LLC MEMBERSHIP EXCHANGE AGREEMENT
THIS LLC MEMBERSHIP EXCHANGE AGREEMENT (this "Agreement") is
made and entered into as of March 1, 2002 by and among Category 5 Technologies,
Inc., a Nevada corporation ("Category 5"), Flash Ally, LLC, a Utah limited
liability company, (the "Company"), and its members Xxxxx Xxxxxxxx and Xxxx
Xxxxx, individuals ("Sellers").
RECITALS
WHEREAS, the Company owns software that enables the automated
design and creation of Web sites utilizing Macromedia's Flash technology
("FlashAlly"), and the Company has secured all rights from Macromedia to
incorporate Flash into the software.
WHEREAS. Sellers own all of the membership interests of the
Company; and
WHEREAS, Sellers desire to exchange all of their membership
interests in the Company, which constitute all of the membership interests in
the Company (the "Interests") for shares of common stock of Category 5, and
Category 5 desires to issue shares of its common stock in exchange for the
Interests, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises,
representations and mutual covenants hereinafter set forth and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, agree as follows:
ARTICLE I
EXCHANGE OF LLC MEMBERSHIP INTERESTS AND SHARES
1.1 Exchange. Seller hereby agree to exchange, sell, transfer
and deliver to Category 5, and Category 5 hereby agrees to purchase and acquire
from Seller, on the Closing Date (as hereinafter defined) all of the membership
interests (the "Interests") of the Company free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever.
1.2 Consideration for Interests. Category 5 shall deliver at
the Closing (as hereinafter defined), in addition to the items set forth in
Section 7.3, in exchange and as consideration for the Interests, stock
certificates representing in the aggregate 2,000,000 shares of Category 5's
Common Stock (the "Category 5 Shares"), par value $.001 per share. The Category
5 Shares shall be delivered to Sellers as follows:
(i) Tranche I Shares. At the Closing, Category shall deliver
to Sellers, in exchange for all of the Interests, 500,000 Category 5 Shares (the
"Tranche I Shares").
(ii) Tranche II Shares. At the Closing, Category 5 shall
deliver to a third-party escrow agent (the "Escrow Agent") satisfactory to both
parties the remaining 1,500,000 Category 5 Shares (the "Tranche II Shares"), to
be released pursuant to the terms of an escrow agreement ("Escrow Agreement")
among Category 5, the Company and Sellers in substantially
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the form attached hereto as Exhibit A. The Sellers shall have voting rights with
respect to the Tranche II shares commencing the Closing Date. The Tranche II
Shares shall secure Category 5 against undisclosed liabilities,
misrepresentations and breaches of warranties, covenants and agreements, and
such Tranche II Shares shall be released to Sellers as follows:
(a) If, during or prior to the end of the twelve (12) months
following the Closing, Category 5 and/or the Company have generated revenues
from the sale and/or license of FlashAlly outside of Category 5's seminars
("Non-Seminar Sales") equal to or exceeding $5 million, the Escrow Agent shall
release to Sellers 500,000 of the Tranche II Shares.
(b) If, during or prior to the end of the eighteen (18) months
following the Closing, Category 5 and/or the Company have generated revenues
from Non Category 5 Seminar Sales equal to or exceeding $10 million, the Escrow
Agent shall release to Sellers an additional 500,000 of the Tranche II Shares.
(c) If, during or prior to the end of the twenty-four (24)
months following the Closing, Category 5 and/or the Company have generated
revenues from Non-Category 5 Seminar Sales equal to or exceeding $15 million,
the Escrow Agent shall release to Sellers the remaining 500,000 of the Tranche
II Shares.
(iii) Royalty Agreement. At the Closing, Category 5 shall
deliver to the Sellers a Royalty Agreement (the "Royalty Agreement") in
substantially the form attached hereto as Exhibit B. which shall provide for
payment to the Sellers of a cash royalty as follows:
(a) 75% of the net income generated from the sale or license of
FlashAlly to or through any of the entities set forth on Schedule 1 attached
hereto (the "Existing Leads"), for a period of not fewer than 12 months from the
Closing.
(b) If, at any time after 12 months, the 15-day average closing price
for Category 5 Common Stock equals or exceeds $5.00 per share, then the royalty
shall decrease to 50% of the net income generated from sales of FlashAlly to or
through the Existing Leads.
(c) If, at any time after 12 months, the 15-day average closing price
for Category 5 Common Stock equals or exceeds $10.00 per share, then the royalty
shall decrease to 25% of the net income generated from sales of FlashAlly to or
through the Existing Leads.
(d) If, at any time after 12 months, the 15-day average closing price
for Category 5 Common Stock equals or exceeds $15.00 per share, then the royalty
shall terminate.
(e) Commencing at Closing, and continuing until the earlier of one year
(12 months) from Closing or until the 15-day average closing price for Category
5 Common Stock equals or exceeds $10.00 per share, Category 5 shall pay to the
shareholders of Flash a royalty of $15 per person per year for sales of
FlashAlly through Category 5 or affiliate seminars.
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1.3 Delivery of Shares. At the Closing, Sellers shall deliver
to Category 5, in addition to those items set forth in Section 9.2, in exchange
for the Category 5 Shares, all of the membership interests in the Company, in a
form reasonably acceptable to Category 5, free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever, together with the minute
books and stock ledger of the Company.
1.4 Legends. The certificates evidencing the Category 5 Shares
shall bear the following legend and any legends required by any state securities
laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION UNDER THE ACT THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
SATISFACTION OF THE COMPANY."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY
The Company and each of the Sellers jointly and severally
agree with, and represent and warrant to Category 5 as follows:
2.1 Corporate Existence. Good Standing and Authority. The
Company is a limited liability company duly organized, validly existing and in
good standing under the laws of the state of Utah. The Company has full power
and authority to carry on its business as now being conducted and is entitled to
own, lease or operate the property and assets now owned, leased or operated by
it. The Company is qualified to do business, is in good standing and has all
required and appropriate licenses in each jurisdiction in which its failure to
obtain or maintain such qualification, good standing or licensing (i) would,
individually or in the aggregate, have or reasonably could be expected to have a
material adverse effect on the assets, liabilities, business, financial
condition, results of operations, or prospects of the Company (a "Material
Adverse Effect"), or (ii) would result in a material breach of any of the other
representations, warranties or covenants set forth in this Agreement. The
Company has all requisite corporate power and corporate authority to enter into
this Agreement all other agreements and documents contemplated hereby (the
"Ancillary Agreements") and to consummate the transactions contemplated hereby
and thereby. This Agreement has been, and the Ancillary Agreements, when
executed, will be, duly executed and delivered by the Company and each of the
Sellers, has been authorized by all necessary action of the Company and
constitutes a legal, valid and binding obligation of the Company and each of the
Sellers, enforceable against the Company and each of the Sellers in accordance
with its terms, except as enforcement may be limited by equitable principles or
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally.
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2.2 Capitalization. The Sellers are the only members of the
Company, and the Interests constitute all of the membership interests of the
Company. There are no options, warrants, conversion rights, rights of exchange,
or other rights, plans, agreements or other commitments providing for the
purchase, issuance or sale of any additional membership interests or any
securities convertible into or exchangeable for any membership interests of the
Company.
2.3 Good and Marketable Title To Interests. All of the
Interests are owned, beneficially and of record, only by the Sellers and are
free from any charge, lien, encumbrance or adverse claim of any kind whatsoever.
The Sellers have the absolute and unrestricted right, power, authority and
capacity to transfer the Interests to Category 5 and upon the Closing, without
exception, Category 5 will acquire from the Sellers legal and beneficial
ownership of, good and valid title to, and all rights to vote, the Interests,
free from any charge, lien, encumbrance or adverse claim of any kind whatsoever.
2.4 Subsidiaries. Except as set forth on Schedule 2.4, the
Company does not presently own, directly or indirectly, any interest in any
other corporation, association, joint venture or other business entity.
2.5 Financial Statements. The balance sheet and related
statements of income and cash flows of the Company since inception through
September 30, 2001 (the "Flash Financial Statements") have been provided to
Category 5. The internal books and records of the Company from which the Flash
Financial Statements were prepared do not contain any information which is false
or misleading. The Flash Financial Statements (i) were prepared in accordance
with such books and records; (ii) were prepared in accordance with the Company's
accounting policies and principles, and are in accordance with international
accounting standards ("IAS"), applied on a consistent basis; and (iii) present
fairly the Company's financial position and results of operations at the dates
and for the periods reflected therein.
2.6 Properties. The Company does not own or hold title to any
real property. The Company has beneficial ownership of and good and marketable
title to all properties and assets it owns which are used in its operations or
necessary for the conduct of its business, and such properties and assets are
not subject to no mortgages, liens, pledges, loans or encumbrances of any kind
whatsoever. With respect to property and assets it leases, the Company is in
compliance in all material respects with such leases and holds a valid leasehold
interest free of any liens, claims or encumbrances of any kind whatsoever. All
real and tangible personal property, including machinery, equipment and fixtures
currently used by the Company in the operation of its businesses is, and at the
time of Closing will be, in good operating condition and repair, ordinary wear
and tear excepted.
2.7 Litigation. No litigation, arbitration or proceeding is
pending or, to the best knowledge of the Company, threatened by or against the
Company, its properties or assets, the Interests or its officers, directors or
the Sellers before any court or any government agency, and, to the knowledge of
the Company, no facts exist which might form the basis for any such litigation,
arbitration or proceeding. To the knowledge of the Company, the Company is not
the subject of any investigation for violation of any laws, regulations or
administrative orders applicable to its businesses by any governmental authority
or any other person. There is no judgment, writ, decree, injunction, rule or
order of any court, governmental department,
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commission, agency, instrumentality or arbitrator outstanding against the
Company, its properties or assets or the Interests.
2.8 Non-Contravention. The execution and delivery of this
Agreement by the Company and consummation of the transactions contemplated
hereby will not result in or constitute any of the following: (i) a conflict,
violation or default with or an event that, with notice or lapse of time or
both, would be a default, breach, or violation of the Articles of Incorporation
or Bylaws of the Company, any contract, lease, license, permit, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust, or
other agreement, instrument or arrangement to which the Company is a party or by
which the Company or its assets are bound; (ii) an event that would permit any
party to terminate any agreement or instrument or to accelerate the maturity of
or permit the subordination of any indebtedness or other obligation of the
Company; (iii) the creation or imposition of any lien, charge, or encumbrance on
any of the assets of the Company; or (iv) conflict with or result in the
violation or breach of any law, rule or regulation of any governmental
authority, or any judgment, order, injunction or decree applicable to the
Company or its assets.
2.9 Absence of Certain Changes. Except as set forth in
Schedule 2.9, since September 30, 2001, there has not been:
(a) Any Material Adverse Effect;
(b) Any increase in the compensation paid or payable by the
Company, other than in the ordinary course of business, to any of its officers,
directors, employees, agents or Sellers;
(c) Any split-up or other recapitalization in respect of the
capital stock of the Company or any direct or indirect redemption, purchase or
other acquisition of any such capital stock or any agreement to do any of the
foregoing;
(d) Any issuance, transfer, sale or pledge by the Company of
any Interests of its capital stock or other securities or of any commitment,
option, right or privilege under which the Company is or may become obligated to
issue any Interests of its capital stock or other securities;
(e) Any indebtedness incurred by the Company, except such as
may have been incurred or entered into in the ordinary course of business;
(f) Any loan made or agreed to be made by the Company, nor has
the Company become liable or agreed to become liable as a guarantor with respect
to any loan;
(g) Any waiver or compromise by the Company of any right or
rights of material value or any payment, direct or indirect, of any material
debt, liability or other obligation;
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(h)Any sale, assignment, or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets of material
value other than licenses granted in the ordinary course of business;
(i) Any purchase or other acquisition of, or any sale, lease,
disposition of, mortgage, pledge or subjection to any lien or encumbrance on,
any material property or asset, tangible or intangible, of the Company or any
agreement to do any of the foregoing;
(j) Any actual or threatened amendment, termination or loss of
(i) any material contract, lease, license or other agreement to which the
Company is a party; or (ii) any certificate or other authorization required for
the continued operation by the Company of any material portion of any of its
business;
(k) Any resignation or termination of employment of any
officer or employee of the Company;
(l) Any change in or amendment to the charter documents of the
Company;or
(m)Any agreement or commitment by the Company to do any of the
things described in this Section 2.9.
2.10 Employees. The Company has complied in all material
respects with all applicable laws, rules and regulations relating to employment,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes and other sums as required by appropriate governmental
authorities.
2.11 Compliance with Law: Consents. The business and
operations of the Company have been and are being conducted in compliance with
all laws, rules, regulations and licensing requirements applicable thereto,
except where failure to be so in compliance would not have a Material Adverse
Effect. The Company is unaware of any facts which might form the basis for a
claim that any material violation of such laws exists. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental authority
or any third party on the part of the Company or the Sellers is required in
connection with the execution, delivery and performance by the Company or the
Sellers of this Agreement, the consummation of the transactions contemplated
hereby or Category 5's operation of the business of the Company following the
Closing Date.
2.12 Contracts and Other Agreements. Schedule 2.12 sets forth
a list of all contracts and other agreements to which the Company is a party or
by or to which it or its assets or properties are bound or subject, whether or
not made in the ordinary course of business, that have or would be reasonably
expected to have a material effect on the Business of Company. True and complete
copies of all the contracts and other agreements (and all amendments, waivers or
other modifications thereto and all appendices and attachments) set forth on the
Company Disclosure Schedule have been furnished to Category 5. Each of such
contracts is valid, existing, in full force and effect, binding upon the
Company, and to the best knowledge of the Company, binding upon the other
parties thereto in accordance with their
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terms (subject in each case to the application of general principles of equity
or by the effect of bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting creditors' rights), and the Company is not in
default under any of them, nor, to the best knowledge of the Company, is any
other party to any such contract or other agreement in default thereunder, nor
does any condition exist that with notice or lapse of time or both would
constitute a default thereunder, except, in each case, such defaults as would
not, individually or in the aggregate, have a material adverse effect on the
Business of Company.
2.13 Affiliate Relationships. Other than as provided on
Schedule 2.13, the Company does not have any material financial interest, direct
or indirect, in any supplier or service provider to, or customer of, the Company
or other party to any contract or other arrangement which is material to the
Company. For purposes of this Section 2.13, the term the Company shall be deemed
to include the Company, the Sellers and any person, firm or corporation which,
directly or indirectly, alone or together with others, controls, is controlled
by, or is under common control with the Company.
2.14 No Termination of Business Relationship. None of the
entities with which the Company has a material business relationship or any
other present material customer of the Company has given notice of any intention
to cancel or otherwise terminate a material business relationship with the
Company and the Company has no knowledge of any event (including, without
limitation, the transactions contemplated hereby) which would precipitate the
cancellation or termination of, or entitle any such entity or customer to
terminate, such a material business relationship.
2.15 Intellectual Property Rights. To the Company's best
knowledge, the Company has exclusive license to all patents, patent rights,
trademarks, trademark rights, service marks, service xxxx rights, trade names,
trade name rights and copyrights (collectively, the "Intellectual Property")
necessary for its business without any conflict with or infringement of the
valid rights of others and the lack of which could have a Material Adverse
Effect, and the Company has not received any notice of infringement upon or
conflict with the asserted rights of others. Schedule 2.15 contains a complete
list of patents, patent applications, trade names, trademarks, service marks,
brandmarks copyrights, registrations owned or used by the Company and any
applications for the foregoing. All Intellectual Property is vested in (or, if
applicable, leased or licensed by) the Company free and clear of any equities,
claims, liens, encumbrances or restrictions of any kind whatsoever. All
Intellectual Property which is licensed to the Company by others are identified
in Schedule 2.15 and all such licenses will continue in full force and effect
upon the consummation of the transactions contemplated hereby. The Company has a
valuable body of trade secrets, including know-how, concepts, computer programs
and other technical data (the "Proprietary Information") for the operation of
its business. To the Company's best knowledge, the Company has the right to use
the Proprietary Information free and clear of any rights, liens, encumbrances or
claims of others. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the
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Company, except for inventions that have been assigned or licensed to the
Company as of the date hereof. Each employee, officer and consultant of the
Company has executed a Proprietary Information and Inventions Agreement in the
form provided by Category 5. To the Company's best knowledge, no employee,
officer or consultant is in violation thereof, and the Company will use its best
efforts to prevent any such violation.
2.16 No Undisclosed Liabilities. The Company does not have,
and as of the Closing Date will not have, any liabilities, obligations or
commitments of any nature (absolute, accrued, contingent or otherwise) matured
or unmatured ("Liabilities") except (i) Liabilities which are adequately
reflected or fully reserved against in the Flash Financial Statements; (ii)
Liabilities which have been incurred in the ordinary course of business and
consistent with past practice since September 30, 2001; (iii) Liabilities
disclosed in the Schedules hereto; and (iv) Liabilities arising under contracts
or other agreements which because of the dollar amount involved are not required
to be listed in Schedule 2.12.
2.17 Representations Complete. None of the representations and
warranties made by the Sellers or the Company herein, nor any statement made in
any Exhibit, Schedule or certificate furnished pursuant to this Agreement,
contains or will contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein, or necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading.
2.19 Broker's and Finder's Fees. Neither the Company nor the
Sellers has incurred, nor will it incur, directly or indirectly, any liability
for brokerage or finder's fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby that may
become the obligations or liabilities of Category 5.
ARTICLE III
REPRESENTATIONS AND WARRANTS OF SELLERS
Each of the Sellers agree with, and represent and warrant to Category 5
as follows:
3.1 Good and Marketable Title to Interests. The Sellers have
and will have on the Closing Date, full right, power, and authority to sell,
transfer and deliver the Interests as provided in this Agreement.
3.2 Purchase Entirely for Own Account. Each Seller understands
that Category 5 is entering into this Agreement with each Seller in reliance
upon such Seller's representation to Category 5, which by such Seller's
execution of this Agreement such Seller hereby confirms, that the Category 5
Shares to be received by such Seller, (for purposes of Article III, the
"Securities") will be acquired for investment for such Sellers own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that such Seller has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, each Seller further represents that such Seller does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant
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participation to such person or to any third person, with respect to any of the
Securities. Each Seller represents that it has full power and authority to enter
into this Agreement.
3.3 Disclosure of Information. Each Seller believes that it
has received all the information it considers necessary or appropriate for
deciding whether to purchase the Securities. Each Seller further represents that
it has had an opportunity to ask questions and receive answers from Category 5
regarding Category 5 and its business and operations and the terms and
conditions of the offering of the Securities.
3.4 Investment Experience. Each Seller acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
3.5 Accredited Seller. Each Seller is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act of 1993,
as now in effect.
3.6 Restricted Securities. Each Seller understands that the
Category 5 Shares it is purchasing are characterized as "restricted securities"
under the United States securities laws inasmuch as they are being acquired from
Category 5 in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act of 1933, as amended (the "Act"), only in
certain limited circumstances. In this connection, each Seller represents that
it is familiar with Rule 144 promulgated under the Act, as now in effect, and
understands the resale limitations imposed thereby and by the Act. Each Selling
Seller agrees that it will (i) not sell, assign or transfer any of the Category
5 Shares to anyone other than Category 5 or to a transferee who has agreed to be
bound by the Exchange Agreement, (ii) not make any disposition of all or any
portion of the Category 5 Shares unless such disposition is in compliance with
all applicable federal and state securities law, and (iii) not, to the extent
requested by an underwriter of common stock (or other securities) of Category 5
during a one-year period following the Closing, sell or otherwise transfer or
dispose of any such securities during a reasonable and customary period of time,
as agreed to by Category 5 and the underwriters.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CATEGORY 5
Category 5 represents and warrants to the Sellers and the Company that:
4.1 Corporate Existence. Good Standing and Authority. Category
5 has been duly incorporated and is validly existing and in good standing under
the laws of the State of Nevada. Category 5 has full corporate power and
authority to enter into, deliver, perform its obligations under and carry out
this Agreement and the Ancillary Agreements to which it is a party. This
Agreement constitutes, and all agreements and Ancillary Agreements will
constitute, valid and legally binding obligations of Category 5 enforceable in
accordance with their terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
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4.2 Category5 Shares Fully Paid and Non-Assessable. The
Category 5 Shares deliverable pursuant to Section 1.2 when issued and delivered
as herein provided, will be validly issued and outstanding shares of Category 5
Common Stock, fully paid and non-assessable, free and clear of all liens,
encumbrances, restrictions and claims of every kind.
4.3 Consents and Approvals. Except as otherwise described
herein, no consent, approval, authorization, order, registration or
qualification of or with any court or any regulatory authority or any other
governmental body is required for the consummation by Category 5 of the
transactions contemplated by this Agreement has been obtained or will be
obtained prior to or upon the Closing Date.
4.4 No Breach. The execution and delivery of this Agreement by
Category 5 and consummation of the transactions contemplated hereby will not
result in or constitute any of the following: (i) a conflict, violation or
default with or an event that, with notice or lapse of time or both, would be a
default, breach, or violation of the Certificate of Incorporation or Bylaws of
Category 5, any contract, lease, license, permit, promissory note, conditional
sales contract, commitment, indenture, mortgage, deed of trust, or other
agreement, instrument or arrangement to which Category 5 is a party or by which
Category 5 or its assets are bound; (ii) an event that would permit any party to
terminate any agreement or instrument or to accelerate the maturity of or permit
the subordination of any indebtedness or other obligation of the Category 5;
(iii) the creation or imposition of any lien, charge, or encumbrance on any of
the assets of the Category 5; or (iv) conflict with or result in the violation
or breach of any law, rule or regulation of any governmental authority, or any
judgment, order, injunction or decree applicable to Category 5 or its assets.
4.5 Financial Statements. The consolidated audited financial
statements of Category 5 and its subsidiaries as filed with the Securities and
Exchange Commission (the "SEC") on Form 10K for the year ended June 30, 2001,
(the "Category 5 Audited Financial Statements") and the unaudited consolidated
financial statements of Category 5 and its subsidiaries as filed with the SEC on
Form 10-Q for the three and six months ended December 31, 2001 (the "Category 5
Unaudited Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with applicable rules and regulations of
the Securities and Exchange Commission. The Category 5 Audited Financial
Statements and the Category 5 Unaudited Financial Statements (i) were prepared
in accordance with Category 5's internal books and records; (ii) were prepared
in accordance with Category 5's accounting policies and principles, and are in
accordance with generally accepted accounting principles ("GAAP"), applied on a
consistent basis; and (iii) present fairly Category 5's financial position and
results of operations at the dates for the periods reflected therein.
4.6 Properties. Category 5 does not own or hold title to any
real property. Category 5 has beneficial ownership of and good and marketable
title to all properties and assets it owns which are used in its operations or
necessary for the conduct of its business, and such properties and assets are
not subject to any mortgages, liens, pledges, loans or encumbrances of any kind
whatsoever. With respect to property and assets it leases, Category 5 is in
compliance in all material respects with such leases and holds a valid leasehold
interest free of any liens, claims or encumbrances of any kind whatsoever. All
real and tangible personal property, including machinery, equipment and fixtures
currently used by Category 5 in the operation of its
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businesses is, and at the time of Closing will be, in good operating condition
and repair, ordinary wear and tear excepted.
4.7 Litigation. Except as set forth in Schedule 4.7 hereto or
in which an adverse outcome would not have a Material Adverse Effect, no
litigation or proceeding is pending or, to the knowledge of Category 5,
threatened by or against Category 5, its assets or the Category 5 Shares before
any court or any government agency, and, to the best knowledge of Category 5, no
facts exist which might form the basis for any such litigation or proceeding. To
the knowledge of Category 5, Category 5 is not the subject of any investigation
for violation of any laws, regulation or administrative orders applicable to its
business by any governmental authority or any other person. There is no
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against Category 5 or the Category 5 Shares.
4.8 Representations Complete. None of the representations and
warranties made by Category 5 herein, nor any statement made in any Exhibit,
Schedule or certificate furnished pursuant to this Agreement, contains or will
contain any untrue statement of a material fact, or omit to state any material
fact required to be stated therein, or necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
4.9 Broker's and Finder's Fees. Category 5 has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finder's fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
ARTICLE V
COVENANTS OF THE SELLERS
5.1 Non-Competition Agreements. Sellers hereby agree to not
compete with Category 5, the Company, and/or FlashAlly following the Closing,
and Sellers agree to enter into a non-competition agreement (the
"Non-Competition Agreement") substantially in the form attached hereto as
Exhibit C.
5.2 Best Efforts. Each of the Sellers will use his best
efforts to perform and fulfill all obligations on their respective parts to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms. Each of the Sellers shall each cooperate with Category 5 in such
actions and in securing requisite approvals and shall deliver such further
documents as Category 5 may reasonably request as necessary to evidence such
transactions.
ARTICLE VI
COVENANTS OF CATEGORY 5
6.1 Employee Matters. The Company shall enter into employment
agreements with Xxxx Xxxxx (the "Employment Agreement"), substantially in the
form attached hereto as Exhibit D.
-11-
6.2 Board Seat. The Company shall appoint a nominee of Sellers
to the Board of Directors of the Company, effective as of the Closing. Sellers
shall deliver the name and written background of the nominee to the Company
prior to the Closing. The Company covenants to submit such nominee as one of its
slate of directors to be elected to the Board at the Company's next Annual
Meeting of Shareholders.
6.3 Best Efforts. Category 5 will use its best efforts to
perform and fulfill all obligations on its part to be performed and fulfilled
under this Agreement, to the end that the transactions contemplated by this
Agreement shall be effected substantially in accordance with its terms.
ARTICLE VII
CLOSING
7.1 Time and Place. The purchase and sale of the Interests
hereunder (the "Closing") shall occur on the date of execution of this Agreement
by all of the parties hereto (the "Closing Date").
7.2 Deliveries of the Sellers. At the Closing, the Sellers
will deliver or cause to be executed and delivered to Category 5:
(a) Amended Operating Agreement. An Amended Operating
Agreement of the Company, reflecting ownership of all of the Interests
by Category 5;
(b) Articles. The Articles of Formation of the Company,
certified by the appropriate government agency as of a recent date;
(c) Books and Records. Any and all of the minute books and
similar records of the Company;
(d) Employment Agreement. The executed Employment Agreement;
(e) Non-Competition Agreements. Executed Non-Competition
Agreements;
(f) Escrow Agreement. The executed Escrow Agreement;
(g) Royalty Agreement. The executed Royalty Agreement; and
(g) Other Documents. Such other documents and instruments as
Category 5 or its counsel reasonably shall deem necessary to consummate
the transactions contemplated hereby.
All documents delivered to Category 5 shall be in form and
substance reasonably satisfactory to Category 5 and its counsel.
-12-
7.3 Deliveries of Category 5. At the Closing, Category 5 will
execute and deliver or cause to be executed and delivered simultaneously with
delivery of the items referred to in Section 7.2 above:
(a) Payment of the Consideration. The Tranche I Shares,
delivered to Sellers;
(b) Escrowed Shares. The Tranche II Shares, delivered to the
Escrow Agent;
(c) Employment and Non-Competition Agreements. The executed
Employment Agreement and the Non-Competition Agreements;
(d) Escrow Agreement. The executed Escrow Agreement;
(e) Royalty Agreement. The executed Royalty Agreement; and;
(f) Other Documents. Such other documents and instruments as
Category 5 or its counsel reasonably shall deem necessary to consummate
the transactions contemplated hereby.
ARTICLE VIII
TRANCHE II CLOSINGS
8.1 Tranche II Closings. The release of the Tranche II Shares
from Escrow (each, a "Tranche II Closing") shall occur at Category 5's offices
in Salt Lake City, Utah, on the 30th day following confirmation by Category 5
that Flash has met the conditions set forth in Section 1.2(ii) above and in the
Escrow Agreement for release of the Tranche II Shares. It is anticipated that
there will be 3 separate Tranche II Closings.
8.2 Conditions to Category 5's Obligations at the Tranche II
Closing. The obligation of Category 5 to direct the Escrow Agent to release the
Tranche II Shares to Sellers is subject to the satisfaction of the following
conditions, unless waived in writing by Category 5:
(a) Representations. All representations of the Sellers in
this Agreement or the Schedules and Exhibits hereto, or in any written
statement or certificate that shall be delivered to Category 5 under
this Agreement, other than those representations which reference a
specific date therein, shall be true on and as of such Tranche II
Closing Date as though such representations and warranties were made on
and as of that date, and the Sellers shall have delivered a
certificate, dated such Tranche II Closing date so certifying.
(b) No Violations: No Actions. Consummation of the
transactions contemplated by the Tranche II Closing shall not violate
any order, decree or judgment of any court or governmental body having
competent jurisdiction and no action or proceeding shall have been
instituted or threatened by any person, entity or governmental agency
which has a reasonable probability of resulting in (i) an order,
judgment or decree
-13-
restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by the Tranche II Closing or (ii) other relief in
connection therewith.
(c) Employment. Xxxx Xxxxx shall not have voluntarily
terminated his employment with the Company as of such Tranche II
Closing.
8.3 Deliveries of Category 5 at Tranche II Closing. At the
Tranche II Closing Category 5 will execute and deliver or cause to be executed
and delivered to the Sellers Instructions to the Escrow Agent to release the
applicable number of Tranche II Shares.
ARTICLE IX
OBLIGATIONS OF SELLERS AND CATEGORY 5 AFTER CLOSING
9.1 Indemnification by the Sellers. The Sellers shall
indemnify and hold harmless Category 5 and its respective officers, directors,
employees, successors and assigns in respect of any and all claims, actions,
suits or other proceedings and any and all losses, costs, expenses, liabilities,
fines, penalties, interest, and damages, whether or not arising out of any
claim, action, suit or other proceeding (and including reasonable counsel and
accountants' fees and expenses and all other reasonable costs and expenses of
investigation, defense or settlement of claims and amounts paid in settlement)
incurred by, imposed on or borne by Category 5 (collectively "Damages")
resulting from:
(a) The breach of any of the representations or warranties
made by the Company or the Sellers in this Agreement;
(b) The breach or the failure of performance by the Company or
the Sellers of any of the covenants that they are to perform hereunder;
(c) The payment of any taxes (including interest and
penalties) of any kind or nature imposed, whether before or after the
Closing, by any government or subdivision thereof upon the business,
assets or employees or independent contractors of the Company or
otherwise resulting from or relating to the respective businesses or
operations of the Company prior to the Closing or any of its properties
or assets as they existed as of or any time prior to the Closing Date
and the transactions contemplated by this Agreement;
(d) The death of or injury to any person or damage to property
that occurred prior to the Closing and arose out of or in connection
with the business or operations of the Company (whether asserted,
discovered or established before or after the Closing), and whether or
not it is the subject matter of a claim or action disclosed in the
Schedules to this Agreement; and
(e) All employment-related claims and causes of action, and
all other claims and causes of actions, that have arisen or arise out
of in connection with the operations of the businesses of the Company
conducted prior to the Closing (whether asserted, discovered or
established before or after the Closing).
-14-
Damages shall exclude any amount with respect to which
Category 5 or the Company as the case may be shall have received under any
insurance policy which provides coverage for the liability to which such amount
relates.
9.2 Indemnification by Category 5.. Category 5 shall indemnify
and hold harmless the Sellers, in respect of any and all claims, losses, costs,
expenses, liabilities, fines, penalties, interest, and damages (including
reasonable counsel and accountants' fees and expenses and all other reasonable
costs and expenses of investigation, defense or settlement of claims and amounts
paid in settlement) incurred by, imposed on or borne by the Sellers resulting
from:
(a) The breach of any of the representations or warranties
made by Category 5 in this Agreement; or
(b) The breach or the failure of performance by Category 5 of
any of the covenants that it is to perform hereunder.
9.3 Indemnification Procedure for Claims. Whenever any claim
shall arise for indemnification hereunder, the party entitled to indemnification
(the "indemnified party") shall promptly notify the other party or parties (the
"indemnifying party") of the claim and, when known, the facts constituting the
basis for such claim; provided, that the indemnified party's failure to give
such notice shall not affect any rights or remedies of an indemnified party
hereunder with respect to indemnification for damages except to the extent that
the indemnifying party is materially prejudiced thereby. In the event of any
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice to the indemnifying
party shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The indemnified party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder, without the prior written consent of the indemnifying
party (which shall not be unreasonably withheld) unless suit shall have been
instituted against it and the indemnifying party shall not have taken control of
such suit after notification thereof as provided in Section 10.8 this Agreement.
9.4 Defense by Indemnifying Party. In connection with any
claim giving rise to indemnity hereunder or resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement, the
indemnifying party at its sole cost and expense may, upon written notice to the
indemnified party, assume the defense of any such claim or legal proceeding if
it acknowledges to the indemnified party in writing its obligations to indemnify
the indemnified party with respect to all elements of such claim, and thereafter
diligently conducts the defense thereof with counsel reasonably acceptable to
the indemnified party. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense. If the indemnifying party does not assume or fails to conduct in a
diligent manner the defense of any such claim or litigation resulting therefrom,
(i) the indemnified party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, without limitation, settling such
claim or litigation, after giving notice of the same to the indemnifying party,
on such terms as the indemnified party may deem appropriate, and (ii) the
indemnifying party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
indemnifying party thereafter seeks to question the manner in which the
indemnified party defended such third
-15-
party claim or the amount or nature of any such settlement, the indemnifying
party shall have the burden to prove by a preponderance of the evidence that the
indemnified party did not defend or settle such third party claim in a
reasonably prudent manner. Each party agrees to cooperate fully with the other,
such cooperation to include, without limitation, attendance at depositions and
the provision of relevant documents as may be reasonably requested by the
indemnifying party; provided, that the indemnifying party will hold the
indemnified party harmless from all of its expenses, including reasonable
attorneys' fees, incurred in connection with such cooperation by the indemnified
party.
9.5 Manner of Indemnification. All indemnification hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check to the indemnified party.
9.6 Limitations on Indemnification. Notwithstanding any
provision of this Agreement to the contrary, the Sellers shall have no
obligation to indemnify any person entitled to indemnity under Section 11.1
unless the persons so entitled to indemnity thereunder have suffered Damages in
an aggregate amount in excess of $25,000 (the "Deductible") and then only to the
extent of such excess.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival. The representations and warranties of the
Company and the Sellers set forth in this Agreement or in any instrument or
document furnished in connection herewith shall survive the Closing and all
representations and warranties set forth herein or in any instrument or document
furnished in connection herewith will expire on the third anniversary of the
Closing Date. No claim or action for indemnity pursuant to Sections 9.1 or 9.2
hereof for breach of any representation or warranty shall be asserted or
maintained by any party hereto after the expiration of such representation or
warranty pursuant to the provisions of this Section 10.1 except for claims made
in writing prior to such expiration and actions (whether instituted before or
after such expiration) based on any claim made in writing prior to such
expiration. Each party hereto may rely on the representations and warranties
made by the other parties hereto notwithstanding any investigation of the facts
constituting the basis of the representations and warranties of any party by any
other party hereto.
10.2 Further Assurance_. At the request of any of the parties
hereto, and without further consideration, the other parties agree to execute
such documents and instruments and to do such further acts as may be necessary
or desirable to effectuate the transactions contemplated hereby.
10.3 Each Party to Bear Own Costs. Each of the parties shall
pay all costs and expenses incurred or to be incurred by it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
10.4 Headings. The subject headings of the Articles and
Sections of this Agreement are included for purposes of convenience only, and
shall not affect the construction or interpretation of any of its provisions.
-16-
10.5 Entire Agreement: Waivers. This Agreement and the
Exhibits and Schedules hereto constitute the entire agreement between the
parties pertaining to the contemporaneous agreements, representations, and
understandings of the parties. No supplement, modification, or amendment of this
Agreement shall be binding unless executed in writing by all parties. No waiver
of any of the provisions of this Agreement shall be deemed, or shall constitute,
a waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
10.6 Third Parties. Nothing in this Agreement, whether express
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
10.7 Successors and Assigns. This Agreement shall not be
assigned by the Company or the Sellers without the written consent of Category
5. This Agreement shall be binding on, and shall inure to the benefit of, the
parties to it and their respective heirs, legal representatives, successors, and
assigns.
10.8 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when so delivered in person, by overnight courier, by
facsimile transmission (with receipt confirmed by telephone or by automatic
transmission report) or two business days after being sent by registered or
certified mail (postage prepaid, return receipt requested) as follows:
To the Company at: Flash Ally, LLC
000 Xxxxx Xxxxxx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
To the Sellers: Xxxx Xxxxx
000 Xxxxx Xxxxxx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
To Category 5 at: Category 5 Technologies, Inc.
0000 X. Xxxxxxx Xxxx., Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: 000-000-0000
Any party may change its address for purposes of this paragraph by giving notice
of the new address to each of the other parties in the manner set forth above.
-17-
l0.9 Arbitration. Any controversy or claim arising out of or
relating to this Agreement shall be determined by arbitration administered by
the American Arbitration Association under its International Arbitration Rules.
10.10 Attorneys' Fees. If any party to this Agreement shall
bring any action, suit, counterclaim or appeal for any relief against the other,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the Prevailing Party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in bringing and prosecuting such Action
and/or enforcing any order, judgment, ruling or award granted as part of such
Action. "Prevailing party" within the meaning of this Section 10.10 includes,
without limitation, a party who agrees to dismiss an Action upon the other
party's payment of all or a portion of the sums allegedly due or performance of
the covenants allegedly breached, or who obtains substantially the relief sought
by it.
10.11 Governing Law. The terms of this Agreement shall be
governed by the laws of the State of Utah applicable to agreements entered into,
to be wholly performed in and among residents exclusively of, Utah.
10.12 Consent to Jurisdiction and Forum Selection. The parties
agree that all actions or proceedings arising in connection with this Agreement
shall be tried and litigated exclusively in the State and Federal courts located
in Utah. The aforementioned choice of venue is intended by the parties to be
mandatory and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this Agreement
in any jurisdiction other than that specified in this Section 10. 12. Each party
hereby waives any right it may have to assert the doctrine of forum non
conveniens or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this paragraph, and stipulates that the
State and Federal courts located in Utah shall have in personam jurisdiction and
venue over each of them for the purposes of litigating any dispute, controversy
or proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this Section 10.12 by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement, or in the manna set forth
in Section 10.8 of this Agreement for the giving of notice. Any final judgment
rendered against a party in any action or proceeding shall be conclusive as to
the subject of such final judgment and may be enforced in other jurisdictions in
any manner provided by law.
10.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
10.14 Severability. All provisions contained herein are
severable and in the event that any of them shall be held to be to any extent
invalid or otherwise unenforceable by any court of competent jurisdiction, such
provision shall be construed as if it were written so as to effectuate to the
greatest possible extent the parties' expressed intent; and in every case the
remainder of this Agreement shall not be affected thereby and shall remain valid
and enforceable, as if such affected provision were not contained herein.
-18-
10.15 Publicity. The parties shall cooperate with each other
in the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated hereby. None of the
parties shall issue or make, or cause to have issued or made, any press release
or announcement concerning the transactions contemplated hereby without the
advance approval in writing of the form and substance thereof by the other
parties, unless otherwise required by applicable law.
-19-
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase and Exchange Agreement as of the date first above written.
CATEGORY 5 TECHNOLOGIES, INC.
By: __/s/__________________________
Name: ____________________________
Title: _____________________________
FLASH ALLY, LLC
By: _/s/ Xxxx Kearl__________________
Name: __Troy Kearl_________________
Title: ___Member___________________
SELLERS
/s/ Xxxx Xxxxx
----------------------------------------------------
Xxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxxx
-20-
Schedule 1
Existing Agreements
1. The Xxxxxxxx Group (MLM)
------------------------
2. Nippon Direct (Japan and Pacific Rim)
-------------------------------------
3. The Xxxxxxxx Group (Telesales)
-------------------------------------
-21-
EXHIBIT A
JOINT ESCROW INSTRUCTIONS
March 1, 2002
Secretary, as Escrow Agent
Category 5 Technologies, Inc.
0000 X. Xxxxxxxxxx Xxxx, 0x Xx.
Xxxx Xxxx Xxxx, Xxxx 00000
Dear Sir:
As Escrow Agent for both the undersigned ("Shareholders") and Category 5
Technologies, Inc., a Nevada corporation (the "Corporation"), you are hereby
authorized and directed to hold the share certificates delivered to you pursuant
to the terms of that certain LLC Membership Exchange Agreement (the "Agreement")
between the Corporation and the undersigned, to which a copy of these Joint
Escrow Instructions is attached as Exhibit A, in accordance with the following
instructions:
1. Shareholders irrevocably authorizes the Corporation to deposit with you
the certificate evidencing 1,500,000 shares of stock (the "Shares") to
be held by you hereunder and any additions and substitutions to said
shares as deemed in the Agreement. Shareholders do hereby irrevocably
constitute and appoint you as their attorney-in-fact and agent for the
term of this escrow to execute with respect to such securities all
documents necessary or appropriate to make such securities negotiable
and to complete any transaction herein contemplated. Subject to the
provisions of this paragraph, Shareholders shall exercise all rights
and privileges of a shareholder of the Corporation while the stock is
held by you.
2. If, prior to termination of this escrow, Category 5 becomes liable for
or suffers damages as a result of any undisclosed liabilities,
misrepresentations and breaches of warranties, covenants and agreements
in the Agreement, you are directed to return to Category 5 such number
of the Shares as are necessary to compensate Category 5 for such damage
or liability. Category 5 shall deliver to you instructions setting
forth the dollar amount of such claim or liability, and you shall
return to Category 5 such number of shares as are equal, as of such
date, to such amount.
3. The Shares shall be released to Shareholders as follows:
a. If, during or prior to the end of the twelve (12) months
following the Closing, Category 5 and/or the Company have
generated revenues from the sale and/or license of FlashAlly
outside of Category 5's seminars ("Non-Seminar Sales") equal to
or exceeding $5 million, and we certify such results to you, you
shall release to Shareholders 500,000 of the Tranche II Shares.
1
c.
7.
b. If, during or prior to the end of the eighteen (l 8) months
following the Closing, Category 5 and/or the Company have
generated revenues from Non-Category 5 Seminar Sales equal to or
exceeding $10 million, and we certify such results to you, you
shall release to Shareholders an additional 500,000 of the
Tranche II Shares.
c. If, during or prior to the end of the twenty-four (24) months
following the Closing, Category 5 and/or the Company have
generated revenues from NonCategory 5 Seminar Sales equal to or
exceeding $15 million, and we certify such results to you, you
shall release to Shareholders the remaining 500,000 of the
Tranche II Shares.
4. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to
Shareholders, you shall deliver all of same to Shareholders and shall
be discharged of all further obligations hereunder.
5. Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
6. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed
by you to be genuine and to have been signed or presented by the proper
party or parties. You shall not be personally liable for any act you
may do or omit to do hereunder as Escrow Agent or as attorney-in-fact
for Shareholders while acting in good faith, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be
conclusive evidence of such good faith.
7. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and you
are hereby expressly authorized to comply with and obey orders,
judgments or decrees of any court. In case you obey or comply with any
such order, judgment or decree, you shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of
such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
8. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or
papers deposited or called for hereunder.
9. You shall not be liable for relinquishing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions
or any documents deposited with you.
10. You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel., and
may pay such counsel reasonable compensation therefor.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Corporation or if you shall resign
by written notice to each party. In the event of any such termination,
the Corporation shall appoint a successor Escrow Agent.
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto,
the necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to
retain in your possession without liability to anyone all or any part
of said securities until such disputes shall have been settled either
by mutual written agreement of the parties concerned or by a final
order, decree or judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but
you shall be under no duty whatsoever to institute or defend any such
proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed to each of the other
parties "hereunto entitled at the following addresses, or at such other
addresses as a party may designate by ten days' advance written notice
to each of the other parties hereto.
CORPORATION: 0000 X. Xxxxxxxxxx Xxxx, 0xx F1.
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: 000-000-0000
SHAREHOLDERS: 0000 X. Xxxxxxxxxx Xxxx, 0xx Xx.
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: 000-000-0000
ESCROW AGENT: 0000 X. Xxxxxxxxxx Xxxx, 0xx Xx.
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: 000-000-0000
15. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
16. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
THE CORPORATION:
/s/
-------------------------------------------------------------
Name:
Title:
3
SHAREHOLDER:
--------------------------------------
Name:
SHAREHOLDER:
--------------------------------------
Name:
ESCROW AGENT:
--------------------------------------
Secretary
4
Exhibit B
ROYALTY AGREEMENT
This ROYALTY AGREEMENT ("Agreement") is entered into as of this 1st day
of March, 2002, by and between Category 5 Technologies, Inc., a Nevada
corporation (the
"Company") and the individuals set forth on the signature page hereto
("Sellers").
WHEREAS, the Company owns software that enables the automated design
and creation of Web sites utilizing Macromedia's Flash technology ("FlashAlly").
Further, the Company has the rights to market said technology exclusively in the
network marketing, multi-level marketing, direct selling, seminar,
telemarketing, and infomercial arenas; and
WHEREAS, C5 has agreed to purchase from Sellers, and Sellers have
agreed to sell to C5, all right, title and interest in Flash Ally, pursuant to
that certain LLC Membership Exchange Agreement of even date herewith (the
"Purchase Agreement"); and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Purchase Agreement that C5 the Sellers enter into this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the parties
agree as follows:
1. Royalty. C5 hereby agrees to pay to Sellers a cash royalty from the
proceeds of the sale or license of FlashAlly software in existence as of the
date hereof ("FlashAlly"), in the following amounts and on the following terms:
(a) 75% of the net income generated from the sale or license
of FlashAlly to or through any of the entities set forth on Schedule I
attached hereto (the "Existing Leads"), for a period of not fewer than
12 months from the Closing.
(b) If, at any lime after 12 months, the 15-day average
closing price for Category 5 Common Stock equals or exceeds $5.00 per
share, then the royalty shall decrease to 50% of the net income
generated from sales of FlashAlly to or through the Existing Leads.
(c) If, at any time after 12 months, the 15-day average
closing price for Category 5 Common Stock equals or exceeds $10.00 per
share, then the royalty shall decrease to 25% of the net income
generated from sales of FlashAlly to or through the Existing Leads.
(d) If, at any time after 12 months, the 1 5-day average
closing price for Category 5 Common Stock equals or exceeds $15.00 per
share, then the royalty shall terminate.
FlashAlly/Royalty Agmt
1
(e) Commencing at Closing, and continuing until the earlier of
one year (12 months) from Closing or until the 1 5-day average closing
price for Category 5 Common Stock equals or exceeds $10.00 per share,
Category 5 shall pay to the shareholders of Flash a royalty of $15 per
person per year for sales of FlashAlly through Category 5 or affiliate
seminars.
2. Definitions. The term "net income" as used in this agreement shall
mean the revenue received by C5 from sales and/or licensing of FlashAlly
software, less the cost of goods sold, the selling, general and administrative
costs involved with the sale, delivery and ongoing support of FlashAlly
software, the tax payable on profits from such sales, and any other expenses
associated with the sale, delivery and ongoing support of FlashAlly software.
3. Payments. Payments under this Agreement shall be made to Sellers no
late. than thirty (30) days following receipt of 'funds by C5.
4. Binding Effect. This Agreement shall be binding upon C5, Sellers,
and their successors and assigns.
5. Arbitration. Any dispute or controversy arising out of or relating
to any interpretation, construction, performance or breach of this Agreement,
shall be settled by arbitration to be held Salt Lake City, Utah, in accordance
with the rules then in effect of the American Arbitration Association. The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's decision
in any court having jurisdiction; provided, however, that the arbitrator shall
not have the power to alter or amend this Agreement.
6. Governing Law. This Agreement shall be construed in accordance with,
and all actions arising under or in connection therewith shall be governed by,
the internal laws of the State of Utah (without reference to conflict of law
principles).
7. Attorneys' Fees. Should either I or the Company, or any heir,
personal representative, successor or permitted assign of either party, resort
to legal proceedings to enforce this Agreement, the prevailing party (as defined
in Utah statutory law) in such legal proceeding shall be awarded, in addition to
such other relief as may be granted, attorneys' fees and costs incurred in
connection with such proceeding.
8. Severability. If any term, provision, covenant or condition of this
Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable or void, the remainder of this
Agreement and such term, provision, covenant or condition as applied to other
persons, places and circumstances shall remain in full force and effect.
9. Notices. Any notice, request' consent or approval required or
permitted to be given under this Agreement or pursuant to law shall be
sufficient if it is in writing, and if
FlashAlly/Royalty Agmt
2
and when it is hand delivered or sent by regular mail, with postage prepaid, to
the address set forth in the Purchase Agreement.
10. Assignment. This Agreement may not be assigned without the
Company's prior written consent.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
set forth above.
CATEGORY 5 TECHNOLOGIES, INC.
By: /s/
---------------------------------------------------------------
Name:
Title:
SELLERS:
---------------------------------------------------------------
Name:
---------------------------------------------------------------
Name:
FlashhAlly/Royaty Agmt
3
SCHEDULE I
Existing Leads
1. The Xxxxxxxx Group (MLM)
------------------------
2. Nippon Direct (Japan and Pacific Rim)
-------------------------------------
3. The Xxxxxxxx Group (Telesales)
------------------------------
FlashAlly/Royalty Agmt
4
Exhibit C
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made and entered
into as of March 1, 2002, among Category 5 Technologies, Inc., a Nevada
corporation (the "Company") and Xxxx Xxxxx and Xxxxx Xxxxxxxx (each, a
"Seller"). This Agreement is made pursuant to the Stock Purchase and Exchange
Agreement, dated as of March 1, 2002 between the Company and the Sellers, (the
"Purchase Agreement").
1. Noncompetition. For good consideration and as an inducement for the
Company to enter into the Purchase Agreement, the Seller hereby agrees not to
directly or indirectly compete with the business of the Company and its
successors and assigns for a period of three years following the closing of the
transactions contemplated in the Purchase Agreement.
2. Definitions. The term "not compete" as used in this Agreement means
that the Seller shall not own, manage, operate, consult or to be a shareholder
or owner in a business substantially similar to or competitive with the present
business of the Company or such other business activity in which the Company may
substantially engage during the term of this Agreement.
3. Confidentiality.. The Seller acknowledges that the Company shall or
may in reliance on this agreement provide Seller access to trade secrets,
customers and other confidential data and good will. Seller agrees to retain
said information as confidential and not to use said information on his or her
own behalf or disclose same to any third party.
This agreement shall be binding upon and inure to the benefit of the parties,
their successors, assigns, and personal representatives.
Category 5 Technologies, Inc.
By: /s/
----------------------------------------------------
Name:
Title:
/s/ Xxxx Xxxxx
----------------------------------------------------
Xxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
----------------------------------------------------
Xxxxx Xxxxxxxx
Exhibit D
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the ___ day of , 2002, by and between C5,Inc., a Utah corporation ("CS" or
the "Company") and XXXX XXXXX (hereinafter referred to as the "Executive").
WITNESSETH:
WHEREAS, the Executive was an owner of Flash Ally, LLC, which was
purchased by the Company as of the date hereof; and
WHEREAS, the Company desires to have the benefit of the Executive's
efforts and services, both for and on behalf of the Company;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Accrued Benefits" shall mean the amount payable not later
than ten (10) days following an applicable Termination Date and which
shall be equal to the sum of the following amounts:
(i) All salary earned or accrued through the Termination Date;
(ii) Reimbursement for any and all monies advanced in
connection with the Executive's employment for reasonable and
necessary expenses incurred by the Executive through the
Termination Date;
(iii) Any and all other cash benefits previously earned
through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plans then in
effect;
(iv) The full amount of any stated bonus payable to the
Executive in accordance with Section 6 herein with respect to the
year in which termination occurs; and
(v) All other payments and benefits to which the Executive may
be entitled under the terms of any benefit plan of the Company.
(b) "Board" shall mean the Board of Directors of C5, Inc.
(c) "Cause" shall mean any of the following:
(i) The engaging by the Executive in fraudulent conduct, as
avid. by a determination in a binding and final judgment, order
or decree of a court or administrative agency of competent
jurisdiction, in effect after exhaustion or lapse of all rights
of appeal, in an action, suit or proceeding, whether civil,
criminal, administrative or investigative, which the Board
determines, in its sole discretion, has a significant adverse
impact on the Company in the conduct of the Company's business;
(ii) Conviction of a felony, as evidenced by a binding and
final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion or lapse of all rights
of appeal, which the Board determines, in its sole discretion,
has a significant adverse impact on the Company in the conduct of
the Company's business;
(iii) Neglect or refusal by the Executive to perform the
Executive' duties or responsibilities; or
(iv) A significant violation by the Executive of the Company's
established policies and procedures.
Notwithstanding the foregoing, Cause shall not exist under subparagraphs (iii)
and (iv) above unless the Company furnishes written notice to the Executive of
the specific offending conduct and the Executive fails to correct such offending
conduct within the fifteen (1 S) day period commencing on the receipt of such
notice.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Company" shall mean Category 5 Technologies, Inc.
(f) "Disability" shall mean a physical or mental condition
whereby the Executive is unable to perform on a full-time basis the
customary duties of the Executive under this Agreement.
(g) "Good Reason" shall mean a failure by the Company to comply
with any material provision of this Agreement which has not been cured
within thirty (30) days after written notice of such noncompliance has
been given by the Executive to the Company.
(h) "Notice of Termination" shall mean the notice described in
Section 11 herein.
(i) "Person" shall mean any individual, partnership, joint
venture, association, trust, corporation or other entity, other than an
employee benefit plan of the Company or an entity organized, appointed
or established pursuant to the terms of any such benefit plan.
Xxxxx EmpAgr
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(j) "Termination Date" shall mean:
(i) The Executive's date of death,
(ii) Thirty (30) days after the delivery of the Notice of
Termination terminating the Executive's employment on account of
Disability pursuant to Section 9 herein, unless the Executive
returns on a full-time basis to the performance of his or her
duties prior to the expiration of such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if the Executive's employment is terminated by the
Executive voluntarily; and
(iv) Thirty (30) days after the delivery of the Notice of
Termination if the Executive's employment is terminated by the
Company for any reason other than death or Disability.
2. EMPLOYMENT. The Company hereby agrees to employ the Executive and
the Executive hereby agrees to serve the Company, on the terms and conditions
set forth herein.
3. TERM. The employment of the Executive by the Company pursuant to the
provisions of this Agreement shall commence on the date hereof and end on
December, 31, 2002, unless further extended or sooner terminated as hereinafter
provided. On December 31, 2002, and on the last day of December each year
thereafter, the term of the Executive's employment shall, unless sooner
terminated as hereinafter provided, be automatically extended for an additional
one year period from the date thereof unless, at least thirty (30) days before
such December 31, the Company shall have delivered to the Executive or the
Executive shall have delivered to the Company written notice that the term of
the Executive's employment hereunder will not be extended beyond its existing
duration (the term of employment and any extensions thereto shall be referred to
as the "Period of Employment").
4. POSITIONS AND DUTIES. The Executive shall serve as Vice President,
Product Development of the Company and in such additional capacities as may be
assigned to the Executive by the Board. In connection with the foregoing
positions, the Executive shall have such duties, responsibilities and authority
as may from time to time be assigned to the Executive by the Board. The
Executive shall devote substantially all the Executive's working time and
efforts to the business and affairs of the Company.
5. PLACE OF PERFORMANCE. In connection with the Executive's employment
by the Company, the Executive shall be based at the offices of the Company in
Salt Lake City, Utah, except for required travel on Company business.
6. COMPENSATION AND RELATED MATTERS. (a) Salary. The Company shall pay
to the Executive $140,000, as his annualized base salary (subject to adjustment
as provided herein) in equal installments (as nearly as practicable), in
accordance with the Company's standard payroll policy (as in effect from time to
time), which currently provides for payments to be made every two 3 weeks, in
Xxxxx EmpAgr
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arrears. Such annualized base salary may be increased from time to time in
accordance with normal business practices of the Company. The annualized base
salary of the Executive shall not be decreased below its then existing amount
during the term of this Agreement.
(b)Bonus. The Executive shall be entitled to receive bonuses,
when and as declared by the Board of Directors.
(c) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all expenses for travel and
living expenses while away from home on business or at the request of
and in the service of the Company, provided that such expenses are
incurred and accounted for in accordance with the policies and
procedures established from time to time by the Company.
(d) Other Benefits. The Company shall provide Executive with all
other benefits normally provided to an employee of the Company
similarly situated to Executive, including being added as a named
officer on the Company's existing directors' and officers' liability
insurance policy. At a minimum, the benefits will include:
(i) Health Insurance (medical, dental vision);
(ii) Paid vacation; and
(iii) Participation in Employee Stock Option Plan.
(e) Vacations. The Executive shall be entitled to the number of
vacation days in each calendar year, and to compensation in respect of
earned but unused vacation days, determined in accordance with the
Company's vacation plan, but in no event less than fifteen (15) days.
The Executive shall also be entitled to all paid holidays given by the
Company to its executives.
(f) Services Furnished. The Company shall furnish the Executive
with office space, and such other facilities and services as shall be
suitable to the Executive's position and adequate for the performance
of the Executive's duties as set forth in Section 4 hereof.
7. OFFICES. The Executive agrees to sewe without additional
compensation, if elected or appointed thereto, as a member of the Board of
Directors of any parent or any subsidiary of the Company; provided, however,
that the Executive is indemnified for sewing in any and all such capacities on a
basis no less favorable than is currently provided in the Company's bylaws, or
otherwise.
8. TERMINATION AS A RESULT OF DEATH. If the Executive shall die during
the term of this Agreement, the Executive's employment shall terminate on the
Executive's date of death and the Executive's surviving spouse, or the
Executive's estate if the
Kearl_EmpAgr
4
Executive dies without a surviving spouse, shall be entitled to the Executive's
Accrued Benefits as of the Termination Date.
9. TERMINATION FOR DISABILITY. If, as a result of the Executive's
Disability, the Executive shall have been unable to perform the Executive's
duties hereunder on a full-time basis for two (2) consecutive months and within
thirty (30) days after the Company provides the Executive with a Termination
Notice, the Executive shall not have returned to the performance of the
Executive's duties on a full-time basis, the Company may terminate the
Executive's employment. During the term of the Executive's Disability prior to
termination, the Executive shall continue to receive all salary and benefits
payable under Section 6 herein, including participation in all employee benefit
plans, programs and arrangements in which the Executive was entitled to
participate immediately prior to the Disability; provided, however, that the
Executive's continued participation is permitted under the terms and provisions
of such plans, programs and arrangements. In the event that the Executive's
participation in any such plan, program or arrangement is barred as the result
of such Disability, the Executive shall be entitled to receive an amount equal
to the contributions, payments, credits or allocations which would have been
paid by the Company to the Executive, to the Executive's account or on the
Executive's behalf under such plans, programs and arrangements. In the event the
Executive's employment is terminated on account of the Executive's Disability in
accordance with this Section 9, the Executive shall receive the Executive's
Accrued Benefits as of the Termination Date and shall remain eligible for all
benefits provided by any long-term disability programs of the Company in effect
at the time of such termination.
10. OTHER TERMINATION.
(a) For Cause. The Company may terminate this Agreement for cause
at any time upon notice to Executive.
(b) Termination by the Executive. The Executive may terminate his
employment hereunder (i) for Good Reason or (ii) if his health should
become impaired to an extent that makes his continued performance of
his duties hereunder hazardous to his physical or mental health or his
life, provided that the Executive shall have furnished the Company with
a written statement from a qualified-doctor to such effect and provided
further, that, at the Company's request, the Executive shall submit to
an examination by a doctor selected by the Company and such doctor
shall have concurred in the conclusion of the Executive's doctor.
11. TERMINATION NOTICE. Any termination by the Company or the Executive
of the Executive's employment during the Employment Period shall be communicated
by written Notice of Termination to the Executive, if such Notice of Termination
is delivered by the Company, and to the Company, if such Notice of Termination
is delivered by the Executive. The Notice of Termination shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
the effective date of termination.
12. NONDISCLOSURE OF PROPRIETARY INFORMATION. Recognizing that the
Company is presently engaged, and may hereafter continue to be engaged, in the
research
Kearl_EmpAgr
5
and development of processes, the manufacturing of products or performance of
services, which involve experimental and inventive work and that the success of
its business depends upon the protection of the processes, products and services
by patent, copyright or by secrecy and that the Executive has had, or during the
course of his engagement as an employee or consultant may have, access to
Proprietary Information, as hereinafter defined, of the Company or other
information and data of a secret or proprietary nature of the Company which the
Company wishes to keep confidential and the Executive has furnished, or during
the course of his engagement may furnish, such information to the Company, the
Executive agrees that:
(a) "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a similar nature related to
the business of the Company disclosed to the Employee or otherwise made
known to him as a consequence of or through his engagement by the
Company (including information originated by the Executive) in any
technological area previously developed by the Company or developed,
engaged in, or researched, by the Company during the term of the
Executive's engagement, including, but not limited to, trade secrets,
processes, products, formulae, apparatus, techniques, know-how,
marketing plans, data, improvements, strategies, forecasts, customer
lists, and technical requirements of customers., unless such
information is in the public domain to such an extent as to be readily
available to competitors.
(b) The Executive acknowledges that the Company has exclusive
property rights to all Proprietary Information and the Executive hereby
assigns all rights he might otherwise possess in any Proprietary
Information to the Company. Except as required in the performance of
his duties to the Company, the Executive will not at any time during or
after the term of his engagement, which term shall include any time in
which the Executive may be retained by the Company as a consultant,
directly or indirectly use, communicate, disclose or disseminate any
Proprietary Information or any other information of a secret,
proprietary, confidential or generally undisclosed nature relating to
the Company, its products, customers, processes and services, including
information relating to testing, research, development, manufacturing,
marketing and selling.
(c) All documents, records, notebooks, notes, memoranda and
similar repositories of, or containing, Proprietary Information or any
other information of a secret, proprietary, confidential or generally
undisclosed nature relating to the Company or its operations and
activities made or compiled by the Executive at any time or made
available to him prior to or during the term of his engagement by the
Company, including any and all copies thereof, shall be the property of
the Company, shall be held by him in trust solely for the benefit of
the Company, and shall be delivered to the Company by him on the
termination of his engagement or at any other time on the request of
the Company.
(d) The Executive will not assert any rights under any
inventions, copyrights, discoveries, concepts or ideas, or improvements
thereof, or know-how related thereto, as having been made or acquired
by him prior to his being engaged by the Company or during the term of
Xxxxx EmpAgr
6
his engagement if based on or otherwise related to Proprietary
Information.
13. ASSIGNMENT OF INVENTIONS.
(a) For purposes of this Paragraph 13, the term "Inventions"
shall mean discoveries, concepts, and ideas, whether patentable or
copyrightable or not, including but not limited to improvements,
know-how, data, processes, methods, formulae, and techniques, as well
as improvements thereof or know-how related thereto, concerning any
past, present or prospective activities of the Company which the
Executive makes, discovers or conceives (whether or not during the
hours of his engagement or with the use of the Company's facilities,
materials or personnel), either solely or jointly with others during
his engagement by the Company or any affiliate and, if based on or
related to Proprietary Information, at any time after termination of
such engagement. All Inventions shall be the sole property of the
Company, and Executive agrees to perform the provisions of this
paragraph 13 with respect thereto without the payment by the Company of
any royalty or any consideration therefor other than the regular
compensation paid to the Executive in the capacity of an employee or
consultant.
(b) The Executive shall maintain written notebooks in which he
shall set forth, on a current basis, information as to all Inventions,
describing in detail the procedures employed and the results achieved
as well as information as to any studies or research projects
undertaken on the Company's behalf. The written notebooks shall at all
times be the property of the Company and shall be surrendered to the
Company upon termination of his engagement or, upon request of the
Company, at any time prior thereto.
(c) The Executive shall apply, at the Company's request and
expense, for United States and foreign letters patent or copyrights
either in the Executive's name or otherwise as the Company shall
desire.
(d) The Executive hereby assigns to the Company all of his rights
to such Inventions, and to applications for United States and/or
foreign letters patent or copyrights and to United States and/or
foreign letters patent or copyrights granted upon such Inventions.
(e) The Executive shall acknowledge and deliver promptly to the
Company, without charge to the Company, but at its expense, such
written instruments (including applications and assignments) and do
such other acts, such as giving testimony in support of the Executive's
inventorship, as may be necessary in the opinion of the Company to
obtain, maintain, extend, reissue and enforce United States and/or
foreign letters patent and copyrights relating to the Inventions and to
vest the entire right and title thereto in the Company or its nominee.
The Executive acknowledges and agrees that any copyright developed or
conceived of by the Executive during the term of Executive's employment
which is related to the business of the Company shall be a "work for
hire" under the copyright law of the United States and other applicable
jurisdictions.
Kearl_EmpAgr
7
(f)The Executive represents that his performance of all the terms
of this Agreement and as an employee of or consultant to the Company
does not and will not breach any trust prior to his employment by the
Company. The Executive agrees not to enter into any agreement either
written or oral in conflict herewith and represents and agrees that he
has not brought and will not bring with him to the Company or use in
the performance of his responsibilities at the Company any materials or
documents of a former employer which are not generally available to the
public, unless he has obtained written authorization from the former
employer for their possession and use, a copy of which has been
provided to the Company.
(g) No provisions of this Paragraph shall be deemed to limit the
restrictions applicable to the Executive under Paragraphs 12, 14 and
15.
14. SHOP RIGHTS. The Company shall also have the royalty-free right to
use in its business, and to make, use and sell products, processes and/or
services derived from any inventions, discoveries, concepts and ideas, whether
or not patentable, including but not limited to processes, methods, formulas and
techniques, as well as improvements thereof or know-how related thereto, which
are not within the scope of Inventions as defined in Paragraph 13 but which are
conceived or made by the Executive during the period he is engaged by the
Company or with the use or assistance of the Company's facilities, materials or
personnel.
15. NON-COMPETE. The Executive hereby agrees that during the Period of
Employment and the Consulting Period, and for a period of two years from the
termination thereof, the Executive will not:
(a) Within any jurisdiction or marketing area in the United
States in which the Company or any subsidiary thereof is doing
business, own, manage, operate or control any business of the type and
character engaged in and competitive with the Company or any subsidiary
thereof For purposes of this paragraph, ownership of securities of not
in excess of five percent (5%) of any class of securities of a public
company shall not be considered to be competition with the Company or
any subsidiary thereof; or
(b) Within any jurisdiction or marketing area in the United
States in which the Company or any subsidiary thereof is doing
business, act as, or become employed as, an officer, director,
employee, consultant or agent of any business of the type and character
engaged in and competitive with the Company or any of its subsidiaries;
or
(c) Solicit any similar business to that of the Company's for, or
sell any products that are in competition with the Company's products
to, any company in the United States, which is, as of the date hereof,
a customer or client of the Company or any of its subsidiaries, or was
such a customer or client thereof within two years prior to the date of
this Agreement; or
(d) Solicit the employment of, or hire, any full time employee
employed by the Company or its subsidiaries as of the date of
termination of this Agreement.
Xxxxx EmpAgr
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16. REMEDIES AND JURISDICTION.
(a) The Executive hereby acknowledges and agrees that a breach of
the agreements contained in Sections 12, 13, 14 and 15 of this
Agreement will cause irreparable harm and damage to the Company, the
remedy at law for the breach or threatened breach of the agreements set
forth in Sections 12, 13, 14 and 15 of this Agreement will be
inadequate, and that, in addition to all other remedies available to
the Company for such breach or threatened breach (including, without
limitation, the right to recover damages), the Company shall be
entitled to injunctive relief for any breach or threatened breach of
the agreements contained in Sections 12, 13, 14 and 15 of this
Agreement;
(b) All claims, disputes and other matters in question between
the parties arising under this Agreement, shall, unless otherwise
provided herein, be decided by arbitration in Salt Lake City, Utah, in
accordance with the Model Employment Arbitration Procedures of the
American Arbitration Association (including such procedures governing
selection of the specific arbitrator or arbitrators), unless the
parties mutually agree otherwise. The losing party shall pay the costs
of any such arbitration. The award by the arbitrator or arbitrators
shall be final, and judgment may be entered upon it in accordance with
applicable law in any state or Federal court having jurisdiction
thereof.
17. INDEMNIFICATION. The Company hereby agrees to indemnify Executive
against any action, claim, suit or proceeding involving the Executive in his
capacity as an officer of the Company.
18. ATTORNEYS' FEES. In the event that either party hereunder
institutes any legal proceedings in connection with its rights or obligations
under this Agreement, the prevailing party in such proceeding shall be entitled
to recover from the other party, all costs incurred in connection with such
proceeding, including reasonable attorneys' fees, together with interest thereon
from the date of demand at the rate of twelve percent (12%) per annum.
19. SUCCESSORS. This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, estates, executors, administrators, heirs and beneficiaries. In
the event of the Executive's death, all amounts payable to the Executive under
this Agreement shall be paid to the Executive's surviving spouse, or the
Executive's estate if the Executive dies without a surviving spouse. This
Agreement shall inure to the benefit of, be binding upon and be enforceable by,
any successor, surviving or resulting corporation or other entity to which all
or substantially all of the business and assets of the Company shall be
transferred whether by merger, consolidation, transfer or sale.
20. ENFORCEMENT. The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
Xxxxx EmpAgr
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21. AMENDMENT OR TERMINATION. This Agreement may not be amended or
terminated during its term, except by written instrument executed by the Company
and the Executive.
22. SURVIVABILITY. The provisions of paragraphs 12, 13, 14, 15 and 16
shall survive termination of this Agreement.
23. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the Executive and the Company with respect to the subject matter hereof,
and supersedes all prior oral or written agreements, negotiations, commitments
and understandings with respect thereto.
24. VENUE; GOVERNING LAW. This Agreement and the Executive's and
Company's respective rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of Utah without giving effect
to the provisions, principles, or policies thereof relating to choice or
conflict laws.
25. NOTICE. Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when received, and if mailed, shall be mailed
by United States registered or certified mail, return receipt requested,
addressee only, postage prepaid, if to the Company, to:
Category 5 Technologies, Inc.
0000 X. Xxxxxxxxxx Xxxxxxxx 0x, Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
or to such other address as the Company shall have given to the Executive or, if
to the Executive, to such address as the Executive shall have given to the
Company.
26. NO WAIVER. No waiver by either party at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.
27. HEADINGS. The headings herein contained are for reference only and
shall not affect the meaning or interpretation of any provision of this
Agreement.
28. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
Xxxxx EmpAgr
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed b, its duly authorized officer, and the Executive has executed this
Agreement, on the date and year first above written.
CATETORY 5 TECHNOLOGIES, INC.
By: /s/
--------------------------------------------------------
Its:
--------------------------------------------------------
EXECUTIVE
/s/ Xxxx Xxxxx
------------------------------------------------------
Xxxx Xxxxx
Xxxxx EmpAgr
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