STOCK PURCHASE AGREEMENT
Exhibit 10.6
THIS STOCK PURCHASE AGREEMENT is dated effective as of July 16, 2003 between Citadel Security Software Inc., a Delaware corporation ("Company"), and Xxxxxxxx X. Xxxxxxxxx (the "Purchaser"). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 5 of this Agreement.
ARTICLE II -- CONDITIONS OF OBLIGATIONS AT THE CLOSING
The obligations of Purchaser to purchase and pay for the Shares and of the Company to issue and deliver the Shares at Closing is subject to the satisfaction as of the Closing of the following conditions:
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ARTICLE III -- TRANSFER OF RESTRICTED SECURITIES AND REGISTRATION RIGHTS
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In connection with registration of securities, the Company shall bear all expenses incurred in connection with such registration statement, except that the Purchaser shall pay the following expenses with respect to its Shares: broker/dealer commissions, underwriting discounts, fees and disbursements of counsel of such Purchaser, and any stock transfer taxes incurred with respect of the Shares of such Purchaser.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES
4.1 PURCHASER'S REPRESENTATIONS - ACCREDITED INVESTOR STATUS. Purchaser hereby represents and warrants to the Company that the Purchaser is an Accredited Investor as defined in Regulation D under the Securities Act by virtue of having a net worth in excess of one million dollars, that it has sufficient knowledge and experience in business and finance matters to be capable of evaluating the merits and risks of an investment in the Common Stock of the Company, that it is acquiring the Shares 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. Purchaser either (i) had individual income (not including spouse's income, if any) during each of the previous two calendar years in excess of or $200,000, or joint income with Purchaser's spouse's income for such years in excess of $300,000, and Purchaser expects to meet such income levels in the current calendar year, or (ii) Purchaser's net worth (or joint net worth with Purchaser's spouse) is in excess of $1,000,000. Purchaser represents that Purchaser could afford to hold the Shares for an indefinite period and could afford a complete loss. Purchaser has read and understands the risk factors contained in the Company's filings with the Securities and Exchange Commission. Purchaser has had the opportunity to ask questions and obtain information from the Company's management regarding the business and financial condition of the Company and all such questions have been answered and requested information provided to the Purchaser's full satisfaction.
(1) As of the Closing and immediately thereafter, the authorized capital stock of the Company shall consist of 50,000,000 shares of Common Stock, and 1,000,000 shares of preferred stock. As of the Closing, the Shares shall be validly issued, fully paid and nonassessable.
(2) 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.
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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 (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 6.3 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 6.3.
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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.
ARTICLE VI -- MISCELLANEOUS
"The securities represented by this certificate 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 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 conditions shall be furnished by the Company to the holder hereof upon written request and without charge."
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6.11 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.
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IF TO THE COMPANY:
0000 Xxxxx Xxxxxxx Xxxx., Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
IF TO PURCHASER:
At the address set forth on the signature page 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.
6.13. 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 SHALL BE CONDUCTED UNDER THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION (AAA). EITHER PARTY MAY INVOKE ARBITRATION PROCEDURES 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.
By: /s/ XXXXXX X. XXXXXXX
Xxxxxx X. Xxxxxxx,
Chief Executive Officer
PURCHASER
/s/ XXXXXXXX X. XXXXXXXXX
Xxxxxxxx X. Xxxxxxxxx
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
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