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Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is dated as of June 29, 1998, between
CITADEL TECHNOLOGY, INC., a Delaware corporation (the "Company"), and ICARUS
INVESTMENTS I, LTD., a Texas limited partnership (the "Purchaser"). Except as
otherwise indicated herein, capitalized terms used herein are defined in SECTION
6 of this Agreement.
WHEREAS, the Company desires to issue and sell the Shares (as defined
in SECTION 1.1 below) to the Purchaser, and the Purchaser desires to purchase
the Shares from the Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
AUTHORIZATION AND CLOSING
1.1 AUTHORIZATION. The Company shall authorize the issuance and sale to
Purchaser of one million (1,000,000) shares (the "Shares") of its Common Stock,
par value $.01 per share (the "Stock").
1.2 PURCHASE AND SALE OF THE SHARES. At the Closing (as defined in
SECTION 1.3 below), the Company shall sell to Purchaser and, subject to the
terms and conditions set forth herein, Purchaser shall purchase from the
Company, the Shares at a price of $1.50 per share for an aggregate purchase
price of one million five hundred thousand dollars ($1,500,000.00) (the
"Purchase Price").
1.3 THE CLOSING. The closing of the purchase and sale of the Shares to
be purchased pursuant to SECTION 1.2 (the "Closing") shall take place at the
offices of the Company, at 0000 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000 at 12:00 p.m. on June 29, 1998 or at such other place or on such other
date as may be mutually agreeable to the Company and Purchaser. At the Closing,
the Company shall deliver to Purchaser stock certificates evidencing the Shares
to be purchased by Purchaser, registered in Purchaser'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 the Purchase Price.
ARTICLE II
CONDITIONS OF PURCHASER'S OBLIGATION AT THE CLOSING
The obligation of Purchaser to purchase and pay for the Shares at the
Closing is subject to the satisfaction as of the Closing of the following
conditions:
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2.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in SECTION 4 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.
2.2 COMPLIANCE WITH APPLICABLE LAWS. The purchase of the Shares by
Purchaser hereunder shall not be prohibited by any applicable law or
governmental regulation, shall not subject Purchaser to any penalty, liability
or, in Purchaser'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 Purchaser is subject.
2.3 WAIVER. Any condition specified in this SECTION 2 may be waived
only if such waiver is set forth in a writing executed by Purchaser.
ARTICLE III
TRANSFER OF RESTRICTED SECURITIES
3.1 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 3(i)(a) 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 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 such 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 Purchaser, the Company shall promptly supply to
Purchaser or its prospective transferees all information regarding the Company
required to be delivered in connection with a transfer pursuant to Rule 144A of
the Commission.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to Purchaser to enter into this Agreement and
purchase the Shares, the Company hereby represents and warrants to Purchaser
that:
4.1 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.
4.2 CAPITAL STOCK AND RELATED MATTERS.
(a) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of (1) 60,000,000 shares of Common
Stock, of which (i) 24,948,348 shares are issued and outstanding as of June 29,
1998, and (2) 1,000,000 shares of Preferred Stock, of which 50 shares of Series
A Preferred Stock, 425 shares of Series C Preferred Stock, 2,000 shares of
Series D Preferred Stock, and 5,000 shares of Series E Preferred Stock are
outstanding as of June 29, 1998. As of the Closing, the Shares shall be validly
issued, fully 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 Shares hereunder. Based in part on the investment
representations of Purchaser 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 its capital stock, and the offer, sale and issuance
of the Shares hereunder do not and will not require registration under the
Securities Act or any applicable state securities laws.
4.3 AUTHORIZATION; NO BREACH. The execution, delivery and performance
of this Agreement and all other agreements contemplated hereby to which the
Company is a party have been duly authorized by the Company. This Agreement 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 and all other agreements
contemplated hereby to which the Company is a party, the offering, sale and
issuance of the Shares hereunder 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
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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.
4.4 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.
4.5 CLOSING DATE. The representations and warranties of the Company
contained in this SECTION 4 and all information contained in any exhibit,
schedule or attachment hereto or in any writing delivered by, or on behalf of,
the Company to Purchaser 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 IV
REGISTRATION RIGHTS
(a) If any Restricted Securities are outstanding, the Company shall
provide written notice to the Purchaser of its intention to file any
registration statement with the Commission (other than a registration statement
on Form S-8 or Form S-4) in connection with any public offering involving the
Company's Common Stock. If the Purchaser desires to elect to sell its Restricted
Securities in connection with the registration statement, the Purchaser shall
provide written notice to the Company within five days of its intention to sell
all or any multiple of 20% of its original Restricted Securities. The Company
shall use its best efforts to include such Restricted Securities requested by
the Purchaser in such registration statement, to the extent requisite to permit
the public offering and sale of the Restricted Securities, and will use its best
efforts to cause such registration statement to become effective as promptly as
practicable. In the event the registration statement is filed on behalf of the
Company (as opposed to other selling stockholders), if the managing underwriter
or underwriters of the proposed offering advise the Company that the success of
the offering would be materially and adversely affected by the inclusion of all
of the shares requested to be included, then the number of shares to be included
for any persons other than the Company shall be reduced or limited (i) as
between the selling shareholders and the Company, in the sole and absolute
discretion of the Board of Directors of the Company, and (ii) as between the
selling shareholders, pro rata based upon the total number of shares held by
such shareholders on a fully diluted basis. As used herein, the "Restricted
Securities" shall not include Shares
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that have been previously sold or that may be resold pursuant to Rule 144
promulgated under the Act or other available exemption. Notwithstanding the
foregoing, the Company shall in no event be required to keep any such
registration or qualification in effect for a period in excess of 90 days or
after two years from the date on which the Purchaser purchased such Restricted
Securities.
(b) In connection with registration of securities pursuant to this
Section, the Purchaser shall pay all fees and expenses with respect to its
shares, including the proportionate part, based upon the number of the
Purchaser's shares sold in relation to all shares to be sold, of broker/dealer
commissions, underwriting discounts, the expenses of such underwriter, and fees
and disbursements of counsel of the Purchaser and any stock transfer taxes
incurred with respect of the Restricted Securities of the Purchaser. The Company
shall bear all other expenses incurred in connection with such registration
statement, including Commission filing fees.
ARTICLE VI
DEFINITIONS
6.1 For the purposes of this Agreement, the following terms have the
meanings set forth below:
"COMMON STOCK" means the Company's common stock, par value $.01 per
share.
"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 Shares issued hereunder 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 3.1(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.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"COMMISSION" means the Securities and Exchange Commission and 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. The Purchaser shall have all rights and remedies set
forth in this Agreement and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
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 PURCHASER'S INVESTMENT REPRESENTATIONS. Purchaser hereby represents
that it is an Accredited Investor as defined in Regulation D under the
Securities Act, 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 Purchaser and subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of ARTICLE III hereof. Each certificate for Restricted Securities
shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were
originally issued on June 29, 1998 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 Stock Purchase Agreement, dated as of June 29, 1998, between the
issuer (the "Company") and a certain investor, and the Company reserves
the right to refuse the transfer of such securities until such
conditions have been fulfilled with respect to such transfer. A copy of
such
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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
Purchaser or holders of a majority of the Shares. No other course of dealing
between the Company and the holder of any Shares 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
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 Purchaser 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 Purchaser's benefit as a purchaser or
holder of Shares are also for the benefit of, and enforceable by, any subsequent
holder of such Shares. The rights and obligations of Purchaser under this
Agreement and the agreements contemplated hereby may be assigned by Purchaser at
any time, in whole or in part, to any Subsidiary of Purchaser, 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.
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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 Texas, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Texas 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 Purchaser 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
IF TO PURCHASER:
Icarus Investments I, Ltd.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxx, President
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
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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. 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 DALLAS, TEXAS, AT A
PLACE DESIGNATED BY THE AAA. ALL ARBITRATION 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.
CITADEL TECHNOLOGY, INC.
By: /s/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, President
ICARUS INVESTMENTS I, LTD.
By: ICARUS INVESTMENTS, INC., General Partner
By: /s/ XXXXXXX XXXX
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Xxxxxxx Xxxx, President
