EXHIBIT 10.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
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THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Agreement
Amendment"), is made and entered into this 25th day of July, 2003, by and
between SARO, INC., a Delaware Corporation ("Purchaser"), and BILLSERV, INC., a
Nevada corporation ("Seller").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase Agreement dated May 19,
2003 (the "Agreement"), together with all amendments and modifications thereto,
the parties hereto have agreed that Seller sell, assign, transfer and convey to
Purchaser, and that Purchaser purchase from Seller, the Assets (as defined in
the Agreement) in exchange for cash and assumption of the Assumed Liabilities
(as defined in the Agreement), all according to the terms and subject to the
conditions set forth in this Agreement Amendment (the "Transaction").
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms. All terms used herein but not otherwise defined herein
shall have the meanings set forth and/or defined in the Agreement,
unless specifically indicated herein to the contrary.
2. Schedule D of Section 1.46 of the Agreement is deleted in its entirety
and replaced with the attached Schedule D.
3. Schedule B of Sections 1.7 and 4.13 of the Agreement is deleted in its
entirety and replaced with the attached Schedule B.
4. Section 2.2(n) of the Agreement is deleted in its entirety.
5. Schedule H of Section 2.3 of the Agreement is deleted in its entirety
and replaced with the attached Schedule H.
6. Section 2.6 of the Agreement is deleted in its entirety and replaced
with the following:
Purchase Price. The aggregate consideration for the Business and the
Assets shall be $4,800,000 (the "Purchase Price"), plus the assumption of the
Assumed Liabilities. At Closing, Purchaser shall pay Seller $4,100,000 (the
"Cash Payment"). The Cash Payment shall be paid to Seller in the following
manner: 1) that portion of the Cash Payment necessary to satisfy the Material
Unsecured Creditors (as defined in Section 6.11) will be delivered via wire
transfer to LJT (as defined in Section 6.11), 2) that portion of the Cash
Payment necessary to satisfy the Secured Creditors (as defined in Section
9.3(d)) will be delivered via wire transfer to LJT (as defined in Section
9.3(d)), and 3) the remainder of the Cash Payment will be delivered to Seller
via wire transfer.
(a) Earnouts.
i. Seller may earn an additional payment from Purchaser of
$100,000 (the "$100,000 Earnout") based on gross revenues
(as defined by GAAP) associated with the Business calculated
for a one (1) year period, beginning on the first day of the
first full month after Closing ("Annual Period"). If at the
end of the Annual Period, the aggregate of gross revenues
associated with the Business for the total of the twelve
months in the Annual Period are equal to or exceed
$5,000,000, then the $100,000 Earnout shall be paid to
Seller. If Seller earns the $100,000 Earnout, Purchaser
shall make the $100,000 Earnout available to Seller via wire
transfer within ten (10) business days following the end of
the Annual Period.
ii. Seller may earn a second additional payment from Purchaser
of $600,000 (the "$600,000 Earnout"), in an amount not to
exceed $150,000 per quarter (or $600,000 total) (each an
"Earnout") based on gross revenues associated with the
Business (as defined by GAAP) calculated for each of the
first four (4) consecutive ninety (90) day periods, with the
first quarterly period beginning on the first day of the
first full month after Closing (each a "Quarterly Period").
In any such Quarterly Period that gross revenues associated
with the Business are: (i) less than $1,250,000, then such
Quarterly Period Earnout shall be $0, (ii) between
$1,250,000 and $1,375,000, then such Quarterly Period
Earnout shall be $50,000, (iii) between $1,375,000 and
$1,500,000, then such Quarterly Period Earnout shall be
$100,000, (iv) more than $1,500,000, then such Quarterly
Period Earnout shall equal $150,000. If Seller earns an
Earnout, Purchaser shall make such Earnout available to
Seller via wire transfer within ten (10) business days
following the end of such applicable Quarterly Period. After
each calendar month of each Quarterly Period, Purchaser
shall certify and deliver to Seller a copy of Purchaser's
financial records for the Business for that month, for the
sole purpose of confirming gross revenue amounts. During the
Annual Period, and including one month thereafter, Purchaser
shall deliver the financial records (and certify that such
records have been prepared in accordance with GAAP)
applicable to a month to Seller by the fifteenth (15th) day
of such month (the "Records Due Date"). Should Purchaser
fail to deliver the financial records by the Records Due
Date, Purchaser shall pay to Seller liquidated damages in
the amount of $2,250 per every fifth (5th) day past the
Records Due Date that Purchaser fails to deliver such
financial records to Seller (the "Liquidated Damages").
Notwithstanding the aforementioned, Purchaser shall have no
responsibility to deliver the financial records (until such
time as Seller cures any applicable breach of a Seller
representation or warranty in the Agreement, as described
further in this sentence) or pay the Liquidated Damages in
the event Seller's breach of a Seller representation or
warranty in the Agreement is the cause for Purchaser's
failure to meet the applicable Records Due Date; provided,
however, that in the event such issue is determined by a
court or other tribunal, then such decision making body will
be permitted to fairly apportion the Liquidated Damages as
it or they shall determine under the facts and
circumstances. Not more than once after each Quarterly
Period (a
"Prior Quarterly Period"), Seller retains the right to audit
Purchaser's books and records related to the Business for
such Prior Quarterly Period. The results of any such audit
shall be binding upon the parties. Seller will select the
auditor subject to Purchaser's approval, which approval will
not be unreasonably withheld. If any discrepancies
discovered by an audit result in an Earnout payable to
Seller for such Prior Quarterly Period that is larger than
the Earnout, or lack thereof, alleged on Purchaser's
financial records for such Prior Quarterly Period, then the
Earnout as determined by the auditor's written report shall
be made available to Seller via wire transfer within ten
(10) business days following the issuance of such written
report by the auditor. In the event a discrepancy as
described above is discovered by an audit, Purchaser will
pay the costs of the audit. In the event a discrepancy as
described above is not discovered by an audit, Seller will
pay the costs of the audit. In the event, however, that the
Business is sold by Purchaser or Purchaser materially
changes the scope or market of the Business during the
Annual Period, Seller will be entitled to both the $100,000
Earnout and the $600,000 Earnout, via wire transfer, within
fifteen days of such sale or material change.
1. Within ten (10) business days following the conclusion
of the Annual Period (the end of the fourth Quarterly
Period), Purchaser shall pay Seller the difference, if
any, between the sum of the Quarterly Period Earnouts
paid or owing to Seller under Section 2.6(a)(ii) above
and the following amounts:
At the end of the Annual Period, if gross revenues
(as defined by GAAP) associated with the Business
calculated for the Annual Period are: (i) less
than $5,000,000, then $0, (ii) between $5,000,000
and $5,500,000, then $200,000, (iii) between
$5,500,000 and $6,000,000, then $400,000, (iv)
more than $6,000,000, then $600,000.
This paragraph shall in no event require Seller to
return or refund any Quarterly Period Earnout paid
Seller pursuant to Section 2.6(a)(ii) above.
7. Schedule U of the Agreement is amended by deleting "Shareholder
Agreement, Billserv Australia PTY Limited".
8. Section 9.2(c) of the Agreement is deleted in its entirety and
replaced by the following: "Purchaser shall have delivered the Cash
Payment in accordance with Section 2.6 thereof.
9. Section 9.2(e)(i) of the Agreement is amended by deleting "the JV Note
and the JV Security Agreement."
10. Section 11.1(b) of the Agreement is deleted in its entirety and
replaced with the following:
(b) by either Purchaser or Seller if the Closing shall not have
occurred by July 25, 2003, unless: 1) the failure to consummate the
transactions contemplated herein is attributable to a failure on the
part of the party seeking to terminate this Agreement to perform any
material obligation required to be performed by such party at or prior
to the Closing or 2) the approval of this Agreement by Seller's
stockholders is delayed by action or inaction of the SEC provided
that: i) Seller shall prepare and cause to be filed with the SEC the
Proxy Statement, within fifteen (15) business days following the
execution of this Agreement; and ii) that Seller use best efforts to
comply with all rules and regulations of the SEC to obtain any and all
other approvals necessary to approve this Agreement and the
Acquisition;
11. Section 12.3 is deleted in its entirety. Additionally, the Escrow
Agreement between the parties and Wachovia Bank, dated May 19, 2003 is
hereby terminated and made null and void. The parties acknowledge that
the sufficiency of the consideration provided herein, including the
amended Purchase Price, eliminates the necessity of the Escrow Fund
and Escrow Agreement.
12. Section 12.4 of the Agreement is deleted in its entirety.
13. Section 12.5 of the Agreement is deleted in its entirety.
14. Section 12.6 of the Agreement is deleted in its entirety.
15. Section 12.7 of the Agreement is deleted in its entirety.
16. The Promissory Note (the "Note") executed by Purchaser to Seller in
the principal amount of Six Hundred Thousand Dollars ($600,000) is
hereby terminated and made null and void. The parties acknowledge that
the sufficiency of the consideration provided herein, including the
amended Purchase Price, eliminates the necessity of the Promissory
Note.
17. The Security Agreement executed by and between Purchaser and Seller
granting Seller a Security Interest - Pledge of Tangible and
Intangible Assets as holder of the Note in the principal amount of Six
Hundred Thousand Dollars ($600,000) is hereby terminated and made null
and void. The parties acknowledge that the sufficiency of the
consideration provided herein, including the amended Purchase Price,
eliminates the necessity of the Security Agreement.
18. The parties agree that they each will not use, copy, reproduce,
retain, possess, sell, or transfer, in any way, form, or method
whatsoever, and will delete and destroy (and produce to one another
certification of the aforementioned) the following source code, object
code, and other tangible and intangible assets (each and all the
"Prohibited Assets") associated with Billserv Australia PTY Limited
("Billserv Australia"): 1) back-end processes including database
schemas, customer data, scripts, log files, and applications; and 2)
front-end code written for Billserv Australia, including but not
limited to, SE Water, TXU, and Commonwealth Bank.
19. Successors and Assigns. The terms and provisions hereof shall be
binding upon and inure to the benefit of Purchaser and Seller, and
upon the heirs, executors, representatives, administrators, successors
and assigns of Purchaser and Seller.
20. Governing Law. This Agreement Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware.
21. Integration. This Agreement Amendment, the Agreement and all the
exhibits and schedules thereto, the certificates referenced therein,
the exhibits thereto, and the Confidentiality Agreement constitute the
entire understanding and agreement of the parties hereto with respect
to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties
with respect hereto and thereto including, without limitation, that
certain letter of intent between the parties dated April 14, 2003.
IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this
Agreement to be executed under seal as of the day and year first written.
SARO, INC., BILLSERV, INC.,
a Delaware corporation a Nevada corporation
By: ___________________________ By: ___________________________
Name: _________________________ Name: _________________________
Title: __________________________ Title: ___________________