Exhibit 4.14(b)
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
April 14, 2005 by and among by and among BrightStar Information Technology
Group, Inc., a Delaware corporation (the "Company"), Stellar XxXxx, LLC, a
Delaware limited liability company (the "Investor") and Guzov Ofsink, LLC (the
"Escrow Agent").
RECITALS
A. The Company is a corporation duly incorporated and validly existing
under the laws of Delaware, with its principal executive offices at 0000 Xxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000.
B. The Investor is a limited liability company duly formed and validly
existing under the laws of Delaware, with its principal executive offices at 000
Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxxxxx 00000.
C. The Company desires to sell to the Investor and the Investor desires to
purchase from the Company, shares of Common Stock, par value $.001 per share, of
the Company ("Common Stock") on the terms and conditions set forth in this
Agreement.
D. The Company desires to issue and sell to the Investor and the Investor,
desires to purchase from the Company, shares of Series A Convertible Preferred
Stock, par value $.001 per share, of the Company (the "Series A Preferred") on
the terms and conditions set forth in this Agreement.
E. The Investor has deposited $50,000 with the Company as a downpayment of
the Purchase Price (as hereinafter defined), which deposit shall be
non-refundable.
ACCORDINGLY, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Agreement To Purchase And Sell Shares
1.1 Authorization. As of the Closing (as defined below), the Company will
have authorized the issuance, pursuant to the terms and conditions of this
Agreement, of not less than (a) 72,000,000 shares of Common Stock and (b)
136,585 shares of Series A Preferred having the rights, preferences, privileges
and restrictions as set forth in the Certificate of Designations, Preferences
and Rights of the Series A Preferred of the Company to be authorized by the
Board of Directors in the form attached hereto as Exhibit A and filed with the
Secretary of State of the State of Delaware prior to the Closing (the
"Certificate of Designations").
1.2 Agreement to Purchase and Sell.
(a) Subject to the terms and conditions hereof, on the Closing Date (as
defined below), the Company hereby agrees to sell to the Investor, and the
Investor hereby agrees to purchase from the Company, forty one million four
hundred eighty seven thousand nine hundred and twenty nine (41,487,929) shares
of Common Stock (the "Purchased Common Shares"), at a price of $0.005144032922
per share, for an aggregate purchase price of $213,415. (the "Common Shares
Purchase Price"); and the Company hereby agrees to issue and sell to the
Investor, and the Investor hereby agrees to purchase from the Company, one
hundred thirty-six thousand five hundred eighty-five (136,585) shares of Series
A Preferred (the "Purchased Preferred Shares" and together with the Purchased
Common Shares, the "Purchased Shares"), at a price of $1.00 per share, amounting
to an aggregate purchase price of $136,585 (the "Preferred Shares Purchase
Price" and together with the Common Shares Purchase Price, the "Purchase
Price").
(b) The rights, preferences, privileges and restrictions of the Purchased
Preferred Shares are set forth in the Certificate of Designations. $300,000 of
the Purchase Price payable at the Closing shall be paid by wire transfer of
funds directly to a designated account of the Company for such purpose, provided
that wire transfer instructions are delivered to the Investor at least one (1)
business day prior to the date of the Closing. The $50,000 balance of the
Purchase Price has been previously deposited by the Investor with the Company
and upon the Closing shall be credited to the Investor in respect of the
Purchase Price. Checkwriting or other funds disposition authority for the
account designated by the Company to receive the $300,000 balance of the
Purchase Price shall be given only to (i) such persons as shall be designated by
the Investor and approved by the Company and (ii) for the exclusive purpose of
satisfying at closing the legacy liabilities set forth in Exhibit F. The Company
shall take all necessary corporate action at or prior to the Closing to cause
such designees and only such designees to be so authorized.
1.3 Closing.
(a) Subject to the fulfillment of the conditions in Section 4.1 and 4.2,
the closing of the transactions described in Section 1.2 (the "Closing") shall
be held at the offices of the Escrow Agent, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 at 10:00 a.m EDT on April 14, 2005, or at such other time
and place as all the parties hereto may mutually agree (the "Closing Date").
(b) Delivery. At the Closing, in addition to any items the delivery of
which is made an express closing condition pursuant to Section 4.1 and 4.2, the
Company will deliver to the Investor stock certificates representing the
Purchased Shares against delivery of the Purchase Price payable by the Investor
to the Company in accordance with Section 1.2(b) above.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Investor that, as of the Closing and, except as set forth on
the Disclosure Schedule relating to such Closing attached hereto as Schedule I
(the "Schedule of Exceptions"), which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization, Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all requisite power and authority to own its properties and assets and
to carry on its business as now conducted and as proposed to be conducted.
Except as set forth in the Schedule of Exceptions, the Company and is qualified
to do business and is in good standing (or has equivalent status in all relevant
jurisdictions) in each jurisdiction where the failure to be so qualified would
have a material adverse effect on its financial condition, business or
operations. The Company has not given any powers of attorney which are in force
as of the date hereof.
2.2 Capitalization and Voting Rights. The authorized capital of the Company
consists, or will consist immediately prior to the Closing, of:
(a) Preferred Stock. 3,000,000 shares of Preferred Stock, par value $.01
per share, of which 136,585 shares have been designated Series A Preferred; none
of which are outstanding as of the date hereof; and all of which are to be
issued and sold to the Investor hereunder; and
(b) Common Stock. 72,000,000 shares of Common Stock, of which 15,350,468
shares are issued and outstanding as of the date hereof and 15,350,468 will be
issued and outstanding immediately prior to the Closing which amount includes
62,500 shares to be issued at or near the closing date in an unrelated
transaction.
(c) Valid Issuance. The Purchased Shares that are being purchased by the
Investor hereunder, in each case when issued, sold and delivered in accordance
with the terms of this Agreement for the consideration expressed herein, will be
duly and validly issued, fully paid, and non-assessable, and will be free of
restrictions on transfer other than restrictions on transfer under applicable
securities laws and will be issued in accordance with applicable securities
laws, including, without limitation, the Securities Act of 1933, as amended (the
"Act"). Upon the approval by the stockholders of an amendment (the "Charter
Amendment") of the Certificate of Incorporation of the Company to change the
number of authorized shares of the Company's Common Stock (whether by reverse
stock split or increase in the number of authorized shares or a combination of
the foregoing) such that there shall be a sufficient number of shares of Common
Stock to effect the conversion of all outstanding shares of Series A Preferred
in accordance with the Certificate of Designations and filing of the Charter
Amendment with the Delaware Secretary of State, the Common Stock issuable upon
conversion of the Purchased Preferred Shares will be duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Certificate
of Designations, will be duly and validly issued, fully paid, and non-assessable
and will be free of restrictions on transfer other than restrictions on transfer
under applicable securities laws.
(d) Other Rights. Except for the conversion privileges of the Series A
Preferred and as set forth in the Schedule of Exceptions, there are no
outstanding options, warrants, rights of any kind (including conversion or
preemptive rights) or agreements for the purchase or acquisition from the
Company or any subsidiary of the Company of any shares of its capital stock,
including, without limitation, the Purchased Common Shares and Purchased
Preferred Shares. The Company is not a party or subject to any agreement or
understanding, and there is no agreement or understanding between any persons
and/or entities, which affects or relates to the voting or giving of written
consents with respect to any security of the Company or any of its subsidiaries.
2.3 Subsidiaries. Except as set forth in the Schedule of Exceptions, the
Company presently does not own or control, directly or indirectly, any interest
in any other corporation, association, or other business entity. Neither the
Company nor any subsidiary of the Company is a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. Other than approval of the Charter Amendment by the
Company's common stockholders, all corporate action on the part of the Company
and its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the Certificate of Designations and
any other agreements to be delivered at the Closing (collectively, the
"Transaction Documents"), the performance of all obligations of the Company and
hereunder and thereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Purchased Common Shares and the Purchased
Preferred Shares being sold hereunder and the Common Stock issuable upon
conversion of the Purchased Preferred Shares (together with the Purchased Common
Shares and the Purchased Preferred Shares, the "Securities"), has been taken or
will be taken prior to the Closing. This Agreement constitutes, and the other
Transaction Documents, when executed and delivered, will constitute, valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally.
2.5 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement, except (i)
the filing of the Certificate of Designations with the Secretary of State of the
State of Delaware, (ii) the filing of a Current Report on Form 8-K with the
Securities and Exchange Commission ("SEC") after the issuance of the Shares at
the Closing and (iii) upon approval by the Company's common stockholders, the
filing of the Charter Amendment with the Secretary of State of the State of
Delaware.
2.6 Offering. Subject to the truth and accuracy of the Investor's
representations set forth in Sections 3.2 and 3.3 below, the offer, sale and
issuance of the Purchased Shares as contemplated by this Agreement are exempt
from the registration requirements of the Act and all other applicable
securities laws, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
2.7 Litigation. Except as set forth in the Schedule of Exceptions: There is
no action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or any of its directors,
officers or subsidiaries. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality; there is no action, suit, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate; neither the Company nor any subsidiary of the Company has admitted in
writing its inability to pay its debts generally as they become due, filed or
consented to the filing against it of a petition in bankruptcy or a petition to
take advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt or filed a petition or answer
seeking reorganization or arrangement under any bankruptcy laws or any other
similar law or statute of the United States of America or any other
jurisdiction.
2.8 Property Rights. The Company owns or has a valid right to use all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted and as currently proposed to be conducted and the Company has not
received any notice of any conflict with or infringement of the rights of
others. The Company does not own any patents nor are there pending any patent
applications of the Company. Except as set forth in the Schedule of Exceptions,
there are no outstanding options, licenses, or agreements of any kind granted by
the Company or any subsidiary of the Company relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity, except for standard end-user agreements
with respect to commercially readily available intellectual property such as
"off the shelf" computer software. The Company has not received any
communications alleging that the Company or any subsidiary of the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity, nor is there any
reasonable basis therefor. The Company is not aware that any of its officers,
employees or consultants is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his, her or its best efforts to promote the interests
of the Company or that would conflict with the Company's business as proposed to
be conducted or that would prevent such officers or employees or consultants
from assigning to the Company inventions conceived or reduced to practice in
connection with services rendered to the Company. The Company does not believe
it is or will be necessary to utilize any inventions of any Company employees
(or people it currently intends to hire) made prior to or outside the scope of
their employment by the Company.
2.9 Compliance with Other Instruments and Agreements. The Company is not
in, nor shall the conduct of its business as currently or proposed to be
conducted result in, any violation, breach or default of any term of its
constitutional documents of the Company which shall include the Certificate of
Incorporation of the Company, as amended to date, Certificate of Designations
and the bylaws of the Company (collectively, the "Constitutional Documents"), or
in any material respect of any term or provision of any mortgage, indenture,
contract, agreement or instrument to which the Company or any subsidiary of the
Company is a party or by which it or any of its assets may be bound
(collectively, the "Company Contracts") or of any provision of any judgment,
decree, order, statute, rule or regulation applicable to or binding upon the
Company or any subsidiary of the Company. The execution, delivery and
performance of and compliance with this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation, breach or default, or be in
conflict with or constitute, with or without the passage of time or the giving
of notice or both, either a default under the Company's Constitutional Documents
or any Company Contract, or a violation of any statutes, laws, regulations or
orders, or an event which results in the creation of any lien, charge or
encumbrance upon any asset of the Company.
2.10 Agreements; Action.
Except as set forth in the Schedule of Exceptions:
(a)There are no agreements, understandings or proposed transactions between
or among the Company and any of its officers, directors or any other affiliates.
(b)There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it or any its assets is bound that may involve (i)
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $25,000, (ii) the transfer or license of any patent, copyright, trade secret
or other proprietary right to or from the Company or any subsidiary, (iii)
provisions restricting or affecting the development, manufacture or distribution
of any Company's or any of its subsidiary's products or services, or (iv)
agreements not to compete with any person or entity or not to engage in any
particular line of business.
(c)The Company is not a party to nor is bound by any contract, agreement or
instrument, or subject to any restriction under any of its Constitutional
Documents that materially and adversely affects its business as now conducted or
as currently proposed to be conducted, its properties or its financial
condition.
2.11 Related-Party Transactions. Except as set forth in the Schedule of
Exceptions, neither any key employee, officer, former and current shareholder or
director of the Company or, to the best of the Company's knowledge, member of
his or her immediate family is indebted to the Company or any subsidiary of the
Company, nor is the Company or any subsidiary indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than for accrued
compensation, employee benefits, directors fees and reimbursable expenses
itemized in the Schedule of Exceptions. The Company is not aware that any of
such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company or
any of its subsidiaries has a business relationship, or any firm or corporation
that competes with the Company or any subsidiary of the Company. No officer,
director or employee of the Company, and no member of the immediate family of
any such person, is directly or indirectly interested in any material contract
with the Company or any subsidiary of the Company.
2.12 Compliance with Laws; Permits. Neither Company nor any subsidiary of
the Company is in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its or his business or the ownership
of its properties which violation would materially and adversely affect the
business, assets, prospects or financial condition of the Company. Other than
the Charter Amendment, no governmental orders, permissions, consents, approvals
or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of the Transaction Documents and the issuance and/or sale of the
Securities hereunder, except such as has been, or will be, pursuant to the
Transaction Documents, duly and validly obtained or filed. The Company has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company. The Company is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority.
2.13 Environmental and Safety Laws. Except as set forth in the Schedule of
Exceptions, neither the Company nor any subsidiary of the Company is in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, where such violation would have a
material adverse effect on the Company, and no material expenditures are or will
be required in order to comply with any such existing statute, law or
regulation.
2.14 Manufacturing and Marketing Rights. Except as set forth in the
Schedule of Exceptions, neither the Company nor any subsidiary of the Company
has granted rights to manufacture, produce, assemble, license, market or sell
its products or services to any other person nor is the Company or any
subsidiary bound by any agreement that affects the Company's exclusive right to
develop, manufacture, assemble, distribute, market or sell its products and
services.
2.15 Registration Rights. The Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity,
except as to agreements which have expired or are the subject of a settlement
agreement under which such rights have been terminated or irrevocably waived.
2.16 Corporate Documents. The Company's current certificate of
incorporation and bylaws, as amended, are and will be at Closing in the form
attached hereto as Exhibit B.
2.17 Financial Statements. The Company has delivered to the Investor an
unaudited consolidated balance sheet, statement of operations, statement of
stockholders' equity and statement of cash flows at and for the nine months
ended September 30, 2004, audited consolidated balance sheets, statements of
operations, statements of stockholders' equity and statements of cash flows at
and for the fiscal years ended December 31, 2003 and December 31, 2002 and
drafts of an audited consolidated balance sheet, statement of operations,
statement of stockholders' equity and statement of cash flows at for the fiscal
year ended December 31, 2004 (the foregoing financial statements and any notes
thereto are hereinafter referred to as the "Financial Statements"). Except as
set forth in the Schedule of Exceptions: the Financial Statements in each case
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated and with
each other; the Financial Statements fairly present in all material respects,
the financial condition and operating results of the Company as of the dates,
and for the periods, indicated therein, subject to normal year-end audit
adjustments in the case of the unaudited Financial Statements; except as set
forth in the Financial Statements, the Company has no material liabilities
(contingent or otherwise) other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 2004, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in the Financial Statements, which, in both
cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company; and except as disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation. The Company maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
2.18 Solvency. Neither the Company nor any subsidiary of the Company has
made a general assignment for the benefit of its creditors. Except as set forth
in the Schedule of Exceptions, no proceeding has been or is instituted by or
against the Company or any of its subsidiaries seeking to adjudicate any of them
bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
moratorium, arrangement, adjustment, protection, relief or composition of its
debts under any applicable laws relating to bankruptcy, insolvency or
reorganization.
2.19 Books and Financial Records. All the accounts, books, registers,
ledgers and financial and other material records of whatsoever kind of each of
the Company and its subsidiaries have been fully properly and accurately kept
and completed in all material respects; there are no material inaccuracies or
discrepancies of any kind contained or reflected therein; and they give and
reflect a substantially true and fair view of the financial, contractual and
trading position of each such company and of its plant and machinery, fixed and
current assets and liabilities (actual and contingent), debtors, creditors and
work-in-progress.
2.20 Title to Property Assets. The Company and each of its subsidiaries has
good and marketable title to its property and assets, free and clear of all
liens and encumbrances other than liens relating to obligations arising under
the Company's working capital facility with BFI Financeand the Notes (as such
term is defined in Section 4.2 of this Agreement. With respect to the property
and assets it leases, the Company and each of its subsidiaries is in compliance
with such leases in all material respects and holds a valid leasehold interest
free of any liens, claims or encumbrances. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or actively used by the
Company and its subsidiaries are in reasonable operating condition and repair
(subject to ordinary wear and tear) and are reasonably fit and usable for the
purposes for which they are being used.
2.21 Changes. Except as contemplated by this Agreement (including the
Schedules hereto), and except as set forth in the Schedule of Exceptions, since
December 31, 2004 there has not been:
(a) any change in the assets, liabilities, financial condition or operating
results of the Company and its subsidiaries from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any material change in the contingent obligations of the Company and
its subsidiaries by way of guarantee, endorsement, indemnity, warranty or
otherwise;
(c) any material damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company and its
subsidiaries (as such business is presently conducted and as it is proposed to
be conducted);
(d) any waiver by the Company or any subsidiary of a material right or of a
material debt owed to it;
(e) any material satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by Company or any subsidiary, except in
the ordinary course of business and that is not material to the assets,
properties, financial condition, operating results or business of the Company or
subsidiary (as such business is presently conducted and as it is proposed to be
conducted);
(f) any material change or amendment to a material contract or arrangement
by which the Company, any subsidiary or any of their respective assets or
properties is bound or subject;
(g) any material change in any compensation arrangement or agreement with
any employee of the Company or any subsidiary;
(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(i) except for any resignations arising under this Agreement, any
resignation or termination of employment of any officer or key employee of the
Company, and the Company is not aware of the impending resignation or
termination of employment of any such officer or key employee;
(j) any lien created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company or any subsidiary of the
Company to or for the benefit of the Company, its subsidiaries or any Company
employees, officers or directors, or any members of their immediate families;
(l) any debt, obligation or liability incurred, assumed or guaranteed by
the Company or any subsidiary, except for those incurred in the ordinary course
of the Company's business (but not in excess of $25,000 individually and $75,000
in the aggregate) and in amounts which would not have a material adverse affect
on the assets, condition, affairs or prospects of the Company, financially or
otherwise;
(m) any declaration, setting aside or payment or other distribution in
respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(n) any failure by the Company or any subsidiary to conduct business in the
ordinary course, consistent with its past practices;
(o) any other event or condition of any character that might materially and
adversely affect the assets, properties, financial condition, operating results
or business of the Company or any subsidiary (as such business is presently
conducted and as it is currently proposed to be conducted); or
(p) any agreement or commitment by the Company or any subsidiary to do any
of the things described in this section.
2.22 Employee Benefit Plans. Except as set forth in the Schedule of
Exceptions, the Company does not have any "Employee Benefit Plan" as defined in
the U.S. Employee Retirement Income Security Act of 1974.
2.23 Tax Returns, Payments and Elections. Except as set forth in the
Schedule of Exceptions, the Company has timely filed all Tax (as defined below)
returns, statements, reports, declarations and other forms and documents
(including without limitation estimated Tax returns and reports and material
information returns and reports) ("Tax Returns") required pursuant to applicable
law to be filed with any Tax Authority (as defined below), all such Tax Returns
are accurate, complete and correct in all material respects, and the Company has
timely paid all Taxes due; the Company is not aware that it has made any
elections pursuant to any applicable Tax laws, rules and regulations (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have a material effect on a consolidated basis on the
Company and its subsidiaries, their respective financial condition, their
respective business as presently conducted or proposed to be conducted or any of
their respective properties or material assets; since their respective dates of
incorporation, the Company and its subsidiaries have not incurred any Taxes,
assessments or governmental charges other than in the ordinary course of
business (which includes the Company realizing extraordinary gains or losses),
and the Company has made adequate provisions on its respective books of account
to the extent required by GAAP for all actual and contingent Taxes with respect
to its consolidated business, properties and operations for such period; and the
Company has withheld or collected from each payment made to each of its
employees, the amount of all Taxes (including, but not limited to, United States
income taxes and other foreign taxes) required to be withheld or collected
therefrom, and has paid the same to the proper Tax Authority. For purposes of
this Agreement, the following terms have the following meanings: "Tax" (and,
with correlative meaning, "Taxes" and "Taxable") means any and all taxes
including, without limitation, (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, value added, net worth, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any United States,
local or foreign governmental authority or regulatory body responsible for the
imposition of any such tax (domestic or foreign) (a "Tax Authority"), (ii) any
liability for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any taxable period or as the result of being a transferee or successor
thereof and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied obligation to
indemnify any other person.
2.24 Minute Books. The minute books of the Company provided to the Investor
contain a reasonably complete summary of all meetings of directors and
stockholders since the time of incorporation of the Company and do not reflect
any material inaccuracy with respect to any transactions referred to in such
minutes.
2.25 Labor Agreements and Actions; Employee Compensation. Except as set
forth in the Schedule of Exceptions, neither the Company not any subsidiary of
the Company is bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or has sought to represent any of the employees, representatives or agents of
the Company or any subsidiary; there is no strike or other labor dispute
involving the Company or any of its subsidiaries pending, or threatened, that
could have a material adverse effect on the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted), nor is the Company
aware of any labor organization activity involving its employees; except for
terminations arising under this Agreement, the Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any subsidiary, nor does the
Company or any subsidiary of the Company have a present intention to terminate
the employment of any of the foregoing. The employment of each officer and
employee of the Company and each of its subsidiaries is terminable at the will
of the Company or subsidiary. The Company and its subsidiaries have complied in
all material respects with all applicable laws related to employment. Except as
set forth in the Schedule of Exceptions, neither the Company nor any subsidiary
of the Company is a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation agreement.
2.26 Investment Company. The Company 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.
2.27 '34 Act Reports. None of the Company's filings with the U.S.
Securities and Exchange Commission pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein not misleading, in light of the circumstances in which they were made.
2.28 Finders' Fee. No finder's fee is payable by the Company or any of its
subsidiaries in connection with the consummation of this Agreement.
2.29 Disclosure. The Company has fully provided the Investor with all the
information that the Investor has requested for deciding whether to purchase the
Purchased Shares. Neither this Agreement, the Disclosure Schedule nor any
information provided to the Investor in connection with the transactions
contemplated by this Agreement, nor any other statements or certificates made or
delivered in connection herewith or therewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading, in light of the circumstances in which they
were made.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
3.1 Authorization. The Investor is a limited liability company duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite power and authority to own its properties and assets and to
carry on its business as now conducted and as proposed to be conducted. The
Investor has full power and authority to enter into this Agreement, and the
person signing this Agreement on behalf of the Investor is authorized to do so
and to bind Investor to carry out the transactions contemplated by this
Agreement. This Agreement constitutes the valid and legally binding obligation
of the Investor, enforceable against it in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally.
3.2 Purchase Entirely for Own Account. The Securities being purchased
hereunder are being acquired for investment for the Investor's own account and
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof.
3.3 Investment Experience. The Investor acknowledges that it can bear the
economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of an investment in the Securities. Investor has had full access to all
the information Investor considers necessary or appropriate to make an informed
investment decision with respect to the Securities. Investor further has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities and to obtain additional
information necessary to verify any information furnished to Investor or to
which Investor had access.
3.4 No General Solicitation. The Investor has not received any general
solicitation or advertising regarding the offering of the Securities or entering
into this Agreement.
3.5 Restricted Securities. The Investor understands that the Securities it
is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, the Investor
represents that it is familiar with the limitations on resale imposed by the
Act. The Investor understands that the Securities have not been and will not be
registered under the Act and have not been and will not be registered or
qualified in any state in which they are offered, and thus the Investor will not
be able to resell or otherwise transfer its Securities in a public market unless
they are registered under the Act and registered or qualified under applicable
state securities laws, or unless an exemption from such registration or
qualification under the Act and state securities laws is available. Investor
agrees that if the Investor continues to hold a controlling interests of the
Company at such time, then if the Company desires to register any of its
securities under the Act (except on Form S-4 or S-8 or equivalent forms), then
the Investor shall request from the persons who will be issued securities under
the proposed registration statement or whose securities will be covered for
resale thereunder (the "Covered Persons"), that the Noteholders be granted
piggyback registration rights with respect to the common stock to be issued to
the Noteholders in connection with the transactions contemplated by this
Agreement and to use its best efforts to cause the Company to grant such
registration rights if all of such Covered Persons shall consent thereto.
Neither the Investor nor the Company shall have any liability to any Noteholders
if one or more of the Covered Persons shall not consent to the the granting of
registration rights to the Noteholders as provided herein.
3.6 Legends. It is understood that the certificates evidencing the
Securities, in addition to any legend required by the Bylaws of the Company,
will bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON THE COMPANY RECEIVING A
WRITTEN OPINION FROM ITS COUNSEL, THAT THE PROPOSED DISPOSITION IS CONSISTENT
WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR SIMILAR SECURITIES LAW."
4. CONDITIONS TO INVESTOR'S OBLIGATIONS AT THE CLOSING.
4.1 Conditions to Closing. Subject to the terms hereof, the obligation of
the Investor to purchase the Purchased Shares is subject to the fulfillment, to
the satisfaction of the Investor on or prior to the Closing, of the following
conditions:
(a) Representations and Warranties True and Correct. The representations
and warranties made by the Company in Section 2 hereof shall be true and correct
and complete in all material respects as of the date of the Closing with the
same force and effect as if they had been made on and as of such date.
(b) Performance of Obligations. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to the Investor, and the Investor shall have received all such counterpart
originals or certified or other copies of such documents as it may reasonably
request.
(d) Approvals, Consents and Waivers. The Company shall have obtained any
and all approvals, consents and waivers necessary for consummation of the
transactions contemplated by this Agreement, including, but not limited to, (i)
all permits, authorizations, approvals, consents or permits of any governmental
authority or regulatory body, and (ii) the waiver by the existing shareholders
of the Company of any anti-dilution rights, rights of first refusal, preemptive
rights and all similar rights in connection with the issuance and sale of
Purchased Shares.
(e) Compliance Certificate. At the Closing, the Company shall deliver to
the Investor a certificate, dated the date of the Closing, signed by the
Company's chief executive officer certifying that, to his knowledge, the
conditions specified in these Sections 4.1 and 4.2 have been fulfilled and
stating that, to his knowledge and except as set forth in the Schedule of
Exceptions, there shall have been no material adverse change in the business,
affairs, prospects, operations, properties, assets or condition of the Company
since December 31, 2004.
(f) Securities Laws. The sale of the Securities to the Investor pursuant to
this Agreement shall be exempt from the registration and/or qualification
requirements of all applicable securities laws.
(g) Filing of Certificate of Designations. The Certificate of Designations
shall have been duly adopted by the Company by all necessary corporate action of
its Board of Directors, and to the extent required, its shareholders, and shall
have been duly filed with the Secretary of State of the State of Delaware, and
shall be in full force and effect in the form attached hereto as Exhibit A.
(h) Dividends. The Company shall not have declared, set aside or paid any
dividends or made any other distribution of any Company assets in respect of any
of the Company's capital stock, or directly or indirectly have redeemed,
purchased or otherwise acquired any such stock since December 31, 2004.
(i) Opinion of Company's Counsel. The Investor shall have received from
counsel to the Company an opinions addressed to the Investor, dated the date of
Closing, substantially in the form attached hereto as Exhibit C
(j) Good Standing. The Investor shall have received certificates of
corporate good standing with respect to the Company issued by the Secretaries of
State of the States of Delaware and California.
(k) Termination of Employment Agreement of Xxxxxx Xxxxx. The Employment
Agreement, dated as of February 1 2005 between the Company and Xxxxxx Xxxxx
("Wagda") shall have been terminated effective 30 days after the Closing. Wagda
hereby acknowledges that notice of termination of the agreement shall be deemed
to have been given by the Company and received by Wagda at the Closing.
4.2 Additional Conditions to the Closing. In addition to the conditions set
forth in Section 4.1, the obligation of the Investor to purchase the Purchased
Shares at the Closing is subject to the fulfillment, to the satisfaction of the
Investor on or prior to the Closing Date, of the following conditions:
(a) Execution of Transaction Documents. The Company shall have delivered to
the Investor this Agreement duly executed by the Company and all other parties
thereto (except for the Investor).
(b) Directors and Officers. The Investor shall have received a list of the
directors of the board of directors of the Company, and written evidence
satisfactory to the Investor and its counsel that each of the current directors
of the Company other than Xxxxxx Xxxxx, shall have resigned ("Resigning
Directors") effective on the later of the close of business on April 15, 2005 or
one business day after the filing of the Company's 2004 annual report on Form
10-K, that Xxx Xxxxx-Xxxxx, one of the Investor's nominees, shall have been
elected to the board of directors of the Company effective on the effective date
of the resignation of the Resigning Directors, and that Xxxxx Xxxxxx, another of
the Investor's nominees, shall have been elected to take office ten days after
the Company shall both have filed an information statement prepared in
accordance with SEC Rule 14f-1 and transmitted such information statement to all
holders of record of the Common Stock. Effective on the later of the close of
business on April 15, 2005 or one business day after the filing of the Company's
2004 Annual Report on Form 10-K, all of the officers of the Company other than
Wagda shall have resigned and such persons as shall be designated by the
Investor shall have been elected as officers of the Company. Wagda shall remain
as the Chief Executive Officer and Acting Chief Financial Officer of the Company
and shall sign the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2004 (the "2004 10-K") and the certifications required to be
filed as exhibits thereto in such capacities. Effective on the later of the
close of business on April 15, 2005 or one business day after the filing of the
2004 10-K, Wagda shall resign all offices he holds with the Company.
(c) Sale and Amendment of Notes. Each of the following shall have occurred
(collectively, the "Notes Sale and Amendment Transaction"): (i) The Investor
shall have purchased all of the outstanding Series 1 Convertible Subordinated
Promissory Notes (the "Notes") of BrightStar Information Technology Services,
Inc. ("Services") for $860,000 in cash or shall have deposited in escrow with
the Escrow Agent the cash purchase price for any Notes which have not yet been
purchased because the Noteholder (as hereinafter defined) has not delivered to
the Investor or the Company all of the the instruments and documents to be
delivered by such Noteholder in connection with the sale of the Note; (ii) all
of the former holders of the Notes (the "Noteholders"), the Company, Services,
Integrated Controls, Inc. ("Controls"), Software Innovators, Inc. ("SII") and
Software Consulting Services America, Inc. ("SCSAI") shall have executed and
delivered the Amended April 1, 2005 Omnibus Agreement (as amended) re the Notes
in the form attached hereto as Exhibit D (the "Amended Omnibus Agreement");
(iii) all of the Noteholders, the Company, Services, Controls, SII and SCSAI
shall have executed and delivered to the Investor a Promissory Note and Security
Agreement Assignment in the form attached hereto as Exhibit E; (iv) the Company
shall have issued to the Noteholders an aggregate of 13,869,121 shares of Common
Stock.
The Company, Services and Investor hereby agree effective at Closing to
amend the Notes to extinguish all conversion rights and extend the time for
payment of principal and all interest accrued as of March 31, 2005 under the
Notes to December 31, 2007.
5. Conditions to the Company's Obligations at the Closing.
The obligations of the Company under this Agreement with respect to the
Investor are subject to the fulfillment at or before the Closing of the
following conditions:
5.1 Representations and Warranties. The representations and warranties of
the Investor contained in Section 3 hereof shall be true and correct in all
material respects as of such Closing.
5.2 Payment of Purchase Price. The Investor shall have delivered to the
Company the Purchase Price.
5.3 Execution of Transaction Documents. The Investor shall have delivered
to the Company this Agreement, duly executed by the Investor.
5.4 Notes Sale Escrow and Amendment. The Investor shall have deposited with
the Escrow Agent the Notes Purchase Price(as such term is hereinafter defined).
6. Long-Stop Date. In the event that any condition to the Closing hereunder
is not fulfilled or waived within sixty (60) days of the signing of this
Agreement, this Agreement shall terminate. Notwithstanding any termination of
this Agreement, the obligations of the parties specified in Article 8 shall
continue unimpaired and in full force and effect, and such termination shall not
relieve any party from any liability hereunder for any misrepresentation or for
the breach of any warranty, agreement or obligation hereunder.
7. Covenants.
7.1 Investor's Appointment of Officers. So long as the Investor, together
with any of its affiliates, holds at least 50% of the outstanding capital stock
of the Company on an as converted to Common Stock basis (excluding shares
issuable upon the exercise of outstanding warrants and options, if any), and
subject to the exercise by the directors and officers of the Company of their
fiduciary duties, the Company shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the Investor, appoint,
terminate, amend or reassign the job of the Chairman, Chief Executive Officer,
Chief Financial Officer, Vice Presidents or any other employee with policymaking
authority for the Company.
7.2 Use of Proceeds. The Company shall use the Purchase Price paid to it to
resolve and settle liabilities of the Company as of the Closing, as set forth on
Exhibit F, which includes the Company's outstanding credit line, accrued
payables, contingent liabilities and legal and accounting fees.
7.3 Indemnification Provisions. The Company will comply with the
indemnification provisions contained in its Certificate of Incorporation and
By-laws to the extent that they are applicable in each case to its officers and
directors, including former directors and officers.
8. Escrow Provisions.
8.1 The Company and Investor hereby appoint Escrow Agent as escrow agent
for the Investor and the Noteholders in connection with the sale by the
Noteholders to the Investor of their Notes pursuant to the Amended Omnibus
Agreement, the delivery by the Noteholders of the warrant certificates being
delivered by the Noteholders for cancellation by the Company (the "Noteholder
Warrants") in connection with the sale to the Investor of the Notes, the
certificates for the Common Stock being issued to the Noteholders in connection
with the sale of the Notes (the "Noteholder Stock Certificates") and the payment
to the Noteholders of the purchase price for the Notes (the "Notes Purchase
Price") to be paid by the Investor in accordance with the terms and conditions
set forth in the Omnibus Agreement and herein, and the Escrow Agent hereby
accepts such appointment.
8.2 With respect to each individual Noteholder, upon receipt by the Escrow
Agent of the Notes, Noteholder Warrants (or other instruments which the Investor
shall have given written notice to the Escrow Agent are acceptable to the
Investor) and Noteholder Stock Certificates in connection with the sale of the
Notes held by such Noteholder to the Investor, the Escrow Agent shall promptly
deliver to such Noteholder, by check or wire transfer, the amount of the Notes
Purchase Price to which such Noteholder shall be entitled as set forth in
Exhibit G and the Noteholder Stock Certificate to which such Noteholder is
entitled. In the event that the Company fails to deliver to the Escrow Agent
prior to June 30, 2005 any one or more of the Notes, the Noteholder Warrants or
the Noteholder Stock Certificates with respect to the sale of Notes by any one
or more Noteholders (each a "Non-Delivering Noteholder"), upon receipt of
written notice from the Investor, the Escrow Agent (without affecting the
obligations of the Investor and the Noteholders pursuant to this Agreement and
the Amended Omnibus Agreement) shall return the Notes Purchase Price to the
Investor, the appropriate Notes and Noteholders Warrant to each Non-Delivering
Noteholder to the address of such Non-Delivering Noteholder set forth on Exhibit
G and the Noteholders Stock Certificate with respect to the Non-Delivering
Noteholder to the Company..
8.3 Escrow Agent shall have no duties or responsibilities other than those
expressly set forth herein. Escrow Agent shall have no duty to enforce any
obligation of any person to make any payment or delivery, or to direct or cause
any payment or delivery to be made, or to enforce any obligation of any person
to perform any other act. Escrow Agent shall be under no liability to the other
parties hereto, or to anyone else, by reason of any failure, on the part of any
party hereto or any maker, guarantor, endorser or other signatory of any
document or any other person, to perform such person's obligations under any
such document. Except for amendments to this Agreement relating to escrowed
funds or documents or instruments, the Escrow Agent shall not be obligated to
recognize any agreement between any and all of the persons referred to herein,
notwithstanding that references hereto may be made herein and whether or not it
has knowledge thereof.
8.4 Escrow Agent shall not be liable to any party or anyone else for any
action taken, or omitted to be taken by it, or any action suffered by it to be
taken or omitted, in good faith and acting upon any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
Escrow Agent) statement, instrument, report, or other paper or document (not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained), which is believed by the Escrow Agent to be genuine and to
be signed or presented by the proper person or persons. The Escrow Agent shall
not be bound by any of the terms thereof, unlesevidenced by a writing delivered
to the Escrow Agent signed by the proper party or parties and, if the duties or
rights of the Escrow Agent are affected, unless it shall give its prior written
consent thereto.
8.5 Escrow Agent shall not be responsible for the sufficiency or accuracy
of the form, or of the execution, validity, value or genuineness of, any
document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein; nor shall the Escrow Agent be responsible or liable to
the other parties hereto or to anyone else in any respect on account of the
identity, authority or rights, of the person executing or delivering or
purporting to execute or deliver any document or property or this Agreement. The
Escrow Agent shall have no responsibility with respect to the use or application
of any funds or other property paid or delivered by the Escrow Agent to the
Company, the Investor or the Noteholders pursuant to the provisions hereof other
than as to payment or delivery thereof in accordance with the terms hereof.
8.6 Escrow Agent shall have the right to assume, in the absence of written
notice to the contrary from the proper person or persons, that a fact or an
event, by reason of which an action would or might be taken by the Escrow Agent,
does not exist or has not occurred, without incurring liability to the other
parties hereto or to anyone else for any action taken or omitted, or any action
suffered by it to betaken or omitted, in good faith and in the exercise of its
own best judgment, in reliance upon such assumption.
8.7 Escrow Agent will be indemnified and held harmless by the Investor and
the Company from and against all expenses, including reasonable counsel fees and
disbursements, or loss suffered by the Escrow Agent in connection with any
action, suit or proceeding involving any claim, or in connection with any claim
or demand, which in any way, directly or indirectly, arises out of or relates to
this Agreement, the services of the Escrow Agent hereunder, except for claims
relating to willful misconduct or gross negligence by Escrow Agent or breach of
this Agreement by Escrow Agent, or the monies or other property held by it
hereunder.
9 Miscellaneous.
9.1 Survival of Representations, Warranties and Covenants. The warranties,
representations and covenants of the Company contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing through June 30, 2006 and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the Investor
or the Company. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto shall be deemed to be representations and warranties by the
Company.
9.2 Successors and Assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any Securities).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
9.3 Governing Law; Venue. This Agreement is to be construed in accordance
with and governed by the internal laws of the State of New York without giving
effect to any choice of law rule that would cause the application of the laws of
any jurisdiction other than the internal laws of the State of New York to the
rights and duties of the parties.
9.4 Counterparts and Facsimile Execution. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Any counterparts or
signature delivered by facsimile shall be deemed for all purposes as being good
and valid execution and delivery of this Agreement by that party.
9.5 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.6 Notices. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when a printed confirmation sheet
verifying successful transmission of the facsimile is generated by the sender's
machine, when sent by facsimile to the number set forth below; (c) five (5)
business days after deposit in the mail with first class or certified mail
receipt requested postage prepaid and addressed to the other party at the
address set forth below; or (d) two (2) business days after deposit with
internationally recognized overnight delivery service, postage prepaid,
addressed to the parties as set forth below with next business day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery service provider. A party may change or supplement the
addresses given below, or designate additional addresses, for purposes of this
Section 8.6 by giving the other party written notice of the new address in the
manner set forth above.
To: the Company
Address: 0000 Xxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, Chief Executive Officer
Tele. No.: 000-000-0000
Fax No.: 000-000-0000
To: Investor
Address: 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx Xxxxx-Xxxxx
Tele. No.: 000-000-0000 Fax No.: 000-000-0000
9.7 Finder's Fee. (a) The Company hereby agrees to indemnify and to hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, partners, employees or representatives is responsible.
(b) The Investor hereby agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees or representatives is responsible.
9.8 Expenses. Irrespective of whether the Closing occurs, each party shall
bear its own fees and expenses (including legal and financial advisor's fees).
9.9 Amendments and Waivers. This Agreement can only be amended by a writing
signed by each of the parties hereto. The observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the party
making the waiver.
9.10 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.11 Further Assurances. The Company and the Investor shall from time to
time and at all times hereafter make, do, execute, or cause or procure to be
made, done and executed such further acts, deeds, conveyances, consents and
assurances without further consideration, which may reasonably be required to
effect the transactions contemplated by this Agreement.
9.12 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties with respect to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COMPANY:
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
By:____________________________________________________
Name: ________________________________________________
Title:_________________________________________________
INVESTOR:
STELLAR XXXXX, LLC
By:_____________________________________________________
Name: _________________________________________________
Title:__________________________________________________
ESCROW AGENT:
By:____________________________________________________
Name: _________________________________________________
Title:___________________________________________________
As to Section 4.1(k) Only:
-----------------
Xxxxxx X. Xxxxx
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. (the "Company"), a company
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify, that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and pursuant to Section 151 of the General Corporation
Law of the State of Delaware, the Board of Directors of the Company at a meeting
duly held, adopted resolutions (i) authorizing a series of the Company's
previously authorized preferred stock, par value $.001 per share, and (ii)
providing for the designations, preferences and relative participating, optional
or other rights, and the qualifications, limitations or restrictions, thereof,
of One Hundred Thirty-Six Thousand Five Hundred Eighty-Five(136,585) shares of
Series A Convertible Preferred Stock of the Company as follows:
RESOLVED, that the Company is authorized to issue One Hundred Thirty-Six
Thousand Five Hundred Eight-Five (136,585) shares of Series A Convertible
Preferred Stock (the "Series A"), par value $.001 per share, which shall have
the following powers, designations, preferences and other special rights:
1. No Dividends. The holders of the outstanding shares of Series A shall
not be entitled to receive dividends.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of this
Company, either voluntary or involuntary, the holders of Series A shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of this Company to the holders of Common Stock by reason of their
ownership thereof, for the Series A, an amount of $1.00 (the "Original Series A
Issue Price") for each outstanding share of Series A. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of this Company
legally available for distribution to stockholders shall be distributed ratably
among the holders of the Series A in proportion to the full preferential amount
each such holder is otherwise entitled to receive under this Section 2(a).
(b) For purposes of Section 2(a), a liquidation, dissolution or
winding up of this Company shall be deemed to include (unless the holders of at
least a majority of the voting power of the Series A then outstanding, voting
together as a single class shall determine otherwise), (i) the acquisition of
this Company by another entity by means of any reorganization, merger or
consolidation (but excluding any reorganization, merger or consolidation
effected exclusively for the purpose of changing the domicile of the Company),
or any transaction or series of related transactions in which the Company's
stockholders of record as constituted immediately prior to such transaction or
series of related transactions will, immediately after such transaction or
series of related transactions (by virtue of securities issued in such
transaction or series of related transactions) fail to hold at least 50% of the
voting power of the resulting or surviving Company following such transaction or
series of related transactions; or (ii) a sale of all or substantially all of
the assets of this Company.
(c) This Company shall give each holder of record of Series A written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and
shall also notify such holders in writing of the final approval of such
transaction. The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of this Section 2,
and this Company shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than
twenty (20) days after this Company has given the first notice provided for
herein or sooner than ten (10) days after this Company has given notice of
any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Series A
that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding
shares of Series A.
3. Redemption. Neither the Company nor the holders of Series A
shall have the unilateral right to call or redeem or cause to have called or
redeemed any shares of the Series A.
4. Conversion at Option of the Holder. The holders of the
Series A shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A shall be convertible, at
the option of the holder thereof, at any time after the date of issuance of
such Share, but only to the extent that there shall be authorized a sufficient
number of shares of the Company's Common Stock, par value, $.001 per share
("Common Stock") to issue to the holder upon such conversion, at the office of
this Company or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series A Issue Price by the Conversion Price in effect on the date the
certificate is surrendered for conversion. The initial Conversion Price shall
be equal to $.000282922; provided, however, that the Conversion Price shall be
subject to adjustment as set forth in Section 4(c).
(b) Mechanics of Conversion. Before any holder of Series A shall be
entitled to convert the same into shares of Common Stock, the holder shall
surrender the certificate or certificates therefor, duly endorsed, at the
office of this Company or of any transfer agent for the Series A, and shall
give written notice to this Company at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
This Company shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series A, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
(c) Conversion Price Adjustments of Series A. The Conversion Price of
the Series A shall be subject to adjustment from time to time as follows:
(i) In the event this Company should at any time or from time to
time after the applicable Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Series A shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase in the aggregate
number of shares of Common Stock outstanding and those issuable with respect to
such Common Stock Equivalents.
(ii) If the number of shares of Common Stock outstanding at any
time after the applicable Purchase Date is decreased by a reverse stock split or
combination of the outstanding shares of Common Stock, then, following the
record date of such reverse stock split or combination, the Conversion Price for
the Series A shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(iii) In the event this Company shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
Company or other persons, assets (excluding cash dividends) or options or
rights, then, in each such case for the purpose of this Section 4(c), the
holders of each series of Series A shall be entitled to a proportionate share of
any such distribution as though they were the holders of the number of shares of
Common Stock of this Company into which their shares of Series A are convertible
as of the record date fixed for the determination of the holders of Common Stock
of this Company entitled to receive such distribution.
(iv) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision or combination
transaction provided for elsewhere in this Section4(c)) ,provision shall be
made so that the holders of the Series A shall thereafter be entitled to
receive upon conversion of such series of Series A the number of shares of
stock or other securities or property of this Company or otherwise, to which a
holder of the number of shares of Common Stock deliverable upon conversion of
the Series A held by such holder would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of each series of Series A after the recapitalization to the end
that the provisions of this Section 4 (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion of
Series A) shall be applicable after that event as nearly equivalent as may be
practicable.
(d) No Impairment. This Company will not, by amendment of this
Certificate of Designation or the Certificate of Incorporation of the Company
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by this Company, but will at
all times in good faith assist in the carrying out of all the provisions of
this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series
A against impairment.
(e) No Fractional Shares and Certificate as to Adjustments,
(i) No fractional shares shall be issued upon the conversion
of any share or shares of Series A. In lieu of any fractional shares to which
the holder would otherwise be entitled, the Company shall pay cash equal to
such fraction multiplied by the then fair market value of a share of Common
Stock as determined in good faith by the Board of Directors. The number of
shares of Common Stock to be issued upon such conversion shall be determined on
the basis of the total number of shares of Series A the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of any series of Series A pursuant to this Section 4, this
Company, at its expense, shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to each holder of
Series A a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. This Company shall, upon the written request at any time of any holder
of Series A, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Conversion Price at
the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property that at the time would be received upon the
conversion of a share of Series A.
(f) Notices of Record Date. In the event of any taking by this
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, this Company shall mail
to each holder of Series A, at least twenty (20) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(g) Authorization of Additional Common Stock Issuable Upon
Conversion. This Company shall use its best efforts to take all required
actions to hold a meeting of stockholders on or prior to June 30, 2005 to
consider and approve an amendment of the Certificate of Incorporation of the
Company to change the number of authorized shares of the Company's Common Stock
(whether by reverse stock split or increase in the number of authorized shares
or a combination of the foregoing) such that there shall be a sufficient number
of shares of Common Stock to effect the conversion of all outstanding shares of
Series A and at at all times thereafter reserve and keep available out of its
authorized, but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A; and if at any time the number
of authorized, but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Series A, in addition
to such other remedies as shall be available to the holder of such Series A,
this Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized, but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to the Company's Certificate of
Incorporation.
5. Voting Rights and Election of Series A Director in Certain
Circumstances; Board Observer Rights.
(a) Multiple Votes. The holders of Series A shall
have the right to such number of votes per Share of Series A as shall equal to
the number of shares of Common Stock which shall then be issuable upon
conversion of such Share, and shall be entitled to vote, together with holders
of Common Stock as a single class, with respect to any matter upon which holders
of Common Stock have the right to vote. Such holders shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of this Company.
(b) Certain Approval Rights. So long as any Shares of
Series A are outstanding, this Company shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least two-thirds of the then outstanding shares of Series A voting separately as
a single class, (i) alter or change, whether by amendment of the Certificate of
Incorporation of the Company, merger, consolidation or otherwise, the rights,
preferences or privileges of the Series A or the Common Stock so as to affect
adversely such shares of Series A; or (ii) directly, or through any direct or
indirect subsidiary of the Company. issue any preferred stock or securities
convertible into any equity securities of the Company.
(c) No Other Preferred Stock. So long as any Shares
of Series A are outstanding, this Company shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least two thirds of the then outstanding shares of Series A voting separately as
a single class, issue any shares of any other series of Preferred Stock.
6. Limitations Upon Disposition. The Series A Shares issuable pursuant
to this Certificate and the shares of Common Stock issuable upon conversion of
such Series A Shares (collectively the "Securities"), if not registered by the
Company under the Securities Act of 1933, as amended (the "Act"), may not be
sold or offered for sale in the absence of an effective registration statement
as to the Securities under the Act, or an opinion of counsel satisfactory to the
Company that such registration statement is not required. The above restrictions
in this Section 6 shall be contained in a legend to be placed upon each of the
Series A Share certificates at the time of distribution of the Securities and a
stop transfer order may be placed on such Securities by the Company. In
addition, each Series A certificate shall bear the following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF
THE COMPANY'S CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
THE PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE.
7. Replacement. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any certificate evidencing one or more shares of Series A and in
the case of loss, theft or destruction, of any indemnification undertaking by
the holder to the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver in lieu of such certificate, a new certificate of like kind,
representing the number of shares of Series A which shall have been represented
by such lost, stolen, destroyed, or mutilated certificate.
8. Notices._ Whenever notice is required to be given pursuant to this
Certificate of Designations, unless otherwise provided herein, such notice shall
be given at the address then set forth in the Company's records.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by Xxxxxx Xxxxx, its Chief Executive Officer, as of _____ day of
April, 2005.
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
By: __________________________
Name: Xxxxxx Xxxxx
Title: Chief Executive Officer
EXHIBIT B
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY
EXHIBIT C
April __, 2005
To: Stellar XxXxx LLC
Ladies and Gentlemen:
We have acted as counsel to BrightStar Information Technology Group,
Inc., a Delaware corporation ("BrightStar"), in connection with the transactions
contemplated by that certain Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of April __, 2005 by and among BrightStar, Stellar XxXxx,
LLC, a Delaware limited liability company (the "Investor"), and Guzov Ofsink,
LLC (the "Escrow Agent"). This opinion is delivered to you pursuant to Section
___ of the Stock Purchase Agreement. Any capitalized term used herein and not
otherwise defined shall have the meaning specified for such term in the Stock
Purchase Agreement.
In rendering this opinion, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purpose of rendering this opinion. As to matters of fact material to the
opinions expressed herein, we have relied upon the representations and
warranties as to factual matters contained in and made by BrightStar and the
Investor in the Stock Purchase Agreement and upon certificates and statements of
government officials and of officers of BrightStar. In addition, we have
examined originals or copies of documents, corporate records and other writings
that we consider relevant for the purposes of this opinion. In such examination,
we have assumed the genuineness of all signatures on original documents and the
conformity to original documents of all copies submitted to us. In making our
examination of documents executed by entities other than BrightStar, we have
assumed that each other entity had the power, and that each natural person had
the capacity, to enter into and perform all its obligations thereunder, the due
authorization thereof by each such other entity, the due execution and delivery
thereof by each such other entity and natural person, and that each such
document constitutes a valid and binding obligation of each such other entity
and natural person which is a party thereto, enforceable against such other
entity in accordance with its terms.
As used in this opinion letter, the expression "to our knowledge" or
"known to us" means as to matters of fact that we have examined documents in our
files and documents made available to us by BrightStar and have made such
inquiries of officers of BrightStar as we have deemed necessary, but beyond that
we have undertaken no independent investigation or review for the purpose of
rendering any of the opinions set forth below. Further, the expression "to our
knowledge" or "known to us" with reference to matters of fact refers to the
current actual knowledge of the attorneys of this firm who have worked on the
transactions referred to in the first paragraph of this opinion. Except to the
extent expressly set forth herein or as we otherwise believe to be necessary to
render our opinion, we have not undertaken any independent investigation to
determine the existence or absence of any other facts, and no inference as to
our knowledge of the existence or absence of any such facts should be drawn from
our representation of BrightStar or the rendering of the opinions set forth
below.
We express no opinion as to matters governed by any laws other than the
law of the State of New York, the Delaware General Corporation Law and the
federal law of the United States of America. As you know, we are not licensed to
practice law in the State of Delaware, and our opinions herein with respect to
the corporate law of Delaware are based solely on our review of the Delaware
General Corporation Law as found in a standard compilation of the official
statutes of the State of Delaware. We express no opinion as to whether the laws
of any particular jurisdiction apply, and no opinion to the extent that the laws
of any jurisdiction other than those identified above are applicable to the
Stock Purchase Agreement or the transactions contemplated thereby.
In rendering the opinion set forth in paragraph (a) below as to the
valid existence and good standing of BrightStar, we have relied exclusively on
certificates of public officials.
In rendering the opinion set forth in paragraph (f) below, we have
relied on the certificate of Xxxxxx X. Xxxxx, the Chief Executive Officer of
BrightStar dated April __, 2005 (the "Opinion Certificate").
The opinions hereinafter expressed are subject to the following further
qualifications:
(1) Our opinions are qualified by the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws relating to or
affecting the rights of creditors generally, including, without limitation, laws
relating to fraudulent transfers or conveyances, preferences and equitable
subordination.
(2) Our opinions are qualified by the limitations imposed by general
principles of equity upon the availability of equitable remedies for the
enforcement of provisions of the Agreements, and by the effect of judicial
decisions which have held that certain provisions are unenforceable when their
enforcement would violate the implied covenant of good faith and fair dealing,
or would be commercially unreasonable, or where their breach is not material.
(3) We note that our opinions are based upon current statutes, rules,
regulations, cases and official interpretive opinions, and cover certain items
that are not directly or definitively addressed by such authorities.
(4) We express no opinion as to compliance with applicable securities
laws, rules or regulations (including antifraud statutes)
(5) We express no opinion as to the legality, validity, binding nature
or enforceability of any of the Transaction Documents.
(6) We express no opinion as to Investor's compliance with any law
relating to its legal or regulatory status or the nature of Investor's business.
Based upon and subject to the foregoing, we are of the opinion that:
BrightStar is a corporation validly existing and in good standing under
the laws of Delaware and has the corporate power and authority necessary to own
its properties and to conduct its business as, to our knowledge, it is presently
conducted and as it is presently intended to be conducted. BrightStar is
qualified to do business as a foreign corporation in the State of California.
BrightStar has the corporate power and authority to execute, deliver,
perform, and observe the provision of, the Transaction Documents to which it is
a party and to issue, sell and deliver the Securities
Each of the Transaction Documents to which BrightStar is a party has
been duly authorized, executed and delivered by BrightStar.
The Certificate of Designations has been duly adopted by the Board of
Directors of BrightStar and filed with the Secretary of State of the State of
Delaware.
Upon issuance and delivery against payment therefor in accordance with
the Stock Purchase Agreement, all of the Securities will be validly issued,
fully paid and nonassessable.
Except as set forth in Schedule I to the Stock Purchase Agreement, to
our knowledge, there is no litigation or proceeding pending against BrightStar
which is likely to materially and adversely affect the ability of BrightStar to
perform its obligations under the Transaction Documents, or which seeks to
prevent the consummation of the transactions contemplated by the Transaction
Documents, including the issuance and delivery of the Securities.
This opinion is furnished to you solely for your benefit and may not
be relied on by, nor may copies be delivered to, any other person without our
prior written consent. We assume no obligation to inform you of any facts,
circumstances, events or changes in the law that may hereafter be brought to our
attention that may alter, affect or modify the opinion expressed herein.
Sincerely,
XXXXXX, XXXXXXXXXX & XXXXXXXXX LLP
EXHIBIT D
OMNIBUS AGREEMENT RE NOTES
Amended April 1, 2005 Omnibus Agreement
---------------------------------------
re
--
Series 1 Convertible Subordinated Promissory Notes
--------------------------------------------------
This Amended April 1, 2005 Omnibus Agreement re Series 1 Convertible
Subordinated Promissory Notes (this "Amended Agreement") is entered into as of
April 11, 2005 by and between BrightStar Information Technology Group, Inc., a
Delaware corporation ("BrightStar"), BrightStar Information Technology Services,
Inc., a Delaware corporation (the "Company"), Stellar XxXxx LLC ("Stellar") a
Delaware limited liability company and each of the holders of the Notes (as
defined below) (each a "Holder" and, collectively, the "Holders").
P R E A M B L E
Whereas, the Company initially issued to the Holders its Series 1 Convertible
Subordinated Promissory Notes dated July 26, 2001 (as amended by amendments
dated as of October 14, 2003, June 30, 2004 and September 1, 2004 by and between
the Company and holders of Series 1 Convertible Subordinated Promissory Notes
representing in aggregate outstanding principal amount not less than
seventy-five percent (75%) of the aggregate outstanding principal amount of all
Series 1 Convertible Subordinated Promissory Notes then outstanding, and
including those Series 1 Convertible Subordinated Promissory Notes issued to
Holders as payment in kind for interest, the "Notes"); and
Whereas, the Notes are secured pursuant to that certain Security Agreement dated
as of July 26, 2001, made by BrightStar and others; and
Whereas BrightStar and Stellar have entered into that certain Offer to Purchase
dated March 25, 2005, the form of which is set forth in Exhibit A (the "Purchase
Offer") which is subject to the execution of a definitive agreement (the
"Definitive Agreement"); and
Whereas BrightStar and Stellar have agreed to modify the terms of Exhibit A to
eliminate paragraph 7 thereof pertaining to dilution protection in exchange for
increasing to $860,000 the cash to be paid to the Holders for their Notes and
increasing by one-half percent the number of fully diluted common shares of
BrightStar to be retained by the current holders of BrightStar's common stock,
options and warrants (excluding the Holder's warrants) at April 14, 2005; and
Whereas, BrightStar proposes to issue approximately 13.869 million shares to the
Holders as consideration for their sale of the Notes and for their surrender of
all warrants issued in respect of the Notes, all as provided in the Purchase
Offer; and
Whereas the Holders have received information regarding the financial condition
of BrightStar and the Company and have had the opportunity to request such
additional information regarding BrightStar and the Company as may be material
to them in connection with the transactions contemplated by this Amended
Agreement and, on the basis of such information received, wish to carry out such
transactions;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, BrightStar, the Company, the Holders
and Stellar hereby agree as follows:
1. Agreements of Holders Effective Time. Effective upon the satisfaction
of the conditions set forth in Section 2 hereof (the "Effective
Time"), on or before April 29, 2005 (the "Termination Date," which may
be extended from time to time by the written consent of Holders of
Notes representing in aggregate outstanding principal amount more than
fifty percent (50%) of the aggregate outstanding principal amount of
all Notes), each of the Holders hereby:
a. agrees to sell their Notes to Stellar which shall pay an
aggregate of $860,000 in cash for all of the Notes which shall be
distributed to the Holders in proportion to the principal balance
of their Notes.
b. agrees that all warrants issued to such Holder in connection with
the Notes are cancelled and of no further force or effect.
c. releases BrightStar, the Company, Stellar, and their respective
members, officers, directors, agents, affiliates, successors and
assigns from any and all liability or obligation whatsoever in
respect of any of the Notes, the Security Agreement or any other
document or agreement related thereto, or in respect of any other
claim or matter of any nature arising on or prior to the
Effective Time (except for obligations arising under this Amended
Agreement);
Each of the Holders agrees to deliver the original Notes, endorsed
payable to the order of Stellar, for sale as above provided and
surrender to BrightStar the original warrants issued to such
Holder in connection with the Notes as above provided, all at such
time as is requested by BrightStar in connection with the closing
of the transactions contemplated by the Purchase Offer. In
addition, upon request by BrightStar, the Company or Stellar, each
Holder, at no expense to such Holder, agrees to execute and
deliver any and all further documents necessary or appropriate to
further confirm and assure the effectiveness and completion of the
actions described in clauses a, b, and c above and otherwise to
carry out the intent and purposes of this Amended Agreement,
including, without limitation, the execution of assignments of
financing statements under the Uniform Commercial Code
2. Conditions to Effectiveness. The agreements of the Holders set forth
in Section 1 above shall be effective only upon the prior or
contemporaneous satisfaction of the following conditions on or before
the Termination Date:
a. BrightStar, the Company, Stellar and all of the Holders shall
have executed this Amended Agreement;
b. Stellar shall have acquired at least a majority of the voting
stock of BrightStar, or securities convertible into, or
exchangeable for, a majority of the voting stock of BrightStar;
and
c. The Holders shall have had issued to them by BrightStar
approximately 13.869 million shares of BrightStar common stock in
proportion to the principal balance of their Notes
3. Representations and Warranties of BrightStar and the Holders.
a. BrightStar and the Company each represents and warrants to each
of the Holders and Stellar as follows:
i. It is a corporation validly existing under the
laws of the State of Delaware and has the corporate power to own
its assets and to conduct its business as presently conducted.
ii. The transactions contemplated by this Amended
Agreement have been duly authorized on the part of BrightStar.
iii. BrightStar's Form 10-K and Form 10-Q reports
filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since December 31, 2002, are substantially in
compliance with the requirements of the Exchange Act, and no
statement contained therein contains any untrue statement of a
material fact or omits to state any material fact known to
BrightStar necessary to make the statements contained therein and
therein not misleading.
b. The Holders each represent and warrant to Stellar, the
Company and BrightStar as follows:
i. the Holders have received information regarding
Stellar and its operations and have had the opportunity to request
such additional information regarding Stellar as may be material
to them in connection with the transactions contemplated by this
Amended Agreement and, on the basis of such information received,
wish to carry out such transactions
4. Representations, Warranties and Agreements of Stellar. Stellar
represents and warrants to each of the Holders, BrightStar and the
Company as follows:
a. It is a limited liability company validly existing under the laws
of the State of Delaware and has the power to own its assets and
to conduct its business as presently conducted.
b. The transactions contemplated by this Amended Agreement,
including the purchase of the Notes by Stellar, have been duly
authorized, and the person signing this Amended Agreement on
behalf of Stellar is duly authorized to enter into this Amended
Agreement and bind Stellar to carry out the transactions
contemplated by this Amended Agreement; and
c. Stellar has the financial resources to complete the transactions
contemplated by this Amended Agreement independent of the
approval or financial support of any third party.
5. Disclaimers. Each Holder executing this Amended Agreement is doing so
based solely on the representations and warranties set forth in
Sections 3 and 4 above and the independent determination of such
Holder. Except for the representations and warranties set forth in
Sections 3 and 4 above, no Holder is relying in any way on statements
made by or on behalf of BrightStar, the Company or Stellar, whether
made by directors, officers or members of any of them, by members of
the Company's Ad Hoc Committee of Note Holders, or by any party acting
as a consultant, advisor or attorney for BrightStar, the Company or
Stellar. Each Holder recognizes that any and all projections of
financial performance of the Company in future periods which may have
been furnished to Holders are predictions of future events and thus
inherently uncertain, and actual financial performance will differ
from such projections. In no event shall any individual have any
obligation or liability to any Holder associated with the Notes, the
obligations of BrightStar or the Company under the Notes, or the
transaction contemplated by this Amended Agreement. Stellar
acknowledges that it is not relying on any representation or warranty
made by any Holder and that it is purchasing the Notes without
recourse to any Holder.
6. Effectiveness. This Amended Agreement shall become effective upon
execution hereof by BrightStar, the Company, Stellar and by Holders
whose Notes represent in total one-hundred percent (100%) of the
aggregate outstanding principal amount of the Notes. This Amended
Agreement, when effective, supersedes and completely replaces the
April 1, 2005 Omnibus Agreement re Series 1 Convertible Subordinated
Promissory Notes by and among BrightStar, the Company, Stellar and the
Holders.
7. Acknowledgement and Consent of Company. BrightStar and the Company
acknowledge the continuation of their obligations under the Notes and
the Security Agreement. BrightStar and the Company consent to the
transactions contemplated by this Amended Agreement.
8. Notes Closing. The closing of the sale of the Notes by each Holder to
Stellar shall occur not later than the later of the Termination Date
or five business days after the closing of the transactions described
in the Purchase Offer.
9. Notes Escrow. BrightStar, Stellar and Guzov Ofsink, LLC (the "Escrow
Agent"), counsel to Stellar, intend to enter into a Stock Purchase
Agreement relating to the sale of common and preferred stock of
BrightStar to Stellar (the "Purchase Agreement"). Pursuant to the
Purchase Agreement, the Escrow Agent shall act as escrow agent for the
Notes, warrants to purchase common stock of BrightStar held by the
Holders, common stock to be issued to the Holders pursuant to this
Agreement and the cash purchase price to be paid by Stellar to the
Holders for the purchase of their Notes. The Holders authorize
BrightStar to enter into and perform the escrow provisions of the
Stock Purchase Agreement substantially upon the terms set forth in the
draft of Section 8 of such agreement set forth as Exhibit B attached
hereto.
IN WITNESS WHEREOF, the Parties have executed this Amended Agreement as of the
date first written above.
Name of Holder _________ BrightStar Information Technology Group, Inc.
___________________________ By_____________________
Name of Holder _________ Xxxxxx X. Xxxxx
_________ Chief Executive Officer
BrightStar Information Technology Services,
Inc.
By_____________________
Xxxxxx X. Xxxxx
Chief Executive Officer
Consent of Other Debtors under Security Agreement
-------------------------------------------------
Each of the undersigned consents to the completion of each of the transactions
contemplated by the foregoing Amended April 1, 2005 Omnibus Agreement re Series
1 Convertible Subordinated Promissory Notes, and acknowledges that property
belonging to each of the undersigned will remain subject to liens and security
interests to the extent set forth in the Security Agreement (as defined in the
foregoing Agreement).
IN WITNESS WHEREOF, each of the undersigned has executed this Amended Agreement
as of the date and year first above written.
INTEGRATED CONTROLS, INC.
By:
--------------------------------------------
Print Name:_______________________________
Title:____________________________________
"DEBTOR"
SOFTWARE CONSULTING SERVICES AMERICA, INC.
By:
--------------------------------------------
Print Name:_____________________________________________
Title:____________________________________
"DEBTOR"
SOFTWARE INNOVATORS, INC.
By:
--------------------------------------------
Print Name:_____________________________________________
Title:____________________________________
EXHIBIT A
OFFER TO PURCHASE
Stellar XxXxx LLC ("SMK") hereby offers to purchase certain securities of
BrightStar Information Technology Group, Inc., including its affiliates and
subsidiaries, with its principal offices located at 0000 Xxxxx Xxxxx - Xxxxx
000, Xxxxxxxxxx, XX 00000 ("BrightStar" or the "Company"), under the following
terms and conditions:
1. Acquisition
SMK proposes to purchase from BrightStar newly issued Convertible Preferred
Stock of BrightStar and as a result will acquire control of the Company (on
an as converted basis) and all of its assets including, but not limited to,
the following:
1. All rights, title and exclusive interest to all patents, trademarks,
licenses, trade names, technical processes, know-how or other
intellectual property or rights thereto associated with the business
of the Company, whether registered or not;
2. All tangible and intangible property related to the business of the
Company including customer lists, business development data, records,
goodwill and other intangible assets;
3. All contracts, letters of intent and other supporting information
related to purchases from suppliers, deliveries or other commitments
to customers and beneficial partnership or corporate alliances of the
Company; and
4. Any and all other assets of any nature whatsoever that are related to
or used in connection with the business of the Company and its
goodwill.
2. Consideration
The total consideration paid by SMK to BrightStar and noteholders shall
include the following elements:
a) a Cash Purchase Price of $680,000 to acquire from the holders (the
"Noteholders") all of the outstanding Series 1 Convertible
Subordinated Promissory Notes (the "Notes") of BrightStar Information
Technology Services, Inc. ("Services"). Upon closing of the purchase
of the Notes, SMK agrees to extend the maturity of the Notes until
December 31, 2007. In addition, in consideration of the cancellation
of the warrants and conversion rights related to the Notes, BrightStar
at closing will issue to the Noteholders an amount of stock (estimated
in the aggregate to be approximately 16.7 million shares) which is
equal to the number shares of common stock currently outstanding plus
the shares underlying the outstanding non-Noteholder warrants and
options;
b) a Cash Purchase Price of $350,000 in exchange for the Series A and
Series B preferred stock of the Company as described below, the
proceeds of which shall be used to resolve and settle Legacy
Liabilities, which include the Company's outstanding credit line,
accrued payables, contingent liabilities, legal and accounting fees;
in the event that $350,000 exceeds the total legacy liabilities, the
remaining cash balance will remain in the Company as working capital;
c) Upon SMK's cash purchase of the Notes and Preferred Stock, SMK will be
entitled to receive from BrightStar: (a) in exchange for $197,762.66
in total consideration, Series A Convertible Preferred Stock
convertible into 38,648,278 shares equal to approximately 53.7% of the
currently authorized common stock of BrightStar; and (b) in exchange
for $152,238.34 in total consideration, Series B Convertible Preferred
Stock convertible, upon shareholder approval, into 595,034,440 shares,
said shares being equal to an amount of the common stock of
BrightStar, such that, upon conversion of the Series A and B Preferred
Stock, SMK shall own 95% of the fully diluted stock of BrightStar. The
holders at closing of the outstanding common stock (including the
shares to be issued to the Noteholders), options and non-Noteholder
warrants (together the "Legacy Shares") shall hold the remaining 5% of
common shares of BrightStar on a fully diluted, pro-rata basis,
subject to the anti-dilution adjustment described below.
d) SMK will deposit a non-refundable, good faith payment of $50,000 to
BrightStar, with such amount to be offset from the $350,000 payment
outlined in above, upon the execution of this Offer to Purchase.
3. Voting Rights
Upon SMK's purchasing of the Series A & B Convertible Preferred Stock, the
respective preferred classes will be entitled to vote as shareholders based on
the respective ownership percentages on an "as converted" basis pursuant to the
purchase of the Series A & B preferred classes.
4. Board of Directors
Upon SMK's purchase of the Series A & B Convertible Preferred Stock, SMK will be
entitled to appoint dependent and independent representatives to BrightStar's
board to reflect SMK's percentage ownership in BrightStar on an "as converted"
basis.
5. Closing Date
The transaction described in this Offer to Purchase shall close no later than
10:00 a.m. EST on the 29th of April, 2005, (the "Closing Date") at the offices
of SMK and shall be immediately effective. Both parties agree that the defined
Closing Date can be scheduled at an earlier date, upon mutual agreement of both
parties.
6. Due Diligence
To the extent reasonably required for the purpose of this Offer to Purchase, and
subject to the provisions thereof, and SMK's compliance with that certain
Confidentiality Agreement dated effective March 16, 2005 between the Company and
Stellar Financial, the Company will cause SMK, its counsel, accountants,
investors, lenders, advisors and all other reasonable representatives of SMK
("Representatives") to receive access, during normal business hours, between the
date of this offer and the Closing Date, to all of the properties, books,
contracts, and records of the Company, and will cause to be furnished to SMK,
and its Representatives all such information concerning the affairs of the
Company as SMK, or such Representatives may reasonably request. SMK, and its
Representatives shall have access to customers and suppliers of the Company for
the purpose of gaining information subject to the condition that at least one
officer of the Company shall participate in such discussions.
At all reasonable times during normal business hours, SMK, and its
Representatives shall have access, prior to the Expiration Date, to discuss the
Company's business and affairs with any employee of the Company and the
Company's designated advisors.
If, for any reason and at any time prior to the Closing Date, SMK
determines that the results of its due diligence are unsatisfactory, in the
sole judgment of SMK, it may terminate this Offer to Purchase.
7. Purchase Price Adjustments/Anti dilution protection
The Legacy Shares will represent an aggregate of 5% of the fully diluted common
shares of BrightStar (if necessary, through an adjustment to the conversion
price of the Series A and/or Series B Preferred Stock) until the Market Value of
the Legacy Shares is at least $400,000 after an Adjustment Event, which is
defined as the earlier of a merger or acquisition with a private operating
company to be identified or when BrightStar has raised at least $2 million of
equity pursuant to a merger or acquisition transaction. Market Value shall mean
the weighted average trading prices of BrightStar's common stock during the 20
consecutive trading-day period commencing 30 Calendar days after the Adjustment
Event.
8. Conditions Precedent
The obligation of SMK to complete the purchase of BrightStar shall be subject to
the fulfillment or satisfaction of, on or before the Closing Date, each of the
following conditions precedent:
a) Governmental Approvals - All required governmental approvals, if any,
necessary for the Closing, for the operations of SMK and the full
application of rights in respect to material licenses and agreements in
the manner that the Company operated prior to the Transaction shall
have been obtained. Affirmation of the continuance of all license
rights post-acquisition shall be obtained from BrightStar in writing
prior to Closing.
b) Authorization - BrightStar shall have obtained the approval of a
sufficient proportion of its officers and directors with authorization
to complete the Transaction and execute related documentation.
c) Material Adverse Change - There shall have been no material adverse
change in the business, assets, operations, or prospects of the Company
prior to the Close, relative to the state of the Company as of the date
of this Offer to Purchase, and the Company shall notify SMK of any
material changes discovered prior to Closing.
d) Due Diligence - SMK, its investors and lenders shall have concluded its
due diligence and found the results acceptable.
e) Documentation - SMK shall consider acceptable the documentation
necessary for Closing the Transaction.
f) Approval Process - Successful completion of the approval processes of
SMK's management and directors.
g) Audit - Receipt of the audit for the fiscal years ended December 31st
of 2004 and 2003, in a form satisfactory to SMK.
h) Consulting Agreements - Acceptance and execution of existing
consulting agreements in order to maintain the normal course of
operations of the Company.
9. Securities Purchase and Sale Agreement
The terms and provisions governing this transaction of purchase and sale
shall be contained in a definitive Purchase and Sale Agreement containing
such terms and provisions as may be appropriate under the circumstances,
including representations and warranties, indemnities, covenants and
conditions (including conditions as to any required governmental approvals
or consents), such agreement to be subject to the mutual approval of SMK
and BrightStar which agreement shall also include, without limitation, the
following terms:
a) Upon execution of this agreement, SMK and BrightStar shall make joint
announcements of this transaction to all interested persons, unless
both parties consent to single announcement by either party, and
BrightStar shall file a Form 8-K in accordance with applicable rules;
b) The representations and warranties contained in the agreement shall
incorporate and re-state those key facts and representations contained
in the Confidentiality Agreement dated effective March 16, 2005;.
10. Exclusivity
After acceptance of the terms of this Offer to Purchase, the Company shall
not directly or indirectly through any director, officer, employee, agent,
representative (including, without limitation, investment bankers,
attorneys and accountants) or otherwise, (i) solicit, initiate or encourage
submission of proposals or offers from any third party, relating to any
acquisition or purchase of all or a material portion of the Company's
assets, or any equity interest in it, or any transaction, consolidation or
business combination with it, or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any
person to do or seek any of the foregoing.
11. Other Provisions
The Company shall be precluded from making changes to current levels of
compensation and from declaring or paying dividends prior to the Close. The
Company shall conduct its business only in the ordinary course and shall not
acquire or agree to acquire as part of the business of the Company all or any
substantial portion of the assets or business of any other business organization
by merger or consolidation, stock purchase or asset purchase without the written
approval of SMK.
12. Legal and Other Costs
Each of the parties shall bear their own respective legal and other costs
arising in connection with this transaction. It is agreed that SMK will cause
its counsel to draft the agreements provided for in this Offer to Purchase.
SMK hereby represents that it currently has the liquid assets to complete the
transactions contemplated by this offer without the approval or financial
assistance of any third party. This offer will remain open for acceptance by
BrightStar 7:00 pm EST on the 25th day of March, 2005.
Stellar XxXxx LLC
By: ____________________________
Xxxxx X. Xxxxxx, Managing Member
ACCEPTANCE
BrightStar Information Technology Group, Inc. hereby accepts the foregoing
offer this _____day of March, 2005.
BrightStar Information Technology Group, Inc.
By: ______________________________
Xxxxxx X. Xxxxx, Chairman & CEO
Exhibit B
to
Amended April 1, 2005 Omnibus Agreement
---------------------------------------
8. Escrow Provisions.
8.1 The Company and Investor hereby appoint Escrow Agent as
escrow agent for the Notes being sold by the Noteholders to the Investor
pursuant to the Omnibus Agreement, warrant certificates being delivered by the
Noteholders for cancellation by the Company (the "Noteholder Warrants") in
connection with the sale to the Investor of the Notes, certificates for the
Common Stock being issued to the Noteholders in connection with the sale of the
Notes (the "Noteholder Stock Certificates") and the purchase price for the Notes
(the "Notes Purchase Price") to be paid by the Investor in accordance with the
terms and conditions set forth in the Omnibus Agreement and herein, and the
Escrow Agent hereby accepts such appointment.
8.2 Upon receipt of all of the Notes, Noteholder Warrants (or
other instruments which the investor shall have given written notice to the
Escrow Agent are acceptable to the Investor) and Noteholder Stock Certificates
in connection with the sale of the Notes to the Investor, the Escrow Agent shall
promptly deliver to each of the Noteholders, by check or wire transfer, the
amount of the Notes Purchase Price to which such Noteholder shall be entitled as
set forth in Exhibit G. In the event that the Company fails to deliver to the
Escrow Agent prior to June 30, 2005 any one or more of the Notes, the Noteholder
Warrants or the Noteholder Stock Certificates, upon receipt of written notice
from the Investor, the Escrow Agent shall return the Notes Purchase Price to the
Investor, the appropriate Notes and Noteholders Warrant to each Noteholder to
the address set forth on Exhibit G and the Noteholders Stock to the transfer
agent of the Company for cancellation. Alternatively, at the option of the
Investor, the Investor may direct the Escrow Agent by written notice prior to
June 30, 2005 to deliver to the Investor the appropriate Notes, to deliver to
the Company for cancellation the appropriate Noteholder Warrants and to deliver
to each Noteholder the appropriate Noteholder Stock Certificate and the
appropriate portion of the Notes Purchase Price as set forth on Exhibit G in
order to effectuate the sale to the Investor of some, but less than all of the
Notes. In such event, the Escrow Agent shall return only the unpaid Notes
Purchase Price to the Investor, the unsold Notes and uncancelled Noteholders
Warrants to each Noteholder who has not sold his Note to the address set forth
on Exhibit G for such Noteholder and the Noteholders Stock Certificates that
were to be delivered to the Noteholders upon sale of their Notes to the transfer
agent of the Company for cancellation.
8.3 Escrow Agent shall have no duties or responsibilities
other than those expressly set forth herein. Escrow Agent shall have no duty to
enforce any obligation of any person to make any payment or delivery, or to
direct or cause any payment or delivery to be made, or to enforce any obligation
of any person to perform any other act. Escrow Agent shall be under no liability
to the other parties hereto, or to anyone else, by reason of any failure, on the
part of any party hereto or any maker, guarantor, endorser or other signatory of
any document or any other person, to perform such person's obligations under any
such document. Except for amendments to this Agreement relating to escrowed
funds or documents or instruments, the Escrow Agent shall not be obligated to
recognize any agreement between any and all of the persons referred to herein,
notwithstanding that references hereto may be made herein and whether or not it
has knowledge thereof.
8.4 Escrow Agent shall not be liable to any party or anyone
else for any action taken, or omitted to be taken by it, or any action suffered
by it to be taken or omitted, in good faith and acting upon any order, notice,
demand, certificate, opinion or advice of counsel (including counsel chosen by
the Escrow Agent) statement, instrument, report, or other paper or document (not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained), which is believed by the Escrow Agent to be genuine and to
be signed or presented by the proper person or persons. The Escrow Agent shall
not be bound by any of the terms thereof, unless evidenced by a writing
delivered to the Escrow Agent signed by the proper party or parties and, if the
duties or rights of the Escrow Agent are affected, unless it shall give its
prior written consent thereto.
8.5 Escrow Agent shall not be responsible for the sufficiency
or accuracy of the form, or of the execution, validity, value or genuineness of,
any document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein; nor shall the Escrow Agent be responsible or liable to
the other parties hereto or to anyone else in any respect on account of the
identity, authority or rights, of the person executing or delivering or
purporting to execute or deliver any document or property or this Agreement. The
Escrow Agent shall have no responsibility with respect to the use or application
of any funds or other property paid or delivered by the Escrow Agent to the
Company, the Investor or the Noteholders pursuant to the provisions hereof.
8.6 Escrow Agent shall have the right to assume, in the
absence of written notice to the contrary from the proper person or persons,
that a fact or an event, by reason of which an action would or might be taken by
the Escrow Agent, does not exist or has not occurred, without incurring
liability to the other parties hereto or to anyone else for any action taken or
omitted, or any action suffered by it to betaken or omitted, in good faith and
in the exercise of its own best judgment, in reliance upon such assumption.
8.7 Escrow Agent will be indemnified and held harmless by the
Investor and the Company from and against all expenses, including reasonable
counsel fees and disbursements, or loss suffered by the Escrow Agent in
connection with any action, suit or proceeding involving any claim, or in
connection with any claim or demand, which in any way, directly or indirectly,
arises out of or relates to this Agreement, the services of the Escrow Agent
hereunder, except for claims relating to willful misconduct or gross negligence
by Escrow Agent or breach of this Agreement by Escrow Agent, or the monies or
other property held by it hereunder.
EXHIBIT E
FORM OF PROMISSORY NOTE AND SECURITY AGREEMENT ASSIGNMENT
PROMISSORY NOTE AND SECURITY AGREEMENT ASSIGNMENT
For Value Received, each of the undersigned (each an "Assignor" and
collectively the "Assignors") does hereby sell, assign, transfer and convey unto
Stellar XxXxx LLC, a Delaware limited liability company (hereinafter called the
"Assignee"),its successors and assigns all right, title and interest of Assignor
to and under that certain Series I Convertible Secured Promissory Note, dated
July 26, 2001, in the original principal amount listed opposite the name of the
Assignor on Schedule A attached hereto (each a "Note"), made by BrightStar
Information Technology Services, Inc. ("Maker") and payable to the order of
Assignor (the original copy of which is being delivered to Assignee herewith).
Each Assignor further does hereby assign, transfer and convey to Assignee
all of the Assignor's rights under that certain Security Agreement dated July
26, 2001 by Maker, BrightStar Information Technology Group, Inc. ("Brightstar"),
Software Innovators, Inc. ("SII"), Software Consulting Services America, Inc.
("SCSAI") and Xxxxx X. Xxxxxxxxx & Associates, Inc. ("Xxxxxxxxx") in favor of
Assignors (the "Security Agreement").
By executing this Assignment, each of Maker, Brightstar, SII, and SCSAI
(Xxxxxxxxx was liquidated in 2002 and is no longer in existence) hereby consents
to the assignment of the Notes and the Assignors' rights under the Security
Agreement, agrees to make any and all future payments on the Notes to the
Assignee, its successors and assigns and agrees that Assignee shall be treated
as the Secured Party under the Security Agreement.
The parties hereto acknowledge and agree that, as of March 31, 2005, the
aggregate outstanding principal amount and interest of the Notes is
$1,358,435.22.
Each Assignor agrees to take such further action and execute all such
documents as shall reasonably be required to transfer to Assignee all of the
Assignor's right, title and interests in and to the Note being assigned by the
Assignor and the Assignor's rights in the Security Agreement. Each Assignor
hereby irrevocably appoints Assignee as the Assignor's true and lawful attorney,
with full power of substitution, in the name of the Assignor, to sign and file
Financing Statement Amendments on Form UCC-3 evidencing the assignment to the
Assignee of the security interests granted to Assignor under the Security
Agreement.
This Assignment may be signed in counterparts.
IN WITNESS WHEREOF, the parties have caused this Promissory Note and
Security Agreement Assignment to be executed on their behalf as of the 11th day
of April 2005.
ASSIGNORS
-------------------------
Xxxxxx X. Xxxxx
-------------------------
Xxxxx X. Xxxxxx and Xxxx X.
Xxxxxx, Joint Tenants
--------------------------
Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxxxx
THE XXXXXXX FOUNDATION
By:_________________________
Name:
Title:
KAZOKU INVESTMENTS, LTD.
By:___________________________
Name:
Title:
NAUSET PROPERTIES, LTD.
By:___________________________
Name:
Title:
----------------------------
Xxxxxx Xxxxxxxxx Xxxxxxx
XXXX XXXXXXXX DEFINED BENEFIT PENSION PLAN
By:___________________________
Name:
Title:
------------------------------
Xxxxxx X. Xxxxxxxx
-------------------------------
Estate of Xxxxx X. Xxxxxx
-------------------------------
G. Xxxxxxxx Xxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxx
ALTAMONT CAPITAL MANAGEMENT, INC.
By:___________________________
Name:
Title:
MAKER
BRIGHTSTAR INFORMATION TECHNOLOGY SERVICES, INC.
By:_______________________________
Name:
Title:
DEBTORS UNDER SECURITY AGREEMENT
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
By:______________________________
Name:
Title:
SOFTWARE INNOVATORS, INC.
By:______________________________
Name:
Title:
SOFTWARE CONSULTING SERVICES AMERICA, INC.
By:______________________________
Name:
Title:
Schedule A
Name of Note Holder Aggregate Principal Amount balance of all
--------------------------- Notes Held by Note Holder
-----------------------------------------
Xxxxxx Xxxxx $57,114.53
Xxxxx and Xxxx Xxxxxx, Joint Tenants $91,383.24
Xxxxxxx X. Xxxxxxx $228,458.10
Xxxxxxx X. Xxxxx $11,422.90
Xxxxxx X. Xxxxxx $28,557.27
Xxxxx X. Xxxxxxxx $28,557.27
The Xxxxxxx Foundation $85,671.79
Kazoku Investments, Ltd. $28,557.27
Nauset Properties, Ltd. $114,229.05
Xxxxxx Xxxxxxxxx Xxxxxxx $114,229.05
Xxxx Xxxxxxxx Defined Benefit
Pension Plan $114,229.05
Xxxxx X. Xxxxxxxx $57,114.53
Estate of Xxxxx X. Xxxxxx $39,980.17
G. Xxxxxxxx Xxxxxxx $114,229.05
Xxxxxxx Xxxxxxxx $28,557.27
Altamont Capital Management, Inc. $115,519.85
EXHIBIT F
Use of Proceeds
Creditor Amount
Xxxxxxx Xxxxxx $11,495
Xxxxxx Xxxxxxxxxx $65,000
Xxx Xxxxxxx 2004 payable $10,000
Texas sales tax settlement $25,000
Q-4 2004 Director fees
Xxxxxxxx Xxxxxxx $5,500
Xxxxx Xxxxxxx $5,500
Xxx Xxxxxxx $5,500
Litigation accrual $14,551
------------
Subtotal $142,546
BFI Finance Line of credit balance $157,454
------------
Total to be Paid at closing $300,000
Additional Legacy Payment
Funds from BearingPoint Check $54,610
Less Wagda's vacation accrual* $53,736
------------
Addition to cash on hand $874
* To be paid to Wagda at or after closing a soon as BearingPoint check
ck# 0070116938 is credited by BFI
EXHIBIT G
Escrow Provisions
Official Name of Noteholder Address Aggregate Number of Number of
Principal Warrants Shares of
Amount of Held by Common
Notes to be Noteholder Stock to
Delivered to and Being be
Escrow Agent Delivered Delivered
to
Noteholder
on Sales
of Notes
------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 000 Xxxxxxxxx Xxxxx Xxxxxxxx XX 00000 $57,114.53 38,007 629,768
Xxxxx X. Xxxxxx, Xxxx X. 000 Xxxx Xxxxx Xxx Xxxxxxxx XX
Xxxxxx, Joint Tenants 94506 $91,383.25 60,810 1,007,628
Xxxxxxx X. Xxxxxxx 0000 X. Xxxxxxx Xxxxxxxxxx Xxx 000 Xxxxxx XX 00000 $228,458.10 152,020 2,519,071
Xxxxxxx X. Xxxxx 0000 Xxxx Xxxxx Xxxx Xxxxxxxxxx XX 00000 $11,422.90 7,603 125,953
Xxxxxx X. Xxxxxx 0000 Xxxxxx Xxxxxx Xxxxxxxxxx XX 00000 $28,557.27 19,004 314,884
Xxxxx X. Xxxxxxxx 0000 Xxxxxx Xxxx Xxxxxxx XX 00000 $28,557.27 19,004 314,884
The Xxxxxxx Foundation 0000 X. Xxxxxxx Xxxxxxxxxx Xxx 000 Xxxxxx XX 00000 $85,671.79 57,008 944,652
Kazoku Investments, Ltd. X.X. Xxx 00000 Xxxxxx XX 00000 $28,557.27 19,004 314,884
Nauset Properties, Ltd. 0000 Xxxxxxxxxx Xxxx, Xxxxx 0 Xxxxxxx XX 00000 $114,229.05 76,011 1,259,535
Xxxxxx Xxxxxxxxx Xxxxxxx 0000 Xxxxxxxxxx Xxxx, Xxxxx 0 Xxxxxxx XX 00000 $114,229.05 76,011 1,259,535
Xxxx Xxxxxxxx Defind 00000 Xxxxxx Xxxx Xxxx Xxxx Xxxxxxxxxxx XX
Benefit Pension Plan 94536 $114,229.05 76,011 1,259,535
Xxxxxx X. Xxxxxxxx aka 000 Xxxxxxx Xxxxx Xxxxxxxxx XX
Xxxxx X. Xxxxxxxx 94087 $57,114.54 38,007 629,768
Estate of Xxxxx X. Xxxxxx 000 Xxxxxxx Xxxxx Xxxxxxxxxxx XX 00000 $39,980.17 26,606 440,837
G. Xxxxxxxx Xxxxxxx 0000 Xxxxx Xxxx Xxxxx Xxxx XX 00000 $114,229.05 76,011 1,259,535
Xxxxxxx Xxxxxxxx 0 Xxxxxx Xxxxxxx XX 00000 $28,557.26 19,004 314,884
Altamont Capital 000 Xxxxxxxxx Xxxxx Xxxxxxxx XX
Management, Inc. 94506 $115,519.85 76,872 1,273,768
------------- ---------- ----------
Total $1,257,810.40 836,993 13,869,121
