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EXHIBIT 10.22
ASSET PURCHASE AGREEMENT
DATED AS OF AUGUST 31, 1998
AMONG
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
SOFTWARE CONSULTING SERVICES AMERICA, INC.,
TBQ ASSOCIATES, INC.
AND
THE HOLDERS OF ALL THE
OUTSTANDING CAPITAL STOCK
OF
TBQ ASSOCIATES, INC.
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TABLE OF CONTENTS
Page No.
ARTICLE 1 PURCHASE AND SALE...............................................................................1
1.1 Purchase and Sale of Assets.....................................................................1
1.2 Excluded Assets.................................................................................3
1.3 Obligations Assumed.............................................................................3
1.4 Closing.........................................................................................3
1.5 Purchase Price..................................................................................3
1.6 Determination and Payment of Earn-out...........................................................4
1.7 Determination of Earn-out upon Termination without Cause........................................5
1.8 Review of Earn-Out Statement....................................................................5
1.9 Allocation of Purchase Price....................................................................5
ARTICLE 2 CLOSING DELIVERIES..............................................................................5
2.1 Deliveries by Seller............................................................................5
2.2 Deliveries by Buyer.............................................................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDERS...................................6
3.1 Organization....................................................................................6
3.2 Authority Relative to this Agreement............................................................7
3.3 Consents and Approvals..........................................................................7
3.4 No Violation....................................................................................7
3.5 Litigation......................................................................................7
3.6 Compliance with Laws............................................................................8
3.7 Financial Statements............................................................................8
3.8 Purchased Assets................................................................................8
3.9 Intellectual Property...........................................................................8
3.10 Inventories.....................................................................................9
3.11 Environmental Compliance........................................................................9
3.12 Contracts.......................................................................................9
3.13 Material Changes................................................................................9
3.14 Operation of Business..........................................................................11
3.15 Restricted Securities..........................................................................12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT.............................................13
4.1 Organization...................................................................................13
4.2 Capitalization of the Parent...................................................................13
4.3 Authority Relative to this Agreement...........................................................13
4.4 Consents and Approvals.........................................................................13
4.5 No Violation...................................................................................14
4.6 Not an Investment Company......................................................................14
4.7 Financial Statements...........................................................................14
4.8 Misstatements..................................................................................14
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ARTICLE 5 ADDITIONAL AGREEMENTS AND COVENANTS............................................................14
5.1 Taxes..........................................................................................14
5.2 Public Announcements...........................................................................16
5.3 Further Assurances.............................................................................16
5.4 Preservation of Business Records...............................................................16
5.5 Confidentiality................................................................................16
5.6 Covenant Not to Compete........................................................................17
5.7 Corporate Name.................................................................................18
5.8 Limitation on Assignments......................................................................18
ARTICLE 6 INDEMNIFICATION AND LIMITATIONS ON LIABILITY...................................................18
6.1 Survival.......................................................................................18
6.2 Indemnity by Seller and the Shareholders.......................................................18
6.3 Set-off Rights of Buyer........................................................................19
6.4 Indemnity by Buyer and Parent..................................................................19
6.5 Procedures for Indemnification.................................................................20
6.6 Subrogation....................................................................................21
ARTICLE 7 MISCELLANEOUS..................................................................................22
7.1 Expenses.......................................................................................22
7.2 Notices........................................................................................22
7.3 Entire Agreement...............................................................................23
7.4 GOVERNING LAW..................................................................................23
7.5 Headings.......................................................................................23
7.6 Assignability..................................................................................23
7.7 No Third Party Beneficiaries...................................................................23
7.8 Severability...................................................................................23
7.9 Equitable Relief...............................................................................24
7.10 Counterparts...................................................................................24
7.11 Facsimile or Electronic Transmission of Documents..............................................24
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EXHIBITS AND SCHEDULES
Section Description
1.1(a) Tangible Personal Property
1.1(b) Personal Property Leases
1.1(c) Assured Contracts
1.1(d) Real Property Leases
1.1(f) Licenses
1.1(g) Proprietary Rights
1.1(j) Prepaid Items
1.2 Excluded Assets
1.5(b) TBQ Employees or Contractors
1.9 Allocation of Purchase Price
DISCLOSURE SCHEDULE
Section Description Page No.
3.3 Consents and Approvals 7
3.5 Litigation 7
3.6 Compliance with Laws 8
3.8 Purchased Assets 8
3.11 Environmental Compliance 9
3.12 Assumed Contracts 9
3.13 Conduct of Business 9
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of August 31,
1998, by and among BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC., a Delaware
corporation ("Parent"), SOFTWARE CONSULTING SERVICES AMERICA, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Buyer"), and TBQ
ASSOCIATES, INC., a Nevada corporation ("Seller"), and ALL THE UNDERSIGNED
HOLDERS OF ALL OF THE OUTSTANDING CAPITAL STOCK OF THE SELLER (the
"Shareholders").
R E C I T A L S
WHEREAS, Seller is engaged in the business of providing consulting
services and consultant staffing to users of enterprise resource planning
("ERP") software in the following specialty areas: quality management, plant
maintenance, service management and production planning for process industry
(the "Business"); and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, certain assets used or held for use by Seller in the Business;
NOW, THEREFORE, for and in consideration of the premises and the
covenants herein contained and the benefits to be derived herefrom, the parties
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Subject to the terms and conditions
contained herein and simultaneously with the execution of this Agreement, Buyer
is purchasing from Seller, and Seller is selling to Buyer, all of the right,
title and interest of Seller in and to the following assets (the "Purchased
Assets"):
(a) Tangible Personal Property. All tangible personal property
(including equipment, machinery, tools, appliances, implements, spare
parts, instruments, furniture and supplies) owned by the Seller
("Tangible Personal Property"), including, without limitation, the
Tangible Personal Property set forth on Exhibit 1.1(a);
(b) Personal Property Leases. Seller's rights in, to and under
all leases of equipment, machinery, tools, appliances, implements,
spare parts, instruments, furniture, supplies, and other items of
tangible personal property ("Personal Property Leases") which are set
forth on Exhibit 1.1(b);
(c) Assumed Contracts. Seller's rights in, to and under all
contracts, agreements, insurance policies, purchase orders and
commitments which are set forth on Exhibit 1.1(c), together with all
instruments and all documents of title representing any of the
foregoing, all
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rights in any merchandise or goods which any of the same represent, and
all rights, title, security and guaranties in favor of the Seller with
respect to any of the foregoing (the "Assumed Contracts");
(d) Real Property Leases. The leasehold estates created by,
and all rights conferred on the Seller under or by virtue of, all real
property lease agreements (such real property lease agreements are
hereinafter referred to as "Real Property Leases" and the parcels of
real property in which the Seller has a leasehold interest and that are
subject to the Real Property Leases are hereinafter referred to as
"Leased Property"), which are set forth on Exhibit 1.1(d), and any and
all estates, rights, titles and interests in, to and under all
warehouses, storage facilities, buildings, works, structures, fixtures,
landings, constructions in progress, improvements, betterments,
installations and additions constructed or located on or attached or
affixed to the Leased Property;
(e) Business Records. All books and records of the Seller
wherever located, including without limitation, all credit records,
payroll records, computer records, computer programs, contracts,
agreements, operating manuals, schedules of assets, accounting and
financial records, sales and property tax records and returns, sales
records, customer and supplier data, blueprints, specifications, plats,
maps, surveys, building and machinery diagrams, maintenance records,
personnel and labor relation records, real estate records, construction
records, environmental records and returns, files, papers, books and
all other public and confidential business records (together the
"Business Records"), whether such Business Records are in hard copy
form or are electronically or magnetically stored, excluding only the
Seller's income tax records and returns, its corporate minute book and
stock records;
(f) Licenses. To the extent assignable, all franchises,
licenses, permits, certificates, approvals and other authorizations
from governmental authorities, software developers, manufacturers or
other persons which are necessary to own and operate any of the
Purchased Assets (the "Licenses"), a complete and correct list of which
is set forth on Exhibit 1.1(f);
(g) Proprietary Rights. All (i) United States and foreign
patents, patent applications, trademarks, trademark applications and
registrations, trade dress, brand names, logos, service marks, service
xxxx applications and registrations, copyrights, copyright applications
and registrations and trade names, fictitious names and assumed names
of the Seller including, without limitation, all such rights described
on Exhibit 1.1(g); (ii) proprietary data and technical, manufacturing
know-how and information (and all materials embodying such information)
of the Seller; (iii) developments, discoveries, inventions, ideas and
trade secrets of the Seller; (iv) client lists, marketing plans,
business plans, and client information; and (v) covenants by others not
to compete, rights and privileges of the Seller used in the conduct of
its Business, rights to exclusive use and rights to xxx for past
infringement with respect to any item described in this Section 1.1(g)
(all of the foregoing, collectively, "Proprietary Rights");
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(h) Telephone Numbers. All of the Seller's right, title and
interest in, to and under all telephone numbers used by the Seller and
its employees, including all extensions thereto;
(i) Certain Rights of the Seller. All rights in, to and under
all representations, warranties, covenants, guaranties made or provided
by third parties to or for the benefit of the Seller with respect to
any of the other Purchased Assets and all rights, privileges, claims,
causes of action and options of the Seller relating to the Purchased
Assets;
(j) Prepaid Items. All of the Seller's prepaid expenses,
prepaid insurance, deposits and other similar items ("Prepaid Items"),
a correct and complete list of which items is attached as Exhibit
1.1(j); and
(k) Goodwill. All goodwill with respect to the Business and
operations of the Seller.
1.2 Excluded Assets. Notwithstanding Section 1.1 hereof, the following
assets (the "Excluded Assets") are not included in the Purchased Assets even
though they might be deemed to be used, or held for use, in connection with the
Business:
(a) All cash and cash equivalents;
(b) All accounts receivable;
(c) Other assets listed on Exhibit 1.2.
1.3 Obligations Assumed. As part of the consideration for the Purchased
Assets, Buyer hereby assumes the obligations of Seller that accrue after the
Closing Date under the Personal Property Leases, the Assumed Contracts, the Real
Property Leases and the Licenses if, but only if, they are assigned or
transferred to Buyer or they are performed by the Seller for the benefit of
Buyer pursuant to Section 5.8 hereunder. Other than as specifically set forth in
this Section 1.3, Buyer expressly disclaims the assumption of, and does not
assume, any liability of any type whatsoever of Seller or in connection with any
of Seller's assets or Business operations.
1.4 Closing. The Closing (the "Closing") shall occur on the date hereof
(the "Closing Date") immediately following the execution of this Agreement, at
the offices of Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx in Houston,
Texas. Closing documents will be delivered through the use of the mail or other
delivery services. No parties are required to be in attendance at the Closing.
The parties may agree in writing on another date, time or place for the Closing.
At the Closing, the parties will deliver or cause to be delivered the documents
described in Article 2 below.
1.5 Purchase Price. In consideration of the delivery of the Purchased
Assets, Parent and Buyer agree to pay and deliver to Seller at the Closing (as
defined below) the Purchase Price, which shall be in the following manner:
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(a) Closing Consideration. $1,450,000 shall be payable to
Seller by wire transfer or other immediately available funds on the
Closing Date; and
(b) Additional Consideration. The Seller will be paid
additional consideration (the "Earn-out") based on the performance of
the Business for calendar year 1999 (the "Earn-out Period"), if the
Seller meets the following conditions: (i) the Revenue, as herein
defined, of the Business for the Earn-out Period is in excess of
$3,000,000 and (ii) the Gross Margin, as herein defined, of the
Business for the Earn-out Period is in excess of 30%. "Revenue" shall
equal the sum of the revenue generated for the Buyer from the following
sources: (i) the Assumed Contracts even if the revenue is derived from
the performance of services outside the scope of the Business, (ii) any
subsequent purchase orders or contracts for the services of
Shareholders and the persons named on Schedule 1.5(b), even if the
revenue is derived from the performance of services outside the scope
of the Business, (iii) any purchase orders or contracts, within or
outside the scope of the Business, for the services of new employees or
contractors of the Buyer who are identified to the Buyer by an employee
or contractor working within the scope of the Business, and (iv) any
purchase orders or contracts, within or outside the scope of the
Business, that arise from introductions provided to the Buyer by any
employee or contractor working within the scope of the Business. The
"Gross Margin" of the Business shall be the difference between the
amount of Revenue and the cost of goods and services provided by the
Business or other business unit from which Revenue was derived during
any period. For purposes of determining the Earn-out, Gross Margin
shall be calculated by dividing Gross Income, as defined herein, by
Revenue and expressing the result as a percentage. "Gross Income" shall
be equal to the difference between (i) Revenue minus (ii) the sum of
all material and labor costs incurred, and all variable overhead
reasonably related to the generation of Revenue, including (A) gross
salaries and bonuses of all employees, (B) all federal and state
payroll and unemployment taxes (including employer's portion), (C)
travel and housing costs paid with respect to employees providing
services to customers, (D) the allocated cost of benefits to employees
and (E) reimbursable expenses to employees, but specifically excluding
any allocation of Buyer's administrative expenses.
1.6 Determination and Payment of Earn-out. If the conditions set forth
in Section 1.5 for payment of the Earn-out are satisfied, the amount of the
Earn-out shall be determined as follows:
(a) If Revenue is $4,000,000 or more during the Earn-out
Period, the Earn-out shall be an amount equal to $1,100,000;
(b) If Revenue is between $3,000,000 and $4,000,000 during the
Earn-out Period, the Earn-out shall be an amount equal to the product
of 1.10 multiplied by the difference resulting from subtracting
$3,000,000 from Revenue.
Subject to the provisions in Section 1.8 hereof, payment of the amount
of the Earn-out will be paid to Seller within sixty (60) days following the last
day of the Earn-out Period (the "Earn-out Date") in validly issued fully paid
and non assessable shares of common stock, $.001 par value per
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share, of the Parent (the "Parent Common Stock") at the Market Price; provided
however, the Parent shall have the right to pay the Earn-out in cash if the
Market Price of the Parent Common Stock is less than $10.00 per share. The
"Market Price" shall be deemed to be the average of the daily closing price of
the Parent Common Stock as reported by NASDAQ during the ten consecutive trading
days ending on and including the day that is two trading days prior to the last
day of the Earn-out Period.
1.7 Determination of Earn-out upon Termination without Cause. If any
Shareholder's employment by the Buyer is terminated without "Cause" (as defined
in such Shareholder's Employment Agreement with Buyer) prior to the end of the
Earn-out Period, the Revenue for purposes of determining the Earn-out with
respect to such terminated Shareholder pursuant to Section 1.6 hereof shall be
determined by summing (i) the actual Revenue for the Earn-out Period and (ii)
the Revenue attributable to the terminated Shareholder on an annualized basis;
and then subtracting the Revenue attributable to the terminated Shareholder
prior to the date of termination of his employment and included in the Revenue.
1.8 Review of Earn-Out Statement. Buyer shall prepare and deliver to
Seller, on or before the Earn-out Date, a statement (the "Earn-out Statement")
setting forth the calculation of the Earn-out. Seller shall have the right to
review the Earn-out Statement (and supporting work papers) and provide written
notice to Buyer of Seller's objections with respect to any error, omission or
other discrepancy in the Earn-out Statement (the "Discrepancy Notice") not later
than 20 days following Seller's receipt of the Earn-out Statement. Buyer and
Seller shall work together in good faith to resolve any such dispute and agree
on the final Earn-out Statement. In the event that Buyer and Seller cannot agree
on the final Earn-out Statement within 10 days after delivery of Seller's
Discrepancy Notice, Buyer and Seller shall refer the disputed issue or issues to
a national independent public accounting firm (other than the regular
accountants for any party or the accountants who prepared the Earn-out
Statement) which is reasonably acceptable to each party (the "Arbitrating
Accountants") within 15 days following delivery of Seller's Discrepancy Notice.
The Arbitrating Accountants shall be instructed to render a decision, which
shall be binding upon both parties, within 20 days. Each party shall be entitled
to present any information or analysis concerning the matter in good faith to
the Arbitrating Accountants with a copy provided to the other party. Buyer and
Seller shall each bear their own fees and expenses, and the fees and expenses of
the Arbitrating Accountants shall be shared equally by Buyer and Seller.
1.9 Allocation of Purchase Price. Buyer and Seller shall report the
allocation of the Purchase Price among the Purchased Assets as provided on
Exhibit 1.9.
ARTICLE 2
CLOSING DELIVERIES
2.1 Deliveries by Seller. Simultaneously with the execution of this
Agreement, Seller is delivering to Buyer the following:
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(a) A xxxx of sale, assignment and assumption agreement
executed by Seller conveying all of the Purchased Assets to Buyer;
(b) A legal opinion of Lippenberger, Thompson, Welch, Xxxxxx &
Xxxxxxx LLP, counsel to Seller;
(c) Employment Agreements between Buyer and each of the
Shareholders shall execute and deliver an employment agreement with
Buyer, effective as of the Closing Date;
(d) Any consents, waivers, approvals, exemptions,
authorizations or notices required by any third party, court,
administrative agency or other governmental or regulatory authority in
accordance with Section 3.3; and
(e) Any other documents, certificates, instruments, agreements
and writings required to be delivered by Seller at the Closing pursuant
to this Agreement and such conveyances and instruments as may be
necessary or appropriate to convey the Purchased Assets to Buyer.
2.2 Deliveries by Buyer. Simultaneously with the execution of this
Agreement, Buyer is delivering to Seller the following:
(a) The Closing Consideration in the manner set forth in
Section 1.5;
(b) A xxxx of sale, assignment and assumption agreement
executed by Buyer under which Buyer will assume the Personal Property
Leases, the Assumed Contracts, the Real Property Leases and the
Licenses;
(c) A legal opinion of Chamberlain, Hrdlicka, White, Xxxxxxxx
& Xxxxxx, counsel to Buyer; and
(d) The other documents, instruments and writings required to
be delivered by Buyer at the Closing pursuant to this Agreement or
otherwise required in connection herewith.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE SHAREHOLDERS
Seller and the Shareholders represent and warrant to Buyer and Parent
as set forth below:
3.1 Organization. Seller (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, (ii) has
the requisite corporate power to own, lease and operate its properties and
conduct its business as it is presently being conducted, and (iii) is duly
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qualified to conduct business in and is in good standing in each state where the
ownership of its assets or the conduct of its business requires qualification.
3.2 Authority Relative to this Agreement. Seller has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Seller and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Seller and no other corporate proceedings on the part of Seller are
necessary. This Agreement has been duly and validly executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally and to the effect of
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
3.3 Consents and Approvals. The execution and delivery of this
Agreement by Seller, and performance by Seller of its obligations hereunder, do
not require Seller to obtain any consent, waiver, approval, exemption,
authorization or other action of, or make any filing with or give any notice to,
any third party or any court, administrative agency or other governmental or
regulatory authority or any other Person, except (i) as disclosed in Section 3.3
of the Disclosure Schedule previously provided to the Parent and Buyer by the
Seller (the "Disclosure Schedule"). "Person" shall mean an individual,
partnership, corporation, limited liability company, association, joint stock
company, trust, joint venture, unincorporated organization, or governmental
entity (or any department, agency or political subdivision thereof).
3.4 No Violation. Assuming all consents, approvals, waivers,
exemptions, authorizations and other actions described in Section 3.3 of the
Disclosure Schedule have been obtained or taken, the execution and delivery of
this Agreement by Seller, and the performance by Seller of its obligations
hereunder, do not (i) conflict with or result in a breach of the charter or
bylaws of Seller; (ii) result in the imposition of any mortgage, pledge, lien,
charge, security interest or other encumbrance (a "Lien") on the Purchased
Assets; (iii) result in, or constitute an event which with the passage of time
or giving of notice would be, a breach, violation or default (or give rise to
any right of termination, cancellation or acceleration) under any contract or
agreement to which Seller is a party or is bound; or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Seller, in
each such case where such breach, violation, conflict, default or Lien could
reasonably be expected to have a Material Adverse Effect on the Purchased
Business. The term "Material Adverse Effect" or "Material Adverse Change" shall
mean an adverse effect on or change of the properties, assets, financial
position, results of operations, long-term debt, other indebtedness, cash flows
or contingent liabilities of the Seller in an amount of $10,000.00 or more.
3.5 Litigation. Except as set forth in Section 3.5 of the Disclosure
Schedule, (i) there are no actions, suits, claims, arbitration proceedings or
governmental investigations or inquiries pending or threatened to the knowledge
of Seller or Shareholders, (A) against Seller or any of its affiliates seeking
to prevent or delay the consummation of the transactions contemplated hereby, or
(B) against Seller or its officers, directors or employees which, individually
or in the aggregate, could reasonably
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be expected to have a Material Adverse Effect on the Purchased Business, and
(ii) there are no judgments, decrees, injunctions, orders or consent orders of
any court, governmental authority or arbitrator issued in any proceeding to
which Seller or any of the Shareholders is or was a party which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on the Purchased Business.
3.6 Compliance with Laws. Except as set forth in Section 3.6 of the
Disclosure Schedule, (i) Seller is in compliance with all laws, ordinances,
regulations, orders, judgment and decrees applicable to the operation of the
Purchased Assets as currently operated, where the failure to be in such
compliance, singularly or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on the Purchased Business; and (ii) neither Seller nor
any of the Shareholders has received any notice of, or citation for, any
violation of any law, regulation or order which has not been resolved, which
notice or citation relates to the ownership or operation of the Purchased Assets
and the violation of which law, regulation or order could reasonably be expected
to have a Material Adverse Effect on the Purchased Business.
3.7 Financial Statements. Seller has delivered to Buyer copies of the
following financial statements of Seller: (i) a balance sheet as of December 31,
1997; (ii) a balance sheet as of July 31, 1998 ("Balance Sheet Date"); and (iii)
an income statement for the six month period ended July 31, 1998. (Such
financial statements are collectively referred to herein as the "Financial
Statements".) Except as set forth in the notes to such financial statements,
such financial statements have been prepared from Seller's records and fairly
present, on a cash basis, in all material respects, the financial condition of
Seller as of the dates indicated therein and the results of its operations for
the periods indicated therein. To the best of its knowledge, Seller does not
have any liabilities or obligations of a type that should be included in or
reflected in such financial statements if prepared in accordance with generally
accepted accounting principals ("GAAP"), whether related to tax or non-tax
matters, accrued or contingent, due or not yet due, liquidated or unliquidated,
or otherwise, except as and to the extent disclosed or reflected in such
financial statements or Section 3.7 of the Disclosure Schedule.
3.8 Purchased Assets. The Purchased Assets and the Excluded Assets
constitute all of the assets used or held for use by Seller in the conduct of
the Business. Seller has good title to all Purchased Assets, and all such
property is owned free and clear of any Lien, other than the property held under
the Personal Property Leases. Except as set forth on Section 3.8 of the
Disclosure Schedule, to the best of Seller's knowledge each item of tangible
personal property included in the Purchased Assets is in good operating
condition and repair, normal wear and tear excepted.
3.9 Intellectual Property. Neither Seller, Shareholders, nor any of its
or their affiliates has received any notice from any Person pertaining to or
challenging the right of Seller to use any of the patents, trademarks, service
marks, trade names, copyrights, other proprietary intellectual property rights
and applications for registration and registrations thereof that are used or
held for use in the Purchased Business (the "Intellectual Property"). Seller
owns the Intellectual Property free and clear of Liens. To the knowledge of
Seller and Shareholders, (i) the Intellectual Property does not infringe upon
and is free of conflict with the rights of any other Person, trade name or
trademark of another
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and (ii) the conduct of the Purchased Business does not conflict with, infringe
on, or otherwise violate any copyright, trade secret, or patent rights of
others.
3.10 Inventories. All items of inventory included, if any, in the
Purchased Assets are merchantable, or suitable and usable for the production or
completion of merchantable products, for sale in the ordinary course of business
as first quality goods, and none of such items is obsolete or below standard
quality.
3.11 Environmental Compliance. Except as set forth in Section 3.11 of
the Disclosure Schedule,
(a) the operation of the tangible personal property included
in the Purchased Assets does not involve the use of any material,
pollutant, or waste regulated as of the date hereof under any federal,
state, local or foreign law, statute, ordinance, regulation, rule,
order, requirement or agreement with any governmental authority in
effect in any and all jurisdictions in which the Purchased Assets are
located relating to the protection, preservation or restoration of the
environment or conserving or protecting the environment, wildlife, or
natural resources ("Hazardous Materials"); and
(b) there is no proceeding pending against Seller,
Shareholders or any of its or their affiliates by any federal, state,
foreign or local court, tribunal, administrative agency, department,
commission, board, or other authority or instrumentality with respect
to the presence or release of any Hazardous Materials from real
property currently or previously owned, leased or used, and which
relate to the Purchased Assets.
3.12 Contracts. Section 3.12 of the Disclosure Schedule lists all
contracts or other arrangements relating to the Business or the Purchased Assets
to which the Seller is a party or to which its assets are bound. Except as set
forth in Section 3.12 of the Disclosure Schedule, each of the above-described
contracts is in full force and effect and there is no breach or default (or any
event which, with the giving of notice or lapse of time or both, would be a
breach or default) by Seller, or to the knowledge of Seller or Shareholders, any
other party under any such contract and, to the knowledge of Seller or
Shareholders, there are no facts or circumstances which make such a breach or
default likely to occur subsequent to the date hereof. There are no finders
fees, referral fees, sales commissions or income or revenue sharing arrangements
("Fees") payable in connection with the Purchased Assets. Seller and
Shareholders shall indemnify and hold harmless Buyer and Parent from any and all
liability incurred in connection with such Fees after the Closing Date,
notwithstanding the provisions of Section 6.2 hereof.
3.13 Material Changes. Except as specifically set forth on Schedule
3.13 of the Disclosure Schedule, since the Balance Sheet Date, there has not
been:
(a) any change in the Seller's Articles of Incorporation or
Bylaws;
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(b) any Material Adverse Change of any nature whatsoever in
the financial condition, assets, liabilities (contingent or otherwise),
income, Business or prospects of the Seller;
(c) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or Business of
the Seller;
(d) any change in the authorized capital of the Seller or in
its securities outstanding or any change in its ownership interests;
(e) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
Seller;
(f) any contract or commitment entered into by the Seller or
Shareholders or any incurrence by the Seller or Shareholders or
agreement by the Seller or Shareholders to incur any liability or make
any capital expenditures in excess of $5,000, except in the normal
course of business;
(g) any work interruptions, labor grievances or claims filed,
or any event or condition of any character effecting a Material Adverse
Change in the Purchased Business or future prospects of the Seller;
(h) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, properties or rights of the Seller or requiring consent of any
party to the transfer and assignment of any such assets, properties or
rights;
(i) any purchase or acquisition, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets of
the Seller, other than in the ordinary course of business;
(j) any merger or consolidation or agreement to merge or
consolidate with or into any other corporation (except the transactions
contemplated by this Agreement);
(k) any waiver of any material rights or claims of the Seller
with respect to any contract included in the Purchased Assets;
(l) any breach, amendment or termination of any material
contract, agreement, license, permit, permit application or other right
to which the Seller is a party;
(m) any discharge, satisfaction, compromise or settlement of
any claim, lien, charge or encumbrance or payment of any obligation or
liability, contingent or otherwise, other than current liabilities as
of the Balance Sheet Date, current liabilities incurred since the
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Balance Sheet Date in the ordinary course of business and prepayments
of obligations in accordance with normal and customary past practices;
or
(n) any transaction by the Seller outside the ordinary course
of its business or prohibited hereunder.
3.14 Operation of Business. Except as set forth in Schedule 3.14 of the
Disclosure Schedule.
(a) From the Balance Sheet Date until the date hereof, Seller
has:
(i) used all reasonable efforts to maintain its
assets in their present state of repair, ordinary wear and
tear excepted, to preserve the Business and relationships with
its customers, suppliers, employees and other Persons having
business relationships with the Business; and
(ii) operated the Business in the ordinary course
consistent with prior practice except as otherwise provided by
this Agreement.
(b) From the Balance Sheet Date to the date hereof, Seller has
not taken any of the following actions in respect of the operation of
the Business:
(i) disposed of or encumbered, or entered into any
agreement to sell or transfer, directly or indirectly, any
assets except sales and consumption of inventory in the
ordinary course of business;
(ii) increased in any manner compensation or benefits
of any employees, officers or directors, stockholders,
consultants or agents of the Seller, except any increase made
in the ordinary course of business under existing employment
contracts or policies;
(iii) increased, terminated, amended or otherwise
modified any plan for the benefit of any employee of Seller;
(iv) paid or agreed to pay any pension, retirement
allowance, severance or other employee benefit not required
under any existing plan to any employee of Seller;
(v) entered into, extended, renewed, modified or
canceled any agreements, leases, commitments or contracts,
except as required in the ordinary course of business;
(vi) implemented any price discount or extended
payment terms or other incentives except routine transactions
in the ordinary course of business;
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(vii) mortgaged, pledged or subjected to any Lien any
of the Purchased Assets;
(viii) waived any material rights or privileges it
may have under, or amended in any respect, any contract
included in the Purchased Assets;
(ix) maintained its books of account other than in
the usual, regular and ordinary manner in accordance with
generally accepted accounting principles and on a basis
consistent with prior periods or made any change in any of its
accounting methods or practices; or
(x) acquired any assets that would be included in the
Purchased Assets.
3.15 Restricted Securities.
(a) Seller and the Shareholders acknowledge that the shares of
Parent Common Stock to be acquired by Seller hereunder, and then by the
Shareholders by distribution from the Seller, have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and are being acquired for Seller and the Shareholders' own account for
investment and not with a view to the distribution thereof.
(b) Seller and each Shareholder has the knowledge and
experience in financial and business matters to enable it to evaluate
the merits and risks of entering this Agreement and the transactions
contemplated hereby and acquiring shares of Parent Common Stock.
(c) Seller and each Shareholder is able to bear the economic
risks of its investment in the Parent Common Stock, including the risk
of a loss of the value of the Parent Common Stock.
(d) Seller and the Shareholders have been represented by legal
counsel in this transaction and they and their representatives,
including such counsel, have been given the opportunity to ask
questions of, and receive answers from, the officers of the Parent
concerning the terms of the transactions contemplated by this Agreement
and the affairs and the business and financial condition of the Parent.
(e) Seller and each Shareholder has received the PPM
concerning the Parent and an investment in shares of Parent Common
Stock, and each of them and their representatives have been given such
access to all documents, books and additional information concerning
Parent which they have requested regarding the Parent.
(f) Seller and each Shareholder and their representatives have
conducted such investigations in making a decision to approve this
Agreement and the transactions contemplated hereby as they have deemed
necessary and advisable.
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(g) Seller and each Shareholder acknowledge and agree that the
Parent Common Stock to be issued to the Seller and Shareholders may not
be disposed of except in accordance with the requirements of the
Securities Act and any applicable state securities laws.
3.16 Undisclosed Liabilities. Except as and to the extent disclosed in
Section 3.7 of the Disclosure Schedules or in the Seller's Financial Statements,
Seller has no liabilities or obligations of any nature (whether absolute,
contingent or otherwise) relating to the Purchased Assets other than performance
of the services contemplated under the terms of the Assumed Contracts and
compliance with any restrictive covenants contained therein following the
Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer represents and warrants to Seller and the Shareholders as set
forth below:
4.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Parent is a
corporation duly organized and validly existing and in good standing under the
laws of Delaware.
4.2 Capitalization of the Parent. The total authorized capital stock of
Parent is as set forth and described in Parent's Confidential Private Placement
Memorandum ("PPM") delivered to Shareholders in connection with the transactions
contemplated by this Agreement. The outstanding shares of Parent Common Stock
have been duly and validly issued and are fully paid and non-assessable. All
shares of Parent Common Stock to be issued pursuant hereto, when issued, will be
duly authorized, validly issued, fully paid and non-assessable.
4.3 Authority Relative to this Agreement. Buyer and Parent each have
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Buyer and no other corporate proceedings on the part of Buyer are
necessary. The execution and delivery of this Agreement by Parent has been duly
authorized by all necessary corporate action on the part of Parent. Once the
Earn-out has been determined in accordance with this Agreement, the consummation
of the transactions contemplated hereby will be duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by each of Buyer and Parent and constitutes a legal, valid and
binding obligation of both Buyer and Parent enforceable against Buyer and Parent
in accordance with its terms subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and remedies generally and to the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
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4.4 Consents and Approvals. Except as set forth in Section 4.4 of the
Disclosure Schedule, the execution and delivery by Buyer and Parent of this
Agreement, and performance by Buyer and Parent of its obligations hereunder, do
not require Buyer or Parent to obtain any consent, waiver, approval, exemption,
authorization or other action of, or make any filing with or give any notice to,
any third party or any court, administrative agency or other governmental or
regulatory authority or any other Person where failure to obtain such consents,
waivers, approvals, exemptions, authorizations or actions, make such filings or
give such notices could reasonably be expected to materially affect the ability
of Buyer or Parent to perform any of their material obligations hereunder.
4.5 No Violation. Assuming all consents, approvals, waivers,
exemptions, authorizations and other actions described in Section 4.4 of the
Disclosure Schedule have been obtained or taken, the execution and delivery of
this Agreement by Buyer and Parent, and the performance by Buyer or Parent of
their obligations hereunder, do not (i) conflict with or result in a breach of
the charter or bylaws of Buyer or Parent, respectively, or (ii) violate, or
conflict with, or constitute a default under, or result in the creation or
imposition of any Lien upon the properties or assets of Buyer or Parent under
any mortgage, indenture, agreement, judgment, decree or court order to which
either of them is a party or by which any of the assets of Buyer or Parent are
bound, which violation, conflict, default or Lien could reasonably be expected
to adversely affect the ability of Buyer or Parent to perform their obligations
under this Agreement.
4.6 Not an Investment Company. The Parent is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
4.7 Financial Statements. The Parent has provided certain financial
statements to the Shareholders in the PPM ("Parent Financial Statements") and
such Parent Financial Statements have been prepared in accordance with GAAP and
fairly present the consolidated financial position, results of operations and
cash flows of the Parent and its then existing consolidated subsidiaries as of
the dates and for the periods indicated, subject to normal year-end adjustments
and any other adjustments described therein or in the notes or schedules
thereto. The books and records of the Parent have been kept in reasonable detail
and accurately and fairly reflect the transactions of the Parent.
4.8 Misstatements. The PPM doe not contain any untrue statements of a
material fact or omit any material facts necessary in order to make such
statements, in the light of the circumstances under which they are made, not
misleading.
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ARTICLE 5
ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Taxes.
(a) Seller shall be liable for and shall pay, and pursuant to
Section 6.2 Seller and the Shareholders shall indemnify Buyer and
Parent against, all taxes (whether assessed or unassessed) applicable
to the Business or the Purchased Assets, in each case attributable to
taxable years or periods ending at the time of or prior to the Closing
and, with respect to any tax period that begins before and ends after
the Closing Date (a "Straddle Period"), the portion of such Straddle
Period ending at the time of the Closing. Buyer shall pay, and pursuant
to Section 6.3 shall indemnify Seller against, all taxes (whether
assess or unassessed) applicable to the Business or the Purchased
Assets, in each case attributable to taxable years or period beginning
after the Closing and, with respect to any Straddle Period, the portion
of such Straddle Period beginning immediately after the Closing. For
purposes of this Section 5.1, any Straddle Period shall be treated on a
"closing of the books" basis as two partial periods, one ending at the
time of the Closing, provided, however, that taxes imposed on a
periodic basis shall be allocated on a daily basis.
(b) Notwithstanding paragraph (a), any sales tax, motor
vehicle tax, excise tax, use tax, real property transfer or gains tax,
documentary stamp tax or similar tax attributable to the sale or
transfer of the Business or the Purchased Assets shall be paid 0% by
Seller and 100% by Buyer. Buyer and Seller each agrees to timely sign
and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or
file tax returns with respect to, such taxes including a resale
certificate as provided for under Nevada and California sales tax law.
(c) Buyer or Seller, as the case may be, shall provide
reimbursement for any tax paid by one party all or a portion of which
is the responsibility of the other party in accordance with the terms
of this Section 5.1. Not later than 30 days prior to the payment of any
said tax, the party paying such tax shall give notice to the other
party of the tax payable and the portion that is the liability of each
party, although failure to do so will not relieve the other party from
its liability hereunder. Each party shall have the right at all
reasonable times to examine the books and records of the other party to
the extent necessary to verify the accuracy of any request.
(d) After the Closing, each of Buyer and Seller shall (and
cause their respective employees, agents and affiliates to):
(i) assist the other party in preparing any tax
returns that such other party is responsible for preparing and
filing;
(ii) cooperate fully in preparing for any audits of,
or disputes with taxing authorities regarding, any tax returns
relating to the Business or the Purchased Assets;
(iii) make available to the other and to any taxing
authority as reasonably requested all information, records,
and documents relating to taxes relating to the Business or
the Purchased Assets;
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(iv) provide timely notice to the other in writing of
any pending or threatened tax audits or assessments relating
to the Business or the Purchased Assets for taxable periods
for which the other may have a liability under this Section
5.1;
(v) furnish the other with copies of all
correspondence received from any taxing authority in
connection with any tax audit or information request with
respect to any such taxable period.
5.2 Public Announcements. Neither Parent nor Buyer will disclose or
deliver any information about the Seller to any third Person without the prior
written consent of the Seller except as permitted by this Section 5.2. The
Parent and Buyer may disclose pertinent information regarding this Agreement to
its existing and prospective investors, lenders, or investment bankers or
financial advisors for the purpose of obtaining financing, including, without
limitation, descriptions of this Agreement and the transactions contemplated
hereby may be included in the PPM or any private placement memorandum prepared
by the Parent or any registration statement filed by the Parent under the
Securities Act and in reports filed by the Parent under the Securities Exchange
Act of 1934, and this Agreement may be filed as an exhibit to any thereof. The
Parent may also make appropriate disclosures of the general nature of this
Agreement and the identity, nature and scope of the Seller's operations to
prospective acquisition candidates in connection with the Parent's efforts to
effect additional acquisitions. Each party will have mutual approval rights with
respect to written employee presentations concerning this Agreement. The
Shareholders shall be provided the opportunity for prior review and comment with
respect to any description of the Purchased Business contained in any press
release regarding the execution of this Agreement, and Stockholders shall be
provided the opportunity for prior review and comment with respect to any
description of the Seller contained in any press release regarding the execution
of this Agreement.
5.3 Further Assurances. Seller, Buyer and Parent shall use reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable to carry out all of their
respective obligations under this Agreement and to consummate and make effective
the purchase and sale of the Purchased Assets pursuant to this Agreement.
Seller, Buyer and Parent shall, and shall cause their affiliates, employees and
agents, employees and agents to, execute, acknowledge and deliver all such
further conveyances, notices, assumptions, releases and acquittances and such
other instruments, and shall take such further actions, as may be necessary or
appropriate more fully to assure to Seller, and its successors or assigns, all
of the Excluded Assets intended to be retained by Seller pursuant to this
Agreement.
5.4 Preservation of Business Records. Buyer shall preserve and keep (or
cause to be preserved and kept) the Business Records, and Seller shall preserve
and keep (or cause to be preserved and kept) its books and records not included
in the Purchased Assets, for a period of seven years after the date hereof, and
Buyer and Seller shall each grant to the other reasonable access to such
Business Records retained by them during such period. In the event Buyer or
Seller wishes to destroy Business Records after that time, it shall first give
written notice to the other party, and the other party shall have the right at
its option, upon prior written notice given to the party providing
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the initial notice, to take possession of said Business Records as promptly as
practicable, but in any event within 90 days after the date of its notice
requesting the same.
5.5 Confidentiality. Except as permitted by Section 5.2 and except for
reasonable disclosures made in the ordinary course of Shareholder's employment
with Buyer, Seller and each of the Shareholders, and its and their affiliates,
shall keep confidential all information regarding the Purchased Assets and the
Purchased Business, including without limitation, information included in books
and records retained by Seller, and will not, without the prior written consent
of Buyer and Parent, disclose such information except as required by law or in
connection with tax matters or as becomes generally available to and known by
the public other than as a result of disclosure by Seller.
5.6 Covenant Not to Compete.
(a) For the considerations specified in this Agreement and in
recognition that the covenants by the Shareholders and the Seller in
this Section are a material inducement to Parent and Buyer to enter
into and perform this Agreement, each Shareholder agrees that for the
period (the "Noncompetition Period") from the date hereof to the
earlier to occur of (a) the date which is five (5) years after the
Closing Date, or (b) the date which is two years following any
termination of such Shareholder's employment by Buyer, such Shareholder
will not represent, engage in, carry on, or have a financial interest
in, directly or indirectly, in any business that directly competes with
any of the services or products produced, sold, conducted, developed,
or in the process of development by Buyer, Parent or any of their
respective affiliates on the date of termination of Employee's
employment (including any aspect of the information technology
consulting services industry) within a 100 mile radius of the city or
county limits of any city or county in the United States or foreign
countries where the Buyer or any of its affiliates maintains an office.
For purposes of this Section 5.6, a "financial interest" means any
interest, individually, as a member of a partnership or limited
liability company, equity owner, shareholder (other than as a
shareholder of less than one percent (1%) of the issued and outstanding
stock of a publicly-held company whose gross assets exceed one hundred
million dollars), investor, officer, director, trustee, manager,
employee, agent, associate or consultant.
(b) Shareholders agree that the limitations set forth herein
on Shareholders' rights to compete with Parent, Buyer or their
affiliates as set forth in clause (a) are reasonable and necessary for
the protection of Buyer, Parent and their affiliates. In this regard,
Shareholders specifically agree that the limitations as to period of
time and geographic area, as well as all other restrictions on
Shareholders' activities specified herein, are reasonable and necessary
for the protection of Buyer, Parent and their affiliates. Shareholders
agree that, in the event that the provisions of this Section should
ever be deemed to exceed the scope of business, time or geographic
limitations permitted by applicable law, such provision shall be and
are hereby reformed to the maximum scope of business, time or
geographic limitations permitted by applicable law.
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(c) If there shall be any violation of the covenant not to
compete set forth in Section 5.6(a) above, then the time limitation
thereof shall be extended for a period of time equal to the period of
time during which such violation continues; and in the event Buyer is
required to seek relief from such violation in any court, board of
arbitration or tribunal, then the covenant shall be extended for a
period of time equal to the pendency of such proceedings, including all
appeals.
(d) Shareholders agree that the remedy at law for any breach
by Shareholders of this Section 5.6 will be inadequate and that Buyer
and Parent shall be entitled to injunctive relief.
5.7 Corporate Name. Within 60 days after the date hereof, Seller and
the Shareholders shall take such action as is necessary to change the name of
Seller to remove therefrom the words "TBQ Associates, Inc." or any word or
expression similar thereto.
5.8 Limitation on Assignments. Notwithstanding anything herein
contained to the contrary, this Agreement shall not constitute nor require an
assignment to Buyer of any Contract, License or other right if an attempted
assignment of the same without the consent of any party would constitute a
breach thereof unless and until such consent shall have been obtained. In the
case of any such Contract, License or other right which cannot effectively be
transferred to Buyer without such consent, the Shareholders and Seller will each
use all reasonable efforts to obtain such consent promptly and if such consent
is not obtained, Seller and Buyer agree to enter into such reasonable
arrangements as may be appropriate to provide Buyer with benefits purported to
be vested in Buyer pursuant to the terms of this Agreement had such consent been
obtained.
ARTICLE 6
INDEMNIFICATION AND LIMITATIONS ON LIABILITY
6.1 Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date hereof to the extent provided herein. The
representations and warranties of Seller and Shareholders herein other than
those of Seller and Shareholders in Sections 3.1, 3.2 and 3.8 shall survive for
a period of 24 months after the date hereof and the representations and
warranties of Seller contained in Sections 3.1, 3.2 and 3.8, shall survive for
the maximum period permitted by applicable law. The representations and
warranties of Buyer and Parent herein other than those of Buyer and Parent in
Sections 4.1 and 4.2 shall survive for a period of 24 months after the date
hereof and the representations and warranties of buyer contained in Sections 4.1
and 4.2 shall survive for the maximum period permitted by applicable law. The
periods of survival of the representations and warranties as stated above in
this Section 6.1 are referred to herein as the "Survival Period." The
liabilities of the parties under their respective representations and warranties
shall expire as of the expiration of the applicable Survival Period and no claim
for indemnification may be made with respect to any breach of any representation
or warranty, the applicable Survival Period of which shall have expired, except
to the extent that written notice of such breach shall have been given to the
party against which such claim is asserted on or before the date of such
expiration. The covenants and
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agreements of the parties herein and in other documents and instruments executed
and delivered in connection with the closing of the transactions contemplated
hereby shall survive for the maximum period permitted by law.
6.2 Indemnity by Seller and the Shareholders. Subject to the provisions
of Sections 6.1 and 6.4, Seller and the Shareholders, jointly and severally,
shall indemnify, save and hold harmless Buyer, Parent and any of their assigns
(including lenders) and all of its shareholders, officers, directors, employees,
representatives, agents, advisors and consultants and all of their respective
heirs, legal representatives, successors and assigns (collectively the "Buyer
Indemnified Parties") from and against any and all damages, liabilities, losses,
loss of value (including the value of adverse effects on earnings), claims,
deficiencies, penalties, interest, expenses, fines, assessments, charges and
costs, including reasonable attorneys' fees and court costs (collectively
"Losses") arising from, out of or in any manner connected with or based on:
(a) the breach of any covenant of Seller or Shareholders or
the failure by Seller or Shareholders to perform any of its or their
obligations contained herein;
(b) any inaccuracy in or breach of any representation or
warranty of Seller or Shareholders contained herein;
(c) any liability or obligation, fixed or contingent, direct
or indirect, known or unknown, of Seller other than those specifically
assumed by Buyer pursuant to Section 1.3; and
(d) any act, omission, occurrence, event, condition or
circumstance occurring or existing at any time on or before the date
hereof and involving or related to the assets, properties, business or
operations now or previously owned or operated by Seller and not
included in the Purchased Assets.
Buyer Indemnified Parties shall be entitled to indemnification pursuant
to this Agreement only if the aggregate Losses incurred or sustained by all
Buyer Indemnified Parties exceed $25,000. In the event that the aggregate Losses
incurred or sustained by all Buyer Indemnified Parties exceed $25,000, then the
Buyer Indemnified Parties shall be entitled to indemnification for all such
Losses in the aggregate; provided, however, that the aggregate Losses paid to
the Buyer Indemnified Parties hereunder shall not exceed the Purchase Price. The
foregoing indemnities shall not limit or otherwise adversely affect the
indemnity rights of the Seller Indemnified Parties for Losses under Section 6.4.
6.3 Set-off Rights of Buyer. At the election of Buyer or Parent, Losses
payable to the Buyer Indemnified Parties hereunder shall be set-off against and
shall reduce payments, if any, to be made by Buyer or Parent to Seller or the
Shareholders pursuant to this Agreement or the Employment Agreements including,
without limitation the Earn-out, on a dollar-for-dollar basis.
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6.4 Indemnity by Buyer and Parent.
(a) Subject to the provisions of Sections 6.1 and 6.4, Buyer
shall indemnify, save and hold harmless Seller and the Shareholders and
their respective heirs, legal representatives, successors and assigns
(collectively the "Seller Indemnified Parties") from and against all
Losses arising from, out of or in any manner connected with or based
on:
(i) any breach of any covenant of Buyer or the
failure by Buyer to perform any of its obligations contained
herein;
(ii) any inaccuracy in or breach of any
representation or warranty of Buyer contained herein;
(iii) any act, omission, event, occurrence, condition
or circumstance occurring or existing at any time after (but
not on or before) the date hereof and involving or relating to
the Purchased Assets; and
(iv) the obligations and liabilities of Seller
assumed by Buyer under Section 1.3.
(b) Subject to the provisions of Sections 6.1 and 6.4, Parent
shall indemnify, save and hold harmless Seller Indemnified Parties from
and against all Losses arising from, out of or in any manner connected
with or based on:
(i) any breach of any covenant of Parent or the
failure by Parent to perform any of its obligations contained
herein; and
(ii) any inaccuracy in or breach of any
representation or warranty of Parent contained herein;
Seller Indemnified Parties shall be entitled to indemnification pursuant to this
Agreement only if the aggregate Losses incurred or sustained by all Seller
Indemnified Parties exceed $25,000. In the event that the aggregate Losses
incurred or sustained by all Seller Indemnified Parties exceed $25,000, then the
Seller Indemnified Parties shall be entitled to indemnification for all such
Losses in the aggregate; provided, however, that the aggregate Losses paid to
the Seller Indemnified Parties hereunder shall not exceed the Purchase Price.
The foregoing indemnities shall not limit or otherwise adversely affect the
Buyer's and Parent's rights of indemnity for Losses under Section 6.2.
6.5 Procedures for Indemnification.
(a) The party (the "Indemnified Party") that may be entitled
to indemnity hereunder shall give prompt notice to the party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion
of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought hereunder. Any failure on the
part of any Indemnified Party to give the notice described in this
Section 6.5(a) shall relieve the Indemnifying Party of its obligations
under this Article 6 only to the extent that such
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Indemnifying Party has been prejudiced by the lack of timely and
adequate notice (except that the Indemnifying Party shall not be liable
for any expenses incurred by the Indemnified Party during the period in
which the Indemnified Party failed to give such notice). Thereafter,
the Indemnified Party shall deliver to the Indemnifying Party, promptly
(and in any event within 10 days thereof) after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to such claim,
action, suit or proceeding.
(b) Buyer shall have the obligation to assume the defense or
settlement of any third-party claim, suit, action or proceeding in
respect of which indemnity may be sought hereunder, provided that (i)
Seller shall at all times have the right, at its option, to participate
fully therein, and (ii) if Buyer does not proceed diligently to defend
the third-party claim, suit, action or proceeding within 10 days after
receipt of notice of such third-party claim, suit, action or
proceeding, Seller shall have the right, but not the obligation, to
undertake the defense of any such third-party claim, suit, action or
proceeding.
(c) The Indemnifying Party shall not be required to indemnify
the Indemnified Party with respect to any amounts paid in settlement of
any third-party suit, action, proceeding or investigation entered into
without the written consent of the Indemnifying Party; provided,
however, that if the Indemnified Party is a Buyer Indemnified Party,
such third-party suit, action, proceeding or investigation may be
settled without the consent of the Indemnifying Party on 10 days' prior
written notice to the Indemnifying Party if such third-party suit,
action, proceeding or investigation is then unreasonably interfering
with the Purchased Business or other operations of Buyer and the
settlement is commercially reasonable under the circumstances; and
provided further, that if the Indemnifying Party gives 10 days' prior
written notice to the Indemnified Party of a settlement offer that the
Indemnifying Party desires to accept and to pay all Losses with respect
thereto ("Settlement Notice") and the Indemnified Party fails or
refuses to consent to such settlement within 10 days after delivery of
the Settlement Notice to the Indemnified Party, and such settlement
otherwise complies with the provisions of this Section 6.5, the
Indemnifying Party shall not be liable for Losses arising from such
third-party suit, action, proceeding or investigation in excess of the
amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any
judgment or enter into any settlement without the consent of the
Indemnified Party, if such judgment or settlement imposes any
obligation or liability upon the Indemnified Party other than the
execution, delivery or approval thereof and customary releases of
claims with respect to the subject matter thereof.
(d) The parties shall cooperate in defending any such
third-party suit, action, proceeding or investigation, and the
defending party shall have reasonable access to the books and records,
and personnel in the possession or control of the Indemnified Party
that are pertinent to the defense. The Indemnified Party may join the
Indemnifying Party in any suit, action, claim or proceeding brought by
a third party, as to which any right of indemnity created by this
Agreement would or might apply, for the purpose of enforcing any right
of the indemnity granted to such Indemnified Party pursuant to this
Agreement.
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6.6 Subrogation. Each Indemnifying Party hereby waives for itself and
its affiliates any rights to subrogation against any Indemnified Party or its
insurers for Losses arising from any third-party claims for which it is liable
or against which it indemnifies any Indemnified Party and, if necessary, each
Indemnifying Party shall obtain waivers of such subrogation from its, his or her
insurers.
ARTICLE 7
MISCELLANEOUS
7.1 Expenses. Except as specifically provided herein, all legal and
other costs and expenses in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller or Buyer, as the case may be,
depending upon which party incurred such costs and expenses.
7.2 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be given by registered or certified mail
(postage prepaid, return receipt requested), by personal delivery or by
facsimile transmission, in each case addressed as follows:
(a) To Buyer:
Software Consulting Services America, Inc.
000 Xxxxx Xxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Xx.
Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
with a copy to:
BrightStar Information Technology Group, Inc.
00000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: President
Telecopy: (000) 000-0000
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(b) To Seller:
TBQ Associates, Inc.
000 Xxxxx Xxxxxxxxx #000, Xxxxx 000
Xxxxxxx Xxxxxxx, Xxxxxx 00000
Telecopy:
-------------------
with a copy to:
Xxxxxxx Xxxxxx
Lippenberger, Thompson, Welch, Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Any such notice or other communication shall be deemed received on the fifth
business day following deposit in the mails or on the date of actual receipt, if
earlier; provided that if such communication is received after the close of
business on any day it shall be deemed received on the next business day. Any
party shall be permitted to change its address for communications by notice to
the other as provided herein.
7.3 Entire Agreement. This Agreement supersedes all prior agreements
between the parties (written or oral) and is intended as a complete and
exclusive statement of the terms of the Agreement between the parties. This
Agreement may be amended only by a written instrument duly executed by the
parties.
7.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
7.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.6 Assignability. No party hereto shall assign this Agreement or any
part hereof without the prior written consent of any other party, except that
Buyer may assign its rights hereunder to any direct or indirect wholly-owned
subsidiary of Parent; provided, however, that no such assignment shall relieve
Buyer of its obligations hereunder. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
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7.7 No Third Party Beneficiaries. Except as expressly provided herein,
nothing in this Agreement shall entitle any Person other than Seller, Buyer or
Parent or their respective successors and assigns permitted hereby to any claim,
cause of action, remedy or right of any kind.
7.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
7.9 Equitable Relief. The parties hereto agree that irreparable damage
would occur in the event that the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, it is agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, no one of which needs to be executed by all the parties, and this
Agreement shall be binding upon all the parties with the same force and effect
as if all the parties had signed the same document, and each such signed
counterpart shall constitute an original of this Agreement.
7.11 Facsimile or Electronic Transmission of Documents. Executed
counterparts of this Agreement may be delivered by facsimile or other electronic
means of transmission, and upon receipt such transmission shall be deemed
delivery of an original. Within a reasonable time after such electronic
delivery, the sender shall mail or deliver an originally signed copy of such
document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
BRIGHTSTAR INFORMATION
TECHNOLOGY GROUP, INC.
By: /s/ XXXXXXXX X. XXXX
-------------------------------------
XXXXXXXX X. XXXX,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
SOFTWARE CONSULTING SERVICES AMERICA, INC.
By: /s/ XXXXXXX X. XXXX
-------------------------------------
XXXXXXX X. XXXX, PRESIDENT
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TBQ ASSOCIATES, INC.
By:
------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
/s/ XXXX X. XXXXXX
-----------------------------------------
XXXX X. XXXXXX
/s/ XXXX X. XXXXXX
----------------------------------------
XXXX X. XXXXXX
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EXHIBIT 1.1(a)
TANGIBLE PERSONAL PROPERTY
31
EXHIBIT 1.1(b)
PERSONAL PROPERTY LEASES
32
EXHIBIT 1.1(c)
ASSUMED CONTRACTS
33
EXHIBIT 1.1(d)
REAL PROPERTY LEASES
34
EXHIBIT 1.1(f)
LICENSES
35
EXHIBIT 1.1(g)
PROPRIETARY RIGHTS
36
EXHIBIT 1.1(j)
PREPAID ITEMS
37
EXHIBIT 1.2
OTHER EXCLUDED ASSETS
38
EXHIBIT 1.9
ALLOCATION OF PURCHASE PRICE
