STOCK PURCHASE AGREEMENT
BY AND AMONG
HOUSTON ECONOMIC OPPORTUNITY FUND, L.P.,
AND
CYNET, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of this 3rd day
of February 2000, among Houston Economic Opportunity Fund, L.P., a Delaware
limited partnership ("HEOF"), and CyNet, Inc., a Texas corporation (the
"Company").
WITNESSETH:
WHEREAS, the Company and HEOF desire to memorialize (i) an investment
(the "Investment") by HEOF of one million six hundred thousand dollars
($1,600,000.00) into the Company in exchange for one million six hundred
thousand shares of Series C Redeemable Callable Preferred Stock, no par value
("Series "C Preferred Stock"), of the Company and (ii) an exchange (the
"Exchange") of one million seven hundred sixty six thousand four hundred twenty
three shares (the "Exchange Shares") of Class A voting common stock, no par
value ("Class A Common Stock"), of the Company for one million seven hundred
sixty six thousand four hundred twenty three shares of Series D Redeemable
Convertible Preferred Stock, no par value ("Series D Preferred Stock"), of the
Company;
NOW, THEREFORE, in consideration of their respective covenants,
agreements, representations and warranties contained herein, the sufficiency of
which are acknowledged by all parties, and intending to be legally bound, HEOF
and the Company agree as follows:
ARTICLE ONE
ISSUANCE OF THE SERIES C PREFERRED STOCK AND THE SERIES D PREFERRED STOCK
1.01 ISSUANCE OF SERIES C PREFERRED STOCK. Subject to the terms and conditions
of this Agreement, at the Closing, the Company shall issue and deliver the
Series C Preferred Stock to HEOF, and HEOF shall purchase the Series C Preferred
Stock from the Company for the subscription amount set forth in Section 2.01
below. At the Closing (defined below), the Company shall deliver to HEOF a stock
certificate evidencing ownership of one million six hundred thousand shares of
Series C Preferred Stock in the Company.
1.02 ISSUANCE OF SERIES D PREFERRED STOCK. Subject to the terms and conditions
of this Agreement, at the Closing, the Company shall issue and deliver the
Series D Preferred Stock to HEOF in exchange for receipt of the Exchange Shares,
duly endorsed for transfer. At the Closing, the Company shall deliver to HEOF a
stock certificate evidencing ownership of one million seven hundred sixty six
thousand four hundred twenty three shares of Series D Preferred Stock in the
Company.
ARTICLE TWO
INVESTMENT AMOUNT
2.01 INVESTMENT AMOUNT. In connection with the purchase of the Series C
Preferred Stock, HEOF shall pay One Million Six Hundred Thousand Dollars
($1,600,000.00) in cash to the Company (the "Subscription"). The Subscription
shall be made to the Company on the Closing Date by wire transfer to the
Company's bank account at "Xxxxx Fargo Bank (00000 Xxxxx Xxxx, Xxxxxxx, Xxxxx
00000: Attn Xxx Xxxxxxxx) ABA# 000000000 for the account of CyNet, Inc., Account
No. 0744691932", or by cashiers check payable to the Company.
ARTICLE THREE
THE CLOSING
3.01 CLOSING. The closing of the transactions contemplated herein (the
"Closing") will take place at the offices of HEOF, 0000 Xxxxx Xxxxxx, Xxxxxxx,
Xxxxx 00000-0000 at 3:00 p.m. on February 3, 2000 or at a place or time agreed
upon by the parties (the "Closing Date").
-2-
ARTICLE FOUR
DELIVERIES AT CLOSING
4.01 DELIVERIES AT CLOSING.
(i) THE COMPANY'S OBLIGATIONS. At the Closing, the Company shall
deliver to HEOF and its counsel the items set forth below against delivery of
the items by HEOF as provided in Section 2.01 and Sections 4.01 (ii) below:
(1) Fully executed Stock Purchase Agreement;
(2) Fully executed Secretary's Certificate (with
incumbency signatures), certifying that the Company
was incorporated and duly organized under Texas law,
that attached thereto is a certified copy of the
Articles of Incorporation (and all amendments
thereto) of the Company as of a recent date and that
no amendments have been made from the date thereof
until the date hereof, that attached thereto is a
copy of the Bylaws as in effect as of the date
hereof, and that attached thereto is a copy of the
Statements of the Powers, Designations, Preferences
and Rights for the Series C Preferred Stock and
Series D Preferred Stock adopted by the Board of
Directors of the Company and filed with the Secretary
of State of Texas
(3) Fully executed Stock Certificate - No. C-1 to HEOF
representing one million six hundred thousand shares
of Series C Preferred Stock of the Company; and
(4) Fully executed Stock Certificate - No. D-1 to HEOF
representing one million seven hundred sixty six
thousand four hundred twenty three shares of Series D
Preferred Stock of the Company.
(ii) HEOF OBLIGATIONS. At the Closing, HEOF shall deliver to the
Company the items set forth below against delivery of the items by the Company
and HEOF as provided in Section 4.01 (i):
(1) Fully executed Stock Purchase Agreement;
(2) Stock Certificate No. 1065, fully executed for
transfer in blank, representing one million seven
hundred sixty six thousand four hundred twenty three
shares of Class A Common Stock; and
(3) Fully executed Secretary's Certificate of HEOF
Management Corp. (with incumbency signatures).
ARTICLE FIVE A
COMPANY REPRESENTATIONS AND WARRANTIES
To induce HEOF to enter into this Agreement, the Company makes the following
representations and warranties to HEOF:
5A.01 ORGANIZATION.
The Company is a Texas corporation duly organized and validly existing under the
laws of the State of Texas. The Company has delivered to HEOF true, correct and
complete copies of the Articles of Incorporation and Bylaws of the Company and
such documents are in full force and effect as of the date of this Agreement.
5A.02 AUTHORITY.
The Company has duly authorized, executed and delivered this Agreement and this
Agreement constitutes a valid and binding obligation of the Company, enforceable
against the Company according to its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
5A.03 GOVERNMENTAL AND OTHER AUTHORIZATIONS.
-3-
Neither the Company's execution, delivery and performance of this Agreement, nor
the Company's consummation of the transactions contemplated by this Agreement,
require any consent, approval or action by or in respect of, or any declaration,
filing or registration with, any governmental or regulatory body, court, agency,
official or authority (each, a "Governmental Authority").
5A.04 NON-CONTRAVENTION.
Neither the Company's execution, delivery and performance of this Agreement, nor
the Company's consummation of the transactions contemplated by this Agreement,
with or without the giving of notice, the lapse of time or both: (i) contravene
or conflict with the Articles of Incorporation or Bylaws of the Company or the
terms of any series of preferred stock of the Company issued and outstanding,
(ii) contravene or conflict or constitute a violation of any provision of any
law, rule, regulation, judgment, injunction, order or decree currently in effect
and binding upon or applicable to the Company, (iii) require any consent,
approval or other action by any person, (iv) contravene or conflict with or
constitute a violation of or a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Company or to a loss of any benefit to which the Company is entitled, under any
provision of (A) any agreement, contract, indenture, lease or other instrument
binding upon the Company or (B) any license, franchise, permit or other similar
authorization held by the Company or (v) result in the creation or imposition of
any mortgage, pledge, security interest, lien, claim, charge, restriction,
encumbrance or assessment of any kind (each, a "Lien") on any asset of the
Company, and that, in the case of clauses (ii) through (v), would individually
or in the aggregate have a Material Adverse Effect on the Company or its
business.
5A.05 CAPITALIZATION.
The capital stock of the Company consists of 70,000,000 authorized shares of
capital stock of which 60,000,000 are designated as common stock and 10,000,000
are designated as preferred stock, no par value ("Preferred Stock"). The common
stock consists of 40,000,000 shares designated as Class A Voting Common Stock,
no par value ("Class A Common Stock"), and 20,000,000 shares designated as Class
B Nonvoting Common Stock, no par value ("Class B Common Stock"). The Company has
27,574,735 shares of Class A Common Stock, 2,124,121 shares of Class B Common
Stock, 66,000 shares of Convertible Non voting Series A Preferred Stock, no par
value ("Series A Preferred Stock"), and 50,832 shares of Convertible Non voting
Series B Preferred Stock, no par value ("Series B Preferred Stock"), issued and
outstanding as of December 31, 2000. After the issuance contemplated herein, the
Company will have 27,574,735 shares of Class A Common Stock, 2,124,121 shares of
Class B Common Stock, 66,000 shares of Series A Preferred Stock, 50,832 shares
of Series B Preferred Stock, 1,600,000 shares of Series C Preferred Stock, and
the 1,766,423 shares of Series D Preferred Stock (the "Capital Stock") issued
and outstanding. All issued and outstanding shares of Capital Stock of the
Company are validly issued, fully paid and nonassessable, and have not been
issued in violation of any preemptive, first refusal or other subscription
rights of any shareholder of the Company. Other than the Capital Stock, there
are no outstanding (A) Class A Common Stock or Class B Common Stock
(collectively, the "Common Stock") of the Company or other voting or ownership
interests of the Company, (B) securities of the Company convertible into or
exchangeable for Common Stock or other voting or ownership interest of the
Company or (C) options, warrants, exchange rights, subscription rights or other
agreements, commitments or rights to purchase or otherwise acquire from the
Company, or agreements, commitments or obligations of the Company to issue or
sell, any Common Stock, other voting or ownership interests or securities
convertible into or exchangeable for Common Stock or other voting or ownership
interests of the Company (the items in clauses (A), (B) and (C) being referred
to collectively as the "Company Securities"), except for (i) the convertible
capital stock, options and warrants disclosed in the Company's Registration
Statement on Form SB-2 Registration No. 333-92099, dated December 3, 1999 (the
"Registration Statement"), (ii) the $1,600,000 principal amount of Series A 8%
Convertible Notes due 2002 (the "Debentures") to be issued on the date hereof
and the Warrant to Purchase 160,000 shares of Class A Common Stock issued in
connection with the Debentures and the Registration Right Agreement executed in
connection therewith, (iii) the conversion privileges of the Series D Preferred
Stock and the Debentures, (iv) the rights provided in the Investor Rights and
Preferential Purchase Rights Agreement, dated September 30, 1999 and amended on
November 29, 1999 and January 31, 2000, by and among the Company, certain
members of management of the Company and HEOF, (v) the rights provided in the
Registration Rights Agreement, dated September 30, 1999, by and among the
Company and HEOF and (vi) the Subscription Agreement, dated July 22, 1998 and
amended January 3, 2000, between the Company and CyNet Holdings, L.L.C. There
are no outstanding obligations of the Company to sell, issue or deliver, or to
repurchase, redeem or otherwise acquire, any Company Securities, except for (x)
the rights of HEOF to put shares of Class A Common Stock to the Company provided
in the Option Agreement, dated September 30, 1999 and amended on November 29,
1999, between the Company and HEOF and (y) the obligations of the Company to
issue shares of Class A Common Stock and Class B Common Stock to the holders of
the Series A Preferred Stock and the Series B Preferred Stock, respectively,
upon conversion thereof.
-4-
5A.06 SUBSIDIARIES.
Except as set forth in the Registration Statement, there are no subsidiaries of
the Company.
5A.07 FINANCIAL INFORMATION.
The Company has delivered to HEOF a true, correct and complete copy of the
financial statements of the Company as of September 30, 1999 ("Financial
Statements"). The Financial Statements are unaudited and have been prepared in
accordance with generally accepted accounting principles and fairly present the
financial condition of the Company for the period indicated, subject to normal
year-end audit adjustments. The Company represents and warrants that since the
date of the Financial Statements no material changes have occurred within the
Company which would have a Material Adverse Affect on the financial condition of
the Company or its properties except as disclosed to HEOF in writing (the
"Additional Information").
5A.08 SOLVENCY. The Company represents that as of the date hereof it is solvent.
5A.09 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company has no liabilities or obligations, except those liabilities
or obligations that are disclosed in the Registration Statement or the
Additional Information. To the best knowledge of the Company, there is no basis
for any assertion against the Company of any liability or obligation of any
nature or in any amount not disclosed in the Registration Statement or in the
Additional Information. For purposes of this Agreement, the phrase "liabilities
or obligations" includes any direct or indirect indebtedness, claim, loss,
damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or financial
responsibility, whether accrued, absolute or contingent, known or unknown, fixed
or unfixed, liquidated or unliquidated, secured or unsecured.
5A.10 PROPERTIES.
All of the material assets and properties of the Company are reflected on the
Financial Statements or disclosed in the Registration Statement. As of the
Closing Date the Company, except as otherwise noted in the Financial Statements
or disclosed in the Registration Statement, has good, valid and marketable title
to all of the assets and properties, whether real, personal or mixed, tangible
or intangible, of the Company free and clear of all Liens, except (a) Liens for
current Taxes (as defined hereinafter) not delinquent or being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established in accordance with generally accepted accounting principles as
disclosed in the Registration Statement, and (b) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business with respect to
obligations which are not due or which are being contested in good faith as
disclosed in the Registration Statement.
5A.11 PROPRIETARY RIGHTS.
Except as disclosed in the Registration Statement, the Company does not own,
possess or use any patents, patent applications, trademarks, trademark
applications, service marks, trade names, franchises, permits, copyrights and
copyright registrations for its business (collectively, the "Patents and
Trademarks").
5A.12 LITIGATION.
Except as disclosed in the Registration Statement, there is no action, suit,
arbitration, investigation or legal, administrative or other proceeding
(collectively, "Claims and Litigation") pending against or, to the best
knowledge of the Company, threatened against or affecting, the Company before
any court or arbitrator or any Governmental Authority. The Company is not
subject to any judgment, order or decree entered in any lawsuit or proceeding or
issued by any Governmental Authority.
5A.13 MATERIAL CONTRACTS.
(i) Except for the agreements, contracts, plans, leases, arrangements and
commitments, oral or written, formal or informal, disclosed in the Registration
Statement, the Additional Information, the Financial Statements or any other
Exhibits to this Agreement (collectively, "Contracts"), the Company is not a
party to or subject to any other material contract.
(ii) Except as otherwise disclosed in the Registration Statement or the
Additional Information, each Contract is a valid and
-5-
binding agreement of the Company and is in full force and effect. The Company
is not in default or breach under the terms of any Contract, and, to the best
knowledge of the Company, no other party to any Contract is in default or
breach under the terms of such Contract.
(iii) Except as otherwise disclosed in the Registration Statement or the
Additional Information, the copies of the Contracts delivered to HEOF set forth
the entire agreement between the parties to such Contracts pertaining to the
subject matter contained therein and are correct and complete. There are no
other material agreements, representations or understandings between or among
the Company and the parties to the Contracts except as set forth in the
Contracts.
(iv) Except as otherwise disclosed in the Registration Statement or the
Additional Information, the Company has not received notice that any party to
any of the Contracts intends to terminate any of the Contracts or to exercise or
not to exercise any option under any Contract.
5A.14 TAXES.
The Company has: (i) timely filed, or joined in the filing of, all returns
required to be filed by it with respect to all federal, state and local income,
payroll, withholding, excise, sales, use, personal property, use and occupancy,
business and occupation, mercantile, real estate, capital stock and franchise or
other taxes (all the foregoing taxes, including interest and penalties thereon
and including estimated taxes, being hereinafter collectively called "Taxes");
(ii) paid all Taxes due, whether pursuant to such returns or otherwise, except
those contested by it in good faith; (iii) paid all other Taxes for which a
notice of or assessment or demand for payment has been received, except those
contested in good faith; and (iv) adequately accrued and reserved for the
payment of all Taxes not yet due and payable. All such returns have been
prepared in accordance with all applicable laws and requirements and accurately
reflect the taxable income (or other measure of Tax) of the corporation or
person filing the same.
5A.15 INSURANCE.
The Company has obtained all required insurance and bonds necessary to operate
its business as it is currently operated or required by the terms of the
Company's Contracts.
5A.16 FULL DISCLOSURE.
To the best of the Company's knowledge, none of the representations and
warranties made by the Company in this Agreement, the Registration Statement or
in any Exhibit furnished by the Company, or on its behalf, contains any untrue
statement of material fact, or omits to state any material fact the omission of
which would be misleading considering the context in which such statements were
made, which would have a Material Adverse Effect on the Company or its
properties.
ARTICLE FIVE B
INVESTOR REPRESENTATIONS AND WARRANTIES
HEOF (INDIVIDUALLY, AN "INVESTOR") HEREBY REPRESENTS AND WARRANTS THAT:
5B.01 AUTHORIZATION. HEOF has full power and authority to enter into this
Agreement, and this Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
5B.02 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with HEOF in
reliance upon HEOF's representation to the Company, which by HEOF's execution of
this Agreement HEOF hereby confirms, that the Series C Preferred Stock and the
Series D Preferred Stock to be received by HEOF and the shares of Class A Common
Stock into which the Series D Preferred Stock may be converted (the "Conversion
Shares") (collectively, the "HEOF Securities") will be acquired for investment
for HEOF's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that HEOF has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, HEOF further represents that HEOF does
not have any contract, undertaking, agreement or
-6-
arrangement with any person to sell, transfer or grant participations to HEOF
or to any third person, with respect to any of the HEOF Securities.
5B.03 DISCLOSURE OF INFORMATION. HEOF believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Series C Preferred Stock or the Series D Preferred Stock. HEOF
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Series C Preferred Stock, the Series D Preferred Stock and the business,
properties, prospects and financial conditions of the Company.
5B.04 INVESTMENT EXPERIENCE. HEOF is a sophisticated investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series C Preferred Stock and the
Series D Preferred Stock. HEOF was not organized for the purpose of acquiring
the Series C Preferred Stock or the Series D Preferred Stock.
5B.05 ACCREDITED INVESTOR. HEOF is an "accredited investor" within the meaning
of Securities and Exchange Commission ("SEC") Rule 501 of Regulation D, as
presently in effect.
5B.06 RESTRICTED SECURITIES. HEOF understands that the HEOF Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, HEOF represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
5B.07 TITLE TO SHARES. HEOF has good and indefeasible title to the Exchange
Shares, free and clear of all pledges, liens, charges and other encumbrances
whatsoever.
5B.08 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, HEOF further agrees not to make any disposition
of all or any portion of the Securities unless and until the transferee has
agreed in writing for the benefit of the Company to be bound by this Section and
the Investor Rights Agreement provided and to the extent this Section and such
agreement are then applicable, and:
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) (i) HEOF shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, HEOF shall have furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Act. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances, as reasonably determined by the
Company.
(c) Notwithstanding the provisions of Paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by a partner of HEOF who withdraws after the date hereof, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if the transferee were an original investor hereunder.
5B.08 LEGENDS. It is understood that the certificates evidencing the HEOF
Securities will bear the following restrictive legend:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of 1933, as
amended, or the securities laws of any state. Except upon such registration,
such shares may not be sold or transferred at any time whatsoever except upon
delivery to the Company of an opinion of counsel satisfactory to the Company
that registration is not required for such transfer and/or submission to the
Company of such other evidence as may be satisfactory to the Company to the
effect that any such transfer shall not be in violation of the Securities Act of
1933, as amended, and/or applicable state securities laws and/or any rule or
regulation promulgated thereunder."
ARTICLE SIX
-7-
CONDITIONS PRECEDENT TO HEOF'S PERFORMANCE
The obligations of HEOF to purchase the HEOF Shares, make payment of its
Subscription and surrender the Exchange Shares and complete the Closing are
subject to the satisfaction or waiver, at or before the Closing Date, of all the
conditions set out below in this Article Six. HEOF may waive any or all of these
conditions in whole or in part without prior notice.
6.01 ACCURACY OF THE COMPANY'S REPRESENTATIONS.
All representations and warranties by the Company in this Agreement of a
material nature will be true, correct and complete in all respects on and as of
the Closing Date as though made on and as of the Closing Date.
6.02 PERFORMANCE BY THE COMPANY.
The Company will have performed, satisfied and complied with all covenants and
agreements required by this Agreement to be performed, satisfied or complied
with by the Company on or before the Closing Date.
6.03 ABSENCE OF LITIGATION.
No action, suit, or proceeding before any court or any governmental body or
authority, pertaining to the Company (except as disclosed in the Registration
Statement) or the transactions contemplated by this Agreement or to its Closing
will have been instituted or, to the Company's knowledge, threatened on or
before the Closing Date.
6.04 CONSENTS AND APPROVALS.
All certifications, consents or approvals necessary to permit consummation of
the Closing will have been received on or before the Closing Date.
6.06 LEGAL REPRESENTATION.
The Company acknowledges that it has the opportunity to seek and receive legal
advice from its own legal counsel on all the documents involved in this
transaction.
ARTICLE SEVEN
CONDITIONS PRECEDENT TO THE COMPANY'S PERFORMANCE
The obligations of the Company to issue the HEOF Shares for the Subscription and
surrender of the Exchange Shares and complete the Closing are subject to the
satisfaction, at or before the Closing Date, of all the conditions in this
Article Seven. The Company may waive any or all of these conditions in whole or
in part without prior notice.
7.01 ACCURACY OF REPRESENTATIONS.
All representations and warranties by HEOF in this Agreement of a material
nature will be true, correct and complete in all respects on and as of the
Closing Date as though made on and as of the Closing Date.
7.02 PERFORMANCE.
HEOF will have performed, satisfied and complied with all covenants and
agreements required by this Agreement to be performed, satisfied or complied
with by such person on or before the Closing Date.
7.03 PAYMENT OF PURCHASE PRICE. HEOF shall have delivered the subscription price
and the Exchange Shares specified in Article One.
7.04 LEGAL REPRESENTATION.
-8-
HEOF acknowledges that it has sought and received legal advice from its own
legal counsel on all the documents involved in this transaction.
ARTICLE EIGHT
OTHER AGREEMENTS
8.01 CONVERSION OF PREFERRED STOCK
The Company agrees to exercise its mandatory conversion rights with respect to
the Series A Preferred Stock and Series B Preferred Stock on or before the
Closing Date, convert all of the outstanding shares of Series A Preferred Stock
and the Series B Preferred Stock into Class A Common Stock and Class B Common
Stock, respectively, within thirty (30) days after the date hereof and to retire
the Series A Preferred Stock and Series B Preferred Stock immediately after such
conversion.
ARTICLE NINE
FORM OF AGREEMENT
9.01 SURVIVAL OF WARRANTIES. The warranties and representations of the Company
and HEOF contained in or made pursuant to or in connection with this Agreement
shall survive the execution and delivery of this Agreement and the Closing and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of the Company or HEOF.
9.02 MODIFICATION AND WAIVER.
No supplement, modification, or amendment of this Agreement is binding unless
executed in writing by all the parties. No waiver of any of the provisions of
this Agreement is deemed, or constitutes, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver is binding unless executed in writing by the party making the waiver.
9.03 COUNTERPARTS.
This Agreement may be executed simultaneously in one or more counterparts, each
of which is deemed an original, but all of which together constitute one and the
same instrument. The parties may deliver executed counterparts by telecopier
which counterparts have the same effect as the Agreement itself.
9.04 GOVERNING LAW.
This Agreement is construed according to, and governed by, the laws of the State
of Texas, conflict of laws provisions notwithstanding. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed according to their specific terms or were otherwise
breached. It is accordingly agreed that the parties are entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the Southern District of Texas or any Texas state
court, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties (a) consents to submit itself
to the personal jurisdiction of any Federal court located in the Southern
District of Texas or any Texas state court if any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court sitting
in the Southern District of Texas or any Texas state court.
9.05 DEFINITIONS.
For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
-9-
(b) "Material Adverse Effect" on a party means a material adverse
effect upon the financial condition, results of operations, business,
properties, assets or operations of such party;
(c) "Person" means an individual, corporation, company, joint venture,
association, trust, unincorporated organization or other entity;
(d) a "Subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting Company interests of which
is sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
9.06 INTERPRETATION.
When a reference is made in this Agreement to an Article, Section, or Exhibit,
such reference is to an Article or Section of, or an Exhibit to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
9.07 ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES.
This Agreement (including the documents and instruments referred to herein) (a)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) are not intended to confer upon any
person other than the parties any rights or remedies.
9.08 EFFECTIVE DATE OF THIS AGREEMENT.
This Agreement is effective as of the date first written above upon the
execution hereof by HEOF and the Company.
9.09 FINDER'S FEES.
Each party represents that it neither is nor will be obligated for any finder's
fee or commission in connection with this transaction except as described
herein.
9.10 SEVERABILITY. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
ARTICLE TEN
SUCCESSORS AND ASSIGNS
10.01 SUCCESSORS AND ASSIGNS; ASSIGNMENT.
This Agreement is binding on, and inures to the benefit of, the parties hereto
and their respective heirs, legal representatives, successors, and assigns.
-10-
ARTICLE ELEVEN
REMEDIES
11.01 INDEMNITY.
(a) Each party shall defend, indemnify and save and hold harmless the
other party, and its partners, directors, officers, employees and agents against
all Liabilities that relate to the breach of any of the terms, covenants,
conditions or representations of this Agreement; or such party's
misrepresentations or breaches of warranty contained in this Agreement or any of
the documents entered into or delivered in connection herewith.
(b) The right to indemnification set forth in this Section 11.01
survives this Agreement.
(c) As used in this Section 11.01, the following terms mean:
"Liabilities" means all debts, liabilities, obligations,
losses, damages, costs and expenses (including, without limitation, prejudgment
interest and post-judgment interest), penalties, fines, taxes, liens, court
costs, judgments, awards, settlements, assessments, and attorneys' and
accountants' fees and expenses (including, without limitation, those incurred in
investigating and defending any items indemnified and those incurred in
enforcing any indemnity obligation).
11.02 OTHER REMEDIES.
If any party, without legal cause, fails or refuses to consummate the
transactions contemplated by this Agreement according to the terms and
conditions hereof, then the other parties have all rights and remedies available
at law or in equity, specifically including, but not limited to, the right of
specific performance.
11.03 MEDIATION AFTER CLOSING.
If, after the consummation of Closing, a dispute relating to this
Agreement arises between the parties hereto, the parties agree to use the
following procedure prior to any party pursuing other available remedies.
(a) A meeting shall be held promptly between the parties, attended by
individuals with decision-making authority regarding the dispute, to attempt in
good faith to negotiate a resolution of the dispute.
(b) If, within thirty (30) days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they agree to submit
the dispute to mediation according to the Commercial Mediation Rules of the
American Arbitration Association and to bear equally the costs of the mediation.
(c) The parties will jointly appoint a mutually acceptable mediator,
seeking assistance in such regard from the American Arbitration Association if
they have been unable to agree upon such appointment within twenty (20) days
from the conclusion of the negotiation period.
(d) The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of thirty (30) days.
11.04 MANDATORY ARBITRATION.
If the parties are not successful in resolving the dispute through
mediation as provided in Section 11.03 above, then the parties agree to submit
the matter to binding arbitration in accordance with the rules and regulations
of the American Arbitration Association located in or near Houston, Texas.
Notwithstanding the foregoing, nothing herein or in Section 11.03 above
is construed as limiting a party's right to seek at any time injunctive relief
from any court of appropriate jurisdiction.
-11-
ARTICLE TWELVE
NOTICES
12.01 NOTICES
All notices, claims, requests, demands and other communications under this
Agreement must be in writing and are deemed duly given or made on the date of
service if served personally or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed:
(a) if to Houston Economic Opportunity Fund, L.P., addressed to it at:
Houston Economic Opportunity Fund, L.P.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: President
with copies to:
Houston Economic Opportunity Fund, L.P.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx
and
X. X. Xxxxxx & Associates, P.C.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: T. Xxxx Xxxxxx
(b) if to the Company, addressed to:
CyNet, Inc.
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
with copies to:
Xxxxxx X. Xxxxx
Vice President and General Counsel
CyNet, Inc.
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
and
Xxxxx X. Spring, III
Chamberlin, Hrdlicka, White, Xxxxxxxx & Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Any party may change its address for the purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.
-12-
-13-
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the
day and year first written above.
HOUSTON ECONOMIC OPPORTUNITY FUND, L.P.
BY: HEOF Management Corp.
Its corporate general partner
BY: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxx
President
CYNET, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx, Vice President
-14-
