TABLE OF CONTENTS

 

ARTICLE 1		DEFINITIONS
1.1	Specific Definitions
1.2	Other Terms
1.3	Other Definitional Provisions
ARTICLE 2		PURCHASE AND SALE OF ASSETS
2.1	Purchased Assets
2.2	Retained Assets
2.3	Assumed Liabilities; Retained Liabilities
2.4	Purchase Price; Payment
2.5	Purchase Price Allocation
2.6	Transfer and Sales Taxes
2.7	Delivery of Assets; Resale Certificates
ARTICLE 3		REPRESENTATIONS AND WARRANTIES OF SELLER
3.1	Listing of Certain Assets and Data
3.2	Organization; Directors and Officers
3.3	Subsidiaries
3.4	Authority
3.5	Financial Statements
3.6	Absence of Undisclosed Liabilities
3.7	Absence of Certain Changes and Events
3.8	Litigation
3.9	Compliance with Law
3.10	Taxes
3.11	Consents
3.12	Title to and Condition of Assets
3.13	Contracts
3.14	Manufacturing Processes/Inventories
3.15	Warranties
3.16	Intellectual Property
3.17	Leased Real Estate
3.18	Labor Matters
3.19	Employees
3.20	No Finders
3.21	Product Liability Claims
3.22	Relations with Suppliers and Customers
3.23	Environmental Matters
3.24	Contracts with Related Parties
3.25	Compliance with Medea Settlement Agreement
3.26	Accounts Receivable
ARTICLE 4		REPRESENTATIONS AND WARRANTIES OF CIPRICO
4.1	Organization of Ciprico

 

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4.2	Authority
4.3	No Finders
4.4	SEC Documents
4.5	Shares Of Ciprico Common Stock
4.6	Litigation and Claims
4.7	Absence of Certain Changes and Events
ARTICLE 5		CERTAIN COVENANTS AND AGREEMENTS
5.1	Approvals and Consents
5.2	Preserve Accuracy of Representations and Warranties
5.3	Conduct of Business
5.4	No Solicitation of Other Offers
5.5	Access to Information and Records
5.6	Further Assurances; Ciprico Access to Records
5.7	Periodic Reports/Operations After Closing
5.8	Bulk Sales Rules
5.9	Noncompetition and Nonsolicitation
5.10	Change of Corporate Name
5.11	Notification of Certain Matters
5.12	Release
5.13	Covenant Regarding HSI Related Sales
ARTICLE 6		EMPLOYEE MATTERS
6.1	Benefit Plans
6.2	Employee Matters
6.3	Bonus Payments
ARTICLE 7		CONDITIONS TO CIPRICO’S OBLIGATIONS
7.1	Representations, Warranties and Covenants
7.2	Opinion of Counsel for Seller
7.3	Approvals; Consents
7.4	Litigation Affecting Closing
7.5	Legislation
7.6	Transfer Documents
7.7	Employment Agreements
7.8	Resolutions/Required Seller Shareholder Vote
ARTICLE 8		CONDITIONS TO SELLER’S OBLIGATIONS
8.1	Representations, Warranties and Covenants
8.2	Litigation Affecting Closing
8.3	Legislation
8.4	Termination of Personal Guarantees
8.5	Employment Agreements
ARTICLE 9		CLOSING
9.1	Closing Date
9.2	Proceedings

 

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ARTICLE 10		INDEMNIFICATION
10.1	Indemnification of Ciprico
10.2	Indemnification of Seller and Principals
10.3	Third-Party Claims
10.4	Set-Off
10.5	Cooperation as to Indemnified Liability
10.6	Limitations
10.7	Nature of Indemnification
10.8	Exclusive Remedy
ARTICLE 11		TERMINATION
11.1	Termination Prior to Closing
ARTICLE 12		MISCELLANEOUS
12.1	Complete Agreement
12.2	Survival
12.3	Waiver, Discharge, Amendment, Etc.
12.4	Notices
12.5	Public Announcement
12.6	Expenses
12.7	Governing Law
12.8	Successors and Assigns
12.9	Titles and Headings; Construction
12.10	Severability
12.11	Benefit
12.12	Counterparts
12.13	Further Transfers; Transition Assistance
12.14	Confidentiality
Exhibits
Exhibit A			Short-Term Promissory Note
Exhibit B			Assignment of Leases and Consent to Assignment of Leases
Exhibit C			Holdback Note
Exhibit D			Opinion of Counsel for Seller
Exhibit E-1			Employment Agreement – Michael Anderson
Exhibit E-2			Employment Agreement – Tina Bow

 

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Schedules
Schedule 2.2.3	Retained Assets
Schedule 2.3.1	Assumed Contracts
Schedule 2.5	Purchase Price Allocation
Schedule 3.1.1	Equipment
Schedule 3.1.2	Patents, Trademarks, Formulas, Etc.
Schedule 3.1.3	Certain Agreements, Etc.
Schedule 3.1.4	Permits, Licenses, Etc.
Schedule 3.1.5	Loans and Credit Agreements, Etc.
Schedule 3.1.6	Insurance Policies and Claims
Schedule 3.1.7	Employee Plans
Schedule 3.2	Organization; Directors and Officers
Schedule 3.3	Subsidiaries
Schedule 3.4	Authority
Schedule 3.5	Financial Statements
Schedule 3.6.3	Undisclosed Liabilities
Schedule 3.8	Litigation
Schedule 3.9	Compliance with Law
Schedule 3.11	Consents
Schedule 3.12	Title to and Condition of Assets
Schedule 3.13	Contracts
Schedule 3.14	Manufacturing Processes/Inventories
Schedule 3.15	Warranties
Schedule 3.16	Intellectual Property
Schedule 3.17	Leased Real Estate

 

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Schedule 3.19.2	Multi-Employer Plan
Schedule 3.19.3	No Employee Plan
Schedule 3.21	Product Liability Claims
Schedule 3.22	Relations with Suppliers and Customers
Schedule 3.23	Environmental Matters
Schedule 3.24	Contracts with Related Parties

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of January 31, 2005 , by and among Ciprico Inc. (“ Ciprico ”), a Delaware corporation, Huge Systems, Inc. (“ Seller ”), a California corporation, and Michael Anderson and Tina Bow (the “ Principals ”).

 

RECITALS :

 

A.                                    The parties hereto desire that Seller sell, transfer and assign to Ciprico, and Ciprico purchase from Seller, substantially all of the assets and business of Seller, excluding only the Retained Assets (as defined below), on the terms and for the consideration set forth in this Agreement.

 

B.                                      The Principals own a majority of the outstanding equity interests of the Seller and have substantial operational and technical expertise with respect to the Business of Seller and will receive considerable direct and indirect benefits from the consummation of the transactions contemplated herein.

 

NOW, THEREFORE , in consideration of the respective representations, warranties, covenants and agreements contained herein, and subject to the terms and conditions set forth herein, the parties hereto agree as follows:

 

ARTICLE 1

DEFINITIONS

 

1.1                                  Specific Definitions .  As used in this Agreement, the following terms shall have the meanings set forth or referenced below:

 

“ Advance ” means an advance, not to exceed Fifty Thousand Dollars ($50,000), as and if requested by Seller and the Principals prior to Closing, but only to the extent that the sum of (i) the amount payable to Seller pursuant to Section 2.4.2, without giving effect to such advance, and (ii) the cash and cash equivalents of Seller as of the Closing is less than $1,700,000; provided, however, that any such Advance must be requested at the time of the delivery of the Seller’s Estimated Closing Balance Sheet (as defined below) and notwithstanding anything set forth in this Agreement to contrary, Ciprico shall, with respect to any requested advance that is paid to Seller at the Closing, have an unrestricted right to set-off such advance payment against any Contingent Consideration (or payment pursuant to Section 5.13) that becomes due and payable to Seller and/or Principals, without any limitation or restriction and at Ciprico’s discretion and election.

 

“ Advance Payment Date ” means each of March 31, 2005, June 30, 2005 and September 30, 2005.

 

“ Affiliate ” of a specified person (natural or juridical) means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.  “ Control ” shall mean ownership of more than 50% of the

 

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shares of stock entitled to vote for the election of directors in the case of a corporation, and more than 50% of the voting power in the case of a business entity other than a corporation.

 

“ Annualized Gross Profit Amount ” means, with respect to any Advance Payment Date, (A) the Cumulative Gross Profit with respect to such Advance Payment Date multiplied by (B) a fraction, numerator of which shall be 12 and the denominator of which shall be the number of complete months that have elapsed from the Closing Date through such Advance Payment Date.  By way of example, assuming the Closing Date occurs on January 29, 2005, the denominator for the fraction applicable to the Advance Payment Date falling on June 30, 2005, would be five (5).

 

“ Assets ” means all the assets, properties, rights, interests, claims and business, as of the Closing, of Seller of every kind, nature and description, wherever located, whether now owned or hereafter acquired, whether tangible or intangible, real, personal or mixed, absolute or contingent, known or unknown, including, but not limited to:

 

(i)                                      All books, records (computer or otherwise), files, and data (including customer and supplier lists), customer service histories, warehouse and other inventories, all research and development activities and all product information;

 

(ii)                                   All rights under the Contracts assumed by Ciprico as listed on Schedule 2.3.1 ;

 

(iii)                                All manufacturing related assets, machinery, equipment, fixtures, office furniture, tools, automobiles, computers, printers, copiers, telecopy machines and other tangible property held, owned or leased;

 

(iv)                               All inventory, spare parts, service tools, instruments and supplies;

 

(v)                                  All causes of action, judgments, settlements, claims, indemnity, or other rights, including all rights to all claims or other causes of action, whether known or unknown, accrued or to accrue for past or present infringement or unauthorized use of Intellectual Property;

 

(vi)                               All Intellectual Property, all Intellectual Property licenses (granted to or by Seller or its Affiliates) required to make, have made, use, modify, sell or offer to sell any products currently commercialized by or being developed by Seller including, but not be limited to, the Intellectual Property listed on Schedule 3.16 ;

 

(vii)                            All other intangible assets, including goodwill and, specifically, all residual or reversionary rights to any accounts receivable factored by Seller;

 

(viii)                         All registrations, licenses, approvals, certifications, permits and other similar requirements;

 

(ix)                                 Rights, awards, insurance proceeds, return of security deposits, pre-paid expenses and similar assets or rights, except with respect to insurance proceeds or proceeds from other sources to the extent that they relate to a Retained Asset or are in compensation to Seller with respect to a Retained Liability; and

 

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(x)                                    Any security interests, Liens or rights to repossess products or equipment sold by Seller except to the extent the same relate to a Retained Asset;

 

provided, however, that the definition of “ Assets ” shall exclude the Retained Assets described in Section 2.2 .

 

“ Assumed Liabilities ” means the liabilities described in Section 2.3.1 .

 

“ Authorizations ” has the meaning set forth in Section 3.9 .

 

“ Business ” means all of the business and operations of Seller as currently conducted by Seller.

 

“ Closing ” and “ Closing Date ” have the meanings set forth in Section 9.1 .

 

“ Confidential Information ” means all information of a confidential or proprietary nature (whether or not specifically labeled or identified as “confidential”), in any form or medium, that relates to the business, products, services and/or research and development of the Business and/or its suppliers, distributors, customers, independent contractors and/or other business relations.  Confidential Information includes, but is not limited to, the following information when it is confidential or proprietary:  (i) internal business information (including historical and projected financial information and budgets and information relating to strategic and staffing plans and practices, business, training, marketing, promotional and sales plans and practices, cost, rate and pricing structures and accounting and business methods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, suppliers, distributors, customers, independent contractors or other business relations and their confidential information; (iii) trade secrets, source code and methods of operation relating to the software programs, know-how, compilations of data and analyses, techniques, systems, formulae, research, records, reports, manuals, documentation, models, data and data bases relating thereto; and (iv) inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable).  “Confidential Information” also includes, but is not limited to, information obtained by Ciprico pursuant to Section 5.5 .

 

“ Consents ” has the meaning set forth in Section 3.11 .

 

“ Contract ” means any contract, purchase or sale order, lease, license, commitment or other agreement to which Seller is a party or an assignee or other beneficiary thereof.

 

“ Cumulative Gross Profit ” means, with respect to any Advance Payment Date, the aggregate Gross Profit from HSI Related Sales made through such Advance Payment Date.

 

“ Current Employees ” means all persons who immediately prior to the Closing are employees of Seller, including any such employee who is on short-term or long-term disability or other authorized leave of absence.

 

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“ Employee Plans ” means any health care plan or arrangement; life insurance or other death benefit plan or arrangement; deferred compensation or other pension or retirement plan or arrangement; stock option, phantom stock, bonus or other incentive plan or arrangement; severance, change of control or early retirement plan or arrangement; or other fringe or employee benefit plan or arrangement; or any employment or consulting contract or executive compensation agreement; whether the same are written or otherwise, formal or informal, voluntary or required by law or by Seller’s policies or practices, for the benefit of or relating to any present or former employees, leased employees, consultants, agents, directors, and/or their dependents, of Seller; including, without limitation, any Pension Plan and any Welfare Plan (whether or not any of the foregoing is funded) (i) to which Seller is a party or by which Seller is bound, (ii) that Seller has at any time established or maintained for the benefit of or relating to any present or former employees, leased employees, consultants, agents, directors, and/or their dependents, of Seller, or (iii) with respect to which Seller has made any payments or contributions in any of the last five years, or otherwise has any liability (including any such plan or other arrangement formerly maintained by Seller).

 

“ Environmental Laws ” means and includes any one or more of the following:  (a) the Comprehensive Environmental Response Compensation and Liability Act (“ CERCLA ”), as amended by the Superfund Amendments and Reauthorization Act of 1986 (“ SARA ”), 42 U.S.C. § 9601 et seq.; the Federal Resource Conservation and Recovery Act of 1976 (“ RCRA ”), 42 U.S.C. § 6921 et seq.; the Clean Water Act, 33 U.S.C. § 1321 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.; the Occupational Safety and Health Act of 1976, 29 U.S.C. § 651, all as they may be amended from time to time; any other federal, state, county, municipal, local or other statute, law, ordinance or regulation that relates to or deals with Hazardous Substances, human health or the environment, all as they may be amended from time to time; and all regulations promulgated by a regulatory body pursuant to any of the foregoing statutes, laws, regulations, or ordinances; and (b) to the extent that they apply specifically to Seller, judgments, orders, decrees, injunctions, permits, concessions, grants, franchises, licenses or agreements, to the extent that either (a) or (b) relate to safety, human health, the environment or emissions, discharges, or releases of Hazardous Substances into the environment including ambient air, surface water, ground water, facilities, structures, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, Hazardous Substances, or wastes or the investigation, clean-up, or other remediation thereof.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time.

 

“ Hazardous Substance ” means asbestos, urea formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical waste, radioactive materials, explosives, known carcinogens, petroleum products, pesticides, fertilizers, or any other substance that is dangerous, toxic, or hazardous, or that is a pollutant, contaminant, chemical, material or substance defined as

 

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hazardous or as a pollutant or contaminant in, or the use, transportation, storage, release or disposal of which is regulated by, any Environmental Laws.

 

“ Intellectual Property ” means (a) patents and all divisions, continuations, continuations-in-part, revisions, reissues, renewals, and re-examinations relative thereto; (b) registered and unregistered copyrights and all works of authorship including all translations, adaptations, combinations, compilations and derivations of such copyrights and works of authorship; (c) registered and unregistered trademarks, trade names, brand names, service marks, service names, trade dress, logos, assumed names, and corporate names including all translations, adaptations, combinations and derivations thereof, together with all common law rights and all goodwill associated with each of the foregoing; (d) trade secrets, proprietary data, know-how, and inventions (whether or not reduced to practice), and confidential information (including conceptions, ideas, inventions, innovations, manufacturing, development and production techniques, drawings, specifications, designs, proposals, financial and accounting data, business and marketing plans, customer and supplier lists and related information and documentation), in each case irrespective of whether in human or machine readable form; (e) computer software (including both source and object code) and all related development environments, compilers, scripts, program listings and data, systems, and user, programmer, and other documentation; (f) mask works; (g) all other forms of right by which one may effectively exclude another from using or otherwise enjoying any and each of the foregoing worldwide; and (h) all applications worldwide for any and each of the foregoing including applications for patent or registration, together with all registrations, renewals and extensions for any and each of the foregoing worldwide.

 

“ IRC ” means the Internal Revenue Code of 1986, as amended.

 

“ IRS ” means the United States Internal Revenue Service.

 

“ Inventories ” means finished goods, raw materials and ingredients, work-in-process, consignment goods, wares and merchandise, RMA drives and PCBA components that are either returned to the manufacturer for repair or undergoing qualification testing in engineering, customer evaluation units and cross-shipped warranty units.

 

“ Knowledge ” of Seller means actual knowledge of the Principals or the knowledge that any of such persons would reasonably be expected to have after due and reasonable inquiry of any facts or circumstances actually known to and recognized by such persons.

 

“ Liens ” means liens, mortgages, charges, security interests, pledges, encumbrances, assessments, restrictions or other third-party claims of any nature.

 

“ Material Adverse Effect ” means an effect that, individually or in the aggregate with other related effects, is or could reasonably be expected to be materially adverse to the business, results of operation or condition (financial or otherwise) of the Assets or the Business, considered as a whole, or is or could reasonably be expected to be materially adverse to the ability of Ciprico to conduct the Business following the Closing in a manner consistent with how the Business is presently conducted by Seller; provided that in no event shall any of the

 

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following be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or could be, a Material Adverse Effect, (a) any effect that results from conditions generally affecting the industries and markets in which Seller currently operates or the economy or political environment of any country where Seller has conducted operations that, in each case, does not disproportionately effect Seller or its Business, (b) any effect that results from conditions affecting general worldwide economic, business or capital markets conditions, (c) any effect that results from changes in Laws after the date hereof, and (d) any effect resulting from acts of war (whether or not declared), sabotage or terrorism, military actions or the escalation thereof or other force majeure events occurring after the date hereof.

 

“ Pension Plan ” means an “ employee pension benefit plan ” as defined in Section 3(2) of ERISA.

 

“ Prime Rate ” means, for any calendar quarter, the prime commercial lending rate quoted by Wells Fargo Bank Minnesota, N.A. as in effect on the first day of such quarter.

 

“ Product Liability ” means any liability, claim or expense, including but not limited to attorneys’ fees and medical expenses, arising in whole or in part out of a breach of any express or implied product warranty, strict liability in tort, negligent manufacture of product, negligent provision of services, product recall, or any other allegation of liability arising from the design, testing, manufacture, packaging, labeling (including instructions for use), marketing, distribution or sale of products.

 

“ Purchase Price ” has the meaning set forth in Section 2.4.1 .

 

“ Retained Assets ” has the meaning set forth in Section 2.2 .

 

“ Retained Liabilities ” has the meaning set forth in Section 2.3.2 .

 

“ Required Seller Shareholder Vote ” means the affirmative vote of Seller’s shareholders that is required by law and Seller’s organizational documents for the approval of the transactions contemplated by this Agreement.

 

“ Schedule  3.5 Financial Statements ” has the meaning set forth in Section 3.5 .

 

“ Securities ” means stock, options, phantom stock, warrants, convertible securities or other rights to acquire stock of Seller.

 

“ Taxes ” (and “ Tax ”) means all taxes, additions to tax, penalties, interest, fines, duties, withholdings, assessments, and charges assessed or imposed by any governmental authority, including but not limited to all federal, state, county, local and foreign income, profits, gross receipts, import, ad valorem, real and personal property, franchise, license, sales, use, value added, stamp, transfer, withholding, payroll, employment, excise, custom, duty, and any other taxes, obligations and assessments of any kind whatsoever; the foregoing shall include, but not be limited to, any liability arising as a result of being (or ceasing to be) a member of any

 

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affiliated, consolidated, combined, or unitary group as well as any liability under any Tax allocation, Tax sharing, Tax indemnity or similar agreement.

 

“ Transfer and Sales Taxes ” means all use taxes, stamp taxes, conveyance taxes, transfer taxes, filing fees, recording fees, prepayment fees or penalties, reporting fees and other similar duties, taxes and fees, if any, imposed upon, or resulting from, the transfer of the Assets or the Assumed Liabilities hereunder and the filing of any instruments relating to such transfer, including any sales tax.

 

“ Welfare Plan ” means an “ employee welfare benefit plan ” as defined in Section 3(1) of ERISA.

 

“ Working Capital Balance ” means, in each case, as of the Closing Date, (i) the accounts receivable of the Seller, plus (ii) the Inventory of the Seller, plus (iii) the amount of $17,000 in prepaid expenses and security deposits, plus (iv) an amount, not to exceed $18,000, reflecting the purchase price paid by Seller for a fibre-channel analyzer, less (v) the Seller’s trade accounts payable to be assumed hereunder by Ciprico; provided, however, that for purposes of the definition of “Working Capital Balance,” Inventory shall be valued based on its category as of the Closing Date as follows: (a) production inventory shall be valued at 100% of the Seller’s cost; (b) evaluation inventory shall be valued at 55% of the Seller’s cost; (c) advance swap inventory shall be valued at 90% of the Seller’s cost; (d) spare inventory (whether on-site or off-site) shall be valued at 100% of the Seller’s cost; (e) engineering inventory shall be valued at 60% of the Seller’s cost; (f) non-conforming inventory shall be valued at 15% of the Seller’s cost; and (g) scrap inventory shall be considered to have no value.

 

1.2                                  Other Terms .  Other terms may be defined elsewhere in the text of this Agreement and shall have the meaning indicated throughout this Agreement.

 

1.3                                  Other Definitional Provisions .

 

(a)                                   The words “ hereof ,” “ herein ,” and “ hereunder ” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provisions of this Agreement.

 

(b)                                  The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

 

(c)                                   References to an “ Exhibit ” or to a “ Schedule ” are, unless otherwise specified, to one of the Exhibits or Schedules attached to or referenced in this Agreement, and references to an “ Article ” or a “ Section ” are, unless otherwise specified, to one of the Articles or Sections of this Agreement.

 

(d)                                  The term “ person ” includes any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization or government or any department or agency thereof.

 

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(e)                                   The term “ Dollars ” or “ $ ” shall refer to the currency of the United States of America.

 

(f)                                     All references to time shall refer to Minneapolis, Minnesota time.

 

ARTICLE 2

PURCHASE AND SALE OF ASSETS

 

2.1                                  Purchased Assets .  Upon the terms and subject to the conditions set forth in this Agreement, effective as of the Closing, Seller hereby sells, transfers, assigns and conveys to Ciprico, and Ciprico hereby purchases, the Assets including, but not limited to, the Contracts set forth on Schedule 2.3.1 , in each case free and clear of all Liens.

 

2.2                                  Retained Assets .  Seller hereby retains all of its respective right, title and interest in and to, and there shall be excluded from the sale, assignment or transfer to Ciprico hereunder, the following assets of Seller as of the Closing:

 

2.2.1                         All cash, bank deposits, cash equivalents and short-term investments.

 

2.2.2                         This Agreement, that certain promissory note dated as of the date hereof in the original principal amount of $300,000 made by Ciprico to the order of Seller in the form attached hereto as Exhibit C (the “ Holdback Note ”), the Short-Term Promissory Note (as defined herein) and the amounts to be received by Seller under this Agreement, the Short-Term Promissory Note or the Holdback Note.

 

2.2.3                         The items set forth on Schedule 2.2.3 .

 

2.2.4                         All claims for refunds of Taxes and other governmental charges of whatever nature which relate to the operation of the Business prior to the Closing.

 

2.2.5                         All personnel records and other records that Seller is required by law to retain in its possession.

 

2.2.6                         All Contracts in effect as of the Closing not specifically assumed by Ciprico, minute books, stock ledgers, stock transfer records and tax returns, which, however, shall remain available for review and copying by Ciprico at the offices of Seller upon reasonable request and notice until Seller is dissolved; provided, however that Seller shall remain a corporation existing and in good standing under the laws of its jurisdiction of incorporation at least through the end of the Earnout Period (as defined herein) or the end of the later to expire of the lease terms under the leases assigned to and assumed by Ciprico under Section 2.3 hereof, whichever is later.

 

2.2.7                         All Assets with respect to Employee Plans.

 

2.2.8                         All rights with respect to any of the foregoing.

 

The assets described in this Section 2.2 are referred to as the “ Retained Assets .”

 

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2.3                                  Assumed Liabilities; Retained Liabilities .

 

2.3.1                         Assumed Liabilities .  Upon the terms and subject to the conditions set forth in this Agreement, effective as of the Closing, Seller hereby assigns, transfers, and conveys to Ciprico, and Ciprico hereby assumes and agrees to pay and perform according to their respective terms, only (i) those certain trade accounts payable as specifically set forth and limited to the amounts recorded thereunder on the Closing Balance Sheet (as defined herein); (ii) Seller’s obligations under that lease agreement by and among Seller and Amcal Investment Fund, L.P., as landlord, covering Suite 220 at 30141 Agoura Rd. in Agoura Hills, CA, dated as of June 2, 2004, pursuant to that certain Assignment of Leases and Consent to Assignment of Leases of even date herewith (the “ Lease(s) Assignment Agreement ”) attached hereto as Exhibit B ; (iii) Seller’s obligations under that lease agreement by and among Seller and Amcal Investment Fund, L.P., as landlord, covering Suite 212 at 30141 Agoura Rd. in Agoura Hills, CA dated as of June 2, 2004 pursuant to the Lease(s) Assignment Agreement; (iv) any potential “stay-bonus” obligations of Ciprico pursuant to Section 6.3 hereof; (v) any obligations of Seller to be performed after the Closing under the Contracts listed on Schedule 2.3.1 ; (vi) all obligations with respect to any Hired Employees, including, without limitation, compensation, benefit, severance and workers compensation claims, arising after the Closing Date and solely with respect to any Hired Employees’ employment with Ciprico; (vii) all obligations and liabilities relating to the operation of the Business and/or the use or ownership of the Assets (other than the Retained Assets) following the Closing Date; (viii) all Product Liabilities with respect to products sold after the Closing Date; and (ix) obligations under all warranties incurred in the ordinary course of business with respect to Seller’s products (collectively, the “ Assumed Liabilities ”).

 

2.3.2                         Retained Liabilities .  The parties agree that Ciprico is not, nor shall be considered, the successor to Seller, and that Ciprico does not hereby agree to assume or become liable to pay, perform or discharge any obligation or liability whatsoever of Seller or relating to the Assets or any former or present employees of Seller, including those that may be hired by Ciprico, except as expressly provided for in Section 2.3.1 .  Seller shall retain any liability or obligation of, or claim against, Seller or the Business, direct or indirect, known or unknown, absolute or contingent, not expressly included in the Assumed Liabilities, and, notwithstanding anything to the contrary in the Agreement, none of the following shall be Assumed Liabilities (and each shall be included in the definition of “ Retained Liabilities ”):

 

2.3.2.1                                  The obligations of Seller and the Principals under this Agreement.

 

2.3.2.2                                  Any obligation, liability or claim that may arise from any lawsuits, actions or proceedings against Seller or the Principals.

 

2.3.2.3                                  Any other liability or obligation of, or claim against, Seller or the Principals or the Business, of any kind or nature whatsoever, whether known or unknown, fixed or contingent, determined or determinable, due or not

 

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yet due, or otherwise, that is not expressly assumed by Ciprico under this Agreement.

 

2.4                                  Purchase Price; Payment .

 

2.4.1                         Purchase Price .  Subject to the contingencies set forth in Section 2.4.2 , the total consideration for the Assets (the “ Purchase Price ”) shall be equal to One Million, Six Hundred Twenty-five Thousand Dollars ($1,625,000) plus the amount of any Contingent Consideration earned and due to Seller under Section 2.4.2.3 hereof, plus an amount equal to the Assumed Liabilities and plus or minus , as applicable, the amount, if any, by which the Seller’s Working Capital Balance (as defined herein) as set forth on the Closing Balance Sheet, exceeds or is less than Three Hundred Thousand Dollars ($300,000), all as further set forth below.

 

2.4.2                         Payment of Purchase Price .  The Purchase Price shall be payable as follows:

 

2.4.2.1                                  At the Closing, Ciprico shall, subject to adjustment, deliver to Seller a promissory note, substantially in the form of Exhibit A hereto (the “ Short-Term Promissory Note ”), in a principal amount equal to One Million, Three Hundred Twenty-five Thousand Dollars ($1,325,000) plus or minus , as applicable, the amount of any Preliminary Purchase Price Adjustment (as defined herein) plus the amount of the Advance, if any.

 

2.4.2.1.1                       Not less than two (2) days nor more than five (5) days prior to the Closing Date, the Seller shall prepare and deliver to Ciprico an estimated closing balance sheet of Seller as of the Closing Date (the “ Estimated Closing Balance Sheet ”).  Ciprico shall have an opportunity to review and approve the Estimated Closing Balance Sheet and have reasonable access to all documentation necessary to evaluate the accuracy and reliability thereof prior to Closing.  The Purchase Price payable at Closing shall be (i) reduced by the amount, if any, by which the Working Capital Balance, as set forth on such Estimated Closing Balance Sheet, is less than Three Hundred Thousand Dollars ($300,000.00) or (ii) increased by the amount, if any, by which the Working Capital Balance, as set forth on such Estimated Closing Balance Sheet, exceeds Three Hundred Thousand Dollars ($300,000.00).  Any such tentative reduction or increase to the Purchase Price payable to Seller pursuant to this Section 2.4.2.1.1 , a “ Preliminary Purchase Price Adjustment .”  The Preliminary Purchase Price Adjustment shall be subject to the procedures set forth below for the preparation of the Closing Balance Sheet (as defined herein), the determination of the Closing Balance Sheet Working Capital Balance (as defined herein) and any need for any Post-Closing Purchase Price Adjustment (as

 

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defined herein).  The Estimated Closing Balance Sheet and the Closing Balance Sheet shall be compiled in accordance with Seller’s reasonable accounting principles consistent with the past accounting practices of Seller and with all values determined at the lower of cost or fair market value.

 

2.4.2.1.2                       As promptly as practicable following the Closing, but in any event no later than forty-five (45) days subsequent thereto, Ciprico shall prepare, compile and deliver, or cause to be delivered, to Seller a balance sheet of the Seller as of the Closing Date (the “ Closing Balance Sheet ”) as well as the amount of the Post-Closing Purchase Price Adjustment, if any, and shall furnish such Closing Balance Sheet, the amount of the Post-Closing Purchase Price Adjustment, if any, and the calculation thereof to the Seller along with access to the work papers showing Ciprico’s determination of and compilation of such Closing Balance Sheet and the amount, if any, of the Post-Closing Purchase Price Adjustment.  The Closing Balance Sheet shall be prepared in the same manner as the Estimated Closing Balance Sheet.  The Seller shall have fifteen (15) days from date of receipt of the Closing Balance Sheet to agree with the content of that document and the calculation of the Post-Closing Purchase Price Adjustment, if any, or to present written objections thereto, setting forth in reasonable detail its objections and supporting data and documentation therefor.  If the Seller agrees with the Closing Balance Sheet and the calculation of the Post-Closing Purchase Price Adjustment, or lack thereof, or shall not have objected (in the manner provided above) within such fifteen (15) day period, which non-objection shall be deemed agreement, such agreement shall be binding on the Seller.  In that case, Ciprico shall cause the Post-Closing Purchase Price Adjustment to be made to the Purchase Price promptly after receipt of such written agreement by the Seller or promptly after expiration of such fifteen (15) day period, if any such adjustment is required.  If Seller shall object (in the manner described above) and within such fifteen (15) day period, to the Closing Balance Sheet or the calculation of any Post-Closing Purchase Price Adjustment, the Seller and Ciprico shall promptly meet to attempt to agree on those matters.  If Ciprico, on the one hand, and the Seller, on the other hand, shall be unable to reach such agreement within five (5) days of receipt of the written objections from the Seller, the matter shall be referred to McGladrey & Pullen, LLP (the “ Independent Accountant ”), who shall act as an expert and not as an arbitrator, and who shall resolve the dispute within thirty (30)

 

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days of referral.  The decision of the Independent Accountant as to the Closing Balance Sheet and any Post-Closing Purchase Price Adjustment shall be final and binding upon the parties.  Upon receipt of the decision of the Independent Accountant, Ciprico and the Seller shall cause the appropriate Post-Closing Purchase Price Adjustment to occur, if any.  Ciprico shall provide the Seller and, if necessary, the Independent Account access to the accounting books and records of Ciprico with regard to the Business.  The cost of the Independent Accountant shall be borne by the Seller, on the one hand, and Ciprico, on the other hand, in proportion to the relative differences between the final position of the parties prior to submission of the matter to the Independent Account and the determination of the Independent Accountant.

 

2.4.2.1.3                       If the Working Capital Balance of the Seller as set forth on the Closing Balance Sheet is less than the Working Capital Balance of the Seller as set forth on the Estimated Closing Balance Sheet (the “ Closing Balance Sheet Working Capital Deficit ”), then Ciprico shall have a claim and an unrestricted right to receive, within ten (10) days of the determination thereof, payment from the Seller of an amount equal to the Closing Balance Sheet Working Capital Deficit, without respect to any limitation on claim amounts otherwise set forth herein and as an adjustment to the aggregate Purchase Price.  If the Working Capital Balance of the Seller as set forth on the Closing Balance Sheet exceeds the Working Capital Balance of the Seller as set forth on the Estimated Closing Balance Sheet (the “ Closing Balance Sheet Working Capital Surplus ”), then Seller shall have a claim and an unrestricted right to receive, within ten (10) days of the determination thereof, payment from Ciprico of an amount equal to the Closing Balance Sheet Working Capital Surplus, without respect to any limitation on claim amounts otherwise set forth herein and as an adjustment to the aggregate Purchase Price.  The Closing Balance Sheet shall be prepared in the same manner as the Estimated Closing Balance Sheet.  Any such adjustment to the Purchase Price required pursuant to this Section 2.4.2.1.3 is referred to herein as the “ Post-Closing Purchase Price Adjustment.”

 

2.4.2.2                                  At the Closing Ciprico will execute and deliver the Holdback Note in the original principal amount of Three Hundred Thousand Dollars ($300,000.00), payable to the order of Seller.

 

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2.4.2.3                                  Ciprico shall pay to Seller the contingent consideration due as set forth herein (cumulatively, as earned, the “ Contingent Consideration ”), less any reductions thereto or set-off thereof for amounts otherwise due and owing to Ciprico including, without limitation, any amounts owed to Ciprico pursuant to the provisions of this ARTICLE 2 , or ARTICLE 10 hereof.  The Contingent Consideration shall be considered additional Purchase Price.  Seller shall be entitled to receive, as Contingent Consideration, the amount determined by multiplying the actual Gross Profit allocable to HSI Related Sales (as defined below) during the twelve (12) month period ending on the first anniversary of the Closing Date (the “ Earnout Period ”) by the Earnout Percentage for the appropriate range of Gross Profit as set forth in the table below.  For purposes hereof, “ Gross Profit ” shall mean the difference between (i) the aggregate revenues from HSI Related Sales and (ii) the aggregate cost of goods sold allocable to an HSI Related Sale.  Cost of goods sold allocable to an HSI Related Sale shall mean: (i) for any product sold by Seller, the total material cost of goods for such product on the total bill of material unit costs, determined in Seller’s historical manner, plus an amount equal to $150.00; (ii) for any product manufactured and sold by Ciprico, an amount equal to the total standard bill of material cost of goods for such product, determined in Ciprico’s historical manner.  HSI Related Sales shall mean sales of (i) any products historically produced by Seller, (ii) any products historically produced by Ciprico which are sold to customers that were or have been Seller’s customers or accounts, as reasonably documented by Seller to Ciprico’s reasonable satisfaction, (iii) any new products that are developed by Ciprico using the Seller’s RAID controller technology or other Intellectual Property of the Seller, and (iv) any other products upon which Ciprico and the Principals may mutually agree.  HSI Related Sales shall be deemed made when such sale or purchase has been shipped and invoiced in accordance with Ciprico’s standard revenue recognition procedures and policies (which shall not be dissimilar to those procedures and policies employed by Seller prior to Closing unless otherwise required by GAAP), subject in every case to any cancellation of such sale or order or a return of the product or products counted in the HSI Related Sales Gross Profit calculation, if any, that may occur prior to the 45th day after the end of the Earnout Period.  Revenues from HSI Related Sales shall be subject to any adjustments for discounts, price adjustments or other credits granted to customers in the ordinary course of business.  HSI Related Sales shall be deemed made, and revenues thereupon recognized, prior to the last day of the Earnout Period (and therefore any Gross Profit from such sale shall be “Gross Profit allocable to HSI Related Sales”) if an order is placed on or before the last day of the Earnout Period even though product underlying such order is not shipped and invoiced by Ciprico until after such date, provided that the product is shipped prior to the 45th day after the end of the Earnout Period, and further provided that any products which are ordered by a customer subject to the customer’s request or direction to Ciprico not to ship said products until some date after the last day of the Earnout Period shall not be considered HSI Related Sales during the Earnout Period and shall not be included in the calculation of the Contingent Consideration due and payable to Seller.  Ciprico acknowledges and

 

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agrees to promptly ship all products described in this Section 2.4.2.3 and further acknowledges and agrees that delays and backorders not in the ordinary course of such products shall not be taken into account when determining whether there was a sale and/or order of a product under this Section 2.4.2.3 .

 

 

Gross profit $ - HIS Related Sales								Earn-out Percentage
$	0				$	2,000,000		0	%
$	2,000,001		To		$	2,500,000		30	%
$	2,500,001		To		$	3,000,000		40	%
$	3,000,001		To		$	3,400,000		50	%
$	3,400,001		To		$	4,000,000		60	%
$	4,000,001		To		$	6,999,999		65	%

 

For all amounts of Gross Profit allocable to HSI Related Sales greater than or equal to
$7,000,000, the Contingent Consideration payable shall be limited to $4,550,000.

 

So, by way of illustration:

 

1.                                       If the actual aggregate Gross Profit allocable to HSI Related Sales is $2,100,000 during the Earnout Period, the aggregate earn-out amount or Contingent Consideration payable to Seller would be $ 630,000

 

2.                                       If the actual aggregate Gross Profit allocable to HSI Related Sales is $3,300,000 during the Earnout Period, the aggregate earn-out amount or Contingent Consideration payable to Seller would be $1,650,000.

 

3.                                       If the actual aggregate Gross Profit allocable to HSI Related Sales is $4,100,000 during the Earnout Period, the aggregate earn-out amount or Contingent Consideration payable to Seller would be $2,665,000.

 

4.                                       If the actual aggregate Gross Profit allocable to HSI Related Sales is $7,500,000 during the Earnout Period, the aggregate earn-out amount or Contingent Consideration payable to Seller would be $4,550,000.

 

2.4.2.4                                  Notwithstanding the foregoing, Ciprico shall make advance payments with respect to the Contingent Consideration as follows:

 

2.4.2.4.1                       Within thirty (30) days after each Advance Payment Date, Ciprico shall deliver to the Seller a statement (an “ Advance Payment Statement ”) showing the Cumulative Gross Profit through such Advance payment Date and the Annualized Gross Profit through such Advance Payment Date.

 

2.4.2.4.2                       Upon delivery of each Advance Payment Statement, Ciprico shall pay to the Seller, as an advance payment (an

 

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“ Advance Payment ”) of Contingent Consideration, an amount equal to: the excess of (1) 90% of the product of (A) the Cumulative Gross Profit for such Advance Payment Date multiplied by (B) the Earnout Percentage (expressed as a decimal) for the appropriate range of Gross Profit as set forth in the table above over (2) the aggregate amount of Advance Payments previously paid to the Seller pursuant hereto.

 

So, by way of illustration:

 

1.                                       If the Cumulative Gross Profit through the Advance Payment Date falling on March 31, 2005 is $400,000, then the Annualized Gross Profit for such Advance Payment Date would be $2,400,000 ($400,000 X 12/2 = $2,400,000).  Accordingly, the Earn-out Percentage would be 30%.  Therefore, the Advance Payment for such Advance Payment Date would be 90% of (A) $400,000 X (B) .30 (or $108,000).

 

2.                                       If the Cumulative Gross Profit through the Advance Payment Date falling on June 30, 2005 is $900,000, then the Annualized Gross Profit for such Advance Payment Date would be $2,160,000 ($900,000 X 12/5 = $2,160,000).  Accordingly, the Earn-out Percentage would be 30%.  Therefore, the Advance Payment for such Advance Payment Date would be the excess of (1) 90% of the product of (A) $900,000 X (B) .30 (90% of $270,000 = $243,000) over (2) the aggregate amount of all prior Advance Payments ($108,000).  In this case, the Advance Payment would be $243,000 minus $108,000, or $135,000.

 

2.4.2.4.3                       If the Annualized Gross Profit for any Advance Payment Date (or the actual Gross Profit for the Earnout Period) does not exceed Two Million Dollars ($2,000,000.00), then no payment of Contingent Consideration shall be due from Ciprico with respect thereto.

 

2.4.2.4.4                       Within forty-five (45) days after the end of the Earnout Period, Ciprico shall cause the preparation of a statement (the “ Final Contingent Consideration Statement ”) showing the aggregate Gross Profit for the Earnout Period and the aggregate amount of Contingent Consideration payable with respect to such aggregate Gross Profit.  Ciprico shall furnish such calculation to the Seller along with access to the work-papers and all relevant books and records and employees of Ciprico, showing Ciprico’s determination of the Contingent Consideration payable.  Unless the Seller delivers written notice to Ciprico on or prior to the thirtieth (30 ^th ) day after receipt of the reviewed Final Contingent Consideration Statement specifying in reasonable detail all disputed items and the basis therefore, the parties shall be deemed to have accepted and agreed to the reviewed calculations of the Final

 

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Contingent Consideration Statement.  If the Seller so notifies Ciprico of an objection to the reviewed Final Contingent Consideration Statement, the parties shall, within thirty (30) days following the date of such notice (the “ Resolution Period ”), attempt to resolve their differences and any resolution by them as to any disputed amount shall be final, binding, conclusive and nonappealable for all purposes under this Agreement.  If at the conclusion of the Resolution Period the parties have not reached an agreement on the objections, then all amounts remaining in dispute may, at the election of either party, be submitted to the Independent Accountant who shall resolve such dispute within thirty (30) days of referral.  The decision of the Independent Accountant shall be final and binding upon the parties.  The cost of the Independent Accountant shall be borne by the Seller, on the one hand, and Ciprico, on the other hand, in proportion to the relative differences between the final position of the parties prior to submission of the matter to the Independent Account and the determination of the Independent Accountant.

 

2.4.2.4.5                       Upon the final determination, pursuant to Section 2.4.2.4.4 above, of the aggregate Contingent Consideration payable to the Seller pursuant to this Section 2.4.2.3, Ciprico shall pay to the Seller the amount, if any, by which such aggregate Contingent Consideration exceeds the aggregate amount of Advance Payments made to the Seller pursuant hereto (such amount, the “ Residual Payment ”).  In the event that aggregate Contingent Consideration payable to the Seller, as finally determined pursuant to Section 2.4.2.4.3 above is less than the aggregate amount of Advance Payments that have been made to the Seller pursuant to this Section 2.4.2.4 (such difference, the “ Deficiency Amount ”), then the outstanding principal balance of the Holdback Note shall be reduced by an amount equal to such Deficiency Amount.  Ciprico hereby acknowledges and agrees that reduction of the Holdback Note shall be its sole recourse with respect to any Deficiency Amount.

 

2.4.2.4.6                       Any payment of Contingent Consideration (including any Advance Payment or the Residual Payment) by Ciprico hereunder, if any, shall be made, at the election of the Seller, subject to the limitations set forth herein, via wire transfer of immediately available funds or by delivery of shares of the common stock, par value $0.01 per share, of Ciprico (“ Ciprico Common Stock ”), or any combination thereof.

 

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2.4.2.4.7                       For purposes of valuing any shares of Ciprico Common Stock to be delivered to the Seller in payment of any amount of Contingent Consideration due hereunder, the shares of Ciprico Common Stock shall be valued at the average (rounded to the nearest full cent, with the cents rounded up if the third decimal place is 5 or more) of the closing sales prices of a share of Ciprico Common Stock as reported on the Nasdaq Stock Market as of the end of the regular trading session, as reported in The Wall Street Journal, for the twenty (20) consecutive Nasdaq trading days ending on and including the Nasdaq trading day immediately preceding the date of such Contingent Consideration (or portion thereof) becomes payable hereunder (the “ Earnout Issuance Price ”).

 

2.4.2.4.8                       In order for the Seller to elect to receive all or any Contingent Consideration due hereunder in the form of shares of the Ciprico Common Stock, the Seller and each of the Principals, respectively must be an “accredited investor” within the meaning of Rule 501 under the Securities Act, in the case of Seller, not organized for the specific purpose of acquiring the Purchased Shares and must demonstrate to Ciprico’s satisfaction that they meet the required accreditation standards.  The Seller and each of the Principals, respectively must represent to Ciprico that it has sufficient knowledge and experience in investing in companies similar to Ciprico, in terms of Ciprico’s stage of development, so as to be able to evaluate the risks and merits of an election to receive all or a portion of the Contingent Consideration in the form of Ciprico Common Stock and that Seller and the Principals are able financially to bear the risks thereof.  Seller and the Principals shall also be required to represent that they have had an opportunity to discuss Ciprico’s business, management and financial affairs with management and to indicate that the Ciprico shares are being acquired for Seller’s own account for the purpose of investment and not with a present view toward their public sale or distribution; provided, however , that by making such representation, Seller does not agree to hold any of such shares for any minimum or other specific term and reserves the right to dispose of such shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.  Seller understands that (i) any Ciprico Common Stock issued or to be issued to Seller will not, initially, be registered securities under the Securities Act by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated

 

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thereunder, (ii) the Ciprico Common Stock must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration, (iii) the shares of Ciprico Common Stock will bear a legend to such effect and (iv) Ciprico will make a notation on its transfer books to such effect.

 

2.4.2.4.9                       Anything to the contrary herein notwithstanding, in the event that Ciprico issues shares of Ciprico Common Stock to the Seller pursuant to the terms hereof, Ciprico shall, at its sole cost and expense and within thirty (30) days of a demand by Seller or either of the Principals, respectively, that Ciprico file a registration statement on Form S-3 (or any successor form to Form S-3) for the resale of any such shares, and Ciprico is, at the time of the request, a registrant entitled to use Form S-3 (or any successor form to Form S-3) to register the shares for such an offering, Ciprico shall include in such registration, and in any underwriting involved therein, all the shares specified in Seller’s request, use its best efforts to cause such registration statement to be continuously effective, supplemented and amended as required by the Securities Act of 1933, as amended, from the date of such registration statement is declared effective by the Securities and Exchange Commission (the “SEC”) until the earlier of (i) the date that is One Hundred Twenty (120) days from the date such Registration Statement was declared effective; (ii) the date all shares of Ciprico common stock issued by Ciprico to the Seller hereunder have been sold; or (iii) the date that all shares of Ciprico Common Stock are eligible for sale or resale without limitation pursuant to the provisions of Rule 144(k) of the Securities Act of 1933, as amended.  Ciprico shall also cause such shares to be qualified in such jurisdictions as Seller may reasonably request.  If a Registration Statement is not reviewed by the Securities and Exchange Commission then, within ten (10) days of filing, Ciprico shall promptly request acceleration of the Registration Statement, Ciprico shall permit counsel to the Seller to review the Registration Statement and all amendments and supplements thereto (as well as all requests for acceleration or effectiveness thereof) a reasonable period of time prior to the Registration Statement’s filing with the SEC, and not file any document in a form to which such counsel reasonably objects and will not request acceleration of the Registration Statement without prior notice to such counsel.  Ciprico will use commercially reasonable efforts to remain qualified for Form S-3 registration or a similar short-form registration at all times, however, Ciprico shall not be

 

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obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section:

 

2.4.2.4.9.1                                        In any particular jurisdiction in which Ciprico would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless Ciprico is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

2.4.2.4.9.2                                        During the period starting with the date ninety (90) days prior to the Ciprico’s good faith estimated date of filing of, and ending on the date three (3) months immediately following the effective date of, any registration statement pertaining to any other equity securities of Ciprico; provided, that Ciprico is actively employing in good faith all reasonable efforts to cause such registration statement to become effective and that Ciprico has complied with all other obligations pursuant to this Section ;

 

2.4.2.4.9.3                                        If Ciprico shall furnish to Seller a certificate signed by the President of Ciprico stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Ciprico or its stockholders for a registration statement to be filed in the near future (which Ciprico represents, as of the date hereof, is not presently the case), then Ciprico’s obligation to use best efforts to register, qualify or comply under this Section shall be deferred for a period not to exceed 90 days from the date of receipt of written request from Seller; provided, however, that Ciprico shall not exercise such right more than once in any twelve-month period.

 

2.4.2.4.10                 As set forth above, each of Seller and/or the Principals, individually (in the event that Seller distributes any shares of Ciprico Common Stock to such individuals) may demand that Ciprico register shares of Ciprico Common Stock issued hereunder; provided, however, that Ciprico shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section  2.4.2.3.10 unless the Seller, or either of the Principals, respectively, or any combination thereof requests that Ciprico file a registration statement to register the re-sale of 150,000 or more shares of Ciprico Common Stock, or any lesser amount of such shares then held by Seller or either of the Principals, respectively, or any combination thereof, if the anticipated aggregate proceeds of such registration and sale, net of underwriting discounts and commissions, would exceed $1,000,000 and Ciprico shall not be required to file more than four (4) such registrations, in the aggregate,

 

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(provided that such registrations have become effective) on behalf of the Seller and the Principals, collectively.

 

2.4.2.4.11                 Indemnification .  With respect to the registration of the resale of the shares of Ciprico Common Stock:

 

2.4.2.4.11.1                                  Ciprico will indemnify and hold harmless each of the Seller and the Principals, the trustees, partners, officers, directors and agents of each of the Seller and the Principals, any underwriter (as defined in the Securities Act) for such parties and each person, if any, who controls any of those parties or an underwriter within the meaning of the Securities Act or the Exchange Act, as amended, respectively,  against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “ Violation ”) by Ciprico:  (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus, not corrected by a subsequent or final prospectus, or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by Ciprico of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by the Registration Statement; and Ciprico will reimburse each such of Seller or the Principals or any, trustee, partner, officer, director, agent, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of Ciprico (which consent shall not be unreasonably withheld), nor shall Ciprico be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished to it for use in connection with such registration by the Seller, either of the Principals or any trustee, partner, officer, director, agent, underwriter or controlling person thereof or upon Seller or either of the Principals’ failure to comply with prospectus delivery requirements or to deliver the corrected, amended or supplemented

 

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prospectus made available to them by Ciprico (collectively, “ Seller Prospectus Delivery Failures ”).

 

2.4.2.4.11.2                                  To the extent permitted by law, each of Seller and the Principals will indemnify and hold harmless Ciprico, each of its directors, each of its officers, each person, if any, who controls Ciprico within the meaning of the Securities Act, any underwriter and any other shareholder selling securities under the Registration Statement, if any, or any of such other shareholder’s, trustees, partners, directors or officers or any person who controls such shareholder, against any losses, claims, damages or liabilities (joint or several) to which Ciprico or any such director, officer, controlling person, underwriter or other such shareholder, or trustee, partner, director, officer or controlling person of such other shareholder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Seller or the Principals for use in connection with such registration or upon any Seller Prospectus Delivery Failure; and each of such parties will reimburse any legal or other expenses reasonably incurred by Ciprico or any such director, officer, controlling person, underwriter or other shareholder, or trustee, partner, officer, director or controlling person of such other shareholder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation or upon any Seller Prospectus Delivery Failure; provided, however, that the indemnity agreement contained in this Section shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Seller and the Principals, which consent shall not be unreasonably withheld.

 

2.4.2.4.11.3                                  Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying

 

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party; and provided further, that if there is more than one indemnified party, the indemnifying party shall pay for the fees and expenses of one counsel for any and all indemnified parties to be mutually agreed upon by such indemnified parties, unless representation of an indemnified party by the counsel retained by the other indemnified parties would be inappropriate due to actual or potential differing interests between such indemnified parties.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section.

 

2.4.2.4.11.4                                  If the indemnification provided for in this Section is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  No person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person or entity who shall not have been guilty of such fraudulent misrepresentation.

 

2.4.2.4.11.5                                  The obligation of Ciprico and the Sellers and the Principals under this Section shall survive the completion of any offering for resale of shares of the Ciprico Common Stock in the Registration Statement, and otherwise.

 

2.4.2.5                           Notwithstanding the provisions of Sections 2.4.2.4.6 with respect to Seller’s ability to elect to receive shares of Ciprico Common Stock in

 

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payment for some or all of any Contingent Consideration due and earned pursuant to this Agreement, if the Earnout Issuance Price is less than the FMV of the Common Stock (as defined herein) as of the date hereof, then Ciprico shall not be obligated to issue, and the Seller shall have no right to elect to receive, the Excess Shares (as defined herein).  If the Earnout Issuance Price equals or exceeds the FMV of the Common Stock as of the date hereof, then the provisions of this Section 2.4.2.5 shall not apply.

 

2.4.2.5.1                       “ Excess Shares ” means such number of shares of Ciprico Common Stock otherwise issuable to Seller in payment for some or all of any Contingent Consideration due and earned by Seller under the terms of this Agreement and, specifically, pursuant to this Section 2.4.2.5 hereof, that would exceed the Applicable Limit.

 

2.4.2.5.2                       “ Applicable Limit ” means 19.9999 % of 4,743,595 shares (or if lesser, the actual number of issued and outstanding voting stock as of the date of this Agreement).

 

2.4.2.5.3                       The Fair Market Value of shares of Ciprico Common Stock shall b