--------------------------------------------------------------------------------
PURCHASE AGREEMENT
between
CORESTAFF, INC.
and
CITADEL TECHNOLOGY, INC
Dated September 22, 1997
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I AUTHORIZATION AND CLOSING. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of the Stock . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase and Sale of the Stock . . . . . . . . . . . . . . . . . . . 1
1.3 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II CONDITIONS OF CORESTAFF'S OBLIGATION AT THE CLOSING . . . . . . . . 1
2.1 Representations and Warranties, Covenants. . . . . . . . . . . . . . 1
2.2 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . 2
2.3 First Step Software License Agreement. . . . . . . . . . . . . . . . 2
2.4 Development Services Agreement . . . . . . . . . . . . . . . . . . . 2
2.5 Citadel Products Sales Agreement . . . . . . . . . . . . . . . . . . 3
2.6 Registration Agreement . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . . 4
2.10 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Financial Statements and Other Information . . . . . . . . . . . . . 4
3.2 Inspection of Property . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Current Public Information . . . . . . . . . . . . . . . . . . . . . 8
3.6 Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Election of Director . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV TRANSFER OF RESTRICTED SECURITIES . . . . . . . . . . . . . . . . . 9
4.1 Transfer of Restricted Securities. . . . . . . . . . . . . . . . . . 9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . .10
5.1 Organization and Corporate Power . . . . . . . . . . . . . . . . . .10
5.2 Capital Stock and Related Matters. . . . . . . . . . . . . . . . . .10
5.3 Subsidiaries; Investments. . . . . . . . . . . . . . . . . . . . . .11
5.4 Authorization; No Breach . . . . . . . . . . . . . . . . . . . . . .11
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .11
5.6 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
-i-
5.7 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.8 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.9 Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . . .13
5.10 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . .13
5.12 Compliance with Securities Laws. . . . . . . . . . . . . . . . . . .13
5.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.13 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE VI DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE VII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .16
7.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
7.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
7.3 CORESTAFF's Investment Representations . . . . . . . . . . . . . . .16
7.4 Consent to Amendments. . . . . . . . . . . . . . . . . . . . . . . .17
7.5 Survival of Representation and Warranties. . . . . . . . . . . . . .17
7.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .17
7.7 Generally Accepted Accounting Principles . . . . . . . . . . . . . .17
7.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
7.10 Descriptive Headings; Interpretation . . . . . . . . . . . . . . . .18
7.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
7.12 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
7.13 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
-ii-
LIST OF EXHIBITS
Exhibit A Certificate of Incorporation
Exhibit B Form of First Step Software License Agreement
Exhibit C Form of Development Services Agreement
Exhibit D Form of Citadel Product Sales Agreement
Exhibit E Registration Agreement
Exhibit F Option Agreement
LIST OF SCHEDULES
-----------------
Schedule 5.5(a) Financial Statements
Schedule 5.5(b) Contracts
Schedule 5.7 Litigation
Schedule 5.8 Brokerage
Schedule 5.10 Benefit Plans
-iii-
PURCHASE AGREEMENT
------------------
CITADEL TECHNOLOGY, INC.
THIS AGREEMENT is made as of _________, 1997, between CITADEL
TECHNOLOGY, INC., a _________corporation (the "Company"), and CORESTAFF,
INC., a Delaware corporation ("CORESTAFF"). Except as otherwise indicated
herein, capitalized terms used herein are defined in SECTION 6 hereof.
The parties hereto agree as follows:
ARTICLE I
AUTHORIZATION AND CLOSING
-------------------------
1.1 AUTHORIZATION OF THE STOCK. The Company shall authorize the
issuance and sale to CORESTAFF of up to 2,500,000 shares (the "Stock") of its
Common Stock, par value $.01 per share (the "Common Stock").
1.2 PURCHASE AND SALE OF THE STOCK. At the Closing (as defined in
SECTION 1.3 below), the Company shall sell to CORESTAFF and, subject to the
terms and conditions set forth herein, CORESTAFF shall purchase from the
Company, 2,500,000 shares of Common Stock at a price of $.30 per share.
1.3 THE CLOSING. The closing of the purchase and sale of the Stock to
be purchased pursuant to SECTION 1.2 (the "Closing") shall take place at the
offices of CORESTAFF, Inc., 0 Xxxx Xxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000
at 10:00 a.m. on September __, 1997 or at such other place or on such other
date as may be mutually agreeable to the Company and CORESTAFF. At the
Closing, the Company shall deliver to CORESTAFF stock certificates evidencing
the Stock to be purchased by CORESTAFF, registered in CORESTAFF's name, upon
payment of the purchase price thereof by a cashier's or certified check, or
by wire transfer of immediately available funds to such account as designated
by the Company in the amount of $750,000.
ARTICLE II
CONDITIONS OF CORESTAFF'S OBLIGATION AT THE CLOSING
---------------------------------------------------
The obligation of CORESTAFF to purchase and pay for the Stock at the
Closing is subject to the satisfaction as of the Closing of the following
conditions:
2.1 REPRESENTATIONS AND WARRANTIES, COVENANTS. The representations and
warranties contained in SECTION 5 hereof shall be true and correct at and as
of the Closing as though then made, except to the extent of changes caused by
the transactions expressly
contemplated herein, and the Company shall have performed in all material
respects all of the covenants required to be performed by it hereunder prior
to the Closing.
2.2 CERTIFICATE OF INCORPORATION. The Company's certificate of
incorporation (the "Certificate of Incorporation") shall be in the form set
forth as EXHIBIT A hereto, shall be in full force and effect under the laws
of Delaware as of the Closing and shall not have been amended or modified.
2.3 FIRST STEP SOFTWARE LICENSE AGREEMENT. The Company shall have
entered into an exclusive license agreement, m form and substance
substantially similar to EXHIBIT B attached hereto (the "FIRST STEP LICENSE
AGREEMENT") with CORESTAFF or its Subsidiary and the First Step License
Agreement, shall not have been amended or modified and shall be in full force
and effect as of the Closing. Pursuant to the First Step License Agreement,
(a) CORESTAFF will (i) develop the First Step Software program for Novell
only to the Company's specifications as a full turn-key package on additional
platforms necessary for marketing purposes, at no cost to the Company;
PROVIDED, HOWEVER, if the estimated cost for such development exceeds
$250,000. CORESTAFF has the option to withdraw the First Step Software as
part of this transaction; (ii) provide platform upgrades for Novell only on a
schedule to be determined by the parties and (iii) provide the Company with
an exclusive license to sell the First Step Software until March 31, 1998 and
(b) the Company will (i) represent and warrant to CORESTAFF that it is
satisfied with the form and substance of the First Step Software as currently
developed by CORESTAFF and (ii) agree that CORESTAFF's liability to the
Company under the First Step License Agreement or with respect to the First
Step Software shall be limited to the aggregate amount of royalty payments
paid to CORESTAFF by the Company. Any additional changes to the First Step
Software program will be at CORESTAFF's sole discretion. All pricing of
products and royalties payable to CORESTAFF will be mutually agreed upon and
a percentage of maintenance fees will be paid to the Company. The parties
will determine the level of the company's revenue commitments on the
exclusive license from October 1, 1997 through March 31, 1998. CORESTAFF will
provide technical support service on the First Step product at no cost to the
Company. The Company will continue to maintain all sales relationships with
existing First Step customers. In the event it is agreed that the Company
will take over existing prospects from CORESTAFF, the Company will pay an
additional royalty to CORESTAFF in an amount to be determined by both
parties. Such determination will be made upon transfer of a customer of
CORESTAFF to the Company.
2.4 DEVELOPMENT SERVICES AGREEMENT. The Company and Millennium Computer
Corporation, a Subsidiary of CORESTAFF ("MILLENNIUM") shall have entered into
a Development Services Agreement in form and substance substantially similar
to EXHIBIT C attached hereto (the "DEVELOPMENT SERVICES AGREEMENT"), and the
Development Services Agreement shall be in full force and effect as of the
Closing. Pursuant to the Development Services Agreement, Millennium will
provide development services to the Company at their standard customer rate,
less a ten percent discount. The Company will purchase from
-2-
Millennium a minimum of $250,000 of development services from the Closing
through September 1, 1998.
2.5 CITADEL PRODUCTS SALES AGREEMENT. The Company and CORESTAFF shall
have entered into a Citadel Products Sales Agreement in form and substance
substantially similar to EXHIBIT D attached hereto (the "CITADEL PRODUCTS
SALES AGREEMENT"), and the Citadel Products Sales Agreement shall be in full
force and effect as of the Closing. Pursuant to the Citadel Product Sales
Agreement, CORESTAFF will sell the Company's products and will receive a
higher royalty for sales to existing customers of CORESTAFF.
2.6 REGISTRATION AGREEMENT. The Company and CORESTAFF shall have
entered into a registration agreement in form and substance substantially
similar to EXHIBIT E attached hereto (the "REGISTRATION AGREEMENT"), and the
Registration Agreement shall be in fill force and effect as of the Closing.
2.7 OPTION AGREEMENT. The Company shall have granted an Option to
CORESTAFF in the form of Option Agreement attached hereto as EXHIBIT F. The
Option will provide that CORESTAFF will have the right to purchase an
additional 2,000,000 shares of Common Stock, at an exercise price of $4 per
share for 1,000,000 shares and an exercise price of $5 per share for
1,000,000 shares.
2.8 CLOSING DOCUMENTS. The Company shall have delivered to CORESTAFF
all of the following documents;
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in SECTION 1 and SECTIONS 2.1 through
2.7, inclusive, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by
the Board authorizing the execution, delivery and performance of this
Agreement, the First Step Software License Agreement, the Development
Services Agreement, the Citadel Products Sales Agreement, the Registration
Agreement, the Option Agreement and each of the other agreements
contemplated hereby (collectively, the "DOCUMENTS"), the filing of the
Certificate of Incorporation referred to in SECTION 2.2, the issuance and
sale of the Stock and the consummation of all other transactions
contemplated by this Agreement, and (b) the resolutions duly adopted by the
Company's stockholders approving the transactions contemplated hereby;
(iii) certified copies of the Certificate of Incorporation and
the Company's bylaws, each as in effect at the Closing; and
-3-
(iv) such other documents relating to the transactions
contemplated by this Agreement as CORESTAFF or its counsel may reasonably
request.
2.9 FEES AND EXPENSES. The Company shall have reimbursed CORESTAFF for
the fees and expenses as provided in SECTION 7.1 hereof.
2.10 COMPLIANCE WITH APPLICABLE LAWS. The purchase of Stock by
CORESTAFF hereunder shall not be prohibited by any applicable law or
governmental regulation, shall not subject CORESTAFF to any penalty,
liability or, in CORESTAFF's sole judgment, other onerous conditions under or
pursuant to any applicable law or governmental regulation, and shall be
permitted by laws and regulations of the jurisdictions to which CORESTAFF is
subject.
2.11 WAIVER. Any condition specified in this SECTION 2 may be waived
only if such waiver is set forth in a writing executed by CORESTAFF.
ARTICLE III
COVENANTS
---------
3.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
deliver to CORESTAFF (so long as CORESTAFF holds any Stock):
(a) as soon as available but in any event within 45 days after the
end of each quarterly accounting period in each Fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period
from the beginning of the fiscal year to the end of such quarter, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarterly period, all prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal
year-end adjustments;
(b) as soon as available but in any event within 30 days after the
end of each month in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such month and for the period from the beginning of the
fiscal year to the end of such month, and consolidating and consolidated
balance sheets of the Company and its Subsidiaries as of the end of such
month, all prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the absence of footnote
disclosures and to normal year-end adjustments;
(c) accompanying the financial statements referred to in PARAGRAPH
(a) and (b), an Officer's Certificate stating that neither the Company nor any
of its Subsidiaries is in
-4-
default under any of its other material agreements or, if any such default
exists, specifying the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken and propose to take with
respect thereto;
(d) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consoLidated balance sheets of the Company and its Subsidiaries as of the end
of such fiscal year, setting forth in each case comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by (i) with respect to the consolidated portions of such
statements (except with respect to budget data), an opinion containing no
exceptions or qualifications (except for qualifications regarding specified
contingent liabilities) of an independent accounting firm of recognized
national standing acceptable to the holders of a majority of the Investor
Common, and (ii) a copy of such firm's annual management letter to the Board;
(e) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the Company
by its independent accountants (and not otherwise contained in other
materials provided hereunder);
(f) at least 30 days prior to the beginning of each fiscal year,
annual budgets prepared on a monthly basis for the Company and each of its
Subsidiaries (or regions) for such fiscal year (displaying anticipated
statements of income and cash flows), and promptly upon preparation thereof
any other significant budgets prepared by the Company and any revisions of
such annual or other budgets, and within 30 days after any monthly period in
which there is a material adverse deviation from any annual budgets, an
Officer's Certificate explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto;
(g) promptly (but in any event within five business days) after
the discovery or receipt of notice of any default under any material
agreement to which it or any of its Subsidiaries is a party or any other
event or circumstance affecting the Company or any Subsidiary which is
reasonably likely to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company or any Subsidiary (including the filing of any material litigation
against the Company or any Subsidiary or the existence of any material
dispute with any Person which involves a reasonable likelihood of such
litigation being commenced), an Officer's Certificate specifying the nature
and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto; and
(h) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this SECTION 3.1 may reasonably request.
-5-
Each of the financial statements referred to in PARAGRAPHS (a) and (d) shall
be true and correct in all material respects as of the dates and for the
periods stated therein, subject in tile case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none
of which would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole).
Notwithstanding the foregoing, the financial statements referred to in
paragraphs (g) and (d) shall be in the form of a Form 10-Q and Form 10-K
respectively, so long as the Company remains subject to the requirements of
the Securities Exchange Act.
3.2 INSPECTION OF PROPERTY. The Company shall permit any
representatives designated by CORESTAFF (so long as CORESTAFF holds any
Stock) or any holder of at least 15% of the outstanding Stock, upon
reasonable notice and during normal business hours and such other times as
any such holder may reasonably request, to (i) visit and inspect any of the
properties of the Company and its Subsidiaries, (ii) examine the corporate
and financial records of the Company and its Subsidiaries and make copies
thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers, key employees
and independent accountants of the Company and its Subsidiaries; provided
that the Company shall have the right to have its chief financial officer
present at any meetings with the Company's independent accountants.
3.3 RESTRICTIONS. The Company shall not without the prior written
consent of the holders of a majority of the Investor Common:
(a) directly or indirectly declare or pay any dividends or make
any distributions upon any of its equity securities, other than payments of
dividends on, or redemption payments in respect of, the Common Stock pursuant
to the Certificate of incorporation;
(b) directly or indirectly redeem, purchase or otherwise acquire,
or permit any Subsidiary to redeem, purchase or otherwise acquire, any of the
Company's equity securities (including, without limitation, warrants, options
and other rights to acquire equity securities),
(c) except as expressly contemplated by this Agreement and the
Senior Management Agreements, authorize, issue, sell or enter into any
agreement providing for the issuance (contingent or otherwise), or permit any
Subsidiary to authorize, issue, sell or enter into any agreement providing
for the issuance (contingent or otherwise) of, (i) any notes or debt
securities containing equity features (including, without limitation, any
notes or debt securities convertible into or exchangeable for equity
securities, issued in connection with the issuance of equity securities or
containing profit participation features) or (ii) any equity securities (or
any securities convertible into or exchangeable for any equity securities) or
rights to acquire any
-6-
equity securities, other than the issuance of equity securities by a
Subsidiary to the Company or another Subsidiary;
(d) merge or consolidate with any Person or permit any Subsidiary
to merge or consolidate with any Person (other than a wholly owned
Subsidiary);
(e) sell, lease or otherwise dispose of, or permit any Subsidiary
to sell, lease or otherwise dispose of, more than 5 % of the consolidated
assets of the Company and its Subsidiaries (computed on the basis of book
value, determined in accordance with generally accepted accounting principles
consistently applied, or fair market value, determined by the Board in its
reasonable good faith judgment) in any transaction or series of related
transactions (other than sales of inventory in the ordinary course of
business);
(f) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into partnership form);
(g) acquire, or permit any Subsidiary to acquire, any interest in
any business (whether by a purchase of assets, purchase of stock, merger or
otherwise), or enter into any joint venture;
(h) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than the
operation of veterinary practices and clinics;
(i) enter into, or permit any Subsidiary to enter into, any
transaction with any of its or any Subsidiary's officers, directors,
employees or Affiliates or any individual related by blood, marriage or
adoption to any such Person (a "RELATIVE") or any entity in which any such
Person or individual owns a beneficial interest (a "RELATED ENTITY"), except
for normal employment arrangements and benefit programs on reasonable terms
and except as otherwise expressly contemplated by this Agreement, the Senior
Management Agreements and the Professional Services Agreement; provided that
in no event shall any Relative or Related Entity he employed by, render
services to or receive compensation from the Company or any Subsidiary; or
(j) create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, Indebtedness
exceeding the amounts approved therefor by the Board in the annual budget.
3.4 AFFIRMATIVE COVENANTS. So long as CORESTAFF holds any Stock, the
Company shall, and shall cause each Subsidiary to:
(a) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected
to have a material
-7-
adverse effect upon the financial condition, operating results, assets,
operations or business prospects of the Company and its Subsidiaries taken as
a whole, and pay and discharge when payable all taxes, assessments and
governmental charges (except to the extent the same are being contested in
good faith and adequate reserves therefor have been established); and
(b) enter into and maintain appropriate nondisclosure and
non-compete agreements with its key employees.
3.5 CURRENT PUBLIC INFORMATION. The Company shall file all reports
required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action as any
holder or holders of Restricted Securities may reasonably request, all to the
extent required to enable such holders to sell Restricted Securities pursuant
to (i) Rule 144 adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the Securities and Exchange
Commission or (ii) a registration statement on Form 5-2 or 5-3 or any similar
registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
3.6 PUBLIC DISCLOSURES. The Company shall not, nor shall it permit any
Subsidiary to, disclose CORESTAFF's name or identity as an investor in the
Company in any press release or other public announcement or in any document
or material filed with any governmental entity, without the prior written
consent of CORESTAFF, unless such disclosure is required by applicable law or
governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure the Company shall give written
notice to CORESTAFF describing in reasonable detail the proposed content of
such disclosure and shall permit CORESTAFF to review and comment upon the
form and substance of such disclosure.
-8-
3.7 ELECTION OF DIRECTOR. The Company hereby agrees to elect one
representative designated by CORESTAFF to the Company's Board of Directors
immediately following the Closing. The Company and Xxxxxx Xxxxxxx hereby
agree to use their best efforts to nominate and elect such designee at all
annual or special stockholder meetings for which directors are being elected
until such time as CORESTAFF is the beneficial owner of less than two percent
(2)% of the Company's then outstanding Common Stock.
ARTICLE IV
TRANSFER OF RESTRICTED SECURITIES
---------------------------------
4.1 TRANSFER OF RESTRICTED SECURITIES.
(a) Restricted Securities are transferable only pursuant to (i)
public offerings registered under the Securities Act, (ii) Rule 144 or Rule
144A of the Securities and Exchange Commission (or any similar rule or rules
then in force) if such rule or rules are available and (iii) subject to the
conditions specified in PARAGRAPH (b) below, any other legally available
means of transfer.
(b) In connection with the transfer of any Restricted Securities
(other than a transfer described in subparagraph 4(i)(a) or (b) above), the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion
of Xxxxx & Xxxxxxx, LLP or other counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that
such transfer of Restricted Securities may be effected without registration
of such Restricted Securities under the Securities Act. In addition, if the
holder of the Restricted Securities delivers to the Company an opinion of
Xxxxx & Xxxxxxx, LLP or such other counsel that no subsequent transfer of
such Restricted Securities shall require registration under the Securities
Act, the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities
Act legend set forth in SECTION 7.3. If the Company is not required to
deliver new certificates for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound
by the conditions contained in this paragraph and SECTION 7.3.
(c) Upon the request of CORESTAFF, the Company shall promptly
supply to CORESTAFF or its prospective transferees all information regarding
the Company required to be delivered in connection with a transfer pursuant
to Rule 144A of the Securities and Exchange Commission.
-9-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
As a material inducement to CORESTAFF to enter into this Agreement and
purchase the Stock, the Company hereby represents and warrants to CORESTAFF
that:
5.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware
and is qualified to do business in every jurisdiction in which the failure to
so qualify might reasonably be expected to have a material adverse effect on
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole. The Company
has all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be
conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's Certificate of Incorporation and bylaws which
have been furnished to CORESTAFF's counsel reflect all amendments made
thereto at any time prior to the date of this Agreement and are correct and
complete.
5.2 CAPITAL STOCK AND RELATED MATTERS.
(a) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of __________ shares of Common
Stock, of which (i) __________ shares are issued and outstanding, __________
of which shall be reserved for issuance to CORESTAFF pursuant to the Option
Agreement, and _________ of which shall be reserved for issuance to the
executives pursuant to outstanding options (the "Outstanding Options"). As of
the Closing, the Company shall not have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or containing
any profit participation features, nor shall it have outstanding any rights
or options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans other than pursuant to and
as contemplated by this Agreement, the Option Agreement and the Company's
Stock Option Plan. As of the Closing, the Company shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except pursuant to this Agreement, the
Option Agreement, and the Outstanding Options. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly issued,
hilly paid and nonassessable.
(b) There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal
with respect to the issuance of the Stock hereunder, except as expressly
provided herein. Based in part on the investment representations of
CORESTAFF in SECTION 7.3 hereof, the Company has not violated any applicable
federal or state securities laws in connection with the offer, sale or
issuance of any of
-10-
its capital stock, and the offer, sale and issuance of the Stock hereunder do
not and will not require registration under the Securities Act or any
applicable state securities laws. To the best of the Company's knowledge,
there are no agreements between the Company's stockholders with respect to
the voting or transfer of the Company's capital stock or with respect to any
other aspect of the Company's affairs, except for this Agreement.
5.3 SUBSIDIARIES; INVESTMENTS. The Company does not own or hold any
shares of stock or any other security or interest in any other Person or any
rights to acquire any such security or interest, and the Company has never
had any Subsidiary.
5.4 AUTHORIZATION; NO BREACH. The execution, delivery and performance
of this Agreement, the Documents and all other agreements contemplated hereby
to which the Company is a party and the filing of the Certificate of
Incorporation have been duly authorized by the Company. This Agreement, the
Documents, the Certificate of Incorporation and all other agreements
contemplated hereby each constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms. The execution and delivery
by the Company of this Agreement, the Documents and all other agreements
contemplated hereby to which the Company is a party, the offering, sale and
issuance of the Stock hereunder, the Certificate of Incorporation and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company do not and will not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's capital stock or assets pursuant to. (iv) give
any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization,
consent, approval, exemption or other action by or notice to any court or
administrative or governmental body pursuant to, the Certificate of
Incorporation or bylaws of the Company, or any law, statute, rule or
regulation to which the Company is subject, or any agreement, instrument,
order, judgment or decree to which the Company is a party or by which it is
bound.
5.5 FINANCIAL STATEMENTS.
(a) Attached hereto as SCHEDULE 5.5(a) are the following financial
statements (collectively the "FINANCIAL STATEMENTS") (i) audited balance
sheet and statement of income, changes in stockholder's equity, and cash flow
as of and for the fiscal years ended December 31, 1995 and 1996 (the "MOST
RECENT FISCAL YEAR END") for the Company, and (ii) an unaudited balance sheet
and statement of income, changes in stockholders' equity, and cash flow as of
and for the six months ended June 30, 1997. The Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, are correct and complete, fairly
present the financial condition of the Company as of such dates, and are
Consistent with the books and records of the Company (which books and records
are correct and complete). The Financial Statements for year ended December
31, 1996 were audited by Xxxxx Xxxxxxxx, LLP.
-11-
The Company and its Subsidiaries do not have any material obligation or
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company or any Subsidiary, whether due or to
become due and regardless of when asserted) other than: (i) liabilities set
forth on most recent balance sheet (including any notes thereon delivered to
CORESTAFF pursuant to SECTION 3.1 hereof, (ii) liabilities and obligations
which have arisen after the date of such balance sheet in the ordinary course
of business (none of which is a material liability resulting from breach of
contract, breach of warranty, tort. infringement, claim or lawsuit) and (iii)
liabilities and obligations which have been disclosed to and approved by
CORESTAFF.
5.6 TAX MATTERS. The Company has filed all tax returns (if any) which
it is required to file under applicable laws and regulations; all such
returns are complete and correct in all material respects; the Company has
paid all taxes due and owing by it and has withheld and paid over all taxes
which it is obligated to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third party; the Company has not waived any
statute of limitations with respect to taxes or agreed to any extension of
time with respect to a tax assessment or deficiency; the assessment of any
additional taxes for periods for which returns have been filed is not
expected; no foreign, federal, state or local tax audits are pending or being
conducted with respect to the Company, no information related to tax matters
has been requested by any foreign, federal, state or local taxing authority
and no notice indicating an intent to open an audit or other review has been
received by the Company from any foreign, federal, state or local taxing
authority; and there are no unresolved questions or claims concerning the
Company's tax liability. The Company has not made an election under Section
341(f) of the IRC.
5.7 LITIGATION. ETC. Except as set forth on SCHEDULE 5.7 (Litigation)
attached hereto, there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Company's knowledge,
threatened against or affecting the Company (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company with respect to their businesses or
proposed business activities) at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, any actions, suit, proceedings or
investigations with respect to the transactions contemplated by this
Agreement) which could have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole; the Company is not subject to
any arbitration proceedings under collective bargaining agreements or
otherwise or, to the best of the Company's knowledge, any governmental
investigations or inquiries; and, to the best of the Company's knowledge,
there is no basis for any of the foregoing. The Company is not subject to any
judgment, order or decree of any court or other governmental agency. The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business.
-12-
5.8 BROKERAGE. Except as set forth on SCHEDULE 5.8 (Brokerage)
attached hereto, there are no claims for brokerage commissions, finders, fees
or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding upon the
Company. The Company shall pay, and hold CORESTAFF harmless against, any
liability, loss or expense (including, without limitation, attorneys, fees
and out-of-pocket expenses) arising in connection with any such claim.
5.9 GOVERNMENTAL CONSENT. ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental
authority is required in connection with the execution, delivery and
performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby.
5.10 ERISA. Except as set forth on SCHEDULE 5.10 hereto, the Company
does not maintain or have any obligation to contribute to or any other
liability with respect to or under (including but not limited to current or
potential withdrawal liability), nor has it ever maintained or had any
obligation to contribute to or any other liability with respect to or under,
(i) any plan or arrangement whether or not terminated, which provides
medical, health, life insurance or other welfare type benefits for current or
future retired or terminated employees (except for limited continued medical
benefit coverage required to be provided under Section 4980B of the IRC or as
required under applicable state law), (ii) any "multiemployer plan" (as
defined in Section 3(37) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (iii) any employee plan which is a tax- qualified
"defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not
terminated, (iv) any employee plan which is a tax-qualified "defined
contribution plan" (as defined in Section 3(34) of ERISA), whether or not
terminated, or (v) any other plan or arrangement providing benefits to
current or former employees, including any bonus plan, plan for deferred
compensation, employee health or other welfare benefit plan or other
arrangement, whether or not terminated. For purposes of this SECTION 5.10,
the term "Company includes all organizations under common control with the
Company pursuant to Section 414(b) or (c) of the IRC.
5.11 COMPLIANCE WITH LAWS. The Company has not violated any law or any
governmental regulation or requirement which violation would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company,
and the Company has not received notice of any such violation. The Company is
not subject to any clean up liability, and the Company has no reason to
believe it may become subject to any clean up liability, under any federal,
state or local environmental law, rule or regulation.
5.12 COMPLIANCE WITH SECURITIES LAWS. The Company has complied in all
material respects with all laws, rules, regulations and requirements of the
Securities Act, the Securities Exchange Act and any other Federal or state
securities laws. The Company has made
-13-
all filings required to be made with the Securities and Exchange Commission
and all of such filings are true and correct in all material respects.
5.13 DISCLOSURE Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items
prepared or supplied to CORESTAFF by or on behalf of the Company with respect
to the transactions contemplated hereby contain any untrue statement of a
material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading. There is no fact which the
Company has not disclosed to CORESTAFF in writing and of which any of its
officers, directors or executive employees is aware and which has had or
might reasonably be anticipated to have a material adverse effect upon the
existing or expected financial condition, operating results, assets, customer
or supplier relations, employee relations or business prospects of the
Company.
5.13 CLOSING DATE. The representations and warranties of the Company
contained in this SECTION 5 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in any
writing delivered by, or on behalf of, the Company to CORESTAFF shall be true
and correct in all material respects on the date of the Closing as though
then made, except as affected by the transactions expressly contemplated by
this Agreement.
ARTICLE VI
DEFINITIONS
-----------
6.1 For the purposes of this Agreement, the following terms have the
meanings set forth below:
"AFFILIATE" of any particular person or entity means any other
person or entity controlling, controlled by or under common control with such
particular person or entity.
"COMMON STOCK" means the Company's common stock, par value $.01 per
share.
"INDEBTEDNESS" means all indebtedness for borrowed money (including
purchase money obligations) maturing one year or more from the date of
creation or incurrence thereof or renewable or extendible at the option of
the debtor to a date one year or more from the date of creation or incurrence
thereof, all indebtedness under revolving credit arrangements extending over
a year or more, all capitalized lease obligations and all guarantees of any
of the foregoing.
"INVESTOR COMMON" means (i) the Stock issued hereunder and (ii) any
Common Stock issued or issuable with respect to the Common Stock referred to
in clause (i) above by way of stock dividends or stock splits or in
connection with a combination of shares.
-14-
recapitalization, merger, consolidation or other reorganization. As to any
particular shares of Investor Common, such shares shall cease to be Investor
Common when they have been (a) effectively registered under the Securities
Act and disposed of in accordance with the Registration statement covering,
them or (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar rule then
in force).
"INVESTOR STOCK" means the Investor Common and all shares of Common
Stock acquired pursuant to exercise of the Option Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"OFFICER'S CERTIFICATE" means a certificate signed by the Company's
president or its chief financial officer, stating that (i) the officer
signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the accuracy
of the information set forth in such certificate and (ii) to the best of such
officer's knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate not
misleading.
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"RESTRICTED SECURITIES" means (i) the Stock issued hereunder and
pursuant to the Option Agreement and (ii) any securities issued with respect
to the securities referred to in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to be
Restricted Securities when they have (A) been effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering them, (B)become eligible for sale pursuant to Rule 144(k)
(or any similar provision then in force) under the Securities Act or (C) been
otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in SECTION 7.3 have been delivered by the
Company in accordance with SECTION 4.1(b). Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in SECTION 7.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
-15-
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934. as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body
or agency succeeding to the functions thereof.
"SUBSIDIARY" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are,
at the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 EXPENSES. Each party agrees to bear its own expenses associated
with the transactions contemplated hereby.
7.2 REMEDIES. Each holder of Investor Stock shall have all rights and
remedies set forth in this Agreement and the Certificate of Incorporation and
all rights and remedies which such holders have been granted at any time
under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision
of this Agreement shall & entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other
rights granted by law.
7.3 CORESTAFF'S INVESTMENT REPRESENTATIONS. CORESTAFF hereby
represents that it is acquiring the Restricted Securities purchased hereunder
or acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no
intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent CORESTAFF and subsequent holders
of Restricted Securities from transferring such securities in compliance with
the provisions of ARTICLE IV hereof Each certificate for Restricted
Securities shall be imprinted with a legend in substantially the following
form:
"The securities represented by this certificate here
originally issued on ____________ and have not been
registered under the Securities Act of 1933, as amended.
The transfer of the securities represented by this
certificate is subject to the conditions specified in the
Purchase Agreement, dated as of _______________ 1997,
between the issuer (the "Company") and a certain
investor, and the Company reserves the right to refuse
the transfer of such securities
-16-
until such conditions have been fulfilled with respect to
such transfer. A copy of such conditions shall be furnished
by the Company to the holder hereof upon written request and
without charge."
7.4 CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein required
to be performed by it, only if the Company has obtained the written consent
of the holders of a majority of the Investor Stock. No other course of
dealing between the Company and the holder of any Stock or any delay in
exercising any fights hereunder or under the Certificate of Incorporation
shall operate as a waiver of any rights of any such holders. For purposes of
this Agreement, shares of Stock held by the Company or any Subsidiaries shall
not be deemed to be outstanding.
7.5 SURVIVAL OF REPRESENTATION AND WARRANTIES. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by CORESTAFF or on its behalf
7.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, and whether or not any express assignment has
been made, the provisions of this Agreement which are for CORESTAFF's benefit
as a purchaser or holder of Stock are also for the benefit of, and
enforceable by, any subsequent holder of such Stock. The rights and
obligations of CORESTAFF under this Agreement and the agreements contemplated
hereby may be assigned by CORESTAFF at any time, in whole or in part, to any
Subsidiary of CORESTAFF, or any successor thereto.
7.7 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Where any accounting
determination or calculation is required to be made under this Agreement or
the exhibits hereto, such determination or calculation (unless otherwise
provided) shall be made in accordance with generally accepted accounting
principles, consistently applied, except that if because of a change in
generally accepted accounting principles the Company would have to alter a
previously utilized accounting method or policy in order to remain in
compliance with generally accepted accounting principles, such determination
or calculation shall continue to be made in accordance with the Company's
previous accounting methods and policies.
7.8 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating, the remainder of this Agreement.
-17-
7.9 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall
constitute one and the same Agreement.
7.10 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
Section of this Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
7.11 GOVERNING LAW. The corporate law of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation
of this Agreement and the exhibits and schedules hereto shall he governed by
and construed in accordance with the internal laws of the State of Illinois.
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Illinois or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas.
7.12 NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be
in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid), 48 hours after being deposited to the recipient by United
States mail, first class, postage prepaid, or sent by facsimile. Such
notices, demands and other communications shall be sent to CORESTAFF and to
the Company at the address indicated below:
IF TO THE COMPANY:
Citadel Technology, Inc.
0000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
-18-
IF TO CORESTAFF:
COREStaff, Inc.
0000 Xxxx Xxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
COREStaff, Inc.
0000 Xxxx Xxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
7.13. ARBITRATION. THE PARTIES AGREE TO SUBMIT TO ARBITRATION, IN
ACCORDANCE WITH THESE PROVISIONS, ANY DISPUTED CLAIM OR CONTROVERSY ARISING
FROM OR RELATED TO THE ALLEGED BREACH OF THIS AGREEMENT OR ANY DISPUTED CLAIM
MADE PURSUANT TO SECTION 2.3, THE FIRST STEP LICENSE AGREEMENT OR THE FIRST
STEP SOFTWARE. THE PARTIES FURTHER AGREE THAT THE ARBITRATION PROCESS AGREED
UPON HEREIN SHALL BE THE EXCLUSIVE MEANS FOR RESOLVING ALL DISPUTES MADE
SUBJECT TO ARBITRATION HEREIN, BUT THAT NO ARBITRATOR SHALL HAVE AUTHORITY TO
EXPAND THE SCOPE OF ThESE ARBITRATION PROVISIONS. ANY ARBITRATION HEREUNDER
SHALL BE CONDUCTED UNDER THE PROCEDURES OF THE AMERICAN ARBITRATION
ASSOCIATION (AAA). EITHER PARTY MAY INVOKE ARBITRATION PROCEDURES HEREIN BY
WRITTEN NOTICE FOR ARBITRATION CONTAINING A STATEMENT OF THE MATTER TO BE
ARBITRATED. THE PARTIES SHALL THEN HAVE FOURTEEN (14) DAYS IN WHICH THEY MAY
IDENTIFY A MUTUALLY AGREEABLE, NEUTRAL ARBITRATOR. AFTER THE FOURTEEN (14)
DAY PERIOD HAS EXPIRED, THE PARTIES SHALL PREPARE AND SUBMIT TO THE AAA A
JOINT SUBMISSION, WITH EACH PARTY TO CONTRIBUTE HALF OF THE APPROPRIATE
ADMINISTRATIVE FEE. IN THE EVENT THE PARTIES CANNOT AGREE UPON A NEUTRAL
ARBITRATOR WITHIN FOURTEEN (14) DAYS AFTER WRITTEN NOTICE FOR ARBITRATION IS
RECEIVED, THEIR JOINT SUBMISSION TO THE AAA SHALL REQUEST A PANEL OF THREE
ARBITRATORS WHO ARE PRACTICING ATTORNEYS WITH PROFESSIONAL EXPERIENCE IN THE
FIELD OF CORPORATE LAW, AND THE PARTIES SHALL ATTEMPT TO SELECT AN ARBITRATOR
FROM THE PANEL ACCORDING TO AAA PROCEDURES. UNLESS OTHERWISE AGREED BY THE
PARTIES, THE ARBITRATION HEARING SHALL TAKE PLACE IN HOUSTON, TEXAS, AT A
PLACE DESIGNATED BY THE AAA. ALL ARBITRATION
-19-
PROCEDURES HEREUNDER SHALL BE CONFIDENTIAL. EACH PARTY SHALL BE RESPONSIBLE
FOR ITS COSTS INCURRED IN ANY ARBITRATION. AND THE ARBITRATOR SHALL NOT HAVE
AUTHORITY TO INCLUDE ALL OR ANY PORTION OF SAID COSTS IN AN AWARD, REGARDLESS
OF WHICH PARTY PREVAILS. THE ARBITRATOR MAY INCLUDE EQUITABLE RELIEF. ANY
ARBITRATION AWARDED SHALL BE ACCOMPANIED BY A WRITTEN STATEMENT CONTAINING A
SUMMARY OF THE ISSUES IN CONTROVERSY, A DESCRIPTION OF THE AWARD, AND AN
EXPLANATION OF THE REASONS FOR THE AWARD.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
CITADEL TECHNOLOGY, INC.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
CORESTAFF, INC.
By:
----------------------------------
Name:
---------------------------
Title:
---------------------------
For purposes of Section 3.7 hereof only:
---------------------------------------
Xxxxxx X. Xxxxxxx
-20-
