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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 21, 2000
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Date of Report (date of earliest event reported)
Citadel Environmental Group, Inc.
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Exact Name of Registrant as Specified in its Charter
Colorado 0-16423 84-0907969
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State or Other Jurisdiction Commission File IRS Employer Identifi-
of Incorporation Number cation Number
900 West Castleton Road, Suite 100, Castle Rock, Colorado 80104
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Address of Principal Executive Office, Including Zip Code
(303) 297-9656
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Registrant's Telephone Number, Including Area Code
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 21, 2000, Citadel Environmental Group, Inc. (the "Company")
completed the acquisition of 100% of the outstanding common stock of CoComp,
Inc., a Colorado corporation ("CoComp") in exchange for $1,079,000 in cash,
$951,000 in promissory notes due over the next two years and $1,000,000 worth
of the Company's common stock.
The stock issuances were made pursuant to four Purchase Agreements
("Agreements") between the Company and the three shareholders and one key
employee of CoComp. The terms of the Agreements were the result of
negotiations between the managements of the Company and CoComp. However, the
Board of Directors did not obtain any independent "fairness" opinion or other
evaluation regarding the terms of the Agreements, due to the cost of obtaining
such opinion or valuation.
The foregoing summary of the Agreements is qualified by reference to the
complete text of the Agreements, which are filed as exhibits hereto, and are
incorporated herein by this reference.
In the year-ended December 31, 1999, CoComp generated gross revenues of
approximately $9,000,000 on sales of data storage systems and services to
commercial clients in the western United States. Utilizing various hardware
and software products and manufacturers, CoComp designs and implements data
storage solutions and provides long-term data storage administration and
management servicing. CoComp has offices in Phoenix, Arizona and Dallas,
Texas, with Colorado locations in Boulder, Fort Collins and Colorado Springs.
CoComp's commercial business will compliment the government business of the
Company's other subsidiary, Storage Area Networks. CoComp will begin
immediately doing business under the name of Storage Area Networks ("SAN").
CoComp principals Kent Shields and Steve Davis will join the management
team as Vice Presidents of SAN. The acquisition of CoComp and its established
data storage customer accounts is strategically important to SAN because it
increases its technical service capabilities while bringing important new
commercial customers from a diversified geographic area. With the addition of
CoComp, SAN has a balanced business framework to exploit both government and
commercial data storage opportunities on a national level for a variety of
expanding market segments, including "Dot.com" companies, Internet Service
Providers and the federal government.
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS.
The Company intends to hold a special shareholders meeting in early March
2000, at which time shareholders will be asked to approve a change of the
Company's name to SAN Holdings, Inc.; a one-for-thirty-six (1 for 36) reverse
stock split; and a Stock Option Plan.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The financial
statements required by Rule 3-05(b) of Regulation S-X for CoComp are not yet
available, and will be filed by amendment on or before April 5, 2000.
(b) PRO FORMA FINANCIAL INFORMATION. The pro forma financial
information required by Article 11 of Regulation S-X is not yet available, and
will be filed by amendment on or before April 5, 2000.
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(c) EXHIBITS.
Exhibit 10.1 Purchase Agreement by and among the Company,
Storage Area Networks and Brent J. Duckworth
Exhibit 10.2 Purchase Agreement by and among the Company,
Storage Area Networks and Lawrence J. Chisesi
Exhibit 10.3 Purchase Agreement by and among the Company,
Storage Area Networks and Kent A. Shields
Exhibit 10.4 Agreement by and among the Company, Storage
Area Networks and Steve Davis
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CITADEL ENVIRONMENTAL GROUP, INC.
Dated: January 31, 2000 By:/s/ L. W. Buxton
L. W. Buxton, President
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made the 21st day of January 2000, by and
among Storage Area Networks, a Nevada corporation ("SAN"), Citadel
Environmental Group, Inc. ("Citadel"), and Brent J. Duckworth (referred to as
"Shareholder"), a shareholder of CoComp, Inc. ("CoComp").
WHEREAS, Citadel desires to acquire all of the issued and outstanding
shares of common stock of CoComp from all three of CoComp's shareholders; and
WHEREAS, SAN is a wholly-owned subsidiary of Citadel; and
WHEREAS, the Shareholder desires to participate in this transaction and
sell all of his Shares of common stock of CoComp; and
WHEREAS, Citadel, SAN and the Shareholder desire to make certain
representations, warranties, covenants and agreements in connection with the
Purchase.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
THE PURCHASE
1.1 Sale and Delivery of Common Stock. Subject to all the terms and
conditions of this Agreement, Shareholder shall transfer, convey and deliver
to Citadel at the Closing (as defined in paragraph 1.2 hereof) good, valuable
and marketable title to the Shares, free and clear of all liens, claims and
encumbrances in exchange for the consideration described in this Article 1.
The consideration described in this Article 1 hereof shall be delivered to the
Shareholder in accordance with the provisions of Section 1.4 below.
1.2 Effective Date and Closing. The closing of the transaction
contemplated herein (the "Closing") shall occur at a mutually agreeable time
and place, on the earliest practicable date following the day on which all of
the obligations and conditions precedent contained herein are complied with.
The Closing date shall be January 21, 2000, or as soon thereafter as
reasonably practicable (the "Closing Date"). The effective date for
determining the amount of revenues and expenses in Section 1.4 b. shall be
January 1, 2000.
1.3 Purchase Price. Subject to the terms of Section 1.4 and subject to
all of the other terms and conditions set forth in the Agreement and in
reliance on the representations, warranties and covenants hereinafter set
forth, Citadel shall pay to the Shareholder a combination of cash and a
promissory note having a total value of $865,000 (hereinafter referred to as
the "Purchase Price").
1.4 Payment of Purchase Price. The total Purchase Price shall be paid
as follows:
a. $318,000 in cash shall be paid to the Shareholder at Closing.
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b. At the Closing, Shareholder will provide to SAN five reports
prepared as of December 31, 1999: (1) accounts receivable aging; (2) accounts
payable; (3) purchases clearing(inventory received and shipped but no invoice
received); (4) inventory; and (5) balance sheet. When both accounts payable
and purchases clearing as set forth on the reports are completely paid from
monies collected on the accounts receivable and inventory used on sales
orders, Citadel will begin making monthly payments to the three CoComp
shareholders on a monthly basis until each of the three shareholders has
received $155,000. It is estimated that this process will take 180 days.
This process will be monitored by Buck Buxton and Brent Duckworth on a weekly
basis.
c. $42,000 in cash will be paid to the Shareholder by June 30,
2000.
d. $250,000 in cash will be paid to the Shareholder one year from
Closing.
e. $100,000 in cash will be paid to the Shareholder two years
from Closing.
f. A promissory note will be issued at the Closing representing
the future payment obligations set forth in 1.4 c, d and e, and such note will
be on the form attached hereto as Exhibit A.
1.5 Deposit of Severance Packages. Concurrently with the Closing,
Citadel agrees to set aside a total of $30,000 which will be paid as a
severance or relocation expense, as the case may be, to Laura Beshears, John
Altizar, and Neda Amidon.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SAN
Except as disclosed in Schedule 2 which is attached hereto and
incorporated herein by reference, SAN hereby represents and warrants to CoComp
and Shareholder:
2.1 Organization. SAN is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification. SAN has entered into a binding agreement with Citadel
Environmental Group, Inc. pursuant to which SAN will become a wholly owned
subsidiary of Citadel in a transaction scheduled to close on or about January
7, 2000. A copy of the Agreement is attached as Exhibit 2.1.
2.2 Capital. The authorized capital stock of SAN consists of 20,000,000
shares of Common Stock, $.005 par value, of which 3,000,000 are currently
issued and outstanding and 5,000,000 shares of Preferred Stock, $.0001 par
value, of which no shares are issued and outstanding. All of the issued and
outstanding shares of SAN are duly authorized, validly issued, fully paid, and
nonassessable. There are no outstanding subscriptions, options, rights,
warrants, debentures, instruments, convertible securities, or other agreements
or commitments obligating SAN to issue or to transfer from treasury any
additional shares of its capital stock of any class.
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2.3 Subsidiaries. SAN does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation) except as disclosed in Schedule 2.
2.4 Directors and Officers. Schedule 2 contains the names and titles of
all directors and officers of SAN as of the date of this Agreement.
2.5 Financial Statements. SAN has delivered to CoComp unaudited balance
sheets and statements of operations for the year ended November 30, 1999 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated. The Financial Statements accurately set out and describe
the financial condition of SAN as of November 30, 1999.
2.6 Absence of Changes. Since November 30, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of SAN's knowledge, SAN has conducted its
business only in the ordinary course and has not experienced or suffered any
material adverse change in the condition (financial or otherwise), results of
operations, properties, business or prospects of SAN or waived or surrendered
any claim or right of material value.
2.7 Absence of Undisclosed Liabilities. Neither SAN nor any of its
properties or assets are subject to any material liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that are not reflected in the financial statements presented
to CoComp or have otherwise been disclosed to CoComp.
2.8 Tax Returns. Within the times and in the manner prescribed by law,
SAN has filed all federal, state and local tax returns required by law, or has
filed extensions which have not yet expired, and has paid all taxes,
assessments and penalties due and payable.
2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, CoComp
and/or its attorneys shall have the opportunity to meet with accountants and
attorneys to discuss the financial condition of SAN. SAN shall make available
to CoComp and/or its attorneys all books and records of SAN.
2.10 Trade Names and Rights. SAN does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
2.11 Compliance with Laws. To the best of SAN's knowledge, SAN has
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business, except for matters which would
not have a material affect on SAN or its properties.
2.12 Litigation. SAN is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation
pending or, to the best knowledge of SAN, threatened against or affecting SAN
or its business, assets or financial condition, except for matters which would
not have a material affect on SAN or its properties. SAN is not in default
with respect to any order, writ, injunction or decree of any federal, state,
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local or foreign court, department, agency or instrumentality applicable to
it. Except as set forth on Schedule 2, SAN is not engaged in any lawsuit to
recover any material amount of monies due to it.
2.13 Authority. SAN has full corporate power and authority to enter
into this Agreement. The board of directors of SAN has taken all action
required to authorize the execution and delivery of this Agreement by or on
behalf of SAN and the performance of the obligations of SAN under this
Agreement. No other corporate proceedings on the part of SAN are necessary to
authorize the execution and delivery of this Agreement by SAN in the
performance of its obligations under this Agreement. This Agreement is, when
executed and delivered by SAN, and will be a valid and binding agreement of
SAN, enforceable against SAN in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights
generally.
2.14 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by SAN of its obligations under
this Agreement, nor the consummation of the transactions contemplated under
this Agreement will to the best of SAN's knowledge: (a) materially violate
any provision of SAN's articles of incorporation or bylaws; (b) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a material default under, or cause or permit
the termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of SAN, or require the payment of any prepayment or
other penalties; (c) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which SAN is bound; (d) result
in the creation or imposition of any security interest, lien, or other
encumbrance upon any material property or assets of SAN; or (e) violate any
material statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority to which SAN is bound or subject.
2.15 Full Disclosure. None of the representations and warranties made
by SAN herein, or in any schedule, exhibit or certificate furnished or to be
furnished in connection with this Agreement by SAN, or on its behalf, contains
or will contain any untrue statement of material fact.
2.16 Assets. SAN has good and marketable title to all of its tangible
properties and such tangible properties are not subject to any material liens
or encumbrances.
2.17 Material Contracts and Obligations. Attached hereto on Schedule 2
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which SAN is a party or by which it is bound that are material
to the conduct and operations of its business and properties, which provide
for payments to or by SAN in excess of $25,000; or which involve transactions
or proposed transactions between SAN and its officers, directors, affiliates
or any affiliate thereof. Copies of such agreements and contracts and
documentation evidencing such liabilities and other obligations have been made
available for inspection by Shareholder and its counsel. All of such
agreements and contracts are valid, binding and in full force and effect in
all material respects, assuming due execution by the other parties to such
agreements and contracts.
2.18 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by SAN in connection with: (a)
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the execution and delivery by SAN of this Agreement; (b) the performance by
SAN of its obligations under this Agreement; or (c) the consummation by SAN of
the transactions contemplated under this Agreement.
2.19 Investigation of Financial Condition. SAN has had the opportunity
to meet with CoComp and Shareholder's accountants and attorneys to discuss the
financial condition of CoComp. CoComp has made available to SAN all books and
records of CoComp. SAN has made such investigation of the financial condition
of CoComp as it deems necessary. CoComp and the Shareholder have provided all
documents requested by SAN and answered all questions and inquiries made by
SAN. SAN has relied on its own legal, tax and financial advisors. SAN is not
relying on any oral statements made by any person.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CITADEL
Except as disclosed in Schedule 3 which is attached hereto and
incorporated herein by reference, Citadel represents and warrants to CoComp
and Shareholder that:
3.1 Organization. Citadel is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on business, and it is not now
conducting any business, except to the extent to which the effecting of the
transaction contemplated by this Agreement constitutes doing business.
3.2 Capitalization. The authorized capital stock of Citadel consists of
25,000,000 shares of no par value Common Stock of which 19,450,909 shares of
Common Stock are currently issued and outstanding, and 1,199,000 shares of
$.01 par value preferred stock of which 917,500 shares are issued and
outstanding. Citadel has also authorized 2,200,000 shares of Series AA
Convertible Preferred Stock to be issued to investors in a private offering
and 3,800,000 shares of Series BB Convertible Preferred Stock which were
issued to acquire SAN. All of the issued and outstanding shares of Common
Stock and Preferred Stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating Citadel to issue or to transfer from
treasury any additional shares of its capital stock of any class.
3.3 Subsidiaries. Except as set forth in Schedule 3, Citadel does not
presently have any subsidiaries or own any interest in any other enterprise
(whether or not such enterprise is a corporation).
3.4 Directors and Officers. Schedule 3 contains the names and titles of
all directors and officers of Citadel as of the date of this Agreement.
3.5 Financial Statements. Citadel has delivered to CoComp and
Shareholders its audited balance sheet and statements of operations and cash
flows as of and for the period ended December 31, 1998, and its unaudited
balance sheet and statements of operations and cash flows as of and for the
period ended September 30, 1999 (collectively the "Financial Statements").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein.
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3.6 Authority. Citadel has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The Board of Directors of Citadel has taken all action required to
authorize the execution and delivery of this Agreement by or on behalf of
Citadel, the performance of the obligations of Citadel under this Agreement
and the consummation by Citadel of the transactions contemplated under this
Agreement. No other corporate proceedings on the part of Citadel are
necessary to authorize the execution and delivery of this Agreement by Citadel
in the performance of its obligations under this Agreement. This Agreement
is, and when executed and delivered by Citadel, will be a valid and binding
agreement of Citadel, enforceable against Citadel in accordance with its
terms, except as such enforceability may be limited by general principles of
equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors rights generally.
3.7 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by Citadel of its obligations
under this Agreement, nor the consummation of the transactions contemplated
under this Agreement will violate any provision of Citadel's articles of
incorporation or bylaws, or to the best of Citadel's knowledge: (a) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a default under, or cause or permit the
termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of Citadel, or require the payment of any prepayment
or other penalties; (b) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which Citadel is bound; (c)
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Citadel; or (d) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Citadel is bound or subject.
3.8 Full Disclosure. None of the representations and warranties made by
Citadel herein, or in any exhibit, certificate or memorandum furnished or to
be furnished by Citadel, or on its behalf, contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
3.9 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Citadel in connection with:
(a) the execution and delivery by Citadel of its obligations under this
Agreement; (b) the performance by Citadel of its obligations under this
Agreement; or (c) the consummation by Citadel of the transactions contemplated
by this Agreement.
3.10 Investigation of Financial Condition. Citadel has had the
opportunity to meet with CoComp and Shareholder's accountants and attorneys to
discuss the financial condition of CoComp. CoComp has made available to
Citadel all books and records of CoComp. Citadel has made such investigation
of the financial condition of CoComp and title to the shares of Shareholder
acquired hereunder as it deems necessary. CoComp and the Shareholder have
provided all documents requested by Citadel and answered all questions and
inquiries made by Citadel. Citadel has relied on its own legal, tax and
financial advisors. Citadel is not relying on any oral statements made by any
person.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
As an inducement to SAN and Citadel to enter into this Agreement,
Shareholder represents and warrants to SAN that to the best of his actual
knowledge without further investigation:
4.1 Organization. CoComp is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on its business as now owned
and operated by it in Colorado; however, CoComp is not qualified to do
business in any other states.
4.2 Capitalization. The authorized capital stock of CoComp consists of
50,000 shares of $1.00 par value Common Stock of which 3,500 shares of Common
Stock are currently issued and outstanding. All of the issued and outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating CoComp to issue or to transfer from treasury any additional shares
of its capital stock of any class.
4.3 Subsidiaries. CoComp does not presently have any subsidiaries or
own any interest in any other enterprise (whether or not such enterprise is a
corporation).
4.4 Directors and Officers. Schedule 4 contains the names and titles of
all directors and officers of CoComp as of the date of this Agreement.
4.5 Financial Statements. CoComp has delivered to SAN its unaudited
balance sheet and statements of operations as of and for the period ended
December 31, 1999 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with accounting principles applied on a consistent
basis throughout the periods indicated. The Financial Statements accurately
set out and describe the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein.
4.6 Absence of Changes. Since December 31, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of Shareholder's knowledge, CoComp has not
experienced or suffered any material adverse change in its condition
(financial or otherwise), results of operations, properties, business or
prospects or waived or surrendered any claim or right of material value.
4.7 Absence of Undisclosed Liabilities. Neither CoComp nor any of its
properties or assets are subject to any liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise and whether due or
to become due, that are not reflected in the financial statements presented to
SAN or shown in Schedule 4 attached hereto.
4.8 Tax Returns. Within the times and in the manner prescribed by law,
CoComp has filed all federal, state and local tax returns required by law and
has paid all taxes, assessments and penalties due and payable.
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4.9 Trade Names and Rights. CoComp does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
4.10 Compliance with Laws. CoComp has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, any applicable building, zoning,
or other law, ordinance, or regulation) affecting its properties or the
operation of its business or with which it is otherwise required to comply.
4.11 Litigation. CoComp is not a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or threatened against or affecting CoComp or its
business, assets, or financial condition. CoComp is not in default with
respect to any order, writ, injunction, or decree of any federal, state,
local, or foreign court, department agency, or instrumentality. CoComp is not
engaged in any legal action to recover moneys due to it.
4.12 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated under this Agreement will: (a) violate any provision of CoComp's
articles of incorporation or bylaws; (b) with or without the giving of notice
or the passage of time, or both, violate, or be in conflict with, or
constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any debt, contract, agreement or obligation
of CoComp, or require the payment of any prepayment or other penalties; (c)
require notice to, or the consent of, any party to any agreement or
commitment, lease or license, to which CoComp is bound; (d) result in the
creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of CoComp; or (e) violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority to which CoComp is bound or subject.
4.13 Full Disclosure. None of the representations and warranties made
by Shareholder herein, or in any exhibit, certificate or memorandum furnished
or to be furnished by Shareholder contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
4.14 Assets. CoComp has good and marketable title to all of its
property and such property is not subject to any liens or encumbrances other
than as disclosed in Schedule 4. Schedule 4 lists all property and equipment
of CoComp and the location of such property with a value of $1,000 or more.
4.15 Material Contracts and Obligations. Attached hereto on Schedule 4
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which CoComp is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by CoComp in excess of $25,000; or which involve
transactions or proposed transactions between CoComp and its officers,
directors, affiliates or any affiliate thereof. Copies of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by SAN and its counsel. All of such
agreements and contracts are valid, binding and in full force and effect in
all material respects, assuming due execution by the other parties to such
agreements and contracts.
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4.16 Real Property. CoComp does not own, use or claim any interest in
any real property, including without limitation any license, leasehold or any
similar interest in real property, except for the offices which are set forth
on Schedule 4.
4.17 Share Ownership. Shareholder holds 1,116 of the outstanding common
shares of CoComp Common Stock. Such shares are owned and the Shareholder's
ownership is of record and beneficially owned by Shareholder, and such shares
are not subject to any claim, lien, encumbrance or pledge. Shareholder has
authority to sell such shares pursuant to this Agreement.
ARTICLE 5
COVENANTS
5.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsels, accountants, auditors, and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments, and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request. If the transaction contemplated hereby is not
completed, all documents received by each party and/or its attorneys and
accountants, auditors or other authorized representatives shall be returned to
the other party who provided same upon request. The parties hereto, their
directors, employees, agents and representatives shall not disclose any of the
information described above unless such information is already disclosed to
the public, without the prior written consent of the party to which the
confidential information pertains. Each party shall take such steps as are
necessary to prevent disclosure of such information to unauthorized third
parties.
5.2 Conduct of Business. Prior to the Closing, SAN and CoComp shall
each conduct its business in the normal course, and shall not sell, pledge, or
assign any assets, without the prior written approval of the other party,
except in the regular course of business or as contemplated in previously
disclosed contractual obligations. Neither SAN nor CoComp shall amend its
Articles of Incorporation or Bylaws, declare dividends, redeem or sell stock
or other securities, incur additional or newly-funded liabilities, acquire or
dispose of fixed assets, change employment terms, enter into any material or
long-term contract, guarantee obligations of any third party, settle or
discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction other than in the regular course of business except as otherwise
contemplated herein. Prior to Closing, the Compaq Master Alliance Agreement
shall be assigned to Mr. Chisesi and Mr. Duckworth and CoComp shall have no
continuing rights or obligations thereunder.
5.3 Tax Returns for 1999 and Short Period. The former shareholders of
CoComp shall be responsible for preparing and filing federal and applicable
state S-Corporation income tax returns for CoComp for the calendar year ended
December 31, 1999, and for the short period ending on the closing date (the
"S-Corporation Returns"). SAN shall cooperate in causing CoComp to execute
such returns and returning the executed forms to the Shareholders for filing.
SAN shall not amend any S-Corporation Return without the advance written
consent of the Shareholder.
9
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5.4 Lease Expenses of Fort Collins office. SAN agrees to pay for 80% of
the lease expenses of CoComp's Fort Collins facility for the 90 day period
following the Closing. At the conclusion of such 90 day period. CoComp shall
assign the lease to Shareholder and Duckworth and vacate the premises. All of
the lease expenses for this facility will become the sole obligation of
Messrs. Duckworth and Chisesi and their new entity.
5.5 Covenant not to Compete. Mr. Duckworth acknowledges and agrees
that he possesses information unique and proprietary to CoComp and SAN, and
that SAN would not be willing to enter into this Agreement if Mr. Duckworth,
after the Closing Date, could compete with CoComp and SAN because such
competition by Mr. Duckworth would severely injure CoComp and SAN no matter
where in the geographic areas listed below such competition occurred.
Accordingly and in exchange for the Purchase Price, Mr. Duckworth agrees that
for a period of three (3) years from the Closing Date, he shall not directly
or indirectly, whether as an owner, stockholder, partner, employee,
independent contractor, or otherwise, compete with CoComp or SAN or any
affiliate of CoComp and SAN anywhere within the states of Texas, New Mexico,
Arizona and Colorado in the business of selling disk drives, disk arrays,
disk raid systems, tape drives, tape libraries and accompanying backup,
disaster recovery and archiving software and all fiber switches and hubs. The
period, the geographical area and the scope of the restrictions on Mr.
Duckworth's activities are divisible so that if any provision of the
restriction is invalid, that provision shall automatically be modified to the
extent necessary to make it valid. Mr. Duckworth also agrees that he will not
solicit for employment any of the CoComp employees who are transitioned to SAN
for a period of three years from the Closing Date. The parties hereto agree
and acknowledge that many of the rights conveyed by this Section 4.5 are of a
unique and special nature and that CoComp and SAN will not have an adequate
remedy at law in the event of failure of Mr. Duckworth to abide by its terms
and conditions, nor will money damages adequately compensate for such injury.
It, therefore, is agreed between the parties that in the event of breach by
Mr. Duckworth of his agreement contained in this Section 4.5 CoComp and SAN
shall have the rights, among other rights, to damages sustained thereby and
to an injunction to restrain Mr. Duckworth from the prohibited acts. Nothing
herein contained shall in any way limit or exclude any and all other rights
granted by law or equity to CoComp and SAN.
In the event of default by SAN in the payment of any amount due pursuant
to Article 1 of this Agreement and within any applicable notice to cure
period, then this covenant not to compete shall become null and void and shall
be of no further force or effect.
ARTICLE 6
CONDITIONS PRECEDENT TO
SHAREHOLDER'S PERFORMANCE
6.1 Conditions. The obligations of the Shareholder hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 6. The Shareholder may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by the Shareholder of
any other condition of or any of the Shareholder's other rights or remedies,
at law or in equity, if SAN shall be in default of any of their
representations, warranties, or covenants under this Agreement.
10
<PAGE>
6.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by SAN in this Agreement or in
any written statement that shall be delivered to CoComp and/or Shareholder by
SAN under this Agreement shall be true and accurate on and as of the Closing
Date as though made at that time.
6.3 Performance. SAN shall have performed, satisfied, and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed or complied with by it, on or before the Closing Date.
6.4 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against SAN on or before the Closing Date.
ARTICLE 7
CONDITIONS PRECEDENT TO CITADEL'S AND SAN'S PERFORMANCE
7.1 Conditions. Citadel's and SAN's obligations hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 7. Citadel and SAN may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by Citadel or SAN of
any other condition of or any of Citadel's or SAN's rights or remedies, at law
or in equity, if the Shareholder shall be in default of any of his
representations, warranties, or covenants under this Agreement.
7.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by Shareholder in this Agreement
or in any written statement that shall be delivered to SAN by Shareholder
under this Agreement shall be substantially true and accurate on and as of the
Closing Date as though made at that time.
7.3 Performance. Shareholder, Lawrence J. Chisesi and Kent Shields
shall have performed, satisfied, and complied with all covenants, agreements,
and conditions required by their respective Agreements to be performed or
complied with by them, on or before the Closing Date.
7.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against any party hereto on or before the Closing
Date.
ARTICLE 8
CLOSING
8.1 Closing. The Closing of this transaction shall be held at the
offices of Krys Boyle Freedman Scott & Sawyer, P.C., 600 Seventeenth Street,
Suite 2700 South Tower, Denver, Colorado 80202, or such other place as shall
be mutually agreed upon, on such date as shall be mutually agreed upon by the
parties, but in no event shall the Closing be later than January 31, 2000. At
the Closing:
8.2 Shareholder shall deliver the certificates representing the share of
CoComp being sold pursuant to this Agreement, and such certificates will be
duly endorsed.
11
<PAGE>
8.3 Citadel shall deliver a certified or cashier's check payable to
Shareholder for $318,000.
8.4 Citadel and SAN shall deliver a Promissory Note covering the future
cash payments owed by SAN to Shareholder pursuant to Sections 1.4 c, d and e
above.
8.5 Citadel and SAN shall deliver a signed Consent or Minutes of the
Directors of Citadel and SAN approving this Agreement and each matter to be
approved by the Directors of Citadel and SAN under this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
9.2 No Oral Change. This Agreement and any provision hereof, may not be
waived, changed, modified, or discharged orally, but it can be changed by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
9.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future
of any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (iii) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
9.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
9.5 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings.
9.6 Choice of Law. This Agreement and its application shall be governed
by the laws of the State of Colorado, except to the extent its conflict of
laws provisions would apply the laws of another jurisdiction.
9.7 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
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Shareholder:
Brent J. Duckworth
______________
______________
with a copy to:
James A. Martell
Wyatt, Martell, Weaver & Rogers LLC
222 West Magnolia Street
Fort Collins, Colorado 80521-2899
Phone: (970) 484-1112
Fax: (970) 484-1170
SAN and Citadel:
Storage Area Networks
900 West Castleton Road
Castle Rock, Colorado 80104
with a copy to:
Jon D. Sawyer
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street, Suite 2700
Denver, Colorado 80202
Phone: (303) 893-2300
Fax: (303) 893-2882
9.8 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.9 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
9.10 Brokers. The parties hereto represent and agree that no broker has
brought about the aforementioned transaction. Each of the parties hereto
shall indemnify and hold the other harmless against any and all claims,
losses, liabilities or expenses which may be asserted against it as a result
of its dealings, arrangements or agreements with any broker or person, except
as described in this paragraph.
9.11 Announcements. SAN and Shareholder will consult and cooperate with
each other as to the timing and content of any announcements of the
transactions contemplated hereby to the general public or to employees,
customers or suppliers.
9.12 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for herein above, including any
items referenced therein or required to be attached thereto. Any material
changes to the Exhibits shall be immediately disclosed to the other party.
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<PAGE>
AGREED TO AND ACCEPTED as of the date first above written.
STORAGE AREA NETWORKS SHAREHOLDER:
By:/s/ Buck Buxton /s/ Brent J. Duckworth
Buck Buxton, President Brent J. Duckworth
CITADEL ENVIRONMENTAL GROUP,
INC.
By:/s/ Buck Buxton
Buck Buxton, President
14
<PAGE>
SCHEDULE 2
STORAGE AREA NETWORKS
("SAN")
2.4 The Officers and Directors of SAN are as follows:
Name Position
L. W. Buxton President, Treasurer and Director
Warren Smith Vice President, Secretary, Treasurer and
Director
2.1 Litigation. SAN is involved in a lawsuit filed by SAN against 3SI, Inc.,
and the parties have recently reached a tentative settlement during mediation.
A copy of the proposed settlement terms has been provided to Shareholder.
<PAGE>
SCHEDULE 3
CITADEL ENVIRONMENTAL GROUP, INC.
("Citadel")
3.3 Subsidiaries.
a) Citadel owns 621,025 shares of Alliance Medical Corporation, which
represents approximately 3% of the Alliance shares outstanding. These shares
were spun-off to the shareholders of Citadel as of December 31, 1999. The
shares will be placed in an escrow account to be distributed once Alliance
Medical Corporation is an SEC reporting company. If this does not occur
within two years, the shares will revert back to being an asset of Citadel,
unless extended by the Board of Directors.
b) Citadel owns 100% of SAN.
3.4 Directors and Officers of Citadel:
Name Position
Louis F. Coppage Chairman of the Board
L. W. Buxton President and Director
Warren Smith Vice President and Director
Cory J. Coppage Secretary, Treasurer and Director
3.19 Material Contracts of Citadel:
None
<PAGE>
PROMISSORY NOTE
$392,000 January 21, 2000
Storage Area Networks, a Nevada corporation ("Obligor"), for value
received, hereby promises to pay to the order of Brent J. Duckworth
("Obligee"), in lawful money of the United States at a place to be designated
in writing by Obligee, the principal sum of Three Hundred Ninety-Two Thousand
Dollars ($392,000.00), plus interest at the rate of 12% per annum.
The $392,000 shall be due and paid as follows:
$42,000 shall be paid on or before June 30, 2000.
$250,000 shall be paid on January 21, 2001.
$100,000 shall be paid on January 21, 2002.
All accrued and unpaid interest will be due and payable every three
months with the first payment due April 21, 2000.
This Note may be prepaid, in whole or in part, at any time without
permission or penalty.
If payment on this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State of Colorado, such payment shall be made on
the next succeeding business day.
Immediately upon the occurrence of an "Event of Default" (as defined
below), Obligee may, at its option, declare immediately due and payable the
entire unpaid principal amount of this Note, together with all interest
thereon, plus any other amounts payable at the time of such declaration
pursuant to this Note. An Event of Default shall be defined as each of the
following: (i) failure of Obligor to make any payment of principal within ten
(10) days after the due date; (ii) Obligor shall admit in writing its
inability to pay its debts as they become due, shall make a general assignment
for the benefit of creditors or shall file any petition for action for relief
under any bankruptcy, reorganization, insolvency or moratorium law, or any
other law or laws for the relief of, or relating to, debtors; or (iii) an
involuntary petition shall be filed against Obligor under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws of for
the relief of, or relating to, debtors unless such petition shall be dismissed
or vacated within thirty (30) days of the date hereof. Upon an Event of
Default, unpaid principal or interest shall bear interest from the date of the
Event of Default until paid in full at the rate of 18% per annum.
If Obligee should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Obligor, Obligor shall be liable to pay to holder immediately and without
demand all reasonable costs and expenses of collection incurred by Obligee,
including, without limitation, reasonable attorney fees, whether or not suit
or other action or proceeding be instituted and specifically including but not
limited to collection efforts that may be made through a bankruptcy court.
EXHIBIT A
<PAGE>
This Note shall be construed and governed by the laws of the State of
Colorado without regard to otherwise applicable principles of conflicts of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. No modification hereof shall be binding or
enforceable against Obligee unless approved in writing by Obligee.
Obligor hereby waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand. To the extent permitted by law, Obligor hereby
waives and releases all errors, defects and imperfections in any proceedings
instituted by Obligee under the terms of this Note. The rights and privileges
of Obligee under this Note shall inure to the benefit of his heirs, personal
representatives and assigns. All representations, warranties and agreements
of Obligor made in connection with this Note shall bind Obligor's successors
and assigns. The rights and remedies of Obligee under this Note shall be in
addition to any other rights and remedies available to Obligee at law or in
equity, all of which may be exercised singly or concurrently. The parties
agree to the exclusive jurisdiction of the federal and state courts located in
Denver, Colorado in connection with any matter arising hereunder, including
the collection and enforcement hereof, except as the Obligee may otherwise
elect. If any provision in this Note is found by a Court of competent
jurisdiction to be invalid in any respect, such finding shall not effect or
release the absolute obligation to repay the principal sum owed hereunder on
or before the Maturity Date.
IN WITNESS WHEREOF, intending to be legally bound, Obligor has duly
executed this Promissory Note the day and year first above written by its duly
authorized officer.
CITADEL ENVIRONMENTAL STORAGE AREA NETWORKS
GROUP, INC.
By:/s/ Buck Buxton By:/s/ Buck Buxton
Name: Buck Buxton Name: Buck Buxton
Title: President Title: President
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made the 21st day of January 2000, by and
among Storage Area Networks, a Nevada corporation ("SAN"), Citadel
Environmental Group, Inc. ("Citadel"), and Lawrence J. Chisesi (referred to as
"Shareholder"), a shareholder of CoComp, Inc. ("CoComp").
WHEREAS, Citadel desires to acquire all of the issued and outstanding
shares of common stock of CoComp from all three of CoComp's shareholders; and
WHEREAS, SAN is a wholly-owned subsidiary of Citadel; and
WHEREAS, the Shareholder desires to participate in this transaction and
sell all of his Shares of common stock of CoComp; and
WHEREAS, Citadel, SAN and the Shareholder desire to make certain
representations, warranties, covenants and agreements in connection with the
Purchase.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
THE PURCHASE
1.1 Sale and Delivery of Common Stock. Subject to all the terms and
conditions of this Agreement, Shareholder shall transfer, convey and deliver
to Citadel at the Closing (as defined in paragraph 1.2 hereof) good, valuable
and marketable title to the Shares, free and clear of all liens, claims and
encumbrances in exchange for the consideration described in this Article 1.
The consideration described in this Article 1 hereof shall be delivered to the
Shareholder in accordance with the provisions of Section 1.4 below.
1.2 Effective Date and Closing. The closing of the transaction
contemplated herein (the "Closing") shall occur at a mutually agreeable time
and place, on the earliest practicable date following the day on which all of
the obligations and conditions precedent contained herein are complied with.
The Closing date shall be January 21, 2000, or as soon thereafter as
reasonably practicable (the "Closing Date"). The effective date for
determining the amount of revenues and expenses in Section 1.4 b. shall be
January 1, 2000.
1.3 Purchase Price. Subject to the terms of Section 1.4 and subject to
all of the other terms and conditions set forth in the Agreement and in
reliance on the representations, warranties and covenants hereinafter set
forth, Citadel shall pay to the Shareholder a combination of cash and a
promissory note having a total value of $865,000 (hereinafter referred to as
the "Purchase Price").
1.4 Payment of Purchase Price. The total Purchase Price shall be paid
as follows:
a. $318,000 in cash shall be paid to the Shareholder at Closing.
<PAGE>
b. At the Closing, Shareholder will provide to SAN five reports
prepared as of December 31, 1999: (1) accounts receivable aging; (2) accounts
payable; (3) purchases clearing(inventory received and shipped but no invoice
received); (4) inventory; and (5) balance sheet. When both accounts payable
and purchases clearing as set forth on the reports are completely paid from
monies collected on the accounts receivable and inventory used on sales
orders, Citadel will begin making monthly payments to the three CoComp
shareholders on a monthly basis until each of the three shareholders has
received $155,000. It is estimated that this process will take 180 days.
This process will be monitored by Buck Buxton and Brent Duckworth on a weekly
basis.
c. $42,000 in cash will be paid to the Shareholder by June 30,
2000.
d. $250,000 in cash will be paid to the Shareholder one year from
Closing.
e. $100,000 in cash will be paid to the Shareholder two years from
Closing.
f. A promissory note will be issued at the Closing representing the
future payment obligations set forth in 1.4 c, d and e, and such note will be
on the form attached hereto as Exhibit A.
1.5 Deposit of Severance Packages. Concurrently with the Closing,
Citadel agrees to set aside a total of $30,000 which will be paid as a
severance or relocation expense, as the case may be, to Laura Beshears, John
Altizar, and Neda Amidon.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SAN
Except as disclosed in Schedule 2 which is attached hereto and
incorporated herein by reference, SAN hereby represents and warrants to CoComp
and Shareholder:
2.1 Organization. SAN is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification. SAN has entered into a binding agreement with Citadel
Environmental Group, Inc. pursuant to which SAN will become a wholly owned
subsidiary of Citadel in a transaction scheduled to close on or about January
7, 2000. A copy of the Agreement is attached as Exhibit 2.1.
2.2 Capital. The authorized capital stock of SAN consists of
20,000,000 shares of Common Stock, $.005 par value, of which 3,000,000 are
currently issued and outstanding and 5,000,000 shares of Preferred Stock,
$.0001 par value, of which no shares are issued and outstanding. All of the
issued and outstanding shares of SAN are duly authorized, validly issued,
fully paid, and nonassessable. There are no outstanding subscriptions,
options, rights, warrants, debentures, instruments, convertible securities, or
other agreements or commitments obligating SAN to issue or to transfer from
treasury any additional shares of its capital stock of any class.
2
<PAGE>
2.3 Subsidiaries. SAN does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation) except as disclosed in Schedule 2.
2.4 Directors and Officers. Schedule 2 contains the names and titles
of all directors and officers of SAN as of the date of this Agreement.
2.5 Financial Statements. SAN has delivered to CoComp unaudited balance
sheets and statements of operations for the year ended November 30, 1999 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated. The Financial Statements accurately set out and describe
the financial condition of SAN as of November 30, 1999.
2.6 Absence of Changes. Since November 30, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of SAN's knowledge, SAN has conducted its
business only in the ordinary course and has not experienced or suffered any
material adverse change in the condition (financial or otherwise), results of
operations, properties, business or prospects of SAN or waived or surrendered
any claim or right of material value.
2.7 Absence of Undisclosed Liabilities. Neither SAN nor any of its
properties or assets are subject to any material liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that are not reflected in the financial statements presented
to CoComp or have otherwise been disclosed to CoComp.
2.8 Tax Returns. Within the times and in the manner prescribed by law,
SAN has filed all federal, state and local tax returns required by law, or has
filed extensions which have not yet expired, and has paid all taxes,
assessments and penalties due and payable.
2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, CoComp
and/or its attorneys shall have the opportunity to meet with accountants and
attorneys to discuss the financial condition of SAN. SAN shall make available
to CoComp and/or its attorneys all books and records of SAN.
2.10 Trade Names and Rights. SAN does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
2.11 Compliance with Laws. To the best of SAN's knowledge, SAN has
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business, except for matters which would
not have a material affect on SAN or its properties.
2.12 Litigation. SAN is not a party to any suit, action, arbitration
or legal, administrative or other proceeding, or governmental investigation
pending or, to the best knowledge of SAN, threatened against or affecting SAN
or its business, assets or financial condition, except for matters which would
not have a material affect on SAN or its properties. SAN is not in default
with respect to any order, writ, injunction or decree of any federal, state,
3
<PAGE>
local or foreign court, department, agency or instrumentality applicable to
it. Except as set forth on Schedule 2, SAN is not engaged in any lawsuit to
recover any material amount of monies due to it.
2.13 Authority. SAN has full corporate power and authority to enter
into this Agreement. The board of directors of SAN has taken all action
required to authorize the execution and delivery of this Agreement by or on
behalf of SAN and the performance of the obligations of SAN under this
Agreement. No other corporate proceedings on the part of SAN are necessary to
authorize the execution and delivery of this Agreement by SAN in the
performance of its obligations under this Agreement. This Agreement is, when
executed and delivered by SAN, and will be a valid and binding agreement of
SAN, enforceable against SAN in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights
generally.
2.14 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by SAN of its obligations under
this Agreement, nor the consummation of the transactions contemplated under
this Agreement will to the best of SAN's knowledge: (a) materially violate
any provision of SAN's articles of incorporation or bylaws; (b) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a material default under, or cause or permit
the termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of SAN, or require the payment of any prepayment or
other penalties; (c) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which SAN is bound; (d) result
in the creation or imposition of any security interest, lien, or other
encumbrance upon any material property or assets of SAN; or (e) violate any
material statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority to which SAN is bound or subject.
2.15 Full Disclosure. None of the representations and warranties made
by SAN herein, or in any schedule, exhibit or certificate furnished or to be
furnished in connection with this Agreement by SAN, or on its behalf, contains
or will contain any untrue statement of material fact.
2.16 Assets. SAN has good and marketable title to all of its tangible
properties and such tangible properties are not subject to any material liens
or encumbrances.
2.17 Material Contracts and Obligations. Attached hereto on Schedule 2
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which SAN is a party or by which it is bound that are material
to the conduct and operations of its business and properties, which provide
for payments to or by SAN in excess of $25,000; or which involve transactions
or proposed transactions between SAN and its officers, directors, affiliates
or any affiliate thereof. Copies of such agreements and contracts and
documentation evidencing such liabilities and other obligations have been made
available for inspection by Shareholder and its counsel. All of such
agreements and contracts are valid, binding and in full force and effect in
all material respects, assuming due execution by the other parties to such
agreements and contracts.
2.18 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by SAN in connection with: (a)
4
<PAGE>
the execution and delivery by SAN of this Agreement; (b) the performance by
SAN of its obligations under this Agreement; or (c) the consummation by SAN of
the transactions contemplated under this Agreement.
2.19 Investigation of Financial Condition. SAN has had the opportunity
to meet with CoComp and Shareholder's accountants and attorneys to discuss the
financial condition of CoComp. CoComp has made available to SAN all books and
records of CoComp. SAN has made such investigation of the financial condition
of CoComp as it deems necessary. CoComp and the Shareholder have provided all
documents requested by SAN and answered all questions and inquiries made by
SAN. SAN has relied on its own legal, tax and financial advisors. SAN is not
relying on any oral statements made by any person.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CITADEL
Except as disclosed in Schedule 3 which is attached hereto and
incorporated herein by reference, Citadel represents and warrants to CoComp
and Shareholder that:
3.1 Organization. Citadel is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on business, and it is not now
conducting any business, except to the extent to which the effecting of the
transaction contemplated by this Agreement constitutes doing business.
3.2 Capitalization. The authorized capital stock of Citadel consists
of 25,000,000 shares of no par value Common Stock of which 19,450,909 shares
of Common Stock are currently issued and outstanding, and 1,199,000 shares of
$.01 par value preferred stock of which 917,500 shares are issued and
outstanding. Citadel has also authorized 2,200,000 shares of Series AA
Convertible Preferred Stock to be issued to investors in a private offering
and 3,800,000 shares of Series BB Convertible Preferred Stock which were
issued to acquire SAN. All of the issued and outstanding shares of Common
Stock and Preferred Stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating Citadel to issue or to transfer from
treasury any additional shares of its capital stock of any class.
3.3 Subsidiaries. Except as set forth in Schedule 3, Citadel does not
presently have any subsidiaries or own any interest in any other enterprise
(whether or not such enterprise is a corporation).
3.4 Directors and Officers. Schedule 3 contains the names and titles
of all directors and officers of Citadel as of the date of this Agreement.
3.5 Financial Statements. Citadel has delivered to CoComp and
Shareholders its audited balance sheet and statements of operations and cash
flows as of and for the period ended December 31, 1998, and its unaudited
balance sheet and statements of operations and cash flows as of and for the
period ended September 30, 1999 (collectively the "Financial Statements").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Financial
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Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein.
3.6 Authority. Citadel has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The Board of Directors of Citadel has taken all action required to
authorize the execution and delivery of this Agreement by or on behalf of
Citadel, the performance of the obligations of Citadel under this Agreement
and the consummation by Citadel of the transactions contemplated under this
Agreement. No other corporate proceedings on the part of Citadel are
necessary to authorize the execution and delivery of this Agreement by Citadel
in the performance of its obligations under this Agreement. This Agreement
is, and when executed and delivered by Citadel, will be a valid and binding
agreement of Citadel, enforceable against Citadel in accordance with its
terms, except as such enforceability may be limited by general principles of
equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors rights generally.
3.7 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by Citadel of its obligations
under this Agreement, nor the consummation of the transactions contemplated
under this Agreement will violate any provision of Citadel's articles of
incorporation or bylaws, or to the best of Citadel's knowledge: (a) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a default under, or cause or permit the
termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of Citadel, or require the payment of any prepayment
or other penalties; (b) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which Citadel is bound; (c)
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Citadel; or (d) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Citadel is bound or subject.
3.8 Full Disclosure. None of the representations and warranties made
by Citadel herein, or in any exhibit, certificate or memorandum furnished or
to be furnished by Citadel, or on its behalf, contains or will contain any
untrue statement of material fact, or omit any material fact the omission of
which would be misleading.
3.9 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Citadel in connection with:
(a) the execution and delivery by Citadel of its obligations under this
Agreement; (b) the performance by Citadel of its obligations under this
Agreement; or (c) the consummation by Citadel of the transactions contemplated
by this Agreement.
3.10 Investigation of Financial Condition. Citadel has had the
opportunity to meet with CoComp and Shareholder's accountants and attorneys to
discuss the financial condition of CoComp. CoComp has made available to
Citadel all books and records of CoComp. Citadel has made such investigation
of the financial condition of CoComp and title to the shares of Shareholder
acquired hereunder as it deems necessary. CoComp and the Shareholder have
6
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provided all documents requested by Citadel and answered all questions and
inquiries made by Citadel. Citadel has relied on its own legal, tax and
financial advisors. Citadel is not relying on any oral statements made by any
person.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
As an inducement to SAN and Citadel to enter into this Agreement,
Shareholder represents and warrants to SAN that to the best of his actual
knowledge without further investigation:
4.1 Organization. CoComp is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on its business as now owned
and operated by it in Colorado; however, CoComp is not qualified to do
business in any other states.
4.2 Capitalization. The authorized capital stock of CoComp consists of
50,000 shares of $1.00 par value Common Stock of which 3,500 shares of Common
Stock are currently issued and outstanding. All of the issued and outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating CoComp to issue or to transfer from treasury any additional shares
of its capital stock of any class.
4.3 Subsidiaries. CoComp does not presently have any subsidiaries or
own any interest in any other enterprise (whether or not such enterprise is a
corporation).
4.4 Directors and Officers. Schedule 4 contains the names and titles
of all directors and officers of CoComp as of the date of this Agreement.
4.5 Financial Statements. CoComp has delivered to SAN its unaudited
balance sheet and statements of operations as of and for the period ended
December 31, 1999 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with accounting principles applied on a consistent
basis throughout the periods indicated. The Financial Statements accurately
set out and describe the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein.
4.6 Absence of Changes. Since December 31, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of Shareholder's knowledge, CoComp has not
experienced or suffered any material adverse change in its condition
(financial or otherwise), results of operations, properties, business or
prospects or waived or surrendered any claim or right of material value.
4.7 Absence of Undisclosed Liabilities. Neither CoComp nor any of its
properties or assets are subject to any liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise and whether due or
to become due, that are not reflected in the financial statements presented to
SAN or shown in Schedule 4 attached hereto.
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4.8 Tax Returns. Within the times and in the manner prescribed by law,
CoComp has filed all federal, state and local tax returns required by law and
has paid all taxes, assessments and penalties due and payable.
4.9 Trade Names and Rights. CoComp does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
4.10 Compliance with Laws. CoComp has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, any applicable building, zoning,
or other law, ordinance, or regulation) affecting its properties or the
operation of its business or with which it is otherwise required to comply.
4.11 Litigation. CoComp is not a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or threatened against or affecting CoComp or its
business, assets, or financial condition. CoComp is not in default with
respect to any order, writ, injunction, or decree of any federal, state,
local, or foreign court, department agency, or instrumentality. CoComp is not
engaged in any legal action to recover moneys due to it.
4.12 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated under this Agreement will: (a) violate any provision of CoComp's
articles of incorporation or bylaws; (b) with or without the giving of notice
or the passage of time, or both, violate, or be in conflict with, or
constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any debt, contract, agreement or obligation
of CoComp, or require the payment of any prepayment or other penalties; (c)
require notice to, or the consent of, any party to any agreement or
commitment, lease or license, to which CoComp is bound; (d) result in the
creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of CoComp; or (e) violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority to which CoComp is bound or subject.
4.13 Full Disclosure. None of the representations and warranties made
by Shareholder herein, or in any exhibit, certificate or memorandum furnished
or to be furnished by Shareholder contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
4.14 Assets. CoComp has good and marketable title to all of its
property and such property is not subject to any liens or encumbrances other
than as disclosed in Schedule 4. Schedule 4 lists all property and equipment
of CoComp and the location of such property with a value of $1,000 or more.
4.15 Material Contracts and Obligations. Attached hereto on Schedule 4
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which CoComp is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by CoComp in excess of $25,000; or which involve
transactions or proposed transactions between CoComp and its officers,
directors, affiliates or any affiliate thereof. Copies of such agreements and
contracts and documentation evidencing such liabilities and other obligations
8
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have been made available for inspection by SAN and its counsel. All of such
agreements and contracts are valid, binding and in full force and effect in
all material respects, assuming due execution by the other parties to such
agreements and contracts.
4.16 Real Property. CoComp does not own, use or claim any interest in
any real property, including without limitation any license, leasehold or any
similar interest in real property, except for the offices which are set forth
on Schedule 4.
4.17 Share Ownership. Shareholder holds 1,116 of the outstanding
common shares of CoComp Common Stock. Such shares are owned and the
Shareholder's ownership is of record and beneficially owned by Shareholder,
and such shares are not subject to any claim, lien, encumbrance or pledge.
Shareholder has authority to sell such shares pursuant to this Agreement.
ARTICLE 5
COVENANTS
5.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsels, accountants, auditors, and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments, and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request. If the transaction contemplated hereby is not
completed, all documents received by each party and/or its attorneys and
accountants, auditors or other authorized representatives shall be returned to
the other party who provided same upon request. The parties hereto, their
directors, employees, agents and representatives shall not disclose any of the
information described above unless such information is already disclosed to
the public, without the prior written consent of the party to which the
confidential information pertains. Each party shall take such steps as are
necessary to prevent disclosure of such information to unauthorized third
parties.
5.2 Conduct of Business. Prior to the Closing, SAN and CoComp shall
each conduct its business in the normal course, and shall not sell, pledge, or
assign any assets, without the prior written approval of the other party,
except in the regular course of business or as contemplated in previously
disclosed contractual obligations. Neither SAN nor CoComp shall amend its
Articles of Incorporation or Bylaws, declare dividends, redeem or sell stock
or other securities, incur additional or newly-funded liabilities, acquire or
dispose of fixed assets, change employment terms, enter into any material or
long-term contract, guarantee obligations of any third party, settle or
discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction other than in the regular course of business except as otherwise
contemplated herein. Prior to Closing, the Compaq Master Alliance Agreement
shall be assigned to Mr. Chisesi and Mr. Duckworth and CoComp shall have no
continuing rights or obligations thereunder.
5.3 Tax Returns for 1999 and Short Period. The former shareholders of
CoComp shall be responsible for preparing and filing federal and applicable
state S-Corporation income tax returns for CoComp for the calendar year ended
December 31, 1999, and for the short period ending on the closing date (the
"S-Corporation Returns"). SAN shall cooperate in causing CoComp to execute
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such returns and returning the executed forms to the Shareholders for filing.
SAN shall not amend any S-Corporation Return without the advance written
consent of the Shareholder.
5.4 Lease Expenses of Fort Collins office. SAN agrees to pay for 80%
of the lease expenses of CoComp's Fort Collins facility for the 90 day period
following the Closing. At the conclusion of such 90 day period. CoComp shall
assign the lease to Shareholder and Duckworth and vacate the premises. All of
the lease expenses for this facility will become the sole obligation of
Messrs. Duckworth and Chisesi and their new entity.
5.5 Covenant not to Compete. Mr. Chisesi acknowledges and agrees that
he possesses information unique and proprietary to CoComp and SAN, and that
SAN would not be willing to enter into this Agreement if Mr. Chisesi, after
the Closing Date, could compete with CoComp and SAN because such competition
by Mr. Chisesi would severely injure CoComp and SAN no matter where in the
geographic areas listed below such competition occurred. Accordingly and in
exchange for the Purchase Price, Mr. Chisesi agrees that for a period of three
(3) years from the Closing Date, he shall not directly or indirectly, whether
as an owner, stockholder, partner, employee, independent contractor, or
otherwise, compete with CoComp or SAN or any affiliate of CoComp and SAN
anywhere within the states of Texas, New Mexico, Arizona and Colorado in the
business of selling disk drives, disk arrays, disk raid systems, tape drives,
tape libraries and accompanying backup, disaster recovery and archiving
software and all fiber switches and hubs. The period, the geographical area
and the scope of the restrictions on Mr. Chisesi's activities are divisible so
that if any provision of the restriction is invalid, that provision shall
automatically be modified to the extent necessary to make it valid. Mr.
Chisesi also agrees that he will not solicit for employment any of the CoComp
employees who are transitioned to SAN for a period of three years from the
Closing Date. The parties hereto agree and acknowledge that many of the
rights conveyed by this Section 4.5 are of a unique and special nature and
that CoComp and SAN will not have an adequate remedy at law in the event of
failure of Mr. Chisesi to abide by its terms and conditions, nor will money
damages adequately compensate for such injury. It, therefore, is agreed
between the parties that in the event of breach by Mr. Chisesi of his
agreement contained in this Section 4.5 CoComp and SAN shall have the rights,
among other rights, to damages sustained thereby and to an injunction to
restrain Mr. Chisesi from the prohibited acts. Nothing herein contained shall
in any way limit or exclude any and all other rights granted by law or equity
to CoComp and SAN.
In the event of default by SAN in the payment of any amount due pursuant
to Article 1 of this Agreement and within any applicable notice to cure
period, then this covenant not to compete shall become null and void and shall
be of no further force or effect.
ARTICLE 6
CONDITIONS PRECEDENT TO
SHAREHOLDER'S PERFORMANCE
6.1 Conditions. The obligations of the Shareholder hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 6. The Shareholder may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by the Shareholder of
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any other condition of or any of the Shareholder's other rights or remedies,
at law or in equity, if SAN shall be in default of any of their
representations, warranties, or covenants under this Agreement.
6.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by SAN in this Agreement or in
any written statement that shall be delivered to CoComp and/or Shareholder by
SAN under this Agreement shall be true and accurate on and as of the Closing
Date as though made at that time.
6.3 Performance. SAN shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to
be performed or complied with by it, on or before the Closing Date.
6.4 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against SAN on or before the Closing Date.
ARTICLE 7
CONDITIONS PRECEDENT TO CITADEL'S AND SAN'S PERFORMANCE
7.1 Conditions. Citadel's and SAN's obligations hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 7. Citadel and SAN may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by Citadel or SAN of
any other condition of or any of Citadel's or SAN's rights or remedies, at law
or in equity, if the Shareholder shall be in default of any of his
representations, warranties, or covenants under this Agreement.
7.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by Shareholder in this Agreement
or in any written statement that shall be delivered to SAN by Shareholder
under this Agreement shall be substantially true and accurate on and as of the
Closing Date as though made at that time.
7.3 Performance. Shareholder, Brent Duckworth and Kent Shields shall
have performed, satisfied, and complied with all covenants, agreements, and
conditions required by their respective Agreements to be performed or complied
with by them, on or before the Closing Date.
7.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against any party hereto on or before the Closing
Date.
ARTICLE 8
CLOSING
8.1 Closing. The Closing of this transaction shall be held at the
offices of Krys Boyle Freedman Scott & Sawyer, P.C., 600 Seventeenth Street,
Suite 2700 South Tower, Denver, Colorado 80202, or such other place as shall
be mutually agreed upon, on such date as shall be mutually agreed upon by the
parties, but in no event shall the Closing be later than January 31, 2000. At
the Closing:
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8.2 Shareholder shall deliver the certificates representing the share
of CoComp being sold pursuant to this Agreement, and such certificates will be
duly endorsed.
8.3 Citadel shall deliver a certified or cashier's check payable to
Shareholder for $318,000.
8.4 Citadel and SAN shall deliver a Promissory Note covering the future
cash payments owed by SAN to Shareholder pursuant to Sections 1.4 c, d and e
above.
8.5 Citadel and SAN shall deliver a signed Consent or Minutes of the
Directors of Citadel and SAN approving this Agreement and each matter to be
approved by the Directors of Citadel and SAN under this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
9.2 No Oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but it can be changed by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
9.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future
of any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (iii) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
9.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
9.5 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings.
9.6 Choice of Law. This Agreement and its application shall be
governed by the laws of the State of Colorado, except to the extent its
conflict of laws provisions would apply the laws of another jurisdiction.
9.7 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
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is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
Shareholder:
Lawrence J. Chisesi
4017 Spruce Drive
Fort Collins, Colorado 80526
with a copy to:
James A. Martell
Wyatt, Martell, Weaver & Rogers LLC
222 West Magnolia Street
Fort Collins, Colorado 80521-2899
Phone: (970) 484-1112
Fax: (970) 484-1170
SAN and Citadel:
Storage Area Networks
900 West Castleton Road
Castle Rock, Colorado 80104
with a copy to:
Jon D. Sawyer
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street, Suite 2700
Denver, Colorado 80202
Phone: (303) 893-2300
Fax: (303) 893-2882
9.8 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.9 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
9.10 Brokers. The parties hereto represent and agree that no broker
has brought about the aforementioned transaction. Each of the parties hereto
shall indemnify and hold the other harmless against any and all claims,
losses, liabilities or expenses which may be asserted against it as a result
of its dealings, arrangements or agreements with any broker or person, except
as described in this paragraph.
9.11 Announcements. SAN and Shareholder will consult and cooperate
with each other as to the timing and content of any announcements of the
transactions contemplated hereby to the general public or to employees,
customers or suppliers.
9.12 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for herein above, including any
items referenced therein or required to be attached thereto. Any material
changes to the Exhibits shall be immediately disclosed to the other party.
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AGREED TO AND ACCEPTED as of the date first above written.
STORAGE AREA NETWORKS SHAREHOLDER:
By:/s/ Buck Buxton By:/s/ Lawrence J. Chisesi
Buck Buxton, President Lawrence J. Chisesi
CITADEL ENVIRONMENTAL GROUP,
INC.
By:/s/ Buck Buxton
Buck Buxton, President
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SCHEDULE 2
STORAGE AREA NETWORKS
("SAN")
2.4 The Officers and Directors of SAN are as follows:
Name Position
L. W. Buxton President, Treasurer and Director
Warren Smith Vice President, Secretary, Treasurer
and Director
2.12 Litigation. SAN is involved in a lawsuit filed by SAN against 3SI,
Inc., and the parties have recently reached a tentative settlement during
mediation. A copy of the proposed settlement terms has been provided to
Shareholder.
<PAGE>
SCHEDULE 3
CITADEL ENVIRONMENTAL GROUP, INC.
("Citadel")
3.3 Subsidiaries.
a) Citadel owns 621,025 shares of Alliance Medical Corporation, which
represents approximately 3% of the Alliance shares outstanding. These shares
were spun-off to the shareholders of Citadel as of December 31, 1999. The
shares will be placed in an escrow account to be distributed once Alliance
Medical Corporation is an SEC reporting company. If this does not occur
within two years, the shares will revert back to being an asset of Citadel,
unless extended by the Board of Directors.
b) Citadel owns 100% of SAN.
3.4 Directors and Officers of Citadel:
Name Position
Louis F. Coppage Chairman of the Board
L. W. Buxton President and Director
Warren Smith Vice President and Director
Cory J. Coppage Secretary, Treasurer and Director
3.19 Material Contracts of Citadel:
None
<PAGE>
PROMISSORY NOTE
$392,000 January 21, 2000
Storage Area Networks, a Nevada corporation ("Obligor"), for value
received, hereby promises to pay to the order of Lawrence J. Chisesi
("Obligee"), in lawful money of the United States at a place to be designated
in writing by Obligee, the principal sum of Three Hundred Ninety-Two Thousand
Dollars ($392,000.00), plus interest at the rate of 12% per annum.
The $392,000 shall be due and paid as follows:
$42,000 shall be paid on or before June 30, 2000.
$250,000 shall be paid on January 21, 2001.
$100,000 shall be paid on January 21, 2002.
All accrued and unpaid interest will be due and payable every three
months with the first payment due April 21, 2000.
This Note may be prepaid, in whole or in part, at any time without
permission or penalty.
If payment on this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State of Colorado, such payment shall be made on
the next succeeding business day.
Immediately upon the occurrence of an "Event of Default" (as defined
below), Obligee may, at its option, declare immediately due and payable the
entire unpaid principal amount of this Note, together with all interest
thereon, plus any other amounts payable at the time of such declaration
pursuant to this Note. An Event of Default shall be defined as each of the
following: (i) failure of Obligor to make any payment of principal within ten
(10) days after the due date; (ii) Obligor shall admit in writing its
inability to pay its debts as they become due, shall make a general assignment
for the benefit of creditors or shall file any petition for action for relief
under any bankruptcy, reorganization, insolvency or moratorium law, or any
other law or laws for the relief of, or relating to, debtors; or (iii) an
involuntary petition shall be filed against Obligor under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws of for
the relief of, or relating to, debtors unless such petition shall be dismissed
or vacated within thirty (30) days of the date hereof. Upon an Event of
Default, unpaid principal or interest shall bear interest from the date of the
Event of Default until paid in full at the rate of 18% per annum.
If Obligee should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Obligor, Obligor shall be liable to pay to holder immediately and without
demand all reasonable costs and expenses of collection incurred by Obligee,
including, without limitation, reasonable attorney fees, whether or not suit
or other action or proceeding be instituted and specifically including but not
limited to collection efforts that may be made through a bankruptcy court.
This Note shall be construed and governed by the laws of the State of
Colorado without regard to otherwise applicable principles of conflicts of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. No modification hereof shall be binding or
enforceable against Obligee unless approved in writing by Obligee.
<PAGE>
Obligor hereby waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand. To the extent permitted by law, Obligor hereby
waives and releases all errors, defects and imperfections in any proceedings
instituted by Obligee under the terms of this Note. The rights and privileges
of Obligee under this Note shall inure to the benefit of his heirs and
personal representatives. All representations, warranties and agreements of
Obligor made in connection with this Note shall bind Obligor's successors and
assigns. The rights and remedies of Obligee under this Note shall be in
addition to any other rights and remedies available to Obligee at law or in
equity, all of which may be exercised singly or concurrently. The parties
agree to the exclusive jurisdiction of the federal and state courts located in
Denver, Colorado in connection with any matter arising hereunder, including
the collection and enforcement hereof, except as the Obligee may otherwise
elect. If any provision in this Note is found by a Court of competent
jurisdiction to be invalid in any respect, such finding shall not effect or
release the absolute obligation to repay the principal sum owed hereunder on
or before the Maturity Date.
IN WITNESS WHEREOF, intending to be legally bound, Obligor has duly
executed this Promissory Note the day and year first above written by its duly
authorized officer.
CITADEL ENVIRONMENTAL STORAGE AREA NETWORKS
GROUP, INC.
By:/s/ Buck Buxton By:/s/ Buck Buxton
Name: Buck Buxton Name: Buck Buxton
Title: President Title: President
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made the 21st day of January 2000, by and
between Storage Area Networks, a Nevada corporation ("SAN"), Citadel
Environmental Group, Inc. ("Citadel"), and Kent A. Shields (referred to as
"Shareholder"), a shareholder of CoComp, Inc. ("CoComp").
WHEREAS, Citadel desires to acquire all of the issued and outstanding
shares of common stock of CoComp from all three of CoComp's shareholders; and
WHEREAS, the Shareholder desires to participate in this transaction and
sell all of his Shares of common stock of CoComp; and
WHEREAS, SAN, Citadel and the Shareholder desire to make certain
representations, warranties, covenants and agreements in connection with the
Purchase.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
THE PURCHASE
1.1 Sale and Delivery of Common Stock. Subject to all the terms and
conditions of this Agreement, Shareholder shall transfer, convey and deliver
to SAN at the Closing (as defined in paragraph 1.2 hereof) title to the
Shares, free and clear of all liens, claims and encumbrances in exchange for
the consideration described in this Article 1. The consideration described in
this Article 1 hereof shall be delivered to the Shareholder in accordance with
the provisions of Section 1.4 below.
1.2 Effective Date and Closing. The closing of the transaction
contemplated herein (the "Closing") shall occur at a mutually agreeable time
and place, on the earliest practicable date following the day on which all of
the obligations and conditions precedent contained herein are complied with.
The Closing date shall be January __, 2000, or a soon thereafter as reasonably
practicable (the "Closing Date"). The effective date for the purposes of
determining revenues and expenses in paragraph 1.4.b. below will be January 1,
2000.
1.3 Purchase Price. Subject to the terms of Section 1.4 and subject to
all of the other terms and conditions set forth in the Agreement and in
reliance on the representations, warranties and covenants hereinafter set
forth, SAN shall pay to the Shareholder a combination of cash, Citadel common
stock and a promissory note having a total value of $1,015,000 (hereinafter
referred to as the "Purchase Price").
1.4 Payment of Purchase Price. The total Purchase Price shall be paid
as follows:
a. $318,000 in cash shall be paid to the Shareholder at Closing.
b. At the Closing, Shareholder will provide to SAN five reports
(the "Closing Reports") prepared as of December 31, 1999: (1) accounts
receivable aging; (2) accounts payable; (3) purchases clearing(inventory
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received and shipped but no invoice received); (4) inventory; and (5) balance
sheet. SAN shall use its best efforts to sell all such inventory and to
collect all such accounts receivable as listed on the Closing Reports promptly
after the Closing. All collections on accounts shall be credited to the
oldest invoices as such collections are received. SAN will promptly apply any
such collections against the accounts payable and inventory clearing
identified on the Closing Reports after the Closing. Once SAN (or CoComp) has
received collections in the amount of the payables and inventory clearing
liabilities identified on the Closing Reports from and after the Effective
Date, SAN will promptly establish a separate account to hold further
collections for the benefit of Shareholder, Brent Duckworth and Larry Chisesi
to be paid as follows: SAN shall disburse such funds on the 30th of each
month on a pro-rata basis to each of Shareholder, Brent Duckworth and Larry
Chisesi until each has received $155,000. This process will be monitored by
Buck Buxton, Shareholder and Brent Duckworth on a weekly basis.
c. $42,000 in cash will be paid to the Shareholder by June 30,
2000.
d. A promissory note will be issued at the Closing representing the
future payment obligation set forth in 1.4 c, and such note will be on the
form attached hereto as Exhibit A.
e. Stock of Citadel Environmental Group, Inc. ("Citadel"). Within
15 days following the effective date of the proposed reverse split of Citadel
(which acquired SAN on January 7, 2000), Citadel shall issue to Shareholder
shares of Citadel's common stock having a value of $500,000 based on the lower
of the closing price on January 21, 2000, or the average closing price for the
ten trading days prior to the date of issuance. Citadel agrees to use its
best efforts to complete the proposed reverse split as soon as possible
following the Closing. In the event that the reverse split is not effective
by July 21, 2000, Shareholder will have the option to receive, in lieu of the
shares, a promissory note signed by Citadel and SAN and payable to Shareholder
in the principal amount of $500,000. The note will bear interest at the rate
of 12% per annum commencing January 21, 2000, and in the event of default, the
note will bear interest at the rate of 18%. The Note will be in the form of
Exhibit A except with respect to the different terms described in this
paragraph 1.4.e. One-half of the principal plus accrued interest will be due
on January 21, 2001, and the other one-half plus accrued interest will be due
on January 21, 2002. The note will be convertible by Shareholder immediately
upon notice to Citadel into common stock at a price equal to the lower of the
closing price on January 21, 2000, or the average closing price (adjusted for
the split) for the twenty trading days prior to the date the note holder
notifies the Company of his intention to convert.
1.5 Deposit of Severance Packages. Concurrently with the Closing, SAN
agrees to set aside a total of $30,000 ($10,000 per CoComp shareholder) which
will be paid as a severance or relocation expense, as the case may be, to
Laura Beshears, John Altizer and Neda Amedon. This payment is in addition to
the Purchase Price.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SAN
Except as disclosed in Schedule 2 which is attached hereto and
incorporated herein by reference, SAN hereby represents and warrants to CoComp
and Shareholder:
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2.1 Organization. SAN is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification. SAN has become a subsidiary of Citadel Environmental Group,
Inc. in a transaction that closed on January 7, 2000. A copy of the Agreement
has previously been provided to Shareholder.
2.2 Capital. The authorized capital stock of SAN consists of 20,000,000
shares of Common Stock, $.005 par value, of which 2,400,000 are currently
issued and outstanding and 5,000,000 shares of Preferred Stock, $.0001 par
value, of which no shares are issued and outstanding. All of the issued and
outstanding shares of SAN are duly authorized, validly issued, fully paid, and
nonassessable. Except for common stock purchase warrants to purchase a total
of 600,000 shares of Common Stock, there are no outstanding subscriptions,
options, rights, warrants, debentures, instruments, convertible securities, or
other agreements or commitments obligating SAN to issue or to transfer from
treasury any additional shares of its capital stock of any class.
2.3 Subsidiaries. SAN does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation) except as disclosed in Schedule 2.
2.4 Directors and Officers. Schedule 2 contains the names and titles of
all directors and officers of SAN as of the date of this Agreement.
2.5 Financial Statements. SAN has delivered to CoComp unaudited balance
sheets and statements of operations for the year ended November 30, 1999 (the
"SAN Financial Statements"). The SAN Financial Statements are complete and
correct in all material respects and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated. The SAN Financial Statements accurately set
out and describe the financial condition of SAN as of November 30, 1999.
2.6 Absence of Changes. Since November 30, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of SAN's knowledge, SAN has conducted its
business only in the ordinary course and has not experienced or suffered any
material adverse change in the condition (financial or otherwise), results of
operations, properties, business or prospects of SAN or waived or surrendered
any claim or right of material value.
2.7 Absence of Undisclosed Liabilities. Neither SAN nor any of its
properties or assets are subject to any material liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that are not reflected in the financial statements presented
to CoComp or have otherwise been disclosed to CoComp.
2.8 Tax Returns. Within the times and in the manner prescribed by law,
SAN has filed all federal, state and local tax returns required by law, or has
filed extensions which have not yet expired, and has paid all taxes,
assessments and penalties due and payable.
2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, CoComp
and/or its attorneys shall have the opportunity to meet with accountants and
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attorneys to discuss the financial condition of SAN. SAN shall make available
to CoComp and/or its attorneys all books and records of SAN.
2.10 Trade Names and Rights. SAN does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
2.11 Compliance with Laws. To the best of SAN's knowledge, SAN has
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business, except for matters which would
not have a material affect on SAN or its properties.
2.12 Litigation. SAN is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation
pending or, to the best knowledge of SAN, threatened against or affecting SAN
or its business, assets or financial condition, except for matters which would
not have a material affect on SAN or its properties. SAN is not in default
with respect to any order, writ, injunction or decree of any federal, state,
local or foreign court, department, agency or instrumentality applicable to
it. Except as set forth on Schedule 2, SAN is not engaged in any lawsuit to
recover any material amount of monies due to it.
2.13 Authority. SAN has full corporate power and authority to enter
into this Agreement. The board of directors of SAN has taken all action
required to authorize the execution and delivery of this Agreement by or on
behalf of SAN and the performance of the obligations of SAN under this
Agreement. No other corporate proceedings on the part of SAN are necessary to
authorize the execution and delivery of this Agreement by SAN in the
performance of its obligations under this Agreement. This Agreement is, when
executed and delivered by SAN, and will be a valid and binding agreement of
SAN, enforceable against SAN in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights
generally.
2.14 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by SAN of its obligations under
this Agreement, nor the consummation of the transactions contemplated under
this Agreement will to the best of SAN's knowledge: (a) materially violate
any provision of SAN's articles of incorporation or bylaws; (b) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a material default under, or cause or permit
the termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of SAN, or require the payment of any prepayment or
other penalties; (c) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which SAN is bound; (d) result
in the creation or imposition of any security interest, lien, or other
encumbrance upon any material property or assets of SAN; or (e) violate any
material statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority to which SAN is bound or subject.
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2.15 Full Disclosure. None of the representations and warranties made
by SAN herein, or in any schedule, exhibit or certificate furnished or to be
furnished in connection with this Agreement by SAN, or on its behalf, contains
or will contain any untrue statement of material fact.
2.16 Assets. SAN has good and marketable title to all of its assets and
properties and such assets and properties are not subject to any liens or
encumbrances (except as set forth in Schedule 2 or disclosed in the SAN
Financial Statements.
2.17 Material Contracts and Obligations. Attached hereto on Schedule 2
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which SAN is a party or by which it is bound that are material
to the conduct and operations of its business and properties, which provide
for payments to or by SAN in excess of $25,000; or which involve transactions
or proposed transactions between SAN and its officers, directors, affiliates
or any affiliate thereof. Copies of such agreements and contracts and
documentation evidencing such liabilities and other obligations have been made
available for inspection by Shareholder and its counsel. All of such
agreements and contracts are valid, binding and in full force and effect in
all material respects, assuming due execution by the other parties to such
agreements and contracts.
2.18 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by SAN in connection with: (a)
the execution and delivery by SAN of this Agreement; (b) the performance by
SAN of its obligations under this Agreement; or (c) the consummation by SAN of
the transactions contemplated under this Agreement.
2.19 Investigation of Financial Condition. SAN has had the opportunity
to meet with CoComp and Shareholder's accountants and attorneys to discuss the
financial condition of CoComp. CoComp has made available to SAN all books and
records of CoComp. SAN has made such investigation of the financial condition
of CoComp and title to the shares of Shareholder acquired hereunder as it
deems necessary. CoComp and the Shareholder have provided all documents
requested by SAN and answered all questions and inquiries made by SAN. SAN
has relied on its own legal, tax and financial advisors. SAN is not relying
on any oral statements made by any person.
2.20 Termination of Shareholder Agreement. SAN and Citadel acknowledge
that the shareholders of CoComp and CoComp have entered into that Termination
of Shareholder Agreement, a copy of which is attached hereto as Schedule 2.20.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CITADEL
Except as disclosed in Schedule 3 which is attached hereto and
incorporated herein by reference, Citadel represents and warrants to CoComp
and Shareholder that:
3.1 Organization. Citadel is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on business, and it is not now
conducting any business, except to the extent to which the effecting of the
transaction contemplated by this Agreement constitutes doing business.
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3.2 Capitalization. The authorized capital stock of Citadel consists
of 25,000,000 shares of no par value Common Stock of which 19,450,909 shares
of Common Stock are currently issued and outstanding, and 1,199,000 shares of
$.01 par value preferred stock of which 917,500 shares are issued and
outstanding. Citadel has also authorized 2,200,000 shares of Series AA
Convertible Preferred Stock to be issued to investors in a private offering
and 3,800,000 shares of Series BB Convertible Preferred Stock which were
issued to acquire SAN. All of the issued and outstanding shares of Common
Stock and Preferred Stock are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Schedule 3, there are no outstanding
subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating Citadel to issue or to transfer from
treasury any additional shares of its capital stock of any class.
3.3 Subsidiaries. Except as set forth in Schedule 3, Citadel does not
presently have any subsidiaries or own any interest in any other enterprise
(whether or not such enterprise is a corporation).
3.4 Directors and Officers. Schedule 3 contains the names and titles
of all directors and officers of Citadel as of the date of this Agreement.
3.5 Financial Statements. Citadel has delivered to CoComp and
Shareholders its audited balance sheet and statements of operations and cash
flows as of and for the period ended December 31, 1998, and its unaudited
balance sheet and statements of operations and cash flows as of and for the
period ended September 30, 1999 (collectively the "Financial Statements").
The Financial Statements are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein.
3.6 Authority. Citadel has full corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The Board of Directors of Citadel has taken all action required to
authorize the execution and delivery of this Agreement by or on behalf of
Citadel, the performance of the obligations of Citadel under this Agreement
and the consummation by Citadel of the transactions contemplated under this
Agreement. No other corporate proceedings on the part of Citadel are
necessary to authorize the execution and delivery of this Agreement by Citadel
in the performance of its obligations under this Agreement. This Agreement
is, and when executed and delivered by Citadel, will be a valid and binding
agreement of Citadel, enforceable against Citadel in accordance with its
terms, except as such enforceability may be limited by general principles of
equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors rights generally.
3.7 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by Citadel of its obligations
under this Agreement, nor the consummation of the transactions contemplated
under this Agreement will violate any provision of Citadel's articles of
incorporation or bylaws, or to the best of Citadel's knowledge: (a) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a default under, or cause or permit the
termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of Citadel, or require the payment of any prepayment
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or other penalties; (b) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which Citadel is bound; (c)
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Citadel; or (d) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Citadel is bound or subject.
3.8 Full Disclosure. None of the representations and warranties made
by Citadel herein, or in any exhibit, certificate or memorandum furnished or
to be furnished by Citadel, or on its behalf, contains or will contain any
untrue statement of material fact, or omit any material fact the omission of
which would be misleading.
3.9 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Citadel in connection with:
(a) the execution and delivery by Citadel of its obligations under this
Agreement; (b) the performance by Citadel of its obligations under this
Agreement; or (c) the consummation by Citadel of the transactions contemplated
by this Agreement.
3.10 Investigation of Financial Condition. Citadel has had the
opportunity to meet with CoComp and Shareholder's accountants and attorneys to
discuss the financial condition of CoComp. CoComp has made available to
Citadel all books and records of CoComp. Citadel has made such investigation
of the financial condition of CoComp and title to the shares of Shareholder
acquired hereunder as it deems necessary. CoComp and the Shareholder have
provided all documents requested by Citadel and answered all questions and
inquiries made by Citadel. Citadel has relied on its own legal, tax and
financial advisors. Citadel is not relying on any oral statements made by any
person.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
As an inducement to SAN to enter into this Agreement (except as disclosed
in the disclosure schedules and schedules and exhibits attached hereto as
referenced in the other sections of this Agreement), Shareholder represents
and warrants to SAN that to the best of his actual knowledge without further
investigation:
4.1 Organization. CoComp is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on its business as now owned
and operated by it in Colorado; however, CoComp is not qualified to do
business in any other states.
4.2 Capitalization. The authorized capital stock of CoComp consists of
50,000 shares of no par value Common Stock of which 3,500 shares of Common
Stock are currently issued and outstanding. All of the issued and outstanding
shares of Common Stock are duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating CoComp to issue or to transfer from treasury any additional shares
of its capital stock of any class.
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4.3 Subsidiaries. CoComp does not presently have any subsidiaries or
own any interest in any other enterprise (whether or not such enterprise is a
corporation).
4.4 Directors and Officers. Schedule 4 contains the names and titles
of all directors and officers of CoComp as of the date of this Agreement.
4.5 Financial Statements. CoComp has delivered to SAN its unaudited
balance sheet and statements of operations as of and for the period ended
November 30, 1999 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with accounting principles applied on a consistent
basis throughout the periods indicated. The Financial Statements accurately
set out and describe the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein.
4.6 Absence of Changes. Since November 30, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of Shareholder's knowledge, CoComp has not
experienced or suffered any material adverse change in its condition
(financial or otherwise), results of operations, properties, business or
prospects or waived or surrendered any claim or right of material value.
4.7 Absence of Undisclosed Liabilities. Neither CoComp nor any of its
properties or assets are subject to any material liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that are not reflected in the financial statements presented
to SAN or shown in Schedule 4 attached hereto.
4.8 Tax Returns. Within the times and in the manner prescribed by law,
CoComp has filed all federal, state and local tax returns required by law and
has paid all taxes, assessments and penalties due and payable.
4.9 Trade Names and Rights. CoComp does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
4.10 Compliance with Laws. CoComp has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, any applicable building, zoning,
or other law, ordinance, or regulation) affecting its properties or the
operation of its business or with which it is otherwise required to comply,
except for matters with no material adverse effect on CoComp..
4.11 Litigation. CoComp is not a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or threatened against or materially affecting CoComp or
its business, assets, or financial condition. CoComp is not in default with
respect to any order, writ, injunction, or decree of any federal, state,
local, or foreign court, department agency, or instrumentality. CoComp is not
engaged in any legal action to recover any material amount of moneys due to
it.
4.12 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated under this Agreement will: (a) violate any provision of CoComp's
articles of incorporation or bylaws; (b) with or without the giving of notice
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or the passage of time, or both, violate, or be in conflict with, or
constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any debt, contract, agreement or obligation
of CoComp, or require the payment of any prepayment or other penalties; (c)
require notice to, or the consent of, any party to any agreement or
commitment, lease or license, to which CoComp is bound; (d) result in the
creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of CoComp; or (e) violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority to which CoComp is bound or subject.
4.13 Full Disclosure. None of the representations and warranties made
by Shareholder herein, or in any exhibit, certificate or memorandum furnished
or to be furnished by Shareholder contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
4.14 Assets. CoComp has good and marketable title to all of its
property and such property is not subject to any liens or encumbrances other
than as disclosed in Schedule 4. Schedule 4 lists all property and equipment
of CoComp and the location of such property with a value of $1,000 or more.
4.15 Material Contracts and Obligations. Attached hereto on Schedule 4
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which CoComp is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by CoComp in excess of $25,000; or which involve
transactions or proposed transactions between CoComp and its officers,
directors, affiliates or any affiliate thereof. Copies of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by SAN and its counsel. All of such
agreements and contracts are valid, binding and in full force and effect in
all material respects, assuming due execution by the other parties to such
agreements and contracts.
4.16 Real Property. CoComp does not own, use or claim any interest in
any real property, including without limitation any license, leasehold or any
similar interest in real property, except for the offices which are set forth
on Schedule 4.
4.17 Share Ownership. Shareholder holds 1,116 of the outstanding
common shares of CoComp Common Stock. Such shares are owned and the
Shareholder's ownership is of record and beneficially owned by Shareholder,
and such shares are not subject to any claim, lien, encumbrance or pledge.
Shareholder has authority to sell such shares pursuant to this Agreement.
4.18 Investment Intent. Shareholder understands and acknowledges that
the shares of Citadel Common Stock (the "Citadel Shares") are being offered in
reliance upon the exemption provided in Section 4(2) of the Securities Act of
1933 (the "Securities Act") for non-public offerings; and Shareholder makes
the following representations and warranties with the intent that the same may
be relied upon in determining the suitability of Shareholder as a purchaser of
securities:
(a) The Citadel Shares are being acquired solely for the account of
Shareholder, for investment purposes only, and not with a view to, or for sale
in connection with, any distribution thereof and with no intention of
distributing or reselling any part of the Citadel Shares.
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(b) Shareholder agrees not to dispose of his Citadel Shares or any
portion thereof unless the intended disposition is permissible and does not
violate the Securities Act or any applicable state securities laws, or the
rules and regulations thereunder.
(c) Shareholder acknowledges that Citadel has made all
documentation pertaining to all aspects of this transaction available to him,
and has offered him an opportunity to discuss this transaction with the
officers of Citadel.
(d) Shareholder has relied solely upon independent investigations
made by Shareholder.
4.19 Survivability; Limitations. Notwithstanding any other provisions
of this Agreement to the contrary, the representations and warranties of
Shareholder shall expire, and no action may be commenced with respect thereto,
one year after the Closing Date. No claim may be maintained with respect to
the representations and warranties of this Section 4 except to the extent SAN
or Citadel shall have incurred actual out of pocket damages in excess of
$5,000 per claim and $25,000 in aggregate.
ARTICLE 5
COVENANTS
5.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsels, accountants, auditors, and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments, and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request. If the transaction contemplated hereby is not
completed, all documents received by each party and/or its attorneys and
accountants, auditors or other authorized representatives shall be returned to
the other party who provided same upon request and all information received in
connection with this transaction concerning the business of the other parties
shall be kept confidential and may not be used for any purpose. The parties
hereto, their directors, employees, agents and representatives shall not
disclose any of the information described above unless such information is
already disclosed to the public, without the prior written consent of the
party to which the confidential information pertains. Each party shall take
such steps as are necessary to prevent disclosure of such information to
unauthorized third parties.
5.2 Conduct of Business. Prior to the Closing, SAN and CoComp shall
each conduct its business in the normal course, and shall not sell, pledge, or
assign any assets, without the prior written approval of the other party,
except in the regular course of business or as contemplated in previously
disclosed contractual obligations. Neither SAN nor CoComp shall amend its
Articles of Incorporation or Bylaws, declare dividends, redeem or sell stock
or other securities, incur additional or newly-funded liabilities, acquire or
dispose of fixed assets, change employment terms, enter into any material or
long-term contract, guarantee obligations of any third party, settle or
discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction other than in the regular course of business except as otherwise
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contemplated herein. Prior to the Closing, the Compaq Master Alliance
Agreement shall be assigned to Mr. Chisesi and Mr. Duckworth, and CoComp shall
have no continuing rights or obligations thereunder.
5.3 Tax Returns of 1999 and Short Period. The former shareholders of
CoComp shall be responsible for preparing and filing federal and applicable
state S-Corporation income tax returns for CoComp for the calendar year ended
December 31, 1999, and for the short period ending on the closing date (the
"S-Corporation Returns"). SAN shall cooperate in causing CoComp to execute
such returns and returning the executed forms to the Shareholders for filing.
SAN shall not amend any S-Corporation Return without the advance written
consent of the Shareholder.
5.4 Guarantees. SAN and Citadel will use their best efforts to cause
Shareholder to be released from any personal guarantees of CoComp obligations.
5.5 Public Information. Citadel will maintain current periodic
reporting as required under the Securities Exchange Act of 1934 and with all
other regulatory or self-regulatory organizations and will take such other
actions as may be required such that Shareholder can utilize the provisions
of Rule 144 of the Securities Act and similar state laws after the Closing.
5.6 Information and Reporting. So long as Shareholder is a shareholder
of Citadel, SAN and Citadel shall provide monthly balance sheets and profit
and loss statements of SAN and Citadel to Shareholder on the 15th day of the
following month (which shall be quarterly once all amounts due Shareholder
under this Agreement have been paid). Shareholder shall be entitled to such
other information from SAN and Citadel as he shall reasonably request from
time to time during such period.
ARTICLE 6
CONDITIONS PRECEDENT TO SHAREHOLDER'S PERFORMANCE
6.1 Conditions. The obligations of the Shareholder hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 5. The Shareholder may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by the Shareholder of
any other condition of or any of the Shareholder's other rights or remedies,
at law or in equity, if SAN shall be in default of any of their
representations, warranties, or covenants under this Agreement.
6.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by SAN and Citadel in this
Agreement or in any written statement that shall be delivered to CoComp and/or
Shareholder by SAN and Citadel under this Agreement shall be true and accurate
on and as of the Closing Date as though made at that time.
6.3 Performance. SAN and Citadel shall have performed, satisfied, and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it, on or before the Closing
Date.
6.4 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against SAN or Citadel on or before the Closing Date.
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6.5 Releases. Shareholder shall have been released from any personal
guarantees of CoComp obligations.
ARTICLE 7
CONDITIONS PRECEDENT TO SAN'S PERFORMANCE
7.1 Conditions. SAN's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in
this Article 6. SAN may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by SAN of any other condition of or any of
SAN's rights or remedies, at law or in equity, if the Shareholder shall be in
default of any of his representations, warranties, or covenants under this
Agreement.
7.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by Shareholder in this Agreement
or in any written statement that shall be delivered to SAN by Shareholder
under this Agreement shall be substantially true and accurate on and as of the
Closing Date as though made at that time.
7.3 Performance. Shareholder, Brent Duckworth and Larry Chisesi shall
have performed, satisfied, and complied with all covenants, agreements, and
conditions required by their respective Agreements to be performed or complied
with by them, on or before the Closing Date.
7.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against any party hereto on or before the Closing
Date.
ARTICLE 8
CLOSING
8.1 Closing. The Closing of this transaction shall be held at the
offices of Krys Boyle Freedman Scott & Sawyer, P.C., 600 Seventeenth Street,
Suite 2700 South Tower, Denver, Colorado 80202, or such other place as shall
be mutually agreed upon, on such date as shall be mutually agreed upon by the
parties, but in no event shall the Closing be later than January 31, 2000. At
the Closing:
8.2 Shareholder shall deliver the certificates representing the shares
of CoComp being sold pursuant to this Agreement, and such certificates will be
duly endorsed.
8.3 SAN shall deliver a certified or cashier's check payable to
Shareholder for $318,000.
8.4 SAN and Citadel shall deliver a Promissory Note covering the future
cash payments owed by SAN to Shareholder pursuant to Sections 1.4 c above.
8.5 SAN and Citadel shall deliver a signed Consent or Minutes of the
Directors of SAN of Citadel approving this Agreement and each matter to be
approved by the Directors of SAN and Citadel under this Agreement.
12
<PAGE>
ARTICLE 9
MISCELLANEOUS
9.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
9.2 No Oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but it can be changed by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
9.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future
of any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (iii) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
9.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
9.5 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings. Shareholder is making no representations and warranties
except as expressly set forth in this Agreement, including, without
limitation, Shareholder is making no representation or providing any assurance
with regard to future prospects of the business of CoComp, its sales revenues,
profitability, employees, customers or other contractual relationships.
9.6 Choice of Law. This Agreement and its application shall be
governed by the laws of the State of Colorado, except to the extent its
conflict of laws provisions would apply the laws of another jurisdiction.
9.7 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
Shareholder:
Kent A. Shields
3910 S. Rural Road, Suite D
Tempe, Arizona 85282
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with a copy to:
Michael D. Hool
Mariseth, Weeks, McIntyre & Friedlander, P.A.
2901 North Central, Suite 200
Phoenix, Arizona 85012
SAN and Citadel:
Storage Area Networks
900 West Castleton Road
Castle Rock, Colorado 80104
with a copy to:
Jon D. Sawyer
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street, Suite 2700
Denver, Colorado 80202
Phone: (303) 893-2300
Fax: (303) 893-2882
9.8 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.9 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
9.10 Brokers. The parties hereto represent and agree that no broker
has brought about the aforementioned transaction. Each of the parties hereto
shall indemnify and hold the other harmless against any and all claims,
losses, liabilities or expenses which may be asserted against it as a result
of its dealings, arrangements or agreements with any broker or person, except
as described in this paragraph.
9.11 Announcements. SAN and Shareholder will consult and cooperate
with each other as to the timing and content of any announcements of the
transactions contemplated hereby to the general public or to employees,
customers or suppliers.
9.12 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits and Schedules provided for herein above,
including any items referenced therein or required to be attached thereto.
All such exhibits and schedules are incorporated into the provisions of this
Agreement by reference. Any material changes to the Exhibits shall be
immediately disclosed to the other party.
9.13 Attorneys Fees. The prevailing party in any action to interpret
or enforce the provisions of this Agreement shall be entitled to recover
attorneys fees and other costs and fees incurred in the investigation and
pursuit of such action.
14
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9.14 Counterparts. This Agreement may be executed by counterpart
signature pages, by facsimile or original, with each party agreeing to
promptly remit originals to the other.
9.15 Knowledge of SAN and Citadel. The term "knowledge" and similar
terms hereunder with respect to SAN and Citadel shall mean the knowledge of
L.W. Buxton or Warren Smith.
AGREED TO AND ACCEPTED as of the date first above written.
STORAGE AREA NETWORKS SHAREHOLDER:
By:/s/ Buck Buxton /s/ Kent A. Shields
Buck Buxton, President Kent A. Shields
CITADEL ENVIRONMENTAL GROUP,
INC.
By:/s/ Buck Buxton
Buck Buxton, President
15
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SCHEDULE 2
STORAGE AREA NETWORKS
("SAN")
2.4 The Officers and Directors of SAN are as follows:
Name Position
L. W. Buxton President, Treasurer and Director
Warren Smith Vice President, Secretary, Treasurer and
Director
2.12 Litigation. SAN is involved in a lawsuit filed by SAN against 3SI,
Inc., and the parties have recently reached a tentative settlement
during mediation. A copy of the proposed settlement terms has been
provided to Shareholder.
<PAGE>
SCHEDULE 3
CITADEL ENVIRONMENTAL GROUP, INC.
("Citadel")
3.3 Subsidiaries.
a) Citadel owns 621,025 shares of Alliance Medical Corporation, which
represents approximately 3% of the Alliance shares outstanding.
These shares were spun-off to the shareholders of Citadel as of
December 31, 1999. The shares will be placed in an escrow account
to be distributed once Alliance Medical Corporation is an SEC
reporting company. If this does not occur within two years, the
shares will revert back to being an asset of Citadel, unless
extended by the Board of Directors.
b) Citadel owns 100% of SAN.
3.4 Directors and Officers of Citadel:
Name Position
Louis F. Coppage Chairman of the Board
L. W. Buxton President and Director
Warren Smith Vice President and Director
Cory J. Coppage Secretary, Treasurer and Director
3.19 Material Contracts of Citadel:
None
<PAGE>
PROMISSORY NOTE
$42,000 January 21, 2000
Storage Area Networks, a Nevada corporation and Citadel Environmental
Group, Inc. (jointly and severally "Obligor"), for value received, hereby
promises to pay to the order of Kent A. Shields ("Obligee"), in lawful money
of the United States at a place to be designated in writing by Obligee, the
principal sum of Forty-Two Thousand Dollars ($42,000.00), plus interest at the
rate of 12% per annum.
The $42,000 and any unpaid accrued interest shall be due and paid on or
before June 30, 2000.
All accrued and unpaid interest will be due and payable every three
months with the first payment due April 21, 2000.
This Note may be prepaid, in whole or in part, at any time without
permission or penalty.
This Note is made in connection with that certain Purchase Agreement
dated January 21, 2000 ("Purchase Agreement").
If payment on this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State of Colorado, such payment shall be made on
the next succeeding business day.
Immediately upon the occurrence of an "Event of Default" (as defined
below), Obligee may, at its option, declare immediately due and payable the
entire unpaid principal amount of this Note, together with all interest
thereon, plus any other amounts payable at the time of such declaration
pursuant to this Note. An Event of Default shall be defined as each of the
following: (i) failure of Obligor to make any payment of principal within ten
(10) days after the due date; (ii) Obligor shall admit in writing its
inability to pay its debts as they become due, shall make a general assignment
for the benefit of creditors or shall file any petition for action for relief
under any bankruptcy, reorganization, insolvency or moratorium law, or any
other law or laws for the relief of, or relating to, debtors; (iii) an
involuntary petition shall be filed against Obligor under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws of for
the relief of, or relating to, debtors unless such petition shall be dismissed
or vacated within thirty (30) days of the date hereof; or (iv) and breach or
default by either Obligor of any obligations under the Purchase Agreement or
documents executed in connection therewith. Upon an Event of Default, unpaid
principal or interest shall bear interest from the date of the Event of
Default until paid in full at the rate of 18% per annum.
If Obligee should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Obligor, Obligor shall be liable to pay to holder immediately and without
demand all reasonable costs and expenses of collection incurred by Obligee,
including, without limitation, reasonable attorney fees, whether or not suit
or other action or proceeding be instituted and specifically including but not
limited to collection efforts that may be made through a bankruptcy court.
EXHIBIT A
<PAGE>
This Note shall be construed and governed by the laws of the State of
Colorado without regard to otherwise applicable principles of conflicts of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. No modification hereof shall be binding or
enforceable against Obligee unless approved in writing by Obligee.
Obligor hereby waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand. To the extent permitted by law, Obligor hereby
waives and releases all errors, defects and imperfections in any proceedings
instituted by Obligee under the terms of this Note. The rights and privileges
of Obligee under this Note shall inure to the benefit of his heirs, personal
representatives and assigns. All representations, warranties and agreements
of Obligor made in connection with this Note shall bind Obligor's successors
and assigns. The rights and remedies of Obligee under this Note shall be in
addition to any other rights and remedies available to Obligee at law or in
equity, all of which may be exercised singly or concurrently. The parties
agree to the exclusive jurisdiction of the federal and state courts located in
Denver, Colorado in connection with any matter arising hereunder, including
the collection and enforcement hereof, except as the Obligee may otherwise
elect. If any provision in this Note is found by a Court of competent
jurisdiction to be invalid in any respect, such finding shall not effect or
release the absolute obligation to repay the principal sum owed hereunder on
or before the Maturity Date.
IN WITNESS WHEREOF, intending to be legally bound, Obligor has duly
executed this Promissory Note the day and year first above written by its duly
authorized officer.
STORAGE AREA NETWORKS
By:/s/ Buck Buxton
Name: Buck Buxton
Title: President
CITADEL ENVIRONMENTAL GROUP, INC.
By:/s/ Buck Buxton
Name: Buck Buxton
Title: President
AGREEMENT
THIS AGREEMENT is made the 21st day of December 1999, by and between
Storage Area Networks, a Nevada corporation ("SAN"), Citadel Environmental
Group, Inc. ("Citadel") and Steve Davis, an individual ("Davis").
WHEREAS, Citadel desires to acquire all of the issued and outstanding
shares of common stock of CoComp, Inc., a Colorado corporation ("CoComp") from
the three CoComp shareholders, and concurrently with the closing of that
transaction Citadel desires to compensate Davis for his work in connection
with the transaction; and
WHEREAS, SAN desires to make certain representations, warranties,
covenants and agreements in connection with the transaction.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
COMPENSATION
1.1 Closing of CoComp Transaction. On the Closing of Citadel's purchase
of all of the issued and outstanding shares of common stock of CoComp, Citadel
agrees to pay to Davis $125,000 in cash and to deliver to Davis a Promissory
Note in the form attached hereto as Exhibit 1.1, in the amount of $125,000
which is due on June 30, 2000.
1.2 Stock of Citadel Environmental Group, Inc. ("Citadel"). Within 15
days following the effective date of the proposed reverse split of Citadel
(which acquired SAN on January 7, 2000), SAN shall cause Citadel to issue to
Davis shares of Citadel's common stock having a value of $500,000 based on the
lower of the closing price on January 21, 2000, or the average closing price
for the ten trading days prior to the date of issuance. Citadel agrees to use
its best efforts to complete the proposed reverse split as soon as practicable
following the Closing. In the event that the reverse split is not effective
by July 21, 2000, Davis will have the option to receive, in lieu of the
shares, a promissory note signed by Citadel and SAN and payable to Davis in
the principal amount of $500,000. The note will bear interest at the rate of
12% per annum commencing January 21, 2000, and in the event of default, the
note will bear interest at the rate of 18%, similar to the default provisions
of Exhibit A. One-half of the principal plus accrued interest will be due on
January 21, 2001, and the other one-half plus accrued interest will be due on
January 21, 2002. The note will be convertible into common stock at a price
equal to the lower of the closing price on January 21, 2000, or the average
closing price for the twenty trading days prior to the date the note holder
notifies the Company of his intention to convert.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SAN
Except as disclosed in Schedule 2 which is attached hereto and
incorporated herein by reference, SAN hereby represents and warrants to Davis:
<PAGE>
2.1 Organization. SAN is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification. SAN has entered into a binding agreement with Citadel
Environmental Group, Inc. pursuant to which SAN will become a wholly owned
subsidiary of Citadel in a transaction scheduled to close on or about January
7, 2000. A copy of the Agreement is attached as Exhibit 2.1.
2.2 Capital. The authorized capital stock of SAN consists of 20,000,000
shares of Common Stock, $.005 par value, of which 2,400,000 are currently
issued and outstanding and 5,000,000 shares of Preferred Stock, $.0001 par
value, of which no shares are issued and outstanding. All of the issued and
outstanding shares of SAN are duly authorized, validly issued, fully paid, and
nonassessable. Except for common stock purchase warrants to purchase a total
of 600,000 shares of Common Stock, there are no outstanding subscriptions,
options, rights, warrants, debentures, instruments, convertible securities, or
other agreements or commitments obligating SAN to issue or to transfer from
treasury any additional shares of its capital stock of any class.
2.3 Subsidiaries. SAN does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation) except as disclosed in Schedule 2.
2.4 Directors and Officers. Schedule 2 contains the names and titles of
all directors and officers of SAN as of the date of this Agreement.
2.5 Financial Statements. SAN has delivered to CoComp unaudited balance
sheets and statements of operations for the year ended November 30, 1999 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated. The Financial Statements accurately set out and describe
the financial condition of SAN as of November 30, 1999.
2.6 Absence of Changes. Since November 30, 1999, except for changes in
the ordinary course of business which have not in the aggregate been
materially adverse, to the best of SAN's knowledge, SAN has conducted its
business only in the ordinary course and has not experienced or suffered any
material adverse change in the condition (financial or otherwise), results of
operations, properties, business or prospects of SAN or waived or surrendered
any claim or right of material value.
2.7 Absence of Undisclosed Liabilities. Neither SAN nor any of its
properties or assets are subject to any material liabilities or obligations of
any nature, whether absolute, accrued, contingent or otherwise and whether due
or to become due, that are not reflected in the financial statements presented
to CoComp or have otherwise been disclosed to CoComp.
2.8 Tax Returns. Within the times and in the manner prescribed by law,
SAN has filed all federal, state and local tax returns required by law, or has
filed extensions which have not yet expired, and has paid all taxes,
assessments and penalties due and payable.
2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, CoComp
2
<PAGE>
and/or its attorneys shall have the opportunity to meet with accountants and
attorneys to discuss the financial condition of SAN. SAN shall make available
to CoComp and/or its attorneys all books and records of SAN.
2.10 Trade Names and Rights. SAN does not use any trademark, service
mark, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
2.11 Compliance with Laws. To the best of SAN's knowledge, SAN has
complied with, and is not in violation of, applicable federal, state or local
statutes, laws and regulations (including, without limitation, any applicable
building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business, except for matters which would
not have a material affect on SAN or its properties.
2.12 Litigation. SAN is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation
pending or, to the best knowledge of SAN, threatened against or affecting SAN
or its business, assets or financial condition, except for matters which would
not have a material affect on SAN or its properties. SAN is not in default
with respect to any order, writ, injunction or decree of any federal, state,
local or foreign court, department, agency or instrumentality applicable to
it. Except as set forth on Schedule 2, SAN is not engaged in any lawsuit to
recover any material amount of monies due to it.
2.13 Authority. SAN has full corporate power and authority to enter
into this Agreement. The board of directors of SAN has taken all action
required to authorize the execution and delivery of this Agreement by or on
behalf of SAN and the performance of the obligations of SAN under this
Agreement. No other corporate proceedings on the part of SAN are necessary to
authorize the execution and delivery of this Agreement by SAN in the
performance of its obligations under this Agreement. This Agreement is, when
executed and delivered by SAN, and will be a valid and binding agreement of
SAN, enforceable against SAN in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights
generally.
2.14 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by SAN of its obligations under
this Agreement, nor the consummation of the transactions contemplated under
this Agreement will to the best of SAN's knowledge: (a) materially violate
any provision of SAN's articles of incorporation or bylaws; (b) with or
without the giving of notice or the passage of time, or both, violate, or be
in conflict with, or constitute a material default under, or cause or permit
the termination or the acceleration of the maturity of, any debt, contract,
agreement or obligation of SAN, or require the payment of any prepayment or
other penalties; (c) require notice to, or the consent of, any party to any
agreement or commitment, lease or license, to which SAN is bound; (d) result
in the creation or imposition of any security interest, lien, or other
encumbrance upon any material property or assets of SAN; or (e) violate any
material statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority to which SAN is bound or subject.
3
<PAGE>
2.15 Validity of SAN Shares. The shares Citadel Common Stock to be
delivered pursuant to this Agreement, when issued in accordance with the
provisions of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable.
2.16 Full Disclosure. None of the representations and warranties made
by SAN herein, or in any schedule, exhibit or certificate furnished or to be
furnished in connection with this Agreement by SAN, or on its behalf, contains
or will contain any untrue statement of material fact.
2.17 Assets. SAN has good and marketable title to all of its tangible
properties and such tangible properties are not subject to any material liens
or encumbrances.
2.18 Material Contracts and Obligations. Attached hereto on Schedule 2
is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which SAN is a party or by which it is bound that are material
to the conduct and operations of its business and properties, which provide
for payments to or by SAN in excess of $25,000; or which involve transactions
or proposed transactions between SAN and its officers, directors, affiliates
or any affiliate thereof. Copies of such agreements and contracts and
documentation evidencing such liabilities and other obligations have been made
available for inspection by CoComp and its counsel. All of such agreements
and contracts are valid, binding and in full force and effect in all material
respects, assuming due execution by the other parties to such agreements and
contracts.
2.19 Consents and Approvals. No consent, approval or authorization of,
or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by SAN in connection with: (a)
the execution and delivery by SAN of this Agreement; (b) the performance by
SAN of its obligations under this Agreement; or (c) the consummation by SAN of
the transactions contemplated under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF DAVIS
3.1 Investment Intent. Davis understands and acknowledges that the
shares of Citadel Common Stock (the "Citadel Shares") are being offered in
reliance upon the exemption provided in Section 4(2) of the Securities Act of
1933 (the "Securities Act") for non-public offerings; and Davis makes the
following representations and warranties with the intent that the same may be
relied upon in determining the suitability of Shareholder as a purchaser of
securities:
(a) The Citadel Shares are being acquired solely for the account of
Davis, for investment purposes only, and not with a view to, or for sale in
connection with, any distribution thereof and with no intention of
distributing or reselling any part of the Citadel Shares.
(b) Davis agrees not to dispose of its Citadel Shares or any
portion thereof unless and until counsel for Citadel shall have determined
that the intended disposition is permissible and does not violate the
Securities Act or any applicable state securities laws, or the rules and
regulations thereunder.
4
<PAGE>
(c) Davis acknowledges that Citadel has made all documentation
pertaining to all aspects of this transaction available to him, and has
offered him an opportunity to discuss this transaction with the officers of
Citadel.
(d) Davis has relied solely upon independent investigations made by
Davis.
ARTICLE 4
COVENANTS
4.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsels, accountants, auditors, and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments, and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request. If the transaction contemplated hereby is not
completed, all documents received by each party and/or its attorneys and
accountants, auditors or other authorized representatives shall be returned to
the other party who provided same upon request. The parties hereto, their
directors, employees, agents and representatives shall not disclose any of the
information described above unless such information is already disclosed to
the public, without the prior written consent of the party to which the
confidential information pertains. Each party shall take such steps as are
necessary to prevent disclosure of such information to unauthorized third
parties.
4.2 Employment Agreement with Davis. Commencing on the Closing, SAN
agrees to enter into an executive employment agreement with Davis which
agreement will contain terms and conditions mutually agreeable to the parties.
ARTICLE 5
CONDITIONS PRECEDENT TO CITADEL'S PERFORMANCE
5.1 Conditions. Citadel's obligations hereunder shall be subject to the
satisfaction, at or before the Closing, of all the conditions set forth in
this Article 5. Citadel may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by Citadel of any other condition of or
any of Citadel's rights or remedies, at law or in equity.
5.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by Davis in this Agreement or in
any written statement that shall be delivered to Citadel by Davis under this
Agreement shall be true and accurate on and as of the Closing Date as though
made at that time.
5.3 Performance. Davis shall have performed, satisfied, and complied
with all covenants, agreements, and conditions required by this Agreement to
be performed or complied with by him, on or before the Closing Date.
5.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against any party hereto on or before the Closing
Date.
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5.5 Closing of CoComp Transaction. The transaction in which Citadel is
purchasing all of the issued and outstanding common stock of CoComp shall have
closed.
ARTICLE 6
CLOSING
6.1 Closing. The Closing of this transaction shall be held at the
offices of Krys Boyle Freedman Scott & Sawyer, P.C., 600 Seventeenth Street,
Suite 2700 South Tower, Denver, Colorado 80202, or such other place as shall
be mutually agreed upon, on such date as shall be mutually agreed upon by the
parties, but in no event shall the Closing be later than January 31, 2000. At
the Closing:
6.2 Citadel shall deliver a certified or cashier's check payable to
Davis for $125,000.
6.3 Citadel shall deliver a Promissory Note in the amount of $125,000 in
the form attached hereto as Exhibit 1.1 which is due on June 30, 2000.
ARTICLE 7
MISCELLANEOUS
7.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
7.2 No Oral Change. This Agreement and any provision hereof, may not be
waived, changed, modified, or discharged orally, but it can be changed by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
7.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future
of any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (iii) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
7.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
7.5 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings.
7.6 Choice of Law. This Agreement and its application shall be governed
by the laws of the State of Colorado, except to the extent its conflict of
laws provisions would apply the laws of another jurisdiction.
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7.7 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
Steve Davis:
Steve Davis
_________________
_________________
with a copy to:
Patrick S. Scobie
Scobie and Modang, LLC
1660 S. Albion Street, Suite 918
Denver, Colorado 80222
SAN and Citadel:
Storage Area Networks
900 West Castleton Road
Castle Rock, Colorado 80104
with a copy to:
Jon D. Sawyer
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street, Suite 2700
Denver, Colorado 80202
Phone: (303) 893-2300
Fax: (303) 893-2882
7.8 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
7.9 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
7.10 Brokers. The parties hereto represent and agree that no broker has
brought about the aforementioned transaction. Each of the parties hereto
shall indemnify and hold the other harmless against any and all claims,
losses, liabilities or expenses which may be asserted against it as a result
of its dealings, arrangements or agreements with any broker or person, except
as described in this paragraph.
7.11 Announcements. SAN and CoComp will consult and cooperate with each
other as to the timing and content of any announcements of the transactions
contemplated hereby to the general public or to employees, customers or
suppliers.
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7.12 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for herein above, including any
items referenced therein or required to be attached thereto. Any material
changes to the Exhibits shall be immediately disclosed to the other party.
AGREED TO AND ACCEPTED as of the date first above written.
STORAGE AREA NETWORKS
/s/ Steve Davis By:/s/ L. W. Buxton
Steve Davis L. W. Buxton, President
CITADEL ENVIRONMENTAL GROUP, INC.
By:/s/ L. W. Buxton
L. W. Buxton, President
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SCHEDULE 2
STORAGE AREA NETWORKS
("SAN")
2.4 The Officers and Directors of SAN are as follows:
Name Position
L. W. Buxton President, Treasurer and Director
Warren Smith Vice President, Secretary, Treasurer and
Director
2.12 Litigation. SAN is involved in a lawsuit filed by SAN against 3SI,
Inc., and the parties have recently reached a tentative settlement
during mediation. a copy of the proposed settlement terms has been
provided to Citadel.
<PAGE>
PROMISSORY NOTE
$125,000 January 21, 2000
Storage Area Networks, a Nevada corporation ("Obligor"), for value
received, hereby promises to pay to the order of Steve Davis ("Obligee"), in
lawful money of the United States at a place to be designated in writing by
Obligee, the principal sum of One Hundred Twenty-Five Thousand Dollars
($125,000.00), plus interest at the rate of 12% per annum.
The $125,000 shall be paid on or before June 30, 2000.
All accrued and unpaid interest will be due and payable every three
months with the first payment due April 21, 2000.
This Note may be prepaid, in whole or in part, at any time without
permission or penalty.
If payment on this Note shall become due on a Saturday, Sunday or public
holiday under the laws of the State of Colorado, such payment shall be made on
the next succeeding business day.
Immediately upon the occurrence of an "Event of Default" (as defined
below), Obligee may, at its option, declare immediately due and payable the
entire unpaid principal amount of this Note, together with all interest
thereon, plus any other amounts payable at the time of such declaration
pursuant to this Note. An Event of Default shall be defined as each of the
following: (i) failure of Obligor to make any payment of principal within ten
(10) days after the due date; (ii) Obligor shall admit in writing its
inability to pay its debts as they become due, shall make a general assignment
for the benefit of creditors or shall file any petition for action for relief
under any bankruptcy, reorganization, insolvency or moratorium law, or any
other law or laws for the relief of, or relating to, debtors; or (iii) an
involuntary petition shall be filed against Obligor under any bankruptcy,
reorganization, insolvency or moratorium law, or any other law or laws of for
the relief of, or relating to, debtors unless such petition shall be dismissed
or vacated within thirty (30) days of the date hereof. Upon an Event of
Default, unpaid principal or interest shall bear interest from the date of the
Event of Default until paid in full at the rate of 18% per annum.
If Obligee should institute collection efforts, of any nature whatsoever,
to attempt to collect any and all amounts due hereunder upon the default of
Obligor, Obligor shall be liable to pay to holder immediately and without
demand all reasonable costs and expenses of collection incurred by Obligee,
including, without limitation, reasonable attorney fees, whether or not suit
or other action or proceeding be instituted and specifically including but not
limited to collection efforts that may be made through a bankruptcy court.
This Note shall be construed and governed by the laws of the State of
Colorado without regard to otherwise applicable principles of conflicts of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. No modification hereof shall be binding or
enforceable against Obligee unless approved in writing by Obligee.
Obligor hereby waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand. To the extent permitted by law, Obligor hereby
waives and releases all errors, defects and imperfections in any proceedings
instituted by Obligee under the terms of this Note. The rights and privileges
<PAGE>
<PAGE>
of Obligee under this Note shall inure to the benefit of his heirs, personal
representatives, and assigns. All representations, warranties and agreements
of Obligor made in connection with this Note shall bind Obligor's successors
and assigns. The rights and remedies of Obligee under this Note shall be in
addition to any other rights and remedies available to Obligee at law or in
equity, all of which may be exercised singly or concurrently. The parties
agree to the exclusive jurisdiction of the federal and state courts located in
Denver, Colorado in connection with any matter arising hereunder, including
the collection and enforcement hereof, except as the Obligee may otherwise
elect. If any provision in this Note is found by a Court of competent
jurisdiction to be invalid in any respect, such finding shall not effect or
release the absolute obligation to repay the principal sum owed hereunder on
or before the Maturity Date.
IN WITNESS WHEREOF, intending to be legally bound, Obligor has duly
executed this Promissory Note the day and year first above written by its duly
authorized officer.
CITADEL ENVIRONMENTAL STORAGE AREA NETWORKS
GROUP, INC.
By:/s/ Buck Buxton By:/s/ Buck Buxton
Name: Buck Buxton Name: Buck Buxton
Title: President Title: President
