EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT
dated April 1, 2000
by and among
XXXXXXXX X. XXXXX,
XXXXXXX XXXXX,
XXXX XXXXX, and
XXXX XXXXXXXX,
collectively, the Sellers
and
CYBERSTAR COMPUTER CORPORATION, A MINNESOTA CORPORATION,
the Purchaser
TABLE OF CONTENTS
PAGE
ARTICLE 1: EXCHANGE OF SHARES.................................................2
1.1 Exchange.....................................................2
1.2 Seller's Balance Sheet Adjustments...........................2
1.3 Legends......................................................2
1.4 Pledge of Shares.............................................3
ARTICLE 2: INTENTIONALLY OMITTED..............................................3
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY..........3
3.1 Due Incorporation............................................3
3.2 Due Authorization............................................3
3.3 No Breach....................................................3
3.4 Litigation...................................................4
3.5 Taxes........................................................4
3.6 Employee Benefits............................................4
3.7 Full Disclosure..............................................4
3.8 Absence of Certain Developments..............................4
3.9 Intellectual Property........................................5
3.10 Compliance with Laws.........................................5
3.11 Books and Records............................................5
3.12 Shares.......................................................5
3.13 Products Liability Claims....................................5
3.14 Brokers; Insurance...........................................6
3.17 Loans........................................................6
3.18 Investment...................................................6
3.19 Consummation of Transaction..................................6
3.20 Back Orders..................................................6
3.21 Warranties...................................................6
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER........................6
4.1 Due Incorporation............................................7
4.2 Due Authorization............................................7
4.3 No Breach....................................................7
4.4 Disclosure...................................................7
4.5 Brokers......................................................7
ARTICLE 5: PERFORMANCE BY SELLERS PENDING CLOSING.............................7
5.1 Access to Information........................................7
5.2 Business As Usual............................................7
5.3 Encumbrances.................................................8
5.4 Restrictions on Sale of Assets...............................8
5.5 No Solicitation of Other Offers..............................8
5.6 Capital Expenditures.........................................8
TABLE OF CONTENTS, continued
ARTICLE 6: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS....................8
6.1 Accuracy of Representations and Warranties...................8
6.2 Compliance with Covenants and Agreements.....................8
6.3 No Adverse Change............................................8
ARTICLE 7: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.......................9
7.1 Accuracy of Representations and Warranties...................9
7.2 Compliance with Covenants and Agreements.....................9
ARTICLE 8: INDEMNIFICATION....................................................9
8.1 The Seller's Indemnification.................................9
8.2 Indemnification by Purchaser................................10
8.3 Resolutions.................................................10
8.4 Right of Set-Off............................................11
ARTICLE 9: EMPLOYMENT OF SELLERS; WARRANTS, RESTRICTIVE COVENANTS............11
9.1 Employment of Seller........................................11
9.2 Warrants....................................................11
9.3 Restrictive Covenants.......................................11
ARTICLE 10: CLOSING..........................................................13
10.1 Date of Closing.............................................13
ARTICLE 11: TERMINATION......................................................13
11.1 Termination.................................................13
11.2 Return of Documents and Nondisclosure.......................14
ARTICLE 12: DEFINITIONS......................................................14
ARTICLE 12: DEFINITIONS......................................................14
ARTICLE 13: MISCELLANEOUS....................................................17
13.1 Survival of Representations and Warranties..................17
13.2 Cooperation.................................................17
13.3 Notices.....................................................17
13.4 Entire Agreement............................................18
13.5 Remedies Cumulative.........................................18
13.6 Amendments..................................................19
13.7 Successors and Assigns......................................19
13.8 Costs.......................................................19
13.9 Governing Law...............................................19
13.10 Counterparts................................................19
13.11 Headings....................................................19
13.12 Scope of Agreement..........................................19
13.13 Number and Gender...........................................20
13.14 Severability................................................20
13.15 Parties in Interest.........................................20
13.16 Waiver......................................................20
13.17 Intentionally Omitted.......................................20
13.18 Construction................................................20
13.19 Copies for Schedules or Lists...............................20
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13.20 Recitals....................................................21
ARTICLE 14: RESOLUTION OF DISPUTES...........................................21
14.1 Dispute Resolution..........................................21
SCHEDULE 1.2 - ASSET LIST.....................................................24
SCHEDULE 1.2(b) - ACCOUNTS PAYABLE............................................25
SCHEDULE 3.1 - CONTRACT RESTRICTIONS..........................................26
SCHEDULE 3.5 - LITIGATION.....................................................27
SCHEDULE 3.7 - EMPLOYEE BENEFITS..............................................28
SCHEDULE 3.9 - DEVELOPMENTS..................................................29
SCHEDULE 3.10 - INTELLECTUAL PROPERTY.........................................30
SCHEDULE 3.11 - INSURANCE CARRIERS, LICENSES AND APPLICABLE LAWS AND
INSURANCE POLICIES............................................31
SCHEDULE 3.15 - INSURANCE.....................................................32
SCHEDULE 3.16 - OWNED SOFTWARE; LICENSED SOFTWARE AND LICENSE AGREEMENTS......33
SCHEDULE 3.17 - LOANS.........................................................34
SCHEDULE 9.2 - WORK IN PROGRESS...............................................35
SCHEDULE "Z"...................................................................1
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STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT ("AGREEMENT") is made and entered into as
of the 1st day of April, 2000, by and among CyberStar Computer Corporation, a
Minnesota corporation (the "PURCHASER"), and Xxxxxxxx X. Xxxxx, Xxxxxxx Xxxxx,
Xxxx Xxxxx, and Xxxx Xxxxxxxx (collectively, the "SELLERS").
RECITALS:
A. Sellers are the owners of all of the issued and outstanding
shares of each class and series of capital stock of
International Trade Center, Inc., an Arizona corporation
("COMPANY"). Sellers are the owners of the common voting
shares of the Company set forth below which are fully paid and
nonassessable having no par value (such shares may be referred
to as the "SHARES");
Shareholder Name Number of Shares
---------------- ----------------
Xxxxxxxx X. Xxxxx 1,000
Xxxxxxx Xxxxx 1,000
Xxxx Xxxxx 1,000
Xxxx Xxxxxxxx 1,000
B. The Company is engaged in the business of wholesale computer
distribution (the "BUSINESS"); and
C. Purchaser desires to exchange the Shares of the Sellers in the
Company for the voting shares of Purchaser ("CYBERSTAR
SHARES") set forth herein which shall be fully paid and
nonassessable;
D. The parties intend that this transaction constitute a tax-free
exchange of Sellers' Shares solely in exchange for the
CyberStar Shares, in accordance with the provisions of Section
368(a)(1)(B) of the Code, and all terms contained herein shall
be interpreted to effectuate such intent;
E. Article 12 of this Agreement provides definitions of certain
terms used in this Agreement. Capitalized terms, if not
defined in the section of the Agreement in which such
capitalized term is set forth, shall be defined in Article 12;
and
F. The Company may be operated as a wholly owned subsidiary of
the Purchaser or may be merged into Purchaser and operated as
a division of the Purchaser, at Purchaser's sole discretion.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1: EXCHANGE OF SHARES
1.1 EXCHANGE. On the Date of Closing, Sellers shall exchange the Shares
in the Company duly endorsed or with an Assignment Separate From Certificate
attached for the number of CyberStar Shares equal to two (2) times the book
value of the Company as of the Closing Date, based on a price per share of
$5.50. For example, if the book value of the Company as of the Closing Date is
$50,000, the number of CyberStar Shares shall be equal to 18,182 [($50,000 x 2)
/ $5.50]. Thus, each of the Sellers shall receive 4,545.5 of the CyberStar
Shares. This transaction shall be completed in accordance with the provisions of
Section 368(a)(1)(B) of the Code.
1.2 OTHER TRANSACTIONS. Notwithstanding anything contained in this
Agreement to the contrary, Purchaser will acquire nor assume, when it exchanges
the CyberStar Shares for the Shares of the Company owned by Seller, the
following:
a. Any Accounts Receivable of the Company for goods delivered
whether or not incurred in the ordinary course of business on
or after the Effective Date, as set forth on Schedule 1.2a;
and
b. Any Accounts Payable of the Company whether or not incurred in
the ordinary course of business on or after the Effective
Date.
c. The Purchaser shall retain all back orders for products in
existence as of the Effective Date. On the Closing Date, the
Sellers and the Company shall deliver to Purchaser all
purchase orders, memoranda, correspondence and any other
documentation with respect to such back orders.
1.3 LEGENDS. Sellers and Purchaser acknowledge and agree the CyberStar
Shares being received by the Sellers will be held for investment and not for
distribution. Accordingly, Sellers shall each execute and deliver to Purchaser a
Subscription Agreement and Letter of Investment Intent in form of Exhibit "B"
attached hereto. Sellers acknowledge the CyberStar Shares Sellers shall be
receiving pursuant to Section 1.1, are restricted and shall bear the following
restrictive legend:
The shares of stock represented by this Certificate
are subject to a pledge of the holder pursuant to a
Stock Exchange Agreement dated ___________________,
2000, a copy of which is on file with the issuer at
its principal office in Eden Prairie, Minnesota.
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1.4 PLEDGE OF SHARES. As security for their indemnification obligations
contained in Section 8.1 hereof, Sellers agree to pledge the CyberStar Shares to
Purchaser pursuant to the terms of Pledge Agreements in the form of the attached
Exhibits X-0, X-0, X-0 and A-4.
ARTICLE 2: INTENTIONALLY OMITTED
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
As an inducement for Purchaser to enter into this Agreement and
consummate the transactions contemplated hereby, intending that Purchaser rely
thereon in entering into and performing this Agreement, Sellers on behalf of
themselves and the Company jointly and severally warrant and represent to
Purchaser that each and all of the following are true and correct as of the date
of this Agreement and will be true and correct at and as of the Closing (and to
the extent not true and correct, Sellers on behalf of themselves and the Company
shall set forth the appropriate disclosure either as an identified schedule or
on Schedule Z hereto attached which disclosures shall identify the sections or
subsections to the Agreement to which the disclosure is provided):
3.1 DUE INCORPORATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona,
and has all requisite power and authority, corporate and otherwise, to own,
operate and lease its properties and assets and to conduct the Business as it is
now being conducted. The Company is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of every state or
jurisdiction in which the nature of its activities or of its properties owned,
leased or operated makes such qualification necessary and in which the failure
to be so qualified could reasonably be expected to have a Material Adverse
Effect (as hereinafter defined) on the Company or the Business. Neither Sellers
nor the Company are subject to any Contract which restricts or may restrict the
conduct of any portion of the Business in any jurisdiction or location, does
business, or payment of local tax or so registered to do business set forth on
Schedule 3.1.
3.2 DUE AUTHORIZATION. This Agreement and the documents, instruments,
agreements, and corporate actions of the Company, to be executed and/or
delivered by Sellers and/or the Company pursuant to this Agreement have been or
will be on or before the Date of Closing duly and validly authorized, executed
and delivered by Sellers and/or the Company and the obligations of Sellers
and/or the Company hereunder and thereunder are or will be upon such execution
or delivery valid and legally binding, and this Agreement and the documents,
instruments and agreements to be executed and/or delivered by Sellers pursuant
to this Agreement are or will be upon such execution and delivery enforceable
against Sellers in accordance with their respective terms.
3.3 NO BREACH. Sellers has full power and authority, to sell, assign,
transfer, convey and deliver the Shares of the Company to be sold hereunder and
to otherwise perform their respective obligations under this Agreement and the
documents, instruments and agreements to be executed and/or delivered by the
Sellers pursuant hereto.
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3.4 LITIGATION. Except as described in Schedule 3.5 hereto, there is no
pending Proceeding:
a. that has been commenced by or against Sellers or the Company
that otherwise relates to or may affect the Business of, or
any of the assets owned or used by, the Company; or
b. that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any
of the transactions contemplated hereby.
c. to the Knowledge of the Sellers and the Company, (1) no such
proceeding has been threatened, and (2) no event has occurred
or circumstance exists that may give rise to, or serve as a
basis for, the commencement of any such proceeding.
3.5 TAXES. With respect to the Sellers and the Company, (a) all Tax
Returns and all similar filings required to be filed on or before the Date of
Closing by the Sellers and/or the Company (true and correct copies of which have
been furnished to the Purchaser) with respect to any Taxes have been timely
filed and paid with an appropriate Governmental Body in all jurisdictions in
which such Tax Returns are required to be filed, and all such Tax Returns
correctly reflect the Liability of the Sellers and the Company for Taxes for the
periods, properties or events covered thereby; (b) no deficiency in respect of
any Taxes that has been assessed against the Sellers or the Company remain
unpaid and there are no unassessed Tax deficiencies or any audits or
investigations pending or threatened against the Sellers or the Company with
respect to any Taxes, (c) no claim has ever been made by any Tax authority in a
jurisdiction in which the Sellers or the Company do not file Tax Returns that
neither the Sellers nor the Company are or may be subject to taxation by that
jurisdiction;
3.6 EMPLOYEE BENEFITS. Except as described in Schedule 3.7 hereto,
Company does not maintain or contribute to any Benefit Plans.
3.7 FULL DISCLOSURE. No representation or warranty made by Sellers in
this Agreement, including the documents, instruments and agreements to be
executed and/or delivered by Sellers and/or the Company pursuant to this
Agreement, and no statement, certificate or other document or instrument
furnished or to be furnished by or on behalf of Sellers and/or the Company
pursuant to this Agreement or in connection with the consummation of the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit, to state a material fact necessary to
make the statements contained herein and therein not misleading or any fact
necessary to provide Purchaser with proper and adequate information concerning
the properties, assets, Liabilities, revenues, income, Business, operations,
financial condition and prospects of the Company and the Business. Neither
Sellers nor the Company has knowingly failed to fully disclose to Purchaser any
and all facts and information known to each of them or it that reasonably could
be expected to have a Material Adverse Effect on the Company or the Business.
3.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the transactions
contemplated by this Agreement or as otherwise set forth on Schedule 3.8 hereto,
since the Effective Date, Sellers have conducted the Business only in the
Ordinary Course of Business and have not:
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a. Sold, leased, assigned or otherwise transferred any properties
or assets other than in the Ordinary Course of Business;
b. Suffered, sustained or incurred any material loss or waived or
released any material right or claim, whether or not in the
Ordinary Course of Business;
c. Made any capital expenditure (or series of related capital
expenditures) exceeding Two Thousand Five Hundred Dollars
($2,500);
d. Subjected any of its properties or assets to any Encumbrance,
whether or not in the Ordinary Course of Business;
e. Except as contemplated by this Agreement, discharged or
satisfied any Encumbrance, or paid any Liability, other than
current Liabilities shown on Seller's balance sheet as of the
Effective Date, and current Liabilities incurred in the
Ordinary Course of Business since the Effective Date;
f. Received notice from any customer, supplier, vendor,
Governmental Body or any other Person that could reasonably be
expected to have, give rise to or result in a Material Adverse
Effect on the Sellers or the Company and its Business; and
g. Been made aware that any Manufacturer/Vendor will cease doing
business with the Company; change its prices charged to the
Company in the near term contrary to the price quotes under
which the Company currently does business with such
Manufacturer/Vendor.
3.9 INTELLECTUAL PROPERTY. Schedule 3.10 hereto contains a list and
description of all Intellectual Property of any kind that relates to, arises
from or that is used or useful in the operation of the Business.
3.10 COMPLIANCE WITH LAWS. The Business has been operated and the
assets and Sellers are in full compliance with all requirements of insurance
carriers, the Licenses and all Applicable Laws and all insurance policies
relating to the Company and its Business are set forth on Schedule 3.11.
3.11 BOOKS AND RECORDS. All of the Company's books of account and other
financial and corporate records relating to the Business have been made
available to Purchaser and its representatives (or will be so made available
prior to the Date of Closing). Such books of account and records are current,
complete, true and correct in all material respects and reflect in all material
respects all items of income and expense with respect to the Business and all
assets, Liabilities and accruals with respect to the Business.
3.12 SHARES. Sellers are the holders of all of the issued and
outstanding shares of each and every class and series of the capital stock of
the Company. Except as disclosed herein, there are no outstanding subscriptions,
warrants, options, agreements, convertible securities or other commitments
pursuant to which Sellers or the Company are or may be obligated to issue any
shares of any class or series of them or the Company's capital stock or other
securities to any other Person.
3.13 PRODUCTS LIABILITY CLAIMS. All products and services of the
Company that the Company has sold as part of its Business have been merchantable
and free from defects in material or
5
workmanship. Sellers have no reasonable grounds to believe that future product
liability claims with respect to the Business of the Company prior the Effective
Date will be different from the Company's past experience with respect thereto
as set forth herein.
3.14 BROKERS; INSURANCE. Sellers have not employed or engaged any
broker, finder, agent, banker or third party, nor have they otherwise dealt with
anyone purporting to act in the capacity of a finder or broker in connection
with the transactions contemplated hereby. No commissions, finder's fees or like
charges have been or will be incurred by Sellers in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. Sellers have maintained and will continue to maintain until
the Closing Date the insurance related to the Company described in Schedule 3.15
which insurance covers the Business.
3.17 LOANS. Except as set forth in Schedule 3.17, there have been no
loans by Sellers or the Company to any officer, director or employee, nor loans
to Sellers from any officer, director or employee.
3.18 INVESTMENT. The Sellers are acquiring the CyberStar Shares of the
Purchaser solely for their own respective account for investment purposes and
not with a view to the distribution thereof and have received certain
information as desired in order to evaluate the merits and the risks inherent in
holding the CyberStar Shares.
3.19 CONSUMMATION OF TRANSACTION. Company and Sellers represent and
warrant that all transactions contemplated under that certain Settlement and
Redemption Agreement and Mutual General Release ("SETTLEMENT AGREEMENT") dated
March 31, 2000, by and among the Sellers and Nashville Computer Liquidators,
L.P., a Tennessee limited partnership ("NASHVILLE"), including the complete
redemption of Nashville's entire interest in the Company, have been completed
and no further rights or obligations exist with respect to the Settlement
Agreement in favor of any of the parties thereto or hereto.
3.20 BACK ORDERS. Sellers and Company represent and warrant that (i)
the back orders retained by Purchaser hereunder as of the Effective Date and as
of the Closing Date shall be in at least the amount of $1,200,000, and (ii) that
all such back orders are with credit worthy customers and (iii) that all
accounts receivable with respect to such orders shall be collectible in the
ordinary course of business.
3.21 WARRANTIES. Except as set forth on the attached Schedule 3.21, the
Company has not issued any express warranties with respect to products sold by
the Company and has disclaimed any and all implied warranties of
merchantability, fitness for a particular purpose or sale by sample with respect
to such products.
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement for Sellers to enter into this Agreement and
consummate the transactions contemplated hereby, intending that Sellers relies
thereon in entering into and performing this Agreement, Purchaser warrants and
represents to Sellers that each and all of the following are true and correct in
all material respects as of the date of this Agreement and will be true and
correct in all material respects at
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and as of the Effective Date and/or the Date of Closing (except as set forth on
Schedule Z hereto attached, Purchaser shall set forth the appropriate disclosure
on Schedule Z which shall identify the sections or subsections for which
disclosure is provided):
4.1 DUE INCORPORATION. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
and has all requisite power and authority, corporate and otherwise, to own,
operate and lease its properties and assets and to conduct its business as it is
now being conducted.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement, including the documents, instruments and agreements to be executed
and/or delivered by Purchaser pursuant to this Agreement, and the consummation
of the transactions contemplated hereby and thereby have been or will be on or
before the Date of Closing duly and validly authorized by all necessary
corporate action on the part of Purchaser.
4.3 NO BREACH. Purchaser has full corporate power and authority,
corporate and otherwise, to exchange the Shares of the Sellers in the Company
being acquired hereunder and to otherwise perform its obligations under this
Agreement and the documents, instruments and agreements to be executed by the
Purchaser pursuant hereto.
4.4 DISCLOSURE. No representation or warranty made by Purchaser in this
Article 4, contains or will contain any untrue statement of a material fact.
4.5 BROKERS. Purchaser has not employed or engaged any broker, finder,
agent, investment banker or third party nor has it otherwise dealt with anyone
purporting to act in the capacity of a finder or broker, in connection with the
transactions contemplated hereby. No commissions, finder's fees or like charges
have been or will be incurred in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 5: PERFORMANCE BY SELLERS PENDING CLOSING
Sellers covenants and agrees that from and after the date of this
Agreement and until the earlier of Date of Closing or the termination of this
Agreement in accordance with Article 11 hereof:
5.1 ACCESS TO INFORMATION. At the request of Purchaser, Sellers shall,
from time to time, give or cause to be given to Purchaser, its officers,
employees, counsel, accountants and other representatives, upon reasonable
notice to Seller, full access during normal business hours to the Business and
all of the books, minute books, title papers, records, files, Contracts,
insurance policies, Licenses and documents of every character of the Company
relating to the Business.
5.2 BUSINESS AS USUAL. Sellers shall cause the Company to carry on the
Business diligently, only in the Ordinary Course of Business and substantially
in the same manner as heretofore conducted.
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5.3 ENCUMBRANCES. Sellers shall not, directly or indirectly, perform or
fail to perform any act that might reasonably be expected to result in the
creation or imposition of any Encumbrance on any of the assets or otherwise
adversely affect the Business.
5.4 RESTRICTIONS ON SALE OF ASSETS. Sellers shall not sell, assign,
transfer, lease, sublease, pledge or otherwise encumber or dispose of any of its
properties or assets.
5.5 NO SOLICITATION OF OTHER OFFERS. The Sellers will not, (i) solicit
or encourage submission of or any inquiries, proposals or offers by, (ii)
participate in any negotiations with, (iii) afford any access to the properties,
books or records of the Company to, (iv) accept or approve, or (v) otherwise
assist, facilitate or encourage, or enter into any Contract with, any Person or
group (other than Purchaser), in connection with any purchase of Seller's Shares
in the Company or sale of all or any of the Company's assets.
5.6 CAPITAL EXPENDITURES. Sellers shall not cause the Company to make
any capital expenditures in excess of Two Thousand Five Hundred Dollars ($2,500)
individually or Two Thousand Five Hundred Dollars ($2,500) in the aggregate
without the Purchaser's prior written consent.
ARTICLE 6: CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Unless waived by Purchaser in writing, each and every obligation of
Purchaser to be performed at the Closing shall be subject to the satisfaction at
or prior thereto of each and all of the following conditions precedent:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Sellers and/or the Company in this Agreement, including the
documents, instruments and agreements to be executed and/or delivered by Sellers
and/or the Company pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing with the same force and effect as
though such representations and warranties had been made or given at and as of
the Closing.
6.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Sellers and/or the
Company shall have performed and complied with all of their and its covenants,
agreements and obligations under this Agreement.
6.3 NO ADVERSE CHANGE. As of the Date of Closing, nothing shall have
occurred which, in the reasonable judgment of Purchaser could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Sellers or the Business, or the ability of Sellers to conduct the Business
of the Company on the same basis with the same or greater earning power as in
the past.
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ARTICLE 7: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Unless waived by Sellers in writing, each and every obligation of the
Sellers to be performed at the Closing shall be subject to the satisfaction at
or prior thereto of each and all of the following conditions precedent:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Purchaser in this Agreement, shall be true and correct in all
material respects at and as of the Closing with the same force and effect as
though such representations and warranties had been made or given at and as of
the Closing.
7.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Purchaser shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by it at or
prior to the Closing.
ARTICLE 8: INDEMNIFICATION
8.1 THE SELLER'S INDEMNIFICATION. From and after the Closing, subject
to the provisions of this Section 8, the Sellers, jointly and severally, agree
to defend, indemnify, and hold Purchaser and each of its affiliates, each of
their respective officers, directors, employees, shareholders, agents, legal
representatives, successors, and permitted assigns (the "PURCHASER INDEMNIFIED
PARTIES"), harmless from, and against any loss, claim, damage, liability,
penalty, or other cost or expense (including reasonable attorneys' fees and
costs) incurred or sustained by any of them (a "LOSS"), at any time, on account
of, relating to, or resulting from: (a) any breach of any representation or
warranty given by Sellers and the Company in this Agreement or any of the
documents, agreements or instruments delivered at Closing; (b) any
nonperformance or breach of any covenant, agreement, document or instrument of
the Sellers or the Company contained in, referenced in, and/or made pursuant to
this Agreement or any of the documents, agreements or instruments delivered at
Closing; (c) any claim or Liability to the Company's employees arising prior to
the Closing Date, claims of the Company's former employees whose employment
terminated for any reason prior to or on the Closing Date, including, but not
limited to, salaries, pensions or profit sharing benefits, wages, vacation and
sick pay, other employee benefits, which are accrued as of the open of business
on the Date of Closing, as well as any severance pay payable by the Company to
present and former employees, except to the extent such claim(s) has been
explicitly assumed by Purchaser in Section 3.1; (d) any claim, assessment,
Liability and/or Encumbrances, penalties, interest, or lien by any federal,
state, county, local, or municipal governmental body for any taxes found to be
due and owing, directly or indirectly, by the Sellers and/or the Company not
explicitly assumed by Purchaser hereunder; (e) the operation of the Business or
ownership of the assets prior to the Closing Date, except to the extent such
Loss has been explicitly assumed by the Purchaser hereunder, (f) all claims,
demands, Liabilities and/or Encumbrances which may be asserted by creditors of
and/or claimants against Seller, except to the extent that Purchaser has assumed
such Liabilities under the provisions of Section 3.1 of this Agreement; (g) all
claims, demands, Liabilities and/or Encumbrances that may be asserted against
Purchaser or any of the Company's assets at any time or
9
from time to time (excluding only any Liability explicitly assumed by Purchaser
under the provisions of Section 3.1 of this Agreement) resulting from or arising
out of the ownership, use, maintenance or operation of the Business by the
Company with respect to any period of time prior to the Date of Closing; (h) any
other Liability of or claims against Sellers and/or the Company of any kind, to
the extent not specifically assumed by the Purchaser under the provisions of
Section 3.1 of this Agreement; (i) any products sold or services provided by the
Company in the operation of the Business prior to the Date of Closing,
including, but not limited to, any warranty claims provided by the Company in
connection with products it sells and/or services in its Business which are not
specifically identified in Schedule Z; (j) and all costs of attorneys' fees,
costs and expenses incurred by the Purchaser Indemnified Parties in defending
any claim or Liability, the amount of any verdict or settlement, and attorneys'
fees and costs incurred in enforcing this indemnification obligation against the
Seller.
8.2 INDEMNIFICATION BY PURCHASER. From and after the Closing, subject
to the provisions of this Section 8, Purchaser, agrees to defend, indemnify, and
hold the Sellers (the "SELLER'S INDEMNIFIED PARTY), harmless from and against,
and to promptly pay to them or reimburse them for any Loss sustained or incurred
by any of them relating to or resulting from (a) any breach of any
representation or warranty made by Purchaser in this Agreement; and (b) any
nonperformance or breach of any covenant or agreement of Purchaser contained in
or made pursuant to this Agreement; and (c) any claim, assessment, liability,
penalties, interest or lien by any federal, state, county, local or municipal
governmental body for any taxes found to be due and owing, directly or
indirectly, by the Purchaser where claim has been made against the Seller.
8.3 RESOLUTIONS. The Indemnified Party may compromise and settle the
Third Party Claim only with the prior written consent of the Indemnifying Party,
which consent will not be unreasonably withheld, delayed, or conditioned. The
Indemnifying Party may not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, delayed, or conditioned, unless the entry of judgment or settlement is
only for a liquidated dollar amount and the Indemnifying Party posts security
adequate to the Indemnified Party for the payment of the judgment or the
settlement amount. Without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld, delayed, or conditioned,
Indemnifying Party may not enter into any settlement of any Third Party Claim or
cease to defend against a Third Party Claim, if pursuant to or as a result of
settlement or cessation: (i) injunctive or other equitable relief would be
imposed against the Indemnified Party, or (ii) settlement or cessation would
lead to liability or create any financial or other obligation on the part of the
Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder, or (iii) the proposed settlement includes a written
admission of guilt. If an offer is made to settle a Third Party Claim which all
parties to the Third Party Claim (including the Indemnifying Party) are prepared
to settle and which offer the Indemnifying Party is permitted to settle under
this Section only upon the prior written consent of the Indemnified Party, the
Indemnifying Party will give prompt written notice to the Indemnified Party to
that effect. If the Indemnified Party fails to consent to the firm offer within
30 calendar days after its receipt of notice, the Indemnified Party may continue
to contest or defend the Third Party Claim and, in
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that event, the maximum liability of the Indemnifying Party as to the Third
Party Claim will not exceed the amount of the settlement offer, plus costs and
expenses paid or incurred by the Indemnified Party through the end of that 30
day period. The Indemnifying Party will not be entitled to control, and the
Indemnified Party will be entitled to have sole control over, the defense or
settlement of any claim (i) to the extent that claim seeks an order, injunction,
or other equitable relief against the Indemnified Party which, if successful,
could materially interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnified Party or (ii) in a
proceeding to which the Indemnifying Party is also a party and the Indemnified
Party determines in good faith that joint representation would be inappropriate
(and in each case the cost of defense will constitute an amount for which the
Indemnified Party is entitled to indemnification hereunder).
8.4 RIGHT OF SET-OFF. In order to secure Sellers' payment of all claims
for indemnification under Section 8, and in addition to any other rights
Purchaser may have against the Sellers, Purchaser may in good faith set off the
amount of Claims and Third Party Claims subject to indemnification by Sellers
against the CyberStar Shares Sellers have pledged in accordance with Section 1,
or Purchaser may deduct from the compensation being paid to Sellers from the
Company (or Purchaser) any amount due the Purchaser as indemnification for
Seller.
ARTICLE 9: EMPLOYMENT OF SELLERS; WARRANTS, RESTRICTIVE COVENANTS
9.1 EMPLOYMENT OF SELLERS. Sellers shall become employees of the
Company or Purchaser, as the case may be, effective as of the Closing Date.
9.2 WARRANTS. Any and all warrants held by the Sellers for shares in
the Company shall be canceled and terminated effective as of the Effective Date.
Each of the Sellers shall receive Warrants for 25,000 shares each of the common
stock of the Purchaser in the form of the attached Exhibits X-0, X-0, X-0 and
B-4, respectively.
9.3 RESTRICTIVE COVENANTS. As additional consideration and as an
inducement to the Purchaser to issue the Warrants (subject to the terms of
Exhibits B-1 through B-4) to each of the Sellers, each of the Sellers
represents, warrants and covenants to the Purchaser and the Company to be bound
by the restrictive covenants as follows:
a. CONFIDENTIALITY. Each of the Sellers covenants, warrants and
agrees that they shall not, directly or indirectly, during the
term of their employment with the Company or the Purchaser, if
applicable, and for three (3) years thereafter, use or
disclose any Confidential Information to any person not
employed by the Purchaser or the Company, or both, without the
prior written consent of the Purchaser or Company, as the case
may be. Each of the Sellers will use reasonable and prudent
care to safeguard, to protect, and to prevent the unauthorized
use and disclosure of Confidential Information. The covenants
relating to Confidential Information will not apply to any
Confidential Information that is now or becomes generally
available to the public through no fault of the Sellers or
Company's or Purchaser's, as the case may be, disclosure of
such Confidential Information required by law, judicial or
administrative process.
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b. NON-COMPETITION. Each of the Sellers covenants, warrants and
agrees that they shall not engage in any commercial activity
which, directly or indirectly, competes with the Company or
Purchaser during the term of their employment by the Company
or Purchaser, as the case may be, and for a period of one (1)
year after termination of employment with the Company, or, if
applicable, the Purchaser.
c. NON-ENTICEMENT. Each of the Sellers covenants, warrants and
agrees that they shall not call upon any person, directly or
indirectly, during their employment by the Company, or, if
applicable, the Purchaser, and for a period of one (1) year
thereafter for the purpose or with the intent of enticing such
employee or independent contractor away from, not to do
business with, or out of the employ of the Company, if
applicable, or the Purchaser.
d. NON-CUSTOMER INTERFERENCE. Each of the Sellers covenants,
warrants and agrees that they shall not, directly or
indirectly, during the term of each Seller's employment with
the Company or the Purchaser, as applicable, and for one (1)
year thereafter, call upon any person or entity that is/was a
customer or prospective customer or vendor of the Company or
the Purchaser for the purpose of competing, with the Company's
business or the Purchaser's business. As used herein, the term
"CUSTOMER" means any entity to whom the Company or the
Purchaser, as the case may be, has provided services within
the twelve (12) month period prior to the date of Seller's
termination; the term "PROSPECTIVE CUSTOMER" means any entity
that has been subject to documented sales and marketing
activity, other than mass mailings, by the Company or the
Purchaser, as the case may be, within the six (6) month period
prior to Seller's termination of employment; and the term
"VENDOR" means any entity serving as a source for any
component of any hardware or software or providing any
hardware or software or other equipment or service to the
Company or Purchaser, as the case may be, to enable the
Company or Purchaser to provide services or products or both
to the Company's or the Purchaser's customers.
e. NON-MERGER INTERFERENCE. Each of the Sellers covenants,
warrants and agrees that they shall not, directly or
indirectly, during the term of his employment with the
Company, or, if applicable, the Purchaser, and for one (1)
year thereafter, call upon, for the purpose of acquiring or
performing services for any entity, any prospective
acquisition or merger candidate that was either called upon by
the Company or Purchaser, as the case may be, or for which the
Company or the Purchaser made an acquisition or merger
analysis during the twelve (12) month period prior to the
termination of Seller's employment with the Company or the
Purchaser, as the case may be.
f. GEOGRAPHIC AREA. The covenants set forth in Sections 9.4.a
through 9.4.e, inclusive, shall apply to all of the United
States, because none of the Sellers is granted an exclusive
territory.
g. REMEDIES. Sellers covenant, warrant and agree that any breach
or threatened breach of the covenants set forth in this
Section 9.4 will cause the Company, or the Purchaser, as
applicable, or both, irreparable harm for which there is no
adequate remedy at law, and, without limiting other rights and
remedies, the Company or the Purchaser, or both, as the case
may be, may have at law or under and pursuant to this
Agreement, Sellers consent to the remedies set forth in this
Section 9.4.g, including, but not limited to, the issuance of
an injunction in favor of the Company, or the Purchaser, as
applicable, or both, enjoining the breach of one or all of the
aforesaid covenants by any court of appropriate jurisdiction
(or arbitration, if applicable). Such injunction shall provide
the Company, or the Purchaser, or both, with at least the one
(1) year contractual protection agreed to by the parties in
Sections 9.4.b through 9.4.d, inclusive, and the three (3)
year contractual protection provided in Section 9.4.a. In the
event Employee violates the terms of the injunction, Employee
covenants and agrees that a court of appropriate jurisdiction
(or an arbitrator, if applicable) shall have the power to
extent the length or breadth of the injunction to provide the
Company or the Purchaser, or both, as the case may be, with a
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full measure of protection intended by this Agreement,
including, but not limited to, the extension of such
injunction for a reasonable period of time in order to
eliminate any commercial advantage which may be derived from
misappropriation of Confidential Information or breach or
default of the covenants set forth in Sections 9.4.a through
9.4.e, inclusive. If any or all of the aforesaid covenants are
held not to be enforceable because of the scope or duration of
such covenants, or if applicable, the area covered by such
covenants, the parties agree that a court of appropriate
jurisdiction (or the arbitrator, if applicable) shall make
such determination, and the court (or the arbitrator, if
applicable) shall have the power to reduce the scope,
duration, and area of any covenant (or one or more of the
foregoing), to the extent which allows maximum scope, duration
and area as permitted by applicable law. The covenants set
forth in this Section 9.4 protect and apply to not only the
Company and the Purchaser, but also any operations or
divisions controlled by the Company or the Purchaser, or
controlling the Company or the Purchaser, whether a parent,
subsidiary, brother-sister corporation, related party, or
affiliate. Employee shall pay reasonable attorneys' fees,
costs and expenses which may be incurred by the Company or the
Purchaser, or both, in enforcing one or more of the covenants
set forth in this Section 9.4. Section 9.4 shall have
independent legal significance, and shall survive termination
of this Agreement and employment of Sellers with the Company,
or the Purchaser, if applicable.
ARTICLE 10: CLOSING
10.1 DATE OF CLOSING. Subject to the satisfaction or waiver of the
conditions precedent contained in Articles 5, 6 and 7 hereof, the closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held at
10:00 a.m., CDT, on May 17, 2000, at the offices of Xxxx & Xxxxxxx, a
Professional Association, 0000 Xxxxxxx Xxxxxx, 00 Xxxxx Xxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, or such place as may be mutually agreed upon
in writing by Purchaser and Sellers, and shall be as of the opening of business
on such day. Such date is referred to in this Agreement as the "DATE OF
CLOSING," "CLOSING," or "CLOSING DATE."
ARTICLE 11: TERMINATION
11.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated herein may be abandoned after the date of this Agreement, but not
later than the Closing:
a. By mutual written consent of all parties hereto;
b. By Purchaser if any of the conditions provided for in Article
6 of this Agreement have not been met and have not been waived
in writing by Purchaser on or before the Date of Closing; and
c. By Sellers if any of the conditions provided for in Article 7
of this Agreement have not been met and have not been waived
in writing by Sellers on or before the Date of Closing.
In the event of termination or abandonment by any party as provided in this
Section 11.1, written notice shall forthwith be given to the other party and
each party shall pay its own expenses incident to preparation for consummation
of this Agreement and the transactions contemplated hereunder and neither party
shall have any Liability to the other hereunder except such Liability as may
arise as a result of a breach hereof.
13
11.2 RETURN OF DOCUMENTS AND NONDISCLOSURE. If this Agreement is
terminated for any reason pursuant to Section 11.1 hereto, each party shall
return all documents and materials which shall have been furnished by or on
behalf of the other party, and each party hereby covenants that it will not
disclose to any Person any confidential or proprietary information about the
other party or any information about the transactions contemplated hereby,
except insofar as may be necessary to assert its rights hereunder.
ARTICLE 12: DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified:
"AGREEMENT" -- has the meaning set forth in the preface above.
"APPLICABLE LAWS" -- any and all laws, ordinances, constitutions,
regulations, statutes, treaties, rules, codes, licenses, certificates,
franchises, permits, requirements and Injunctions adopted, enacted, implemented,
promulgated, issued, entered or deemed applicable by or under the authority of
any Governmental Body having jurisdiction over Sellers of the Company or its
assets.
"BENEFIT PLAN" -- any and all bonus, stock option, restricted stock,
stock purchase, stock appreciation, phantom stock, profit participation,
profit-sharing, deferred compensation, severance, 401(k) plan, pension,
retirement, disability, medical, dental, health, life or dental insurance, death
benefit, incentive, welfare and/or other benefit, compensation and/or retirement
plan, policy, arrangement and/or Contract now or at any time heretofore
maintained, sponsored or participated in by Sellers or any of its Affiliates.
"BROKER" -- has the meaning set forth in Sections 3.16 and 8.5 hereof.
"BUSINESS" -- has the meaning set forth in the Recitals hereto.
"CLOSING" -- has the meaning set forth in Section 10.1 hereof.
"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Internal Revenue
Code or any successor law.
"CONFIDENTIAL INFORMATION" -- for the purposes of this Agreement, shall
mean information that is proprietary to the Purchaser and the Company or
proprietary to others and entrusted to Purchaser or the Company, whether or not
trade secrets. Confidential information includes, but is not limited to,
information relating to business plans and to business as conducted or
anticipated to be conducted, and to past or current or anticipated products or
services of Purchaser and the Company. Confidential Information also includes,
without limitation, information concerning research, development, purchasing,
accounting, marketing, selling, pricing, client proposal ads or promotions,
working papers, and services of Purchaser and the Company.
14
"CONTRACT" -- any agreement, lease, license, contract, obligation,
promise, commitment, arrangements, understanding or undertaking, instrument,
document (whether written or oral and whether express or implied) of any type,
nature or description that is legally binding.
"DATE OF CLOSING" -- has the meaning set forth in Section 10.1 hereof.
"EFFECTIVE DATE" -- refers to April 1, 2000.
"ENCUMBRANCE" -- any claim, lien, pledge, charge, security interest,
encumbrance, mortgage, lease, license, equitable interest, option, right of
first refusal or preemptive right, condition, or other restriction of any kind,
including any restriction on use, voting (in the case of any security),
transfer, receipt of income, or exercise of any other attribute of ownership,
except to the extent that any such claim or other restriction does not, and
insofar as can reasonably be foreseen in the future will not, have a Material
Adverse Effect on the Seller, the Business or the Purchaser.
"INDEMNIFIED PARTY" -- is a party entitled to indemnification pursuant
to Sections 8.1 or 8.2.
"INDEMNIFYING PARTY" -- is a party having obligation to indemnify
pursuant to Sections 8.1 or 8.2.
"INJUNCTION" -- any and all writs, rulings, awards, executive orders,
directives, injunctions (whether temporary, preliminary or permanent),
judgments, decrees or other orders adopted, enacted, implemented, promulgated,
issued, entered or deemed applicable by or under the authority of any
Governmental Body.
"INTELLECTUAL PROPERTY" -- any and all (i) inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof, (ii) CyberStars, service
marks, trade dress, logos, trade names, assumed names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (iii) copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (iv) mask works and all applications, registrations and renewals in
connection therewith, (v) trade secrets and confidential business information
(including ideas, research and development, know-how, technology, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (vi)
computer software (including data and related software program documentation in
computer readable and hard-copy forms), (vii) other intellectual property and
proprietary rights of any kind, nature or description, and (viii) copies of
tangible and embodiments thereof (in whatever form or medium).
"KNOWLEDGE" or "KNOWLEDGE" -- an individual will be deemed to have
"Knowledge" or "knowledge" or a particular fact or other matter if:
15
(i) such individual is actually aware of such fact or
other matter; or
(ii) a reasonably prudent individual actively involved in
a company of the size and nature of the Company, as
applicable, could be expected to discover or
otherwise become aware of such fact or other matter
in the normal course of conducting business. A Person
(other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if
any individual who is serving, or who has at any time
served, as a director, governor, officer, manager,
partner, executor, or trustee of such Person (or in
any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"LIABILITY" or "LIABILITIES" -- any and all debts, liabilities and/or
obligations of any type, nature or description (whether known or unknown,
asserted or unasserted, secured or unsecured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due).
"MATERIAL ADVERSE EFFECT" -- in connection with any party, any event,
change or effect that is materially adverse, individually or in the aggregate,
to the condition (financial or otherwise), properties, assets, Liabilities,
revenues, income, business, operations, results of operations or prospects of
such party, taken as a whole.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(i) such action is consistent with the past practices of
such Person and is taken in the ordinary course of
the normal day-to-day operations of such Person; and
(ii) such action is not required to be authorized by the
board of directors of such Person (or by any Person
or group of Persons exercising similar authority) and
does not require any other separate or special
authorization of any nature.
"PERSON" -- any individual, corporation organization, or other entity
or Governmental Body.
"PROCEEDING" -- any suit, litigation, arbitration, hearing, audit,
investigation or other action (whether civil, criminal, administrative or
investigative) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"PURCHASER" -- shall mean CyberStar Computer Corporation, Inc., any
affiliate, partially or wholly owned subsidiary, or any parent of Purchaser, and
the respective successor and assignor of each and all thereof.
"SHARES" -- has the meaning set forth in Section 1.1.
"TAX or TAXES" -- (i) any and all net income, gross income, gross
revenue, gross receipts, net receipts, ad valorem, franchise, profits, transfer,
sales, use, social security, employment, unemployment, disability, license,
withholding, payroll, privilege, excise, value-added, severance, stamp,
occupation, property, customs, duties and/or other taxes, assessments, levies,
fees or charges of any kind whatsoever imposed by any Governmental Body,
together with any interest or penalty relating thereto,
16
and/or (ii) the Liability for the payment of any consolidated tax, including
interest or penalties relating thereto, of the type described in the immediately
preceding subsection (i), including any federal, state, county, local and/or
other consolidated income tax Liability including any penalty or interest
thereon, as a result of being a member of, and which may be imposed upon, an
affiliated group (as defined in Section 1504(a) of the Code, or other Applicable
Law).
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing, or any notice has been given in writing, or if any other event
has occurred, or any other circumstances exist that would lead a reasonably
prudent Person to conclude that such a claim, Proceeding, dispute, action, or
other matter is substantially likely to be asserted, commenced, taken or
otherwise pursued in the future.
ARTICLE 13: MISCELLANEOUS
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the parties contained in this Agreement and in
any exhibit, schedule, certificate, instrument or document delivered by or on
behalf of any of the parties hereto pursuant to this Agreement and the
transactions contemplated hereby shall survive the Closing of the transactions
contemplated hereby and any investigation made by the parties or their agents
either prior to or after the date hereof for a period of twelve (12) months,
after which no claim for an incorrect statement or representation, or for the
breach of any warranty under this Agreement may be brought, and no litigation
with respect thereto may be commenced, and no party shall have any Liability or
obligation with respect thereto, unless the indemnified party gave written
notice to the indemnifying party specifying with particularity the incorrect
statement or representation or breach of warranty claimed on or before the
expiration of such period.
13.2 COOPERATION. The parties hereto shall cooperate with each other in
all respects, including using their best efforts to assist each other in
satisfying the conditions precedent to their respective obligations under this
Agreement, to the end that the transactions contemplated hereby will be
consummated. Without limiting the generality of the foregoing, Sellers will vote
all of their stock in the Company in favor of the consummation of the
transactions contemplated hereby; shall resign as members of the Board of
Directors of the Company and shall resign any position held in the Company.
13.3 NOTICES. All notices, demands and other communications provided
for hereunder shall be in writing and shall be given by personal delivery, via
facsimile transmission (receipt telephonically confirmed), by nationally
recognized overnight courier (prepaid), or by certified or registered first
class mail, postage prepaid, return receipt requested, sent to each party, at
its/his address as set forth below or at such other address or in such other
manner as may be designated by such party in written notice to each of the other
parties. All such notices, demands and communications shall be effective when
personally delivered, one (1) business day after delivery to the overnight
courier, upon telephone or machine confirmation of facsimile transmission or
upon receipt after dispatch by mail to the party to whom the same is so given or
made:
17
If to Sellers: Xxxxxxxx X. Xxxxx
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Telephone: (000) 000-0000
Xxxxxxx Xxxxx
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Telephone: (000) 000-0000
Xxxx Xxxxx
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Telephone: (000) 000-0000
Xxxx Xxxxxxxx
0000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Telephone: (000) 000-0000
With a copy to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Telephone:
------------------------------
If to Purchaser: CyberStar Computer Corporation, Inc.
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
E-Mail: xxxxxxx@xxxxxxxxxxx.xxx
With a copy to: Xxxxx Xxxxxxx, Esq.
Xxxx & Xxxxxxx, a Professional Association
0000 Xxxxxxx Xxxxxx
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Telephone/Direct: (000) 000-0000
Telephone/General: (000) 000-0000
Fax: (000) 000-0000
E-mail: XxxxxxxX@xxxx-xxxxxxx.xxx
13.4 ENTIRE AGREEMENT. This Agreement, including the documents,
instruments, and agreements to be executed by the parties pursuant hereto
referenced in this Agreement, contain the entire agreement of the parties hereto
and supersedes all prior or contemporaneous agreements and understandings, oral
or written, between the parties hereto with respect to the subject matter
hereof.
13.5 REMEDIES CUMULATIVE. Remedies herein provided are cumulative and
not exclusive of any other remedies provided by law.
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13.6 AMENDMENTS. No purported amendment, modification or waiver of any
provision of this Agreement or any of the documents, instruments or agreements
to be executed by the parties pursuant hereto shall be effective unless in a
writing specifically referring to this Agreement and signed by all of the
parties.
13.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns, but except as hereinafter
provided in this Section 13.7, nothing in this Agreement is to be construed as
an authorization or right of any party to assign its rights or delegate its
duties under this Agreement without the prior written consent of the other
parties hereto. In its sole discretion, Purchaser may assign its rights in
and/or delegate its duties under this Agreement to an Affiliate of the
Purchaser. In the event of such an assignment of rights and/or delegation of
duties, all references to the Purchaser in this Agreement shall also be deemed
to be references to the Affiliate to which this Agreement is assigned; provided
that no such assignment and/or delegation shall relieve Purchaser of any of its
duties or obligations hereunder.
13.8 COSTS. Each party hereto shall pay its/his own costs and expenses
incurred in connection with negotiating and preparing this Agreement and
consummating the transactions contemplated hereby, including but not limited to
fees and disbursements of their attorneys and accountants.
13.9 GOVERNING LAW. This Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the parties
pursuant hereto, shall be construed, governed by and enforced in accordance with
the laws of the State of Minnesota, without giving effect to the principles of
conflicts of laws thereof.
13.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same Agreement.
13.11 HEADINGS. The headings of the articles, sections and subsections
of this Agreement are intended for the convenience of the parties only and shall
in no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof. The terms "this Agreement," "hereof,"
"herein," "hereunder," "hereto" and similar expressions refer to this Agreement
as a whole and not to any particular article, section, subsection or other
portion hereof and include the schedules and exhibits hereto and any document,
instrument or agreement executed and/or delivered by the parties pursuant
hereto.
13.12 SCOPE OF AGREEMENT. Unless the context otherwise requires, all
references in this Agreement or in any schedule or exhibit hereto, to the
assets, properties, operations, business, financial statements, employees, books
and records, accounts receivable, accounts payable, Contracts or other
attributes of the Business of the Company shall mean such items or attributes as
they are used in, apply to, or relate to the Business of the Company.
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13.13 NUMBER AND GENDER. Unless the context otherwise requires, words
importing the singular number shall include the plural and vice versa and words
importing the use of any gender shall include all genders.
13.14 SEVERABILITY. In the event that any provision of this Agreement
is declared or held by any court of competent jurisdiction to be invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement, unless such invalid or unenforceable provision
goes to the essence of this Agreement, in which case the entire Agreement may be
declared invalid and not binding upon any of the parties.
13.15 PARTIES IN INTEREST. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer any rights or remedies
under or by reason of this Agreement upon any Person other than Purchaser and
Seller, and his respective heirs, personal representatives, successors and
permitted assigns. Nothing in this Agreement is intended to relieve or discharge
the Liabilities of any third Person to Purchaser or Seller.
13.16 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may be
waived only by a written instrument executed by the party waiving compliance.
Any such waiver shall only be effective in the specific instance and for the
specific purpose for which it was given and shall not be deemed a waiver of any
other provision hereof or of the same breach or default upon any recurrence
thereof. No failure on the part of a party hereto to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
13.17 INTENTIONALLY OMITTED.
13.18 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" shall mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
13.19 COPIES FOR SCHEDULES OR LISTS. Wherever in this Agreement
reference is to a list or a schedule to be attached as a Schedule to this
Agreement, the Schedule shall not only list the information required by the body
of the Agreement, but shall also be accompanied by a clear, legible and true and
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correct photocopy of each and every agreement, document, instrument, memoranda,
or similar writing which shall be attached to and included as part of such
schedule. Where an agreement or understanding is oral and not written, Sellers
shall provide a written summary of the oral agreement or understanding, the date
such oral agreement or understanding was reached, the representatives of Sellers
and other persons involved in the conversation or conversations which developed
the agreement or understanding, any modifications to the agreement or
understanding, the date of such modifications, and confirmation that the third
party and representatives of such third party are aware of the agreement and
understanding and it remains in effect as of the execution of this Agreement and
on the Date of Closing. The attachment of any written instrument, document,
agreement, memoranda or the like and/or any oral summaries of agreements or
understandings constitutes the warranty, covenant and representation of Sellers
that all such information provided pursuant to this Section 13.19 is true and
correct as of the date of this Agreement and as of the Date of Closing.
13.20 RECITALS. The recitals above set forth are incorporated into the
body of this Agreement by reference and made a part hereof.
ARTICLE 14: RESOLUTION OF DISPUTES
14.1 DISPUTE RESOLUTION. Any and all controversies or disputes, of whatever
nature between or among the Sellers and Purchaser, including (i) the meaning of
words or provisions under this Agreement, relating to whether or not there has
been a breach, default, or violation; (ii) to obtain an interpretation of words
or provisions; or (iii) disputes or controversies relating to the subject matter
of this Agreement, the Purchaser or the Company shall be submitted to dispute
resolution as follows:
a. The Sellers and the Purchaser shall attempt in good faith to
resolve any dispute promptly by negotiations between them.
Either Sellers or the Purchaser may give any other party
written notice of the dispute and request that good faith
negotiations begin and continue for a period of the next
twenty (20) days. If the matter is not resolved within such
twenty (20) days, or if the parties fail to meet within such
twenty (20) days, either Sellers or the Purchaser may initiate
mediation of the controversy or claim or request arbitration
as provided herein.
b. If a party intends to be accompanied at a meeting by an
attorney, the other party involved in the negotiations shall
be given at least three (3) working days notice of such
intention, and also may accompanied by an attorney (or by
attorneys, as the case may be). All negotiations pursuant to
this Section 14 are confidential and shall be treated as
compromise and settlement negotiations for purposes of the
rules of evidence.
c. If the dispute is not been resolved by negotiation as provided
above, the parties shall endeavor to settle the dispute by
mediation under the then current model for alternative dispute
resolution process, pursuant to Rule 114 of the Minnesota
General Rules of Practice. The neutral third party will be
selected from the roster of qualified neutrals maintained by
the Minnesota State Court Administrator. If the parties
encounter difficulty in agreeing on a neutral, then the
accountant regularly employed by the Purchaser shall select
such neutral from such roster. Efforts to reach a settlement
will continue until the conclusion of the mediation
proceeding, which is deemed to occur when (i) a written
settlement is reached; (ii) the mediator concludes and informs
the parties in writing that further efforts will not be
useful; or (iii) the parties agree in writing that an impasse
has been reached. Neither party may withdraw before the
conclusion of this process.
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All negotiations and disclosures pursuant to this Section
14.1.3 shall be confidential and shall be treated as
compromise settlement negotiations for purposes of the Rules
of Evidence.
d. If such disputes have not been resolved by non-binding means,
as provided herein above within ninety (90) days after the
first notice of the dispute has been served requesting
negotiation, such disputes shall finally be settled by
arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association by a sole
arbitrator and judgment upon any award rendered by the
arbitrator shall be conclusive, final, and binding, and may be
entered in any court of appropriate jurisdiction. The
arbitrator shall be selected from the neutral roster
maintained by the Supreme Court Administrator of the State of
Minnesota, from the panel of the American Arbitration
Association, or may be selected by mutual agreement of the
parties. If the Shareholders cannot mutually agree on an
arbitrator, the arbitrator shall be selected the accountant
regularly employed by the Purchaser, which decision by the
accountant shall be final and conclusive.
e. With respect to the arbitration itself, the following shall
apply: (i) judgment upon the award rendered by the arbitrator
may be entered by any court having jurisdiction thereof, and
shall be conclusive, final and binding upon the Sellers and
the Purchaser; (ii) the law of the State of Minnesota,
exclusive of its conflicts of law rules, shall govern as to
all substantive matters, and as to the merits of the dispute;
(iii) the arbitrator shall provide the Sellers and the
Purchaser with a written report specifying the factual and
legal basis for any award; (iv) the standard of review of any
award shall be limited to whether the arbitrator has a
conflict of interest not revealed, fraud, or a decision beyond
the scope of authority granted to the arbitrator; (v) the
arbitrator is not empowered to award damages in excess of
compensatory, actual, incidental and consequential damages
unless authorized to so do by applicable statutes, and
equitable relief as provided or contemplated in this
Agreement; (vi) all arbitration proceedings shall be in
Minneapolis, Minnesota; (vii) either Sellers or Purchaser
shall have the right to seek from any court of appropriate
jurisdiction equitable or provisional remedies (such as
temporary restraining orders, temporary injunctions, and the
like) before or during any arbitration, but once obtained
jurisdiction shall be returned to the arbitration for any
permanent equitable relief, and (viii) any award of the
arbitrator may be entered in any court of appropriate
jurisdiction pursuant to Minnesota Statutes Section 572.08 et.
seq., which statutes, relating to arbitration, are
incorporated herein by reference.
f. Except as set forth in Section 9.4.g, the arbitrator shall
have the discretion to award attorneys' fees and costs in
favor of any party if, in the opinion of the arbitrator, the
dispute arose because one of the parties was not acting in
good faith, or was in material breach or default of any
covenants, representations, terms and/or conditions of this
Agreement. If no such finding by the arbitrator is made, each
of the parties to the arbitration shall bear the cost of their
respective attorneys and their own expenses, but share equally
the cost of said arbitration proceeding and the cost of the
arbitrator.
g. All applicable Statutes of Limitations and defenses based upon
the passage of time shall be tolled while the procedure
specified in this Article 14 is pending. The parties will take
such action, if any, as required to effectuate such tolling.
Each party is required to continue to perform his/their/its
obligations under this Agreement pending final resolution of
any dispute arising out of, or relating to this Article 14,
unless such performance has been enjoined by a court (or
arbitration) of appropriate jurisdiction. All deadlines
specified in this Article 14 may be extended by mutual
agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by duly authorized representations as of the day, month and year first
above written.
PURCHASER:
CyberStar Computer Corporation
By /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Xxxxxxx Xxxxxx
Its Chairman of the Board
SELLERS:
/s/ Xxxxxxxx X. Xxxxx
---------------------------------------------
Xxxxxxxx X. Xxxxx
/s/ Xxxxxxx Xxxxx
---------------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxx Xxxxx
---------------------------------------------
Xxxx Xxxxx
/s/ Xxxx Xxxxxxxx
---------------------------------------------
Xxxx Xxxxxxxx
FOR VALUE RECEIVED, the undersigned International Trade Center, Inc.,
this 1st day of April, 2000, hereby agrees to be bound by each and every term,
condition, warranty, representation, and obligation of Sellers in the above
Agreement.
International Trade Center, Inc.
By /s/ Xxxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxxx X. Xxxxx
-------------------------------------------
Its President
----------------------------------------
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LIST OF SCHEDULES
The following schedules are omitted in accordance with item 601(b)(2) of
Regulation S-K as not material to an investment decision. The Company will
supply any omitted schedule to the Commission upon request.
Schedule 1.2 - Asset List
Schedule 1.2(b) - Accounts Payable
Schedule 3.1 - Contract Restrictions
Schedule 3.5 - Litigation
Schedule 3.7 - Employee Benefits
Schedule 3.9 - Developments
Schedule 3.10 - Intellectual Property
Schedule 3.11 - Insurance Carriers. Licenses and Applicable Laws and
Insurance Policies
Schedule 3.15 - Insurance
Schedule 3.16 - Owned Software; licensed Software and License Agreements
Schedule 3.17 - Loans
Schedule 9 2 - Work in Progress
Schedule "Z"
