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EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
Dated as of April 1, 1999
among
BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
SOFTWARE CONSULTING SERVICES AMERICA, INC.,
INTEGRATED SYSTEMS CONSULTING, LLC
and
THE INDIVIDUALS OWNING ALL OF THE
MEMBERSHIP INTERESTS
OF
INTEGRATED SYSTEMS CONSULTING, LLC
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EXHIBITS AND SCHEDULES
Section Description
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1.1(a) Tangible Personal Property
1.1(b) Personal Property Leases
1.1(c) Assured Contracts
1.1(d) Real Property Leases
1.1(f) Licenses
1.1(g) Proprietary Rights
1.1(j) Prepaid Items
1.2 Excluded Assets
1.5(b) Employees or Contractors
1.9 Allocation of Purchase Price
DISCLOSURE SCHEDULE
Section Description Page No.
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3.3 Consents and Approvals 7
3.5 Litigation 7
3.6 Compliance with Laws 8
3.8 Purchased Assets 8
3.11 Environmental Compliance 9
3.12 Assumed Contracts 9
3.13 Conduct of Business 9
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of April 1,
1999, by and among BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC., a Delaware
corporation ("Buyer"), and Integrated Systems Consulting, LLC, an Arizona
limited liability company ("Seller"), and ALL THE UNDERSIGNED HOLDERS OF ALL OF
THE MEMBERSHIP INTERESTS OF THE SELLER, INCLUDING THE SHAREHOLDERS OF SUCH
HOLDERS (such holders and shareholders are referred to collectively as the
"Members").
R E C I T A L S
WHEREAS, Seller is engaged in the business of providing consulting
services and consultant staffing to users of enterprise resource planning
("ERP") (the "Business"); and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, certain assets used or held for use by Seller in the Business;
NOW, THEREFORE, for and in consideration of the premises and the
covenants herein contained and the benefits to be derived herefrom, the parties
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Subject to the terms and conditions
contained herein, at the Closing and effective as of the Effective Time, as
those terms are hereinafter defined, Buyer shall purchase from Seller, and
Seller shall sell to Buyer, all of the right, title and interest of Seller in
and to the following assets (the "Purchased Assets"):
(a) Tangible Personal Property. All tangible personal property
(including equipment, machinery, tools, appliances, implements, spare
parts, instruments, furniture and supplies) owned by the Seller
("Tangible Personal Property"), including, without limitation, the
Tangible Personal Property set forth on Exhibit 1.1(a);
(b) Personal Property Leases. Seller's rights in, to and under all
leases of equipment, machinery, tools, appliances, implements, spare
parts, instruments, furniture, supplies, and other items of tangible
personal property ("Personal Property Leases") which are set forth on
Exhibit 1.1(b);
(c) Assumed Contracts. Seller's rights in, to and under all contracts,
agreements, insurance policies, purchase orders and commitments which
are set forth in Section 3.13 of the Disclosure Schedule, together
with all instruments and all documents of title representing any of
the foregoing, all rights in any merchandise or goods which any of the
same represent, and all rights, title, security and guaranties in
favor of Seller with respect to any of the foregoing (the "Assumed
Contracts");
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(d) Business Records. All books and records of Seller wherever
located, including without limitation, all credit records, payroll
records, computer records, computer programs, contracts, agreements,
operating manuals, schedules of assets, accounting and financial
records, sales and property tax records and returns, sales records,
customer and supplier data, blueprints, specifications, plats, maps,
surveys, building and machinery diagrams, maintenance records,
personnel and labor relation records, real estate records,
construction records, environmental records and returns, files,
papers, books and all other public and confidential business records
(together the "Business Records"), whether such Business Records are
in hard copy form or are electronically or magnetically stored,
excluding only the Seller's limited liability company minutes of
proceedings and ownership records and income tax records and returns
(provided that copies of such tax records and returns shall be
provided to Buyer;
(e) Licenses. To the extent assignable, all franchises, licenses,
permits, certificates, approvals and other authorizations from
governmental authorities, software developers, manufacturers or other
persons which are necessary to own and operate any of the Purchased
Assets (the "Licenses"), a complete and correct list of which is set
forth on Exhibit 1.1(e);
(f) Proprietary Rights. All (i) United States and foreign patents,
patent applications, trademarks, trademark applications and
registrations, trade dress, brand names, logos, service marks, service
xxxx applications and registrations, copyrights, copyright
applications and registrations and trade names, fictitious names and
assumed names of the Seller including, without limitation, all such
rights described on Exhibit 1.1(f); (ii) proprietary data and
technical, manufacturing know-how and information (and all materials
embodying such information) of the Seller; (iii) developments,
discoveries, inventions, ideas and trade secrets of the Seller; (iv)
client lists, marketing plans, business plans, and client information
of the Seller; and (v) covenants by others not to compete, rights and
privileges of the Seller used in the conduct of its Business, rights
to exclusive use and rights to xxx for past infringement with respect
to any item described in this Section (all of the foregoing,
collectively, "Proprietary Rights");
(g) Telephone Numbers. All of the Seller's right, title and interest
in, to and under all telephone numbers used by the Seller and its
employees, including all extensions thereto;
(h) Certain Rights of the Seller. All rights in, to and under all
representations, warranties, covenants, guaranties made or provided by
third parties to or for the benefit of the Seller with respect to any
of the other Purchased Assets and all rights, privileges, claims,
causes of action and options of the Seller relating to the Purchased
Assets;
(i) Prepaid Items. All of the Seller's prepaid expenses, prepaid
insurance, deposits and other similar items ("Prepaid Items"), a
correct and complete list of which items is attached as Exhibit
1.1(i); and
(j) Goodwill. All goodwill with respect to the Business and operations
of the Seller.
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1.2 Excluded Assets. Notwithstanding Section 1.1 hereof, the following
assets (the "Excluded Assets") are not included in the Purchased Assets even
though they might be deemed to be used, or held for use, in connection with the
Business:
(a) All cash and cash equivalents;
(b) All accounts receivable (and documents and information
necessary to collect such accounts receivable);
(c) The Closing Consideration; and
(d) Other assets listed on Exhibit 1.2.
1.3 Obligations Assumed. As part of the consideration for the Purchased
Assets, at the Closing Buyer shall assume and agree to pay and perform when
required by the terms thereof all of the obligations of Seller that accrue
after the Effective Time under the Personal Property Leases, the Assumed
Contracts and the Licenses. Other than as specifically set forth in this
Section 1.3, Buyer expressly disclaims the assumption of, and does not assume,
any liability of any type whatsoever of Seller or in connection with any of
Seller's assets or Business operations. Seller shall hold Buyer harmless and
shall indemnify Buyer with respect to all liabilities of or claims against
Seller, the Business or the Members that are not expressly assumed by Buyer.
Buyer shall hold Seller and the Members harmless and shall indemnify Seller and
the Members with respect to all liabilities of or claims against Seller and the
Members that are assumed by Buyer.
1.4 Closing and Effective Time. The Closing (the "Closing") shall occur
as soon as practicable, and in any event not later than May 28, 1999, at the
offices of Buyer in Foster City, California, whereupon the purchase and sale of
the Purchased Assets shall be deemed to have occurred effective prior to the
commencement of business on April 1, 1999 (the "Effective Time"). Closing
documents will be delivered through the use of the mail or other delivery
services. No parties are required to be in attendance at the Closing. The
parties may agree in writing on another date, time or place for the Closing. At
the Closing, the parties will deliver or cause to be delivered the documents
described in Article 2 below. Provided the Closing occurs as provided herein,
Seller and the Members shall receive and hold for the benefit of Buyer all
accounts receivable and the proceeds thereof that accrue to Seller after the
Effective Time. All accounts receivable generated by Seller after the Effective
Time shall be assigned to and for the benefit of Buyer, and all wages and
reimbursable expenses incurred by Seller after the Effective Time shall be paid
or reimbursed by Buyer.
1.5 Purchase Price. In consideration of the delivery of the Purchased
Assets, Buyer agrees to pay and deliver to Seller the Purchase Price. The
Purchase Price shall equal $3,000,000, subject to adjustment as set forth in
Section 1.5(d), below . The Purchase Price shall be delivered to Seller in the
following manner (the "Closing Consideration"):
(a) $500,000 shall be paid to Seller by wire transfer or other
immediately available funds at the Closing;
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(b) $1,000,000 shall be payable to Seller by delivery on June 1, 2000
of shares of validly issued fully paid and non assessable shares of
common stock, $.001 par value per share, of the Buyer (the "Buyer
Common Stock") at the Market Price, provided, however, that Buyer
shall have the right to pay up to $700,000 of such amount in cash,
together with interest at the rate of 7 1/2% per annum. The "Market
Price" shall be deemed to be the average of the daily closing price of
the Buyer Common Stock as reported by NASDAQ during the ten
consecutive trading days ending on and including the day that is four
trading days prior to the Closing.
(c) $500,000 shall be paid by Buyer's delivery to Seller of Buyer's
Convertible Subordinated Promissory Note, in the form attached as
Exhibit 1.5(c) (the "Convertible Note").
(d) (1) The remaining $1,000,000 of the Purchase Price shall be paid
subject to the achievement during the twelve months ending March 31,
2000, of ISC Earnings, as determined in Section 1.5(d)(2), below, of at
least $1,050,000.
(2) "ISC Earnings" shall equal the difference between ISC Revenues, as
defined below, minus salaries, wages, payroll taxes, health benefits
and reimbursable expenses paid or allocable by Buyer to the Members and
to all other employees and consultants in connection with any project
generating ISC Revenues, and any other overhead expenses of Buyer
allocable to ISC Revenues in accordance with generally accepted
accounting principles. . "ISC Revenues" shall mean all net revenues
recognized by Buyer from (i) the contracts of Seller that are assigned
to Buyer by this Agreement, and (ii) clients who contract for the first
time with Buyer after the date of this Agreement and who were solicited
primarily by a Member. The determination of ISC Revenues and ISC
Earnings shall be determined by the Company's Chief Financial Officer
in accordance with generally accepted accounting principles. Subject to
the procedure set forth below, such determination shall be binding upon
all parties. Not later than June 15, 2000, the Company's Chief
Financial Officer shall submit to the Seller a report setting forth in
reasonable detail ISC Revenues, ISC Earnings, and the amount payable
pursuant to this Section 1.5(d). If Seller does not object to such
report within fifteen days after receipt, the determination set forth
therein shall be deemed accepted and the amount due under this Section
1.5(d), if any, shall be paid after June 1, 1999, and in any event
before July 1, 2000. Any objection to such report shall be made in a
writing setting forth in reasonable detail the basis for such
objection. The parties shall negotiate in good faith to resolve such
objection within ten days after the Company's receipt of Seller's
written objection. If the objection is not resolved within such period,
Seller may submit its objection to binding arbitration before the
American Arbitration Association in Phoenix, Arizona, provided that the
determination by the Chief Financial Officer of ISC Revenues, ISC
Earnings and the amount payable pursuant to this Section 1.5(d) shall
not be set aside unless the arbitrator finds that such determination
was made in bad faith or without reasonable business judgment. The
Company shall use reasonable commercial efforts to support the
generation of ISC Revenues and the maximization of ISC Earnings.
(3) If the ISC Earnings are less than $1,050,000 but more than
$750,000, the $1,000,000 otherwise payable pursuant to this Section
1.5(d) shall be reduced ratably, so that if, for example,
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the ISC Earnings equal $900,000, the amount payable pursuant to this
Section 1.5(d) shall equal $500,000. If the ISC Earnings are less than
$750,000, the amount payable pursuant to this Section 1.5(d) shall be
$0.00 and the Purchase Price shall be correspondingly reduced to
$2,000.000.00.
(4) The amount, if any, payable pursuant to this Section 1.5 shall be
paid at the time set forth in (2), above, as follows: One-fourth shall
be paid in cash; one-fourth shall be paid pursuant to a three-month
promissory note bearing interest at the rate of 7 1/2% per annum, and
the remaining one-half shall be paid in shares of Buyer Common Stock at
the Market Price, provided that Buyer may pay up to 70% of such amount
in cash, with interest at the rate of 7 1/2% per annum.
(5) It is expressly provided that the amounts payable under Section
1.5(d) (i) arise as a consequence of a disagreement among the parties
regarding the fair market value of the Purchased Assets and (ii) are
expressly intended to constitute a portion of the Purchase Price of the
Purchased Assets. Each party agrees to take a tax reporting position
consistent with the foregoing.
It is expressly provided herein that in determining the amount (if any)
of imputed interest associated with the transfer of the Buyer Common
Stock in accordance with Sections 1.5(b) or 1.5(d) , any interest
associated with the transfer of the Convertible Note in accordance with
Section 1.5(c) or the promissory note described in Section 1.5(d) in
excess of the "applicable federal rate" (as defined by the Internal
Revenue Code) associated with the Convertible Note or the promissory
note shall be deemed to have been paid in connection with the Buyer
Common Stock. Preliminary to issuance and filing with relevant taxing
authorities of any documents or forms reflecting the amount of imputed
interest associated with the transfer of the Closing Consideration,
including any IRS Forms 1099, the parties shall mutually agree as to
the amount of imputed interest arising as a consequence of the
transactions contemplated by this Agreement.
1.6 Allocation of Purchase Price. Buyer and Seller shall report the
allocation of the Purchase Price among the Purchased Assets and the agreed
amount of assumed liabilities as provided on Exhibit 1.6. The allocation shall
be incorporated in IRS Forms 8594 prepared and filed by Buyer and Seller. Prior
to filing all Forms 8594 (including any amended Forms 8594 to reflect the
portion of the Purchase Price paid pursuant to Section 1.5(d)), Buyer and
Seller shall agree as to the precise content thereof which shall in any case be
consistent with the terms set forth in Exhibit 1.6. The parties also agree the
initial Form 8594 shall not reflect the portion of the Purchase Price reflected
in Section 1.5(d).
1.7 Adjustment of Number of Shares. The number of shares issuable pursuant
to Section 1.5(b) and Section 1.5(d) shall be subject to adjustment for stock
dividends, splits, combinations, or other distributions and payments made in
respect of Buyer's capital stock. Such adjustment shall be computed in
accordance with Sections 4, 5, 6, 7 and 8 of the Convertible Note, which are
incorporated herein by this reference.
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ARTICLE 2
CLOSING CONDITIONS; DELIVERIES
2.1 Deliveries by Seller . At the Closing, Seller shall deliver to Buyer
the following:
(a) A xxxx of sale, assignment and assumption agreement executed by
Seller conveying all of the Purchased Assets to Buyer, effective as of
the Effective Time;
(b) Employment Agreements between Buyer and each of the Members,
effective as of the Effective Time;
(c) Any consents, waivers, approvals, exemptions, authorizations or
notices required by any third party, court, administrative agency or
other governmental or regulatory authority in accordance with Section
3.3; and
(e) Any other documents, certificates, instruments, agreements and
writings required to be delivered by Seller at the Closing pursuant to
this Agreement and such conveyances and instruments as may be
reasonably necessary or appropriate to convey the Purchased Assets to
Buyer.
2.2 Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller the
following:
(a) The Closing Consideration in the manner set forth in Section 1.5;
(b) A xxxx of sale, assignment and assumption agreement executed by
Buyer under which Buyer will assume and agree to pay and perform when
required by the terms thereof all of the obligations and liabilities
under the Personal Property Leases, the Assumed Contracts, the Real
Property Leases and the Licenses; and
(c) Employment Agreements between Buyer and each of the Members,
effective as of the Effective Time
(d) The other documents, instruments and writings required to be
delivered by Buyer at the Closing pursuant to this Agreement or
otherwise required in connection herewith.
2.3 Board Approval. The obligation of Buyer to consummate the transactions
contemplated by this Agreement is subject in all respects to the approval by
Buyer's Board of Directors of this Agreement. If such approval is not given
before June 1, 1999, either party may terminate this Agreement without penalty,
provided that the parties' obligations of nondisclosure shall survive this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE MEMBERS
Seller and the Members, jointly and severally, represent and warrant
to Buyer as set forth below:
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3.1 Organization. Seller (i) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Arizona, (ii) has the requisite power to own, lease and operate its properties
and conduct its business as it is presently being conducted, and (iii) is duly
qualified to conduct business in and is in good standing in each state where
the ownership of its assets or the conduct of its business requires
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect on the business of Seller or the
Purchased Assets.
3.2 Authority Relative to this Agreement. Seller has the requisite
limited liability company power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Seller and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Seller and no other limited liability company proceedings
on the part of Seller are necessary. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies generally
and to the effect of general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity).
3.3 Consents and Approvals. The execution and delivery of this Agreement
by Seller, and performance by Seller of its obligations hereunder, do not
require Seller to obtain any consent, waiver, approval, exemption,
authorization or other action of, or make any filing with or give any notice
to, any third party or any court, administrative agency or other governmental
or regulatory authority or any other Person, except (i) as disclosed in Section
3.3 of the Disclosure Schedule previously provided to the Buyer by the Seller
(the "Disclosure Schedule"). "Person" shall mean an individual, partnership,
corporation, limited liability company, association, joint stock company,
trust, joint venture, unincorporated organization, or governmental entity (or
any department, agency or political subdivision thereof).
3.4 No Violation. Assuming all consents, approvals, waivers, exemptions,
authorizations and other actions described in Section 3.4 of the Disclosure
Schedule have been obtained or taken, the execution and delivery of this
Agreement by Seller, and the performance by Seller of its obligations
hereunder, do not (i) conflict with or result in a breach of the articles of
organization or the operating agreement of Seller; (ii) result in the
imposition of any mortgage, pledge, lien, charge, security interest or other
encumbrance (a "Lien") on the Purchased Assets; (iii) result in, or constitute
an event which with the passage of time or giving of notice would be, a breach,
violation or default (or give rise to any right of termination, cancellation or
acceleration) under any contract or agreement to which Seller is a party or is
bound; or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller, in each such case of (i) through (iv) above
where such breach, violation, conflict, default or Lien could reasonably be
expected to have a Material Adverse Effect on the Purchased Business. The term
"Material Adverse Effect" or "Material Adverse Change" shall mean an adverse
effect on or change of the properties, assets, , long-term debt, other
indebtedness, or contingent liabilities of the Seller in an amount of
$25,000.00 or more.
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3.5 Litigation. Except as set forth in Section 3.5 of the Disclosure
Schedule, (i) there are no actions, suits, claims, arbitration proceedings or
governmental investigations or inquiries pending or threatened to the knowledge
of Seller or Members, (A) against Seller or any of its affiliates seeking to
prevent or delay the consummation of the transactions contemplated hereby, or
(B) against Seller or its officers, directors or employees which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect on the Purchased Business, and (ii) there are no judgments, decrees,
injunctions, orders or consent orders of any court, governmental authority or
arbitrator issued in any proceeding to which Seller or any of the Members is or
was a party which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Purchased Business.
3.6 Compliance with Laws. Except as set forth in Section 3.6 of the
Disclosure Schedule, (i) Seller is in compliance with all laws, ordinances,
regulations, orders, judgments and decrees applicable to the operation of the
Purchased Assets as currently operated, where the failure to be in such
compliance, singularly or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Purchased Business; and (ii) neither
Seller nor any of the Members has received any notice of, or citation for, any
violation of any law, regulation or order which has not been resolved, which
notice or citation relates to the ownership or operation of the Purchased
Assets and the violation of which law, regulation or order could reasonably be
expected to have a Material Adverse Effect on the Purchased Business.
3.7 Financial Statements. Seller has delivered to Buyer copies of the
following financial statements of Seller: (i) a balance sheet as of December
31, 1998; (ii) a balance sheet as of February 28, 1999 ("Balance Sheet Date");
and (iii) an income statement for the year ended December 31, 1998 and the two
month period ended February 28, 1999. (Such financial statements are
collectively referred to herein as the "Financial Statements".) Except as set
forth in the notes to such financial statements, such financial statements have
been prepared from Seller's records and fairly present, on a cash basis, in all
material respects, the financial condition of Seller as of the dates indicated
therein and the results of its operations for the periods indicated therein. To
its knowledge, Seller does not have any liabilities or obligations of a type
that should be included in or reflected in such financial statements if they
had been prepared in accordance with generally accepted accounting principals
("GAAP"), whether related to tax or non-tax matters, accrued or contingent, due
or not yet due, liquidated or unliquidated, or otherwise, except as and to the
extent disclosed or reflected in such financial statements or Section 3.7 of
the Disclosure Schedule.
3.8 Purchased Assets. The Purchased Assets and the Excluded Assets
constitute all of the assets used or held for use by Seller in the conduct of
the Business. Seller has good and marketable title to all Purchased Assets, and
all such property is owned free and clear of any Lien, other than the property
held under the Personal Property Leases and any liens which would not
reasonably be expected to have a Material Adverse Effect on the Purchased
Assets. Except as set forth on Section 3.8 of the Disclosure Schedule, to
Seller's knowledge each item of tangible personal property included in the
Purchased Assets is in good operating condition and repair, normal wear and
tear excepted.
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3.9 Intellectual Property. Neither Seller, Members, nor any of its or
their affiliates has received any notice from any Person pertaining to or
challenging the right of Seller to use any of the patents, trademarks, service
marks, trade names, copyrights, other proprietary intellectual property rights
and applications for registration and registrations thereof that are used or
held for use in the Purchased Business (the "Intellectual Property
3.10 Inventories. [Intentionally left blank]
3.11 Environmental Compliance. To Seller's knowledge, except as set forth
in Section 3.11 of the Disclosure Schedule,
(a) the operation of the tangible personal property included in the
Purchased Assets does not involve the use of any material, pollutant,
or waste regulated as of the date hereof under any applicable federal,
state, local or foreign law, statute, ordinance, regulation, rule,
order, requirement or agreement with any governmental authority in
effect in any and all jurisdictions in which the Purchased Assets are
located relating to the protection, preservation or restoration of the
environment or conserving or protecting the environment, wildlife, or
natural resources ("Hazardous Materials"); and
(b) there is no proceeding pending or threatened against Seller,
Members or any of its or their affiliates by any federal, state,
foreign or local court, tribunal, administrative agency, department,
commission, board, or other authority or instrumentality with respect
to the presence or release of any Hazardous Materials which relates to
the Purchased Assets.
3.12 Contracts. Section 3.12 of the Disclosure Schedule lists all contracts
or other arrangements relating to the Business or the Purchased Assets to which
the Seller is a party or to which its assets are bound. Except as set forth in
Section 3.12 of the Disclosure Schedule, each of the above-described contracts
is in full force and effect and there is no breach or default (or any event
which, with the giving of notice or lapse of time or both, would be a breach or
default) by Seller, or to the knowledge of Seller or Members, any other party
under any such contract and, to the knowledge of Seller or Members, there are
no facts or circumstances which make such a breach or default likely to occur
subsequent to the date hereof. All consents necessary for the assignment of
such contracts to Buyer have been obtained, or will have been obtained prior to
the Closing. There are no finders fees, referral fees, sales commissions or
income or revenue sharing arrangements ("Fees") payable in connection with the
Purchased Assets. Seller and Members shall indemnify and hold harmless Buyer
from any and all liability incurred in connection with such Fees after the
Closing Date, notwithstanding the provisions of Section 6.2 hereof.
3.13 Material Changes. Except as specifically set forth on Schedule 3.13
of the Disclosure Schedule and as have occurred in the normal course of
business, since the Balance Sheet Date, there has not been:
(a) any change in the Seller's Articles of Organization or operating
agreement;
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(b) any Material Adverse Change in the assets liabilities, Business
or prospects of the Seller;
(c) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or Business
of the Seller;
(d) any change in the authorized capital of the Seller or in its
securities outstanding or any change in its ownership interests;
(e) any declaration or payment of any dividend or distribution in
respect of the ownership interests or any direct or indirect
redemption, purchase or other acquisition of any of the ownership
interestof the Seller;
(f) any contract or commitment entered into by the Seller or Members
or any incurrence by the Seller or Members or agreement by the Seller
or Members to incur any liability or make any capital expenditures in
excess of $5,000, except in the normal course of business;
(g) any work interruptions, labor grievances or employment claims
filed, or any related event or condition effecting a Material Adverse
Change in the Purchased Business or future prospects of the Seller;
(h) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
properties or rights of the Seller or requiring consent of any party
to the transfer and assignment of any such assets, properties or
rights;
(i) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets of the Seller,
other than in the ordinary course of business;
(j) any merger or consolidation or agreement to merge or consolidate
with or into any other corporation (except the transactions
contemplated by this Agreement);
(k) any waiver of any material rights or claims of the Seller with
respect to any contract included in the Purchased Assets;
(l) to Seller's knowledge, any breach, amendment or termination of any
material contract, agreement, license, permit, permit application or
other right to which the Seller is a party;
(m) any discharge, satisfaction, compromise or settlement of any
claim, lien, charge or encumbrance or payment of any obligation or
liability, contingent or otherwise, other than current liabilities as
of the Balance Sheet Date, current liabilities incurred since the
Balance Sheet Date in the ordinary course of business and prepayments
of obligations in accordance with normal and customary past practices;
or
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(n) any transaction by the Seller outside the ordinary course of its
business or prohibited hereunder.
3.14 Operation of Business. Except as set forth in Schedule 3.14 of the
Disclosure Schedule.
(a) From the Balance Sheet Date until the Closing, Seller has and will
have:
(i) used all reasonable efforts to maintain its assets in their
present state of repair, ordinary wear and tear excepted, to
preserve the Business and relationships with its customers,
suppliers, employees and other Persons having business
relationships with the Business; and
(ii) operated the Business in the ordinary course consistent with
prior practice except as otherwise provided by this Agreement.
(b) From the Balance Sheet Date to the Closing, Seller has not taken
nor will it take any of the following actions in respect of the
operation of the Business, except in the ordinary course of business:
(i) disposed of or encumbered, or entered into any agreement to
sell or transfer, directly or indirectly, any assets except sales
and consumption of inventory in the ordinary course of business;
(ii) increased in any manner compensation or benefits of any
employees, officers or directors, stockholders, consultants or
agents of the Seller, except any increase made in the ordinary
course of business under existing employment contracts or
policies;
(iii) increased, terminated, amended or otherwise modified any
plan for the benefit of any employee of Seller;
(iv) paid or agreed to pay any pension, retirement allowance,
severance or other employee benefit not required under any
existing plan to any employee of Seller;
(v) entered into, extended, renewed, modified or canceled any
agreements, leases, commitments or contracts, except as required
in the ordinary course of business;
(vi) implemented any price discount or extended payment terms or
other incentives except routine transactions in the ordinary
course of business;
(vii) mortgaged, pledged or subjected to any Lien any of the
Purchased Assets;
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(viii) waived any material rights or privileges it may have under,
or amended in any respect, any contract included in the Purchased
Assets;
(ix) maintained its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted
accounting principles and on a basis consistent with prior periods
or made any change in any of its accounting methods or practices,
except as provided in Section 3.7 of the Disclosure Schedule; or
(x) acquired any assets that would be included in the Purchased
Assets.
3.15 Restricted Securities.
(a) Seller and the Members acknowledge that the shares of Buyer Common
Stock to be acquired by Seller hereunder, and then by the Members by
distribution from the Seller, have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are
being acquired for Seller and the Members' own account for investment
and not with a view to the distribution thereof.
(b) Seller and each Member and their representatives have conducted
such investigations in making a decision to approve this Agreement and
the transactions contemplated hereby as they have deemed necessary and
advisable.
(c) Seller and each Member acknowledge and agree that the Buyer Common
Stock to be issued to the Seller and Members may not be disposed of
except in accordance with the requirements of the Securities Act and
any applicable state securities laws.
(d) Neither Seller nor any Member has engaged in any purchase or sale,
directly or indirectly, of Buyer's capital stock within the ninety (90)
days preceding the date of this Agreement.
3.16 Undisclosed Liabilities. Except as and to the extent disclosed in
Section 3.7 of the Disclosure Schedules or in the Seller's Financial
Statements, Seller has no liabilities or obligations of any nature (whether
absolute, contingent or otherwise) relating to the Purchased Assets other than
performance of the services contemplated under the terms of the Assumed
Contracts and compliance with any restrictive covenants contained therein
following the Closing Date.
3.17 Knowledge. Knowledge, when used in this Agreement in connection with
Seller and/or the Members, means the actual knowledge of any of the Members.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Members as set forth
below:
4.1 Organization. Buyer (i) is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, (ii) has the
requisite power to own, lease and operate its properties and conduct its
business as it is presently being conducted, and (iii) is duly qualified to
conduct business in and is in good standing in each state where the ownership
of its assets or the conduct of its business requires qualification, except
where the failure to be so qualified or in good standing would not have a
material adverse effect on the business of Buyer.
4.2 Capitalization of the Buyer. The total authorized capital stock of
Buyer is as set forth and described in Buyer's Annual Report on Form 10-K for
the year ended December 31, 1998, as filed with the Securities and Exchange
Commission. The outstanding shares of Buyer Common Stock have been duly and
validly issued and are fully paid and non-assessable. All shares of Buyer
Common Stock to be issued pursuant to the Convertible Note and hereto, when
issued pursuant to the terms of the Convertible Note and this Agreement, will
be (i)duly authorized, validly issued, fully paid and non-assessable, (ii) free
and clear of any liens and encumbrances, (iii) eligible for trading on the
Nasdaq National Market, and (iv) issued in compliance with federal and state
securities laws, subject to the accuracy of Seller's and the Member's
representations set forth herein.
4.3 Authority Relative to this Agreement. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement, the
Employment Agreements with the Members, and the Convertible Note (collectively,
the "Acquisition Documents" and to consummate the transactions contemplated
hereby. The execution and delivery of the Acquisition Documents by Buyer and
the consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of Buyer and no other
corporate proceedings on the part of Buyer are necessary. This Agreement has
been duly executed and delivered by Buyer and constitutes a legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally and to the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
4.4 Consents and Approvals. Except as set forth in Section 4.4 of the
Disclosure Schedule, the execution and delivery by Buyer of the Acquisition
Documents, and performance by Buyer of its obligations hereunder, do not
require Buyer to obtain any consent, waiver, approval, exemption, authorization
or other action of, or make any filing with or give any notice to, any third
party or any court, administrative agency or other governmental or regulatory
authority or any other Person where failure to obtain such consents, waivers,
approvals, exemptions, authorizations or actions, make such filings or give
such notices could reasonably be expected to materially affect the ability of
Buyer to perform any of their material obligations hereunder.
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4.5 No Violation. Assuming all consents, approvals, waivers, exemptions,
authorizations and other actions described in Section 4.5 of the Disclosure
Schedule have been obtained or taken, the execution and delivery of the
Acquisition Documents by Buyer, and the performance by Buyer of its obligations
thereunder, do not (i) conflict with or result in a breach of the charter or
bylaws of Buyer, or (ii) violate, or conflict with, or constitute a default
under, or result in the creation or imposition of any Lien upon the properties
or assets of Buyer under any mortgage, indenture, agreement, judgment, decree
or court order to which either of them is a party or by which any of the assets
of Buyer are bound, which violation, conflict, default or Lien could reasonably
be expected to adversely affect the ability of Buyer to perform its obligations
under the Acquistion Documents; or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Buyer, in each such case of
(i) through (iv) above where such breach, violation, conflict, default or Lien
could reasonably be expected to have a Material Adverse Effect on Buyer.
4.6 Not an Investment Company. The Buyer is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
4.7 Compliance Matters. The Buyer has timely filed with the Securities and
Exchange Commission all filings required of it under the Securities Exchange
Act of 1934, as amended, and all such filings complied in all material respects
with the rules and regulations promulgated under such Act, and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements included in such reports have been prepared in accordance
with generally accepted accounting principles and fairly present the financial
condition of Buyer as of the dates thereof.
4.8 Misstatements. No representation or warranty made by the Buyer in
this Agreement or in any document or certificate furnished or to be furnished
by the Buyer pursuant to this Agreement contains or will contain any material
misstatement of fact or omits or will omit to state a material fact necessary
make the statements contained herein or therein, in the light of the
circumstances under which they are made, not misleading.
ARTICLE 5
ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Taxes.
(a) Seller shall be liable for and shall pay, and pursuant to Section
6.2 Seller and the Members shall indemnify Buyer against, all taxes
(whether assessed or unassessed) applicable to the Business or the
Purchased Assets, in each case attributable to taxable years or
periods ending at the time of or prior to the Effective Time and, with
respect to any tax period that begins before and ends after the
Effective Time (a "Straddle Period"),
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the portion of such Straddle Period ending at the time of the
Effective Time. Buyer shall pay, and pursuant to Section 6.2 shall
indemnify Seller against, all taxes (whether assessed or unassessed)
applicable to the Business or the Purchased Assets, in each case
attributable to taxable years or periods beginning after the Closing
and, with respect to any Straddle Period, the portion of such Straddle
Period beginning immediately after the Effective Time. For purposes of
this Section 5.1, any Straddle Period shall be treated on a "closing
of the books" basis as two partial periods, one ending at the time of
the Effective Time, provided, however, that taxes imposed on a
periodic basis shall be allocated on a daily basis.
(b) Notwithstanding paragraph (a), any sales tax, motor vehicle tax,
excise tax, use tax, real property transfer or gains tax, documentary
stamp tax or similar tax attributable to the sale or transfer of the
Business or the Purchased Assets shall be paid by Buyer. Buyer and
Seller each agrees to timely sign and deliver such certificates or
forms as may be necessary or appropriate to establish an exemption
from (or otherwise reduce), or file tax returns with respect to, such
taxes including a resale certificate as provided for under Arizona and
California sales tax law.
(c) Buyer or Seller, as the case may be, shall provide reimbursement
for any tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this
Section . Not later than 30 days prior to the payment of any said tax,
the party paying such tax shall give notice to the other party of the
tax payable and the portion that is the liability of each party,
although failure to do so will not relieve the other party from its
liability hereunder. Each party shall have the right at all reasonable
times to examine the books and records of the other party to the
extent necessary to verify the accuracy of any request.
(d) After the Closing, each of Buyer and Seller shall promptly (and
cause their respective employees, agents and affiliates to):
(i) assist the other party in preparing any tax returns that such
other party is responsible for preparing and filing;
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any tax returns relating to the
Business or the Purchased Assets;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents
relating to taxes relating to the Business or the Purchased
Assets;
(iv) provide timely notice to the other in writing of any pending
or threatened tax audits or assessments relating to the Business
or the Purchased Assets for taxable periods for which the other
may have a liability under this Section;
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(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit or
information request with respect to any such taxable period.
5.2 Public Announcements. Buyer will not disclose or deliver any
information about the Seller to any third Person without the prior written
consent of the Seller except as permitted by this Section . Buyer may disclose
pertinent information regarding this Agreement to its existing and prospective
investors, lenders, or investment bankers or financial advisors for the purpose
of obtaining financing, including, without limitation, descriptions of this
Agreement or any private placement memorandum prepared by the Buyer or any
registration statement filed by the Buyer under the Securities Act and in
reports filed by the Buyer under the Securities Exchange Act of 1934, and this
Agreement may be filed as an exhibit to any thereof. After the Closing, the
Buyer may also make appropriate disclosures of the general nature of this
Agreement and the identity, nature and scope of the Seller's operations to
prospective acquisition candidates in connection with the Buyer's efforts to
effect additional acquisitions. Each party will have mutual approval rights
with respect to written employee presentations concerning this Agreement. The
Members shall be provided the opportunity for prior review and comment with
respect to any description of the Purchased Business contained in any press
release regarding the execution of this Agreement, and Members shall be
provided the opportunity for prior review and comment with respect to any
description of the Seller contained in any press release regarding the
execution of this Agreement.
5.3 Further Assurances. Seller and Buyer shall use reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to carry out all of their respective
obligations under this Agreement and to consummate and make effective the
purchase and sale of the Purchased Assets pursuant to this Agreement. Seller
and Buyer shall, and shall cause their affiliates, employees and agents to,
execute, acknowledge and deliver all such further conveyances, notices,
assumptions, releases and acquittances and such other instruments, and shall
take such further actions, as may be necessary or appropriate more fully to
assure to Seller, and its successors or assigns, all of the Excluded Assets
intended to be retained by Seller pursuant to this Agreement.
5.4 Preservation of Business Records. Buyer shall preserve and keep (or
cause to be preserved and kept) the Business Records, and Seller shall preserve
and keep (or cause to be preserved and kept) its books and records not included
in the Purchased Assets, for a period of seven years after the date hereof, and
Buyer and Seller shall each grant to the other reasonable access to such
Business Records retained by them during such period. In the event Buyer or
Seller wishes to destroy Business Records after that time, it shall first give
written notice to the other party, and the other party shall have the right at
its option, upon prior written notice given to the party providing the initial
notice, to take possession of said Business Records as promptly as practicable,
but in any event within 90 days after the date of its notice requesting the
same.
5.5 Confidentiality. Except as permitted by Section 5.2 and except for
reasonable disclosures made in the ordinary course of a Member's employment
with Buyer, Seller and each of the Members, and its and their affiliates, shall
keep confidential all information regarding the Purchased Assets and the
Purchased Business, including without limitation, information included
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in books and records retained by Seller, and will not, without the prior
written consent of Buyer, disclose such information except as required by law
or as becomes generally available to and known by the public other than as a
result of disclosure by Seller.
5.6 Covenant Not to Compete. For the considerations specified in this
Agreement and in recognition that the covenants by the Members and the Seller
in this Section are a material inducement to Buyer to enter into and perform
this Agreement, each Member agrees that for the period (the "Noncompetition
Period") from the date hereof to the earlier to occur of (a) the date which is
three (3) years (provided that for non-SAP consulting such period shall be
eighteen (18) months) after the Closing Date, or (b) the date which is one year
following any termination of such Member's employment by Buyer or by a Member
for Good Reason, such Member will not represent, engage in, carry on, or have a
financial interest in, directly or indirectly, in enterprise application
consulting for third parties, including, without limitation, SAP implementation
and consulting, within the States of Arizona, California, Texas and Washington.
For purposes of this Section 5.6, a "financial interest" means any interest,
individually, as a member of a partnership or limited liability company, equity
owner, shareholder (other than as a shareholder of less than one percent (1%)
of the issued and outstanding stock of a publicly-held company whose gross
assets exceed one hundred million dollars), investor, officer, director,
trustee, manager, employee, agent, associate or consultant of a consulting
entity. If a Member's employment with Buyer is terminated by the Buyer without
Cause, as defined in such Member's Employment Agreement, or terminated by a
Member for Good Reason, as defined in the Member's Employment Agreement, such
Member's Noncompetition Period shall continue, if at all, only so long as the
Buyer continues to make salary payments under such agreement. The obligations
of this Section 5.6 shall expire upon the breach by Buyer of any provision of
this Agreement, where such breach continues after thirty (30) days written
notice given to Buyer or any breach of any provision of the Convertible Note.
(a) Members agree that the limitations set forth herein on Members'
rights to compete with Buyer or its affiliates as set forth in clause
(a) are reasonable and necessary for the protection of Buyer and its
affiliates. In this regard, Members specifically agree that the
limitations as to period of time and geographic area, as well as all
other restrictions on Members' activities specified herein, are
reasonable and necessary for the protection of Buyer and its
affiliates. Members agree that, in the event that the provisions of
this Section should ever be deemed to exceed the scope of business,
time or geographic limitations permitted by applicable law, such
provision shall be and are hereby reformed to the maximum scope of
business, time or geographic limitations permitted by applicable law.
(b) If there shall be any violation of the covenant not to compete set
forth in Section above, then the time limitation thereof shall be
extended for a period of time equal to the period of time during which
such violation continues; and in the event Buyer is required to seek
relief from such violation in any court, board of arbitration or
tribunal, then the covenant shall be extended for a period of time
equal to the pendency of such proceedings, including all appeals.
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(c) Members agree that the remedy at law for any breach by Members of
this Section will be inadequate and that Buyer shall be entitled to
injunctive relief.
5.7 Company Name. Within 60 days after the date hereof, Seller and the
Members shall take such action as is necessary to change the name of Seller to
remove therefrom the words "Integrated Systems Consulting" or any word or
expression similar thereto.
5.8 Limitation on Assignments. Notwithstanding anything herein contained
to the contrary, this Agreement shall not constitute nor require an assignment
to Buyer of any Contract, License or other right if an attempted assignment of
the same without the consent of any party would constitute a breach thereof
unless and until such consent shall have been obtained. In the case of any such
Contract, License or other right which cannot effectively be transferred to
Buyer without such consent, the Members and Seller will each use all reasonable
efforts to obtain such consent promptly and if such consent is not obtained,
Seller and Buyer agree to enter into such reasonable arrangements as may be
appropriate to provide Buyer with benefits purported to be vested in Buyer
pursuant to the terms of this Agreement had such consent been obtained.
5.9 Reasonable Access. Between the date of this Agreement and the Closing,
Seller shall give Buyer and its authorized representatives reasonable access to
Seller's properties, books, and records in order that Buyer may have full
opportunity to investigate the affairs of Seller. Any investigation shall be
conducted by Buyer in a manner so as not to interfere unreasonably with the
business or operations of Seller.
5.10 S-3 Registration Rights. (a) In the event Seller or any of the Members
desire to transfer shares of Buyer's Common Stock issuable pursuant to Section
1.5(b) or upon conversion of the Convertible Note commencing one year after the
date of this Agreement (collectively, the "Shares"), and if, within ten (10)
days after written request therefor, counsel for Buyer is unable to render an
opinion that such transfer is exempt from registration under Rule 144 of the
Securities Act of 1933, as amended, then Buyer and the Members (referred to in
this Section as a Holder or Holders) shall each have the right, acting
individually or in concert, to request registration of their Shares on Form S-3
(such requests shall be in writing and shall state the number of Shares to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holders), provided, however, that Buyer shall not be obligated to
effect any such registration if (i) the Holders, together with the holders of
any other securities of Buyer entitled to inclusion in such registration,
propose to sell Shares and such other securities (if any) on Form S-3 at an
aggregate price to the public of less than $250,000, or (ii) in a given
six-month period, Buyer has effected one such registration in such period, or
(iii) it is to be effected more than three years after the date of this
Agreement.
(b) If a request complying with the requirements of Section 5.10(a)
hereof is delivered to Buyer, Buyer shall as soon as practicable use its best
efforts to effect such registration (including, without limitation, filing
post-effective amendments, and appropriate qualifications under applicable blue
sky or other state securities laws ), and appropriate compliance with the
Securities Act of 1933, as amended (the "Act") and as would permit or
facilitate the sale and distribution of all or such portion of such Shares as
are specified in such request. All registration expenses incurred in connection
with a registration effected pursuant to this Section 5.10 shall be
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borne by the requesting Holder(s); provided, however, that the Company's
expenses in connection with such offering shall not exceed $10,000. Buyer shall
have the right to defer filing a registration statement pursuant to this
Section 5.10 one time for a period of up to 120 days following the requested
filing date if Buyer furnishes to the Holders requesting registration a
certificate signed by the Chief Executive Officer of Buyer stating that in the
good faith judgment of Buyer's Board of Directors it would be seriously
detrimental to Buyer and its stockholders for a registration statement to be
filed at the time requested.
(c) To the extent permitted by law, Buyer will indemnify each Holder
and each other holder participating in a registration pursuant to this Section
5.10, each of its officers and directors, members and partners, and each person
controlling such Holder or such other holder within the meaning of Section 15
of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 5.10, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by Buyer of the Securities Act or any rule or regulation promulgated
under the Securities Act applicable to Buyer in connection with any such
registration, qualification or compliance, and Buyer will reimburse such Holder
and such other holder, each of its officers and directors, and each person
controlling such Holder and such other holder, each such underwriter and each
person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending
any such claim, loss, damage, liability or action, provided that Buyer will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to Buyer by an instrument duly
executed by such Holder, such other holder, such controlling person or such
underwriter and stated to be specifically for use therein.
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(d) To the extent permitted by law, each Holder and each other holder
will, if Registrable Securities or other securities held by such Holder or such
other holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify Buyer, each of its
directors and officers, each underwriter, if any, of Buyer's securities covered
by such a registration statement, each person who controls Buyer or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder and each other such holder, each of its officers and
directors and each person controlling such other Holder or such other holder
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, and will reimburse
Buyer, each other such Holder and each other such holder, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to Buyer by an instrument duly
executed by such Holder or such other holder, respectively, and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder and each other holder under this subsection (b) shall be limited in
an amount equal to the proceeds to such Holder or such other holder from the
shares sold by such Holder or such other holder, unless such written
information furnished by such Holder or such other holder as aforesaid was
known by such Holder or such other holder to be untrue or to omit a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
(e) Each party entitled to indemnification under this Section 5.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 5.10 unless the
failure to give such notice is prejudicial to an Indemnifying Party's ability
to defend such action and provided further, that the Indemnifying Party shall
not assume the defense for matters as to which there is a conflict of interest
or separate and different defenses. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party.
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ARTICLE 6
INDEMNIFICATION AND LIMITATIONS ON LIABILITY
6.1 Survival. The representations, warranties and covenants set forth in
this Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date hereof to the extent provided herein. The
representations and warranties of Seller, Members and Buyer shall survive for a
period of 18 months after the date hereof or for the maximum period permitted
by applicable law, whichever is less (except that warranties given with respect
to taxes shall survive to the extent of the applicable statute of limitations).
The periods of survival of the representations and warranties as stated above
in this Section 6.1 are referred to herein as the "Survival Period." The
liabilities of the parties under their respective representations and
warranties shall expire as of the expiration of the applicable Survival Period
and no claim for indemnification may be made with respect to any breach of any
representation or warranty, the applicable Survival Period of which shall have
expired, except to the extent that written notice of such breach shall have
been given to the party against which such claim is asserted on or before the
date of such expiration. The covenants and agreements of the parties herein and
in other documents and instruments executed and delivered in connection with
the closing of the transactions contemplated hereby shall survive for the
maximum period permitted by law. The rights and remedies under Sections 6.2,
6.3 and 6.4 shall constitute the sole remedies under this Agreement.
6.2 Indemnity by Seller and the Members. Subject to the provisions of
Section 6.1, Seller and the Members, jointly and severally, shall indemnify,
save and hold harmless Buyer and any of its assigns (including lenders) and all
of its shareholders, officers, directors, employees, representatives, agents,
advisors and consultants and all of their respective heirs, legal
representatives, successors and assigns (collectively the "Buyer Indemnified
Parties") from and against any and all damages, liabilities, losses, loss of
value (including the value of adverse effects on earnings), claims,
deficiencies, penalties, interest, expenses, fines, assessments, charges and
costs, including reasonable attorneys' fees and court costs (collectively
"Losses") arising from, out of or in any manner connected with or based on:
(a) the breach of any covenant of Seller or Members or the failure by
Seller or Members to perform any of its or their obligations contained
herein;
(b) any breach of any representation or warranty of Seller or Members
contained herein;
(c) any liability or obligation, fixed or contingent, direct or
indirect, known or unknown, of Seller other than those specifically
assumed by Buyer pursuant to Section 1.3; and
(d) any act, omission, occurrence, event, condition or circumstance
occurring or existing at any time on or before the date hereof and
involving or related to the assets, properties, business or operations
now or previously owned or operated by Seller and not included in the
Purchased Assets.
Buyer Indemnified Parties shall be entitled to indemnification
pursuant to this Agreement only if the aggregate Losses incurred or sustained
by all Buyer Indemnified Parties exceed
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$50,000. In the event that the aggregate Losses incurred or sustained by all
Buyer Indemnified Parties exceed $50,000, then the Buyer Indemnified Parties
shall be entitled to indemnification for all such Losses in the aggregate;
provided, however, that the aggregate Losses paid to the Buyer Indemnified
Parties hereunder shall not exceed the Purchase Price. The foregoing
indemnities shall not limit or otherwise adversely affect the indemnity rights
of the Seller Indemnified Parties for Losses under Section 6.4.
6.3 Set-off Rights of Buyer. At the election of Buyer, Losses payable to
the Buyer Indemnified Parties hereunder may be set-off against and shall reduce
payments, if any, to be made by Buyer to Seller or the Members pursuant to this
Agreement or the Employment Agreements including, without limitation the
Convertible Note, on a dollar-for-dollar basis. Buyer shall provide Seller and
the Members with ten days advanced written notice of any set-off pursuant to
this Section 6.3, including a description of the basis therefor. The parties
agree to negotiate in good faith with respect to any disagreements concerning a
proposed set-off. Any set off shall for tax purposes be considered a negative
adjustment of the Purchase Price.
6.4 Indemnity by Buyer.
Subject to the provisions of Section 6.1 , Buyer shall
indemnify, save and hold harmless Seller and the Members and their
respective shareholders, officers, directors, employees, agents,
advisors, consultants, heirs, legal representatives, successors and
assigns (collectively the "Seller Indemnified Parties") from and
against all Losses arising from, out of or in any manner connected
with or based on:
(i) any breach of any covenant of Buyer or the failure by
Buyer to perform any of its obligations contained herein;
(ii) any breach of any representation or warranty of Buyer
contained herein;
(iii) any act, omission, event, occurrence, condition or
circumstance occurring or existing at any time after (but not
on or before) the date hereof and involving or relating to
the Purchased Assets; and
(iv) the obligations and liabilities of Seller assumed by
Buyer under Section 1.3.
Seller Indemnified Parties shall be entitled to indemnification pursuant to
this Agreement only if the aggregate Losses incurred or sustained by all Seller
Indemnified Parties exceed $50,000. In the event that the aggregate Losses
incurred or sustained by all Seller Indemnified Parties exceed $50,000, then
the Seller Indemnified Parties shall be entitled to indemnification for all
such Losses in the aggregate; provided, however, that the aggregate Losses paid
to the Seller Indemnified Parties hereunder shall not exceed the Purchase
Price. The foregoing indemnities shall not limit or otherwise adversely affect
the Buyer's rights of indemnity for Losses under Section .
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6.5 Procedures for Indemnification.
(a) The party (the "Indemnified Party") that may be entitled to
indemnity hereunder shall give prompt notice to the party obligated to
give indemnity hereunder (the "Indemnifying Party") of the assertion
of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought hereunder. Any failure on the
part of any Indemnified Party to give the notice described in this
Section shall relieve the Indemnifying Party of its obligations under
this Article only to the extent that such Indemnifying Party has been
prejudiced by the lack of timely and adequate notice (except that the
Indemnifying Party shall not be liable for any expenses incurred by
the Indemnified Party during the period in which the Indemnified Party
failed to give such notice). Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, promptly (and in any event within
10 days thereof) after the Indemnified Party's receipt thereof, copies
of all notices and documents (including court papers) received by the
Indemnified Party relating to such claim, action, suit or proceeding.
(b) Buyer shall have the obligation to assume the defense or
settlement of any third-party claim, suit, action or proceeding in
respect of which indemnity may be sought hereunder, provided that (i)
Seller shall at all times have the right, at its option and at its own
expense, to participate fully therein, and (ii) if Buyer does not
proceed diligently to defend the third-party claim, suit, action or
proceeding within 10 days after receipt of notice of such third-party
claim, suit, action or proceeding, Seller shall have the right at
Buyer's expense, but not the obligation, to undertake the defense of
any such third-party claim, suit, action or proceeding.
(c) The Indemnifying Party shall not be required to indemnify the
Indemnified Party with respect to any amounts paid in settlement of
any third-party suit, action, proceeding or investigation entered into
without the written consent of the Indemnifying Party; provided,
however, that if the Indemnified Party is a Buyer Indemnified Party,
such third-party suit, action, proceeding or investigation may be
settled without the consent of the Indemnifying Party on 10 days'
prior written notice to the Indemnifying Party if such third-party
suit, action, proceeding or investigation is then unreasonably
interfering with the Purchased Business or other operations of Buyer
and the settlement is commercially reasonable under the circumstances;
and provided further, that if the Indemnifying Party gives 10 days'
prior written notice to the Indemnified Party of a settlement offer
that the Indemnifying Party desires to accept and to pay all Losses
with respect thereto ("Settlement Notice") and the Indemnified Party
fails or refuses to consent to such settlement within 10 days after
delivery of the Settlement Notice to the Indemnified Party, and such
settlement otherwise complies with the provisions of this Section ,
the Indemnifying Party shall not be liable for Losses arising from
such third-party suit, action, proceeding or investigation in excess
of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any
judgment or enter into any settlement without the consent of the
Indemnified Party, if such judgment or settlement imposes any
obligation or liability upon the Indemnified Party other than the
execution, delivery or approval thereof and customary releases of
claims with respect to the subject matter thereof.
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(d) The parties shall cooperate in defending any such third-party
suit, action, proceeding or investigation, and the defending party
shall have reasonable access to the books and records, and personnel
in the possession or control of the Indemnified Party that are
pertinent to the defense. The Indemnified Party may join the
Indemnifying Party in any suit, action, claim or proceeding brought by
a third party, as to which any right of indemnity created by this
Agreement would or might apply, for the purpose of enforcing any right
of the indemnity granted to such Indemnified Party pursuant to this
Agreement.
6.6 Subrogation. Each Indemnifying Party hereby waives for itself and its
affiliates any rights to subrogation against any Indemnified Party or its
insurers for Losses arising from any third-party claims for which it is liable
or against which it indemnifies any Indemnified Party and, if necessary, each
Indemnifying Party shall obtain waivers of such subrogation from its, his or
her insurers.
ARTICLE 7
MISCELLANEOUS
7.1 Expenses. Except as specifically provided herein, all legal and other
costs and expenses in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller or Buyer, as the case may be,
depending upon which party incurred such costs and expenses.
7.2 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be given by registered or certified
mail (postage prepaid, return receipt requested), by personal delivery or by
facsimile transmission, in each case addressed as follows:
To Buyer:
BrightStar Information Technology Group, Inc.
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx
Xxxxx & Xxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
To Seller:
Integrated Systems Consulting, LLC
000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
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with a copy to:
Xxxxxx X. Xxxxxx
Xxxxx & Xxxxxx, L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Any such notice or other communication shall be deemed received on the fifth
business day following deposit in the mails or on the date of actual receipt,
if earlier; provided that if such communication is received after the close of
business on any day it shall be deemed received on the next business day. Any
party shall be permitted to change its address for communications by notice to
the other as provided herein.
7.3 Entire Agreement. This Agreement supersedes all prior agreements
between the parties (written or oral) and is intended as a complete and
exclusive statement of the terms of the Agreement between the parties. This
Agreement may be amended only by a written instrument which refers to this
Agreement and is duly executed by the parties.
7.4 Governing Law; Forum. This agreement shall be governed by and
construed in accordance with laws of the State of California without regard to
the choice of law principles thereof. Any suit to enforce any provision of this
Agreement or arising out of or based upon this Agreement shall be brought in
the United States District Court for the Northern District of California or the
Superior or Municipal Court in and for the County of Alameda, to the in
personam jurisdiction of which each party hereby submits.
7.5 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7.6 Assignability. No party hereto shall assign this Agreement or any
part hereof without the prior written consent of any other party, except that
Buyer may assign its rights hereunder to any direct or indirect wholly-owned
subsidiary of Buyer; provided, however, that no such assignment shall relieve
Buyer of its obligations hereunder and; provided further, however, that Buyer
shall furnish all of the Closing Consideration. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Anything in this Agreement to the contrary
notwithstanding including without limitation this Section 7.6, in the event of
the liquidation of the Company after the Closing, Buyer agrees to make all
payments of the Closing Consideration otherwise owing to the Company to be made
(and to assign the Convertible Note and the promissory note described in
Section 1.5(d) issued to the Company in accordance with this Agreement) to the
Members in such proportions as shall be set forth in a writing signed by all of
the Members. Nothing in this Section 7.6 is, however, intended to obligate the
Members to cause the liquidation of the Company.
7.7 No Third Party Beneficiaries. Except as expressly provided herein,
nothing in this Agreement shall entitle any Person other than Seller or Buyer
or their respective successors and assigns permitted hereby to any claim, cause
of action, remedy or right of any kind.
7.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or
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unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
7.9 Equitable Relief. The parties hereto agree that irreparable damage
would occur in the event that the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, it is agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, no one of which needs to be executed by all the parties, and this
Agreement shall be binding upon all the parties with the same force and effect
as if all the parties had signed the same document, and each such signed
counterpart shall constitute an original of this Agreement.
7.11 Facsimile or Electronic Transmission of Documents. Executed
counterparts of this Agreement may be delivered by facsimile or other
electronic means of transmission, and upon receipt such transmission shall be
deemed delivery of an original. Within a reasonable time after such electronic
delivery, the sender shall mail or deliver an originally signed copy of such
document
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
BRIGHTSTAR INFORMATION INTEGRATED SYSTEMS
TECHNOLOGY GROUP, INC. CONSULTING, LLC
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxx House
------------------------------------ --------------------------------
XXXXXXX X. XXXX, PRESIDENT
MEMBERS OF SELLER
/s/ Xxxxx Xxxxxx /s/ Xxx Xxxxx
------------------------------------ --------------------------------
XXXXX XXXXXX XXX XXXXX
/s/ Xxxxxx House /s/ Xxxxxxxxxxx Xxxxxx
------------------------------------ --------------------------------
XXXXXX HOUSE XXXXX XXXXXX
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