Exhibit 10.1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
THIS AGREEMENT (the "Agreement") is made as of December 31, 2003, by and
among Availent Financial, Inc. a Delaware corporation (the "Buyer"), Broyd,
Inc., a Texas corporation d/b/a First Texas Residential (the "Seller"), Caroline
D. Brown ("C. Brown") and Thomas P. Boyd ("Boyd") (C. Brown and Boyd are
collectively referred to herein as the "Shareholders") (Seller, C. Brown and
Boyd are collectively referred to herein as the "Seller Parties").
WI T N E S S E T H :
WHEREAS, the Seller is in the business of providing mortgage finance
marketing services in Texas and elsewhere in the United States (the "Business"),
and
WHEREAS, subject to the terms and conditions of this Agreement, the Seller
desires to sell to Buyer and the Buyer desires to purchase from Seller
substantially all of the assets of Seller relating to the Business (the
"Purchase Transaction"), and
WHEREAS, the terms Closing, Closing Date, and Effective Date, as used in
this Agreement, shall have the definitions as set forth in this Agreement, and
WHEREAS, the parties hereto have entered into this Agreement to set forth
their agreements and understandings related to the Purchase Transaction.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is hereby agreed as follows:
1. Sale and Purchase of Tangible Assets. Except as set forth in Section 3, at
the Closing, the Seller shall sell, assign and transfer to Buyer, and Buyer
shall purchase from Seller, all of the Seller's rights, title and interest
in and to the following assets of the Business (together herein referred to
as the "Tangible Assets"):
a. Accounts Receivables. All of Seller's accounts receivable from clients
or others which are billed or unbilled for periods on or prior to the
Closing Date, and which are outstanding and not collected as of the
close of business on the later of (i) the thirtieth (30th) day
following the Closing Date, or (ii) the date the Promissory Note is
paid in full.
b. Litigation Receivables. The Seller's interest in any litigation or
collection proceedings, collection efforts or other actions related to
the collection of any past due, reserved or written-off litigation or
collection proceedings accounts receivable outstanding as of the
Closing Date.
c. Security Deposits. Such security deposits, utility deposits and other
similar deposits or pre-paid expenses held by companies or other
entities as a condition of supplying any service, product, or other
item related to or used by Seller in the conduct of the Business, as
set forth on the Schedule of Security Deposits attached hereto as
Exhibit 1-C.
d. Other Receivables. Any and all other receivables of Seller under the
terms of any and all notes, installment sales agreements, supply
contracts, other debt instruments or other similar contracts or
agreements related to the conduct of the Business by Seller, but
excluding any receivables for services to be supplied subsequent to
the Closing Date.
e. Office Equipment, Computers, Furniture and Fixtures. All office
equipment, computer equipment, computer software, furniture, fixtures,
improvements, and other items owned by Seller and used in or related
to the conduct of the Business, including but not limited to the
property set forth on the Schedule of Office Equipment, Computers,
Furniture and Fixtures attached hereto as Exhibit 1-E.
f. Telephone Systems. All telephone equipment, systems and related
software owned by Seller and used in or related to the conduct of the
Business, including all local and (800) telephone numbers associated
with the offices of Seller, including but not limited to the property
set forth on the Schedule of Telephone Systems and Telephone Numbers
attached hereto as Exhibit 1-F.
g. Office Supplies and Miscellaneous Items. All inventory of office
supplies, promotional materials, and other miscellaneous items owned
by Seller and used in the conduct of the Business.
h. Rebates. The Seller's rights to any discounts, rebates, premiums, or
other payments from third parties earned prior to, but due on or
after, the Closing Date.
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i. Other Tangible Assets. All other tangible assets and personal property
owned by Seller and used in or relating to the conduct of the Business
other than the Excluded Assets.
2. Sale and Purchase of Intangible Assets. Except as set forth in Section 3,
at the Closing, the Seller shall sell, assign and transfer to Buyer, and
Buyer shall purchase from Seller, all of the Seller's rights, title and
interest in and to the following intangible assets of the Business
(together herein referred to as the "Intangible Assets") (the Tangible
Assets and Intangible Assets are sometimes collectively referred to herein
as the "Assets"):
a. All client lists, correspondence, purchase orders, contracts,
agreements and files related to the Business.
b. All sales prospects lists, correspondence, notes of previous contacts
and related files.
c. Any mailing lists and related data base information concerning either
current, past, or prospective clients of Seller.
d. All lists of personnel and related files held by Seller for past or
future use in providing mortgage finance marketing services to the
clients of Seller.
e. Current employee records, employment, non-compete or other agreements
with current employees, either permanent or contract, and all other
correspondence, performance reviews, and employee files for those
corporate employees to be hired by the Buyer.
f. Any designs, text, or concepts for promotional materials, including
photographs or other graphics owned by Seller in its marketing and
sales functions.
g. The Seller's rights to and interest in any internet Web site including
the site address, the site design and related software, related e-mail
addresses, and any and all intellectual property or rights to such
property associated with the development, operation, or functions of
any Web site owned by Seller.
h. All supplier and vendor lists, purchase orders, contracts, agreements,
mortgage loan commitments, and files including the assignment of any
distributor, dealer, or other supply agreements, extended payment
agreements, or other such agreements or contracts, either written or
verbal, between Seller and its suppliers and vendors which relate to
its operation of the Business.
i. Seller's interest in all other contracts, agreements, partnership
agreements and interests, purchase orders, and understandings with
clients, suppliers, vendors and others which relate to the conduct of
the Business.
j. Other books, records and files, or copies thereof, which are necessary
for the future conduct of the Business as it is currently being
conducted.
k. Equipment operation and service manuals or other instructions related
to any of the office equipment being purchased by Buyer as listed in
paragraph 1.a above.
l. Computer software and/or user licenses, including operation and
service manuals and all computer data base information stored by or
related to such software which may be assigned or transferred to the
Buyer without the consent of any third party.
m. Any occupational licenses, permits, or other government approvals
issued to Seller which may be assigned or transferred to the Buyer.
n. Any and all other licenses, permits, and agreements necessary to the
conduct of the Business which can be assigned or transferred to the
Buyer.
o. Any and all documents related to know-how and/or trade secrets in
connection with the conduct of the Business by Seller.
p. Subject to the condition herein set forth at paragraph 16a herein, the
names "Broyd, Inc.", and "First Texas Residential", and any and all
other trade, assumed or fictitious names together with their related
logos or other identifying marks used in the sale or promotion of
Seller's services by Seller or which relate to the conduct of the
Business.
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q. All other intangible assets which, together with the above, represent
all intellectual property and all intangible assets owned by Seller
and used in connection with or related to the conduct of the Business
but specifically excluding the Excluded Assets, attorney/client
communications and other similar information subject to
attorney/client confidentiality rules.
3. Excluded Assets. Notwithstanding anything contained in paragraphs 1 and 2
hereof or in this Agreement to the contrary, the following assets of the
Business are specifically excluded from the Purchase Transaction, the
definitions herein of Tangible Assets, Intangible Assets or Assets, and are
specifically not being sold by Seller to Buyer (such excluded assets are
herein collectively referred to as the "Excluded Assets"):
a. All of Seller's cash, cash equivalents and short term investments on
hand, on deposit, or in transit as of the close of business on the
Closing Date.
b. All of Seller's accounts receivable from clients or others which are
billed or unbilled for periods on or prior to the Closing Date, and
which are collected by Seller as of the close of business on the later
of (i) the thirtieth (30th) day following the Closing Date, or (ii)
the date the Promissory Note is paid in full.
c. The Seller's rights to refunds of all or any part of federal, state or
local taxes.
d. The corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and
other documents relating to the organization, maintenance, and
existence of Seller.
e. The rights of Seller under this Agreement or under any other agreement
entered into in connection with the transactions contemplated
hereunder.
f. All insurance policies that relate to the Business.
g. Any voting or other securities of or other interests in any
corporation, partnership, limited liability company, joint venture or
other entity.
h. Other tangible assets not specifically listed in paragraph 1 above and
in the related exhibits.
4. Purchase Price, Warrants and Allocation.
a. Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be Three Million Five Hundred Thousand Dollars
($3,500,000.00), plus (i) the earnout consideration, if any, owed to
the Seller under the Contingency Payment Agreement and (ii) the
Assumed Liabilities. The Purchase Price is payable by the Buyer as
follows:
i. Two Hundred Fifty Thousand Dollars ($250,000.00) in cash or other
immediately available funds on the Closing Date;
ii. A promissory note, in the form attached hereto as Exhibit 4-A2
(the "Promissory Note"), in the principal amount of Three Million
Two Hundred Fifty Thousand Dollars ($3,250,000.00); and
iii. The Contingency Payment Agreement between the Buyer and Seller,
in the form attached hereto as Exhibit 4-A3 and
b. Common Stock Warrants. At Closing, the Buyer shall issue to Seller
(the "Warrant Holder") warrants (the "Warrants") to purchase 2,275,000
shares in the aggregate (the "Shares") of the common stock, par value
$0.50 per share, of the Buyer (the "Common Stock"), pursuant to which
the Warrant Holder shall have the right to purchase all or any part of
the Shares pursuant to the terms of the Warrants as set forth in
Exhibit 4-B attached hereto. It is understood and agreed that the
issuance of neither the Warrants nor the Shares shall have been
registered under the Securities Act of 1933, as amended (the "Act"),
and that the Warrant Holder shall agree to execute an investment
letter, in the form which is made apart of Exhibit 4-B, prior to the
issuance of the Shares. It is agreed that the Warrants shall
terminate, and no longer be effective, if Seller terminates this
Agreement pursuant to Section 6 of this Agreement.
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c. Allocation Reporting. Within 45 days following the Closing, the Buyer
shall deliver to the Seller a schedule (the "Allocation Schedule"),
allocating the Purchase Price among the Assets and the Non-Competition
Agreements. The Allocation Schedule including the allocation of the
Non-Competition Agreements shall be prepared in accordance with
Section 1060 of the Code and the regulations thereunder. If within 15
days following delivery of the Allocation Schedule (or an amended
Allocation Schedule) the Seller does not object in writing thereto,
then the Buyer and the Seller each agree to file IRS Form 8594, and
all federal, state, local and foreign tax returns, in accordance with
the Allocation Schedule. If the Seller objects in writing to the
computation within such 15 day period, then the Buyer and the Seller
shall negotiate in good faith and attempt to resolve their
disagreement. Should such negotiations not result in an agreement
within 20 days following the expiration of such 15 day period, then
each party may allocate the Purchase Price in accordance with their
own Allocation Schedule. The Buyer and the Seller each agree to
provide the other promptly with any other information required to
complete IRS Form 8594.
5. Assumption of Certain Liabilities; UCC Search.
a. Assumption of Certain Liabilities. Notwithstanding anything contained
in this Agreement or in any Exhibit to the contrary, Buyer is not and
shall not assume any liabilities of the Business or of the Seller,
except for the following liabilities of the Seller pertaining solely
to the operation of the Business after the Closing Date (the "Assumed
Liabilities"):
i. The obligations of the Seller and related payment requirements
from and after the Closing Date under the unexpired facility
leases for the "Branch Offices" and the "Seller Site" (as such
terms are defined in paragraph 13.p hereof) as set forth on the
Schedule of Lease Obligations attached hereto as Exhibit 5-A1.
ii. The obligations of the Seller and related payment requirements
from and after the Closing Date for the supply of utilities or
other services related to the operation of the Branch Offices and
the Seller Site as set forth on the Schedule of Occupancy
Payables attached hereto as Exhibit 5-A2.
iii. The obligations of the Seller and related payment requirements
from and after the Closing Date under any equipment lease,
lease/purchase or maintenance agreements for those items of
office equipment to be purchased by Buyer as outlined in
paragraph 1.a above, as set forth on the Schedule of Equipment
Related Obligations attached hereto as Exhibit 5-A3.
b. Liabilities Not Being Assumed. Notwithstanding anything contained in
this Agreement or in any Exhibit to the contrary, Buyer does not
assume any liability not described in paragraph 5.a hereof and in
particular (by way of illustration and not limitation) does not assume
any of the following liabilities, which liabilities will remain the
obligations of Seller (such liabilities are herein collectively
referred to as the "Excluded Liabilities"):
i. Any and all trade payables outstanding, accrued to, or due as of
the Closing Date.
ii. Any and all accrued salaries, overtime pay, expenses and other
employee compensation for both temporary and permanent employees
of Seller payable up to the Closing Date unless otherwise assumed
hereunder.
iii. FICA, withholding, and other payroll related taxes payable up to
the Closing Date for any and all periods prior to the Closing
Date.
iv. Sales tax obligations for any and all services rendered prior to
the Closing Date.
v. Other taxes, fees and assessments payable by Seller or accrued as
of the Closing Date.
vi. Audit or other similar adjustments, including any penalties or
fines, related to FICA and other payroll taxes, sales taxes,
retirement plan contributions, workers' compensation insurance
and similar expenses subject to audits and adjustments for
occurrences and time periods prior to the Closing Date.
vii. Federal and state taxes on income earned by Seller prior to the
Closing Date and accrued to or payable as of the Closing Date.
viii. Revolving credit line obligations or other short term bank
borrowings, long term bank loans or installment payment debts of
Seller.
ix. Notes and other financial instruments payable by Seller.
x. Any and all notes payable, advances, deferred compensation or
other debts owed to Doug Brown ("D. Brown"), C. Brown, Boyd, or
any other member of the family of each of such individuals or
entities related to them or their family members, including any
payments related to compensation, vacation pay, sick pay, fringe
benefits, or reimbursable expenses related to the employment of,
or services performed by, any of such individuals prior to the
Closing Date.
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xi. Any and all other liabilities of Seller existing as of the
Closing Date and not specifically listed as being assumed by
Buyer in Section 5a.
xii. Any contingent or unstated liabilities of Seller including, but
not limited to, liabilities occurring as a result of legal
actions, suits or other claims and resulting from actions or
other occurrences which took place prior to the Closing Date.
c. UCC Search. All Assets acquired by Buyer from Seller shall be free of
any liens, claims, liabilities, charges, restrictions, royalties, fees
or other encumbrances other than (i) liens for Taxes which are not due
and payable as of the Closing Date and (ii) encumbrances which would
not have a material adverse effect on the Business (collectively, the
"Permitted Encumbrances"). No later than the Closing Date, the Seller
shall secure written releases for the Assets acquired from the holder
of any lien, security interest or other obligation of the Seller
related to any lien, security interest or other encumbrance attaching
to all or any category of the assets of Seller.
6. Default under the Promissory Note; Repurchase of Assets. (a)
Notwithstanding anything to the contrary contained in this Agreement, as an
inducement for the Seller Parties to enter into this Agreement, the Buyer
agrees that the Seller Parties and D. Brown shall have the right and option
to terminate this Agreement, the Promissory Note, the Contingent Payment
Agreement, the Employment Agreements, the Non-Competition Agreements and
the Warrants (and all agreements related thereto) and to unwind the
transactions related thereto on the terms and conditions herein set forth:
(i) Upon an event of default under the Promissory Note, the Seller Parties
may, in their sole discretion, give notice to the Buyer of their
intent to terminate their relationship with the Buyer, including this
Agreement, the Promissory Note, the Contingent Payment Agreement, the
Employment Agreements the Non-Competition Agreements and the Warrants
(and all agreements related thereto). Such written notice shall
specify the effective date of the termination (the "Termination
Date");
(ii) On the Termination Date, the Buyer agrees to sell the Assets purchased
hereunder to the Seller for $1.00 and no other consideration. The
Buyer will deliver to the Seller such bills of sale, assignments and
other good and sufficient instruments of conveyance and transfer in
form sufficient to sell, assign and transfer the Assets, such
documents to be effective to vest in the Seller good and marketable
title to the Assets of the Business being transferred to the Seller by
Buyer, free and clear of all liens, charges, encumbrances and
restrictions of any kind; and
(iii) Upon receipt of the Assets by the Seller, the Promissory Note (and
the related security instrument) shall be terminated and returned to
the Buyer.
(b) The Buyer acknowledges and agrees that if the Seller Parties elect to
terminate their relationship with the Buyer as provided in subsection
(a), (i) the Seller Parties shall be entitled to retain any and all
portions of the Purchase Price paid by Buyer to Seller, including the
Two Hundred Fifty Thousand Dollars ($250,000.00) in cash consideration
paid by Buyer to the Seller as part of the Purchase Price, and the
$100,000.00 paid to Seller if Buyer elects to extend the maturity date
under the Promissory Note, (ii) the Seller Parties and D. Brown will
not be subject to any employment agreements, noncompetition agreements
or nonsolicitation agreements after the Termination Date and will be
free to compete against the Buyer and to solicit and hire Seller's
former employees as if the transaction had never occurred, and (iii)
the Buyer waives all claims and causes of action with respect to (i)
the $250,000.00 paid at Closing or (ii) the $100,000.00 if Buyer
elects to extend the maturity date under the Promissory Note. The
Buyer acknowledges and agrees that the Buyer's commitment to pay the
Promissory Note was a material inducement to and a material part of
the consideration for the consummation of this Agreement by the Seller
Parties. The Buyer further acknowledges and agrees that in the event
of a default under the Promissory Note, it would be difficult to
calculate the precise amount of damages, and for that reason the
parties have determined that any and all amounts paid to Seller as
part of the Purchase Price will be appropriate liquidated damages for
such actions.
(c) The seeking or obtaining by the Seller Parties of such termination
under this Section 6 shall not foreclose or in any way limit the right
of the Seller Parties to obtain a money judgment against the Buyer for
any damage to the Seller Parties that may result from any breach by
the Buyer of any provision of this Agreement, other than the
non-payment of the Promissory Note.
(d) In the event of any conflict between (i) the provisions of this
Section 6, and (ii) the provisions of any other Section of this
Agreement, the provisions of this Section 6 shall govern.
7. Non-Competition Agreements. On the date that the Promissory Note is payable
in full, each of the Seller, D. Brown (in his individual capacity), C.
Brown (in her individual capacity) and Boyd (in his individual capacity),
shall each execute and deliver to Buyer, non-competition agreements
(collectively, the "Non-Competition Agreements"), substantially in the form
agreed to by the parties and consistent with the non-competition agreements
set forth in the Employment Agreements.
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8. Employment Agreements. At Closing, Buyer shall enter into employment
agreements (the "Employment Agreements") with D. Brown and Boyd,
substantially in the form attached hereto as Exhibit 8.
9. Option to Hire Employees; Existing Employee Agreements. It is the
intention, but not the obligation, of the Buyer to hire as its employees
substantially all of the employees, both contract and permanent, of Seller.
The employment of all such employees as might be hired by Buyer will be
terminable by Buyer at will. The Seller, D. Brown, C. Brown and Boyd will
each use commercially reasonable efforts to assist Buyer in any hiring
effort and to assist Buyer in retaining such employees in their current
positions, and the Seller will assign to the Buyer any employment and
non-competition agreements that Seller possesses, whether pertaining to
current or previous employees. Nothing in this Agreement will vest in any
employee of Seller, either contract or permanent (other than D. Brown and
Boyd with respect to their employment agreements with Buyer), or in any
other party, any rights whatsoever as a third party beneficiary to this
Agreement.
10. Effective Date. The effective date for the transactions contemplated under
this Agreement shall be at 11:59 p.m. on December 31, 2003 (the "Closing
Date" or "Effective Date"). The transactions contemplated to be taken on
the Closing Date are herein referred to as the "Closing."
11. Instruments of Conveyance and Transfer. At the Closing:
a. The Seller will deliver to the Buyer such bills of sale, assignments
and other good and sufficient instruments of conveyance and transfer
in form sufficient to sell, assign and transfer the Assets, such
documents to be effective to vest in the Buyer good and marketable
title to the Assets of the Business being transferred to the Buyer by
Seller, free and clear of all liens, charges, encumbrances and
restrictions of any kind, except for the Permitted Encumbrances and
the Assumed Liabilities.
b. Simultaneously with such delivery, the Seller will use all reasonable
efforts to put the Buyer in actual possession, operation and control
of the Assets to be transferred hereunder.
c. The Buyer shall deliver to Seller the cash portion of the Purchase
Price.
d. The Buyer shall deliver the Promissory Note to the Seller.
e. The Buyer shall deliver a Security Agreement in favor of Seller with
respect to the Promissory Note.
f. Both the Buyer and the Seller shall take such other action as is
contemplated by this Agreement to be taken to consummate the Purchase
Transaction.
12. Sales and Transfer Taxes/Fees. All applicable sales, transfer, use, filing
and other taxes and fees that may be due or payable as a result of the
conveyance, assignment, transfer or delivery of the Assets of the Business
to be conveyed and transferred as provided herein shall be borne by the
Seller.
13. Representations and Warranties Pertaining to the Seller. As a material
inducement to the Buyer to execute and perform its obligations under this
Agreement, the Seller Parties hereby jointly and severally represent and
warrant to the Buyer as follows:
a. Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of
Texas, has requisite corporate power and authority to carry on its
business as it is presently being conducted, to enter into this
Agreement and to carry out and perform the terms and provisions of
this Agreement. Seller shall deliver at Closing a Certificate of Good
Standing from its state of incorporation, which Certificate shall be
attached hereto as Exhibit 13-A to this Agreement. The names of all
holders of the ownership interests in Seller, and the percentage of
ownership interest held in each, are as follows:
Name of Entity Name of Holder Ownership Percentage
- -------------- -------------- --------------------
Broyd, Inc. Caroline D. Brown 50%
Thomas P. Boyd 50%
b. Litigation. Except for the legal actions (the "Pending Litigation")
disclosed on the Schedule of Pending Litigation attached hereto as
Exhibit 13-B, there are no actions, suits or proceedings affecting the
Assets which are pending or, to the knowledge of the Seller Parties,
threatened against Seller or affecting any of its properties or
rights, at law or in equity, or before any federal, state, municipal
or other governmental agency or instrumentality, domestic or foreign.
Seller is not in default with respect to any order or decree of any
court or of any such governmental agency or instrumentality. Buyer is
specifically not assuming any of Seller's liability obligations under
the Pending Litigation or any other pending or threatened litigation
pertaining to the operation of the Business prior to the Closing Date,
and the Seller Parties shall remain fully liable for all of such
liability obligations.
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c. Compliance with Laws and other Instruments. The execution and delivery
of, and performance and compliance with, this Agreement will not
result in the violation of or be in conflict with or constitute a
default under any term or provision of any charter, bylaw, mortgage,
indenture, contract, agreement, instrument, judgment, decree, order,
statute, rule or regulation or result in the creation of any mortgage,
lien, encumbrance or charge upon any of the Assets pursuant to any
such term or provision other than Permitted Encumbrances.
d. Corporate Acts and Proceedings. The sale and transfer of the Assets by
the Seller, as provided for in this Agreement, have been approved and
consented to by the Board of Directors of Seller, and all actions
required by the laws of the state of incorporation of Seller by the
shareholders of Seller with regard to the Purchase Transaction have
been appropriately authorized and accomplished. This Agreement and all
other agreements contemplated hereby have been duly and validly
executed and delivered by Seller and, assuming this Agreement and the
agreements contemplated hereby constitute the valid and binding
obligation of Buyer, will constitute valid and binding obligations of
Seller enforceable against Seller in accordance with each agreement's
terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, and the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought.
e. Title to Assets; Quality of Tangible Assets.
(i) Seller has good and marketable title to all of the Assets being
sold to Buyer pursuant to this Agreement.
(ii) ALL OF THE ASSETS CONVEYED HEREBY ARE CONVEYED "AS IS", "WHERE
IS" AND "WITH ALL FAULTS", EXCEPT AS SPECIFICALLY SET OUT HEREIN.
THE SELLER PARTIES MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER
WHETHER EXPRESSED, IMPLIED OR STATUTORY WITH RESPECT TO THE KIND,
SIZE, QUALITY, DESCRIPTION, MERCHANTABILITY, CONDITION, USE OR
FITNESS FOR ANY PARTICULAR PURPOSE OF THE ASSETS, EXCEPT AS
SPECIFICALLY SET OUT HEREIN. THE BUYER AGREES, BY ITS EXECUTION
HEREOF, THAT THERE ARE NO REPRESENTATIONS AND WARRANTIES EXCEPT
AS SPECIFICALLY SET OUT HEREIN, AND THE BUYER DOES FURTHER AGREE
THAT IT IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF THE
SELLER PARTIES WITH RESPECT TO THE FITNESS OF THE ASSETS FOR ANY
PURPOSE INTENDED BY THE BUYER, AND THAT THE BUYER HAS EXAMINED
AND IS FAMILIAR WITH THE ASSETS AND IS BUYING THE ASSETS "AS IS",
"WHERE IS", AND "WITH ALL FAULTS" AND WITHOUT ANY EXPRESSED OR
IMPLIED WARRANTIES OF ANY KIND, EXCEPT AS SPECIFICALLY SET OUT
HEREIN, INCLUDING, BUT NOT LIMITED TO, WARRANTIES RELATED TO
MATERIALS, WORKMANSHIP, MERCHANTABILITY, CONDITION, USE, OR
FITNESS FOR ANY PARTICULAR PURPOSE, AND THE SELLER PARTIES HEREBY
DISCLAIM ANY SUCH WARRANTIES.
(iii) THE BUYER REPRESENTS, WARRANTS, ACKNOWLEDGES AND AGREES THAT IT
HAS THOROUGHLY INSPECTED THE ASSETS AND HAS CONCLUDED THAT IT IS
FULLY SATISFIED WITH THE CONDITION OF THE ASSETS.
f. No Default. To the knowledge of the Seller Parties, Seller is not in
default in any material respect under any of the contracts,
agreements, leases, documents or other commitments disclosed on an
Exhibit hereto to which it is a party or otherwise bound.
g. Brokers. Neither Seller nor any of its Affiliates has retained any
financial advisor, broker, agent or finder or paid or agreed to pay
any financial advisor, broker, agent or finder any commission,
brokerage fee or other compensation relative to this Agreement or the
transactions contemplated hereby for which Buyer shall have any
liability or responsibility.
h. Employment Contracts; Employees. Except as disclosed on Exhibit A13-H,
there are no written contracts of employment between Seller and any
employee of the Business.
i. Employee Benefit Plans. Except as disclosed on Exhibit 13-I, the
Seller has no pension, bonus, profit-sharing or retirement plans for
employees of the Business, nor is Seller required to contribute to any
such plan.
j. Insurance. The policy coverage information with respect to the Assets
set forth on the Schedule of Insurance Policies, attached hereto as
Exhibit 13-J is accurate and complete.
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k. Tax Matters. All tax and information returns required to have been
filed by the Seller with the United States of America, have been duly
filed and each such return in all material respects reflects the
income, franchise, property, sales, use, value-added, withholding,
excise, capital or other tax liabilities and all other information
required to be reported thereon. The Seller has paid, or made
provision for payment, of all income, franchise, business, property,
sales, use, value-added, withholding, payroll, excise, capital and
other taxes shown to be due and payable on said returns, and all
penalties, assessments or deficiencies of every nature and
description.
l. Financial Statements. The Seller has provided Buyer with Seller's
unaudited financial statements for the twelve months ended December
2001 and 2002, and the nine (9) months ended September 30, 2003
(collectively, the "Financial Statements"). The Financial Statements
reflect in all material respects the assets, liabilities, revenues and
profits of Seller, subject to normal year end adjustments and any
other adjustments described therein.
m. Operating Results. During the three (3) year period ended December 31,
2003, (i) Seller participated in the funding of loans in the average
amount of $360,000,000.00 per annum, and (ii) no more than thirty
percent (30%) of such loans involved rate and term refinancing of
existing mortgages.
n. Absence of Certain Changes. Other than those events, adjustments and
changes specifically identified in the Exhibits to this Agreement,
since November 1, 2003, there has occurred no event or development
which has had a materially adverse effect on the Assets or the
Business.
o. Undisclosed Liabilities. The Seller has no liabilities (whether known
or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a)
liabilities disclosed on the Financial Statements; and (b) liabilities
which were incurred after December 1, 2003, and were incurred in the
ordinary course of operation of the Business.
p. Real Estate. Seller operates the Business from several leased branch
offices in the metropolitan area of Houston, Texas (collectively, the
"Branch Offices") and maintains its headquarters and administrative
offices in a leased facility located at 141905 Southwest Freeway,
Suite 201, Sugar Land, Texas 77478 (the "Seller Site").
q. Warranties. Except as set forth in Exhibit 13-Q, no service delivered
by the Seller is subject to any guaranty, warranty, right of credit or
other indemnity other than the applicable standard terms and
conditions of service set forth in Seller's standard form of service
agreements.
r. Disclosure. No representation or warranty by the Seller Parties, in
this Agreement or in any writing attached hereto, contains or will
contain any untrue statement of material fact or omits or will omit to
state any material fact, of which the Seller Parties have knowledge or
notice required to make the statements herein or therein contained not
misleading.
s. No Other Representations. Except as and to the extent set forth in
this Agreement, Seller Parties make no representations or warranties
whatsoever to the Buyer or any of its Affiliates or representatives
and hereby disclaim all liability and responsibility for any
representation, warranty, statement, or information made,
communicated, or furnished (orally or in writing) to the Buyer
(including without limitation any opinion, information, projection, or
advice that may have been or may be provided to Buyer by any director,
officer, employee, agent, consultant, or representative of Seller or
any Affiliate thereof). Seller Parties make no representations or
warranties to the Buyer regarding the probable success or
profitability of the Business or the Acquired Assets.
14. Representations and Warranties of Buyer. Buyer represents and warrants to
Seller that:
a. Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware,
has requisite corporate power and authority to carry on its business
as it is presently being conducted, to enter into this Agreement, and
to carry out and perform the terms and provisions of this Agreement,
and is registered or qualified to do business in all jurisdictions
where the nature of its business requires such registration or
qualification, except where failure to be so qualified could not have
a material adverse affect on its business. Buyer shall deliver at
Closing a Certificate of Good Standing from the State of Delaware,
which Certificate shall be Exhibit 14-A to this Agreement.
b. Litigation. There are no actions, suits or proceedings which are
pending or, to Buyer's knowledge, threatened against Buyer which would
prohibit Buyer from carrying out its obligations to Seller under this
Agreement, nor is Buyer or any of its officers or directors aware of
any facts which to it or their knowledge might reasonably be expected
to result in any such action, suit or proceeding.
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c. Compliance with Laws and other Instruments. The execution and delivery
of and performance and compliance with this Agreement will not result
in the violation of or be in conflict with or constitute a default
under any term or provision of any charter, bylaw, mortgage,
indenture, contract, agreement, instrument, judgment, decree, order,
statute, rule or regulation.
d. Corporate Acts and Proceedings. The transactions contemplated to be
entered into by Buyer pursuant to this Agreement have been approved
and consented to by its Board of Directors, and all action required by
any applicable law by the shareholders of the Buyer, if any, with
regard to such transactions, have been appropriately authorized and
accomplished. This Agreement and all other agreements contemplated
hereby have been duly and validly executed and delivered by Buyer and,
assuming this Agreement and the agreements contemplated hereby
constitute the valid and binding obligation of Seller, will constitute
valid and binding obligations of Buyer enforceable against Buyer in
accordance with each agreement's terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
e. Capitalization. (a) The authorized capital stock of the Buyer consists
of 100,000,000 shares of Common Stock, and 10,000,000 shares of
Preferred Stock.
(b) At the close of business on December 31, 2003:
(i) 22,654,381 shares of Common Stock were issued and
outstanding, all of which were validly issued, fully paid
and nonassessable and free of preemptive rights;
(ii) 121 shares of Common Stock were held in the treasury of the
Buyer;
(iii) 5,350,000 shares of Common Stock were issuable upon
exercise of outstanding options granted under the stock
option plans of the Buyer;
(iv) 1,450,000 shares of Common Stock are reserved for issuance
upon exercise of outstanding warrants;
(v) 7,000,000 shares of Preferred Stock were issued and
outstanding, all of which were validly issued, fully paid
and nonassessable and free of preemptive rights;
(vi) 7,000,000 shares of Common Stock are reserved for issuance
upon the conversion of the outstanding Preferred Stock of
the Buyer; and
(vii) 2,275,000 shares of Common Stock will be reserved for
issuance upon exercise of the Warrants.
(c) Except as set forth in subsection (b), there are no options,
warrants, calls, rights or agreements to which the Buyer is a
party or by which it is bound obligating the Buyer to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Buyer or obligating the
Buyer to grant, extend or enter into any such option, warrant,
call, right or agreement, and there are no outstanding
contractual rights to which the Buyer is a party the value of
which is based on the value of the shares of Common Stock.
(d) The Buyer does not have any outstanding bonds, debentures, notes
or other obligations the holders of which have the right to vote
(or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of the Buyer on
any matter.
f. Valid Issuance. The Warrants, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable,
free of any liens or encumbrances and, based in part upon the
representations of each Warrant Holder in the investment letter, will
be issued in compliance with all applicable state and federal
securities laws. The Shares have been duly and validly reserved for
issuance and, upon issuance, will be duly and validly issued, fully
paid and nonassessable, free of any liens or encumbrances created by
the Buyer. The sale of the Warrants and the Shares are not and will
not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or satisfied.
g. SEC Documents and Other Reports. None of the documents (including
proxy statements) filed by Buyer with the Securities and Exchange
Commission (the "SEC") since October 3, 2002 (the "Buyer SEC
Documents") contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
financial statements (including, in each case, any notes thereto) of
the Buyer included in the Buyer SEC Documents complied in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting
principles ("GAAP") (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated therein or in
the notes thereto) and fairly presented in all respects the financial
position of the Buyer as at the respective dates thereof and the
results of its operations and its cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in the Buyer SEC Documents or as
required by GAAP, the Buyer has not, since September 30, 2003, made
any change in the accounting practices or policies applied in the
preparation of financial statements.
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h. Absence of Certain Changes or Events. Except as disclosed in the Buyer
SEC Documents filed with the SEC prior to the date of this Agreement,
since September 30, 2003, (a) the Buyer has not incurred any material
liability or obligation (indirect, direct or contingent) that is not
in the ordinary course of business, and (b) there has not been any
changes in the amount or terms of the indebtedness of the Buyer from
that described in the Buyer SEC Documents filed prior to the date
hereof.
i. Brokers. The Buyer has not retained any financial advisor, broker,
agent or finder or paid or agreed to pay any financial advisor,
broker, agent or finder any commission, brokerage fee or other
compensation relative to this Agreement or the transactions
contemplated hereby for which any of the Seller Parties shall have any
liability or responsibility.
j. Board Approval. The Board of Directors of the Buyer has approved the
terms and conditions of the Purchase Transaction, and has authorized
and empowered the Buyer to consummate the Purchase Transaction.
k. Due Diligence. Buyer hereby acknowledges and affirms that the Buyer
has completed its own independent investigation, analysis and
evaluation of the Business and the Assets, that it has made all such
reviews and inspections of the business, assets, results of
operations, condition (financial or otherwise) and prospects of the
Business and the Assets as it has deemed necessary or appropriate, and
that in making its decision to enter into this Agreement and to
consummate the transactions contemplated hereby, the Buyer has relied
solely on its own independent investigation, analysis, and evaluation
of the Business and the Assets and the representations made by Seller
in Section 13 of this Agreement.
l. Knowledge. Buyer has no knowledge of any fact which results in any
representation or warranty of Seller in Section 13 being breached. If
after the date of this Agreement but before ten (10) business days
prior to the Closing Date, the Buyer obtains knowledge of any fact
which results in any such representation or warranty being breached,
the Buyer will as soon as reasonably practicable but in no event later
than ten (10) business days before the Closing Date provide notice
thereof to Seller. If the Buyer obtains knowledge of any such fact
during the period between ten (10) business days prior to the Closing
Date and the Closing Date, the Buyer will immediately provide notice
thereof to the Seller. If the Buyer fails to provide any such notice
to Seller, such fact shall not be considered a breach of such
representation or warranty by Seller.
15. Intentionally Deleted
16. Covenants.
a. Use of Names. On the date that the Promissory Note is paid in full,
the Seller shall take action to transfer to Buyer the right to use the
names "Broyd, Inc."; and "First Texas Residential", and any and all
other trade, assumed or fictitious names together with their related
logos or other identifying marks used in the sale or promotion of the
services of Seller, or which relate to the conduct of the Business.
b. Name Change Amendment. Within one (1) month from the date the
Promissory Note is paid in full, the Seller agrees to change its
corporate name to a name which does not contain any words that would
result in confusion with the corporate and/or fictitious names to be
used by the Buyer after the Closing Date, and shall file a name change
amendment, within such time period after the Closing Date, with the
appropriate agency or agencies of the state of incorporation of each
Seller entity, as amendments to the Articles of Incorporation of each
such entity.
c. Audits. Within ninety (90) days from the Closing Date, Seller and
Buyer shall undertake to have the financial statements of Seller
audited, for a period of three (3) years ending as of December 31,
2003, subject to the conditions that (i) the auditing firm to perform
such audits shall be an independent public accounting firm which is
permitted, by the rules and regulations of the Securities and Exchange
Commission, to conduct audits pursuant to the Act and the Exchange Act
of 1934, as amended, and shall be a firm that is reasonably acceptable
to Buyer, (ii) Seller Parties shall cooperate with such auditors in
connection with the conduct of such audits, and (iii) Buyer shall be
obligated to pay for the reasonable fees and expenses of the auditing
firm conducting such audits.
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d. Third Party Consents and Approvals.
(i) Each party to this Agreement shall use all commercially
reasonable efforts to obtain all authorizations, consents,
orders, and approvals of, and to give all notices to and make all
filings with, all governmental entities and other third parties
that may be or become necessary for its execution and delivery
of, and the performance of its obligations under this Agreement
and will cooperate fully with the other parties in promptly
seeking to obtain all such authorizations, consents, orders, and
approvals, giving such notices, and making such filings.
(ii) Buyer will use its best efforts (at its cost) to assist Seller in
obtaining any consents of third parties necessary or advisable in
connection with the transactions contemplated by this Agreement,
including providing to such third parties such financial
statements and other available financial information with respect
to Buyer as such third parties may reasonably request.
(iii) If the transfer of any contract, permit, or other Asset to Buyer
hereunder shall require the consent of any party thereto other
than Seller which has not been obtained as of the Closing Date,
then this Agreement shall not constitute an agreement to assign
the same, and such item shall not be assigned to or assumed by
Buyer, if an actual or attempted assignment thereof would
constitute a breach thereof or default thereunder. In such case,
Seller and Buyer shall cooperate and each shall use commercially
reasonable efforts to obtain such consents to the extent required
of such other parties and, if and when any such consents are
obtained, to transfer the applicable contract, permit or other
Asset.
e. Access to Books and Records. From and after the Closing, the Buyer
shall provide the Seller, its shareholders, affiliates, agents and
assigns with reasonable access (for the purpose of examining and
copying), during normal business hours, to the books and records of
the Seller delivered to the Buyer in connection with any matter
whether or not relating to or arising out of this Agreement or the
transactions contemplated hereby or for financial reporting and
accounting matters. Buyer shall not for a period of seven years
following the Closing Date, destroy, alter, or otherwise dispose of
(or permit any such destruction, alteration or disposal of) any of the
books and records of any delivered by Buyer in connection with the
Purchase Transaction without first offering to surrender to the Seller
such books and records or any portion thereof which the Buyer may
intend to destroy, alter, or dispose of.
f. No Liens. Without the prior written consent of Seller Parties, prior
to the Promissory Note being paid in full, no Buyer Party shall
create, incur, assume or suffer to exist any lien, security interest,
security title, mortgage, deed of trust or other encumbrance upon or
with respect to any of the Assets, except for liens in favor of Seller
Parties.
17. Closing Deliveries by Buyer. At or prior to the Closing Date, Seller shall
deliver the following to Buyer:
a. Governmental Approvals. All governmental approvals required to
consummate the Purchase Transaction.
b. Non-Competition Agreements. The Seller, D. Brown, C. Brown and Boyd
shall each have entered into the Non-Competition Agreements
substantially in the forms attached hereto as Exhibit 6.
c. Employment Agreement. D. Brown and Boyd shall have entered into the
Employment Agreement substantially in the form attached hereto as
Exhibit 7.
18. Conditions Precedent to Closing by Seller. At or prior to the Closing Date,
Buyer shall deliver the following to Seller:
a. Governmental Approvals. All governmental approvals required to
consummate the Purchase Transaction.
b. Non-Competition Agreements. The Seller, D. Brown, C. Brown and Boyd
shall each have entered into the Non-Competition Agreements
substantially in the forms attached hereto as Exhibit 6.
c. Employment Agreement. Buyer shall have entered into the Employment
Agreement with D. Brown and Boyd, substantially in the form attached
hereto as Exhibit 7.
d. Promissory Note. Buyer shall deliver an executed copy of the
Promissory Note to Seller.
19. Survival of Representations, Warranties and Indemnification Obligations.
a. Seller Parties. The representations, warranties and indemnification
obligations of the Seller Parties contained and made pursuant to this
Agreement shall survive the execution of this Agreement for a period
of two (2) years from the Closing Date, except that any
indemnification claims of Buyer against Seller for unpaid tax
liability for the operation of the Business on or before the Closing
Date shall survive the execution of this Agreement for the applicable
statute of limitations period.
b. Buyer. The representations, warranties and indemnification obligations
of Buyer contained and made pursuant to this Agreement shall survive
the execution of this Agreement for a period of two (2) years from the
Closing Date, except that any indemnification claims of the Warrant
Holders against Seller relating to the issuance of the Warrants and
Shares shall survive the execution of this Agreement.
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20. Indemnification; Remedies.
a. Indemnification by Seller. Subject to the limitations set forth in
this Section 20, the Seller Parties (each an "Indemnifying Party")
shall and do hereby agree, jointly and severally, to indemnify and
hold harmless, during that period described in paragraph 19 hereof,
Buyer and its directors, officers, employees, agents and assigns (each
an "Indemnified Party"), as to and against any Damages (as hereinafter
defined) resulting from: (i) any inaccurate representation made by
Seller in or under this Agreement, (ii) any breach of any warranties
made by Seller in or under this Agreement, (iii) any breach or default
in the performance by Seller of any of the covenants to be performed
by Seller in or under this Agreement, and (iv) any Damages relating to
the operation of the Business on or before the Closing Date (unless
such Damages pertain to the Assumed Liabilities).
b. Indemnification by Buyer. Subject to the limitations set forth in this
Section 20, Buyer ("Indemnifying Party") shall and hereby agrees to
indemnify and hold harmless, during that period described in paragraph
19 hereof, each of the Seller, C. Brown, D. Brown and Boyd and their
respective directors, officers, employees, agents and assigns, as
appropriate (each an "Indemnified Party"), as to and against any
Damages resulting from: (i) any inaccurate representation made by
Buyer in or under this Agreement, (ii) any breach of any warranties
made by Buyer in or under this Agreement, (iii) any breach or default
in the performance by Buyer of any of the covenants or other
agreements to be performed by Buyer in or under this Agreement or
contemplated hereby, (iv) non-payment when due of any of the Assumed
Liabilities, and (v) any Damages relating to the operation of the
Business following the Closing Date (unless such Damages pertain to a
liability in existence as of the Closing Date which is not being
specifically assumed by Buyer hereunder).
c. Definition of Damages. The term "Damages" as used herein, shall
include any demands, claims, actions, deficiencies, losses,
delinquencies, defaults, assessments, fees, costs, taxes, expenses,
debts, liabilities, obligations, penalties and damages, including
reasonable counsel fees actually incurred in investigating or in
attempting to avoid the same or oppose the imposition thereof.
Notwithstanding any other provision of this Agreement, Damages shall
not include incidental, consequential, or punitive damages (whether
arising in tort, contract or otherwise, including the negligence or
gross negligence of either or both parties and whether or not
foreseeable).
d. Limitations. Notwithstanding any other provision of this Agreement,
none of the parties to this Agreement shall be liable for any Damages
contemplated by this Section 20 unless and until the aggregate claims
exceed $50,000 (the "Basket"), whereupon such Indemnifying Party shall
be liable for and shall indemnify such Indemnified Party from and
against all Damages in excess of the Basket; provided, however, that
any Damages related to (i) unpaid tax liabilities by Seller and (ii)
the issuance of the Warrants and Shares by Buyer, in either case,
shall not be subject to the Basket. Notwithstanding any other
provision of this Agreement, in no event shall the Damages under this
Agreement or any other exhibit or agreement contemplated hereunder
exceed an aggregate amount equal to the amount actually paid to Seller
under and pursuant to this Agreement plus such additional amount as
shall equal the amount paid to Seller pursuant to the Contingency
Payment Agreement.
e. Remedies. Promptly after receipt by an Indemnified Party of notice of
any Damage to which the indemnification provisions of this Agreement
would apply, such Indemnified Party shall give written notice thereof
to the Indemnifying Party, but the omission to so notify the
Indemnifying Party promptly will not relieve the Indemnifying Party
from any liability except to the extent that the Indemnifying Party
shall have been prejudiced as a result of the failure or delay in
receiving such notice. Such notice shall state the information then
available regarding the amount and the nature of the Damage and shall
specify the provision or provisions under this Agreement under which
the liability or obligation is asserted. If within twenty (20) days
after receiving such notice any of the Indemnifying Party gives
written notice to such Indemnified Party stating that: (a) it would be
liable under the provisions hereof for indemnity in the amount of such
Damage if such Damage was successful, and (b) that it disputes and
intends to defend against such claim, liability or expense at its own
cost and expense, then counsel for the defense shall be selected by
the Indemnifying Party (subject to the consent of the Buyer which
consent shall not be unreasonably withheld) and the Indemnifying Party
shall assume the defense with respect to such claim, liability or
expense at the Indemnifying Party's expense as long as the
Indemnifying Party is conducting a good faith and diligent defense at
its own expense; provided, however, that the assumption of defense of
any such matters by the Indemnifying Party shall relate solely to the
Damage that is subject or potentially subject to indemnification. The
Indemnifying Party shall have the right, with the consent of such
Indemnified Party, which consent shall not be unreasonably withheld
and such Indemnified Party shall cooperate with Indemnifying Party in
connection therewith, to settle all indemnifiable matters related to
the claims by third parties that are susceptible to being settled
provided its obligation to indemnify such Indemnified Party therefor
will be fully satisfied. As reasonably requested by such Indemnified
Party, the Indemnifying Party shall keep such Indemnified Party
apprised of the status of the Damage and any resulting suit,
proceeding or enforcement action, shall furnish such Indemnified Party
with all documents and information that such Indemnified Party shall
reasonably request and shall consult with such Indemnified Party prior
to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated to the contrary, such
Indemnified Party shall at all times have the right to fully
participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or
proceeding include both the Indemnifying Party and such Indemnified
Party and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
expense of separate counsel for such Indemnified Party shall be paid
by the Indemnifying Party, provided, however, that the separate
counsel selected by such Indemnified Party shall be approved by the
Indemnifying Party, which approval shall not be unreasonably withheld.
If no such notice of intent to dispute and defend is given by the
Indemnifying Party, or if such diligent good faith defense is not
being or ceases to be conducted, such Indemnified Party shall, at the
expense of the Indemnifying Party, undertake the defense of (with
counsel selected by such Indemnified Party), and shall have the right
to compromise or settle (exercising reasonable business judgment),
16
such claim, liability or expense. Provided however, before settling
such Indemnified Party shall first use reasonable efforts to obtain
the consent to that settlement from the Indemnifying Party, which
consent shall not be unreasonably withheld. After using reasonable
efforts without success such Indemnified Party may settle without the
consent of the Indemnifying Party without any prejudice to its claim
for indemnity. If such claim, liability or expense is one that by its
nature cannot be defended solely by the Indemnifying Party, then such
Indemnified Party shall make available all information and assistance
that the Indemnifying Party may reasonably request and shall cooperate
with the Indemnifying Party in such defense.
f. Exclusive Rights and Remedies. Except as provided in Section 6, the
provision of this Section 20 shall be the exclusive basis of the
parties to this Agreement for (i) any breach of a representation or
warranty herein, (ii) any failure of a party to comply with any
obligation, covenant, agreement or condition herein or (iii) any other
claim, action, demand, loss, cost, expense, liability, penalty, or
other damage relating to or arising out of the transactions
contemplated by this Agreement.
g. Reduction of Indemnified Amounts. Notwithstanding any provision of
this Section 20 to the contrary, Damage owed by an Indemnifying Party
to an Indemnified Party shall be reduced by the amount of any
mitigating recovery an Indemnified Party shall have received with
respect thereto from any recovered by the Indemnified Party under any
insurance policies, without regard to whether the Indemnified Party or
another person paid the premiums therefor. If such a recovery is
received by an Indemnified Party after it receives payment or other
credit under this Agreement with respect to Indemnified Amounts, then
a refund equal to the aggregate amount of such recovery shall be made
promptly to the Indemnifying Party.
h. Set-off. Subject to Section 20d and Section 20i, upon written notice
to the Seller specifying in reasonable detail its justification
therefor, the Buyer shall have the right to set off the Damage under
Section 20a, against any amount at anytime payable to Seller under or
pursuant to this Agreement or the Contingent Payment Agreement, before
seeking reimbursement from the Seller. If the Seller gives written
notice to the Buyer of a dispute over the proposed set-off, the
procedures of Section 20i shall apply. Notwithstanding anything to the
contrary contained herein, the Buyer shall not be entitled to set-off
any Damages against the Promissory Note
i. Escrow. If there exists a bona fide dispute at the time any payment is
due under this Agreement regarding a claim by a Buyer Indemnified
Party under Section 20a or with respect to the right of Buyer to
offset under Section 20h against amounts due under or pursuant to this
Agreement or the Contingent Payment Agreement, the parties agree that
at such time Buyer shall deposit the portion of such amount due and
payable under or pursuant to this Agreement and/or the Contingent
Payment Agreement, as the case may be, equal to the amount in dispute
into a mutually acceptable interest-bearing escrow account ("Escrow
Account") pending resolution of such dispute. Interest on the Escrow
Account shall accrue for the benefit of the party to whom the Escrow
Account proceeds are released upon resolution of such dispute;
provided, that if the Escrow Account proceeds are released to more
than one party, the interest shall be prorated among the parties based
on the amounts released to the parties. To the extent of resolution of
the dispute in favor of the Buyer Indemnified Parties, the Buyer shall
be entitled to exercise its right of set-off in the manner provided in
Section 20h of this Agreement against the proceeds in the Escrow
Account. Immediately after resolution of the dispute, the Escrow Agent
shall release and deliver to the Seller as payment under this
Agreement and/or the Contingent Payment Agreement, as the case may be,
all of the remaining Escrow Account proceeds.
21. Prepaid Items; Deposits; Etc. All prepaid rent and utility deposits and
similar items paid by or owing to the Seller by any person, shall be
considered to be part of the Assets and shall, upon the consummation of the
transactions contemplated by this Agreement, be considered the property of
Buyer.
22. Expenses. Except as otherwise stated herein, each of the parties shall bear
all expenses incurred by them in connection with this Agreement and in
consummation of the transactions contemplated hereby or in preparation
thereof.
23. Amendment and Waiver. This Agreement may be amended or modified at any time
and in all respects, or any provisions may be waived by an instrument in
writing executed by Buyer and Seller, or either of them in the case of a
waiver.
24. Assignment; No Third-Party Beneficiaries. Neither this Agreement nor any
right created hereby shall be assignable by the Seller Parties or the Buyer
without the prior written consent of the other. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person, other than the
parties hereto and their successors, any rights or remedies under or by
reason of this Agreement.
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25. Notices. All notices, payments, demands and requests from one party to the
another, made pursuant to this Agreement or the transactions contemplated
hereunder, shall be in written form and shall be deemed duly given if
personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by Federal Express or other
recognized next-day business couriers, or by fax and followed by hard copy,
at the following addresses:
Buyer at: Availent Financial, Inc.
2720 Stemmons Freeway
South Tower.
Suite 600
Dallas, Texas 75207
Attention: President
pmcgeeney@availentfinancial.com
copies to: Marshal W. Dooley
Dooley & Rucker, P.C.
4245 North Central Expressway No. 220
Dallas, Texas 75205
mwd@dooleyrucker.com
Seller at: Broyd, Inc.
141905 Southwest Freeway, Suite 201
Sugar Land, Texas 77478
Attention: Thomas P. Boyd
and to: Locke Liddell & Sapp LLP
3400 JPMorgan Chase Tower, 600 Travis
Houston, Texas 77002
Attention: Joseph A. Perillo
jperillo@lockeliddell.com
Notice shall be effective (i) if by registered or certified mail, or
overnight next-day business couriers, three (3) days after deposit in the U.S.
mail or with such courier, (ii) if by fax, upon confirmation of successful
transmission of such notice, (iii) if by personal delivery, upon such delivery,
and (iv) if by any other permitted means, upon receipt. In the event that any of
the named parties desire to receive notice at another address, it shall be their
responsibility to notify all of the other parties, in writing, of the new
address.
26. Choice of Law and Venue. It is the intention of the parties that the laws
of the State of Texas shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties
of the parties, without giving effect to any choice or conflict of law
provision or rule. Any action involving or relating to this Agreement shall
be brought in any Federal or state court sitting in Harris County, Texas,
and the parties hereto agree to the exclusive jurisdiction of such court.
27. Headings. Headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
28. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same agreement. Facsimile signatures may be
deemed binding for this Agreement, or any modification or amendment
thereto, or any documents contemplated hereby, provided that originals of
same are delivered within a reasonable time.
29. Gender. All personal pronouns used in this Agreement shall include the
other genders whether used in the masculine or feminine or neuter gender,
and the singular shall include the plural whenever and as often as may be
appropriate.
30. Parties in Interest. All the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of, and be enforceable by Seller
and Buyer and their respective successors and assigns.
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31. Integrated Agreement; Exhibits. This Agreement constitutes the entire
agreement between the parties hereto, supercedes any prior understandings,
agreements or representations of the parties and there are no agreements,
understandings, restrictions, warranties, or representations between the
parties, written or oral, other than those set forth herein or herein
provided for. All of the Exhibits referenced in this Agreement are
incorporated into this Agreement by such reference thereto and made a part
hereof.
32. Further Assurances. From time to time hereafter and without further
consideration, each of the parties hereto shall execute and deliver such
additional or further instruments of conveyance, assignment and transfer
and take such other actions as any of the other parties may reasonably
request in order to more effectively consummate the transactions
contemplated hereunder or as shall be reasonably necessary or appropriate
in connection with the carrying out of the parties' respective obligations
hereunder for the purposes of this Agreement.
33. Construction. The parties hereto 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.
34. Execution. This Agreement shall be executed by each of the Buyer, D. Brown,
C. Brown and Boyd to evidence the consent of such parties to the terms and
conditions of this Agreement which are applicable to them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the 31st day of December, 2003.
AVAILENT FINANCIAL, INC.
By: /s/ Patrick A. McGeeney
---------------------------------------
Patrick A. McGeeney, Chairman/CEO
BROYD, INC.
By: /s/ Thomas P. Boyd
---------------------------------------
Thomas P. Boyd, President
/s/ Doug Brown
---------------------------------------
Doug Brown
/s/ Caroline D. Brown
---------------------------------------
Caroline D. Brown
/s/ Thomas P. Boyd
Thomas P. Boyd
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