EXHIBIT 10.0
STOCK PURCHASE AGREEMENT
by and between
AVATAR SYSTEMS, INC.
(THE "COMPANY")
AND
CYBERTEC HOLDINGS PLC
("CYBERTEC")
July 10, 2000
TABLE OF CONTENTS
ARTICLE/
SECTION SUBJECT PAGE
------- ------- ----
ARTICLE I. -- PURCHASE OF SHARES...............................................2
1.1 Purchase of Shares...............................................2
1.2 Purchase Price...................................................2
1.3 Deposit of Purchase Price........................................2
1.4 Use of Proceeds..................................................2
ARTICLE II. -- REPRESENTATIONS OF THE COMPANY AND THE SHAREHOLDERS.............3
2.1 Issuance of Company Shares and Warrants..........................3
2.2 Validity of Transaction..........................................3
2.3 Existence and Good Standing......................................3
2.4 Capital Stock....................................................4
2.5 Subsidiaries and Investments.....................................4
2.6 Financial Statements and No Material Changes.....................4
2.7 Books and Records................................................4
2.8 Title to Properties; Encumbrances................................5
2.9 Leases...........................................................5
2.10 Material Contracts...............................................5
2.11 Restrictive Documents............................................5
2.12 Litigation.......................................................6
2.13 Taxes............................................................6
2.14 Liabilities......................................................6
2.15 Insurance........................................................6
2.16 Intellectual Properties..........................................7
2.17 Compliance with Laws.............................................7
2.18 Accounts Receivable..............................................7
2.19 Employment Relations.............................................7
2.20 Employee Benefit Plans...........................................8
2.21 Interests in Clients, Suppliers, Etc.............................8
2.22 Disclosure.......................................................8
2.23 Broker's or Finder's Fees........................................8
2.24 Copies of Documents..............................................9
2.25 Environmental Compliance.........................................9
2.26 Customer Commitments.............................................9
2.27 Insider Interests................................................9
2.28 Registration Rights..............................................9
2.29 Agreements; Action..............................................10
2.30 Transactions with Affiliates....................................10
2.31 Business Plan...................................................10
2.32 Permits.........................................................10
2.33 Marketing Rights................................................10
2.34 Representations as of Closing...................................10
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ARTICLE III. -- REPRESENTATIONS OF CYBERTEC...................................11
3.1 Existence and Good Standing of Cybertec.........................11
3.2 Restrictive Documents...........................................11
3.3 Broker's or Finder's Fee........................................11
3.4 Purchase for Investment.........................................11
3.5 Investor Qualifications.........................................12
3.6 Representations as of Closing...................................12
ARTICLE IV. -- ADDITIONAL AGREEMENTS..........................................12
4.1 Preserve Accuracy of Representation and Warranties..............12
4.2 Passage of Title and Risk of Loss...............................12
4.3 Consents........................................................12
4.4 Company Employee Stock Options..................................12
4.5 Management Contract.............................................12
4.6 Consulting Agreement............................................13
4.7 Xxxxxxx Warrant.................................................13
4.8 Xxxxx Warrant...................................................13
4.9 Shareholders' Agreement.........................................13
4.10 Investors' Rights Agreement.....................................13
4.11 Schedules and Exhibits..........................................13
ARTICLE V. -- CONDITIONS TO CYBERTEC'S OBLIGATIONS............................13
5.1 Opinion of the Company's Counsel................................13
5.2 Good Standing and Tax Certificates..............................13
5.3 No Material Adverse Change......................................14
5.4 Truth of Representations and Warranties.........................14
5.5 Performance of Agreements/Authorization.........................14
5.6 No Litigation Threatened........................................14
5.7 Management Agreement............................................14
5.8 Shareholders' Agreement.........................................14
5.9 Consulting Agreement............................................14
5.10 Investors' Rights Agreement.....................................14
5.11 Consents........................................................15
5.12 Governmental Approvals..........................................15
5.13 Proceedings.....................................................15
5.14 Due Diligence Review............................................15
5.15 Company's Credit Facility with Bank One Texas, N.A..............15
ARTICLE VI. -- CONDITIONS TO THE COMPANY'S OBLIGATIONS........................15
6.1 Payment of Purchase Price.......................................15
6.2 Truth of Representations and Warranties.........................15
6.3 Government Approvals............................................15
6.4 Proceedings.....................................................16
6.5 Management Agreement............................................16
6.6 Shareholders' Agreement.........................................16
6.7 Consulting Agreement............................................16
6.8 Investors' Rights Agreement.....................................16
6.9 No Litigation Threatened........................................16
6.10 Consents........................................................16
6.11 Performance of Agreements/Authorization.........................16
6.12 No Material Adverse Change......................................16
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ARTICLE VII. -- COVENANTS OF THE COMPANY......................................17
7.1 Conduct of Business.............................................17
7.2 Key Man Insurance...............................................17
7.3 Business Plan...................................................17
ARTICLE VIII. -- CLOSING......................................................17
8.1 Closing.........................................................17
8.2 Actions of the Company at Closing...............................17
8.3 Actions of Cybertec at Closing..................................18
ARTICLE IX. -- SURVIVAL OF REPRESENTATIONS: INDEMNITY.........................19
9.1 Survival of Representations and Obligations to Indemnify........19
9.2 Indemnification by the Company..................................19
9.3 Indemnification by Cybertec.....................................20
9.4 Defense.........................................................20
ARTICLE X. -- MISCELLANEOUS...................................................21
10.1 Expenses........................................................21
10.2 Governing Law...................................................21
10.3 Captions........................................................21
10.4 Publicity.......................................................21
10.5 Notices.........................................................21
10.6 Parties in Interest.............................................22
10.7 Counterparts....................................................22
10.8 Entire Agreement................................................22
10.9 Amendments......................................................22
10.10 Severability....................................................22
10.11 Third Party Beneficiaries.......................................22
10.12 Negotiation.....................................................22
10.13 Definitions.....................................................22
SCHEDULES:
Schedule A Schedule of Exceptions................................ S-1
EXHIBITS:
Exhibit "A" Form of Management Agreement.......................... A-1
Exhibit "B" Form of Shareholders' Agreement....................... B-1
Exhibit "C" Form of Consulting Agreement.......................... C-1
Exhibit "D" Form of Warrant....................................... D-1
Exhibit "E" Form of Investors' Rights Agreement................... E-1
Exhibit "F" Balance Sheet dated June 30, 2000..................... F-1
Exhibit "G" Form of Opinion of Counsel............................ G-1
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") dated as of July 10,
2000, is made and entered into between Avatar Systems, Inc., a Texas corporation
(the "Company"), whose principal office address is 0000 XXX Xxxxxxx, Xxxxx 000,
Xxxxxx, Xxxxx 00000, and Cybertec Holdings, Plc., a Public Limited Company
incorporated under the Companies Act of 1985 in England and Wales, whose
registered office is at Xxxxxxxxxx Xxxxx, Xxxxx Xxxx Xxxxxx, Xxxxxxx XX0 0XX, XX
("Cybertec").
RECITALS
The Company was formerly the General Partner of Avatar Systems, Ltd., a
Texas limited partnership ("Avatar Ltd.").
The Company and Avatar Ltd. have completed a reorganization whereby the
Company has become the successor-in-interest to Avatar Ltd. (the
"Reorganization").
The Company provides software, software consulting, application service
provided via Wide Area Network (WAN)/Internet (Application Service Provider) to
the energy industry and other various companies as well as Internet
consulting/web design and deployment of Internet auction sites.
Cybertec desires to acquire 1,600,000 shares of the common stock of the
Company (the "Company Shares") for U.S.$1,600,000 on the terms and subject to
the conditions set forth in this Agreement. Additionally, at the Closing, the
Company shall issue to Cybertec a five-year warrant to purchase an additional
1,000,000 shares of the Company's common stock at an exercise price of $1.00 per
share (the "Cybertec Warrant").
The Company and Xxxxxx Xxxxxxx Xxxxxx, Xx. ("Xxxxxx") will enter into a
management agreement in generally the same form as attached hereto as Exhibit
"A" (the "Management Agreement").
All of the shareholders of the Company, including Cybertec, and all
warrant holders, will enter into a shareholders agreement in substantially the
same form as attached hereto as Exhibit "B" (the "Shareholders Agreement").
The Company, Merchants Capital Holdings, Ltd. ("MCH") and First
Merchant Capital Limited ("FMCL") will enter into a brokerage/consulting
agreement in substantially the same form as attached hereto as Exhibit "C" (the
"Consulting Agreement").
The Company will issue to certain individuals and corporations warrants
(the "Warrants") to purchase shares of the Company's common stock in generally
the same form as attached hereto as Exhibit "D" (the "Form of Warrant").
The Company, Cybertec, MCH, Xxxxxxx X. Komlosy, Shreve, Xxx Xxxxx ("X.
Xxxxx") and Xxxxx Xxxxx ("X. Xxxxx") will enter into an Investors Rights
Agreement in generally the same form as attached hereto as Exhibit "E" (the
"Investors' Rights Agreement").
STOCK PURCHASE AGREEMENT - Page 1
In consideration of the foregoing premises and the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I.
PURCHASE OF SHARES
1.1 Purchase of Shares. On and subject to the terms and conditions set
forth in this Agreement, at the Closing (as defined in Section 8.1), Cybertec
will acquire from the Company, and the Company will sell, deliver and transfer
to Cybertec, the Company Shares and Cybertec Warrant.
1.2 Purchase Price. As consideration in full for the Company Shares and
Cybertec Warrant, Cybertec will pay to the Company an aggregate purchase price
of U.S.$1,600,000 (the "Purchase Price").
1.3 Deposit of Purchase Price. The Purchase Price shall be deposited in
an interest bearing account at Bank One Texas, N.A., Dallas, Texas, account
number _____________ which shall require the joint signature of two designated
officers or directors of the Company acceptable to Cybertec. Cybertec shall have
seven business days to object to the designation of the signatories. In the
event that Cybertec does not object within seven business days, then Cybertec
shall be deemed to have accepted such designation. If either signatory submits a
written request to the other signatory for the approval of expenditures and no
response is received within seven business days, then the non-responsive
signatory shall be deemed to have given such approval. The signatory requirement
for the account at such bank shall be subject to this provision.
1.4 Use of Proceeds. The Purchase Price shall be utilized for the
following purposes unless the written consent of Cybertec is obtained for any
other use. If the written consent or objection of Cybertec is not received by
the Company within seven business days after receipt by Cybertec of the
Company's request to use proceeds for other purposes, then Cybertec shall have
been deemed to consent to such use:
(a) Reimbursement of Cybertec's reasonable legal, accounting,
travel, due diligence and other fees and expenses incurred by Cybertec
and its representatives in connection with the due diligence
investigation of the Company and its business and financial condition,
and negotiating and completion of this Agreement and the other
agreements contemplated herein.
(b) Payment of the Company's reasonable legal, accounting and
other fees and expenses incurred by the Company and its representatives
in negotiating and completion of this Agreement and the other
agreements contemplated by this Agreement.
(c) Acquisition costs in acquiring target U.S.-based companies
in the Internet and software businesses which have been identified and
discussed by the Company and Cybertec.
(d) Compensation and reimbursement of expenses to be paid to
MCH pursuant to the Consulting Agreement.
STOCK PURCHASE AGREEMENT - Page 2
(e) The cost and expenses, including, but not limited to,
legal, accounting and due diligence expenses, of the Company merging
with a U.S. non-operating public company (the "Public Company"), the
Company effecting a registration statement pursuant to the provisions
of the Investors' Rights Agreement and subsequent offerings of the
securities of the Public Company.
ARTICLE II.
REPRESENTATIONS OF THE COMPANY AND THE SHAREHOLDERS
As a material inducement to Cybertec to enter into this Agreement and
perform its obligations hereunder and except as otherwise disclosed on the
Schedule of Exceptions attached hereto as Schedule A (the "Schedule of
Exceptions"), the Company represents, warrants and agrees as follows:
2.1 Issuance of Company Shares and Warrants. When sold, assigned,
transferred and conveyed to Cybertec, the Company Shares and Cybertec Warrant
will be duly authorized, validly issued, fully paid, nonassessable and free of
any preemptive rights of any present shareholder of the Company.
2.2 Validity of Transaction. This Agreement, the Cybertec Warrant, the
Management Agreement, the Shareholders Agreement, the Consulting Agreement, the
Warrants and the Investors' Rights Agreement (collectively, the "Transaction
Documents") are valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms against the Company,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, as limited by laws related to the availability of
specific performance, injunctive relief, or other equitable remedies, and to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws. The
execution, delivery and performance of this Agreement and any other Transaction
Document contemplated hereby have been duly authorized by the Company and will
not violate any applicable federal or state law, any order of any court or
government agency or the articles or certificate of incorporation of the
Company. The execution, delivery and performance of this Agreement and any other
Transaction Document will not result in any breach of or default under, or
result in the creation of any encumbrance upon any of the assets of the Company
pursuant to the terms of any agreement by which the Company or any of its
respective assets may be bound. No consent, approval or authorization of, or
registration or filing with any governmental authority or other regulatory
agency, is required for the validity of the execution and delivery by the
Company of this Agreement or any other Transaction Document.
2.3 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. The Company has the power to own its properties and to carry on its
business as now being conducted. The Company is not qualified to do business in
any state, except Texas, which is the only jurisdiction in which the character
or location of the properties owned or leased by the Company or the nature of
the business conducted by the Company makes such qualification necessary, except
where the lack of such qualification would not reasonably be expected to result
in a material adverse effect on the Company. The Company has all necessary power
and authority to conduct the business it proposes to conduct and enter into and
perform its obligations under the Transaction Documents.
STOCK PURCHASE AGREEMENT - Page 3
2.4 Capital Stock. The Company has an authorized capitalization of
20,000,000 shares of common stock of which 6,400,000 shares are outstanding. The
Company is not a party to, nor does it have any knowledge of, any outstanding
options, warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of the capital stock of the Company, other than
as contemplated by the Transaction Documents. As of the Closing Date, the
Company will not be subject to any obligation, contingent or otherwise, to
repurchase or otherwise acquire or redeem any shares of its capital stock.
2.5 Subsidiaries and Investments. The Company does not own, directly or
indirectly, any of the capital stock of any other corporation or any equity,
profit sharing, participation or other interest in any corporation, partnership,
joint venture or other entity.
2.6 Financial Statements and No Material Changes. The Company has
delivered to Cybertec prior to the Closing Date (as defined herein) the
unaudited balance sheet of Avatar Ltd. as of June 30, 2000 and the related
statements of income, all compiled by management of the Company at June 30, 2000
(the balance sheet and related statements of income of Avatar Ltd. at June 30,
2000 are hereinafter referred to as the "Balance Sheet"). A true and correct
copy of the Balance Sheet is attached hereto as Exhibit "F". The Balance Sheet
fairly presents the financial condition of Avatar Ltd. at the date thereof and,
except as indicated therein, reflects all claims against and all debts and
liabilities of Avatar Ltd., fixed or contingent, as at the date thereof as
required by generally accepted accounting principles, and the related statement
of income fairly presents the results of the operations of Avatar Ltd. and the
changes in its financial position for the periods indicated. The Balance Sheet
is substantially the same as the financial statements of the Company would have
been, on a proforma basis, as of June 30, 2000, assuming that the Reorganization
had occurred prior to such date. After the Reorganization, and since June 30,
2000 (the "Balance Sheet Date") to the Closing Date, there has been (i) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations, of the
Company, whether as a result of any legislative or regulatory change known to
the Company, revocation known to the Company of any license or rights to do
business held by the Company, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation or act of God or other public
force or otherwise and (ii) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations, or prospects, of the Company except in the ordinary
course of business; and to the knowledge of the Company, no fact or condition
exists or is contemplated or threatened which might cause such a change in the
future.
2.7 Books and Records. The Company will make and keep books, records
and accounts that in reasonable detail accurately and fairly reflect the
transactions and dispositions of its assets. The Company will maintain its
present system of internal accounting controls. The Company's present system of
internal accounting controls is sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements and to
maintain accountability for such assets, and (iii) the recorded accountability
for assets is compared with the existing assets at reasonable intervals, and
appropriate action is taken with respect to any differences.
STOCK PURCHASE AGREEMENT - Page 4
2.8 Title to Properties; Encumbrances. The Company has good title to
all its properties, assets and leasehold estates, real and personal, and all
such properties, both real and personal, are not subject to any mortgage, lien,
pledge, security interest, conditional sales agreement or encumbrances of any
kind.
2.9 Leases. Section 2.9 of the Schedule of Exceptions contains an
accurate and complete list and description of the terms of all real property
leases to which the Company is a party as lessee or lessor. Each lease set forth
in such Section 2.9 is in full force and effect; all rents and additional rents
due to date on each such lease have been paid; in each case, the lessee has been
in peaceable possession since the commencement of the original term of such
lease and is not in default thereunder; and there exists no event of default or
event, occurrence, condition or act (including the purchase of the Company
Shares hereunder) that, with the giving of notice, the lapse of time or the
happening of any further event or condition, would reasonably be expected to
become a default under such lease. The Company has not violated any of the terms
or conditions under any such lease in any material respect, and, to the best
knowledge of the Company, all of the covenants to be performed by any other
party under any such lease have been fully performed.
2.10 Material Contracts. Except as set forth on Section 2.10 of the
Schedule of Exceptions or as contemplated by this Agreement, the Company is not
bound by (i) any agreement, contract or commitment relating to the employment of
any person by the Company, or any bonus, deferred compensation, pension, profit
sharing, stock option, employee stock purchase, retirement or other employee
benefit plan, (ii) any agreement, indenture or other instrument that contains
restrictions with respect to payment of dividends or any other distribution in
respect of its capital stock, (iii) any loan or advance to, or investment in,
any other Person (as defined in Section 10.13(c) herein) or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment, (iv) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any other Person (other than the endorsement of
negotiable instruments for collection in the ordinary course of business), (v)
any management service, consulting or any other similar type contract, or (vi)
any agreement, contract or commitment limiting the freedom of the Company to
engage in any line of business or to compete with any other Person. Each
contract or agreement set forth in Section 2.10 of the Schedule of Exceptions is
in full force and effect, and, to the knowledge of the Company, there exists no
default or event of default or event, occurrence, condition or act (including
the purchase of the Company Shares hereunder) that, with the giving of notice,
the lapse of time or the happening of any other event or condition, would
reasonably be expected to become a default or event of default thereunder. The
Company has not violated any of the terms or conditions of any contract or
agreement set forth in Section 2.10 of the Schedule of Exceptions in any
material respect, and, to the knowledge of the Company, all of the covenants to
be performed by any other party thereto have been fully performed.
2.11 Restrictive Documents. To the Company's knowledge, the Company is
not subject to, or a party to, any charter, bylaw, mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, that materially and uniquely adversely affects the business
practices, operations or condition of the Company or any of its assets or
property, or that would prevent consummation of the transactions contemplated by
this Agreement, compliance by the Company with the terms, conditions and
provisions hereof or the continued operation of the Company's business after the
date hereof or the Closing Date on substantially the same basis as heretofore
operated.
STOCK PURCHASE AGREEMENT - Page 5
2.12 Litigation. Except as set forth in Section 2.12 of the Schedule of
Exceptions, to the Company's knowledge, there are no claims, actions, inquiries,
investigations, suits, proceedings or arbitrations pending or threatened against
the Company, before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, threatened or pending
against the Company involving the Company's properties or business that, if
determined adversely to the Company, would, individually or in the aggregate,
result in any materially adverse change in the properties, business, management
or business prospects of the Company nor, to the Company's knowledge, is there
any basis for any such action, suit, proceeding, arbitration, claim,
investigation or inquiry. There are no outstanding orders, judgments or decrees
of any court, governmental agency or other tribunal naming the Company and
enjoining the Company from taking, or requiring the Company to take, any action.
Except as disclosed in Section 2.12 of the Schedule of Exceptions, to the
Company's knowledge, there are no unsatisfied adverse judgments or court or
administrative orders (whether or not on appeal) against the Company and there
are no judgment creditors asserting any claims, whether or not meritorious or
material, against the Company.
2.13 Taxes. The Company has filed or caused to be filed, within the
times and within the manner prescribed by law, all federal, state and foreign
tax returns and tax reports that are required to be filed by, or with respect
to, the Company and its predecessor, Avatar, Ltd., except where the failure to
so file such returns or reports would not reasonably be expected to result in a
material adverse effect on the Company. Such returns and reports reflect
accurately all liability for taxes of the Company for the periods covered
thereby in all material respects. All material federal, state, local and foreign
income, franchise, sales, use, occupancy, excise and other taxes and assessments
(including interest and penalties) payable by, or due from, the Company have
been fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company. Except as set forth and described in
Section 2.13 of the Schedule of Exceptions, to the Company's knowledge, no
examination of any tax return of the Company is currently in progress by any
state or federal administrative or regulatory agency. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any tax return of the Company. The Company has not incurred any tax liability
with any state or federal administrative or regulatory agency as a result of the
Reorganization.
2.14 Liabilities. The Company has no outstanding claims, liabilities or
indebtedness, contingent or otherwise, that would reasonably be expected to
result in a material adverse effect on the Company, except as set forth in the
Balance Sheet. The Company is not in default in respect of the terms or
conditions of any indebtedness.
2.15 Insurance. The Company maintains insurance policies that are, with
respect to their amounts and types of coverage, adequate in accordance with
prevailing standards in the Company's industry. True, complete and correct
copies of all such policies have been provided to Cybertec or its designated
representatives prior to the Closing Date.
STOCK PURCHASE AGREEMENT - Page 6
2.16 Intellectual Properties. Section 2.16 of the Schedule of
Exceptions contains an accurate and complete list of all domestic and foreign
letters patent, patents, patent applications, trade names, trademark
registrations and applications, service xxxx registrations and applications and
copyright registrations and applications owned by the Company (collectively, the
"Intellectual Property"). Unless otherwise indicated in such Section 2.16 of the
Schedule of Exceptions, the Company owns the Intellectual Property and its trade
secrets (including, without limitation, the right to use and license the same)
and each item constituting part of the Intellectual Property has been, to the
extent indicated in such Section 2.16 of the Schedule of Exceptions, duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entities, domestic or
foreign, as are indicated in such Schedule 2.16 of the Schedule of Exceptions;
and such registrations, filings and issuances remain in full force and effect.
To the knowledge of the Company, except as stated in such Section 2.16 of the
Schedule of Exceptions, there are no pending or threatened proceedings or
litigation or other adverse claims with respect to the Intellectual Property.
Section 2.16 of the Schedule of Exceptions lists all notices or claims received
by the Company during the past two years that claim infringement by the Company
of any domestic or foreign letters patent, patent applications, patent licenses
and know-how licenses, trade names, trademark registrations and applications,
service marks, copyrights, copyright registrations or applications, trade
secrets or other confidential proprietary information. Except as set forth in
such Section 2.16 of the Schedule of Exceptions, there is, to the knowledge of
the Company, no reasonable basis upon which a claim may be asserted against the
Company for infringement of any domestic or foreign letters patent, patents,
patent applications, patent licenses and know-how licenses, trade names,
trademark registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the knowledge of the Company, except as
indicated on Section 2.16 of the Schedule of Exceptions, no Person is infringing
upon the Intellectual Property.
2.17 Compliance with Laws. To the Company's knowledge, it is in
compliance in all material respects with all applicable laws, regulations,
orders, judgments and decrees.
2.18 Accounts Receivable. The Balance Sheet accurately reflects the
amount of accounts receivable or other debts due the Company.
2.19 Employment Relations. (i) The Company is in substantial compliance
with all federal, state, provincial or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice, (ii) no unfair labor practice complaint against the Company is
pending before a labor commissioner or other competent authority, (iii) there is
no labor strike, dispute, slowdown or stoppage actually pending or to the
Company's knowledge, threatened against or involving the Company, (iv) no labor
grievance that would reasonably be expected to have a material adverse effect
upon the Company or the conduct of its businesses exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending, and no claim therefor has been asserted, (v) no collective bargaining
agreement is currently being negotiated by the Company, and (vi) the Company has
not experienced any material labor difficulty during the last three years. There
has not been, and to the knowledge of the Company, there will not be, any
material adverse change in relations with employees of the Company as a result
of any announcement of the transactions contemplated by this Agreement. To the
knowledge of the Company, no key employee, or group of employees, has any plans
to terminate employment with the Company. As of the Closing Date, the Company
does not have any employment contracts with any of its employees, except as
contemplated by this Agreement.
STOCK PURCHASE AGREEMENT - Page 7
2.20 Employee Benefit Plans. The Company has (i) no employee benefit
plans within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not any such Employee
Benefit Plans are otherwise exempt from the provisions of ERISA, or (ii) no
other employee benefit plans or any other foreign pension, welfare or retirement
benefit plans. The Company has delivered to Cybertec and its counsel true and
complete copies of (i) all employee benefit plans as in effect as well as the
latest Internal Revenue Service determination letter obtained with respect to
any such employee benefit plan qualified under Section 401 or 501 of the
Internal Revenue Code of 1986, as amended and (ii) Form 5500 for the most recent
completed fiscal year for each employee benefit plan required to file such form.
2.21 Interests in Clients, Suppliers, Etc. Except as set forth on
Section 2.21 of the Schedule of Exceptions, no officer or director of the
Company possesses, directly or indirectly, any financial interest in, or is a
director, officer or employee of, any corporation, firm, association or business
organization that is a client, supplier, customer or competitor of the Company.
Ownership of securities of a company whose securities are registered under the
Securities Exchange Act of 1934, as amended, not in excess of one percent (1%)
of any class of such securities shall not be deemed to be a financial interest
for purposes of this Section 2.21.
2.22 Disclosure. None of this Agreement, the financial statements
referred to in Section 2.6 above, or any agreement, schedule, exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing that has been supplied by or on behalf of the Company, or
by any of the Company's directors or officers to Cybertec, in connection with
the transactions contemplated hereby, contains any untrue statement of a
material fact, or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading. There is no fact
known to the Company that materially and adversely affects the business,
prospects or financial condition of the Company or its properties or assets,
that has not been set forth in this Agreement or in the schedules, exhibits or
certificates or statements in writing furnished in connection with the
transactions contemplated by this Agreement. There has not come to the attention
of the Company any facts that reasonably cause the Company to believe that any
document connected with the transactions contemplated hereby contain any untrue
statement or a material fact, or omit to state a material fact required to be
stated herein or necessary in order to make the statements herein, in light of
the circumstances existing on the Closing Date, not misleading.
2.23 Broker's or Finder's Fees. Except for the fees and other
considerations payable to Merchant Capital Holdings Limited pursuant to the
Consulting Agreement and the Warrant to be issued to Xxxxxxx Xxxxxxx, no agent,
broker, person or firm acting on behalf of the Company is, or will be, entitled
to any commission or broker's or finder's fees from any of the parties hereto,
or from any Person controlling, controlled by or under common control with any
of the parties hereto, in connection with any of the transactions contemplated
herein.
STOCK PURCHASE AGREEMENT - Page 8
2.24 Copies of Documents. The Company has caused to be made available
for inspection and copying by Cybertec and its representatives, attorneys and
accountants, true, complete and correct copies of all documents referred to in
this Article II or in any schedule or exhibit furnished by the Company to
Cybertec pursuant to this Agreement.
2.25 Environmental Compliance. To the knowledge of the Company (i) the
conduct of the business at the Company in connection with the ownership, use,
maintenance or operation of any real property which has ever been owned or
leased by the Company, and the conduct of business by the Company thereon,
complies and complied with, and the Company is not in violation of, any
applicable federal, state, county or local statutes, laws, regulations, rules,
ordinances, codes, licenses, permits (granted to the Company) or orders (naming
the Company) of any governmental authorities relating to environmental matters,
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), and any other law, statute,
ordinance or regulation relating to the protection of the public health and/or
the environment, whether promulgated by the United States, any state,
municipality and/or other governmental body, each as amended (hereinafter
collectively referred to as "Environmental Laws"), (ii) the conduct of the
business at the Company is and has at all times been performed in material
conformance with all Environmental Laws and regulations pertaining thereto, and
all permits or other documents required for the conduct of the business in
accordance with the Environmental Laws are and at all times have been in full
force and effect; and (iii) there are no notices of violation of any
Environmental Laws requiring any work, repairs, construction, capital
expenditures or otherwise with respect to the business of the Company which have
been received by the Company, and there are no writs, notices, injunctions,
decrees, orders, liens or judgments outstanding, no lawsuits based upon either
the Environmental Laws or the common law, claims, proceedings or investigations
pending relating to the operations of the Company with respect to the disposal
of hazardous wastes or hazardous substances by the Company.
2.26 Customer Commitments. There are no oral arrangements or written
contracts, agreements, understandings, commitments and the like under the terms
of which the Company has agreed to pay any bonus, rebate, financing, discount,
waiver of payment, incentive or the like, from May 1, 1999 to the Closing Date,
to any of the Company's customers or their employees.
2.27 Insider Interests. No shareholder, employee, officer or director
of the Company has any material interest in any personal or real property,
tangible or intangible, including, without limitation, inventions or other
Intellectual Property, used in the business of the Company.
2.28 Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any Person.
STOCK PURCHASE AGREEMENT - Page 9
2.29 Agreements; Action. Except for this Agreement and the other
agreements contemplated hereby, and by the Warrants and except as disclosed in
Section 2.29 of the Schedule of Exceptions, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors or Affiliates, or any Affiliate of any of the foregoing.
Except as disclosed in Section 2.29 of the Schedule of Exceptions, there are no
agreements to which the Company is a party or by which it is bound that involve
indemnification by the Company with respect to infringements of such proprietary
rights.
2.30 Transactions with Affiliates. Except as set forth in Section 2.30
of the Schedule of Exceptions or Financial Statements, to the Company's
knowledge, the Company has not had any direct or indirect dealings with any
employee, officer or director of the Company ("Related Party"), or with any of
such Related Party's Affiliates in any transaction exceeding a value of $60,000.
To the Company's knowledge, the Company has no obligation to or claim against
any Related Party, or any of such Related Party's Affiliates and no such Person
has any obligation to or claim against the Company.
2.31 Business Plan. The business plan dated January 2000 delivered to
Cybertec (the "Business Plan") has been prepared in good faith by the Company
and does not contain any untrue statement of a material fact nor does it omit to
state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the Business
Plan, the Company represents only that such projections were prepared in good
faith by the Company and that the Company reasonably believes there is a
reasonable basis for such projections.
2.32 Permits. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would reasonably be expected to materially
and adversely affect the business, properties, prospects, or financial condition
of the Company, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted in the Business Plan. To the Company's knowledge, it is not in default
in any material respect under any of such franchises, permits, licenses, or
other similar authority. 2.33 Marketing Rights. The Company has not granted
rights to produce, license, market, or sell its products to any other Person,
except to the extent that such rights are not reasonably expected to
individually exceed $25,000 in revenue to such Person.
2.34 Representations as of Closing. The representations and warranties
made by the Company in this Article II and the schedules hereto will be correct
in all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties and schedules had been made on
the Closing Date. The liability of the Company for its warranties and
representations under this Article II shall terminate two years after the
Closing Date.
STOCK PURCHASE AGREEMENT - Page 10
ARTICLE III.
REPRESENTATIONS OF CYBERTEC
As a material inducement to the Company to enter into this Agreement
and perform its obligations hereunder, Cybertec represents, warrants and agrees
as follows:
3.1 Existence and Good Standing of Cybertec. Cybertec is a Public
Limited Company incorporated under the Companies Act of 1985, and is duly
organized, validly existing and in good standing under the laws of England and
Wales. Cybertec has corporate power and authority to make, execute, deliver and
perform this Agreement and the other agreements contemplated herein, and this
Agreement and the other agreements contemplated herein have been duly authorized
and approved by all required corporate action of Cybertec. This Agreement and
each other agreement contemplated herein to be executed and delivered by
Cybertec constitute a valid and binding obligation of Cybertec, enforceable in
accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, as limited by
laws related to the availability of specific performance, injunctive relief, or
other equitable remedies, and to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws. Each person executing this Agreement and the
other agreements contemplated herein on behalf of Cybertec is authorized to do
so.
3.2 Restrictive Documents. Cybertec is not subject to any charter,
by-law, mortgage, lien, lease, agreement, instrument, order, law, rule,
regulation, judgment or decree, or any other restriction of any kind or
character, that would prevent consummation of the transactions contemplated by
this Agreement.
3.3 Broker's or Finder's Fee. Except for the fees and other
consideration payable to MCH and FMCL pursuant to the Consulting Agreement and
the issuance of the Warrant to Xxxxxxx Xxxxxxx, no agent, broker, person or firm
acting on behalf of Cybertec is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
3.4 Purchase for Investment. Cybertec will acquire the Company Shares
and Cybertec Warrant for investment and not with a view to resale or for
distributing all or any part thereof in any transaction which would constitute a
"distribution" within the meaning of the Securities Act of 1933, as amended
(the" Securities Act"). The offering of the Company Shares and Cybertec Warrant
to Cybertec was made only through direct, personal communication between the
Company and a duly authorized officer of Cybertec and not through public
solicitation or advertising. Cybertec acknowledges that the Company Shares and
Cybertec Warrant are "restricted securities" and have not been registered under
the Securities Act and except for the obligations of the Company pursuant to the
Investors' Rights Agreement, the Company is not under any obligation to file a
registration statement with the Securities and Exchange Commission or any state
securities agency with respect to the Company Shares and Cybertec Warrant.
STOCK PURCHASE AGREEMENT - Page 11
3.5 Investor Qualifications. Cybertec (i) has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its investment in the Company Shares and Cybertec
Warrant and has the financial ability to assume the monetary risk associated
therewith, (ii) is able to bear the complete loss of its investment in the
Company Shares and Cybertec Warrant, (iii) has received such documents and
information as it has requested and has had the opportunity to ask questions of,
and receive answers from, the Company and its management concerning the Company
and the terms and conditions of the offering of the Company Shares and to obtain
additional information, (iv) is not an entity formed solely to make this
investment, (v) is not relying upon any statements or instruments made or issued
by any person other than the Company and its officers to Cybertec and its legal
representatives and agents in making its decision to invest in the Company
Shares and Cybertec Warrant, and (vi) is an "accredited investor" as such term
is defined in Regulation D promulgated under the Securities Act.
3.6 Representations as of Closing. The representations and warranties
made by Cybertec in this Article III will be correct in all material respects on
and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on the Closing Date. The liability
of Cybertec for its warranties and representations under this Article III shall
terminate two years after the Closing Date.
ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 Preserve Accuracy of Representation and Warranties. Each of the
parties hereto shall refrain from taking any action that would render any
representation or warranty contained herein inaccurate as of the Closing Date.
4.2 Passage of Title and Risk of Loss. Possession and legal and
equitable title and risk of loss with respect to the Company Shares and Cybertec
Warrant to be transferred hereunder shall not pass to Cybertec until the Company
Shares and Cybertec Warrant are transferred to Cybertec at the Closing on the
Closing Date.
4.3 Consents. The Company agrees to use its best efforts to obtain such
consents as may be required under any contract, mortgage, lease, license or
other instrument requiring the consent of another party thereto as a result of
the transactions contemplated by this Agreement.
4.4 Company Employee Stock Options. After Closing, stock options for
the Company's common stock may be granted from time to time to employees based
on performance and at the sole discretion of the Board of Directors of the
Company provided that the aggregate of any employee stock options, excluding the
Warrants issued pursuant to this Agreement, do not exceed 5% of the issued and
outstanding common stock of the Company.
4.5 Management Contract. At the Closing, the Company and Xxxxxx will
enter into a Management Agreement in the form as attached hereto as Exhibit "A"
which will include a five-year warrant for the purchase of 1.6 million shares of
the Company common stock for $1.00 per share (the "Xxxxxx Warrant") in
substantially the same form as the Form of Warrant attached hereto as Exhibit
"D".
STOCK PURCHASE AGREEMENT - Page 12
4.6 Consulting Agreement. At the Closing, the Company, MCH and FMCL
will enter into a Consulting Agreement in substantially the same form as Exhibit
"C" attached hereto. Additionally, the Company will issue and deliver to MCH a
five-year warrant to purchase 2,000,000 shares of the Company's common stock for
$1.00 per share (the "MCH Warrant") in substantially the same form as the Form
of Warrant attached hereto as Exhibit "D".
4.7 Xxxxxxx Warrant. At the Closing, the Company shall issue and
deliver to Xxxxxxx Xxxxxxx or his designee a five-year warrant to purchase
600,000 shares of the Company common stock for $1.00 per share (the "Xxxxxxx
Warrant") in substantially the same form as the Form of Warrant attached hereto
as Exhibit "D".
4.8 Xxxxx Warrant. At the Closing, the Company shall issue and deliver
to Xxx and Xxxxx Xxxxx a five-year warrant to purchase an aggregate of 500,000
shares of the Company's common stock for $1.00 per share (the "Xxxxx Warrant")
in substantially the same form as the Form of Warrant attached hereto as Exhibit
"D".
4.9 Shareholders' Agreement. At the Closing, all of the shareholders of
the Company, including Cybertec and any holder of options or warrants of the
Company, shall enter into the Shareholders' Agreement in substantially the same
form as attached hereto as Exhibit "B".
4.10 Investors' Rights Agreement. At the Closing, the Company shall
have executed and delivered to Cybertec, MCH, Komlosy, Shreve, X. Xxxxx and X.
Xxxxx, the Investors' Rights Agreement in the form attached hereto as Exhibit
"E".
4.11 Schedules and Exhibits. Exhibits and Schedules, as applicable,
shall be brought current to the Closing Date and delivered to Cybertec at
Closing.
ARTICLE V.
CONDITIONS TO CYBERTEC'S OBLIGATIONS
The obligations of Cybertec hereunder are, at its sole option, subject
to and conditioned upon the satisfaction and fulfillment by the Company, on or
prior to the Closing Date of each of the following conditions unless waived in
writing by Cybertec.
5.1 Opinion of the Company's Counsel. The Company shall have furnished
Cybertec with an opinion of Xxxxxx and Xxxxx LLP, as counsel for the Company,
dated the Closing Date, substantially in the form as attached hereto as Exhibit
"G".
5.2 Good Standing and Tax Certificates. The Company shall have
delivered to Cybertec (i) copies of the Company's certificate or articles of
incorporation, including all amendments thereto, certified by the secretary of
state or other appropriate official of its jurisdiction of incorporation, (ii)
certificates from the secretary of state or other appropriate official of the
jurisdiction of incorporation to the effect that the Company is in good standing
or subsisting in such jurisdiction and listing all charter documents of the
Company on file, (iii) a certificate from the appropriate official in each
jurisdiction in which the Company is qualified to do business to the effect that
the Company is in good standing in such jurisdiction, and (iv) a certificate as
to the tax status of the Company in the jurisdiction of incorporation.
STOCK PURCHASE AGREEMENT - Page 13
5.3 No Material Adverse Change. Since the Balance Sheet Date, there
shall be no material adverse change in the assets or liabilities, the business
or condition, financial or otherwise, the results of operations, or prospects of
the Company, whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation or act of God
or other public force or otherwise, and the Company shall have delivered to
Cybertec a certificate, executed by the President of the Company, dated the
Closing Date, to such effect.
5.4 Truth of Representations and Warranties. The representations and
warranties of the Company contained in this Agreement or in any schedule
delivered pursuant hereto shall be true and correct on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date, and the Company shall have delivered to Cybertec on
the Closing Date a certificate, executed by the President of the Company, dated
the Closing Date, to such effect.
5.5 Performance of Agreements/Authorization. Each and all of the
agreements of the Company to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed, and the Company shall have
delivered to Cybertec a certificate executed by the President of the Company,
dated the Closing Date, to such effect. Cybertec shall have also received (i) a
copy of resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and all related documents
and agreements, each certified by the Secretary of the Company as being true and
correct copies of the originals thereof subject to no modifications or
amendments, and (ii) a certificate of the President of the Company, dated the
Closing Date, as to the performance of and compliance by the Company with all
covenants contained herein on and as of the Closing Date and certifying that all
conditions precedent of the Company to the Closing have been satisfied.
5.6 No Litigation Threatened. Prior to and including the Closing Date,
no action or proceedings shall have been instituted or, to the best knowledge,
information and belief of the Company, shall have been threatened before a court
or other governmental body or by any public authority to restrain or prohibit
any of the transactions contemplated hereby, and the Company shall have
delivered to Cybertec a certificate, dated the Closing Date, to such effect.
5.7 Management Agreement. The Company and Xxxxxx shall have entered
into the Management Agreement in substantially the same form as Exhibit "A"
hereto.
5.8 Shareholders' Agreement. The Company and all of the Company's
shareholders, including Cybertec, and any holder of stock options or warrants of
the Company, including the holders of Warrants to be issued pursuant to this
Agreement shall have entered into the Shareholders' Agreement in substantially
the same form as Exhibit "B" hereto.
5.9 Consulting Agreement. The Company, MCH and FMCL shall have entered
into the Consulting Agreement in substantially the same form as Exhibit "C"
hereto.
5.10 Investors' Rights Agreement. The Company, MCH, Cybertec, Komlosy,
Shreve, X. Xxxxx and X. Xxxxx shall have entered into the Investors' Rights
Agreement in substantially the same form as Exhibit "E" hereto.
STOCK PURCHASE AGREEMENT - Page 14
5.11 Consents. Written consents as may be required under any contract,
mortgage, lease, license or other instrument to which the Company is a party
requiring consent of another party thereto as a result of the transactions
contemplated by this Agreement shall have been obtained by the Company and
delivered to Cybertec.
5.12 Governmental Approvals. All governmental and other consents and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received by the Company and
delivered to Cybertec.
5.13 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
including documents relating to the Reorganization, shall be satisfactory in
form and substance to Cybertec in its reasonable discretion, and Cybertec shall
have received copies of all such documents and other evidences as Cybertec or
its counsel may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
5.14 Due Diligence Review. Cybertec and its representatives and
advisors shall have completed a due diligence review of the business, operations
and financial statements of the Company, the results of which shall be
satisfactory to Cybertec and its counsel in their sole discretion.
5.15 Company's Credit Facility with Bank One Texas, N.A.. The Company
and Bank One Texas, N.A. ("Bank One") shall have amended the Company's credit
facility with Bank One in accordance with the letter dated March 25, 2000 from
Bank One to Xxxxxx, Avatar Ltd. and such amended credit facility shall be
acceptable to Cybertec.
ARTICLE VI.
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company hereunder are, at its sole option,
subject to and conditioned upon the satisfaction and fulfillment by Cybertec, on
or prior to the Closing Date, of each of the following conditions unless waived
in writing by the Company.
6.1 Payment of Purchase Price. Cybertec shall have delivered the
Purchase Price pursuant to Article I.
6.2 Truth of Representations and Warranties. The representations and
warranties of Cybertec contained in this Agreement shall be true and correct on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date; and Cybertec shall have
delivered to the Company on the Closing Date a certificate executed by its
Managing Director, dated the Closing Date, to such effect.
6.3 Government Approvals. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received.
STOCK PURCHASE AGREEMENT - Page 15
6.4 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company and its
counsel.
6.5 Management Agreement. The Company and Xxxxxx shall have entered
into the Management Agreement in substantially the same form as Exhibit "A"
hereto.
6.6 Shareholders' Agreement. The Company and all of the shareholders,
including Cybertec and any holder of stock options or warrants of the Company,
including the holders of Warrants to be issued pursuant to this Agreement, shall
have entered into the Shareholders' Agreement in substantially the same form as
Exhibit "B" hereto.
6.7 Consulting Agreement. The Company, MCH and FMCL shall have entered
into the Consulting Agreement in substantially the same form as Exhibit "C"
hereto.
6.8 Investors' Rights Agreement. The Company, MCH, Cybertec, Komlosy,
Shreve, X. Xxxxx and X. Xxxxx shall have entered into the Investors' Rights
Agreement in substantially the same form as Exhibit "E" hereto.
6.9 No Litigation Threatened. Prior to and including the Closing Date,
no action or proceedings shall have been instituted or to the best knowledge of
Cybertec and the Company shall have been threatened before a court or other
governmental body or by any public authority to restrain or prohibit any of the
transactions contemplated herein.
6.10 Consents. Written consents as may be required under any contract,
mortgage, lease, license or other instrument to which Cybertec is a party
requiring consent of another party thereto as a result of the transactions
contemplated by this Agreement shall have been obtained by Cybertec and
delivered to the Company.
6.11 Performance of Agreements/Authorization. Each and all of the
agreements of Cybertec to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed, and Cybertec shall have
delivered to the Company a certificate, executed by its Managing Director, dated
the Closing Date, to such effect. The Company shall have also received (i) a
copy of resolutions of the Board of Directors of Cybertec authorizing the
execution, delivery and performance of this Agreement and all related documents
and agreements, each certified by the managing Director of Cybertec as being
true and correct copies of the originals thereof subject to no modifications or
amendments, and (ii) a certificate of the Managing Director of Cybertec, dated
the Closing Date, as to the performance of and compliance by Cybertec with all
covenants contained herein on and as of the Closing Date and certifying that all
conditions precedent of Cybertec to the Closing Date have been satisfied.
6.12 No Material Adverse Change. During the ninety days prior to the
Closing Date, there shall have been no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise, the results of
operations, or prospects of Cybertec, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise, Cybertec shall
have delivered to the Company a certificate, executed by the Managing Director
of Cybertec, dated the Closing Date, to such effect.
STOCK PURCHASE AGREEMENT - Page 16
ARTICLE VII.
COVENANTS OF THE COMPANY
Until the later of such time that Cybertec owns less than 10% of the
issued and outstanding shares of Common Stock of the Company or unless otherwise
agreed by Cybertec in writing, the Company shall comply with the following
covenants:
7.1 Conduct of Business. The Company shall continue to engage
principally in the business described in the Business Plan dated January 2000.
The Company will keep in full force and effect its corporate existence and will
comply in all material respects with all applicable laws and regulations in the
conduct of its business.
7.2 Key Man Insurance. Within 30 days after closing, the Company will
secure "key man" life insurance in the amount of $1,000,000 on Xxxxxx, the
proceeds of which shall be payable to the Company.
7.3 Business Plan. The Company shall deliver to Cybertec within
forty-five (45) days after the end of each fiscal year, a business plan and
budget for the then current year.
ARTICLE VIII.
CLOSING
8.1 Closing. The consummation of the sale and purchase of the Company
Shares and Cybertec Warrant and the other transactions contemplated by and
described in this Agreement shall take place at a closing (the "Closing") to be
held on July 10, 2000 (the "Closing Date"). The Closing shall be held at the
offices of the Company, 0000 XXX Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, or at
such other place as may be mutually agreed to by the parties hereto and at a
time mutually agreed to by the parties hereto. If acceptable to the Company and
Cybertec, the Closing may be effected by facsimile transmission of executed
copies of the documents delivered at the Closing and payment of the Purchase
Price and by sending original copies of the documents delivered at the Closing
by reputable overnight delivery service, postage or delivery charges prepaid,
for delivery to the parties at their address stated herein by the third business
day following the Closing. All transactions contemplated by this Agreement shall
be deemed effective as of the Closing Date.
8.2 Actions of the Company at Closing. At the Closing, the Company
shall deliver to Cybertec the following:
(a) The certificate(s) representing the Company Shares and
Cybertec Warrant registered in the name of Cybertec.
(b) An opinion letter from Xxxxxx and Xxxxx LLP, counsel for
the Company, in accordance with the provisions of Section 5.1 herein.
(c) The Management Agreement executed by Xxxxxx and the
Company.
STOCK PURCHASE AGREEMENT - Page 17
(d) Certificates of Incumbency for the officers of the Company
making certifications for Closing dated as of the Closing Date.
(e) A copy of resolutions duly and unanimously adopted by the
Company's Board of Directors, as required by law, authorizing and
approving the Company's performance of the transactions contemplated
hereby and the execution and delivery of the documents described
herein, certified as true and in full force as of the Closing Date by
an authorized officer of the Company.
(f) Exhibits and schedules, as applicable, which have been
brought current to the Closing Date.
(g) Good standing and tax certificates as required by Section
5.2 of this Agreement.
(h) Certificate, dated as of the Closing Date and executed by
the President of the Company in conformity with the provisions of
Sections 5.3, 5.4, 5.5 and 5.6 of this Agreement.
(i) All written consents as may be required under any
contract, mortgage, lease, license or other instrument requiring
consent of another party thereto as a result of the transactions
contemplated by this Agreement.
(j) The Shareholders' Agreement executed by Xxxxxx, X. Xxxxx,
X. Xxxxx and the Company.
(k) The Consulting Agreement executed by the Company, MCH and
FMCL.
(l) The Shreve, Komlosy, MCH and Xxxxx Warrants shall be
issued and delivered to the respective parties.
(m) The Investors' Rights Agreement shall be executed and
delivered to the respective parties.
(n) Such other instruments and documents as Cybertec
reasonably deems necessary to effect the transactions contemplated
hereby.
8.3 Actions of Cybertec at Closing. At the Closing, Cybertec shall
deliver to the Company the following:
(a) The Purchase Price for the Company Shares and Cybertec
Warrant which shall be deposited in the bank account designated in
Section 1.3 herein.
(b) The Shareholders' Agreement executed by Cybertec, MCH and
Xxxxxxx.
(c) The Consulting Agreement executed by MCH and FMCL.
STOCK PURCHASE AGREEMENT - Page 18
(d) Certified copies of the resolutions of the Board of
Directors of Cybertec authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby
and Certificates of Incumbency for the officers of Cybertec making
certifications for Closing dated as of the Closing Date.
(e) Certificate, which shall be dated as of the Closing Date
and which shall be signed by the Managing Director of Cybertec,
certifying (i) the authority of Cybertec to enter into and consummate
the transactions contemplated by this Agreement, (ii) the authority of
the officers of Cybertec to execute and deliver any document
contemplated by this Agreement on behalf of Cybertec, (iii) that the
representations and warranties of Cybertec contained in Article III
hereof were true and correct when made and are true and correct as of
the Closing Date, and (iv) that each and every covenant and agreement
of Cybertec contained in this Agreement to be performed by Cybertec on
or prior to the Closing Date has been performed by Cybertec.
(f) All governmental approvals and any other consents, if any,
necessary to permit Cybertec to consummate the transactions
contemplated by this Agreement shall be delivered to the Company.
(g) Good standing certificates for Cybertec.
(h) Such other instruments and documents as the Company
reasonably deems necessary to effect the transactions contemplated
hereby.
ARTICLE IX.
SURVIVAL OF REPRESENTATIONS: INDEMNITY
9.1 Survival of Representations and Obligations to Indemnify. The
respective representations and warranties of the Company and Cybertec contained
in this Agreement or in any Schedule delivered pursuant hereto shall survive the
purchase and sale of the Company Shares and Cybertec Warrant contemplated hereby
for a period of two years. The obligations to indemnify and hold harmless
pursuant to this Article IX shall survive the consummation of the transactions
contemplated by this Agreement.
9.2 Indemnification by the Company. The Company hereby agrees that
notwithstanding any investigation which may have been made by or on behalf of
Cybertec prior to the Closing, the Company shall indemnify, defend and hold
harmless Cybertec (and any affiliated party of Cybertec) at any time after
consummation of the Closing, from and against all demands, claims, actions, or
causes of action, assessments, losses, damages, liabilities, costs and expenses
including, subject to Section 9.4 below, interest, penalties, court costs, and
reasonable attorneys' fees and expenses asserted against, resulting to, imposed
upon or incurred by Cybertec or any affiliated party of Cybertec, directly or
indirectly, caused by reason of or resulting from or arising out of any
misrepresentation or any breach or nonfulfillment of any representation,
covenant, warranty or agreement of the Company contained in this Agreement, in
any exhibit, schedule, certificate or financial statement delivered under this
Agreement, or in any agreement made or executed in connection with the
transactions contemplated by this Agreement.
STOCK PURCHASE AGREEMENT - Page 19
9.3 Indemnification by Cybertec. Cybertec agrees to indemnify, defend
and hold harmless the Company (and any affiliated party of the Company), at any
time after consummation of the Closing, from and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, subject to Section 9.4 below, interest, penalties,
court costs and reasonable attorneys' fees and expenses asserted against,
resulting to, imposed upon or incurred by the Company or any affiliated party of
the Company, directly or indirectly, caused by reason of or resulting from or
arising out of any misrepresentation or any breach or nonfulfillment of any
representation, warranty, covenant and/or agreement of Cybertec contained in
this Agreement, in any exhibit, schedule, certificate or financial statement
delivered under this Agreement, or in any agreement made or executed in
connection with the transactions contemplated by this Agreement.
9.4 Defense.
(a) Promptly after the receipt by any person entitled to
indemnification under Section 9.2 or 9.3 herein of notice of (i) any
claim or (ii) the commencement of any action or proceeding, such party
(the "Aggrieved Party") will, if the claim with respect thereto is made
against any party obligated to provide indemnification pursuant to
Section 9.2 or 9.3 herein (the "Indemnifying Party"), give such
Indemnifying Party written notice of such claim or the commencement of
such action or proceeding and shall permit the Indemnifying Party to
assume the defense of any such claim or any proceeding or litigation
resulting from such claim, unless the action or proceeding seeks an
injunction or other similar relief against the Aggrieved Party or there
is a conflict of interest between it and the Indemnifying Party in the
conduct of the defense of such action. Failure by the Indemnifying
Party to notify the Aggrieved Party of its election to defend any such
proceeding or action within a reasonable time, but in no event more
than 15 days after written notice thereof shall have been given to the
Indemnifying Party, shall be deemed a waiver by the Indemnifying Party
of its right to defend such action.
(b) If the Indemnifying Party assumes the defense of any such
claim or litigation resulting therefrom with counsel reasonably
acceptable to the Aggrieved Party, the obligations of the Indemnifying
Party as to such claim shall be limited to taking all steps necessary
in the defense or settlement of such claim or litigation resulting
therefrom and to holding the Aggrieved Party harmless from and against
any losses, damages and liabilities caused by or arising out of any
settlement or any judgment in connection with such claim or litigation
resulting therefrom. The Aggrieved Party may participate, at its
expense, in the defense of such claim or litigation provided that the
Indemnifying Party shall direct and control the defense of such claim
or litigation. The Aggrieved Party shall cooperate and make available
all books and records reasonably necessary and useful in connection
with the defense. The Indemnifying Party shall not, in the defense of
such claim or any litigation resulting therefrom, consent to entry of
any judgment, except with the written consent of the Aggrieved Party,
or enter into any settlement, except with the written consent of the
Aggrieved Party.
(c) If the Indemnifying Party shall not assume the defense of
any such claim or litigation resulting therefrom, the Aggrieved Party
may defend against such claim or litigation in such manner as it may
deem appropriate and reasonably satisfactory to the Aggrieved Party.
The Indemnifying Party shall promptly reimburse the Aggrieved Party for
the amount of all expenses, legal or otherwise, as incurred by the
Aggrieved Party in connection with the defense against or settlement of
such claim or litigation. No settlement of claim or litigation shall be
made without the consent of the Indemnifying Party, which consent shall
not be unreasonably withheld. If no settlement of the claim or
litigation is made, the Indemnifying Party shall promptly reimburse the
Aggrieved Party for the amount of any judgment rendered with respect to
such claim or in such litigation and of all expenses, legal or
otherwise, as incurred by the Aggrieved Party in the defense against
such claim or litigation.
STOCK PURCHASE AGREEMENT - Page 20
(d) The rights to indemnification hereunder shall apply to
claims made by either party against the other whereby written notice of
the claim has been made and delivered within the period of the
applicable statute of limitations.
ARTICLE X.
MISCELLANEOUS
10.1 Expenses. Except as provided in Section 1.4 herein, the parties
hereto shall pay all of their own expenses relating to the transactions
contemplated by this Agreement.
10.2 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of Texas without regard to the conflict of laws provisions thereof.
10.3 Captions. The Article and Section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
10.4 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue any press release or make any other public statement,
in each case relating to or connected with or arising out of this Agreement or
the matters contained herein, without obtaining the prior approval of all
parties hereto to the contents and the manner of presentation and publication
thereof.
10.5 Notices. Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
telecopy, overnight deliver service or by registered or certified mail, postage
prepaid, addressed as follows: If to Cybertec, Xxxxxxxxxx Xxxxx, Xxxxx Xxxx
Xxxxxx, Xxxxxxx XX0 0XX, XX, Attention: Xx. Xxxxxxx X. Xxxxxxx, Telephone: (44)
000-0000000, Fax No.: (00) 000-0000000, with a copy to its counsel, Xxxxxxx X.
Xxxxxxx, Esq., Xxxxxxx Xxxxxx L.L.P., 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000, XXX, Telephone: (000) 000-0000, Fax: (000) 000-0000; and if to the
Company, 0000 XXX Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, XXX, Attention: Xx.
Xxxxxx Xxxxxxx Xxxxxx, Xx., President, Telephone: (000) 000-0000, Fax: (972)
000-0000, with a copy to its counsel, Xxxx Xxxxxxxx, Xxxxxx and Xxxxx LLP, 0000
Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxxxxxxx, Xxxxx 00000, XXX, Telephone:
(000) 000-0000, Fax: (000) 000-0000, or such other address as shall be furnished
in writing by any such party, and such notice or communication shall be deemed
to have been given as of the date so delivered, sent by fax or mailed.
STOCK PURCHASE AGREEMENT - Page 21
10.6 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law and as may be necessary to consummate the merger of the Company into a
Public Company. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
10.7 Counterparts. This Agreement may be executed in two (2) or more
counterparts, all of which taken together shall constitute one instrument.
10.8 Entire Agreement. This Agreement, including the other documents
referred to herein that form a part hereof, contains the entire understanding of
the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
10.9 Amendments. This Agreement can be waived, amended, supplemented or
modified by written agreement of the parties.
10.10 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
10.11 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
10.12 Negotiation. Each party hereto declares that the provisions of
this Agreement and of all documents annexed thereto or referred to therein, have
been negotiated and declares having read this Agreement and those documents and
having understood their scope and nature.
10.13 Definitions.
(a) "Affiliate" shall mean with respect to a Person, any other
Person which directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with such
Person.
(b) "Indebtedness" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money, (ii)
any indebtedness evidenced by any note, bond, debenture or other debt
security, (iii) any indebtedness for the deferred purchase price of
property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course
of business), (iv) any commitment by which a Person assures a creditor
against loss (including, without limitation, contingent reimbursement
obligations with respect to letters of credit) and (v) any indebtedness
guaranteed in any manner by a Person (including, without limitation,
guarantees in the form of an agreement to repurchase or reimburse.
(c) "Person" includes without limitation any natural person,
joint venture, corporation, partnership, limited liability company,
trust, estate, association, government or governmental entity
(including, but not limited to, any subdivision, branch or agency
thereof) or any other entity.
STOCK PURCHASE AGREEMENT - Page 22
IN WITNESS WHEREOF, Cybertec and the Company have caused their
respective corporate names to be hereunto subscribed by their respective
officers thereunto duly authorized, as of the date first above written.
AVATAR SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxxx Xxxxxx, Xx.
------------------------------------------
Xxxxxx Xxxxxxx Xxxxxx, Xx., President
CYBERTEC HOLDINGS PLC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxx, Managing Director
STOCK PURCHASE AGREEMENT - Page 23
