Shares, to receive any dividends declared thereon, or to receive any notice with respect thereto under this Agreement or otherwise. (b) MSI may Transfer all or a portion of its Shares to (i) any Person to which MSI shall sell, assign or transfer all or substantially all of its assets; (ii) any Affiliate of MSI or (iii) any holder of the Senior Secured Convertible Notes in connection with the exercise of remedies of such holders against MSI pursuant to the terms of such notes. If MSI intends to make a Disposition of all or a portion of its Shares pursuant to this paragraph, MSI shall give at least 30 days prior written notice of such proposed Disposition to the Company. Any such notice shall specify the number of Shares subject to such proposed disposition, identify the proposed transferee and state the relationship between MSI and the proposed transferee. 2 (c) Each Disposition otherwise permitted by this Article II shall not become effective unless and until the transferee executes and delivers to the Company a counterpart to this Agreement, agreeing to be treated in the same manner as MSI. Upon such Disposition and such execution and delivery, the transferee shall be bound by, and entitled to the benefits of, this Agreement with respect to the transferred Shares in the same manner as the MSI. 2.2 AFTER ACQUIRED STOCK. Any Shares acquired by MSI after the date of this Agreement pursuant to the provisions of the Purchase Agreement shall become or remain subject to the terms of this Agreement. ARTICLE III MISCELLANEOUS 3.1 LEGEND. MSI shall cause each certificate representing Shares that are subject to this Agreement to have stamped, printed or typed thereon the following legend: The securities represented by this certificate are subject to a Lock-Up Agreement, dated as of July 31, 2002, between Front Porch Digital Inc. (the "Company") and ManagedStorage International, Inc., a copy of which may be examined at the principal office of the Company. 3.2 NOTICE. Any notice or document required or permitted by this Agreement to be given to a party hereto shall be in writing and is sufficiently given if delivered personally, or if sent by prepaid certified mail, return receipt requested, to MSI or to the Company addressed as follows: the Company: Front Porch Digital Inc. 20000 Horizon Way Suite 120 Mt. Laurel, New Jersey 08054 Attention: Chief Financial Officer with a copy to: Pryor Cashman Sherman & Flynn LLP 410 Park Avenue New York, N.Y. 10022 Attention: Eric M. Hellige, Esq. MSI: ManagedStorage International, Inc. 12303 Airport way Suite 250 Broomfield, Colorado 80021 Attention: Reed Guest, Esq. With a copy: Hogan & Hartson, LLP 3 1470 Walnut Suite 200 Boulder, Colorado 80302-5341 Attn: Patrick Perrin, Esq. Notice so mailed shall be deemed to have been given upon receipt if delivered personally or on the fifth business day next following the date of the returned receipt. Any notice delivered to the party to whom it is addressed shall be deemed to have been given and received on the day it is delivered. Any party may from time to time notify the others in the manner provided herein of any change of address which thereafter, until changed by like notice, shall be the address of such party for all purposes hereof. 3.3 TERM OF AGREEMENT. (a) This Agreement shall terminate on the earlier to occur of July 31, 2003 or such date as is mutually agreed in writing by the parties hereto. (b) Nothing contained in this Section 3.3 shall affect or impair any rights or obligations arising prior to the time of the termination of this Agreement, or which may arise by an event causing the termination of this Agreement. 3.4 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. 3.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and together shall constitute one document. 3.6 ENTIRE AGREEMENT; ETC. This Agreement sets forth the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, among the parties hereto and there are no warranties, representations and other agreements between the parties hereto in connection with the subject matter hereof except as specifically set forth herein or therein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by all the parties to this Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 3.7 GOVERNING LAW. This Agreement shall be construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in 4 New York. IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of each of the parties hereto as of the date first above written. FRONT PORCH DIGITAL INC. By: /s/ Don Maggi ---------------------------------- Name: Don Maggi Title: Chief Executive Officer MANAGEDSTORAGE INTERNATIONAL, INC. By: /s/ Thomas P. Sweeney ---------------------------------- Name: Thomas P. Sweeney Title: Chief Executive Officer 5 EX-10.4 6 c25326_ex10-4.txt WARRANT TO PURCHASE EXHIBIT 10.4 THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH AN EXEMPTION FROM REGISTRATION UNDER THAT ACT. WARRANT TO PURCHASE 1,750,000 SHARES OF COMMON STOCK OF FRONT PORCH DIGITAL, INC. This certifies that MANAGEDSTORAGE INTERNATIONAL, INC. (or any party to whom this Warrant is assigned in accordance with its terms) is entitled to subscribe for and purchase 1,750,000 shares of the Common Stock of Front Porch Digital Inc., a Nevada corporation, on the terms and conditions of this Warrant. 1. DEFINITIONS. As used in this Warrant, the term: 1.1 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated to be closed by law or by executive order. 1.2 "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.3 "COMMON STOCK" shall mean the Common Stock, par value $.001 per share, of the Corporation, or, in the case of a conversion, reclassification or exchange of such shares of such Common Stock, shares of the stock into or for which such shares of Common Stock shall be converted, reclassified or exchanged, and all provisions of Section 4 shall be applied appropriately thereto and to any stock resulting from any subsequent conversion, reclassification or exchange therefor. 1.4 "CORPORATION" shall mean Front Porch Digital Inc., a Nevada corporation, or its successor. 1.5 "EXPIRATION DATE" shall mean July 31, 2012. 1.6 "HOLDER" shall mean ManagedStorage International, Inc. or any party to whom this Warrant is assigned in accordance with its terms. 1.7 "PERSON" shall mean any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. 1.8 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute enacted hereafter, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. 1.9 "WARRANT" shall mean this Warrant and any warrants delivered in substitution or exchange for this Warrant in accordance with the provisions of this Warrant. 1.10 "WARRANT PRICE" shall mean $2.00 per share of Common Stock, as such amount may be adjusted pursuant to Section 4 hereof. 2. EXERCISE OF WARRANT. At any time before the Expiration Date, the Holder may exercise the purchase rights represented by this Warrant, in whole or in part, by surrendering this Warrant (with a duly executed subscription in the form attached) at the Corporation's principal corporate office (located on the date hereof in Mt. Laurel, New Jersey) and by paying the Corporation, by certified or cashier's check, the aggregate Warrant Price for the shares of Common Stock being purchased. 2.1 DELIVERY OF CERTIFICATES. Within ten (10) days after each exercise of the purchase rights represented by this Warrant, the Corporation shall deliver a certificate for the shares of Common Stock so purchased to the Holder and, unless this Warrant has been fully exercised or expired, a new Warrant representing the balance of the shares of Common Stock subject to this Warrant. 2.2 EFFECT OF EXERCISE. The Person entitled to receive the shares of Common Stock issuable upon any exercise of the purchase rights represented by this Warrant shall be treated for all purposes as the holder of such shares of record as of the close of business on the date of exercise. 2.3 ISSUE TAXES. The Corporation shall pay all issue and other taxes that may be payable in respect of any issue or delivery to the Holder of shares of Common Stock upon exercise of this Warrant. 3. STOCK FULLY PAID; RESERVATION OF SHARES. The Corporation covenants and agrees that all securities that it may issue upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable and free from all taxes, liens and charges. The Corporation further covenants and agrees that, during the period within which the Holder may exercise the rights represented by this Warrant, the Corporation shall at all times have authorized and reserved for issuance enough shares of its Common Stock or other securities for the full exercise of the rights represented by this Warrant. The Corporation shall not, by an amendment to its Articles of Incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek 2 to avoid the observance or performance of any of the terms of this Warrant. 4. ADJUSTMENTS. The Warrant Price and the number of shares of Common Stock that the Corporation must issue upon exercise of this Warrant shall be subject to adjustment in accordance with Sections 4.1 through 4.3. 4.1 ADJUSTMENT TO WARRANT PRICE FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. If the Corporation at any time or from time to time after the date hereof (1) declares or pays, without consideration, any dividend on the Common Stock payable in Common Stock; (2) creates any right to acquire Common Stock for no consideration; (3) subdivides the outstanding shares of Common Stock (by stock split, reclassification or otherwise); or (4) combines or consolidates the outstanding shares of Common Stock, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Corporation shall proportionately increase or decrease the Warrant Price, as appropriate. 4.2 ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the Common Stock issuable upon exercise of this Warrant changes into shares of any other class or classes of security or into any other property for any reason other than a subdivision or combination of shares provided for in Section 4.1, including without limitation any reorganization, reclassification, merger or consolidation, the Corporation shall take all steps necessary to give the Holder the right, by exercising this Warrant, to purchase the kind and amount of securities or other property receivable upon any such change by the owner of the number of shares of Common Stock subject to this Warrant immediately before the change. 4.3 SPIN OFFS. If the Corporation spins off any subsidiary by distributing to the Corporation's shareholders as a dividend or otherwise any stock or other securities of the subsidiary, the Corporation shall reserve until the Expiration Date enough of such shares or other securities for delivery to the Holders upon any exercise of the rights represented by this Warrant to the same extent as if the Holders owned of record all Common Stock or other securities subject to this Warrant on the record date for the distribution of the subsidiary's shares or other securities. 4.4 CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment or readjustment required by this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with this Section, cause independent public accountants selected by the Corporation to verify such computation and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. 5. FRACTIONAL SHARES. The Corporation shall not issue any fractional shares in connection with any exercise of this Warrant. 6. DISSOLUTION OR LIQUIDATION. If the Corporation dissolves, liquidates or winds up its business before the exercise or expiration of this Warrant, the Holder shall be entitled, upon exercising this Warrant, to receive in lieu of the shares of Common Stock or any other securities 3 receivable upon such exercise, the same kind and amount of assets as would have been issued, distributed or paid to it upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock or other securities, had the Holder been the holder of record on the record date for the determination of those entitled to receive any such liquidating distribution or, if no record is taken, upon the date of such liquidating distribution. If any such dissolution, liquidation or winding up results in a cash distribution or distribution of property which the Corporation's Board of Directors determines in good faith to have a cash value in excess of the Warrant Price provided by this Warrant, then the Holder may, at its option, exercise this Warrant without paying the aggregate Warrant Price and, in such case, the Corporation shall, in making settlement to Holder, deduct from the amount payable to Holder an amount equal to such aggregate Warrant Price. 7. TRANSFER AND EXCHANGE. 7.1 TRANSFER. Subject to Section 7.3, the Holder may transfer all or part of this Warrant at any time on the books of the Corporation at its principal office upon surrender of this Warrant, properly endorsed. Upon such surrender, the Corporation shall issue and deliver to the transferee a new Warrant or Warrants representing the Warrants so transferred. Upon any partial transfer, the Corporation shall issue and deliver to the Holder a new Warrant or Warrants with respect to the Warrants not so transferred. 7.2 EXCHANGE. The Holder may exchange this Warrant at any time at the principal office of the Corporation for Warrants in such denominations as the Holder may designate in writing. No such exchanges will increase the total number of shares of Common Stock or other securities that are subject to this Warrant. 7.3 SECURITIES ACT OF 1933. By accepting this Warrant, the Holder agrees that this Warrant and the shares of the Common Stock issuable upon exercise of this Warrant may not be offered or sold except in compliance with the Securities Act, and then only with the recipient's agreement to comply with this Section 7 with respect to any resale or other disposition of such securities. The Corporation may make a notation on its records in order to implement such restriction on transferability. 8. LOSS OR MUTILATION. Upon the Corporation's receipt of reasonably satisfactory evidence of the ownership and the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) of a reasonably satisfactory indemnity or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Corporation shall execute and deliver a new Warrant to the Holder. 9. SUCCESSORS. All the covenants and provisions of this Warrant shall bind and inure to the benefit of the Holder and the Corporation and their respective successors and assigns. 10. NOTICES. All notices and other communications given pursuant to this Warrant shall be in writing and shall be deemed to have been given when personally delivered or when 4 mailed by prepaid registered, certified or express mail, return receipt requested. Notices should be addressed as follows: (a) If to Holder, then to: ManagedStorage International, Inc. 12303 Airport Way Suite 250 Broomfield, Colorado 80021 Attention: Reed Guest, Esq. With a copy (which shall not constitute notice) to: Patrick Perrin, Esq. Hogan & Hartson L.L.P. 1470 Walnut, Suite 200 Boulder, Colorado 80302-5341 (b) If to the Corporation, then to: Front Porch Digital Inc. 20000 Horizon Way Suite 120 Mt. Laurel, New Jersey 08054 With a copy (which shall not constitute notice) to: Eric M. Hellige, Esq. Pryor Cashman Sherman & Flynn LLP 410 Park Avenue New York, New York 10022 Such addresses for notices may be changed by any party by notice to the other party pursuant to this Section 10. 11. AMENDMENT. This Warrant may be amended only by an instrument in writing signed by the Corporation and the Holder. 12. CONSTRUCTION OF WARRANT. This Warrant shall be construed as a whole and in accordance with its fair meaning. A reference in this Warrant to any section shall be deemed to include a reference to every section the number of which begins with the number of the section to which reference is made. This Warrant has been negotiated by both parties and its language shall not be construed for or against any party. 5 13. LAW GOVERNING. This Warrant shall be construed and enforced in accordance with and governed by the New York law without regard to any conflicts of law or choice of forum provisions. Dated as of July 31, 2002 FRONT PORCH DIGITAL INC. By: /s/ Don Maggi --------------------------------- Name: Don Maggi Title: Chief Executive Officer 6 SUBSCRIPTION FORM (TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT) The undersigned registered owner of this Warrant irrevocably exercises this Warrant and agrees to purchase __________ shares of Common Stock of Front Porch Digital Inc., all at the price and on the terms and conditions specified in this Warrant. Dated: ------------------------------------- (Signature of Registered Holder) ------------------------------------- (Street Address) ------------------------------------- (City) (State) (Zip) ISSUE OF A NEW WARRANT (TO BE EXECUTED ONLY UPON PARTIAL EXERCISE, EXCHANGE, OR PARTIAL TRANSFER OF WARRANT) Please issue __________ Warrants, each representing the right to purchase __________ shares of Common Stock of Front Porch Digital Inc. to the registered holder. Dated: ----------------------------------- (Signature of Registered Holder) FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered Holder of this Warrant sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the Warrant, with respect to the number of shares of Common Stock set forth below (the "Transfer"): Name of Assignee Address No. of Shares - ---------------- ------- ------------- The undersigned irrevocably constitutes and appoints _________________ as the undersigned's attorney-in-fact, with full power of substitution, to make the transfer on the books of Front Porch Digital Inc. Dated: ----------------------------------- (Signature) EX-10.5 7 c25326_ex10-5.txt WARRANT TO PURCHASE EXHIBIT 10.5 THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH AN EXEMPTION FROM REGISTRATION UNDER THAT ACT. WARRANT TO PURCHASE 1,750,000 SHARES OF COMMON STOCK OF FRONT PORCH DIGITAL, INC. This certifies that MANAGEDSTORAGE INTERNATIONAL, INC. (or any party to whom this Warrant is assigned in accordance with its terms) is entitled to subscribe for and purchase 1,750,000 shares of the Common Stock of Front Porch Digital Inc., a Nevada corporation, on the terms and conditions of this Warrant. 1. DEFINITIONS. As used in this Warrant, the term: 1.1 "BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated to be closed by law or by executive order. 1.2 "COMMISSION" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 1.3 "COMMON STOCK" shall mean the Common Stock, par value $.001 per share, of the Corporation, or, in the case of a conversion, reclassification or exchange of such shares of such Common Stock, shares of the stock into or for which such shares of Common Stock shall be converted, reclassified or exchanged, and all provisions of Section 4 shall be applied appropriately thereto and to any stock resulting from any subsequent conversion, reclassification or exchange therefor. 1.4 "CORPORATION" shall mean Front Porch Digital Inc., a Nevada corporation, or its successor. 1.5 "EXPIRATION DATE" shall mean July 31, 2012. 1.6 "HOLDER" shall mean ManagedStorage International, Inc. or any party to whom this Warrant is assigned in accordance with its terms. 1.7 "PERSON" shall mean any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. 1.8 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute enacted hereafter, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. 1.9 "WARRANT" shall mean this Warrant and any warrants delivered in substitution or exchange for this Warrant in accordance with the provisions of this Warrant. 1.10 "WARRANT PRICE" shall mean $4.00 per share of Common Stock, as such amount may be adjusted pursuant to Section 4 hereof. 2. EXERCISE OF WARRANT. At any time before the Expiration Date, the Holder may exercise the purchase rights represented by this Warrant, in whole or in part, by surrendering this Warrant (with a duly executed subscription in the form attached) at the Corporation's principal corporate office (located on the date hereof in Mt. Laurel, New Jersey) and by paying the Corporation, by certified or cashier's check, the aggregate Warrant Price for the shares of Common Stock being purchased. 2.1 DELIVERY OF CERTIFICATES. Within ten (10) days after each exercise of the purchase rights represented by this Warrant, the Corporation shall deliver a certificate for the shares of Common Stock so purchased to the Holder and, unless this Warrant has been fully exercised or expired, a new Warrant representing the balance of the shares of Common Stock subject to this Warrant. 2.2 EFFECT OF EXERCISE. The Person entitled to receive the shares of Common Stock issuable upon any exercise of the purchase rights represented by this Warrant shall be treated for all purposes as the holder of such shares of record as of the close of business on the date of exercise. 2.3 ISSUE TAXES. The Corporation shall pay all issue and other taxes that may be payable in respect of any issue or delivery to the Holder of shares of Common Stock upon exercise of this Warrant. 3. STOCK FULLY PAID; RESERVATION OF SHARES. The Corporation covenants and agrees that all securities that it may issue upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable and free from all taxes, liens and charges. The Corporation further covenants and agrees that, during the period within which the Holder may exercise the rights represented by this Warrant, the Corporation shall at all times have authorized and reserved for issuance enough shares of its Common Stock or other securities for the full exercise of the rights represented by this Warrant. The Corporation shall not, by an amendment to its Articles of Incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek 2 to avoid the observance or performance of any of the terms of this Warrant. 4. ADJUSTMENTS. The Warrant Price and the number of shares of Common Stock that the Corporation must issue upon exercise of this Warrant shall be subject to adjustment in accordance with Sections 4.1 through 4.3. 4.1 ADJUSTMENT TO WARRANT PRICE FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. If the Corporation at any time or from time to time after the date hereof (1) declares or pays, without consideration, any dividend on the Common Stock payable in Common Stock; (2) creates any right to acquire Common Stock for no consideration; (3) subdivides the outstanding shares of Common Stock (by stock split, reclassification or otherwise); or (4) combines or consolidates the outstanding shares of Common Stock, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Corporation shall proportionately increase or decrease the Warrant Price, as appropriate. 4.2 ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the Common Stock issuable upon exercise of this Warrant changes into shares of any other class or classes of security or into any other property for any reason other than a subdivision or combination of shares provided for in Section 4.1, including without limitation any reorganization, reclassification, merger or consolidation, the Corporation shall take all steps necessary to give the Holder the right, by exercising this Warrant, to purchase the kind and amount of securities or other property receivable upon any such change by the owner of the number of shares of Common Stock subject to this Warrant immediately before the change. 4.3 SPIN OFFS. If the Corporation spins off any subsidiary by distributing to the Corporation's shareholders as a dividend or otherwise any stock or other securities of the subsidiary, the Corporation shall reserve until the Expiration Date enough of such shares or other securities for delivery to the Holders upon any exercise of the rights represented by this Warrant to the same extent as if the Holders owned of record all Common Stock or other securities subject to this Warrant on the record date for the distribution of the subsidiary's shares or other securities. 4.4 CERTIFICATES AS TO ADJUSTMENTS. Upon each adjustment or readjustment required by this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with this Section, cause independent public accountants selected by the Corporation to verify such computation and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. 5. FRACTIONAL SHARES. The Corporation shall not issue any fractional shares in connection with any exercise of this Warrant. 6. DISSOLUTION OR LIQUIDATION. If the Corporation dissolves, liquidates or winds up its business before the exercise or expiration of this Warrant, the Holder shall be entitled, upon exercising this Warrant, to receive in lieu of the shares of Common Stock or any other securities 3 receivable upon such exercise, the same kind and amount of assets as would have been issued, distributed or paid to it upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock or other securities, had the Holder been the holder of record on the record date for the determination of those entitled to receive any such liquidating distribution or, if no record is taken, upon the date of such liquidating distribution. If any such dissolution, liquidation or winding up results in a cash distribution or distribution of property which the Corporation's Board of Directors determines in good faith to have a cash value in excess of the Warrant Price provided by this Warrant, then the Holder may, at its option, exercise this Warrant without paying the aggregate Warrant Price and, in such case, the Corporation shall, in making settlement to Holder, deduct from the amount payable to Holder an amount equal to such aggregate Warrant Price. 7. TRANSFER AND EXCHANGE. 7.1 TRANSFER. Subject to Section 7.3, the Holder may transfer all or part of this Warrant at any time on the books of the Corporation at its principal office upon surrender of this Warrant, properly endorsed. Upon such surrender, the Corporation shall issue and deliver to the transferee a new Warrant or Warrants representing the Warrants so transferred. Upon any partial transfer, the Corporation shall issue and deliver to the Holder a new Warrant or Warrants with respect to the Warrants not so transferred. 7.2 EXCHANGE. The Holder may exchange this Warrant at any time at the principal office of the Corporation for Warrants in such denominations as the Holder may designate in writing. No such exchanges will increase the total number of shares of Common Stock or other securities that are subject to this Warrant. 7.3 SECURITIES ACT OF 1933. By accepting this Warrant, the Holder agrees that this Warrant and the shares of the Common Stock issuable upon exercise of this Warrant may not be offered or sold except in compliance with the Securities Act, and then only with the recipient's agreement to comply with this Section 7 with respect to any resale or other disposition of such securities. The Corporation may make a notation on its records in order to implement such restriction on transferability. 8. LOSS OR MUTILATION. Upon the Corporation's receipt of reasonably satisfactory evidence of the ownership and the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) of a reasonably satisfactory indemnity or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Corporation shall execute and deliver a new Warrant to the Holder. 9. SUCCESSORS. All the covenants and provisions of this Warrant shall bind and inure to the benefit of the Holder and the Corporation and their respective successors and assigns. 10. NOTICES. All notices and other communications given pursuant to this Warrant shall be in writing and shall be deemed to have been given when personally delivered or when 4 mailed by prepaid registered, certified or express mail, return receipt requested. Notices should be addressed as follows: (a) If to Holder, then to: ManagedStorage International, Inc. 12303 Airport Way Suite 250 Broomfield, Colorado 80021 Attention: Reed Guest, Esq. With a copy (which shall not constitute notice) to: Patrick Perrin, Esq. Hogan & Hartson L.L.P. 1470 Walnut, Suite 200 Boulder, Colorado 80302-5341 (b) If to the Corporation, then to: Front Porch Digital Inc. 20000 Horizon Way Suite 120 Mt. Laurel, New Jersey 08054 With a copy (which shall not constitute notice) to: Eric M. Hellige, Esq. Pryor Cashman Sherman & Flynn LLP 410 Park Avenue New York, New York 10022 Such addresses for notices may be changed by any party by notice to the other party pursuant to this Section 10. 11. AMENDMENT. This Warrant may be amended only by an instrument in writing signed by the Corporation and the Holder. 12. CONSTRUCTION OF WARRANT. This Warrant shall be construed as a whole and in accordance with its fair meaning. A reference in this Warrant to any section shall be deemed to include a reference to every section the number of which begins with the number of the section to which reference is made. This Warrant has been negotiated by both parties and its language shall not be construed for or against any party. 5 13. LAW GOVERNING. This Warrant shall be construed and enforced in accordance with and governed by the New York law without regard to any conflicts of law or choice of forum provisions. Dated as of July 31, 2002 FRONT PORCH DIGITAL INC. By: /s/ Don Maggi -------------------------------- Name: Don Maggi Title: Chief Executive Officer 6 SUBSCRIPTION FORM (TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT) The undersigned registered owner of this Warrant irrevocably exercises this Warrant and agrees to purchase _____ shares of Common Stock of Front Porch Digital Inc., all at the price and on the terms and conditions specified in this Warrant. Dated: July 25, 2002 ------------------------------------- (Signature of Registered Holder) ------------------------------------- (Street Address) ------------------------------------- (City) (State) (Zip) ISSUE OF A NEW WARRANT (TO BE EXECUTED ONLY UPON PARTIAL EXERCISE, EXCHANGE, OR PARTIAL TRANSFER OF WARRANT) Please issue _______ Warrants, each representing the right to purchase _______ shares of Common Stock of Front Porch Digital Inc. to the registered holder. Dated: July 25, 2002 ----------------------------------- (Signature of Registered Holder) FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered Holder of this Warrant sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the Warrant, with respect to the number of shares of Common Stock set forth below (the "Transfer"): Name of Assignee Address No. of Shares - ---------------- ------- ------------- The undersigned irrevocably constitutes and appoints __________________ as the undersigned's attorney-in-fact, with full power of substitution, to make the transfer on the books of Front Porch Digital Inc. Dated: July 25, 2002 ----------------------------------- (Signature) EX-99.1 8 c25326_ex99-1.txt PRESS RELEASE [GRAPHIC OMITTED] FRONT PORCH DIGITAL 20000 HORIZON WAY, SUITE 120 / MOUNT LAUREL NJ 08054 T. 856.439.9950 / F. 856.439.9960 / www.fpdigital.com EXHIBIT 99.1 FRONT PORCH DIGITAL ACQUIRES CONTENT MANAGEMENT SOFTWARE DIVISION FROM MANAGEDSTORAGE FRONT PORCH DIGITAL POSITIONED TO BECOME A LEADING GLOBAL PROVIDER OF DIGITAL CONTENT MANAGEMENT SOLUTIONS FOR THE BROADCAST AND MEDICAL INDUSTRIES MOUNT LAUREL, NJ, August 1, 2002 -- Front Porch Digital Inc. (OTCBB:FPDI) today announced that on July 31, 2002 it acquired ManagedStorage International's (MSI) DIVArchive software and solutions division located in Toulouse, France in exchange for common stock. The acquisition will rapidly expand Front Porch Digital's market reach to include companies in Europe, Asia and the Middle East. DIVArchive is an advanced digital content management and archiving software that is integrated with a variety of broadcast and medical systems, including archive systems for medical PACS vendors, such as Kodak. Numerous global entertainment companies and broadcast facilities currently utilize DIVArchive, including newsrooms, centralized broadcast operations, show business channels, television stations and sports event broadcasters. The Content Management Software Group acquired by Front Porch Digital currently services over 30 installations of DIVArchive for the division's top-tier global clients. DIVArchive enables Video Servers and Asset Management Systems to archive to a common storage. Front Porch Digital's VAST workflow automation and transcoding software adds searchability and format independence, considerably enhancing the value of shared storage. The VAST architecture features Front Porch Digital's single capture, multi-repurpose process that simplifies digital content archiving. Broadcasters and Cable Multiple Systems Operators (MSOs) may now treat their shared storage as a shared archive, completing the transition from a videotape based production and distribution to a more efficient data and server based environment. DIVArchive will significantly strengthen Front Porch Digital's software and service offerings to the medical community as well. DIVArchive integrates with newer patient record systems while Front Porch's DICOM Data Mover facilitates the automated migration of these records. The combination of these technologies delivers a complete data migration and content management solution to medical facilities that will allow them to quickly and easily adopt a more comprehensive and powerful records archive system that complies with the new HIPPA legislation. "We are very pleased with our acquisition of DIVArchive and look forward to merging this content management software division into our suite of digital product and service offerings," said Don Maggi, CEO of Front Porch Digital. "We acquired an operating business that has signed contracts, will increase our customer base and offer opportunities for expansion into new international markets. The combined company's contracted revenue is expected to generate over two million dollars in Q3 and Q4, 2002." "Front Porch Digital is a major player in the broadcast business in terms of stature and impact," said Tom Sweeney, President and CEO of ManagedStorage. "Its patented products, coupled with its new global reach, will position the combined organization to be a premier provider of digital content management solutions for the broadcast and medical industries worldwide." Additional information regarding the terms of the acquisition will be disclosed in Front Porch Digital's related Current Report of Form 8-K. - -------------------------------------------------------------------------------- PRESS RELEASE [GRAPHIC OMITTED] FRONT PORCH DIGITAL 20000 HORIZON WAY, SUITE 120 / MOUNT LAUREL NJ 08054 T. 856.439.9950 / F. 856.439.9960 / www.fpdigital.com ABOUT FRONT PORCH DIGITAL: Front Porch Digital Inc. (www.fpdigital.com) is transforming the digital world by developing unique software and services that convert audio, video, images, text and data into digital formats that enable searching, browsing, editing, storage and on-demand delivery of content in nearly any other digital format through a single capture. To join Front Porch Digital's investor e-mail list, please complete the form found at http://www.fpdigital.com/html/e-mail_notification.html. ABOUT MANAGEDSTORAGE INTERNATIONAL: ManagedStorage International Inc. (MSI), the premier provider of guaranteed data protection storage solutions, enables companies and leading service providers to strategically manage storage as a critical corporate resource. Its suite of turnkey data protection solutions enables service providers and value-added resellers to offer guaranteed storage services to their customers. ManagedStorage enables businesses to focus internal IT resources on initiatives that drive competitive performance. The company was formed in April 2000, when it was spun out of StorageTek, with funding from Great Hill Partners and J.P. Morgan Chase & Co. MSI's investors include Providence Equity Partners, Inc. and Wachovia Capital Partners. ManagedStorage is headquartered in Broomfield, Colorado. For more information, visit www.managedstorage.com or call (800) 397-1719. CONTACTS: MARY S. PARK KEVIN THOMAS Front Porch Digital Inc. ManagedStorage International Inc. (646) 336-0366 (303) 449-8279 mpark@fpdigital.com kevin.thomas@managedstorage.com Front Porch Digital Forward Looking Statements: This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect Front Porch Digital's current views with respect to future events and financial performance. Such statements are subject to certain risks and uncertainties that could cause actual events or results to differ materially from those indicated from such forward-looking statements. The potential risk factors include Front Porch Digital's limited operating history and experience in the data and video digital conversion business, Front Porch Digital's ability to attract significant additional financing and incur operational losses and negative cash flow, and risks associated with expansion. Additional risk factors are set forth in Front Porch Digital's reports and documents filed with the Securities and Exchange Commission. ### TRADEMARKS: All products or company names mentioned are used for identification purposes only and may be trademarks of their respective owners. - -------------------------------------------------------------------------------- PRESS RELEASE EX-99.2 9 c25326_ex99-2.txt PRESS RELEASE [GRAPHIC OMITTED] FRONT PORCH DIGITAL 20000 HORIZON WAY, SUITE 120 / MOUNT LAUREL NJ 08054 T. 856.439.9950 / F. 856.439.9960 / www.fpdigital.com EXHIBIT 99.2 FRONT PORCH DIGITAL APPOINTS TOM SWEENEY AS CHAIRMAN OF THE BOARD PAUL MCKNIGHT JOINS BOARD OF DIRECTORS AND IS NAMED COMPANY'S CFO MOUNT LAUREL, N.J., Aug. 7, 2002 -- Front Porch Digital Inc. (OTC Bulletin Board: FPDI) today announced that on August 2, 2002 Tom Sweeney and Paul McKnight were elected to the Board of Directors. The new Board of Directors also elected Tom Sweeney as Chairman of the Board and appointed Paul McKnight as FPDI's Chief Financial Officer. Tom Sweeney is currently President and CEO of ManagedStorage International (MSI). As Chairman of the Board, Sweeney will oversee the current Board of Directors that includes Don Maggi and Paul McKnight, as well as a number of independent Directors through a future expansion of the board. Throughout his career, Sweeney has managed the development and implementation of multi-billion dollar services around the world. "We are very pleased to welcome Tom to the Front Porch Board of Directors," said Don Maggi, CEO of Front Porch Digital, "Tom brings more than 18 years of experience building some the most successful start-ups in history. In particular, his experience in identifying emerging markets and defining product and sales strategies to meet their needs will enhance FPDI's near-term and long-term success. Tom was instrumental in bringing FPDI and MSI together, and positioning the new FPDI for global growth. Tom's business vision and record of accomplishment make him a natural choice to take the helm of the Board of Directors. Tom is a significant addition to our team and will help direct Front Porch Digital as we expand into international markets." Prior to ManagedStorage, Sweeney was part of the original management team at Level 3 Communications, where he was responsible for the development of all products and services globally. Sweeney also served as Senior Vice President, Marketing and Alternate Channels at WorldCom, Inc. and Senior Vice President Business Development at MFS Communications, as well as various other executive positions at MFS and MCI Communications. "I am extremely excited about being a part of Front Porch Digital, and look forward to assisting Don and his management team in any way I can," said Sweeney, "I am particularly enthusiastic about the opportunity to help accelerate sales and distribution agreements, as Front Porch Digital now has the most comprehensive set of products and services in the content management sector." Front Porch also announced that ManagedStorage's CFO, Paul McKnight, has been named to the additional post of CFO at Front Porch Digital, as well as a member of the Board of Directors. McKnight succeeds Ken Lynch, former CFO of Front Porch Digital. McKnight will report directly to Don Maggi and will be responsible for managing Front Porch's financial operations, which include accounting, SEC reporting and implementing systems and business processes. McKnight has over 23 years of financial experience with both public and privately held companies. "Paul is a well respected CFO with a strong financial background," said Don Maggi. "Paul is knowledgeable regarding public companies and their responsibilities to stockholders. Paul's experience, guidance, and financial acumen will contribute significantly to Front Porch." Prior to ManagedStorage, McKnight served as CFO at Equity Pier and before then, COO/CFO at MCI WorldCom Wireless. ABOUT FRONT PORCH DIGITAL: Front Porch Digital Inc. (www.fpdigital.com) is transforming the digital world by developing unique software and services that convert audio, video, images, text and data into digital formats that enable searching, browsing, editing, storage and on-demand delivery of content in nearly any - -------------------------------------------------------------------------------- PRESS RELEASE [GRAPHIC OMITTED] FRONT PORCH DIGITAL 20000 HORIZON WAY, SUITE 120 / MOUNT LAUREL NJ 08054 T. 856.439.9950 / F. 856.439.9960 / www.fpdigital.com other digital format through a single capture. To join Front Porch Digital's investor e-mail list, please complete the form found at http://www.fpdigital.com/html/e-mail_notification.html. ABOUT MANAGEDSTORAGE INTERNATIONAL: ManagedStorage International Inc. (MSI), the premier provider of guaranteed data protection storage solutions, enables companies and leading service providers to strategically manage storage as a critical corporate resource. Its suite of turnkey data protection solutions enables service providers and value-added resellers to offer guaranteed storage services to their customers. ManagedStorage enables businesses to focus internal IT resources on initiatives that drive competitive performance. The company was formed in April 2000, when it was spun out of StorageTek, with funding from Great Hill Partners and J.P. Morgan Chase & Co. MSI's investors include Providence Equity Partners, Inc. and Wachovia Capital Partners. ManagedStorage is headquartered in Broomfield, Colorado. For more information, visit www.managedstorage.com or call (800) 397-1719. CONTACTS: MARY S. PARK KEVIN THOMAS Front Porch Digital Inc. ManagedStorage International Inc. (646) 336-0366 (303) 449-8279 mpark@fpdigital.com kevin.thomas@managedstorage.com Front Porch Digital Forward Looking Statements: This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect Front Porch Digital's current views with respect to future events and financial performance. Such statements are subject to certain risks and uncertainties that could cause actual events or results to differ materially from those indicated from such forward-looking statements. The potential risk factors include Front Porch Digital's limited operating history and experience in the data and video digital conversion business, Front Porch Digital's ability to attract significant additional financing and incur operational losses and negative cash flow, and risks associated with expansion. Additional risk factors are set forth in Front Porch Digital's reports and documents filed with the Securities and Exchange Commission. ### TRADEMARKS: All products or company names mentioned are used for identification purposes only and may be trademarks of their respective owners. - -------------------------------------------------------------------------------- PRESS RELEASE -----END PRIVACY-ENHANCED MESSAGE-----