STOCK EXCHANGE AGREEMENT BY AND AMONG BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC. MYPUBLICINFO, INC. HAROLD KRAFT PAT DANE AND THE INVESTORS LISTED ON EXHIBIT A Dated as of July 25, 2006
EXHIBIT
10.46
BY
AND AMONG
BRIGHTSTAR
INFORMATION TECHNOLOGY GROUP, INC.
MYPUBLICINFO,
INC.
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇
AND
THE
INVESTORS LISTED ON EXHIBIT A
Dated
as of July 25,
2006
This
Stock Exchange Agreement (this “Agreement”)
is
entered into as of July 25, 2006, by and among BrightStar Information Technology
Group, Inc., a Delaware corporation (the “BrightStar”),
▇▇▇▇▇▇ ▇▇▇▇▇, an individual residing at ▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (“Kraft”),
▇▇▇
▇▇▇▇, an individual residing at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (“Dane”),
the
investors listed on Exhibit
A
hereto
(the “Investors”),
and
MyPublicInfo, Inc., a Delaware corporation (the “Company”).
Kraft
and Dane are each sometimes referred to herein individually as a “Seller”
and
collectively as, the “Sellers”
and
each of the parties named in the foregoing sentence is sometimes referred to
herein individually as a “Party”
and
collectively with all of the other parties named in the foregoing sentence
as,
the “Parties.”
PRELIMINARY
STATEMENTS
A. The
Company engages in the business of providing background check information as
well as other tools designed to prevent identity theft through its website,
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (the “Business”).
B. Each
of
the Sellers owns the number of shares of common stock of the Company, par value
$.0001 per share (“Company
Common Stock”),
set
forth opposite such Seller’s name on Exhibit
A
hereto,
and each of the Investors owns the number of company Common Stock issued upon
conversion of the Convertible Promissory Note (as defined in Article 1) or
Company issued options held by such Investor set forth opposite such Investor’s
name on Exhibit
A
hereto
(all of such shares being sometimes referred to herein collectively as, the
“Company
Shares”).
C. BrightStar
desires to acquire the Company Shares in exchange for, and each of the Sellers
and Investors desires to exchange his Company Shares for, newly issued shares
of
BrightStar’s Series B Preferred Stock, par value $.001 per share, upon the terms
and conditions herein set forth.
NOW,
THEREFORE, in consideration of the foregoing and the mutual promises and
covenants herein contained, and for other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, hereby agree as follows:
ARTICLE
1
DEFINITIONS
Capitalized
terms used but not otherwise defined herein shall
have the meanings set forth below:
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1.1
|
“Adverse
Consequences”
means all proceedings, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, investigation and/or
remediation costs, dues, penalties, fines, costs of defense and other
costs, amounts paid in settlement, Liabilities, responsibilities,
Taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys’ fees and expenses.
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|
1.2
|
“Affiliate”
has the meaning set forth in Rule 12b-2 of the regulations promulgated
under the Exchange Act.
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|
1.3
|
“Agreement”
means this Stock Exchange
Agreement.
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|
1.4
|
“Ancillary
Agreements”
means
all other agreements and instruments
to be executed and delivered
pursuant to this Stock Exchange
Agreement.
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|
1.5
|
“BrightStar
Common Stock”
means
common stock, par value $.001 per share, of
BrightStar.
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1.6
|
“BrightStar
Disclosure Schedule”
means the disclosure schedule delivered by BrightStar to Sellers
and the
Company.
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| 1.7 |
“Business”
has the meaning set forth in Paragraph A. of the Preliminary Statements
herein.
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| 1.8 |
“Closing”
has the meaning set forth in Section
2.2.
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| 1.9 |
“Closing
Date”
has the meaning set forth in Section
2.2.
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| 1.10 |
“Code”
means the Internal Revenue Code of 1986, as
amended.
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| 1.11 |
“Company”
has the meaning first set forth
above.
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|
1.12
|
“Company
Common Stock”
has the meaning set forth in Paragraph B. of the Preliminary Statements
herein.
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1.13
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“Company
Intellectual Property”
means all intellectual property and all right, title and interest
therein
currently owned or used by the
Company.
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| 1.14 |
“Company
Disclosure Schedule”
has the meaning set forth in preamble to Article
3 hereof.
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|
1.15
|
“Company
Shares”
has
the meaning set forth in Paragraph B of the Preliminary Statements
herein.
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|
1.16
|
“Convertible
Promissory Notes”
means
the convertible promissory notes of the Company held by, or previously
held by a Seller or Investor.
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|
1.17
|
“Encumbrance”
means
any claim, mortgage, servitude, easement, encroachment, restrictive
covenant, right of way, survey defect, equitable interest, lease
or other
possessory interest, lien, option, pledge, security interest, preference,
priority, right of first refusal, environmental use restriction or
similar
restriction.
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| 1.18 |
“Exchange
Act”
means
the United States Securities Exchange Act of 1934, as
amended.
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| 1.19 |
“Filing”
has the meaning set forth in Section
3.22.
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|
1.20
|
“GAAP”
means United States generally accepted accounting principles as in
effect
as of the date of any document purported to be prepared in accordance
with
GAAP.
|
|
1.21
|
“Governmental
Authorization”
means any approval, consent, ratification, waiver, authorization,
franchise, license, permit (including environmental permits) or
registration issued, granted, given or otherwise made available by
or
under the authority of any Governmental Body or pursuant to any
Law.
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|
1.22
|
“Governmental
Body”
means any (i) nation, region, state, province, county, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ or other jurisdiction, (ii) Federal,
state, provincial, local, municipal, foreign or other government,
(iii) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department or other entity
and
any court or other tribunal), (iv) multinational organization,
(v) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, policy, regulatory or taxing authority
or power of any nature or (vi) official of any of the
foregoing.
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1.23
|
“Investors”
means the holders of outstanding Convertible Promissory Notes of
the
Company, as listed on Exhibit
A
hereto.
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1.24
|
“IRS”
means the United States Internal Revenue Service or any successor
agency
and, to the extent relevant, the United States Department of
Treasury.
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1.25
|
“Law”
means
any foreign, Federal, state and local statute, law, constitution,
treaty,
rule, regulation, by-law, ordinance, code, regulation, resolution,
order,
determination, writ, injunction, awards (including, without limitation,
awards of any arbitrator), judgment, decree, binding case law, principle
of common law or notice of any Governmental Body (for the avoidance
of
doubt, including, but not limited to, the laws of the United States
of
America).
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1.26
|
“Liabilities”
includes liabilities, commitments, indebtedness or obligations of
any
nature, whether known or unknown, whether absolute, accrued, contingent,
▇▇▇▇▇▇, inchoate or otherwise, whether due or to become due, and
whether
or not required to be reflected on a balance sheet prepared in accordance
with GAAP, including any liability for
Taxes.
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1.27
|
“Material
Adverse Effect”
means any event or circumstance that has, or is reasonably likely
to have,
a significant adverse effect on the financial condition, assets,
goodwill,
Business, results of operation or prospects of the Company taken
as a
whole.
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1.28
|
“Material
Contracts”
has the meaning set forth in Section
3.19.
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| 1.29 |
“Party”
and “Parties”
have the meanings first set forth
above.
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1.30
|
“Person”
means an individual or an entity, including a Governmental Body or
any
other body with legal personality separate from its equityholders
or
members, including if established by any Governmental
Body.
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|
1.31
|
“Proceeding”
means any action, arbitration, audit, examination, investigation,
claim,
demand, inquiry, hearing, litigation, suit or appeal (whether civil,
criminal, administrative, judicial or investigative, whether formal
or
informal, and whether public or private) commenced, brought, conducted,
heard by or before or otherwise involving any Governmental Body or
arbitrator.
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| 1.32 |
“SEC”
means the United States Securities and Exchange
Commission.
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| 1.33 |
“Securities
Act”
means the United States Securities Act of 1933, as
amended.
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| 1.34 |
“Seller”
and “Sellers”
each have the meaning set forth in the Preliminary
Statement.
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1.35
|
“Series
B Preferred”
means Series B Preferred Stock of BrightStar, par value $.001 per
share,
with such relative rights and preferences as are set forth in Exhibit
B
hereto.
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|
1.36
|
“Tax”
means any Federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital
stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or
not.
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|
1.37
|
“Tax
Return”
means any return, declaration, report, claim for refund, or information
return or statement required to be supplied to any governmental authority
relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
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ARTICLE
2
EXCHANGE
OF SHARES; closing
2.1 Exchange
of Shares.
On the
Closing Date, and upon the terms and subject to the conditions set forth herein,
the Sellers and the Investors shall sell, assign, transfer, convey and deliver
the Company Shares to BrightStar, and BrightStar shall accept the Company Shares
from the Sellers and the Investors and, in exchange therefor, shall issue and
deliver to each Seller and Investor the number of shares of Series B Preferred
set forth opposite such Seller’s or Investor’s name on the signature page or
Exhibit
A
hereto,
as applicable.
2.2 Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place at the offices of Guzov Ofsink, LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on July 25, 2006, or such other date or at such other location
or time as may be agreed upon by
the
Parties
(the
“Closing
Date”).
At
the Closing, each Seller and Investor shall deliver to BrightStar all
certificates evidencing Company Shares owned by him or her, duly endorsed in
blank, against the delivery by BrightStar to such Seller or Investor of one
or
more certificates, in definitive form and registered in the name of such Seller
or Investor, evidencing the number of shares of Series B Preferred issuable
to
such Seller or Investor hereunder.
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ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND SELLERS
The
Company and Sellers jointly and severally represent and warrant to BrightStar
that, with respect to the Company and Sellers, except as set forth in the
disclosure schedule to be delivered by the Company to BrightStar at the Closing
(the “Company
Disclosure Schedule”):
(i)
all statements contained in this Article
3
are
true, correct and complete on the date hereof; and (ii) all such statements
shall be true, correct and complete on the Closing Date as if first made on
such
date. The Company and Sellers further agree that, notwithstanding anything
contained herein to the contrary, nothing in the Company Disclosure Schedule
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the applicable paragraph of the Company Disclosure
Schedule identifies such exception with reasonable particularity and describes
the relevant facts in reasonable detail in light of the corresponding section
of
this Article
3.
Each
Investor, severally and not jointly, represents and warrants to BrightStar
that,
with respect to such Investor, all statements contained in Section 3.22 and
Sections 3.24 through 3.28 are true, correct and complete on the date hereof
and
shall be true, correct and complete on the Closing Date as if first made on
such
date.
3.1 Organization
and Standing; Capacity. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full and unrestricted corporate
power and authority to: (i) own, operate and lease its assets; (ii) carry on
the
Business as currently conducted and proposed to be conducted; (iii) execute
and
deliver this Agreement and each Ancillary Agreement to which it is a party;
(iv)
perform its obligations hereunder and thereunder; and (v) consummate the
transactions contemplated hereby and thereby. The Company is duly qualified
to
do business and is in good standing in all jurisdictions in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to so qualify will not have a Material Adverse Effect. The
Company does not have any subsidiaries.
(b)
Each
Seller has full capacity and is competent to execute and deliver this Agreement
and all Ancillary Agreements to which such Seller is a party.
3.2 Authorization
of Transaction.
(a)
The
execution and delivery by the Company of this Agreement and each of the
Ancillary Agreements to which it is a party, and the consummation by the Company
of the transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate actions, including all required board and shareholder
approvals.
(b)
Assuming the due and valid execution of this Agreement and each of the Ancillary
Agreements to which the Company is a party by the other parties hereto and
thereto, this Agreement and each of such Ancillary Agreements constitute the
valid and legally binding obligations
of the Company, enforceable in accordance with their respective terms, except
as
such enforcement may be limited by bankruptcy, reorganization, insolvency and
other similar Laws and court decisions relating to or affecting the enforcement
of creditors rights generally and by the application of general equitable
principles. Except as otherwise required by applicable Federal or state
securities Laws, the Company need not provide any notice to, make any filing
with or obtain any authorization, consent, or approval of any Governmental
Body
or any other Person in order to execute and deliver this Agreement and each
Ancillary Agreement to which the Company is a party or to consummate the
transactions contemplated hereby and thereby.
(c)
With
respect to each Seller, assuming
the due and valid execution of this Agreement and each of the Ancillary
Agreements to which such Seller is a party by the other parties hereto and
thereto, this Agreement and each of such Ancillary Agreements constitute the
valid and legally binding obligations of such Seller, enforceable in accordance
with their respective terms, except as such enforcement may be limited by
bankruptcy, reorganization, insolvency and other similar Laws and court
decisions relating to or affecting the enforcement of creditors rights generally
and by the application of general equitable principles and will effectively
vest
in BrightStar good, valid and marketable title to all Company Shares owned
by
such Seller, free and clear of all Encumbrances. Except as otherwise required
by
applicable Federal or state securities Laws, no Seller need provide any notice
to, make any filing with, or obtain any authorization, consent, or approval
of
any Governmental Body or any other Person in order to consummate the
transactions contemplated by this Agreement and each Ancillary Agreement to
which such Seller is a party.
3.3
Noncontravention. (a) The
execution and delivery by the Company of this Agreement and each Ancillary
Agreement to which the Company is a party, the performance by the Company of
its
obligations hereunder and thereunder, and the consummation by the Company of
the
transactions contemplated hereby and thereby, do not and will not: (i) conflict
with or violate any provision of any Law to which the Company is subject or
by
which any of its assets or properties is bound or affected; (ii) conflict with
or violate or any provision of the Company’s Certificate of Incorporation or
By-laws; (iii) conflict with, result in any breach of or constitute a default
under any agreement,
contract or other arrangement (whether written or oral) to
which
the Company is a party or by which any of its assets is bound or affected;
or
(iv) result in or require the creation or imposition of or result in the
acceleration of any indebtedness, or of any Encumbrance of any nature upon,
or
with respect to any of the Company’s assets.
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(b) The
execution and delivery by each Seller of this Agreement and each Ancillary
Agreement to which such Seller is a party, the performance by such Seller of
its
obligations hereunder and thereunder, and the consummation by such Seller of
the
transactions contemplated hereby and thereby, do not and will not: (i) conflict
with or violate any provision of any Law to which such Seller is subject or
by
which any of his assets or properties (including the Company Shares) is bound
or
affected; (ii) conflict with, result in any breach of or constitute a default
under any agreement, contract or other arrangement (whether written or oral)
to
which such Seller is a party or by which any of his assets (including the
Company Shares) is bound or affected; or (iii) result in or require the creation
or imposition of or result in the acceleration of any indebtedness, or of any
Encumbrance of any nature upon or with respect to any of such Seller’s assets
including, but not limited to, the Company Shares.
3.4 Capitalization. The
entire authorized capital stock of the Company consists of (i) 10,000,000 shares
of Company Common Stock, of which 1,984,273 shares
are issued and outstanding. No other capital stock or equity securities of
or
interests in the Company are authorized or outstanding, and except as set forth
in Section 3.4(a) of the Company Disclosure Schedule, there are no shares of
capital stock or other securities of the Company reserved for future issuance.
All of the issued and outstanding shares of Company Common Stock have been
duly
authorized, are validly issued, fully paid and nonassessable, were issued in
compliance with all applicable Federal and state securities Laws and any other
applicable Laws. Except as set forth in Section
3.4(b)
of the
Company Disclosure Schedule, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, rights of first refusal,
pre-emptive rights, conversion rights, exchange rights or other contracts or
commitments (whether written or oral) that could require the Company to issue,
sell or otherwise cause to become outstanding any of its capital stock
(including any instruments or securities convertible into capital stock); and
the Company has no outstanding or authorized stock appreciation, phantom stock,
profit participation or similar rights. There are no voting trusts, proxies,
or
other agreements or understandings with respect to the voting of the Company
Common Stock.
3.5 Financial
Statements.
Attached
hereto as Exhibit
C
are the
Company’s unaudited Balance Sheet and Statements of Income, Changes in
Stockholders’ Equity and Cash Flow (collectively, the “Financial
Statements”)
as of
and for the year ended December 31, 2005 and for the fiscal quarter ended March
31, 2006 and the six months ended June 30, 2006. The Financial Statements
(including the notes thereto) are in accordance with the books and records
of
the Company, have been prepared in accordance with GAAP consistently applied
and
present fairly the financial condition of the Company as of the dates and for
the periods indicated.
3.6 Absence
of Litigation. There
is
no Proceeding pending or threatened by or before any Governmental Body against
the Company or any Seller nor is there any basis for any such Proceeding. As
of
the date hereof, there is no Proceeding pending or, to the Company’s or any
Seller’s knowledge, threatened by or before any Governmental Body (i) seeking to
prevent, hinder, modify or challenge any of the transactions contemplated by
this Agreement, or (ii) that would cause any of the transactions contemplated
by
this Agreement to be illegal, invalid, voidable or otherwise
rescinded.
3.7 Title
to Assets.
The
Company has good and marketable title to, or a valid leasehold interest in,
all
properties and assets owned or used by it or located on its premises or
necessary or advisable for
the
conduct of the Business as currently conducted or proposed to be conducted,
free
and clear of all Encumbrances.
3.8 Employment
Practices. (a)
None
of
the Company’s employees is
covered
by or subject to any collective bargaining agreement, union contract,
labor agreement or conciliation agreement. To
Sellers’ knowledge, (i) none of the Company’s employees has any plans to
terminate employment with the Company; (ii) the Company has not experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes; (iii) there are no outstanding or pending grievances,
claims of unfair labor practices or other employee or collective bargaining
disputes against or involving the Company; (iv) the Company has not
committed any unfair labor practice; (v) no organizational effort is
presently being made or threatened by or on behalf of any labor union with
respect to any of the Company’s employees; and (vi) no (A) charges of
discrimination (relating to sex, age, race, national origin, handicap or veteran
status), or (B) allegations that would be investigated by agencies such as
the Department Of Labor, Occupational Safety and Health Administration, Office
Federal Contract Compliance Programs, Internal Revenue Services or any other
Federal, state or local agency, involving the Company or any of its employees
are pending before any Governmental Body nor, to Sellers’ knowledge, have any
such charges been threatened. Section 3.8(a)
of the
Company Disclosure Schedule sets forth a correct and complete list (including
the name, hire date, current compensation and benefits payable to such persons
for the current calendar year) of all the Company’s employees.
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(b) The
Company has complied with all applicable Laws relating to employment practices
in all material respects. Neither the Company nor any Seller is aware that
any
officer or key employee, or any group of key employees, intends to terminate
their employment with the Company, nor is there any present intention by the
Company or any Seller to terminate the employment of any officer, key employee
or group of key employees.
(c)
Section
3.8(b) of the Company Disclosure Schedule
lists
all current directors, officers and employees of the Company, showing each
such
Person’s name, position, and annual remuneration, bonuses and fringe benefits
for the current fiscal year. Except
as set forth in Section
3.8(c) of the Company Disclosure Schedule,
the
Company has no written employment agreements with any of its directors, officers
and employees and all of its employees are employed “at will.”
3.9 Employee
Benefit Plans. Section
3.9 of the Company Disclosure Schedule
lists
all benefit plans maintained by the Company and all individual or group
compensation arrangements to which the Company is a party (collectively, the
“Plan”). Except as set forth in Section
3.9 of the Company Disclosure Schedule:
(i) Each
Plan, the administrator and fiduciaries of each Plan, and the Company have
complied in all material respects with the applicable requirements of ERISA
(including, but not limited to, the fiduciary responsibilities imposed by Part
4
of Title I, Subtitle B of ERISA) and the prohibited transaction requirements
of
ERISA Section 406), the Code (including, but not limited to, the prohibited
transaction requirements of Code Section 4975) and any other applicable laws,
rules and regulations governing each Plan, and each Plan has at all times been
properly administered in compliance with its terms and in accordance with all
such laws, rules and regulations;
(ii) each
Plan
intended to qualify under Code Section 401(a) is the subject of a favorable,
unrevoked determination letter issued by the IRS as to its qualified status
under the Code and the tax-exempt status of the Plan’s trust under Code Section
501(a) upon which the Company may still rely, and no circumstances have occurred
that would reasonably be expected to adversely affect the tax-qualified status
of any such Plan;
(iii) the
Company has never contributed, or been obligated to contribute, to any (i)
Defined Benefit Plan (within the meaning of ERISA Section 3(35)) or (ii)
Multiemployer Plan (within the meaning of ERISA Sections 3(37) and 4001) and
is
not subject to any funding or withdrawal liability with respect to any such
Plan;
(iv) all
contributions (including all employer contributions and employee salary
reduction contributions), premiums and other payments that would be (without
regard to the transactions contemplated hereby and by the Ancillary Agreements),
but are not yet, due from the Company to or under any Plan have been adequately
and properly provided for by the Company in accordance with such
Plan;
(v) there
is
no matter pending (other than routine determination letter filings) or, to
the
knowledge of Sellers, threatened with respect to any Plan before the Internal
Revenue Service, the Department of Labor, the SEC, the Pension Benefit Guaranty
Corporation or any other Federal or state government agency or any
court;
(vi) no
Plan
that is an employee Welfare Benefit Plan (within the meaning of ERISA Section
3(1)) provides for continuing benefits or coverage for any participant or
beneficiary of a participant after such participant’s termination of employment,
except to the extent required by law, and there has been no violation of Code
Section 4980B or ERISA Sections 601 et seq. or the Health Insurance Portability
and Accountability Act with respect to any such Plan that could result in any
material liability to BrightStar;
(vii) no
Plan
obligates the Company to pay any separation, severance, termination or similar
benefit to any current employee as a result of any transaction contemplated
by
this Agreement or any of the Ancillary Agreements as a result of a change in
control or ownership within the meaning of the Plan or Code Section 280G;
and
(viii) with
respect to each Plan, true, correct, and complete copies of the applicable
following documents have been filed or distributed appropriately and made
available to BrightStar: (i) all current Plan documents and any amendment
thereto; (ii) the most recent Forms 5500, summary annual reports, financial
statements, and actuarial reports for the last three (3) Plan years; (iii)
summary plan descriptions and any summary of material modifications; (iv) the
most recent determination letter received from the IRS; and (v) the related
trust agreements, insurance contracts and other funding agreements that
implement such Plans.
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3.10 Intellectual
Property.
The
Company owns or has a right to use all Company Intellectual Property, free
and
clear of any and all Encumbrances of any kind, except where the failure to
own
or have a right to use such property or such lien or encumbrance would not
have
a Material Adverse Effect. All
Company Intellectual Property and a listing of all names under which the Company
has operated are set forth in Section
3.10 to the Company Disclosure Schedule.
The
Company has provided to BrightStar correct and complete copies of all patents,
copyright and trademark registrations, licenses, agreements and other written
documentation related to, or evidencing the Company’s ownership or right to use,
the Company Intellectual Property. The Company is the sole and exclusive owners
of and possesses all right, title, and interest in and to, the Company
Intellectual Property, free and clear of all Encumbrances. The legality,
validity, enforceability, ownership, use of and right to use the Company
Intellectual Property have not been and are not currently being challenged,
interfered with, or infringed upon and, to the Company’s and Sellers’ knowledge,
are not subject to any such challenge. The Company has taken all reasonably
necessary action to maintain and protect the Company Intellectual Property
and
will continue to maintain those rights until the Closing so as not to adversely
affect the validity or enforcement of the Company Intellectual Property. The
use
of the Company Intellectual Property by the Company does not conflict with,
infringe upon, violate or interfere with or constitute an appropriation of
any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, domain name, patent, service
▇▇▇▇, brand ▇▇▇▇, brand name, database, industrial design, trade secrets,
technology, software, customer lists, copyright or any pending application
therefor of any other Person, and neither the Company nor any Seller has
knowledge of any claims therefor. The use of all Company Intellectual Property
will not be adversely affected by the transactions contemplated in this
Agreement.
3.11 Notes
and Accounts Receivables.
(a) Section
3.11 of the Company Disclosure Schedule
lists
all promissory notes of the Company, the issue and maturity dates thereof,
the
outstanding principal balances thereunder and the interest rate applicable
thereto. All of such notes are reflected properly on the Financial Statements.
(b) Section
3.11 of the Company Disclosure Schedule
lists
all accounts payable and receivable of the Company and the respective ages
thereof. All
accounts payable are current and are not in default. All accounts
receivable are
valid
receivables not subject to setoffs or counterclaims and are current and
collectible.
All
accounts payable and accounts receivable are properly reflected on the Financial
Statements.
3.12 Tax
Matters.
(a)
The
Company
has:
(i)
timely filed all Tax Returns required to have been filed by it. All such Tax
Returns are true, correct and complete in all respects and all Taxes required
to
be paid, with respect to the Business, have been paid or reserves for such
Taxes
have been established on the Company’s accounting books;
(ii)
there are no Liens on any of the Company’s assets that arose in connection with
any failure (or alleged failure) by any Person to pay any Tax;
(ii)
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party;
(iii) not
waived any statute of limitations with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency;
and
(b)
There
are no pending, or to Sellers’ knowledge threatened, audits, investigations,
disputes or claims concerning any Tax liability of the Company with respect
to
the Business.
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8 -
(c)
The
Company is not a party to any Tax allocation or sharing agreement and does
not
have any liability for the Taxes of any Person under Treasury Regulation Section
1.1502-6, as a transferee or successor, by contract or otherwise.
(d)
The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return.
3.13 Books
and Records.
The
books
of account, minute books, equity record books and other records of the Company,
all of which have been or will be made available to BrightStar prior to the
Closing, are accurate and complete in all material respects and have been
maintained in accordance with sound business practices. Each transaction of
the
Company is properly and accurately recorded on the books and records of the
Company.
3.14 Powers
of Attorney.
There
are
no outstanding powers of attorney executed on behalf of the Company or any
Seller.
3.15 Brokers’
Fees. Neither
the Company nor any Seller has any Liability to pay any fees or commissions
or
other consideration to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement or for which BrightStar could become
liable or obligated.
3.16 Conduct
of Business.
With
respect to the Business and except as disclosed in Section 3.16 of the Company
Disclosure Schedule, since December 31, 2005, the Company has not: (i) incurred
any material obligation or Liability except normal trade or Business obligations
or Liabilities incurred in the ordinary and normal course of the Business;
(ii)
failed to discharge or satisfy any lien or pay any obligation or Liability,
other than in the ordinary and normal course of the Business; (iii) sold,
assigned, transferred, leased, exchanged or otherwise disposed of any of its
properties or assets other than current assets in the ordinary and normal course
of the Business; (iv) made any general wage or salary increase, increased the
compensation of any employee, entered into any employment contract with any
employee, or instituted any employee welfare, bonus, stock option,
profit-sharing, retirement or similar plan or arrangement; (v) suffered any
material damage, destruction or loss, whether as the result of fire, explosion,
earthquake, accident, casualty, labor trouble, requisition or taking of property
by any governmental authority, flood, windstorm, embargo, riot or Act of God
or
the enemy, or other similar casualty or event or otherwise, and whether or
not
covered by insurance adversely affecting the Business; (vi) canceled or
compromised any debt or claim other than in the ordinary and normal course
of
the Business; (vii) entered into any transaction, contract or commitment outside
the ordinary and normal course of the Business which would have a Material
Adverse Effect; (viii) acquired or sold any real estate, real property options,
leaseholds, or leasehold improvements; (ix) terminated, discontinued, closed
or
disposed of any operation of the Business; (x) suffered any Material Adverse
Effect; (xi) made (or committed to make) any material capital expenditures
in
connection with the operation of the Business; (xii) failed to operate the
Business only in the ordinary and normal course, ordinary and normal course
of
the Business consistent with past practice; (xiv) failed to pay the trade
payables of the Business in the ordinary and normal course of the Business
consistent with past practice; (xv) failed to pay or discharge material
Liabilities relating to the Business as and when due and payable; (xvi) failed
to keep in full force and effect insurance covering its assets and the Business
in amounts consistent with past practice; (xvii) entered into any contract
other
than in the ordinary and normal course of the Business consistent with past
practice nor permitted any amendment or termination of any contract or that
is
material to the Business; and (xviii) experienced no adverse change in its
employee, customer or supplier relationships other than changes in the ordinary
and normal course of the Business.
3.17. Insurance.
Section
3.17 of the Company Disclosure Schedule sets forth the following information
with respect to each insurance policy (including policies providing property,
casualty, liability, product liability and workers’ compensation coverage and
bond and surety arrangements) to which the Company is a party: (i) the name
of
the insurer, the name of the policy holder and the name of each covered insured;
(ii) the policy number and the period of coverage and type of coverage; and
(iii) a description of any retroactive premium adjustments or other loss sharing
arrangements. Section 3.17 of the Company Disclosure Schedule contains a summary
of all claims submitted, pending or paid under such policies within the past
five (5) years. With respect to each such insurance policy: (i) the policy
is
legal, valid, binding, enforceable in accordance with its terms and in full
force and effect; (ii) neither the Company nor, to Sellers’ knowledge, any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or lapse of time, would constitute such a breach or default, or
permit termination, modification or acceleration, under the policy; (iii)
neither the Company nor, to Sellers’ knowledge, any other party to the policy
has repudiated any provision thereof; and (iv) up to the Closing Date, the
policy and the insurance coverage provided by the policy will be maintained
in
full force and effect and will not be canceled, modified or changed without
the
prior written consent of BrightStar. There are no outstanding sureties or other
bonds securing any obligations of the Company, and the Company has no Liability
(accrued, contingent or otherwise) with respect to surety or other
bonds.
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9 -
3.18 Compliance
with Law. The
Company is in compliance with all applicable Laws, including Federal, foreign,
state, county or local laws, statutes and regulations relating to equal
employment opportunities, fair employment practices, unfair labor practices,
terms of employment, professional licenses, business and other licenses,
occupational health and safety, wages and hours and discrimination, and zoning
ordinances and building codes. Copies of all notices of violation of any of
the
foregoing that the Company or any Seller has received in the past five (5)
years
or since the Company’s inception, whichever is shorter, are set forth in Section
3.18 of the Company Disclosure Schedule.
3.19 Contracts
and Commitments. (a)
Except as set forth in Section 3.19 of the Company Disclosure Schedule, the
Company is not a party to, nor are any of its assets bound by or subject to,
any
oral or written:
(i) contract,
lease or other similar document that has an aggregate value of $10,000 or more
or cannot be terminated or canceled without further liability to the Company
or
the Business upon the giving of no more than thirty (30) days
notice;
(ii) contract
with any consultant, or for the employment of any person, including any
consultant, who is engaged in the conduct of the Business,
(iii) contract
or commitment limiting or restraining the Company or any successor thereto
from
engaging or competing in any manner or limiting or controlling the use or
disclosure of confidential information, nor, to Sellers’ knowledge, is any
employee of the Company subject to any such contract or commitment;
(iv) license,
assignment, franchise, distributorship or other similar contract that relates
in
whole or in part to any software (other than readily available “off-the-shelf”
software), patent, trademark, trade name, service ▇▇▇▇ or copyright or to any
ideas, technical assistance or know-how or other Intellectual Property of or
used by the Company in the conduct of the Business;
(v) contract
relating to borrowed money or other indebtedness (including any letters of
credit) or the mortgaging, pledging or otherwise placing a lien or other
encumbrance on any material asset of the Company;
(vi) contracts
relating to joint ventures or agreements involving a sharing of
profits;
(vii) contract
relating to investigating, testing, handling, removal, cleanup, abatement or
other actions in connection with environmental liabilities;
(viii) contract
for the future purchase of fixed assets or the maintenance thereof or for the
future purchase of materials, supplies or equipment in excess of the Company’s
normal operating requirements; or
(ix) contract
containing any provision for delayed damages, liquidated damages,
indemnification not fully covered by insurance, or extraordinary remedies,
including potential liability for consequential damages;
(b)
Each
of the contracts, leases and other agreements and commitments listed in Section
3.19 of the Company Disclosure Schedule shall be collectively referred to herein
as the “Material Contracts.” All Material Contracts are legal, valid, binding
and enforceable in accordance with their terms, in full force and effect and
binding upon the other parties thereto. There is no breach or default in any
material respect by the Company or, to Sellers’ knowledge, any other party in
the performance, observance or fulfillment of any obligations, covenants,
liabilities or conditions contained in any of the Material Contracts, and no
event has occurred or condition exists that with or without notice, lapse of
time or the happening or occurrence of any other event would constitute a breach
or default in any material respect, or permit termination, modification or
acceleration, by any party to, or bound by, the Material Contracts. The Company
has not assigned, secured, pledged, transferred, conveyed, mortgaged, deeded
in
trust or encumbered in any way any interest in any of the Material Contracts.
There are no disputes, oral agreements or forbearance programs in effect as
to
any Material Contract. Complete and accurate copies of all Material Contracts
that are in writing (including any amendments or supplements thereto) have
been
delivered to BrightStar by the Company and any oral Material Contract has been
summarized in Section 3.19 of the Company Disclosure Schedule. Subject to
receipt of any required consents or approvals set forth in Section 3.19 of
the
Company Disclosure Schedule, the consummation of the transactions contemplated
by this Agreement will not result in the termination, default or breach of
any
Material Contract, and immediately after the Closing, all Material Contracts
will continue in full force and effect without the imposition of any additional
condition or obligation on the Company or the Business resulting from the
consummation of the transactions contemplated hereby and by the Ancillary
Agreements.
3.20 Consents.
No
consents or approvals of, or notices to, or filings, registrations or
qualifications with, any third person and no consents or waivers from, or
notices to, any other parties to leases, licenses, franchises, permits,
indentures, contracts or other instruments are required for the consummation
by
the Company and Sellers of the transactions contemplated hereby and by the
Ancillary Agreements.
3.21 No
Undisclosed Liabilities. The
Company has no Liabilities except: (i) Liabilities which are reflected and
reserved against on the face of the Balance Sheet (which shall not include
any
disclosure in any financial footnotes thereto) which have not been paid or
discharged since the date thereof; (ii) accounts payable and accrued expenses
incurred in the ordinary course of the Business consistent with past practice
which have not caused the level of the Company’s accounts payable or accrued
expenses to increase materially from the amounts reflected on the face of the
Balance Sheet (which shall not include any disclosure in any financial footnotes
thereto); (iii) liabilities arising in the ordinary course of business
consistent with past practice under contracts or real property leases (other
than any liability resulting from, arising out of, relating to, in the nature
of, or caused by any breach of contract, breach of warranty, tort, infringement
or violation of law); (iv) Liabilities which would not be required by GAAP
to be
set forth on a balance sheet and could not, in the aggregate, reasonably be
expected to have a material adverse effect on the financial condition, operation
or prospects of the Company or the Business, or (v) as set forth on Section
3.22
of the Company Disclosure Schedule. The Company is not a guarantor or otherwise
liable for any Liability of any other Person.
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10 -
3.22 Ownership
of Company Shares.
All
of
the Company Shares have been duly and validly issued and are fully paid and
non-assessable.
Each
Seller or each Investor, as applicable, is the record and beneficial owner
of
the Company Shares set forth opposite his name on Exhibit
A,
free
and clear of any and all Encumbrances, and has the power and authority to sell,
transfer, assign and deliver such Company Shares as provided in this Agreement,
and such delivery will convey to BrightStar good and marketable title to such
Company Shares, free and clear of any and all Encumbrances. No Seller or
Investor, as applicable, is a party to any contract with respect to any equity
securities of the Company, including, but not limited to, any contract that
could require such Seller or Investor, as applicable to sell, transfer, or
otherwise dispose of any of his Company Shares other than pursuant to this
Agreement.
3.23
Certain
Business Practices.
The
Company has, at all times, complied with the Controlling the Assault of
Non-Solicited Pornography and Marketing Act of 2003, known as the CAN-SPAM
Act,
to the extent applicable to the Company’s activities.
3.24 No
Registration. Sellers
or the Investors, as applicable, understand that neither the Series B Preferred
nor the shares of BrightStar Common Stock issuable upon conversion of the Series
B Preferred has been registered under the Securities Act or any state securities
laws; and that all of such shares will be issued in reliance upon exemptions
contained in the Securities Act or interpretations thereof and in the applicable
state securities laws and cannot be offered for sale, sold or otherwise
transferred unless they are registered or qualify for exemption from
registration under the Securities Act. Each Seller or Investor, as applicable,
is an “accredited” investor as such term is defined in Rule 502 promulgated
under Regulation D under the Securities Act.
3.25 Acquisition
for Investment. The
Series B Preferred and the shares of BrightStar Common Stock issuable upon
conversion of the Series B Preferred are being acquired under this Agreement
by
Sellers or Investors, as applicable, in good faith solely for their own
respective accounts, for investment and not with a view toward distribution
within the meaning of the Securities Act.
3.26 Risks
of Investment. Sellers
or Investors, as applicable, understand and are able to bear any economic risks
associated with an investment in BrightStar (including, without limitation,
holding the shares of Series B Preferred and any shares of BrightStar Common
Stock issuable on conversion of the Series B Preferred.
3.27 Disclosure
of Information.
Sellers
or Investors, as applicable, acknowledge
that Sellers or Investors, as applicable, have had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Series B Preferred to be issued pursuant to this
Agreement. Sellers or Investors, as applicable, further acknowledge that they
have had an opportunity to ask questions and receive answers from BrightStar
regarding its business and to obtain additional information (to the extent
BrightStar possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to Sellers
or
to which Sellers had access.
|
3.28
|
Full
Disclosure. The
representations and warranties and statements made by the Company
and
Sellers or the Investors, as applicable, in this Agreement are true,
accurate, correct and complete in every respect and do not contain
any
untrue statement of a material fact or omit to state any material
fact
necessary in order to make the statements and information contained
herein
not false or misleading.
|
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ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF BRIGHTSTAR
BrightStar
represents and warrants to the Company and Sellers that: (i) all statements
contained in this Article
4
are
true, correct and complete on the date hereof; and (ii) all such statements
shall be true, correct and complete on the Closing Date as if first made on
such
date. BrightStar further agrees that, notwithstanding anything contained herein
to the contrary, nothing in the BrightStar Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the applicable paragraph of the BrightStar Disclosure Schedule identifies
such exception with reasonable particularity and describes the relevant facts
in
reasonable detail in light of the corresponding section of this Article
4.
4.1 Organization
and Standing. BrightStar
represents and warrants that it is a corporation duly organized and validly
existing under the laws of the State of Delaware, with full corporate power
and
authority to: (i) own, operate and lease its assets to carry on its business
as
currently conducted and as proposed to be conducted; (ii) execute and deliver
this Agreement and each Ancillary Agreement to which it is a party; (iii)
perform its obligations hereunder and thereunder; and (iv) consummate the
transactions contemplated hereby and by the Ancillary Agreements to which it
is
a party.
4.2 Authorization
of Transaction. Assuming
its due and valid execution and delivery by each other Party hereto, this
Agreement constitutes the valid and legally binding obligation of BrightStar,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by bankruptcy, reorganization, insolvency and other
similar Laws and court decisions relating to or affecting the enforcement of
creditors rights generally and by the application of general equitable
principles. Except as otherwise required by applicable Federal or state
securities Laws, BrightStar need not provide any notice to, make any filing
with, or obtain any authorization, consent, or approval of any Governmental
Body
or any other Person in order to consummate the transactions contemplated by
this
Agreement.
4.3 Brokers’
Fees. BrightStar
has no Liability to pay any fees or commissions or other consideration to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement or for which the Company or any Seller could become liable or
obligated.
4.4 Noncontravention. The
execution, delivery and performance by BrightStar of this Agreement, the
fulfillment of and compliance with the respective terms and provisions hereof
and thereof, and the consummation by BrightStar of the transactions contemplated
hereby, do not and will not: (i) conflict with or violate any provision of,
any
Law having applicability to BrightStar or any of its assets, or any provision
of
the Certificate of Incorporation or By-laws of BrightStar; (ii) conflict with,
or result in any breach of, or constitute a default under any agreement,
contract or other arrangement (whether written or oral) to which BrightStar
is a
party or by which BrightStar or any of its assets may be bound; or (iii) result
in or require the creation or imposition of or result in the acceleration of
any
indebtedness, or of any Encumbrance of any nature upon, or with respect to
any
of the assets of BrightStar, including the Series B Preferred.
4.5 Capitalization. The
entire authorized capital stock of BrightStar consists of: (i) 747,000,000
shares of common stock, par value $.001 per share, of which 70,707,518 shares
are issued and outstanding; and (ii) 136,585 shares of Series A Preferred Stock,
par value $.001 per share, all of which are issued and outstanding and held
of
record by Stellar ▇▇▇▇▇ LLC; and (iii) 2,863,415 shares of undesignated
Preferred Stock, par value $.001 per share, none of which is issued
or outstanding.
As of the Closing, 1,984,273 shares
of
such undesignated preferred stock shall be designated as Series B Preferred
Stock, par value $.001 per share, as contemplated by this Agreement. Except
as
set forth in the BrightStar Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, rights
of
first refusal, pre-emptive rights, conversion rights, exchange rights or other
contracts or commitments (whether written or oral) that could require BrightStar
to issue, sell or otherwise cause to become outstanding any of its capital
stock
(including any instruments or securities convertible into capital stock). There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to BrightStar. To BrightStar’s
knowledge, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any outstanding BrightStar capital
stock.
4.6 Due
and Valid Issuance.
The
Series B Preferred, when issued as provided in this Agreement, will be duly
and
validly issued, fully paid and non-assessable and will be issued in compliance
with all applicable Federal and state securities Laws and any other applicable
Laws.
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12 -
4.7 No
Registration. BrightStar
understands that the Company Shares have not been registered under the
Securities Act or any state securities laws and will be issued in reliance
upon
exemptions contained in the Securities Act or interpretations thereof and in
the
applicable state securities laws, and cannot be offered for sale, sold or
otherwise transferred unless such shares are registered or qualify for exemption
from registration under the Securities Act.
4.8 Disclosure
of Information. BrightStar
acknowledges that it has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect
to
the Company Shares to be purchased pursuant to this Agreement. BrightStar
further acknowledges that is has had an opportunity to ask questions and receive
answers from the Company regarding the Business and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to BrightStar or to which BrightStar had
access.
4.9 Full
Disclosure. The
representations and warranties and statements made by BrightStar in this
Agreement are true, accurate, correct and complete in every respect and do
not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained herein
not false or misleading.
ARTICLE
5
CONDITIONS
TO OBLIGATIONS OF BRIGHTSTAR
The
obligations of BrightStar to perform its obligations hereunder and under the
Ancillary Agreements and to consummate the transactions contemplated hereby
and
by the Ancillary Agreements are subject to satisfaction of the following
conditions:
5.1 Representations
and Warranties.
The
representations and warranties made by the Company,Sellers and the Investors
herein and in the Ancillary Agreements shall be true and correct in all material
respects on and as of the Closing Date, as though made on and as of such date
(for purposes of this Section
5.1,
any
representation or warranty that is qualified by a materiality standard shall
be
read without regard to any such materiality qualification as if such
qualification were not contained therein), and the Company and Sellers shall
deliver to BrightStar a certificate, signed by an executive officer of the
Company and by each Seller, to such effect at the Closing, with respect to
the
representations and warranties made by the Company and Sellers;
5.2 No
Breach.
The
Company and each Seller shall have performed in all material respects all
obligations and complied in all material respects with all agreements, covenants
and conditions required under this Agreement and under the Ancillary Agreements
to be performed or complied with by them prior to the Closing, and shall deliver
to BrightStar a certificate, signed by an executive officer of the Company
and
by each Seller, to such effect at the Closing;
5.3 Due
Diligence Investigation.
BrightStar
shall have completed to its satisfaction a due diligence investigation of the
Company and the Business, the results of which shall have been satisfactory
to
BrightStar in its sole discretion. Such due diligence may include, but not
be
limited to, a thorough review of financial, legal, contractual, environmental,
tax, insurance, labor, patent and trademark, pension and benefit, and any other
matters that BrightStar and its auditors, tax and legal counsel and other
advisors may deem relevant. Further, BrightStar and its advisors shall have
had
access to the operating management of the Business and have been permitted
inspection of any and all sites where the Business is conducted.
5.4 Operation
in Ordinary Course.
Sellers
shall have continued to operate the Company and the Business in the ordinary
course from the date hereof until the Closing, and no Material Adverse Effect
shall have occurred from the date hereof until the Closing.
5.5 Conversion
of Outstanding Notes and Exercise of Outstanding
Options.
Any
and
all Convertible Promissory Notes and Company Options shall have been converted
or exercised into shares of Company Common Stock, which shares shall be included
in the Company Shares being purchased hereunder.
5.6 Deliveries.
The
Company and/or Sellers (as applicable) shall have delivered to BrightStar all
of
the following items:
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| (a) | A copy of the Company’s Certificate of Incorporation, as amended to date, certified to by the Secretary of State of Delaware. |
| (b) | A copy of the Company’s By-laws, certified to by the Company’s Secretary. |
| (c) | An incumbency certificate with respect to the executive officers of the Company, signed by the Company’s Secretary. |
| (d) | A certificate of the Secretary of State of Delaware as to the continued good standing of the Company. |
| (e) | Certificates, duly endorsed for transfer in blank, evidencing all of the Company Shares. |
|
(f)
|
Minute
and stock books, ledgers, accounting books and other records of the
Company, as reasonably required.
|
|
(g)
|
An
executed management and administrative service agreement in the form
annexed hereto as Exhibit
D.
|
|
(h)
|
Documents
evidencing a Waiver executed by Affinion Group (fka Trilegiant
Corporation) with respect to certain contractual rights by and between
the
Company and Affinion Group.
|
|
(i)
|
The
Company Disclosure Schedule in a form acceptable to Brightstar in
its
reasonable discretion.
|
ARTICLE
6
CONDITIONS
TO OBLIGATIONS OF THE COMPANY AND SELLERS
The
obligations of the Company and Sellers to perform their respective obligations
hereunder and under the Ancillary Agreements and to consummate the transactions
contemplated hereby and by the Ancillary Agreements are subject to satisfaction
of the following conditions:
6.1 Representations
and Warranties.
The
representations and warranties made by BrightStar herein and in the Ancillary
Agreements shall be true and correct in all material respects on and as of
the
Closing Date, as though made on and as of such date (for purposes of this
Section 6.1, any representation or warranty that is qualified by a materiality
standard shall be read without regard to any such materiality qualification
as
if such qualification were not contained therein), and BrightStar shall deliver
to the Company and Sellers a certificate, signed by an executive officer of
BrightStar, to such effect at the Closing;
6.2 No
Breach.
BrightStar shall have performed in all material respects all obligations and
complied in all material respects with all agreements, covenants and conditions
required under this Agreement and under the Ancillary Agreements to be performed
or complied with by it prior to the Closing, and shall deliver to the Company
and Sellers a certificate, signed by an executive officer of BrightStar, to
such
effect at the Closing;
6.3 Delivery
of Stock Certificates.
BrightStar
shall have delivered to Sellers and the Investors certificates evidencing the
shares of Series B Preferred to be issued to such Parties at the
Closing.
6.4
Investment
of $5 million.
BrightStar
shall have deposited an aggregate of $5 million into a bank account controlled
by it for use by the Company. The
$5
million will be used for the Company’s working capital and investment purposes.
ARTICLE
7
CONDITIONS
TO OBLIGATIONS OF ALL PARTIES
The
obligations of all parties hereto to perform their respective obligations
hereunder and under the Ancillary Agreements and to consummate the transactions
contemplated hereby and by the Ancillary Agreements are subject to satisfaction
of the following conditions:
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14 -
7.1 Litigation;
Proceedings.
No
litigation or other proceeding by any Governmental Body or other third Person
shall have been commenced that challenges the validity or legality of any of
the
transactions contemplated hereby and by the Ancillary Agreements; and no
judgment order, injunction or decree issued by any Governmental Body or other
legal restraint or prohibition preventing the consummation of any of such
transactions shall be in effect. No Law shall have been enacted, entered,
promulgated or enforced by any Governmental Body that prohibits, materially
restricts or makes illegal the consummation of any of the transactions
contemplated hereby or by the Ancillary Agreements.
7.2 Consents;
Filings.
All
material authorizations, consents and exemptions by Governmental Bodies and
other third Persons shall have been obtained, and all filings required to
consummate the transactions contemplated hereby and by the Ancillary Agreements,
including the Certificate of Designations, substantially in the form annexed
hereto as Exhibit
E,
with
respect to the Series B Preferred shall have been made, and all of the foregoing
shall be in full force and effect.
7.3 Employment
Agreements.
Each
of
▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ shall have entered into Employment Agreements with
the
Company, substantially in the form annexed hereto as Exhibits
F-1
and
F-2.
ARTICLE
8
INDEMNIFICATION
8.1 Survival
of Representations and Warranties.
All
the
representations, warranties, covenants, indemnities and other agreements
contained in this Agreement shall survive for a period of two years from the
Closing.
8.2 Indemnification
of the Parties. (a) In
the
event
that either BrightStar, on the one hand, or the Company or Sellers, on the
other
hand, breaches any of such Party’s representations, warranties and covenants
contained herein (ignoring, for purposes of determining whether or not any
such
breach has occurred, any materiality qualifiers), then BrightStar or (in the
case of a breach by the Company or Sellers) Sellers shall indemnify, defend
and
hold harmless the other Party and its directors, officers, employees, agent,
representatives or Affiliates (each, an “Indemnified
Party”)
from
and against the entirety of any Adverse Consequences they may suffer through
and
after the date of the claim for indemnification resulting from, arising out
of,
relating to, in the nature of, or caused by such breach.
8.3 Matters
Involving Third Parties. (a)
If
any third party shall notify any Indemnified Party with respect to any matter
(a
“Third
Party Claim”)
which
may give rise to a claim for indemnification against any other Party (the
“Indemnifying
Party”)
under
this Article
8,
then
each Indemnified Party shall promptly notify the Indemnifying Party thereof
in
writing; provided,
however,
that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is actually and
materially prejudiced.
(b) Any
Indemnifying Party will have the right to defend the Indemnified Party against
the Third Party Claim with counsel of its choice reasonably satisfactory to
the
Indemnified Party so long as: (i) the Indemnifying Party notifies the
Indemnified Party in writing within fifteen (15) days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party
will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim;
(ii) the Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying Party
will
have the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder; (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief;
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party; and (v) the Indemnifying Party conducts
the
defense of the Third Party Claim actively and diligently.
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15 -
(c) So
long
as the Indemnifying Party is conducting the defense of the Third Party Claim
in
accordance with Section
8.3(b):
(i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim; (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably); and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably).
(d) In
the
event any of the conditions in Section
8.3(b)
is or
becomes unsatisfied: (i) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to,
the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Parties need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith); (ii) the Indemnifying Parties
will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys’ fees
and expenses); and (iii) the Indemnifying Party will remain responsible for
any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to
the
fullest extent provided in this Article
8.
ARTICLE
9
EVENTS
OF DEFAULT; TERMINATION
9.1 Events
of Default.
It
shall
be an Event of Default under this Agreement and under each of the Ancillary
Agreements, if any one of the following events shall occur for any reason
whatsoever (each, an “Event
of Default”):
(a) If
BrightStar shall fail to deliver the certificates representing the Series B
Preferred as provided herein;
(b) If
Sellers fail to deliver certificates evidencing all of the Company Shares,
duly
endorsed for transfer in blank, to BrightStar at the Closing;
(b) If
BrightStar shall fail to perform any of its obligations under this Agreement
or
any of the Ancillary Agreements, as the case may be, and fails to cure such
default within ten (10) days after notice thereof from the Company and
Sellers;
(c) If
the
Company or any Seller shall fail to perform any of its or his obligation under
this Agreement or any of the Ancillary Agreements, as the case may be, and
Seller fails to cure such default within ten (10) days after notice thereof
from
BrightStar;
(d) Any
representation, warranty, condition, covenant or agreement made by BrightStar
in
this Agreement or in any Ancillary Agreement shall prove to have been incorrect
in any material respect on or as of the date made or deemed made, and BrightStar
fails to cure such default within twenty (20) days after notice thereof from
the
Company and Sellers; or
(e) Any
representation, warranty, condition, covenant or agreement made by the Company
and Sellers in this Agreement or in any Ancillary Agreement shall prove to
have
been incorrect in any material respect on or as of the date made or deemed
made,
and the Company and Sellers fail to cure such default within ten (10) days
after
notice thereof from BrightStar; or(f) The
Company or any Seller: (i) makes an assignment for the benefit of creditors;
(ii) admits in writing that it is unable to pay its debts generally as they
become due; (iii) files a petition in bankruptcy under the Bankruptcy Code;
(iv)
has a petition in bankruptcy filed against it which petition is not dismissed
within thirty (30) days of the filing thereof; (v) consents to the appointment
of a receiver or trustee for all or a substantial part of its property; (vi)
has
a petition filed against it for the appointment of a receiver which petition
is
not dismissed within thirty (30) days of the filing thereof; or (vii) commences
any proceeding under a state or Federal statute permitting readjustment of
debt;
or
(g) The
Company fails to obtain the agreement of the Investors: (i) to convert the
outstanding principal balances of all Convertible Promissory Notes and the
exercise of all outstanding company options into Company Common Stock; and
(ii)
to include all shares of Company Common Stock issued upon such conversion in
the
Company Shares being exchanged for shares of Series B Preferred pursuant to
this
Agreement.
9.2. Termination.
This
Agreement may be terminated: (i) by the written agreement of the Company,
Sellers and BrightStar; (ii) by the Company or Sellers, upon the occurrence
of
an Event of Default by BrightStar; or (iii) by BrightStar, upon the occurrence
of an Event of Default by the Company or any Seller.
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16 -
9.3 Effect
of Termination.
Termination
of this Agreement shall not constitute or be deemed to be a waiver or release
of, or otherwise affect, the claims, rights and remedies of the parties arising
under this Agreement or any Ancillary Agreement. The provisions of Article
8 and
Article 10 hereof shall survive termination of this Agreement.
ARTICLE
10
MISCELLANEOUS
10.1 Press
Releases and Public Announcements.
None
of
the Company, the Sellers or the Investors shall issue any press release or
make
any public announcement relating to the subject matter of this Agreement or
the
transactions contemplated hereby except as may be required under applicable
Laws.
10.2 No
Third Party Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any Person other than
the
Parties and their respective successors and permitted assigns.
10.3 Entire
Agreement. This
Agreement (including any Ancillary Agreements) constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
10.4 Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the other Party;
provided, however, that any Investor may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Investor shall no longer remain
responsible for the performance of all of its obligations
hereunder).
10.5 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
instrument.
10.6 Headings. The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
10.7 Notices.
All
notices, consents, waivers and other communications under this Agreement must
be
in writing and will be deemed given to a Party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier
service (costs prepaid), (b) sent by facsimile or e-mail with confirmation
of transmission by the transmitting equipment, or (c) received or rejected
by the addressee, if sent by certified mail, return receipt requested; in each
case to the following addresses, facsimile numbers or e-mail addresses and
marked to the attention of the individual (by name or title) designated below
(or to such other address, facsimile number, e-mail address or individual as
a
party may designate by notice to the other parties):
If
to
BrightStar:
BrightStar
Information Technology Group, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇ ▇▇▇▇▇-▇▇▇▇▇
Telephone
No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile
No.: ▇▇▇-▇▇▇-▇▇▇▇
E-mail:
▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
With
a copy (which shall not constitute notice) to:
Guzov
Ofsink, LLC
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
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17 -
If
to the
Company:
MyPublicInfo,
Inc.
▇▇▇▇
▇
▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
With
a copy (which shall not constitute notice) to:
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇, Esq.
Kalbian
▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
If
to
Sellers:
▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
C:
703.598.1369
O:
202.575.3000 x 5000
▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇
▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
With
a copy (which shall not constitute notice) to:
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇, Esq.
Kalbian
▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
If
to an
Investor:
The
address of such Investor as set forth below such Investor’s name on the
signatory page
10.8 Controlling
Law; Venue.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York without regard to choice of law provisions, statutes,
regulations or principles of this or any other jurisdiction. Each Party hereby
irrevocably submits to the exclusive jurisdiction (including personal
jurisdiction) of the state and federal courts of the State of New York for
any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action suit or proceeding shall be brought only in such court
(and
waives any objection based on forum non conveniens or any other jurisdiction
to
venue therein). Process
in any Proceeding under this Agreement may be served on any Party anywhere
in
the world.
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18 -
10.9 Amendments
and Waivers. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Parties. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.10 Severability. Any
term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other jurisdiction.
Furthermore, in lieu of such invalid or unenforceable provision, there shall
be
added automatically as part of this Agreement a provision as similar in terms
to
such invalid or unenforceable provision as may be possible and be legal, valid
and enforceable.
10.11 Expenses.
Each
Party shall bear all costs and expenses incurred by it in connection with the
Agreement and the transactions contemplated hereby.
10.12 Construction. The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. The Parties intend that each representation, warranty,
and
covenant contained herein shall have independent significance. If any Party
has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
10.13 Incorporation
of Exhibits.
The
Exhibits identified in this Agreement are incorporated herein by reference
and
made a part hereof.
(Remainder
of page intentionally left blank)
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19 -
IN
WITNESS WHEREOF, the Parties have executed and delivered this Agreement as
of
the date first set forth above.
BRIGHTSTAR
INFORMATION TECHNOLOGY
GROUP,
INC.
By:
_____________________________________
Name:
_____________________________________
Title:
_____________________________________
MYPUBLICINFO,
INC.
By:
_____________________________________
Name:
_____________________________________
Title:
_____________________________________
SELLERS:
_____________________________________
▇▇▇▇▇▇
▇▇▇▇▇
_____________________________________
▇▇▇
▇▇▇▇
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20 -
EXHIBIT
A
INVESTORS
__________________________________________
▇▇▇▇▇▇
Block
Address:
__________________________________________
▇▇▇▇▇▇▇
Block
Address:
__________________________________________
▇▇
▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇
▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇
▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇
▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇
▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇
▇▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇
▇.
▇▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇
Address:
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__________________________________________
▇▇▇▇▇
▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇
▇▇▇▇▇▇
Address:
__________________________________________
▇▇▇▇▇▇
▇▇▇▇▇▇
Address:
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