EXHIBIT 2.1
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
THIRD AMENDMENT TO STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS THIRD AMENDMENT TO THE STOCK PURCHASE AGREEMENT (the "Amendment") is
made and entered into as of the 30th day of September, 1997, by and among
WESTERN MICRO TECHNOLOGY, INC., a Delaware corporation and successor in interest
------------------------------
to Western Micro Technology, Inc., a California corporation ("WMT"), STAR
----
MANAGEMENT SERVICES, INC., a Delaware corporation (the "Company"), XXXXXX X.
------------------------- ---------
NAJIM ("Stockholder 1") and CARLTON XXXXXX XXXXXXX XX ("Stockholder 2")
----- -------------------------
(Stockholder 1 and Stockholder 2 being hereinafter referred to collectively as
the "Stockholders").
RECITALS:
WHEREAS, WMT, the Company and the Stockholders entered into the Stock
Purchase Agreement dated as of June 4, 1997 (the "Stock Purchase Agreement");
and
WHEREAS, WMT, the Company and the Stockholders have executed a letter
agreement dated July 22, 1997 (the "Extension Letter"), extending the term of
the Stock Purchase Agreement to August 31, 1997 and amending the Stock Purchase
Agreement with respect to certain other matters as set forth therein, including,
without limitation, by increasing the amount payable by WMT in the event of a
termination pursuant to Section 11.2 of the Stock Purchase Agreement to One
Million Dollars ($1,000,000) (the "Termination Fee"); and
WHEREAS, WMT, the Company and the Stockholders have executed an Amendment
to Stock Purchase Agreement dated August 29, 1997, extending the term of the
Stock Purchase Agreement (as amended by the Extension Letter) to September 5,
1997 and amending the Stock Purchase Agreement with respect to certain other
matters as set forth therein (the "First Amendment"); and
WHEREAS, WMT, the Company and the Stockholders have executed a Second
Amendment to Stock Purchase Agreement dated September 5, 1997, extending the
term of the Stock Purchase Agreement (as amended by the Extension Letter and the
First Amendment) to September 30, 1997 and amending the Stock Purchase Agreement
with respect to certain other matters as set forth therein (the "Second
Amendment"); and
WHEREAS, in connection with the execution of the Extension Letter, the
First Amendment and the Second Amendment, WMT has paid the Stockholders One
Million Dollars ($1,000,000), all of which is to be the Termination Fee if the
transactions
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CONFIDENTIAL TREATMENT
contemplated by the Stock Purchase Agreement are not consummated.
WHEREAS, WMT, the Company and the Stockholders desire to enter into this
Agreement to further amend the Stock Purchase Agreement; and
WHEREAS, WMT, the Company and the Stockholders intend that this Agreement
supersede the Extension Letter, the First Amendment and the Second Amendment in
their entirety; and
WHEREAS, WMT, the Company and the Stockholders intend that the Stock
Purchase Agreement, as amended by this Amendment, constitute the final
embodiment of the terms of the Stock Purchase Agreement and shall be executed
concurrently with the Closing; and
WHEREAS, unless otherwise defined herein, terms defined in the Stock
Purchase Agreement are used herein as defined therein:
1. the definition of "Unadjusted Cash Payment" in Section 1 is amended to
read as follows:
""Unadjusted Cash Payment" is defined in this Agreement in Section
2.2(a)(A)."
2. Section 2.2(a) of the Stock Purchase Agreement is hereby amended to
read as follows:
"As consideration for the purchase of the Shares, WMT shall pay an
aggregate amount of (i) Forty-Six Million Fifty-Five Thousand Seven Hundred and
Fifty Dollars ($46,055,750) to be paid in cash by wire transfer in immediately
available funds in three installments, subject to adjustment as provided in
Sections 2.2(c) and 2.5, (ii) 460,000 shares of WMT Common and an amount of One
Million One Hundred and Thirteen Thousand Dollars ($1,113,000) to be paid to
Stockholder 2 in cash by wire transfer in immediately available funds and (iii)
the Earn-Out Payments, if any, as provided in Section 2.6 hereof (collectively,
the "Purchase Price"). Such Purchase Price shall be paid as follows:
(A) at the Closing, an aggregate of Thirty-One Million Fifty-Five
Thousand Seven Hundred and Fifty Dollars ($31,055,750), in cash by wire
transfer in immediately available funds (as unadjusted, the "Unadjusted
Cash Payment"), of which (i) One Million Dollars ($1,000,000) has been
previously paid by WMT and allocated between the Stockholders pro rata in
accordance with their respective ownership of the Company, (ii) Seventeen
Million Seven
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CONFIDENTIAL TREATMENT
Hundred and Ninety-Nine Thousand Seven Hundred and Fifty Dollars
($17,799,750) shall be paid to Stockholder 1 and (iii) Twelve Million Two
Hundred and Fifty-Six Thousand ($12,256,000) shall be paid to Stockholder
2, such amounts to be subject to adjustment as provided in Sections 2(c)
and 2.5 hereof (as adjusted, "Cash Payment");
(B) at the Closing, to Xxxxxxxxxxx 0, Xxxx Xxxxxxx Sixty Thousand
(460,000) shares (the "WMT Shares") of WMT Common and a cash payment of One
Million One Hundred and Thirteen Thousand Dollars ($1,113,000) to be made
by wire transfer in immediately available funds;
(C) with respect to the Seven Million Five Hundred Thousand
($7,500,000) aggregate amount which was to be paid to the Stockholders on
the first anniversary of the Closing as originally contemplated in Sections
2.2(a)(C) and 2.2(a)(D) of the Stock Purchase Agreement, (i) at the Closing
Stockholder 1 and Stockholder 2 shall be paid Two Million Five Hundred and
Ninety Five Thousand Five Hundred and Seventy Five Dollars ($2,595,575) and
Nine Hundred and Eighteen Thousand and Seven Hundred and Eighty Eight
Dollars ($918,788), respectively (such amounts reflect a discount of 8.5%)
and (ii) on the first anniversary of the Closing, an aggregate of Three
Million Six Hundred Seventy-Five Thousand Dollars ($3,675,000) in cash by
wire transfer in immediately available funds, which shall be allocated as
follows: $1,000,000 to Stockholder 1 and $2,675,000 to Stockholder 2 (the
"Second Installment");
(D) with respect to the Seven Million Five Hundred Thousand
($7,500,000) aggregate amount which was to be paid to the Stockholders on
the second anniversary of the Closing as originally contemplated in
Sections 2.2(a)(C) and 2.2(a)(D) of the Stock Purchase Agreement, (i)at the
Closing Stockholder 1 and Stockholder 2 shall be paid Two Million Three
Hundred and Eighty Four Thousand and Seven Hundred and Eighty Two Dollars
($2,384,782) and Eight Hundred Forty Four Thousand and One Hundred and
Seventy Dollars ($844,170), respectively (such amounts reflect a discount
of 8.5%) and (ii) on the second anniversary of the Closing, an aggregate of
Three Million Six Hundred Seventy-Five Thousand Dollars ($3,675,000) in
cash by wire transfer in immediately available funds, which shall be
allocated as follows: $1,000,000 to Stockholder 1 and $2,675,000 to
Stockholder 2 (the "Third Installment"); and
(E) to the Stockholders, the Earn-out Payment as provided in Section
2.6 hereof."
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CONFIDENTIAL TREATMENT
3. Section 2.2(b) of the Stock Purchase Agreement is hereby amended to
read as follows:
"(b) At the Closing, WMT shall (i) deliver to Stockholder 2 a certificate
representing the WMT Shares and (ii) pay (x) to each Stockholder an amount equal
to his respective portion of the Unadjusted Cash Payment, as adjusted by the
Estimated Adjustment Amount of $3,237,470 allocated $1,651,109.70 to Stockholder
1 and $1,586,360.30 to Stockholder 2 in accordance with SECTION 2.2(C) hereof,
(y) to Stockholder 1 $4,980,357, in accordance with SECTIONS 2.2(A)(C) AND
2.2(A)(D) and (z) to Stockholder 2 $2,875,958, in accordance with SECTIONS
2.2(A)(B), 2.2(A)(C) AND 2.2(A)(D), by wire transfer of immediately available
funds to the account of such Stockholder, written notice of which account shall
have been provided to WMT not less than one (1) business day prior to the
Closing. The aggregate cash payment to be paid to the Stockholders at the
Closing, after giving effect to the Estimated Adjustment Amount, is hereinafter
referred to as the "Estimated Cash Payment." The Second Installment and the
Third Installment are collectively referred to herein as the "Installment
Payments" or "Installments.""
4. The first sentence of Section 2.2(c) is hereby amended to read as
follows:
"(c) As soon as reasonably practical, but in no event later than two (2)
business days prior to the Closing, the Stockholders shall cause a balance sheet
(the "Estimated Closing Balance Sheet") of the Company as of August 31, 1997
(after giving effect to the Spin-Off), which shall set forth on a consolidated
basis, the net assets of the Company (after giving effect to the Spin-off) as of
August 31, 1997 to be calculated and prepared in accordance with generally
accepted accounting principles ("GAAP") (the amount of such net assets as thus
determined shall hereinafter be referred to as the "Estimated Net Assets") and
to be delivered to WMT."
5. Section 2.4(b)(ii) of the Stock Purchase Agreement is hereby amended
to read as follows:
" (ii) a Certificate representing the 460,000 WMT shares to Stockholder
2;"
6. Section 2.7 is hereby amended to read as follows:
"2.7 Failure to Make Timely Payments. In the event that (A) WMT fails to
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pay an Installment or make an Earn-out Payment (each an "Outstanding Obligation"
and collectively, the "Outstanding Obligations") on the applicable Due Date, and
(B) reasonably believes it does not have sufficient working capital
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CONFIDENTIAL TREATMENT
to pay such Outstanding Obligations, and (C) after using all reasonable efforts
cannot obtain the funds necessary to pay any such Outstanding Obligations, WMT
shall execute and deliver to each Stockholder to whom such Outstanding
Obligation is owed on the applicable Due Date with respect to each such
Outstanding Obligation, a subordinated promissory note, in substantially the
form of EXHIBIT J hereto, in the principal amount of the Outstanding Obligation
then owed (each, a "Promissory Note"). Such Promissory Note shall bear simple
interest from the applicable Due Date at a rate per annum equal to eighteen
percent (18%) or the maximum rate allowable by applicable law, whichever is less
(the "Default Rate"). Such Promissory Note shall have a term of six (6) months
from the applicable Due Date, with accrued interest due and payable monthly. To
the extent the Promissory Note has not been paid in full when due, and
conditioned upon payment of all accrued interest on such Promissory Note at such
time, the Promissory Note shall automatically renew for additional six (6) month
periods with accrued interest due (and such renewal being conditioned upon
payment of such interest) monthly. In the event that WMT subsequently obtains
sufficient working capital or is able to obtain the financing necessary to pay
such obligations, WMT shall pay such portion of the amount due under the
Promissory Note as is reasonably possible under the circumstances."
7. Exhibit K (the "Warrant") and Exhibit L (the "Warrant Registration
Rights Agreement") originally attached to the Stock Purchase Agreement and all
references and provisions in the Stock Purchase Agreement to Exhibit K, Exhibit
L, "Warrant" or "Warrant Registration Rights Agreement" (including, but not
limited to, such references in Sections 1, 2.8, 2.9 and 5.2) are hereby deleted
and shall be of no further force or effect.
8. Section 2.8(a), 2.8(h) and the last flush paragraph of Section 2.8 of
the Stock Purchase Agreement are hereby amended to read as follows:
"2.8 Acceleration of Obligations.
---------------------------
(a) If
(i) a Promissory Note is issued to either Stockholder
pursuant to SECTION 2.7 above and is not paid in full (including
accrued interest) within twelve (12) months of the original date
of issuance,
(ii) WMT fails to timely deliver a Promissory Note to
either Stockholder as required by SECTION 2.7 above,
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CONFIDENTIAL TREATMENT
(iii) WMT materially breaches the covenants set forth in
SECTION 7.9 hereof,
(iv) WMT does not timely pay the Adjustment Amount as set
forth in SECTION 2.55,
(v) WMT fails to timely pay accrued interest, when due, on any
Promissory Note issued pursuant to SECTION 2.7, or
(vi) in the event any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation or other similar
case or proceeding in connection therewith, is filed by WMT or
with respect to WMT by its creditors.
and, after compliance with the procedures and providing the opportunity to cure
as set forth in SECTIONS 2.8(B), (C) and (D) and (E) below, such act or omission
has not been, or cannot be, cured or corrected, each affected Stockholder may,
in his sole discretion, declare all unpaid Installment Payments, Earn-out
Payments and Promissory Notes in default and demand payment pursuant to this
SECTION 2.8(A) by providing WMT with a notice of its intent to so accelerate
such obligations (the "Acceleration Notice"). WMT shall, within thirty (30) days
of the receipt of the Acceleration Notice, pay, in a lump sum, (A) to
Stockholder 1 (if there shall be a default in the obligations to Stockholder 1),
the aggregate amount of $4,550,000 plus accrued interest, if any, on outstanding
Promissory Notes originally issued to Stockholder 1 minus any Installment
Payments or Earn-out Payments or principal payments on Promissory Notes received
by Stockholder 1 or any assignee thereof prior to such date, and to Stockholder
2 (if there shall be a default in the obligations to Stockholder 2), an
aggregate amount equal to $7,800,000 plus accrued interest, if any, on
outstanding Promissory Notes originally issued to Stockholder 2 minus any
Installment Payments or Earn-out Pay Payments or principal payments on
Promissory Notes received by Stockholder 2 or any assignee thereof prior to such
date. Upon such payment, the Installment Payment and the Earn-out Payment, and
any related outstanding Promissory Note, shall be deemed satisfied in full. Such
payments under this SECTION 2.8(A) are in lieu of any further Installment
Payments, Earn-out Payments, payments under the Promissory Notes or other
payments hereunder or thereunder. To the extent any of the Promissory Notes have
been properly assigned prior to such date, payments shall be made to the then
holder or holders of such Promissory Notes of the outstanding principal and
interest thereon in cancellation thereof, and the payments otherwise due
hereunder to Stockholder 1 or Stockholder 2, as the case may be, shall be
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CONFIDENTIAL TREATMENT
correspondingly reduced on a dollar-for-dollar basis by such payments."
"(h) Concurrent with a Change in Control, WMT shall pay, in a lump sum, (i)
to Stockholder 1, the aggregate amount of $4,550,000 plus accrued interest, if
any on outstanding Promissory Notes originally issued to Stockholder 1 minus any
Installment Payments or Earn-out Payments or principal payments on Promissory
Notes received by Stockholder 1 or any assignee thereof prior to such date, and
(ii) to Stockholder 2, an aggregate amount equal to $7,800,000 plus accrued
interest, if any on outstanding Promissory Notes minus any Installment Payments
or Earn-out Payments or principal payments on Promissory Notes received by
Stockholder 2 or any assignee thereof prior to such date. A "Change in Control"
will be deemed to have occurred upon (A) a sale of substantially all of the
assets of WMT and its subsidiaries, on a consolidated basis, (B) any person
acting alone or together that would constitute a "group" for purposes of section
13d-3 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), as
then in effect, shall acquire beneficial ownership (as defined in Rule 13(d)
under such Act) of more than fifty percent (50%) of the WMT Common or (C) a
merger or consolidation of WMT with another company if the holders of the voting
stock of WMT immediately prior to such merger or consolidation do not own or
control more than fifty percent (50%) of the voting stock of the surviving
corporation. Such payments under this SECTION 2.8(H) are in lieu of any further
Installment Payments, Earn-out Payments, payments under the Promissory Notes or
other payments hereunder or thereunder. To the extent any of the Promissory
Notes have been properly assigned prior to such date, payments shall be made to
the then holder or holders of such Promissory Notes of the outstanding principal
and interest thereon in cancellation thereof, and the payments otherwise due
hereunder to Stockholder 1 or Stockholder 2, as the case may be, shall be
correspondingly reduced on a dollar-for-dollar basis by such payments."
"Notwithstanding anything in this Agreement to the contrary, if the XXX
Agreement is terminated prior to the delivery of an Acceleration Notice, the
Stockholders shall only be entitled to payment, when due, of Earn-out Payments
that had accrued as of the date of such termination and, upon payment of such
accrued amounts, the Earn-out Payments shall be deemed to have been paid in full
for purposes of SECTIONS 2.8(A) and 2.8(H) Without limiting the generality of
the foregoing, for the purposes of SECTIONS 2.8(A) and 2.8(H), upon payment of
such accrued amounts, Stockholder 1 will be deemed to have received $2,550,000
in Earn-out Payments and Stockholder 2 will be deemed to have received
$2,450,000 in Earn-out Payments.
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CONFIDENTIAL TREATMENT
9. Section 2.9 of the Stock Purchase Agreement is hereby deleted in its
entirety and replaced with "[omitted]".
10. Section 2.11 of the Stock Purchase Agreement is hereby amended to read
as follows :
"2.11 Treatment of Stockholders Equally. The Company shall not
---------------------------------
discriminate among the Stockholders with respect to the timely payment of Earn-
out Payments or Installment Payments or otherwise in connection with the
performance of its obligations under this Section 2. Notwithstanding the
foregoing, in the event that WMT is unable to pay the entire amount due to the
Stockholders with respect to the Second Installment or Third Installment, any
amounts paid by the Company in respect of either such Installment Payments, or
any Promissory Notes issued in lieu thereof, shall be paid equally on a dollar-
for-dollar basis up to the total amount due such Stockholder. For example, if
WMT were only able to pay $1,000,000 on the Second Installment, $500,000 would
be paid to Stockholder 1 and $500,000 to Stockholder 2."
11. Section 6.2(e) of the Stock Purchase Agreement is hereby deleted in
its entirety and shall be of no further force or effect.
12. Section 7.9(a) and 7.9(b) of the Stock Purchase Agreement are hereby
amended to read as follows:
"(a) there will not be any direct or indirect redemption, purchase or other
acquisition of the capital stock of WMT by WMT (other than in connection with
(i) a reincorporation; (ii) the repurchase of unvested stock by WMT in
connection with the termination of employment of WMT employees; (iii) the
redemption or repurchase by WMT of any preferred stock issued by WMT in
connection with the private placement of WMT Series A Preferred Stock issued as
of September 19, 1997 (or to pay any Earn-out Payments, Installment Payments or
Promissory Notes relating thereto); (iv) the redemption or repurchase by WMT of
any Series B preferred stock issued by WMT in conjunction with debt financing
used to finance in whole or in part the transaction contemplated by this Stock
Purchase Agreement; (v) the repurchase of all or any portion of the Put Warrants
pursuant to Section 11 of the Registration and Put Rights Agreement dated as of
September 30 among WMT, Canpartners Investments IV, LLC and Xxxxxx Xxxxxxx Inc;
or (vi) the repurchase of all or any portion of the Put Warrants pursuant to
Section 11 of the Registration and Put Rights Agreement dated as of September 30
among WMT and IBM Credit Corporation);
(b) there will not be a declaration or payment of any cash dividend or
other non-equity payment in respect of shares of
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CONFIDENTIAL TREATMENT
capital stock (other than in connection with the declaration or payment of any
cash dividend or other non-equity distribution or non-equity payment made with
respect to the WMT Series A Preferred Stock issued as of September 19, 1997 or
other equity raised for the purpose of financing any Earn-out Payments,
Installment Payments or Promissory Notes relating thereto);"
13. Section 9.3(f)(iii) of the Stock Purchase Agreement is hereby deleted
in its entirety and replaced with "[omitted]".
14. Section 11.1(c) of the Stock Purchase Agreement is hereby amended as
follows:
"(c) by WMT, on the one hand, or the Stockholders, on the other hand, if
the Closing shall not have occurred on or before September 30, 1997 or such
later date as may be mutually agreed upon in writing by the parties."
15. With respect to Section 11.2 of the Stock Purchase Agreement, WMT, the
Company and the Stockholders hereby acknowledge and agree that they are
executing this Amendment immediately prior to the Closing and that, therefore,
Section 11.2 is rendered inapplicable and shall have no further force or effect.
WMT, the Company and the Stockholders further acknowledge and agree that WMT has
previously paid an aggregate amount of One Million Dollars ($1,000,000) to the
Stockholders and that, should the Closing fail to occur (i) such One Million
Dollars ($1,000,000) amount shall constitute full and complete payment of any
Termination Fee which WMT may be obligated to pay under the Stock Purchase
Agreement as amended by this Agreement, (ii) WMT waives any right it may have to
a termination fee from the Company or the Stockholders and (iii) neither WMT, on
the one hand, nor the Company and the Stockholders, on the other hand, shall
have any further obligations to the other, including the return of any amounts
previously paid.
16. WMT agrees to, and does hereby, transfer to the Company all rights to
the name "Business Partner Solutions" and waives any rights it may have to such
name. WMT acknowledges that the Company may commence use of the name "Business
Partner Solutions, Inc." prior to the Closing and consents thereto. WMT will
take such further actions as reasonably necessary to transfer the rights to such
name and enable the Company to use such name in its operations.
17. Exhibit A and Exhibit B to the Stock Purchase Agreement are hereby
supplemented by Exhibit A and Exhibit B attached hereto, respectively.
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CONFIDENTIAL TREATMENT
18. The XXX Agreement attached as Exhibit F to the Stock Purchase
Agreement is hereby superseded in its entirety by the form of XXX Agreement
attached hereto as Exhibit C.
19. The Promissory Note attached as Exhibit J to the Stock Purchase
Agreement is hereby superseded in its entitety by the form of Promissory Note
attached hereto as Exhibit D.
20. The Stock Purchase Agreement shall remain in full force and effect
without change, except to the extent amended or modified hereby.
21. The Stock Purchase Agreement is hereby amended to include the
following:
"THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AND
INTERCREDITOR AGREEMENT IN FAVOR OF CANPARTNERS INVESTMENTS IV, LLC, A
CALIFORNIA LIMITED LIABILITY COMPANY, AND XXXXXX XXXXXXX INC., A DELAWARE
CORPORATION, WHICH SUBORDINATION AND INTERCREDITOR AGREEMENT CONTAINS CERTAIN
SUBORDINATION PROVISIONS AND IS INCORPORATED HEREIN BY REFERENCE.
NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED IN THE WITHIN INSTRUMENT, NO
PAYMENT ON ACCOUNT OF THE PRINCIPAL, PREMIUM, IF ANY, OR INTEREST HEREOF SHALL
BECOME DUE OR BE PAID IN VIOLATION OF THE TERMS OF SUCH SUBORDINATION AND
INTERCREDITOR AGREEMENT."
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CONFIDENTIAL TREATMENT
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as of
the date first set forth above.
STAR MANAGEMENT SERVICES, INC.
By /s/ Carlton Xxxxxx Xxxxxxx, XX
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Its President
------------------------------
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
/s/ Carlton Xxxxxx Xxxxxxx XX
-----------------------------
Carlton Xxxxxx Xxxxxxx XX
WESTERN MICRO TECHNOLOGY, INC.
By /s/ Xxxxx X. Xxxxx
-------------------------
Its Chief Financial Officer
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CONFIDENTIAL TREATMENT
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
EXHIBIT C
INDUSTRY REMARKETER AFFILIATE AGREEMENT
---------------------------------------
THIS INDUSTRY REMARKETER AFFILIATE AGREEMENT (this "Agreement"), dated as
of September __, 1997, is made by and between WESTERN MICRO TECHNOLOGY, INC., a
-----------------------------
Delaware corporation ("Western") having offices at 000 Xxxx Xxxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000 and STAR DATA SYSTEMS, INC. or its successor in
----------------------
interest, a Texas corporation ("SDS"), having offices at 000 Xxxx Xxxx, Xxx
Xxxxxxx, Xxxxx 00000 (Western and SDS are together referred to as "WMT"), and
SIRIUS COMPUTER SOLUTIONS, LTD., a Texas Limited Partnership having offices at
------------------------------
the Spectrum Building, 10th Floor, 000 Xxxxxxxxx Xxxx 000, Xxx Xxxxxxx, Xxxxx
00000 ("XXX").
RECITALS:
A. WMT is authorized to market and distribute certain Products, including
IBM Products, to resellers; WMT is authorized and wishes to appoint XXX as a
solution provider affiliate to sell to End-Users the IBM Products it acquires
exclusively from WMT and to engage XXX to sell other non-IBM Products it
acquires from WMT to End-Users; and XXX is willing to serve in such capacities
s.
B. For the consideration and mutual promises set forth in this Agreement,
the parties agree as follows:
1. Definitions. The terms used in this Agreement have the following
-----------
meanings:
1.1 "End User" means anyone, unaffiliated with XXX, who acquires Products
for its own use and not for resale.
1.2 "IBM" means International Business Machines, Inc. and its
subsidiaries.
1.3 "Machine" means an IBM or non-IBM machine, its features, conversions,
upgrades, elements, accessories, cables or any combination of them (provided by
IBM or another OEM to WMT) approved by IBM or another OEM to be provided to XXX.
1.4 "Original Equipment Manufacturer" or "OEM" means an original equipment
manufacturer, including without limitation IBM.
1.5 "Product" means a Machine, Program or Service which WMT has been
authorized to distribute to XXX.
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CONFIDENTIAL TREATMENT
1.6 "Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
1.7 "Program" means an IBM or non-IBM licensed program (provided by IBM or
another OEM to WMT) approved by IBM or the other OEM to be provided to XXX.
Program does not include an OEM's licensed internal code.
1.8 "Service" means assistance performed or marketed by WMT, including
without limitation use of a resource (such as a network) approved by IBM to be
provided to XXX.
1.9 "Subsidiary" means with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
1.10 "Stock Purchase Agreement" means the Stock Purchase Agreement dated
June 4, 1997, by and among Western, Star Management Services, Inc., Xxxxxx X.
Xxxxx and Xxxxxxx Xxxxxx Xxxxxxx XX, as amended.
1.11 "Value Added Enhancement" or "VAE" means the industry specific IBM
approved Application Software Program.
2. Appointment of Industry Remarketer Affiliate. WMT hereby appoints XXX
--------------------------------------------
as one of its industry remarketer affiliates (also referred to as solution
provider affiliates) of IBM Products for marketing and sale to End Users in the
United States and Puerto Rico with IRA's VAEs. This appointment is not exclusive
with respect to WMT and WMT has entered into and reserves the right to enter
into similar agreements with others for the purpose of marketing and
distributing Products. This appointment is exclusive with respect to providing
IBM Products to XXX for resell and XXX agrees to not enter into any similar
arrangement with any others for the purpose of selling IBM Products to End
Users.
3. XXX Obligations.
---------------
3.1 IBM Requirements. XXX shall be subject to any obligations or
----------------
restrictions imposed by IBM under the terms of any applicable agreement between
WMT and IBM, as such terms may change from time to time, or between XXX and IBM,
as such terms may change from time to time, and XXX agrees to be bound by and
comply with any such obligations or restrictions. In particular, and without
limitation, XXX will comply with all IBM
2
CONFIDENTIAL TREATMENT
requirements set forth in IRA's agreement with IBM, as amended from time to
time.
3.2 Transition Period. During the [***] ([*]) month period immediately
-----------------
following the consummation of the transaction contemplated by the Stock Purchase
Agreement (the "Transition Period"), WMT and XXX will share certain employees
and miscellaneous expenses in accordance with the allocation set forth in the
Schedule that is attached as Exhibit A to this Agreement (the "Cost Sharing
Schedule"). Either party may elect to extend the Transition Period for up to
[*****] ([**]) days upon [*****] ([**]) days prior written notice to the other
party of such extension. Every [*****] ([**]) days during the Transition Period,
the parties will discuss and decide, in good faith, whether any adjustments
should be made to the Cost Sharing Schedule. Each party will pay within [***]
([**]) days of the end of each month the net monthly cost attributable to such
party as shown on the Cost Sharing Schedule.
4. WMT Obligations.
---------------
4.1 Support. WMT will provide telephone support at no charge to up to
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[***] ([*]) identified IRA employees. Such employees shall be technical
personnel rather than sales personnel. At the request of XXX, WMT will provide
support to End Users at [*******************************], which, as of the date
of this Agreement, is $[***] per hour. At the direction of XXX, WMT will either
invoice XXX or such End User for WMT's services with respect to such End Users.
If XXX decides to offer monthly support contracts to End Users, then WMT agrees
to provide the services under the contracts entered into by XXX, or enter into
contracts directly with such End Users, as may be elected by XXX. The applicable
charge by WMT to XXX or such End Users, as the case may be, shall be as follows
:
Monthly Support Monthly Support
Charge for Service Charge for 24-Hour
From 8-5 CST on Service,
IBM Product Business Days Only 7 Days a Week
----------- ------------------ -----------------
9402's $[***] $[***]
9406's $[***] $[***]
XXX shall be entitled to all proceeds received from End Users in excess of the
above described WMT service charges.
4.2 Personnel Rebate. WMT shall pay to XXX a personnel rebate at a rate of
----------------
$[*****] for each $[*******] of Product purchased by XXX from WMT under this
Agreement as more specifically
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
3
CONFIDENTIAL TREATMENT
set forth below. The value of the Products purchased by XXX (the "Actual Dollar
Value") shall be calculated based upon WMT's [***************************]. For
purposes of this Agreement, "Net Sales" means[**********************************
********************************************************************************
********************************************************************************
********************************************************************************
*****************************************************]. Within [***] ([**]) days
after the end of each calendar quarter or the termination of this Agreement
pursuant to SECTION 9 hereof, WMT will calculate the Actual Dollar Value of
Products purchased by XXX from WMT during the preceding calendar quarter (or the
Current Calendar quarter in the case of termination) and will pay to XXX the
personnel rebate due for such period based upon such Actual Dollar Value
calculated as follows :
[******************************
***************]
For example, if XXX purchased $[********] of Product during a calendar
quarter, then WMT would pay XXX a $[******] personnel rebate for such quarter.
If XXX purchased an aggregate of $[*********] in Product, then personnel rebates
with respect to such purchases would total $[*******].
5. Delivery and Title.
------------------
5.1 Delivery. Upon receipt of each purchase order by WMT, if the Product
--------
is not then in WMT's inventory, WMT will, as soon as reasonably possible but in
no event later than two (2) days following receipt of such purchase order, place
the order with IBM or other applicable OEM. With respect to Products in WMT's
inventory or after receipt of such products from the applicable OEM, WMT shall
ship such Products, as soon as reasonably possible, F.O.B. WMT's or IBM's or
the other OEM's facility in the continental United States. Such Products shall
be insured by WMT at IRA's cost; provided, however, XXX shall not be obligated
to pay any shipping or insurance charges to the extent such charges are paid by
IBM or other OEM. All Products shall be packaged for shipment in accordance with
WMT's usual and customary practices which shall be reasonably calculated to
provide adequate protection for its Products. The method of shipment and common
carrier shall be selected by XXX.
5.2 Passing of Title. Title to the IBM or other Machines will pass from
----------------
WMT to XXX. XXX shall pass title to the Machines directly to the End User or, if
applicable, to a third party financing institution on behalf of the End User.
IBM and other OEMs do not transfer title to Programs.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
4
CONFIDENTIAL TREATMENT
6. Price; Payment.
--------------
6.1 Product Costs; Payment Terms.
----------------------------
(a) XXX shall acquire the Products from WMT at the prices of each such
Product as per Exhibit B to this Agreement (the "Price Schedule"). The prices
set forth on the Price Schedule shall be increased or decreased, as the case may
be, from time to time for the following reasons: (i) to comply with SECTION
6.1(B) below; and (ii) to reflect increases or decreases, as the case may be, in
the OEM's price to WMT.
(B) [********************************************************************
*******************************************************************************
*******************************************************************************
*******************************************************************************
****]
(c) For Products which do not have a price set forth on the Price
Schedule, the cost to XXX shall be based upon a [***] percent ([**]%) gross
margin to WMT.
(d) WMT shall not be responsible for any applicable taxes resulting
exclusively from IRA's purchases of Products under this Agreement, other than
taxes based on WMT's sales or income. Payment of WMT's invoice shall be due
forty-five (45) days after the invoice date.
(e) Any price decrease for a Product as contemplated by SECTION 6.1(A)
above shall be effective on the effective date of the OEM's corresponding price
reduction with respect to such Product. XXX shall receive the benefit of any
such OEM price reduction with respect to any Product covered by such price
reduction that (i) as of the effective date of such OEM price reduction, has
been ordered by XXX and has not been shipped, or has been shipped but not
installed with the End User (and WMT receives the price decrease with respect to
such Product), or (ii) is ordered by XXX subsequent to the effective date of
such OEM price reduction. Any price increase for a Product as contemplated by
SECTION 6.1(A) above shall be effective on the effective date of the OEM's price
increase with respect to such Product.
6.2 Delinquent Payments. If IRA's account becomes delinquent, and the
-------------------
amount of such account is not in dispute, WMT may do one or more of the
following: (a) impose a finance charge, up to the maximum permitted by law, on
the delinquent portion of the balance due; or (b) pursue any other remedy
available at law to collect such delinquent amount.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
5
CONFIDENTIAL TREATMENT
7. Arbitration. Any unresolved dispute arising out of or relating to this
-----------
Agreement, any schedule, certificate or other document delivered by any party in
connection with this Agreement or incident to the transactions contemplated
hereby or the breach, inaccuracy, termination or validity hereof or thereof or
otherwise arising out of or relating to the transactions contemplated hereby and
thereby, or any other agreement among them or between any of them, whether
entered into prior to, on or subsequent to the date of this Agreement or those
arising under any federal, state or local law, regulation or ordinance, shall be
determined by binding arbitration in accordance with certain aspects of the then
current Commercial Arbitration Rules of the American Arbitration Association. If
the amount in controversy in the arbitration exceeds Two Hundred Fifty Thousand
Dollars ($250,000), exclusive of interest, attorneys' fees and costs or if the
controversy relates to the termination of this Agreement pursuant to SECTION 9.2
below, the arbitration shall be conducted by a panel of three (3) neutral
arbitrators. Otherwise, the arbitration shall be conducted by a single neutral
arbitrator. The parties shall endeavor to select neutral arbitrators by mutual
agreement. If such agreement cannot be reached within ten (10) business days
after a dispute has arisen which is to be decided by arbitration, any party or
the parties jointly shall request the American Arbitration Association to submit
to each party an identical panel of fifteen (15) persons. Alternate strikes
shall be made to the panel, commencing with the party bringing the claim, until
the name of three (3) persons remain, or one (1) person if the case is to be
heard by a single arbitrator. The parties may, however, by mutual agreement
request the American Arbitration Association to submit additional panels of
possible arbitrators. The person(s) thus remaining shall be the arbitrator(s)
for such arbitration. If three (3) arbitrators are selected, the arbitrators
shall elect a chairperson to preside at all meetings and hearings. If a dispute
is to be resolved by a sole arbitrator in accordance with the terms hereof, or
if the dispute is to be resolved by a panel of three (3) arbitrators as provided
hereinabove, then such sole arbitrator or the chairperson of such panel, as the
case may be, shall be a member of a state bar engaged in the practice of law in
the United States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority of the
arbitrators in the case of a panel of arbitrators, shall be in writing and
reasoned, shall be based on the evidence admitted and the substantive law of the
State of Delaware and shall contain an award for each issue and counterclaim.
The award shall be made within thirty (30) days following the close of the final
hearing and the filing of any post-hearing briefs authorized by the
arbitrator(s). The award of the arbitrator(s) shall be final and binding on the
parties hereto and the subject matter. The arbitration shall be
6
CONFIDENTIAL TREATMENT
governed by the United States Arbitration Act, 9 U.S.C. (S) 1--16, and judgment
upon the award rendered by the arbitrator(s) may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Denver, Colorado. Each
party shall be entitled to inspect and obtain a copy of relevant documents in
the possession or control of the other party and to take depositions of the
other party's employees, agents, representatives and witnesses (including
expert witnesses). All such discovery shall be in accordance with procedures
approved by the arbitrator(s). Unless otherwise provided in the award, each
party shall bear its own costs of discovery. No party shall be entitled to
submit interrogatories to the other parties. All discovery shall be expedited,
consistent with the nature and complexity of the claim or dispute and consistent
with fairness and justice. The arbitrator(s) shall have the power to compel any
party to comply with discovery requests of the other parties and to issue
binding orders relating to any discovery dispute which shall be enforceable in
the same manner as awards. The arbitrator(s) also shall have the power to
impose sanctions for abuse or frustration of the arbitration process, including
without limitation, the refusal to comply with orders of the arbitrator(s)
relating to discovery and compliance with subpoenas. The arbitrator(s) are not
empowered to award damages in excess of actual damages and the XXX and WMT
hereby irrevocably waive any right to recover such damages with respect to any
dispute resolved by arbitration. Each of the parties agrees to participate in
good faith in the arbitration process and take all reasonable actions to
conclude such arbitration as soon as possible.
8. Term. Subject to earlier termination in accordance with SECTION 9 of
----
this Agreement, the term of this Agreement shall commence on the date set forth
above and continue for a period of thirty-six (36) months thereafter at which
time this Agreement will terminate unless otherwise mutually agreed to by
the Parties hereto.
9. Termination.
-----------
9.1 Termination by WMT; Expiration. WMT shall have the right to (a)
------------------------------
terminate this Agreement immediately upon written notice to XXX if WMT is
notified by IBM that XXX no longer meets IBM's guidelines and (b) terminate its
obligation with respect to providing any other OEM's Products to XXX if XXX no
longer meets such OEM's guidelines.
9.2 Termination by XXX. XXX reserves the right to terminate this
------------------
Agreement, upon written notice to WMT if:
7
CONFIDENTIAL TREATMENT
(a) [*******************************************************************
******************************************************************************
****************]
(b) [*******************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
******************************]
(c) if, after a Change of Control (as defined in SECTION 2.8(E) of the
Stock Purchase Agreement) of WMT, [***********] gives XXX notice of its intent
to terminate its distributor agreement with XXX and such notice is not withdrawn
within fifteen (15) business days, or
(d) WMT's contractual relationship with IBM is terminated or expires and
is not renewed, or
(e) if WMT's contractual relationship with IBM is materially modified or
amended with respect to discounts WMT receives as a distributor and such
modification or amendment adversely puts IRA's business at a material
competitive disadvantage (a "Material Modification").
For purposes of this Agreement, a "Material Breach" shall mean a material
breach of this Agreement including, without limitation, (i) WMT's failure to
pass on material rebates, discounts, etc., provided for in Exhibit B to this
Agreement; (ii) WMT unreasonably refusing to accept or process a material or
service order under this Agreement; and (iii) WMT not providing the personnel
rebate set forth in Section 4.2 of this Agreement, in each case in material
breach of the terms of this Agreement and having a material adverse effect on
XXX.
Each party recognizes that the provisions regarding termination of this
Agreement set forth in SECTION 9.2 can impose a severe and unexpected burden on
WMT and that a bona fide dispute can arise as to (i) the proper characterization
for these purposes of acts or omissions constituting a Material Breach of this
Agreement or (ii) whether a Material Modification has occurred. If XXX believes
a Material Breach of this Agree ment or a Material Modification has occurred,
XXX shall give WMT written notice (the "Breach Notice") that a Material Breach
or Material Modification has occurred, describing the acts or omissions
complained of and providing a reasonable description of the action it requires
of WMT to correct and cure such Material Breach (e.g., any actual damages
incurred as a result of such Material Breach) or such Material Modification.
Within five (5) business days of IRA's delivery of such notice, WMT shall
deliver a written notice to XXX of any objections to the
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
8
CONFIDENTIAL TREATMENT
matters contained in such Breach Notice (the "Objection Notice"). Such Objection
Notice may relate to whether a Material Breach or Material Modification has
occurred, the description of the matter giving rise to the claim of Material
Breach or Material Modification or the actions required of WMT to cure and
correct such Material Breach or Material Modification. The failure of WMT to
deliver the Objection Notice within the required time will constitute WMT's
acceptance of all of the matters described in the Breach Notice and the failure
of WMT to object to any matter stated in such Objection Notice will constitute
WMT's acceptance of the matters not objected to therein. If WMT timely objects
to the matters set forth in such Breach Notice, XXX and WMT shall endeavor for
the ten (10) business day period following receipt of such objection to resolve
such dispute. If at the end of such ten (10) business day period, WMT and XXX
are unable to resolve the disagreements set forth in the Objection Notice, such
dispute shall be resolved by arbitration in accordance with SECTION 7 hereof and
that during the pendency of any such arbitration proceeding, the termination
rights created by such provisions shall be stayed. The arbitrator shall be
instructed to resolve the following matters, and only these matters, to the
extent objected to or raised in the Objection Notice, all of such matters to be
resolved in one proceeding: (i) whether a Material Breach or a Material
Modification has occurred, (ii) with respect to a Material Breach, the validity
of IRA's claim with respect to the acts or omissions complained of in the Breach
Notice; (iii) if the acts or omissions which were the subject of the Breach
Notice have occurred and to the extent such Material Breach or Material
Modification can be cured or corrected, the actions necessary to cure or correct
such Material Breach or Material Modification; (iv) the actual damages incurred
by XXX, if any, with respect to the acts or omissions which were the subject of
the Breach Notice; and (v) the validity and actual damages incurred by WMT with
respect to the claims, if any, properly made by WMT against XXX in the Objection
Notice. WMT shall have a thirty (30) day cure period (five (5) business day cure
period with respect to cash payment or the cure or correction of a Material
Modification) after the matters set forth in the Breach Notice are finally
resolved (whether upon the failure to timely object, mutual agreement by the
parties, or pursuant to the finding of the arbitrator), and to the extent such
Material Modification or other act or omission giving rise to a Material Breach
may be cured or corrected, to take such actions finally determined pursuant to
this section to be necessary to cure or correct such Material Breach or Material
Modification. Whether or not the arbitrator concludes that a Material Breach of
this Agreement can be cured or corrected, the arbitrators as part of the
arbitrators' decision, shall determine the actual damages (which shall not
include any incidental, consequential or special damages) suffered by the
9
CONFIDENTIAL TREATMENT
XXX (with respect to terminations under clause (a) of SECTION 9.2) and shall
offset against such amount, any actual damages suffered by WMT as a consequence
of a Material Breach of this Agreement by the XXX; provided, however, WMT shall
not be entitled to an offset for such actual damages suffered by WMT unless such
claims are set forth in the Objection Notice and submitted to arbitration
concurrently with all of the matters set forth in the Objection Notice. In
addition to the action finally determined to be necessary to cure or correct
such Material Breach, but without duplication, WMT shall pay, within ten (10)
business days of such final arbitration decision, to XXX the amount of actual
damages, if any, incurred by XXX, net of the offsets described in the preceding
sentence. In the event that WMT fails to take the actions finally determined
hereunder to be necessary to cure or correct the acts or omissions complained of
within the applicable cure period, a Material Breach or Material Modification,
as the case may be, shall be deemed to have occurred and XXX shall be entitled
to terminate this Agreement pursuant to the foregoing sentence without any
further notices (other than the notice of termination), cure periods or
arbitration proceedings set forth in this SECTION 9.2 with respect to whether
WMT properly cured or corrected such Material Breach or Material Modification,
as the case may be, or paid the actual damages as finally determined. If a
Material Breach is determined to have occurred and WMT properly cures or
corrects the Material Breach as permitted hereunder, and thereafter the act or
omission of WMT which gave rise to the claim of Material Breach continues to
occur, then, notwithstanding any provision in this SECTION 9.2 to the contrary,
XXX may terminate this Agreement pursuant to clause (a) of this SECTION 9.2
without complying with the notice, cure and arbitration provisions of this
SECTION 9.2.
9.3 Termination by XXX for Non-Payment of Second and Third Installment or
----------------------------------------------------------------------
Earn-out. Notwithstanding SECTION 9.2 hereof, in the event that WMT fails to
--------
timely pay on the applicable Due Date (as defined in the Stock Purchase
Agreement) the entire amount due to Xxxxxx X. Xxxxx on the first anniversary of
the Closing pursuant to SECTION 2.2(A)(C) of the Stock Purchase Agreement or the
second anniversary of the Closing pursuant to SECTION 2.2(A)(D) of the Stock
Purchase Agreement or any Earn-out payment due under SECTION 2.6 of the Stock
Purchase Agreement, for any reason whatsoever, the XXX shall thereafter be
entitled to terminate this Agreement with 30 days prior written notice.
Termination under this SECTION 9.3 shall be in addition to any other rights,
payments or remedies to which Xxxxxx X. Xxxxx may be entitled.
9.4 Effect of Termination or Expiration. Upon the expiration or
-----------------------------------
termination of this Agreement, XXX will (a) continue to fulfill its obligations
to End Users and in such a way as not to
10
CONFIDENTIAL TREATMENT
reflect adversely on WMT or the Products; (b) pay to WMT when due all
outstanding amounts including, but not limited to, any amounts owing under
SECTION 6 hereof within forty-five (45) days of the invoice date. Upon the
expiration or termination of this Agreement, WMT will (a) continue to fulfill
its obligations to End Users and in such a way as not to reflect adversely on
XXX, or the Products and (b) pay XXX all due and outstanding amounts including,
without limitation, any amounts due and owing to XXX under SECTION 4.2 hereof.
10. Confidentiality. WMT acknowledges and agrees that this Agreement is
---------------
being executed in connection with the consummation of the transactions
contemplated by the Stock Purchase Agreement, including the Spin-off (as defined
therein) of the End User Business (as defined therein) of SDS into XXX. Western
and SDS, jointly and severally, agree to use commercially reasonable efforts to
assist XXX to maintain its present business relationship with the End User
customers of SDS prior to the Spin-off for the benefit of XXX. Western and SDS
jointly and severally agree that they will (and will cause each person under
their control to) keep confidential and not use any confidential information or
make available to any others any documents, files, customer lists, price lists,
or other papers or information concerning such End User Business except if
required pursuant to an order of any court or administrative agency or otherwise
required by law.
11. Miscellaneous Provisions.
------------------------
11.1 Independent Contractor. WMT and XXX are independent contractors.
----------------------
Neither party will have any right or authority to act on behalf of the other and
neither party shall represent that it has such right or authority.
11.2 Assignment. XXX agrees not to assign, or otherwise transfer, this
----------
Agreement or its rights under it or delegate its obligations or appoint another
reseller (including a related company) or agent to represent it, without the
consent of WMT which shall not be unreasonably withheld. Any attempt to do
either is void. A transfer of all or part of the ownership interest in XXX by
Xxxxxx X. Xxxxx shall not be deemed an assignment prohibited hereunder. WMT
agrees not to (a) assign, or otherwise transfer, this Agreement or its rights
under it or (b) delegate its obligations or appoint another distributor
(including a related company) or agent to represent it without the consent of
XXX, which shall not be unreasonably withheld; provided, however, with respect
to a Change in Control (as defined in the Stock Purchase Agreement) such consent
may be withheld in IRA's sole discretion. Any attempt to do either is void. A
Change in Control of WMT shall be deemed an assignment and prohibited hereunder,
provided, however, XXX shall be deemed
11
CONFIDENTIAL TREATMENT
to have consented to such assignment if all of the Installment Payments and
Earn-out Payments or Promissory Notes related thereto due upon a Change in
Control have been paid in accordance with SECTION 2.8(F) of the Stock Purchase
Agreement.
11.3 Severability. If any provision of this Agreement, or the application
------------
thereof, shall for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement, and (if appropriate) such provision to other
persons or circumstances, shall remain in full force and effect and be
interpreted so as best to reasonably effect the intent of the parties hereto.
11.4 Waiver, Amendment, Modification. Any waiver, amendment or other
-------------------------------
modification of this Agreement will not be effective unless in writing and
signed by the party against whom enforcement is sought. The failure by either
party to exercise any of its rights hereunder will not be deemed a waiver of
such rights in the future or a waiver of any other rights under this Agreement.
11.5 Notices. Any notice, approval or other communication required or
-------
permitted under this Agreement between the parties will be given in writing and
will be sent by facsimile, electronic mail or airmail, postage prepaid, to the
address specified above or to any other address that may be designated by prior
notice. Any notice, approval or other communication delivered by facsimile or
electronic mail will be deemed to have been received the day it is sent, as
confirmed by transmission receipt. Any notice, approval or other communication
sent by airmail will be deemed to have been received on the seventh business day
after its date of posting.
11.6 Governing Law. This Agreement will be governed by and interpreted in
-------------
accordance with the laws of the State of Delaware, excluding its conflict of law
principles.
11.7 Entire Agreement. This Agreement constitutes the complete and entire
----------------
statement of all terms, conditions and representations of agreement between WMT
and XXX with respect to the subject matter contained herein and supersedes all
prior oral or written agreements or understandings .
SIRIUS COMPUTER SOLUTIONS, LTD. WESTERN MICRO TECHNOLOGY, INC.
By: Sirius Management, LLC
By ___________________________
By_________________________________ Title ________________________
12
CONFIDENTIAL TREATMENT
Xxxxxx X. Xxxxx, Manager
STAR DATA SYSTEMS, INC.
By ______________________________
Title ___________________________
13
CONFIDENTIAL TREATMENT
Exhibit A
Schedule of Sirius/BPS Cost Sharing Arrangement
WMT Employee Department Compensation Benefits Total Split BPS Sirius
[**********] [*********] [********] [******] [********] [*****] [********] [*******]
[**********] [*********] [*******] [******] [*******] [*****] [*******] [*******]
[********] [**] [*******] [******] [*******] [*****] [*******] [*******]
[******] [**] [*******] [******] [*******] [*****] [*******] [*******]
[********] [**] [*******] [******] [*******] [*****] [*******] [*******]
[**********] [**] [*******] [******] [*******] [*****] [*******] [*******]
[*********] [**] [*******] [******] [*******] [*****] [*******] [*******]
[*********] [**] [*******] [******] [*******] [*****] [*******] [*******]
[********] [*******] [********] [********] [********]
Equipment/Supplies/Space [*******]
[***************************] [********]
[****************************] [*******]
Sirius Computer Solutions Employees
[************] [**********] [*******] [******] [*******] [*****] [*******] [*******]
[*******] [**********] [*******] [******] [*******] [*****] [******] [*******]
[**********] [*******] [******] [*******] [*****] [*******] [*******]
[********] [*******] [******] [*******] [*****] [******] [*******]
[************************] [*******] [*******]
[*************************] [******]
[*************************]
[**************************] [*******]
NOTE: [************************************************************************]
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
A-1
CONFIDENTIAL TREATMENT
NOTE: [************************************************************************]
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
A-2
CONFIDENTIAL TREATMENT
EXHIBIT B
---------
Discount Schedule for Sirius Computer Solutions
-----------------------------------------------
[*****************************************]
[*******
[**********] **************]
------------ ---------------
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[********] [***]
[******** [***]
********]
[******** [***]
********]
[********] [***]
[********
***** [***]
*****] [***]
[********] [***]
[********] [************]
[********] [************]
[***************]
-----------------
[*************] [*************]
[*************] [*************]
[*************] [*************]
[*************] [*************]
[*************] [*************]
[*************] [*************]
[*************] [*************]
[*********** [*************]
**********]
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
B-1
CONFIDENTIAL TREATMENT
NON-IBM PRODUCTS:
----------------
Current Distributor Cost
------------------------
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[************] [***]
[*******************************************************************************
********************************************************************************
********************************************************************************
*************.]
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
B-2
CONFIDENTIAL TREATMENT
EXHIBIT D
PROMISSORY NOTE
---------------
$__________ San Antonio, Texas
____________, 19__
FOR VALUE RECEIVED, the undersigned __________ (herein called "Maker"),
promises to pay to the order of __________ (herein together with all subsequent
holders hereof called "Holder") at __________, San Antonio, Texas 782__, in
lawful money of the United States of America, the principal sum of __________
($__________), together with interest on the principal balance at the rate
hereinafter provided.
1. From the date of this Promissory Note (this "Note") until the Maturity
Date (as may be extended as provided herein) interest on the principal balance
hereof from time to time remaining unpaid prior to maturity shall accrue at the
lower of (i) a fixed rate per annum equal to eighteen percent (18%) or (ii) the
Maximum Rate, calculated on the basis of actual days elapsed over a year
composed of three hundred sixty-five (365) days, provided, however, that if at
any time the rate of interest specified shall exceed the Maximum Rate, the
interest rate hereunder is automatically limited to the Maximum Rate. As used
herein, the term "Maximum Rate" means the greatest of the rates of interest from
time to time permitted under applicable federal or Texas law. To the extent of
the applicability of Article 5069-1.04, Texas Revised Civil Statutes, as
amended, the Maximum Rate shall be the highest permitted rate based upon the
"indicated (weekly) rate ceiling," but to the extent now or hereafter permitted
by Texas law, Holder may from time to time implement, withdraw and reinstate any
ceiling as an alternative to the indicated rate ceiling, including the right to
reinstate the indicated rate ceiling. Interest on past-due principal and, to
the extent permitted by law, on past-due interest, shall accrue at the lower of
the rates referenced in clauses (i) and (ii) above.
2. Principal and interest on the unpaid principal balance hereof from time
to time outstanding shall be due and payable as follows:
Principal shall be due and payable in full on __________ ("Maturity Date")
[INSERT MATURITY DATE = 6 MONTHS FROM THE DATE OF THIS NOTE]. Accrued
interest shall be due and payable on the last business day of each month.
Automatic Extension of Maturity Date. In the event Maker fails to pay this
------------------------------------
Note in full on the Maturity Date and after using reasonable and good faith
efforts to do so as provided in Section 2.10 of the Stock
-1-
CONFIDENTIAL TREATMENT
Purchase Agreement (as hereinafter defined), Maker shall, on or before the
Maturity Date, provide Holder with written notice of its inability to pay,
and upon delivery of such notice, the Maturity Date shall be automatically
extended for one (1) successive six (6) month period (such new Maturity
Date being __________) [INSERT DATE WHICH IS TWELVE (12) MONTHS FROM THE
DATE OF THIS NOTE]; provided, however, that for such extension of the
Maturity Date to be effective, Maker shall have timely paid all accrued
interest for each month prior thereto, and shall pay, on the Maturity Date,
all accrued and unpaid interest then outstanding and payable under this
Note. If the Maturity Date is extended as provided for in this paragraph,
all accrued interest shall continue to be paid on a monthly basis and all
principal and accrued and unpaid interest shall be due and payable in full
on __________ [INSERT DATE WHICH IS TWELVE (12) MONTHS FROM THE DATE OF
THIS NOTE]. If on __________ [INSERT DATE WHICH IS TWELVE (12) MONTHS FROM
THE DATE OF THIS NOTE], Maker fails to pay this Note, after using
reasonable and good faith efforts to do so as provided in Section 2.10 of
the Stock Purchase Agreement, Maker shall, on or before ______________
[Insert date which is twelve (12) months from the date of this Note],
provide Holder with written notice of its inability to pay, and upon
delivery of such notice, the Maturity Date shall be automatically extended
for successive six (6) month periods until the earlier to occur of (i) the
date that Holder makes written demand to Maker for payment in full of this
Note or (ii) an Acceleration Notice is delivered pursuant to Section 5(a)
hereof, or (iii) if no demand is made under subsection (i) or (ii)
immediately above, on __________ ("Final Maturity Date"); [INSERT DATE
WHICH IS 4 YEARS FROM THE DATE OF THIS NOTE] provided, however, that for
each such automatic extension of the Maturity Date to be effective, Maker
shall pay accrued interest on a monthly basis and pay, on each applicable
extended Maturity Date, all accrued and unpaid interest then outstanding
and payable under this Note. Unless earlier written demand is made as set
forth above or this Note becomes due and payable prior to the Final
Maturity Date pursuant to Section 5(a) hereof, all principal, and accrued
but unpaid interest due on this Note, shall be due and payable in full on
the Final Maturity Date.
Payment of this Note is secured by the terms, conditions and obligations
contained in that certain Stock Purchase Agreement, as amended (the "Stock
Purchase Agreement") dated June 4, 1997, executed by and among Maker,
Holder, Star Management Services, Inc. and _____________.
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CONFIDENTIAL TREATMENT
3. Subject to Section 9 hereof, this Note shall be governed by and
construed in accordance with Texas law and applicable federal law. The parties
hereto intend to conform strictly to the applicable usury laws. In no event,
whether by reason of acceleration of the maturity hereof or otherwise, shall the
amount paid or agreed to be paid to Holder for the use, forbearance or detention
of money hereunder or otherwise exceed the maximum amount permissible under
applicable law. If fulfillment of any provision hereof or of any other document
pertaining to the indebtedness evidenced hereby, at the time performance of such
provision shall be due, would involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced
automatically to the limit of such validity. If Holder shall ever receive
anything of value deemed interest under applicable law which would exceed
interest at the highest lawful rate, an amount equal to any amount which would
have been excessive interest shall be applied to the reduction of the principal
amount owing hereunder in the inverse order of its maturity and not to the
payment of interest, or if such amount which would have been excessive interest
exceeds the unpaid balance of principal hereof, such excess shall be refunded to
Maker. All sums paid or agreed to be paid to Holder for the use, forbearance or
detention of the indebtedness of Maker to Holder shall, to the extent permitted
by applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of such indebtedness so that the amount of interest on account
of such indebtedness does not exceed the maximum permitted by applicable law.
The provisions of this paragraph shall control all existing and future
agreements between Maker and Holder.
4. Right and Obligation to Prepay. Maker may at any time prepay the
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principal sum of this Note, or any part thereof, together with accrued and
unpaid interest thereon, without premium or penalty. In the event that Maker at
any time obtains sufficient working capital or is able to obtain alternative
financing (after using reasonable and good faith efforts to do so as provided in
Section 2.10 of the Stock Purchase Agreement) to so repay all or part of this
Note, Maker shall be obligated to prepay such portion of the principal sum
outstanding under this Note, together with accrued and unpaid interest thereon,
as is reasonably possible under the circumstances.
5. (a) If default is made in the payment of either principal or interest
and such default is not cured within the applicable cure period provided in
Section 2.8(c), (d) or (e) of the Stock Purchase Agreement, then Holder shall
have the right and option, without notice or demand, to declare the unpaid
balance of principal and accrued interest, and all other sums owing on this
Note, at once due and payable. If Holder is entitled to deliver an Acceleration
Notice (as defined in the Stock Purchase Agreement) to Maker pursuant to Section
2.8(a) of the Stock Purchase Agreement, Holder shall have the right and option,
without notice or demand (other than delivery of the Acceleration Notice), to
declare the unpaid balance of principal
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CONFIDENTIAL TREATMENT
and accrued interest, and all other sums owing on this Note, at once due and
payable, such amounts to be paid in accordance with Section 2.8(a) of the Stock
Purchase Agreement; provided, however, such acceleration by Holder shall not
relieve Maker of its obligations to make timely payments of amounts which are
due and owing hereunder prior to the payment period set forth in Section 2.8(a)
of the Stock Purchase Agreement. Notwithstanding any provision in this
Agreement to the contrary, upon a Change in Control (as defined in the Stock
Purchase Agreement), Holder shall have the right and option, without notice or
demand, to declare the unpaid balance of principal and accrued interest, and all
other sums owing on this Note, at once due and payable.
(b) Subject to the notice and cure provisions set forth in Section 2.8 of
the Stock Purchase Agreement, Maker hereby (i) waives demand, presentment for
payment, notice of nonpayment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration and all other notice, filing of suit and
diligence in collecting this Note or enforcing any of its remedies, (ii) agrees
that Holder shall not be required first to institute suit or exhaust its
remedies hereon against Maker or others liable or to become liable hereon or to
enforce its rights against them and (iii) consents to any extension or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice thereof to Maker.
If Maker defaults in the payment of any principal or interest due
hereunder, to the extent not prohibited by law, Maker will pay, or reimburse
Holder for, all reasonable costs and expenses, of every character, incurred or
expended thereafter (including, but not limited to, the reasonable fees and
expenses of counsel for Holder) in connection with the collection of the debt
represented hereby; and all reasonable costs of negotiation, preparation,
execution and delivery of any and all amendments, modifications, supplements,
consents, waivers or other documents or writings relating to this Note. In
addition, if Maker defaults on any payment of principal or interest due
hereunder, Maker will pay, or reimburse Holder for, all reasonable costs and
expenses, of every character incurred or expended thereafter in connection with
the proper exercise by Holder of any of its rights and remedies hereunder or at
law.
If Holder erroneously declares that Maker has defaulted on its obligations
hereunder, Holder will pay, or reimburse Maker for, all reasonable costs and
expenses of every character incurred or expended thereafter in connection with
the defense by Maker of any of any claims made by Holder hereunder.
6. The Maker warrants and represents to the Holder, and to all other
holders of any debt evidenced by this Note, that each loan, whether one or more,
evidenced by this Note is and shall be for business, commercial, investment or
other similar purpose and not primarily for personal, family, household or
agricultural use, as such terms are used in Chapter One of Title 79, Texas
Revised Civil Statutes, 1925, as amended.
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CONFIDENTIAL TREATMENT
7. At any time after the date of this Note, Holder shall have the right to
sell, transfer or assign his interest in all or part of this Note, or the debt
evidenced by this Note, to any relative or spouse of Holder (such relative being
related to the Holder in the second degree), or to a trust, corporation,
partnership or other entity in which all of the beneficial interest is held by
or for such person, persons or the Holder. Except as set forth in the preceding
or following sentence, this Note and the Holder's interest hereunder are not
transferable or assignable other than by will or pursuant to the laws of descent
and distribution. After the expiration of one (1) year after the date of this
Note, Holder shall have the right, exercisable in Holder's sole discretion and
without notice to Maker or any other person, to sell, assign or transfer his
interest in all or part of this Note, or the debt evidenced by this Note. It
shall be a condition to any such transfer that the assignee agree to be bound by
the provisions of this Note, including, without limitation, Sections 5(a), 8, 9
and 10 hereof.
8. Holder acknowledges and agrees that notwithstanding anything to the
contrary contained in this Note or any other agreement or arrangement now
existing or hereafter existing between Holder and Maker, Holder's rights
relating to the repayment of the obligation represented by this Note are
expressly made subject and subordinate to the rights of the following
individuals, corporations, partnerships, trusts, associations or other entities
or organizations, including any government, political subdivision, agency or
instrumentality thereof (the "Senior Creditors") which have loaned or are
expected to lend money or otherwise extend credit to Maker:
(i) IBM Credit Corp, any successor or assign thereof, and/or any
person or entity which enters into one or more working capital lines of
credit with Maker that replaces or is used to repay, in whole or in part,
the working capital line of credit extended by IBM Credit Corp or any
subsequent replacement lines of credit; and
(ii) any financing raised primarily to finance the transactions
contemplated in the Stock Purchase Agreement or obtained in replacement, or
to repay any part of such financing or any subsequent replacement
financing.
Collectively, the loans and other financings referenced in clauses (i) and (ii)
of this Section 8 are referred to herein as the "Senior Debt".
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to Maker or to its creditors, as such, or to its
assets, or (b) any liquidation, dissolution or other winding up of Maker,
whether voluntary or involuntary and whether or not
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CONFIDENTIAL TREATMENT
involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of Maker, then and
in any such event the holders of Senior Debt shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Debt in cash before Holder is entitled to receive any payment on account
of principal or interest on this Note from Maker, and to that end the holders of
Senior Debt shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or deliverable in respect of this
Note in any case, proceeding, dissolution, liquidation or other winding up or
event.
In the event that, notwithstanding the provisions of the foregoing
paragraph, Holder shall have received any payment or distribution of assets of
Maker of any kind or character (other than such payment or distribution duly
authorized by the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making payment or distribution of the
assets of Maker) upon or after the occurrence of an event described in item (a),
(b) or (c) of the immediately preceding paragraph, whether in cash, property or
securities before all Senior Debt is paid in full or payment therefor provided
for, then, and in such event, such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making payment or distribution of
assets of Maker for application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay all Senior Debt in full, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
In the event and during the continuation of any event of default or any
event which, with the giving of notice or the lapse of time, or both, would
constitute an event of default on any Senior Debt, unless and until such event
of default or event which, with the giving of notice or the lapse of time, or
both, would constitute such event of default shall have been cured or waived or
shall have ceased to exist, or in the event any judicial proceeding shall be
pending with respect to any such default, and the holder of such Senior Debt has
given written notice of such default or event of default to Holder, then in each
case no payment shall be made by Maker on account of principal of or interest on
this Note.
In the event that Maker shall make any payment to Holder prohibited by the
provisions of the foregoing paragraph and Holder receives such payment after
receipt by Holder of written notice from the holder of Senior Debt of such
event, then and in such event, such payment shall be paid over and delivered
forthwith to Maker.
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CONFIDENTIAL TREATMENT
The provisions of this and the immediately five preceding paragraphs are,
and are intended, solely for the purpose of defining the relative rights of
Holder on the one hand and the holders of Senior Debt on the other. Nothing in
this and the immediately five preceding paragraphs or elsewhere in this
Agreement or in this Note is intended to or shall (a) impair, as among Maker,
its creditors other than the holders of Senior Debt and Holder, the obligation
of Maker, which is absolute and unconditional, to pay to Holder the principal of
and interest on this Note as and when the same shall become due and payable in
accordance with its terms; or (b) affect the relative rights against Maker of
Holder and creditors of Maker other than the holders of Senior Debt; or (c)
prevent Holder from exercising all remedies otherwise permitted by applicable
law upon default under this Note, subject to the rights, if any, under this and
the immediately five preceding paragraphs of the holders of Senior Debt to
receive cash, property and securities otherwise payable or deliverable to
Holder. No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Maker or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
Holder or Maker with the terms and provisions of this and the immediately five
preceding paragraphs, regardless of any knowledge thereof any such holder may
have or be otherwise charged with.
Any payee of Senior Debt shall have the right to rely on the subordination
contained in this Section 8, and Holder agrees to execute and deliver such
further documents and instruments as Maker may reasonably request to effect the
intent of this subordination.
9. Arbitration. Subject to the procedures set forth in Section 2.8 of the
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Stock Purchase Agreement, any dispute which is not first resolved by Maker and
Holder arising out of or relating to this Note shall be determined by binding
arbitration in accordance with certain aspects of the then-current Commercial
Arbitration Rules of the American Arbitration Association. If the amount in
controversy in the arbitration exceeds Two Hundred Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three (3) neutral arbitrators. Otherwise, the
arbitration shall be conducted by a single neutral arbitrator. The Maker and
Holder shall endeavor to select neutral arbitrators by mutual agreement. If
such agreement cannot be reached within thirty (30) calendar days after a
dispute has arisen which is to be decided by arbitration, the Maker or Holder,
jointly or severally, shall request the American Arbitration Association to
submit to each party an identical panel of fifteen (15) persons. Alternate
strikes shall be made to the panel, commencing with the person
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CONFIDENTIAL TREATMENT
bringing the claim, until the name of three (3) persons remain, or one (1)
person if the case is to be heard by a single arbitrator. Maker and Holder may,
however, by mutual agreement request the American Arbitration Association to
submit additional panels of possible arbitrators. The person(s) thus remaining
shall be the arbitrator(s) for such arbitration. If three (3) arbitrators are
selected, the arbitrators shall elect a chairperson to preside at all meetings
and hearings. If a dispute is to be resolved by a sole arbitrator in accordance
with the terms hereof, or if the dispute is to be resolved by a panel of three
(3) arbitrators as provided hereinabove, then such sole arbitrator or the
chairperson of such panel, as the case may be, shall be a member of a state bar
engaged in the practice of law in the United States or a retired member of a
state or the federal judiciary in the United States. The award of the
arbitrator(s) shall require a majority of the arbitrators in the case of a panel
of arbitrators, shall be in writing and reasoned, shall be based on the evidence
admitted and the substantive law of the State of Delaware (with respect to all
issues other than the enforceability of and the calculation of interest due on
this Note) and shall contain an award for each issue and counterclaim. The
award shall be made within thirty (30) days following the close of the final
hearing and the filing of any post-hearing briefs authorized by the
arbitrator(s). The award of the arbitrator(s) shall be final and binding on the
Maker and Holder and the successors and assigns thereof. The arbitration shall
be governed by the United States Arbitration Act, 9 U.S.C. (S) 1-16, and
judgment upon the award rendered by the arbitrator(s) may be entered by any
court having jurisdiction thereof. The place of arbitration shall be Denver,
Colorado. Maker and Holder shall be entitled to inspect and obtain a copy of
relevant documents in the possession or control of the other and to take
depositions of the other's employees, agents, representatives and witnesses
(including expert witnesses). All such discovery shall be in accordance with
procedures approved by the arbitrator(s). Unless otherwise provided in the
award, each party shall bear its own costs of discovery. No party shall be
entitled to submit interrogatories to the other parties. All discovery shall be
expedited, consistent with the nature and complexity of the claim or dispute and
consistent with fairness and justice. The arbitrator(s) shall have the power to
compel any party to comply with discovery requests of the other parties and to
issue binding orders relating to any discovery dispute which shall be
enforceable in the same manner as awards. The arbitrator(s) also shall have the
power to impose sanctions for abuse or frustration of the arbitration process,
including without limitation, the refusal to comply with orders of the
arbitrator(s) relating to discovery and compliance with subpoenas. The
arbitrator(s) are not empowered to award damages in excess of actual damages and
the Maker and Holder hereby irrevocably waive any right to recover such damages
with respect
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CONFIDENTIAL TREATMENT
to any dispute resolved by arbitration and is empowered to award attorneys fees
and costs to the prevailing party.
10. Offset Rights. Maker shall have the right to offset against principal
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otherwise due under this Note any amounts which it is permitted to so offset
pursuant to Section 9.3 of the Stock Purchase Agreement. Such rights shall be
unaffected by assignment of this Note.
UNLESS EXTENDED AS PROVIDED FOR HEREIN, THIS NOTE IS PAYABLE IN FULL ON
__________, 19__. ON __________, 19__, YOU MUST REPAY THE ENTIRE PRINCIPAL
BALANCE OF THE LOAN AND UNPAID INTEREST THEN DUE. EXCEPT AS SET FORTH HEREIN,
HOLDER IS UNDER NO OBLIGATION TO REFINANCE THIS NOTE AT MATURITY.
THIS PROMISSORY NOTE AND THE OTHER DOCUMENTS EXECUTED IN CONNECTION WITH
THE STOCK PURCHASE AGREEMENT REPRESENT THE FINAL AGREEMENT OF THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AND
INTERCREDITOR AGREEMENT IN FAVOR OF CANPARTNERS INVESTMENTS IV, LLC, A
CALIFORNIA LIMITED LIABILITY COMPANY, AND XXXXXX XXXXXXX INC., A DELAWARE
CORPORATION, WHICH SUBORDINATION AND INTERCREDITOR AGREEMENT CONTAINS CERTAIN
SUBORDINATION PROVISIONS AND IS INCORPORATED HEREIN BY REFERENCE.
NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED IN THE WITHIN INSTRUMENT, NO
PAYMENT ON ACCOUNT OF THE PRINCIPAL, PREMIUM, IF ANY, OR INTEREST HEREOF SHALL
BECOME DUE OR BE PAID IN VIOLATION OF THE TERMS OF SUCH SUBORDINATION AND
INTERCREDITOR AGREEMENT.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the date first
above written.
MAKER
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