ASSET PURCHASE AGREEMENT
BY AND AMONG
UDT CONSULTING, INC.
EDGE TECHNOLOGY GROUP, INC.
UNIVERSAL DATA TECHNOLOGY, INC.
AND
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
and
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Dated as of May 31, 2002
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS 1
Section 1.1 General Definitions 1
Section 1.2 Accounting Terms and Definitions 12
ARTICLE 2. SALE OF ASSETS; PAYMENT OF CERTAIN LIABILITIES 12
Section 2.1 Agreement to Purchase and Sell 12
Section 2.2 Excluded Assets 15
Section 2.3 Purchase Price 16
Section 2.4 Payment of the Purchase Price 18
Section 2.5 Allocation of Purchase Price 20
Section 2.6 Excluded Liabilities 20
Section 2.7 Instruments of Transfer; Consents 20
Section 2.8 Further Assurances and Prorations 21
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER 21
Section 3.1 Organization; Qualification 21
Section 3.2 Authority Relative to this Agreement 21
Section 3.3 Interest in Other Persons; Subsidiaries 22
Section 3.4 Consents and Approvals 22
Section 3.5 Authority; Licenses 22
Section 3.6 No Violations 23
Section 3.7 Compliance with Law 23
Section 3.8 Financial Statements, Etc. 24
Section 3.9 Absence of Undisclosed Liabilities 26
Section 3.10 Title to and Condition of Assets and Property 27
Section 3.11 Investigation or Litigation 29
Section 3.12 Absence of Certain Changes 29
Section 3.13 Employee Benefits 32
Section 3.14 Labor and Employee Matters 33
Section 3.15 Taxes 34
Section 3.16 Proprietary Rights 35
Section 3.17 Accounts Payable and Accrued Liabilities 36
Section 3.18 Real Property Leases 37
Section 3.19 Environmental Matters 37
Section 3.20 Insurance 37
Section 3.21 Product and Service Warranties 37
Section 3.22 Contracts 38
Section 3.23 Investments in Competitors 38
Section 3.24 Solvency 38
Section 3.25 Absence of Certain Business Practices 39
Section 3.26 No Brokers 39
Section 3.27 Disclosure 39
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 40
Section 4.1 Organization 40
Section 4.2 Authority Relative to this Agreement 40
Section 4.3 Consents and Approvals 41
Section 4.4 No Violations 41
Section 4.5 Investigation or Litigation 41
Section 4.6 Disclosure 42
Section 4.7 No Brokers 42
Section 4.8 Financial Statements, Etc. 42
Section 4.9 Solvency 43
ARTICLE 5. ADDITIONAL AGREEMENTS 43
Section 5.1 Conduct of Business of the Seller 43
Section 5.2 Forbearances by the Seller and the Shareholders43
Section 5.3 No Solicitation 44
Section 5.4 Investigation of Business and Properties 45
Section 5.5 Further Assurances 45
Section 5.6 Consents 46
Section 5.7 Notice 46
Section 5.8 Public Announcements 47
Section 5.9 Post-Closing Information 47
Section 5.10 Payment of Liabilities; Maintenance
of Corporate Existence 49
Section 5.11 Disclosure Schedules 49
Section 5.12 Employees 50
Section 5.13 Mail, Etc. 50
Section 5.14 Cooperation 51
ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING 51
Section 6.1 General Conditions 51
Section 6.2 Conditions to Obligations of the Seller 51
Section 6.3 Conditions to Obligations of the Purchaser 53
ARTICLE 7. CLOSING AND TERMINATION 56
Section 7.1 Closing Date 56
Section 7.2 Termination 57
Section 7.3 Effect of Termination 57
Section 7.4 Extension; Waiver 58
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ARTICLE 8. SURVIVAL AND INDEMNIFICATION 58
Section 8.1 Survival 58
Section 8.2 Indemnity by the Seller 59
Section 8.3 Indemnity by the Purchaser 61
Section 8.4 Defense of Claims 61
Section 8.5 Offset 63
Section 8.6 No Third-Party Beneficiaries 64
Section 8.7 Additional Agreement 64
Section 8.8 Arbitration 65
Section 8.9 Non-Disclosure of the Seller's
Proprietary Information 67
Section 8.10 Non-Competition 68
Section 8.11 Non-Solicitation of Employees and
Consultants; Non-Solicitation of Clients 69
ARTICLE 9. GENERAL PROVISIONS AND OTHER AGREEMENTS 70
Section 9.1 Notices 70
Section 9.2 Fees and Expenses 51
Section 9.3 Interpretation 51
Section 9.4 Parties in Interest 51
Section 9.5 Governing Law; Venue 52
Section 9.6 Incorporation by Reference 52
Section 9.7 Entire Agreement; Amendment; Waiver 52
Section 9.8 Assignment; Binding Effect 52
Section 9.9 Severability 52
Section 9.10 Counterparts 52
Section 9.11 Other Terms; Cooperation 52
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LIST OF EXHIBITS
Exhibit A Form of ▇▇▇▇ of Sale
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LIST OF SCHEDULES
Schedule 1.1(A) - Continuing Employees
Schedule 1.1(B) - Excluded Employees
Schedule 1.1(C) - Permitted Encumbrances
Schedule 2.1(a) - Equipment
Schedule 2.1(b) - Computer Equipment/Software
Schedule 2.1(c) - Scheduled Contracts
Schedule 2.1(d) - Intangible Assets
Schedule 2.1(e) - Non-Competition, Non-Solicitation And
Confidentiality Arrangements.
Schedule 2.1(i) - Permits
Schedule 2.1(l) - Seller's Prepaid Expenses and Other
Current Assets
Schedule 2.1(m) - Vehicles
Schedule 2.2 - Excluded Assets
Schedule 2.2(a) - Included Accounts Receivable
Schedule 2.3 - EBITDA Addbacks
Schedule 2.4(f) - Certain Remedies of Seller and the
Shareholders
Schedule 2.6 - Scheduled Liabilities
Schedule 3.1 - Business in States Other than Texas
Schedule 3.4 - Consents and Approvals
Schedule 3.6 - Exceptions to No Violations
Schedule 3.7(b) - Governmental Approvals and Other
Consents
Schedule 3.8(e) - Correcting and Adjusting Entries
Schedule 3.9 - Undisclosed Liabilities
Schedule 3.10(a) - Exceptions to Title of Assets
Schedule 3.10(b) - Exceptions to Conditions of Assets
Schedule 3.10(c) - Environmental
Schedule 3.10(d) - Lease Rights of the Seller
Schedule 3.11 - Litigation
Schedule 3.12 - Absence of Certain Changes
Schedule 3.12(l) - Recipients of Confidential Information
Schedule 3.13 - Employee Benefit Plans
Schedule 3.14 - Labor and Employment Matters
Schedule 3.15 - Taxes
Schedule 3.16 - Proprietary Rights
Schedule 3.19 - Compliance with Environmental Laws
Schedule 3.20 - Insurance
Schedule 3.21 - Product and Service Warranties
Schedule 3.22(b) - Exceptions to Enforceable Contracts
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made as
of May 31, 2002, by and among UDT CONSULTING, INC., a Texas
corporation (the "Purchaser"), EDGE TECHNOLOGY GROUP, INC., a
Delaware corporation and parent of the Purchaser ("Edge"), and
UNIVERSAL DATA TECHNOLOGY, INC., an Arkansas corporation (the
"Seller"), and the shareholders of the Seller, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the
"Shareholders").
In consideration of the mutual covenants and agreements
contained herein, the parties covenant and agree as follows:
1. DEFINITIONS
1.1 General Definitions. Unless otherwise stated in this
Agreement, the following terms shall have the following meanings:
"Actual Knowledge" shall mean actual present knowledge
without any requirement to make any investigation or inquiry.
"Affiliate" shall mean any Person that, directly or
indirectly, controls, or is controlled by, or under common
control with, another Person. For the purposes of this
definition, "control" (including the terms "controlled by" and
"under common control with"), as used with respect to any Person,
means the power to direct or cause the direction of the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities or by contract
or otherwise.
"Annual Financial Statements" shall have the meaning set
forth in Section 3.8(a).
"Applicable Law" shall mean all applicable provisions
(domestic or foreign) of all (i) constitutions, treaties,
statutes, laws (including the common law), rules, regulations,
ordinances, codes and Orders of or with any Governmental Body and
(ii) Governmental Approvals.
"Assets" shall have the meaning set forth in Section 2.1.
"Assumed Prepaid Obligations" shall have the meaning set
forth in Section 2.3(c)(iii).
"Bank Accounts" shall have the meaning set forth in Section
2.2(b).
"▇▇▇▇ of Sale" shall mean the ▇▇▇▇ of Sale substantially in
the form of Exhibit A attached hereto.
"Business" shall mean all of the business operations
acquired or to be acquired by the Purchaser pursuant to the
Operative Documents, consisting of the Assets (but not including
the Excluded Assets), involving generally the computer consulting
business of the Seller, including all business operations
currently being conducted by the Seller at any location.
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"Closing" and "Closing Date" shall have the meaning set
forth in Section 7.1.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Computer Equipment/Software" shall have the meaning set
forth in Section 2.1(b).
"Consent" shall mean any consent, approval, authorization,
action, waiver, permit, grant, franchise, concession, agreement,
license, exemption or Order of, registration, certificate,
declaration or filing with, or report or notice to, any Person
(including foreign Persons), including any Governmental Body.
"Continuing Employees" shall mean those employees of the
Seller (other than the Excluded Employees) listed on Schedule
1.1(A) hereto who are reasonably expected by the Seller to desire
to become the employees of the Purchaser following the Closing.
Schedule 1.1(A) also lists the current hourly rate for hourly
employees and weekly salary rate for salaried employees and the
date of commencement of employment of each Continuing Employee
next to such person's name.
"Customer Data" shall mean all of the Seller's customer
lists, lists of potential customers, sales records (including
pricing information and customer contractual status), other
records, telephone and fax numbers, email addresses and other
customer data (including credit data).
"Damages" shall mean any and all damages, claims,
obligations, demands, assessments, penalties, liabilities (joint
or several), costs, losses, diminution in value, defenses,
judgments, suits, proceedings, disbursements and expenses
(including disbursements, expenses and reasonable fees of
attorneys, accountants and other professional advisors and of
expert witnesses, costs of investigation and preparation, and
costs of settlement) of any kind whatsoever, whether fixed or
contingent, suffered or incurred by a Person, without regard to
the timing of any payment or performance. For clarification
purposes, Damages shall include all reasonable attorney's fees
incurred by Seller and the Shareholders in defending any claim or
suit brought by the Purchaser and/or Edge against the Seller or
the Shareholder for breaches of the representations, warranties
and covenants of the Seller or the Shareholder in the event that
the Seller and/or the Shareholder are the prevailing party in
such claim or suit.
"Disclosure Schedules" shall mean the disclosure schedules
to this Agreement delivered by the Seller and the Shareholders to
the Purchaser on the date hereof and as subsequently supplemented
and amended (which supplements and amendments are approved by the
Purchaser in its sole discretion).
"Dispute" shall have the meaning set forth in Section
8.7(a).
"EBITDA" shall mean, for any entity and for any period
measured, the earnings before interest, taxes, depreciation, and
amortization, as computed in accordance with GAAP, as reflected
on the audited consolidated income statement of such entity over
such period.
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"EBITDA Addbacks" shall mean, those amounts as listed in
Schedule 2.3, which shall not be considered a deduction from the
earnings of the Business by the Purchaser over the Measurement
Period.
"Employee Benefit Plan" or "Plan" shall mean (A) all
employee benefit plans within the meaning of ERISA Section 3(3),
including multiple employer welfare arrangements (within the
meaning of ERISA Section 3(40)), plans to which more than one
unaffiliated employer contributes and employee benefit plans
(such as foreign or excess benefit plans) which are not subject
to ERISA; and (B) all stock or membership interest option plans,
bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans and all other employee benefit
plans, agreements and arrangements not described in (A) above.
"Employment Letters" shall mean each of the separate
Employment Letters to be entered into between each of the
Shareholders and the Purchaser.
"Environmental Laws" shall mean all Applicable Laws and any
judicial or administrative interpretations thereof relating to
the protection of the environment, to human health and safety, or
relating to the emission, discharge, generation, processing,
storage, holding, abatement, existence, release, threatened
release or transportation of any Hazardous Materials or waste,
including (i) the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and
Recovery Act, the Clean Air Act, the Toxic Substances Control
Act, the Federal Water Pollution Control Act, the Endangered
Species Act and the Occupational Safety and Health Act, (ii) all
other requirements pertaining to the reporting, licensing,
permitting, investigation or remediation of emissions,
discharges, releases or threatened releases of Hazardous
Materials or Solid Waste into the air, surface water, ground
water or land, or relating to the manufacture, processing,
distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of Hazardous Materials or Solid Waste, and
(iii) all other requirements pertaining to the protection of the
health and safety of employees or the public.
"Equipment" shall have the meaning set forth in Section
2.1(a).
"Equity Raise" shall have the meaning set forth in Section
2.4(c.
"ERISA" shall mean Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean an Affiliate of the Seller that
was or may be considered a single employer with the Seller under
ERISA Section 4001(b) or part of the same "controlled group" as
the Seller for purposes of ERISA Section 302(d)(8)(C).
"Estimated Monthly Payment" shall have the meaning set forth
in Section 2.4(b).
"Excluded Assets" shall have the meaning set forth in
Section 2.2.
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"Excluded Employees" shall mean those employees of the
Seller (other than Continuing Employees) listed on Schedule
1.1(B) hereto who will not become employees of the Purchaser on
the Closing Date.
"Excluded Liabilities" shall have the meaning set forth in
Section 2.6.
"Financial Statements" shall have the meaning set forth in
Section 3.8(a).
"Financial Wherewithal" shall mean 1) positive working
capital at the measurement date, computed in accordance with GAAP
and expressed as a ratio of not less than 1.2:1, and 2) Edge's
ability to achieve and maintain solvency, on a consolidated
basis, for the foreseeable future based upon forecasts reflecting
(i) recent historical results, (ii) expected, but not assured,
future results, and (iii) the good faith views and opinions of
the management of Edge and the Purchaser, determined in the
reasonable discretion of Edge as evidenced by an officer's
certificate signed by the Chief Financial Officer.
"Fund-raising Payments" shall have the meaning set forth in
Section 2.4(c).
"GAAP" shall have the meaning set forth in Section 1.2.
"Governmental Approval" shall mean any Consent of, from or
with any Governmental Body.
"Governmental Body" shall mean any court or any federal,
state, municipal or other governmental department, commission,
board, bureau, agency, authority or instrumentality, domestic or
foreign.
"Hazardous Materials" shall mean any waste, substance,
material, smoke, gas or particulate matter that: (i) is or
contains asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum or petroleum-derived
substances or wastes, radon gas or related materials, (ii)
requires investigation, removal, regulation or remediation under
any Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" thereunder, or (iii)
is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous or
dangerous or is regulated by any Governmental Body or
Environmental Law.
"Including" or "Includes" shall mean including without
limitation or includes without limitation.
"Indemnitee" shall have the meaning set forth in Section
8.4(a).
"Indemnitor" shall have the meaning set forth in Section
8.4(a).
"Initial Cash Payment" shall have the meaning set forth in
Section 2.4(a).
"Insurance Policies" shall have the meaning set forth in
Section 3.20.
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"Intangible Assets" shall have the meaning set forth in
Section 2.1(d).
"Interim Financial Statements" shall have the meaning set
forth in Section 3.8(a).
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean the terms "knowledge," "awareness"
and "belief" and any similar term or words of like import shall
mean the Seller's or a Shareholder's knowledge, awareness or
belief, as the case may be, following due inquiry with respect to
the subject matter of the representation and/or warranty being
given by the Seller or a Shareholder in Article 3 hereof.
"Leased Real Property" shall mean all interests leased
pursuant to the Real Property Leases.
"Liability" shall mean any commitments, debts, liabilities,
obligations (including contract and capitalization lease
obligations), indebtedness, accounts payable and accrued expenses
of any nature whatsoever (whether any of the foregoing are known
or unknown, secured or unsecured, asserted or unasserted,
absolute or contingent, direct or indirect, accrued or unaccrued,
liquidated or unliquidated and/or due or to become due),
including any liability or obligation for Taxes.
"Lien" shall mean all mortgages, deeds of trust, liens,
security interests, pledges, leases, conditional sale contracts,
rights of first refusal, options, charges, liabilities,
obligations, agreements, easements, rights-of-way, powers of
attorney, limitations, reservations, restrictions and other
encumbrances of any kind.
"Material Adverse Effect" shall mean any effect
(individually or in the aggregate) that is, or could be
reasonably expected to be materially adverse to the business,
general affairs, management, results of operations, condition
(financial or otherwise), assets, liabilities, goodwill or
general business prospects of the Business or the Seller (other
than a change in national economic conditions generally) whether
or not the result thereof would be covered by insurance that will
or could reasonably be expected to result in Damages of $25,000
or greater.
"Measured Monthly Payment" shall have the meaning set forth
in Section 2.3(b).
"Measurement Period" shall mean the period of time beginning
on the Closing Date and ending on the first anniversary of the
Closing Date.
"Minimum Purchase Price" shall have the meaning set forth in
Section 2.3(b).
"Monthly Payment" shall have the meaning set forth in
Section 2.4(b).
"Multiemployer Plan" shall mean an employee benefit plan as
defined in ERISA Section 3(37).
"Net Proceeds" shall have the meaning set forth in Section
2.4(c).
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"Offset Notice" shall have the meaning set forth in Section
8.5.
"Offset Objection Notice" shall have the meaning set forth
in Section 8.5.
"Operative Documents" shall mean this Agreement, and all
other agreements, instruments, documents, exhibits, schedules and
certificates executed and delivered by or on behalf of the
Seller, the Shareholders or the Purchaser at or before the
Closing pursuant to this Agreement.
"Order" shall mean any order, writ, injunction, decree,
judgment, award, decision or determination of, or agreement with,
any Governmental Body.
"OSHA" shall have the meaning set forth in Section 8.2(d).
"Party" or "Parties" shall have the meaning set forth in
Section 5.10(a).
"Permits" shall mean all permits, authorizations,
certificates, approvals, registrations, variances, exemptions,
rights-of-way, franchises, privileges, immunities, grants,
ordinances, licenses and other rights of every kind and character
(a) under any (i) Applicable Law, (ii) Order or (iii) contract
with any Governmental Body or (b) granted by any Governmental
Body.
"Permitted Encumbrances" shall mean (i) Liens for Taxes and
assessments not yet due and payable or which are being challenged
in good faith and identified in the Schedule 1.1(C) of the
Disclosure Schedule and with respect to which adequate reserves
have been established in the Financial Statements (which reserve
is transferred to the Purchaser as part of the Assets without
consideration); (ii) informational filings made by equipment
lessors under the Uniform Commercial Code; and (iii) landlord's
liens created by statute and not by affirmative action of any
landlord.
"Person" shall mean an individual, partnership, joint
venture, corporation, company, limited liability company, bank,
trust, unincorporated organization, Governmental Body or other
entity or group.
"Post-Closing Period" shall have the meaning set forth in
Section 8.8(b).
"Prepaid Services" shall have the meaning set forth in
Section 2.1(m).
"Premises" shall mean all Business locations of the Seller
consisting of the Leased Real Property at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"Proceeding" shall mean any action, claim, suit, proceeding,
litigation, arbitration, mediation, investigation, inquiry,
grievance, review or notice.
"Products" shall mean all products manufactured, produced,
licensed, marketed or distributed by the Seller as a part of the
Business.
"Proprietary Rights" shall have the meaning set forth in
Section 3.16.
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"Purchase Price" shall have the meaning set forth in Section
2.3.
"Purchaser Indemnitees" shall have the meaning set forth in
Section 8.2.
"Purchaser's Working Capital" shall mean, for any time or
period measured, the Purchaser's current assets minus its current
liabilities, each computed in accordance with GAAP.
"Real Property Leases" shall mean the real property leases,
subleases, licenses and occupancy agreements pursuant to which
the Seller is the lessee, sublessee, licensee or occupant, which
relate to the Business or are being used in the Business.
"Required Working Capital" shall mean a ratio of current
assets to current liabilities, each computed in accordance with
GAAP, of not less than 1.2:1.
"Resolution" and "Resolved" shall have the meaning set forth
in Section 8.5.
"Scheduled Contracts" shall have the meaning set forth in
Section 2.1(c).
"Scheduled Liabilities" shall have the meaning set forth in
Section 2.6.
"SEC Documents" shall have the meaning set forth in Section
3.27(a).
"Seller Indemnitees" shall have the meaning set forth in
Section 8.3.
"Seller's Deliverables" shall have the meaning set forth in
Section 6.3.
"Seller's Prepaid Expenses" shall have the meaning set forth
in Section 2.1(l).
"Seller's Proprietary Information" shall have the meaning
set forth in Section 8.8(a).
"Seller Survival Period" shall have the meaning set forth in
Section 8.1(a).
"Shareholders" or "Shareholder" shall mean collectively or
individually ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇.
"Solid Waste" shall mean any garbage, refuse, sludge from a
waste treatment plant, water supply treatment plant, or air
pollution control facility, including air emissions discharged
into the environment whether pursuant to a permit or exemption
from a Governmental Body or pursuant to any Environmental Law,
and other discarded material, including solid, liquid, semi-
solid, or contained or fugitive gaseous material resulting from
industrial, commercial, mining and agricultural operations, and
from community activities.
"Subsidiaries" shall mean with respect to any corporation
shall mean any other corporation of which at least a majority of
the securities having by their terms ordinary voting power to
elect a majority of the Board of Directors of such other
corporation is at the time directly or indirectly owned or
controlled by such first corporation, or by such first
corporation and one or more of its Subsidiaries.
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"Supplier Data" shall mean all of the Seller's supplier and
vendor lists, records, telephone and fax numbers, email addresses
and publications and marketing material relating to the purchase
of goods or the provision of services to the Seller in connection
with the Business.
"Survival Period" shall have the meaning set forth in
Section 8.1(a) and Section 8.1(b).
"Tax Obligations" shall mean any Taxes which are
attributable or related to the Assets or the Business imposed for
any taxable period or portion of a taxable period ended or ending
on or before the Closing Date or any transfer or sales Taxes that
may be applicable because of the Transactions.
"Taxes" shall mean any federal, state, local or foreign
income, franchise, sales, excise, real or personal property, ad
valorem or other Taxes, assessments, fees, levies, imposts,
duties, deductions or other charges of any nature whatsoever
(including interest and penalties) imposed by any Applicable Law.
"Third-Party Claim" shall have the meaning set forth in
Section 8.4(b)(i).
"Threatened" shall mean any matter or thing will be deemed
to have been Threatened when used herein with respect to any
party if that party has received notice from the Person to whom
the threat is attributable or such Person's agents, which notice
makes specific reference to and clearly identifies the matter or
thing being threatened or that party observes an action by the
Person to whom the threat is attributable or such Person's agents
that in the exercise of reasonable and prudent business judgment
would cause such party to believe that the matter or thing is
being threatened.
"Transaction" or "Transactions" shall mean the acquisition
of the Assets and the performance of the other covenants and the
consummation of the transactions described in this Agreement.
"Transaction Expenses" shall mean the expenses incurred in
connection with the preparation, negotiation, execution and
performance of this Agreement and the consummation of the
Transactions, including all fees and expenses of counsel and
representatives.
"Vehicles" shall have the meaning set forth in Section
2.1(m).
"Wire Transfer" shall mean a payment of money by same day
wire transfer in immediately available funds to an account or
account designated in writing by the recipient to the payor at
least two (2) days prior to the date of payment; provided,
however, that if recipient fails to make such designation prior
to the payment due date, the term shall instead mean payment of
money by overnight delivery of a certified or cashier's check of
a federally insured financial institution.
Other terms shall have the meanings ascribed to elsewhere
herein.
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1.2 Accounting Terms and Definitions. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered
hereunder shall be prepared, in accordance with generally
accepted accounting principles published by the Financial
Accounting Standards Board as in effect from time to time,
applied on a consistent basis ("GAAP"), except that the financial
statements do not include and will not include statements of cash
flows or the notes required by GAAP to accompany the balance
sheets and accompanying statements of operations and cash flows
normally required under GAAP.
2. SALE OF ASSETS; PAYMENT OF CERTAIN LIABILITIES
2.1 Agreement to Purchase and Sell. Subject to the
applicable terms and conditions of this Agreement, at the
Closing, the Seller shall sell, transfer, assign, convey and
deliver to the Purchaser, and the Purchaser shall purchase, all
of the assets that are owned by the Seller (other than the
Excluded Assets), whether such assets are now owned or controlled
by the Seller, including the following assets (such assets,
specifically excluding the Excluded Assets, being collectively
referred to as the "Assets"), free and clear of all Liens, other
than the Permitted Encumbrances:
(a) Equipment. All office furniture, space dividers
and work cubicles, manufacturing, fabricating, demo and
other equipment, machinery, apparatus, tools, appliances,
Computers and Computer Components, samples, implements,
spare parts, supplies and all other tangible personal
property of every kind and description whether located on
the Premises or elsewhere (collectively, the "Equipment").
The Equipment as of May 20, 2002 included all of the items
listed in Schedule 2.1(a) hereto.
(b) Computer Equipment/Software. All computer
equipment, hardware and software owned by the Seller,
including all central processing units, terminals, disk
drives, tape drives, electronic memory units, printers,
keyboards, servers, screens, peripherals (and other
input/output devices), modems and other communication
controllers, embedded devices and any and all parts and
appurtenances thereto, together with all right, title and
interest of the Seller in, to and under all intellectual
property, including all source code, instruction set, object
code, title to software, all data files, all licenses
related to the Seller's use of such Computer
Equipment/Software and all leases pursuant to which the
Seller leases any Computer Equipment/Software (collectively,
the "Computer Equipment/Software"). The Computer
Equipment/Software as of May 20, 2002 included all of the
items listed in Schedule 2.1(b) hereto.
(c) Scheduled Contracts. All right, title and interest
of the Seller in, to and under all contracts, arrangements,
licenses, leases (including capital leases), purchase orders
and agreements (whether written or oral) as of the Closing
Date and described in Schedule 2.1(c) hereto (collectively,
the "Scheduled Contracts") including deposits, prepaid
services, and sums of money due from ▇▇▇▇▇▇▇▇ after the
Closing Date. True, correct and complete copies of all
written Scheduled Contracts, together with all amendments
thereto, and accurate and specific descriptions of all
material terms of all oral contracts (including all oral
contracts with suppliers), have been, or will be, provided
to the Seller prior to the Closing Date.
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(d) Intangible Assets. All right, title and interest
of the Seller in, to and under the name "Universal Data
Technology" or "UDT" and any derivative of such name, all
trademarks, trade names, service marks, labels, logos,
copyrights, designs, trade secrets, technology, know-how,
patents, data, licenses, franchises, distributorships,
covenants by others not to compete, rights to telephone,
facsimile, cellular telephone, pager, ISDN, email addresses,
Internet domain names, web sites, and computer passwords,
rights, other intellectual property created by, licensed by
and/or used by the Seller in the Business on or after
December 31, 2001, privileges and any registrations or
applications for registrations of the foregoing used in the
conduct of the Business, and any right to recovery for
infringement thereof (including past infringement) and any
and all goodwill associated therewith or connected with the
use thereof and symbolized thereby (together, the
"Intangible Assets"). The Seller's Intangible Assets include
the trademarks, trade names, service marks, licenses,
franchises, distributorships, labels, logos, covenants not
to compete and registrations and all rights to telephone,
facsimile, cellular telephone, pager, ISDN, email addresses,
Internet domain names, web sites and computer passwords
listed on Schedule 2.1(d) hereto.
(e) Non-Competition, Non-Solicitation And
Confidentiality Arrangements. All of the Seller's right,
title and interest to the benefits it holds under any and
all agreements which provide for employees, consultants,
associates, customers, suppliers and vendors of the Seller
and other individuals, entities and third parties (i) to
refrain from engaging in activities which may directly or
indirectly compete with the Business, (ii) to refrain from
soliciting the employees, consultants, customers, suppliers
or vendors from the Seller, or (iii) to keep and hold
confidential proprietary, trade secret, or other
confidential information of the Seller, all of which are
listed on Schedule 2.1(e) hereto.
(f) Customer Data and Supplier Data. All of the
Customer Data and Supplier Data.
(g) Insurance Proceeds and Warranty Rights. All
insurance proceeds and insurance claims of the Seller
relating to all or any part of the Assets and, to the extent
transferable, the benefit of and the right to enforce the
covenants and warranties, if any, that the Seller is
entitled to enforce with respect to the Assets or the
Business against the Seller's predecessors in title to the
Assets.
(h) Goodwill. The goodwill of the Business of the
Seller associated with the Intangible Assets or which is
connected with the use of and symbolized by any of the
Intangible Assets.
(i) Permits. All of the Seller's Permits relating to
the Business or all or any part of the Assets. The Permits
include the Permits listed on Schedule 2.1(i).
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(j) Books and Records. All of the Seller's books,
records, papers, files and instruments of whatever nature
and wherever located in the manner in which it is presently
being conducted, including accounting and financial records,
maintenance and production records, media, personnel and
labor relations records, Computer Equipment/Software,
environmental records and reports, sales and marketing
literature, brochures or other sales aids, catalogs, price
lists, mailing lists, sales and property Tax records and
returns, graphic materials, specifications, surveys,
building and machinery diagrams, warranties, but
specifically excluding income Tax records and returns,
corporate minute book and stock records of the Seller and
personnel and labor relations records of Excluded Employees.
(k) Other Intangibles. All right, title and interest
of the Seller in, to and under all rights, privileges,
claims, and causes of action.
(l) Seller's Prepaid Expenses and Other Current
Assets. All right, title and interest of the Seller in and
to all prepaid rentals, lease payments, refunds, Taxes,
clearing accounts, other prepaid expenses, bonds, deposits
and financial assurance requirements (the "Seller's Prepaid
Expenses), and other current assets relating to any of the
Assets or the Business (the "Other Current Assets"). The
Prepaid Expenses and Other Current Assets as of May 20, 2002
included all of the items listed in Schedule 2.1(l) hereto.
(m) Vehicles. All automobiles, trucks, trailers, vans,
forklifts, rolling stock and other certificated vehicles of
the Seller (collectively, the "Vehicles") as of the Closing
Date.
(n) Other Property. All other or additional
privileges, rights, interests, properties and assets of the
Seller of every kind and description and wherever located,
including, without limitation, property that is used or
intended for use in connection with, or that are required or
necessary to the continued conduct of, the Business as
presently being conducted.
2.2 Excluded Assets.
(a) Accounts Receivable. All accounts, consulting and
outsourcing fees receivable of the Seller and other rights
of the Seller to receive payment for goods and products
sold, licensed or leased or for services rendered prior to
May 22, 2002 with the exception of any Accounts Receivable
specifically listed on Schedule 2.2(a), (the "Included
Accounts Receivable").
(b) Cash and Bank Accounts. All bank accounts
(including all cash on deposit in such accounts and
uncleared deposits in such accounts) (the "Bank Accounts"),
the cash of the Seller, all temporary cash investments and
instruments representing same (including marketable
securities and rights of repurchase agreements) and all
other cash equivalents.
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Notwithstanding those assets listed in Section 2.1 hereto,
the foregoing definition of Assets shall specifically exclude
those assets identified in Schedule 2.2 hereto (the "Excluded
Assets").
2.3 Purchase Price. Subject to the terms and conditions of
this Agreement, and subject to any adjustments set forth in this
Agreement, the aggregate consideration to be paid by the
Purchaser to the Seller for the Assets shall be the cash payments
to be calculated and paid in the following manner (in the
aggregate these cash payments shall be referred to herein as the
"Purchase Price"):
(a) In calculating EBITDA of the Purchaser, both Edge
and the Shareholders shall work in good faith to reconcile
and agree upon any issues that might in an unintended manner
affect the EBITDA of the Purchaser caused by the
relationship of Edge or the Purchaser with other wholly
owned subsidiaries of Edge (such as allocations of overhead,
rent, customer contracts, revenue and other items), while
attempting to maintain the Business operated by the
Purchaser segregated to the greatest extent feasible from
the remaining operations of Edge and its other wholly owned
subsidiaries and other EBITDA Addbacks. In addition, for
purposes of calculating EBITDA for the Measurement Period,
the EBITDA Addbacks (listed in Schedule 2.3), shall not be
considered a deduction from the earnings of the Business by
the Purchaser (however, any merit bonuses, whether
discretionary or by virtue of meeting financial criteria
during the Measurement Period will be considered an accrued
expense during the Measurement Period in so calculating
EBITDA).
(b) The total Purchase Price shall be the sum of (i)
$1,127,750 (the "Minimum Purchase Price") and (ii) the
product of the EBITDA of the Purchaser over the Measurement
Period, multiplied by two (2); provided, however, that
except for the application of Section 8.7 herein, the
Purchase Price shall not be less than the Minimum Purchase
Price.
(c) At the Closing, the Purchaser shall receive credit
for paying a portion of the Purchase Price (which shall be
credited dollar for dollar against the Minimum Purchase
Price) equal to the amount of the remaining unpaid balance
of principal and interest due and owing on the Closing Date
from the Seller to Edge under that certain Promissory Note
executed by the Seller and the Shareholders in favor of Edge
in the original principal amount of $150,000, dated
April 19, 2002 (the "Edge Note"). Upon the application of
such credit, Edge shall cancel the Edge Note and provide the
Seller and the Shareholders with a release of the lien and
any other obligations under the Edge Note.
(d) The amount of Purchase Price shall be reduced by
the following amounts (at the time such amounts become
obligations of the Purchaser):
(i) any amount of accrued vacation time of the
Seller's employees who become the employees of the
Purchaser (but not of any employees who do not join the
Purchaser);
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(ii) any Scheduled Liabilities;
(iii)any amount of the Seller's obligations
arising under the Scheduled Contracts as a result of
prepayment for the Seller's goods or services and
accruing before May 20, 2002 (the "Assumed Prepaid
Obligations");
(iv) subject to the provisions of Section 8.7
below, any expenses incurred by the Purchaser and/or
Edge which result from a breach of any representation,
warrant, or covenant made by the Seller under the terms
of this Agreement; and
(v) subject to the provisions of Section 8.7
below, any amounts offset by the Purchaser in
accordance with Section 8.5.
(e) The Purchase Price shall be calculated as soon as
practicable following the end of the Measurement Period and
in any event shall be no later than thirty (30) days
following the delivery to all Parties of all financial
statements necessary to make such a determination.
(f) The Purchase Price shall include one half of the
monthly financing costs incurred by the Purchaser during the
twelve month period following the Closing Dates under any
"factoring" financing arrangements.
2.4 Payment of the Purchase Price.
(a) On the Closing Date, Edge shall cause the
Purchaser to make an initial payment to the Seller of
$227,750 plus the amount determined in Section 2.3(c) (the
"Initial Cash Payment") to be credited against payment of
the Minimum Purchase Price.
(b) Each month beginning with the first full month
after the Closing Date, Edge shall cause the Purchaser to
make a payment to the Seller, to the extent the Purchaser
has sufficient cash to do so, of the sum of (i) the amount
that the Purchaser's Working Capital exceeds Required
Working Capital measured as of the last day of such month
(the "Measured Monthly Payment") plus (ii) the fixed dollar
amount, if any (the "Estimated Monthly Payment"), that Edge
determines in its sole and absolute discretion to pay to the
Seller in addition to the Measured Monthly Payment based on
the performance of the Purchaser for the first three (3)
full months following the Closing Date (the Measured Monthly
Payments and the Estimated Monthly Payments, if any, shall
be collectively referred to as the "Monthly Payments"). No
payment will be due by the Purchaser until the fifth day
after the financial statements necessary to determine the
Monthly Payment have been delivered to Edge. Monthly
Payments will be credited against payment of the Minimum
Purchase Price, and no Monthly Payment shall be made which
would result in total credits against the Purchase Price
exceeding the remaining unpaid balance of the Minimum
Purchase Price.
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(c) In the event that Edge receives proceeds from the
issuance of its capital stock (or indebtedness convertible
into its capital stock) during the Measurement Period (an
"Equity Raise"), then Edge agrees to cause the Purchaser to
advance to the Seller (the "Fund-raising Payments") the
amount of twenty percent (20%) of the net proceeds of such
Equity Raise until the total net proceeds of such Equity
Raises exceeds one million dollars ($1,000,000), after which
Edge shall cause the Purchaser to advance to the Seller ten
percent (10%) of any net proceeds in excess of one million
dollars ($1,000,000) during the Measurement Period. Fund-
raising Payments will be credited against payment of the
Minimum Purchase Price, and no Fund-raising Payment shall be
made which would result in total credits against the
Purchase Price exceeding the remaining unpaid balance of the
Minimum Purchase Price. "Net proceeds" as used herein shall
mean gross proceeds from such Equity Raise, less all
purchase price discounts provided to the funding source and
all transaction costs associated therewith, such as legal
fees, accounting fees, brokerage fees and related matters
associated with the negotiation, documentation and
consummation of such transaction.
(d) Within ten (10) days of the date that the Purchase
Price has been reduced to a sum certain, and in any event no
later than thirty (30) days following the Purchaser's
delivery to Edge of all financial statements necessary to
make such a determination, Edge will cause the Purchaser to
advance to the Seller an amount representing the difference,
if any between (i) the sum of the Initial Cash Payment, all
Monthly Payments, and any Fund-raising Payments made to the
Seller during the Measurement Period and (ii) the greater of
either (A) the Purchase Price or (B) the Minimum Purchase
Price.
(e) Edge hereby guarantees the Purchaser's obligation
to pay the Purchase Price to the Seller pursuant to the
terms of this Agreement.
(f) In the event Edge does not have the Financial
Wherewithal to pay the Purchase Price to the Seller when due
after the end of the Measurement Period, then Edge will have
until seventy-five (75) days after the end of the
Measurement Period to negotiate with the Seller and the
Shareholders an alternative method by which Edge shall pay
such amount due (which discussions may include an issuance
of restricted shares of common stock of Edge, a deferred
payment plan, or a combination of such items and other items
as mutually determined by the Parties). If the Seller, at
its sole discretion, fails to accept such alternative
payment plan, then the Seller shall be entitled to pursue
the remedies set forth on Schedule 2.4(f).
2.5 Allocation of Purchase Price.
(a) The Purchase Price (as adjusted) for the Assets
shall be allocated on the Closing Date (or as soon as
practical thereafter) among the Assets in accordance with an
allocation schedule to be prepared by the Purchaser and
consented to by the Seller, which consent shall not be
unreasonably withheld. Such allocation schedule shall be
prepared in accordance with Section 1060 of the Code.
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(b) In connection with a determination of the
allocation schedule contemplated in Section 2.5(a) above,
the parties shall cooperate with each other and provide such
information as any of them shall reasonably request. The
parties shall each report the federal, state and local and
other Tax consequences of the purchase and sale contemplated
hereby (including the filing of IRS Forms 8594) in a manner
consistent with such allocation schedule and shall not make
any inconsistent written statement or take any inconsistent
position on any Tax returns during the course of any IRS or
other Tax audit, for any financial or regulatory purpose, in
any litigation or investigation or otherwise.
(c) Each party shall promptly notify the other party
if it receives notice that the IRS proposes any allocation
different from the allocation agreed upon in accordance with
this Section 2.5.
2.6 Excluded Liabilities. Neither the Purchaser nor Edge,
nor any of the Affiliates of the Purchaser or Edge, shall assume
or have any liability for any Liabilities (collectively, the
"Excluded Liabilities") of the Seller or any of its Affiliates,
or which in any manner relates to or arises out of the operation
of the Business or the ownership of the Assets during any period
prior to the Closing Date or which are owed by the Seller to any
of the Seller's Affiliates other than those obligations and
commitments set forth in Schedule 2.6, (the "Scheduled
Liabilities").
2.7 Instruments of Transfer; Consents. At the Closing, the
Seller shall deliver to the Purchaser (i) a ▇▇▇▇ of Sale,
substantially in the form of Exhibit A hereto and (ii) all
necessary Consents to consummate the Transactions.
2.8 Further Assurances and Prorations . At the Closing, and
at all times thereafter as may be reasonably necessary, the
Seller and the Shareholders shall execute and deliver to the
Purchaser and/or Edge (i) such instruments of transfer as shall
be reasonably necessary or appropriate to vest in the Purchaser
good and indefeasible title to the Assets and to otherwise comply
with the terms, purposes and intent of this Agreement, and (ii)
such other instruments as shall be reasonably necessary or
appropriate to evidence the assignment by the Seller of the
Scheduled Contracts. At the Closing, and at all times thereafter
as may be reasonably necessary, the Purchaser and Edge shall
execute and deliver to the Seller and the Shareholders such other
instruments as shall be reasonably necessary or appropriate to
evidence the transactions contemplated by this Agreement.
Further, to the extent prorations of certain items (such as year
2002 personal property Taxes on the Assets, prepaid insurance
premiums or similar items) are material, Edge and the Seller will
equitably account for such items in connection with or promptly
following the Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller and the Shareholders, jointly and severally,
hereby represent and warrant to the Purchaser and to Edge that
the following is true, correct and complete as of the date of
this Agreement and will be true, correct and complete (without
limitation) through and as of the Closing Date, regardless of
what investigations, if any, the Purchaser or Edge shall have
made
-15-
prior hereto or prior to the Closing (but which representations
and warranties shall be modified by any of the disclosures
contained in the Disclosure Schedules):
3.1 Organization; Qualification. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Arkansas. The Seller has full
corporate power and authority to own and lease all of the
properties and assets it now owns and leases and to carry on its
business as now being conducted. Schedule 3.1 to the Disclosure
Schedule sets forth a true, correct and complete list of each
foreign jurisdiction in which the Seller is required to be
qualified or licensed to operate the Business and which if any of
such jurisdictions the Seller is not so qualified or licensed.
3.2 Authority Relative to this Agreement. The Seller and
the Shareholders each has full power and authority (corporate and
otherwise) to execute, deliver and perform this Agreement
(including execution, delivery and performance of the Operative
Documents to which each of them is a party) and to consummate the
Transactions. The Shareholders constitute all of the
shareholders of the Seller, and no person, firm corporation or
entity has a claim against the Seller (or a successor in interest
to the Seller) based upon (a) ownership or rights to ownership of
any shares of the Seller's Common Stock; (b) any rights as a
securities holder of the Seller, including, without limitation,
any option or other right to acquire any of the Seller's
securities, any preemptive rights or any rights to notice or to
vote; or (c) any rights under any agreement between the Seller
and any current or former holder of the Seller's securities in
such holder's capacity as such. The execution and delivery by the
Seller and the Shareholders of this Agreement and the Operative
Documents, and the consummation of the Transactions, have been
duly and validly authorized by the Board of Directors of the
Seller and the shareholders of the Seller in accordance with
Applicable Law and no other corporate proceedings on the part of
the Seller are necessary with respect thereto. This Agreement
has been duly and validly executed and delivered by the Seller
and the Shareholders, and constitutes the legal, valid and
binding obligation of the Seller and the Shareholders,
enforceable against each of them in accordance with its terms.
The Seller and the Shareholders will each take, and cause to be
taken, all corporate action that is necessary for the Seller to
complete the Transactions to be completed by the Seller or the
Shareholders pursuant to this Agreement.
3.3 Interest in Other Persons; Subsidiaries. The Seller
does not own or control any equity, partnership, joint venture,
profit sharing, participation or other interest or investment in
any Person, nor does the Seller have any loans outstanding to any
Person. Without limiting the generality of the foregoing, the
Seller does not have any Subsidiaries.
3.4 Consents and Approvals. Except as set forth in
Schedule 3.4, the execution, delivery and performance by the
Seller and the Shareholders of this Agreement and the Operative
Documents and the consummation of the Transactions by each of
them requires no Consent or Order by, from or with any
Governmental Body or other Person.
-16-
3.5 Authority; Licenses. The Seller possesses all of the
Permits required by Applicable Law, as set forth on Schedule
2.1(i), and these Permits constitute all of the Permits necessary
for the Seller to own, use, operate and lease the properties and
assets of the Business and to carry on the Business as it is now
being conducted.
3.6 No Violations. Except as set forth in Schedule 3.6,
neither the execution, delivery or performance of this Agreement
or the Operative Documents by the Seller and the Shareholders,
nor the consummation by the Seller and the Shareholders of the
Transactions will (a) conflict with or result in any breach or
violation of any provision of the Articles of Incorporation or
Bylaws of the Seller, (b) result in a default, or give rise to
any right of termination, cancellation or acceleration or loss of
any material benefit under any of the provisions of any note,
bond, mortgage, indenture, license, trust, agreement, lease or
other instrument or obligation to which any of the Seller or the
Shareholders is a party or by which the Seller or the
Shareholders may be bound including any Scheduled Contract, (c)
result in the creation or imposition of any Lien on any of the
property of the Seller, including any Lien on any of the Assets,
(d) violate any Order, Applicable Law or Permit applicable to the
Seller, the Shareholders, the Business or the Assets or (e)
violate any territorial restriction on the business of the Seller
or the Shareholders or any noncompetition or similar arrangement.
3.7 Compliance with Law.
(a) Neither the Seller, the Assets nor the Business is
in violation in any material respect of any Applicable Law.
Neither the Seller nor any Shareholder is aware of, nor
prior to the date hereof, have any of them received actual
notice of, any past, present or future conditions, events,
practices or incidents which could be reasonably expect to
interfere in any material manner with or prevent compliance
or continued compliance in all material respects with
Applicable Law after the Closing. To the Seller's or any
Shareholder's Actual Knowledge, no such Applicable Law, with
a future compliance date could reasonably be expected to
have a Material Adverse Effect.
(b) Schedule 3.7(b) sets forth all Governmental
Approvals and other Consents necessary for, or otherwise
material to, the conduct of the Business or the ownership,
use or operation of the Assets. Except as set forth in
Schedule 3.7(b), all such Governmental Approvals and
Consents have been duly obtained and are in full force and
effect, and the Seller is in compliance in all material
respects with each of such Governmental Approvals and
Consents held by it relating to the conduct or operation of
the Business or the ownership, use or operation of the
Assets.
(c) The Seller has filed with the proper authorities
all material statements and reports required by the
Applicable Laws to which it or any of its employees (because
of his or her activities on behalf of his or her employer)
is subject relating to the conduct or operation of the
Business or the ownership, use or operation of the Assets.
-17-
3.8 Financial Statements, Etc.
(a) The Seller has delivered to the Purchaser and to
Edge (i) the audited financial statements of the Seller at
and for the periods ended December 31, 2001 (the "Annual
Financial Statements"), and (ii) the March 31, 2002
unaudited quarterly financial statements of the Seller's
last audit date (the "Interim Financial Statements"),
including in each case, a balance sheet and income statement
(the Annual Financial Statements and Interim Financial
Statements, collectively referred to as the "Financial
Statements"). The Interim Financial Statements have been
prepared consistent with the accounting methods historically
used by the Seller and have been completed without formal
assistance of or review by a certified public accountant.
Consistent with historical practice, the Seller has
adequately funded or accrued, as the case may be, all
accrued expenses of the Business, if any, as of the date of
the Interim Financial Statements. The Disclosure Schedule
contains a true, correct and complete copy of the Financial
Statements.
(b) Except as set forth on Schedule 3.8, the Financial
Statements have been prepared in accordance with GAAP,
consistently applied, and on that basis fairly present, in
all material respects, the financial position of the Seller
as of the dates indicated and the results of its operations
and cash flows for the periods then ended (subject to
normal, recurring accounting adjustments which do not and
will not have any Material Adverse Effect on the Seller, the
Business or the Assets). Subject to the foregoing, the
Financial Statements are true, complete and correct in all
material respects and have been prepared from the books and
records of the Seller and have been prepared consistently
with past practices of the Seller and the Business.
(c) Except as set forth on Schedule 3.8, without
limiting the generality of this Section 3.8, the Accounts
and other receivables of the Business which are classified
as current assets in the Financial Statements are bona fide
receivables, were acquired in the ordinary course of
business, are good and collectible (except for stated
reserves), are stated in accordance with GAAP and are not
subject to any offset, counterclaim, credit or backcharges;
there are no Accounts of the Business owned by the Seller or
any Affiliates of the Seller which are not disclosed in the
Financial Statements; all inventories, if any, reflected in
the Financial Statements will be valued at the lower of cost
or market, with cost determined using the average cost
method; adequate provision will have been timely made in the
Financial Statements for doubtful accounts and other
receivables; sales will be stated in the Financial
Statements net of discounts, returns and allowances; all
Taxes assessable against the Seller and due or paid will be
timely and adequately reflected in the Financial Statements
and all Taxes assessable against the Seller and not yet due
and payable will be timely and fully accrued or otherwise
provided for therein; and any items of income or expense
that are unusual or of a nonrecurring nature will be
separately disclosed in the Financial Statements.
(d) The Business has no Liabilities (contingent or
otherwise) other than:
(i) those timely set forth or reserved against in
the respective Financial Statements;
(ii) contractual or other obligations of
performance (other then obligations arising by reason
of a default in performance) incurred in the ordinary
course of business and not required to be reflected in
the Financial Statements under GAAP consistently
applied; and
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(iii)those incurred since the date of the date of
the latest Interim Financial Statement in the ordinary
course of business, consistent with past practices.
(e) After reflecting all year-end correcting and
adjusting entries for the fiscal years ended December 31,
2001 and all period-end correcting and adjusting entries
made as of the latest Interim Financial Statements (which
entries have been disclosed in Schedule 3.8(e)), (i) the
Seller's books of account have been accurately kept in all
material respects with respect to such time periods, (ii)
the transactions entered therein represent bona fide
transactions, and (iii) the revenues, expenses, assets and
Liabilities of the Business have been properly recorded in
such books in all material respects, consistent with
historical practice, with respect to such time periods;
provided, however, that notwithstanding the foregoing, in
all cases all pre-closing expenses have been recorded prior
to closing and all recorded revenues are bona fide.
3.9 Absence of Undisclosed Liabilities. Except as set
forth on Schedule 3.9 and, except as and to the extent reflected
and accrued for in accordance with GAAP on the date of the latest
Interim Financial Statement or incurred in the ordinary course of
business consistent with past practice since the date of the
latest Interim Financial Statement, either individually or in the
aggregate, the Business has no Liability of any nature whatsoever
(including any Tax Liabilities or deferred Tax Liabilities
incurred in respect of or measured by income) or any other
material Liabilities relating to or arising out of any act,
omission, transaction, circumstance, sale of Products or
services, state of facts or other condition that occurred or
existed on or before the Closing, whether or not due or payable.
The Business is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any Person. None of the
employees of the Seller employed in the Business is now or will
by the passage of time hereinafter become entitled to receive any
vacation time, vacation pay or severance pay attributable to
services rendered prior to the Closing Date that is not reflected
as an accrued liability on the latest Interim Financial
Statement.
3.10 Title to and Condition of Assets and Property.
(a) Except for Assets being leased or being used under
licenses disclosed in this Agreement or except as
specifically set forth in Schedule 3.10(a), the Seller has
good and indefeasible title to all Assets and such Assets
are free and clear of all Liens, except for the Permitted
Encumbrances. Except for the Excluded Assets, the Assets
constitute all assets and properties, real, personal,
tangible and intangible that are currently being utilized in
the Business and that are necessary in the conduct of the
Business as presently being conducted. Except for the
Excluded Assets, all assets or properties used by the Seller
in the operation of the Business and owned by any Person
other than the Seller will be transferred, leased or
licensed to the Purchaser following the Closing under valid,
current assignments, leases or license arrangements. Except
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as set forth in Schedule 3.10(a), since the date of the
latest Interim Financial Statement, the Seller has not sold,
transferred, leased, distributed or otherwise disposed of
any of the Assets, or agreed to do so, except for sales of
inventory in the ordinary course of business consistent with
past practices. Upon consummation of the Transactions, the
Purchaser will own the Assets free and clear of all Liens,
except for Permitted Encumbrances.
(b) To the Knowledge of the Seller and the
Shareholders, except as set forth in Schedule 3.10(b), the
tangible Assets of the Business (i) are in good operating
condition and repair, subject to ordinary wear and tear,
(ii) are fit in all material respects for the purposes for
which they are being used and are capable of being used in
the Business as presently being conducted without present
need for any material repair or replacement, except in the
ordinary course of the Business, (iii) except for such
exceptions as will not materially affect the conduct of the
Business, conform in all material respects with all
Applicable Laws, (iv) have been fitted and equipped with all
required guards, ▇▇▇▇▇▇▇, cutoffs and other safety devices
and such devices are in good operating condition and repair,
subject to ordinary wear and tear, and (v) in the aggregate
provide capacity that is consistent with prior capacity
needs and can enable the Purchaser to engage in commercial
operation of the Business on a continuous basis (subject to
normal maintenance and repair outages in the ordinary
course). No material item of maintenance, replacement or
repair has been deferred or neglected. Except as set forth
in Schedule 3.10(b), all of the Assets (subject to normal
maintenance, replacement or repair outages in the ordinary
course of Business) have been and are now producing
merchantable Products or Services and are adequate and
sufficient for all material operations conducted by the
Business in substantially the same manner as currently
conducted prior to Closing.
(c) Except as set forth on Schedule 3.10(c), no
Hazardous Material exists in any structure located on, or
exists on or under the surface of, any real property owned,
leased or otherwise used by the Seller, any predecessor or
successor to the Seller or Affiliate of the Seller in the
Business. Except as set forth in Schedule 3.10(c), the
Seller has not been in violation of any Environmental Law
and, except as set forth on Schedule 3.10(c), there have not
been any environmental assessments or environmental audits
of the Seller or any of its Assets. Except as set forth in
Schedule 3.10(c), there is no Proceeding pending or
Threatened against the Seller relating to compliance with
any Environmental Law nor is there a basis for the assertion
against the Seller of any such Proceeding. Except as set
forth in Schedule 3.10(c), neither the Seller nor any
Shareholder has received notice of, nor does any of them
know of, any past, present or future events, conditions,
facts, circumstances, activities, practices, incidents,
actions or plans which relate to the ownership, use,
operation, lease or occupancy of any Asset or the operation
of the Business, that may interfere with, or prevent
compliance with, or continued compliance or that might
constitute a violation of, any Environmental Law.
(d) All tangible personal property held by the Seller
in the Business under lease is held under a valid and
binding lease agreement that is in full force and effect.
The Seller is not in default, and no notice of alleged
default has been received by the Seller, under any such
lease. Except as set forth in Schedule 3.10(d), none of the
rights of the Seller under any such lease will be impaired
by the consummation of the Transactions contemplated by this
Agreement.
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(e) Since the date of the latest Interim Financial
Statement, no property of the Seller used in the Business
has been damaged by any casualty or act of God which,
singularly or in the aggregate, would have a Material
Adverse Effect, or been subject to any condemnation
proceedings.
3.11 Investigation or Litigation. Except as set forth on
Schedule 3.11, there is no Proceeding pending or Threatened
against, relating to or affecting the Seller, any Shareholder,
the Assets or the Business. None of the Seller, any Shareholder,
the Business or the Assets is subject to any currently existing
Proceeding by any Governmental Body or other Person. To the
Seller's and the Shareholders' knowledge, there is no basis for
the assertion of any Proceeding by any Governmental Body or any
Person regarding any violation of any Environmental Law or any
other Applicable Law that would have a Material Adverse Effect on
the operations of the Business.
3.12 Absence of Certain Changes. Since the date of the
latest Interim Financial Statement, except as set forth on
Schedule 3.12, the Seller has owned and operated the Assets and
the Business in the ordinary course of business and consistent
with past practice and there has not been any material adverse
change in the Business, the Assets or in the operation, condition
(financial or otherwise), assets, properties, Liabilities or
general business prospects of the Seller. Without limiting the
generality of the foregoing, except as set forth on Schedule
3.12, the Seller has not since the date of the latest Interim
Financial Statement (other than as contemplated by this
Agreement):
(a) suffered any Material Adverse Effect with respect
to the Assets or the Business or experienced any event or
failed to take any action which reasonably could be expected
to result in a Material Adverse Effect;
(b) suffered any loss, damage, destruction or other
casualty of the Assets (whether or not covered by insurance)
or suffered any loss of or change in relationship with
officers, employees, dealers, distributors, independent
contractors, sales representatives, customers or suppliers
which had or could be expected to result in a Material
Adverse Effect;
(c) subjected any Asset or permitted any Asset to
become subject to, or incurred, any Lien (whether voluntary
or by operation of law) absolute, accrued, contingent or
otherwise, whether due or to become due, except for
Permitted Encumbrances and current Liabilities for trade and
business obligations incurred in connection with the
purchase of goods or services in the ordinary course of
business of the Business consistent with past practice, none
of which Liens or Liabilities, in any case or in the
aggregate, could have a Material Adverse Effect;
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(d) sold, transferred, mortgaged, assigned, leased,
licensed or otherwise disposed of any material Asset other
than inventory sold in the ordinary course of business and
consistent with past practice;
(e) made any capital expenditures, capital additions
or improvements in excess of an aggregate of $10,000 or made
any legally binding commitments therefor insofar as the
foregoing relates to the Assets or the Business;
(f) entered into any material contract, agreement,
instrument or understanding (whether written or oral), or
made or agreed (whether in writing or orally) to any
amendment, modification or termination to any material
contract, agreement, instrument or understanding, including
any Scheduled Contract, other than in the ordinary course of
business of the Business and consistent with past practice;
(g) received any notice of termination of any
contract, lease or other agreement related to the Business
or suffered any damage, destruction or loss (whether or not
covered by insurance) which, in any case or in the
aggregate, has had or could have a Material Adverse Effect;
(h) waived, released, compromised or canceled any
Liabilities owed to or any rights or claims of the Seller
insofar as the foregoing relates to the Business or the
Assets;
(i) made any grant or credit to any customer or
distributor on terms more favorable than the terms on which
credit has been extended to such customer or distributor in
the past or changed the terms of any credit previously
extended insofar as the foregoing relates to the Business or
accepted any order from a customer that is more than sixty
(60) days delinquent in paying its accounts receivable of
the Seller;
(j) failed to replenish inventories of the Business in
a normal and customary manner consistent with prior practice
and prudent business practices or made any purchase
commitment materially in excess of the normal, ordinary and
usual requirements of the Business or at any price
materially in excess of then current market price or upon
the terms and conditions materially more onerous than those
usual and customary in the industry, or made any material
change in its selling, pricing, advertising or personnel
practices of the Business inconsistent with past practice
and prudent business practices;
(k) deferred payment on any liabilities outside the
ordinary course of business of the Business or otherwise
treated suppliers of the Business in such a way that could
negatively affect the future relationship with such
suppliers;
(l) disclosed any confidential proprietary information
of the Business to any person or entity other than to the
Seller's bank lender and to the Seller's accountants and
attorneys and other than pursuant to written confidentiality
agreements. The recipients of confidential information are
described in Schedule 3.12(l) and true and complete copies
of all written confidentiality agreements have been attached
to Schedule 3.12(l);
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(m) accepted or entered into any purchase order or
quotation, arrangement or understanding (whether written or
oral) for future sale of services or Products by or in the
Business which the Seller knew, or should have known at the
time of such acceptance or execution, would not be
profitable in any material respect;
(n) adopted or amended any bonus, profit sharing,
pension, retirement or other compensation plan or made any
material change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or
paid or agreed or orally promised to pay, conditionally or
otherwise, any bonus, incentive, retention or other
compensation, retirement, welfare, fringe or severance
benefit or vacation pay, to or in respect of any director,
officer, employee, salesman, distributor, consultant or
agent of the Seller providing services to the Business;
(o) instituted, settled or agreed to settle any
Proceeding before any court or Governmental Body other than
in the ordinary course of business of the Business
consistent with past practices, but not in any case
involving amounts in excess of $5,000;
(p) been or become actually aware of any fact which
has or could have a Material Adverse Effect on the financial
condition, results of operations, properties, liabilities or
prospects of the Business after Closing;
(q) written up the carrying value of any of the
Assets;
(r) entered into any material transaction related to
the Business other than those contemplated by this Agreement
or considered to be in the ordinary course of business of
the Business;
(s) varied insurance coverage;
(t) entered into any agreement or understanding to do
or permit any of the foregoing, or taken any action or
omitted to take any action that could reasonably be expected
to result in the occurrence of any of the foregoing; or
(u) experienced any material adverse change in the
nature of, or the manner of conducting, the Business.
3.13 Employee Benefits. Schedule 3.13 sets forth a list of
every Employee Benefit Plan maintained by the Seller for
employees in the Business.
(a) Except as provided in Schedule 3.13, each Employee
Benefit Plan which has been maintained by the Seller under
Section 401(a) of the Code, has received a favorable
determination letter from the IRS regarding its
qualification under that section and has, in fact, been
qualified under that section of the Code from the effective
date of such Plan through and including the Closing (or, if
earlier, the date that all of such Plan's assets were
distributed). No event or omission has occurred which would
cause any such Plan to lose its qualification under Section
401(a).
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(b) The Seller has complied with all Applicable Laws
with respect to the Plans. With respect to any Plan, there
has occurred no "prohibited transaction," as defined in
Section 406 of ERISA (for which no exemption exists under
Section 408 of ERISA), or Section 4975 of the Code (for
which no exemption exists under Section 4975(c)(2) or (d) of
the Code), or breach of any duty under ERISA or other
Applicable Law (including any Tax law requirements, or
conditions to favorable Tax treatment, applicable to such
plan), which could result, directly or indirectly (including
through any obligation of indemnification or contribution),
in any Taxes, penalties or other Liability to the Seller or
any ERISA Affiliate. No Proceeding (other than those
relating to routine claims for benefits) is pending or
Threatened or, to the best knowledge of the Seller and the
Shareholders, contemplated with respect to any such Plan.
(c) Neither the Seller nor any ERISA Affiliate
maintains any employee benefit plans subject to the funding
requirements of ERISA Section 302 or Code Section 412.
Neither the Seller nor any ERISA Affiliate fund any Plan
through an association described in Code Section 501(c)(9).
All payments and/or contributions required to have been made
(under the provisions of any agreements or other governing
documents or Applicable Law) with respect to all Plans
maintained by the Seller as they relate to the Business,
either have been made or have been accrued (and all such
unpaid but accrued amounts with respect to the Business are
reflected on the Interim Financial Statements); provided
that any such payments and/or contributions out of the
ordinary course of business since the date of the latest
Interim Financial Statements are listed on Schedule 3.13.
Neither the Seller nor any ERISA Affiliate has ever
maintained a Multiemployer Plan. None of the Plans has ever
provided health care or any other non-pension benefits to
any employees after their employment was terminated (other
than coverage mandated by Applicable Law, including coverage
as required by Part 6 of Subtitle B of Title I of ERISA) or
has ever promised to provide such post-termination benefits.
3.14 Labor and Employee Matters. No employees of the Seller
are represented by a union or other labor organization. Neither
the Seller nor any Shareholder is aware of any union organizing
activities or Proceedings involving, or any pending petitions for
recognition of, a labor union or association. There are no labor
disputes currently subject to any Proceeding, there is no
Proceeding pending or Threatened or, to the knowledge of the
Seller or any Shareholder, contemplated with respect to any
employee employed in the operation of the Business, and no basis
exists for asserting any of the foregoing. There has been no
labor strike, dispute, slowdown or stoppage pending or Threatened
against or affecting the Seller. Except as set forth on Schedule
3.14, the Seller has no obligations, contingent or otherwise,
under any employment or consulting agreement, or collective
bargaining agreement or other contract with a labor union or
other labor or employee group. The Seller is not engaged in any
unfair labor practice and, except for such nonmaterial violations
as will not have a Material Adverse Effect on the conduct of the
Business after the Closing, has complied with all provisions of
Applicable Law pertaining to the employment of employees employed
in the operation of the Business, including all such Applicable
Laws relating to labor relations, equal employment, employment
practices, terms and conditions of employment, wages and hours,
entitlement, prohibited discrimination or other similar
employment practices or acts. No agreement which is binding on
the Seller restricts it
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from relocating or closing any of its operations. Except as set
forth in Schedule 3.14, to the Knowledge of the Seller and any
Shareholder (with the Shareholders and the Seller having a duty
to investigate any rumors of which they are aware), there has not
been, and the Seller and the Shareholders do not expect that
there will be, and have not received any notice that there may
be, any adverse changes in relations with any employee of the
Seller as a result of any announcement or consummation of the
Transactions, except for such changes as may be made by the
Purchaser after the Closing, and neither the Seller nor the
Shareholders have any knowledge that any employee of the Seller
will not accept employment with the Purchaser upon consummation
of the Transactions.
3.15 Taxes. Other than those disclosed in Schedule 13.15,
all Taxes that are due and payable by the Seller have been timely
paid (and through the Closing will be timely paid), and the
Seller has timely filed (and, through the Closing Date, will
timely file) all Tax reports and returns required by Applicable
Law to be filed by it. All such Tax reports and returns are
true, complete and correct in all respects with regard to the
Seller for the periods covered thereby. The Seller is not
delinquent in the payment of any Tax relating to the Assets and
the Business. Other than those disclosed in Schedule 3.15, there
is no Tax deficiency asserted against the Seller, and there is no
unpaid assessment, proposal for additional Taxes, deficiency or
delinquency in the payment of any of the Taxes of the Seller or
the Shareholders or other shareholders of the Seller relating to
the Assets and the Business or any violation of any Tax law that
could be asserted by any taxing authority. Other than those
disclosed in Schedule 3.15, there are no Tax Liens upon any
properties or assets of the Seller relating to the Business
(except for statutory liens for current Taxes not yet due) nor
has notice been given of any event which could lead to any such
Lien. No IRS, state or local audit, investigation or Proceeding
of the Seller or the Shareholders or other shareholders of the
Seller is pending or Threatened, and the results of any completed
audits are properly reflected in the Financial Statements. Other
than those disclosed in Schedule 3.15, neither the Seller nor the
Shareholders or any of the other shareholders of the Seller have
granted any extension to any taxing authority of the limitation
period during which any Tax liability may be asserted. The Seller
has not committed any violation of any Tax laws. All monies
required for the payment of Taxes by the Seller relating to the
Assets and the Business not yet due and payable with respect to
the operations of the Seller through and including the Closing
Date, have been accrued and entered upon the books of the
Company. All monies required to be withheld by the Seller from
employees, independent contractors, or others or collected from
customers for income Taxes, social security and unemployment
insurance Taxes and sales, excise and use Taxes, and all accrued
Taxes to be paid by the Seller to any Governmental Body, have
either been paid to the applicable Governmental Body or been
accrued and entered upon the books of the Company. Consummation
of the Transactions will not result in any obligations for Tax on
the Assets, except for sales tax payable as a result of
conveyance of vehicles to the Purchaser.
3.16 Proprietary Rights. Except as set forth on Schedule
3.16, the Seller owns, validly licenses or possesses adequate
authority to use all technology, proprietary information, know-
how, ideas (patented or unpatented), data, licenses, customer
lists, processes, formulas, trade secrets, telephone numbers, fax
numbers, computer software, computer programs, designs,
inventions, trademarks and service marks, trademark and service
marks registrations and
-25-
applications therefor, registered and common law copyrights, and
registered copyright applications, trade names (whether or not
registered or registrable), service marks, service ▇▇▇▇
registrations and applications therefor, Internet domain names
and web sites necessary to conduct the Business as the Business
is presently being conducted (collectively, the "Proprietary
Rights"). Schedule 3.16 sets forth a complete and correct list
(including, where applicable, registration numbers and dates of
filing, renewal and termination) of all Proprietary Rights.
Except as reflected on Schedule 3.16, the Seller has exercised
reasonable efforts to protect its Proprietary Rights. Except as
reflected on Schedule 3.16, no Consent of any Person will be
required for the use of the Proprietary Rights by the Purchaser
after the consummation of the Transactions contemplated hereby
and the Transactions hereunder will not result in any breach of
any agreement relating to any Proprietary Rights. No claim or
opposition has been asserted by any Person to the ownership of
the Seller's Proprietary Rights or the Seller's right to use any
of the Proprietary Rights or challenging or questioning the
validity or effect of any license or agreement relating thereto,
and there is no valid basis for any such claim or assertion.
Each of the Proprietary Rights is valid and subsisting, has not
been canceled, abandoned or otherwise terminated and, if
applicable, has been duly asserted, registered and filed. Except
as set forth on Schedule 3.16, the Proprietary Rights owned by
the Seller are owned free and clear of all Liens. The
Purchaser's use of the Proprietary Rights will not, and the
conduct of the Business as presently conducted does not, infringe
on or violate the rights of any other Person. No Proceedings
have been instituted, are pending or Threatened or are, to the
knowledge of the Seller or the Shareholders, contemplated that
challenge or oppose the rights of the Seller with respect to any
of the Proprietary Rights. The Seller has not received any notice
or inquiry from any Person of any alleged infringement by the
Seller of any intellectual property right. The Seller has not
given and is not bound by any agreement of indemnification in
connection with any Proprietary Rights or Product or service sold
or performed by it. Set forth on Schedule 3.16 is a true,
correct and complete list of all confidentiality agreements and
all other contracts, royalty agreements, licenses or other
understandings or arrangements entered into relating to the
Proprietary Rights and all such contracts are in full force and
effect.
3.17 Accounts Payable and Accrued Liabilities. The Seller's
accounts payable and accrued liabilities at the date of the
latest Interim Financial Statement, were $550,355.28
respectively. Neither the Seller nor the Shareholders is aware of
any event or condition with respect to a specific vendor or
creditor that causes either of them to believe that the terms of
payment to such vendor or creditor are likely to change in any
material respect from the terms enjoyed by the Seller
historically.
3.18 Real Property Leases. The Seller has no Real Property
Leases and has no leased real property whatsoever, associated
with the conduct of the Business.
3.19 Environmental Matters. The Seller holds all Permits,
regulatory plans and compliance schedules, including any permit
or exemption regulating the discharge of air emissions, necessary
under Environmental Laws for conducting the Business. Except as
set forth in Schedule 3.19, the Seller's business, operations,
assets, equipment, leaseholds and other facilities are in
compliance with the provisions of all applicable Environmental
Laws.
-26-
3.20 Insurance. A description of each of the Seller's
insurance policies (including insurance providing benefits for
employees) is attached hereto as Schedule 3.20 (the "Insurance
Policies." All the Insurance Policies currently maintained by the
Seller are in full force and effect, all insurance premiums have
been timely paid to date, and no Insurance Policy will be
canceled prior to Closing, but will be assigned to the Purchaser
and included by Seller in Schedule 2.1(c) as a "Scheduled
Contract". The Insurance Policies carried by the Seller provides
adequate coverage, less deductibles, against the risks normally
insured against by a person conducting the same business as the
Seller.
3.21 Product and Service Warranties. Except as set forth on
Schedule 3.21, there is no claim against the Seller on account of
Product or service warranties or with respect to the manufacture,
fabrication, sale or lease of Products or performance of
services, including any amount due to any customer by reason of
any understanding or agreement between the Seller and any
customer, and there is no basis for any such claim on account of
Products heretofore manufactured, fabricated, sold or leased or
services performed.
3.22 Contracts.
(a) The Seller has disclosed in Schedule 2.1(c) all
Scheduled Contracts, together with all amendments thereto
and accurate descriptions of all material terms of all oral
contracts (including all oral contracts with suppliers),
that are Scheduled Contracts.
(b) Except as set forth on Schedule 3.22(b), all
Scheduled Contracts are and following Closing will be in
full force and effect and enforceable against each party
thereto. The Seller has not received notice of any plan or
intention of any party to any Scheduled Contract to exercise
any right to cancel, terminate or modify any Scheduled
Contract. There does not exist under any Scheduled Contract
any event of default or event or condition that, after
notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder on the part
of the Seller or, to the Seller's or any Shareholder's
knowledge, any other party thereto, except as set forth in
Schedule 3.22(b) hereto. Except as set forth in Schedule
3.22(b), no Consent is required under any Scheduled Contract
as a result of or in connection with, and the enforceability
of any Scheduled Contract will not be affected in any manner
by, the execution, delivery and performance of this
Agreement or any other agreement executed and delivered
hereunder or pursuant hereto or the consummation of the
Transactions contemplated hereby or thereby.
(c) The Seller has not granted any outstanding power
of attorney with respect to the Business or the Assets.
3.23 Investments in Competitors. Except for the ownership
of non-controlling interests of corporations the shares of which
are publicly traded, neither the Seller, any Shareholder nor any
Affiliates of the Seller or any Shareholder (including the
current officers, directors and key employees of the Seller) own
directly or indirectly any interest or has any investment or
profit participation in any Person that is a competitor or
potential competitor of, or which otherwise directly or
indirectly does business with, the Seller.
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3.24 Solvency. The Seller is not now insolvent, nor will the
Seller be rendered insolvent by the consummation of the
Transactions. As used in this Section only, "insolvent" means,
for any Person, that the sum of the present fair saleable value
of its assets does not and/or will not exceed its debts and other
probable liabilities, and the term "debts" includes any legal
liability, whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent, disputed or
undisputed or secured or unsecured.
3.25 Absence of Certain Business Practices. Neither the
Seller, any Shareholder, nor any director, officer, shareholder,
employee or agent of the Seller or any Shareholder, nor any other
Person acting on the Seller's or any Shareholder's behalf, has,
directly or indirectly, within the past five (5) years given or
agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other Person who is or may be
in a position to help or hinder the Business (or assist in
connection with any actual or proposed Transactions) which (i)
could subject the Seller or any such Person to any damage or
penalty in any civil, criminal or governmental Proceeding, (ii)
if not given in the past, could reasonably be expected to have
had an adverse affect on the Business as reflected in the
Financial Statements, or (iii) if not continued in the future,
could reasonably be expected to adversely affect the Business or
which could subject the Seller or any such Person to suit or
penalty in any private or governmental Proceeding.
3.26 No Brokers. Neither the Seller nor any Shareholder has
not employed any broker, agent or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the Transactions.
3.27 Disclosure.
(a) Each of the Seller and each Shareholder has
delivered or made available to the Purchaser complete and
accurate copies of all documents listed on the Disclosure
Schedules delivered as a part hereof. No representation or
warranty of the Seller or the Shareholders contained in this
Agreement or statement in the Disclosure Schedules hereto
contains any untrue statement. No representation or
warranty of the Seller or any Shareholder contained in this
Agreement or statement in the Disclosure Schedules hereto
omits to state a material fact necessary in order to make
the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
(b) (i) No event, transaction or information which has
not been set forth in this Agreement or in the Disclosure
Schedules hereto has come to the attention of the Seller or
the Shareholders which could, as it relates to the Business,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Seller, the Business
of the Assets, and (ii) there is no fact which has specific
application to the Purchaser and which could have a Material
Adverse Effect on the Assets, the Business, the Seller or
the Purchaser which has not been set forth in this Agreement
or the Disclosure Schedules hereto.
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(c) The disclosure in the Disclosure Schedules with
reasonable particularity shall relate to all other
applicable Disclosure Schedules, provided, that reference to
an agreement or document shall not be deemed disclosure with
particularity with respect to terms and conditions included
in the subject agreement or document.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND EDGE
The Purchaser and Edge, jointly and severally, hereby
represent and warrant to the Seller and the Shareholders that the
following are true, correct and complete as of the date of this
Agreement and will be true, correct and complete (without
limitation) through and as of the Closing Date, regardless of
what investigations, if any, the Seller or the Shareholders shall
have made prior hereto or prior to the Closing:
4.1 Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Texas. The Purchaser has the full corporate
power and authority to own and lease all of the properties and
assets it now owns and leases and to carry on its business as now
being conducted. The Purchaser is duly qualified or licensed as
a foreign limited partnership and is in good standing to do
business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it
makes such qualification necessary.
4.2 Authority Relative to this Agreement. Each of the
Purchaser and Edge has full power and authority (partnership and
otherwise) to execute, deliver and perform this Agreement
(including execution, delivery and performance of the Operative
Documents) and to consummate the Transactions. The execution and
delivery by the Purchaser and by Edge of this Agreement, and the
consummation of the Transactions, have been duly and validly
authorized by the Board of Directors of the Purchaser and of Edge
and no other corporate proceedings on the part of the Purchaser
or Edge are necessary with respect thereto. This Agreement has
been duly and validly executed and delivered by the Purchaser and
by Edge and constitutes the legal, valid and binding obligation
of the Purchaser and of Edge enforceable against the Purchaser
and Edge in accordance with its terms.
4.3 Consents and Approvals. Except as set forth in or
otherwise required by this Agreement or the Operative Documents,
the execution, delivery and performance by the Purchaser and Edge
of this Agreement and the consummation of the Transactions by it
requires no Consent or Order of, by or in respect of, any
Governmental Body or other Person, except as has been received by
the Purchaser or Edge on or prior to the Closing.
4.4 No Violations. Neither the execution, delivery or
performance of this Agreement or the Operative Documents by the
Purchaser or by Edge, nor the consummation by the Purchaser or
Edge of the Transactions will (a) conflict with or result in any
breach or violation of any provision of the Articles of
Incorporation or Bylaws of the Purchaser or the Certificate of
Incorporation or Bylaws of Edge, (b) result in a default, or give
rise to any right of termination, cancellation or acceleration or
loss of any material benefit under any of the provisions of any
note, bond, mortgage, indenture, license, trust, agreement, lease
or other instrument or obligation to which the Purchaser or Edge
is a party or by which the Purchaser or Edge may be bound, (c)
violate any Order, Applicable Law or Permit applicable to the
Purchaser or to Edge or (d) violate any noncompetition or similar
arrangement.
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4.5 Investigation or Litigation. There is no Proceeding
pending or Threatened against, relating to or affecting the
Purchaser. The Purchaser is not subject to any currently existing
Proceeding by any Governmental Body or other Person. To the
Purchaser's knowledge, there is no basis for the assertion of any
Proceeding by any Governmental Body or any Person regarding any
violation of any Applicable Law.
4.6 Disclosure.
(a) No representation or warranty of the Purchaser or
by Edge contained in this Agreement contains any untrue
statement. No representation or warranty of the Purchaser or
Edge contained in this Agreement omits to state a material
fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were
made, not misleading.
(b) There has been no event, transaction or
information which has come to the attention of the Purchaser
or to Edge which would, individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect on the Purchaser's or Edge's ability to consummate
the Transactions or perform their respective obligations as
provided in this Agreement.
4.7 No Brokers. Except with respect to principals of the
Purchaser or of Edge, for which the Purchaser and Edge are solely
responsible, neither the Purchaser nor Edge has employed any
broker, agent of finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with
the Transactions.
4.8 Financial Statements, Etc.
(a) Edge has delivered to the Seller and to the
Shareholders (i) the audited financial statements of Edge at
and for the periods ended December 31, 2001 (the "Annual
Financial Statements"), and (ii) all of the March 31, 2002
unaudited interim monthly financial statements of Edge (the
"Interim Financial Statements"), including in each case, a
balance sheet and income statement (the Annual Financial
Statements and Interim Financial Statements collectively
referred to as the "Edge Financial Statements"). To the
extent required by GAAP, Edge has adequately funded or
accrued, as the case may be, all accrued expenses of Edge ,
if any, as of the date of the Interim Financial Statements.
(b) Except as set forth on Schedule 3.8, the Financial
Statements have been prepared in accordance with GAAP,
consistently applied, and on that basis fairly present, in
all material respects, the financial position of Edge as of
the dates indicated and the results of its operations and
cash flows for the periods then ended (subject to normal,
recurring accounting adjustments which do not and will not
have any Material Adverse Effect on Edge). Subject to the
foregoing, the Financial Statements are true, complete and
correct in all material respects and have been prepared from
the books and records of Edge and have been prepared
consistently with past practices of Edge.
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4.9 Solvency. Edge is not now insolvent, nor will Edge be
rendered insolvent by the consummation of the Transactions. As
used in this Section only, "insolvent" means, for any Person,
that the sum of the present fair saleable value of its assets
does not and/or will not exceed its debts and other probable
liabilities, and the term "debts" includes any legal liability,
whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent, disputed or undisputed or secured
or unsecured.
5. ADDITIONAL AGREEMENTS
5.1 Conduct of Business of the Seller. The Seller and the
Shareholders covenant that after the date hereof and prior to the
Closing Date, the Seller shall conduct the Business according to
the normal course of business and in accordance with past
practice to preserve its business organization, keep available
the services of its officers and employees, maintain satisfactory
relationships with licensors, suppliers, dealers, customers and
all others having business relationships with it and continue to
service and maintain all of its respective assets in a manner
consistent with past practice. All risk of loss arising out of
fire and casualty and all liability to third parties arising out
of the operations of the Business prior to the Closing Date shall
be that of the Seller, and the Purchaser shall have no obligation
or liability in connection therewith unless the Closing shall
occur.
5.2 Forbearances by the Seller and the Shareholders. The
Seller and the Shareholders covenant that, except as contemplated
by this Agreement, the Seller shall not, after the date hereof
and prior to the Closing Date, without the prior written consent
of the Purchaser:
(a) sell any Assets other than in the ordinary course
of business;
(b) mortgage, pledge or otherwise encumber or create
any Lien on any of its properties or Assets;
(c) make any commitments for capital expenditures or
other commitment or transaction other than in the ordinary
course of business and consistent with past practice and
with the written consent of the Purchaser;
(d) enter into any employment, consulting, brokerage
or commission agreement or arrangement;
(e) increase compensation payable or to become payable
or make a bonus payment to or otherwise enter into one or
more agreements with any employee or agent of the Seller
employed or engaged in the Business;
(f) take any action, or fail to take any action, the
result of which can reasonably be expected to be a
termination of or material default under any Scheduled
Contract;
(g) materially amend, modify or terminate, or agree to
materially amend, modify or terminate any Scheduled Contract
or any Employment Agreement;
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(h) fail to maintain the confidential treatment of any
of its Proprietary Rights;
(i) take any action, or knowingly omit to take any
action, which could reasonably be expected to result in a
breach of any of the representations, warranties or
covenants set forth in this Agreement or in any document to
be executed or delivered by the Seller hereunder; or
(j) enter into any agreement to do any of the things
described in clauses (a) through (i) above.
5.3 No Solicitation. The Seller and the Shareholders
covenant and agree that, until the sooner of the Closing or the
termination of this Agreement, the Seller and the Shareholders
will negotiate exclusively with the Purchaser and Edge with
respect to the sale of the Assets and the Business, and the
Seller and the Shareholders will not permit any of its respective
Affiliates, agents or representatives (including investment
bankers, attorneys and accountants) to, directly or indirectly
(a) solicit, initiate, review, accept, engage in discussions or
encourage submission of proposals or offers by, or (b) furnish
any information with respect to, or otherwise cooperate in any
way with, or participate in any discussions or negotiations with,
any Person (other than the Purchaser, Edge and their agents) with
respect to any proposal regarding the acquisition or purchase of
all or a material portion of the Assets of, or any equity
interest in the Seller or any business combination, partnership,
joint venture or strategic alliance with the Seller. The Seller
and the Shareholders will promptly notify the Purchaser and Edge
in writing with the details of, and forward to the Purchaser and
to Edge, any inquiry or proposal received by them with respect to
any such transaction.
5.4 Investigation of Business and Properties. The
Purchaser may make or cause to be made such investigation of the
Business and Assets of the Seller and of its financial and legal
condition as appropriate or advisable to familiarize itself
therewith. The Seller agrees to furnish the Purchaser and Edge
and their employees, officers, agents, investment bankers,
accountants, counsel and other representatives with all
financial, operating and other data and information concerning
the Business and the Assets and commitments of the Seller with
respect to the Business and the Assets as the Purchaser or Edge
shall from time to time reasonably request and will afford the
Purchaser and Edge and their employees, officers, accountants,
attorneys, agents, investment bankers and other authorized
representatives access to the Seller's offices (including access
during normal business hours) to review such documents and their
books and records regarding the Assets and the Business and will
be given opportunity to ask questions of, and receive answers
from, representatives of the Seller and the Shareholders with
respect to such matters. Without limiting the foregoing, the
Purchaser and Edge shall have reasonable access to interview the
Seller's customers during the period from the execution of this
Agreement until Closing, such access to be closely coordinated
between the Seller, the Purchaser and Edge, recognizing that
customer relations is a high priority during the process of
advising customers of the proposed sale of the Business.
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5.5 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to
use all commercially reasonable efforts to do all things
necessary, proper or advisable under Applicable Laws and
regulations to consummate and make effective, as soon as
reasonably practicable, the Transactions contemplated by the
Operative Documents, including the obtaining of all Consents and
Orders of any Governmental Body or other Person required in
connection therewith and initiating or defending any legal action
that is necessary or appropriate to permit the Transactions to be
consummated. At any time after the Closing Date, if any further
action is necessary, proper or advisable to carry out the
purposes of this Agreement, then, as soon as is reasonably
practicable, each party to this Agreement shall take, or cause
its proper officers to take, such action. Each party hereto
further agrees to cooperate fully with the other party after the
consummation of the Transactions for the purpose of providing the
Purchaser with the information and access to information
necessary to ensure the Purchaser with a reasonably smooth
transition into the ownership of the Business. No party to this
Agreement shall take or cause to be taken any action that would
cause the representations or warranties expressed herein to be
untrue or incorrect on the Closing Date.
5.6 Consents. As soon as practicable after the execution
of this Agreement, but prior to Closing, the Seller and the
Shareholders will use their respective commercially reasonable
efforts to obtain all necessary approvals and Consents of all
third Persons required on the part of the Seller for the
consummation of the Transactions. The Purchaser will reasonably
cooperate with the Seller in securing any necessary Consents
from, or in making any filings with, or giving any notice to, any
third Persons necessary for the Seller to comply with this
Section 5.6. Notwithstanding any other provision of this
Agreement, to the extent that the assignment by the Seller of any
Scheduled Contract to be assigned hereunder shall require the
Consent of another Person thereto, the consummation of the
Transactions shall not constitute an assignment or attempt at an
assignment thereof if such assignment or attempted assignment
would constitute a breach thereof. If any Consent of a third
Person with respect to any one or more Scheduled Contracts is not
obtained at or prior to Closing, each party hereto agrees to take
whatever action that may be necessary to provide the Purchaser
with the uninhibited benefits of such Scheduled Contracts,
subject to the assumption by the Purchaser of the Seller's
obligations thereunder.
5.7 Notice. Each Party shall promptly give notice to other
Parties upon becoming aware of the occurrence or failure to
occur, or the impending or threatened occurrence or failure to
occur, of any event that would cause or constitute, any of its
representations or warranties being or becoming untrue or any of
its covenants being breached.
5.8 Public Announcements. The parties agree to consult
with each other prior to making any public announcement or other
public disclosure concerning the Transactions contemplated by
this Agreement, including to the existence of discussions
regarding possible Transactions and any of terms and conditions
of such. Except as otherwise required by Applicable Law
(including Applicable Laws and regulations promulgated by or for
the Securities and Exchange Commission), neither party shall and
shall not permit any of its respective Affiliates, agents or
representatives, to make directly or indirectly a public
announcement regarding the Transactions contemplated by this
Agreement without the prior written consent of the other party,
which consent shall not be unreasonably withheld. If a party is
required by law to make any such disclosure, it must provide
notice of such requirement, as soon as practicable, to the other
party.
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5.9 Post-Closing Information.
(a) Taxes. The Purchaser, the Seller and the
Shareholders (each, a "Party," and collectively, the
"Parties") shall cooperate with one another by providing
each other with such assistance as may reasonably be
requested by any of them in connection with the preparation
of any Tax return, any Tax audit or other examination by any
Governmental Body, or any Proceedings related to liability
for Taxes. The Purchaser, the Seller and the Shareholders
shall retain and provide each other with any records or
information which may be relevant to such preparation,
audit, examination, proceeding or determination. Such
assistance shall include making employees available on a
mutually convenient basis to provide and explain such
records and information and shall include providing copies
of any relevant Tax returns and supporting work schedules.
The Party requesting assistance hereunder shall reimburse
the other for reasonable out-of-pocket expenses incurred in
providing such assistance.
(b) Books and Records.
(i) Access. Until April 15, 2005, each Party
shall provide the other Parties with reasonable access
during normal business hours to its books and records
relating to the Business as such books and records
exist as of the Closing (other than books and records
protected by the attorney-client privilege) to the
extent that they relate to the condition or operation
of the Business prior to Closing and are requested by
such Party to prepare its Tax returns, to respond to
any Proceeding arising from or involving a third party
or for any other legitimate purpose specified in
writing. Each Party shall have the right, at its own
expense, to make copies of any such books and records.
(ii) Destruction. Until April 15, 2005, neither
Party shall dispose of or destroy any books and records
relating to the Business to the extent that they relate
to the condition or operation of the Business prior to
Closing without first offering to turn over possession
thereof to the other Parties by written notice at least
thirty (30) days prior to the proposed date of
disposition or destruction; provided, however, that
neither Party may destroy any books or records that
relate to any ongoing proceeding.
(iii) Confidentiality. Each Party may take
such action as it deems reasonably appropriate to
separate or redact information unrelated to the
Business from documents and other materials requested
and made available pursuant to this section and may
condition the other Party's access to documents and
other materials that it deems confidential to the
execution and delivery of an agreement by the other
Parties not to disclose or misuse such information.
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(iv) Assistance. Each Party shall, upon written
request, make reasonable arrangements to (a) make
personnel available for a reasonable period of time to
assist in locating and obtaining any books and records
relating to the Business to the extent that they relate
to the condition or operation of the Business prior to
the Closing, and (b) make personnel available for a
reasonable period of time whose assistance,
participation or testimony is reasonably required in
anticipation of, preparation for, or the prosecution or
defense of, any Proceeding arising from or involving a
third party in which the other Parties do not have any
adverse interest. The Party requesting assistance
hereunder shall reimburse the other Party for all
reasonable out-of-pocket expenses incurred in
connection with providing such assistance.
(c) Exception. Anything in this Agreement to the
contrary notwithstanding, no Party shall be required to
furnish any information or documentation to any other Party
if such information or documentation relates to a claim,
dispute, cause of action, suit or Proceeding between such
Parties, such information and documentation to be discovered
by appropriate and usual discovery in any such claim,
dispute, cause of action, suit or Proceeding.
(d) Edge Information. During the Measurement Period,
on a periodic basis upon reasonable request from the
Shareholders, Edge shall provide various internally
generated information (such as internally generated,
monthly financial statements) of Edge and its Subsidiaries
to the Shareholders. All such information shall be deemed
to be confidential and material non-public information of
Edge, and shall be treated as such by each Shareholder.
5.10 Payment of Liabilities; Maintenance of Corporate
Existence. For as long as the Seller remains liable for any of
the Excluded Liabilities, the Seller shall, and each Shareholder
shall cause the Seller to not declare or pay and dividend on, nor
make any payment on account of, the purchase, redemption,
retirement or other acquisition of any of the capital stock of
the Seller nor make any other distribution in respect thereof,
whether directly or indirectly, in cash or in property of the
Seller (and otherwise work in good faith towards the compromise
or payment of the remaining balance of the Excluded Liabilities,
including with respect to vendors or other parties that have a
business relationship with the Purchaser).
5.11 Disclosure Schedules. The Seller shall have delivered
to the Purchaser and Edge as soon as practicable before the
Closing Date, the proposed final version of the Disclosure
Schedules containing all of the disclosures, exhibits and other
information or items required by the various provisions of this
Agreement. Thereafter, and until the Closing, the Seller shall
deliver to the Purchaser and Edge any supplements or amendments
to such Disclosure Schedules promptly after the Seller or the
Shareholders become aware of any event which changes any
representation, warranty or disclosure made by the Seller or the
Shareholders in this Agreement or any statement made by the
Disclosure Schedules or in any supplement or amendment thereto;
provided, however, that no supplement of or amendment to the
Disclosure Schedules shall relieve the Seller and the
Shareholders from any breach of a representation or warranty or
will require the Purchaser to accept any such supplement or
amendment.
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5.12 Employees. From and after the date hereof through the
Closing Date or earlier termination of this Agreement, the
Purchaser has the right to enter into negotiations with any and
all employees of the Seller for their continued employment with
the Purchaser from and after the Closing Date. The Purchaser
shall use commercially reasonable efforts to employ the
Continuing Employees as of the Closing Date upon such terms and
with such benefits as the Purchaser provides to its employees
generally. Each individual offered employment by the Purchaser
shall be considered "newly hired" and, except as provided in
Section 2.3(c)(i) relating to accruals for vacation and sick pay,
the Purchaser shall have no liability whatsoever with respect to
any matter relating to the employment of such persons by the
Seller prior to the Closing Date. The provisions of this Section
5.13 shall inure solely to the benefit of the Seller and no third
Person (including any employee of the Seller) shall be permitted
to rely hereon as a third party beneficiary or otherwise. The
Purchaser shall take all actions necessary or appropriate to
permit the Continuing Employees to participate as soon as
practical after the Closing Date in the standard employee benefit
programs of the Purchaser for which they are otherwise eligible.
5.13 Mail, Etc. The Purchaser, on the one hand, and the
Seller and the Shareholders, on the other hand, each agree to
promptly deliver to the other the original of any mail or other
communication received by such party after the Closing Date which
should properly be the property of the other. The Purchaser, on
the one hand, and the Seller and the Shareholders, on the other
hand, each further agree from and after the Closing Date to
promptly deliver to the other any monies, checks or other
instruments of payment to which the other party is entitled
hereunder (including any monies related to the Accounts of the
Seller for the period after the Closing Date, which shall be
property of the Purchaser), together with a reasonable accounting
therefor.
5.14 Cooperation. After consummation of the Transactions,
the Seller and the Shareholders each agree to cooperate with the
Purchaser (to the extent reasonably requested by the Purchaser)
in the transition of employees, customers, vendors, suppliers and
other Persons currently having a business relationship with the
Seller. Without limiting the generality of the foregoing, after
the consummation of the Transactions, at the Purchaser's request,
the Seller and the Shareholders shall cooperate with the
Purchaser in making any internal or external notice, announcement
or other communication related to the consummation of the
Transactions and such other matters as the Purchaser shall
reasonably require.
6. CONDITIONS PRECEDENT TO CLOSING
6.1 General Conditions. Consummation of the Transactions
shall be subject to the fulfillment at the Closing Date of each
of the following conditions:
(a) No Injunction. No court having jurisdiction shall
have issued, to the knowledge of the Purchaser, the Seller
or the Shareholders, an injunction preventing the
consummation of the Transactions that shall not have been
stayed or dissolved on or before the Closing Date.
(b) Proceedings. All proceedings taken or to be taken
in connection with the Transactions and all documents
incident thereto shall be reasonably satisfactory in form
and substance to the parties and their respective counsel,
and the parties and their respective counsel shall have
received all such counterpart originals or certified or
other copies of such documents as the parties or their
respective counsel may reasonably request.
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(c) Governmental Consents, Authorizations, Etc. All
material Consents of and with, and any Permits required by,
any applicable Governmental Body that are required for, or
in connection with, the consummation of the Transactions
shall have been obtained or made.
6.2 Conditions to Obligations of the Seller. Consummation
of the Transactions shall be subject to the fulfillment, to the
reasonable satisfaction of the Seller, or its written waiver, at
or before the Closing Date, of each of the following conditions:
(a) Representations and Warranties of the Purchaser.
The representations, warranties and statements of the
Purchaser and Edge contained in this Agreement and the
Operative Documents shall be true, correct and complete as
of the date of this Agreement and shall also be true,
correct and complete at and as of the Closing Date, except
for changes contemplated by this Agreement and, except for
representations and warranties that are expressly limited by
their terms to another date, as if made on the Closing Date;
and the Purchaser and Edge shall have duly performed and
complied with all agreements and covenants required by this
Agreement and the Operative Documents to be performed or
complied with by it hereunder and thereunder at or prior to
the Closing Date.
(b) The Purchaser's Closing Certificate. The
Purchaser and Edge shall have delivered to the Seller a
Closing Certificate dated the Closing Date signed by
officers of the Purchaser and Edge to the effect that the
conditions specified in Section 6.1 and this Section 6.2
have been satisfied.
(c) The Purchaser's Officers' Certificate. The
Purchaser and Edge shall have delivered to the Seller an
Officers' Certificate dated the Closing Date signed by an
officer of the Purchaser and Edge certifying to (a) the due
adoption by the Board of Directors of the attached
resolutions approving the execution and delivery of this
Agreement and the consummation of the Transactions, (b) the
incumbency of the President, Secretary and other officers of
the Purchaser and Edge executing this Agreement or any of
the Operative Documents and (c) such other matters as the
Seller may reasonably request.
(d) Payment of Initial Cash Payment. As set forth in
Section 2.4, the Purchaser shall have delivered, on or
before the Closing Date, by Wire Transfer the Initial Cash
Amount of the Purchase Price to an account designated in
writing by the Seller.
(e) Shareholder Employment Letters. The Purchaser
shall have delivered to each Shareholder such Shareholder's
Employment Letter on terms and conditions reasonably
satisfactory to such Shareholder.
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(f) No Material Adverse Effect. No event, occurrence,
fact, condition, change, development or effect shall have
occurred , exist or come to exist (whether or not covered by
insurance) since the date of the latest Interim Financial
Statement, that individually or in the aggregate, has
constituted or resulted in, or could in the opinion of Edge
be expected to constitute or result in, a Material Adverse
Effect on Edge.
(g) Certificate of Good Standing. Edge ant the
Purchaser shall cause to be delivered to the Seller a
currently effective Certificate of Good Standing of the
Purchaser from the Secretary of State of Delaware (for Edge)
and Texas (for the Purchaser).
(h) Other Matters. The Purchaser shall have delivered
to the Seller, in form and substance reasonably satisfactory
to counsel for the Seller, such certificates and other
evidence as the Seller may reasonably request as to the
satisfaction of the conditions contained in this Section
6.2.
6.3 Conditions to Obligations of the Purchaser.
Consummation of the Transactions shall be subject to the
fulfillment, to the reasonable satisfaction of the Purchaser, or
its written waiver, at or before the Closing Date of the
following conditions (collectively, the Purchaser's obligations
under this Section 6.3 shall be referred to as the "Seller's
Deliverables"):
(a) Representations and Warranties of the Seller and
the Shareholders. The representations, warranties and
statements of the Seller and the Shareholders contained in
this Agreement and the Operative Documents shall be true,
correct and complete as of the date of this Agreement and
shall also be true, correct and complete at and as of the
Closing Date, except for changes contemplated by this
Agreement and, except for representations and warranties
that speak as of a certain date, as if made at and as of the
Closing Date; and the Seller and the Shareholders shall have
performed and complied with all agreements and covenants
required by this Agreement and the Operative Documents to be
performed or complied with by he, it or them hereunder and
thereunder by he, it or them at or prior to the Closing
Date.
(b) The Seller's and Shareholders' Closing
Certificates. The Seller and the Shareholders shall have
delivered to the Purchaser a Closing Certificate dated the
Closing Date signed by each shareholder individually and an
officer of the Seller to the effect that the conditions
specified in Section 6.1 and this Section 6.3 have been
satisfied.
(c) The Seller's Officers' Certificate. The Seller
shall have delivered to the Purchaser an Officer's
Certificate dated the Closing Date signed by officers of the
Seller certifying to (a) the Articles of Incorporation of
the Seller (as certified to by an appropriate officer of the
State issuing same), (b) the Bylaws of the Seller, (c) the
due adoption by the Board of Directors and shareholders of
the Seller of the attached resolutions approving the
execution and delivery of this Agreement and the
consummation of the Transactions, (d) the incumbency of the
President, Secretary and other officers of the Seller
executing this Agreement and any of the Operative Documents
and (e) such other matters as the Purchaser may reasonably
request.
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(d) Transfer Documents. The Seller shall have
delivered to the Purchaser at the Closing all documents,
certificates and agreements necessary to transfer to the
Purchaser good and indefeasible title to the Assets, free
and clear of any and all Liens thereon (including, without
limitation, the Lien in favor of Evergreen Funding
Corporation), other than Permitted Encumbrances, including
without limitation:
(i) the ▇▇▇▇ of Sale; and
(ii) assignment of the Scheduled Contracts dated
on or before the Closing Date, assigning to the
Purchaser all of the Seller's right, title and interest
therein and thereto with, at the Purchaser's election,
any required Consent endorsed thereon.
(e) Employment Agreement. Each Shareholder shall have
delivered to the Purchaser such Shareholder's specific
Employment Letter, and other key employees have entered into
employment agreements with the Purchaser on terms and
conditions reasonably satisfactory to the Purchaser.
(f) The Purchaser's Investigations. The Purchaser
shall have had a full and complete opportunity to inspect
all aspects of the Business and the Assets as well as any
and all books, records, contracts and other documents
relevant to the Business or the Assets. The investigations
by the Purchaser and its representatives in connection with
the proposed transactions shall not have caused the
Purchaser or its representatives to become aware of any
facts or circumstances relating to the Business, operations,
Assets, liabilities, financial condition, results of
operations or affairs of the Seller, or that, in the sole
and absolute discretion of the Purchaser, make it
inadvisable for the Purchaser to proceed with the
transactions contemplated by this Agreement.
(g) Litigation. There shall be no effective Order of
any nature (including any temporary restraining order)
issued by a court or Governmental Body of competent
jurisdiction restraining or prohibiting consummation or
altering the terms of any of the Transactions, or actions
seeking damages based upon the foregoing which the Purchaser
reasonably deems material, and the Seller shall not have
become subject to any litigation, which, if adversely
determined, could, in the reasonable opinion of the
Purchaser, have a Material Adverse Effect on the Business or
Assets.
(h) No Material Adverse Effect. No event, occurrence,
fact, condition, change, development or effect shall have
occurred , exist or come to exist (whether or not covered by
insurance) since the date of the latest Interim Financial
Statement, that individually or in the aggregate, has
constituted or resulted in, or could in the opinion of the
Purchaser be expected to constitute or result in, a Material
Adverse Effect.
(i) Certificate of Good Standing. The Seller shall
cause to be delivered to the Purchaser a currently effective
Certificate of Good Standing of the Seller from the
Secretary of State of each state in which the Seller is
foreign qualified and conducts business.
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(j) Consents. The Seller shall have delivered copies
of all Consents from third Persons and all necessary action
shall have been taken to assign to the Purchaser the Assets,
the Business and the Scheduled Contracts.
(k) Legislation. No law or legally binding regulation
shall have been enacted that does or would prohibit,
restrict or delay consummation of the Transactions or any of
the conditions to the consummation of the Transactions or
that does or would have a Material Adverse Effect on the
Seller, the Assets or the Business.
(l) Real Estate Leases. The Seller shall have
delivered to the Purchaser nondisturbance agreements from
the mortgagee relating to any mortgage to which the Premises
is subject, and consents to assignments, landlord lien
waivers and agreement to the continuation of the options to
renew from the landlords.
(m) Insurance Coverage. The Seller shall have made all
necessary arrangements to provide for insurance coverage
comparable to the coverage afforded under the policies in
Schedule 3.20 in favor of the Purchaser, such coverage to
become effective as of the Closing Date, the costs of which
shall be borne by the Purchaser.
(n) Adequate Financing. UDT Consulting will have in
place and immediately available upon the Closing Date, a
line of financing upon terms and continuing acceptable to
Edge and Purchaser, in the exercise of their reasonable
discretion.
(o) Other Matters. The Seller shall have delivered to
the Purchaser, in form and substance reasonably satisfactory
to counsel for the Purchaser, such certificates and other
evidence as the Purchaser may reasonably request as to the
satisfaction of the conditions contained in this Section
6.3.
7. CLOSING AND TERMINATION
7.1 Closing Date. Subject to the right of the Purchaser,
the Seller and the Shareholders to terminate this Agreement
pursuant to Section 7.2 hereof, the closing for the consummation
of the Transactions contemplated by this Agreement (the
"Closing") shall, unless another date or place is agreed to in
writing by the Seller, the Shareholders and the Purchaser, take
place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on no later than
the third day after all Closing Conditions in Sections 6.1, 6.2,
and 6.3 have been met (the "Closing Date") or such other place
and date as the parties may agree upon in writing. The Closing
shall be effective as of 12:01 a.m. on the day following the
Closing Date.
7.2 Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of the Purchaser, Edge, the
Seller and the Shareholders;
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(b) by either the Seller, the Purchaser or Edge by
written notice to the other party if the Transactions shall
not have been consummated on or before May 31, 2002, unless
such date shall be extended by mutual written consent of the
parties hereto; provided, however, that no party shall be
permitted to terminate hereunder if such party is in
violation of this Agreement;
(c) by the Purchaser or Edge by written notice to the
Seller and the Shareholders if any of the conditions set
forth in Sections 6.1 and 6.3 shall not have been, or if it
becomes apparent that any such conditions will not be,
fulfilled by May 31, 2002, unless such failure shall be due
to the failure of the Purchaser or Edge to perform or comply
with any of the covenants, agreements or conditions hereof
to be performed or complied by the Purchaser or Edge prior
to the Closing; or
(d) by the Seller by written notice to the Purchaser
and Edge if any of the conditions set forth in Sections 6.1
and 6.2 shall not have been, or if it becomes apparent that
any such conditions will not be, fulfilled by May 31, 2002,
unless such failure shall be due to the failure of the
Seller or the Shareholders to perform or comply with any of
the covenants, agreements or conditions hereof to be
performed or complied with by the Seller or the
Shareholders, as the case may be, prior to the Closing.
7.3 Effect of Termination. In the event of the termination
of this Agreement as provided herein, this Agreement shall become
wholly void and have no further force and effect, except as
hereinafter provided; and there shall be no liability on the part
of the Seller, the Shareholders, the Purchaser or Edge (or their
respective officers or directors), except (a) as specified in
Section 9.2 hereof relating to fees and expenses and in Section
5.7 hereof relating to brokers, (b) for any Damages suffered by
the Purchaser or Edge resulting from the Seller's or any
Shareholder's breach of the Seller's or Shareholders' respective
representations and warranties hereunder or the Seller's or
Shareholders' respective breach of the covenants required to be
performed by or complied with by the Seller or the Shareholders
hereunder or under any Operative Document, and (c) for any
Damages suffered by the Seller or the Shareholders resulting from
the Purchaser's breach of the Purchaser's representations and
warranties hereunder or the Purchaser's breach of the covenants
required to be performed by or complied with by the Purchaser
hereunder or under any Operative Document. Nothing contained
herein shall relieve any party from liability for its breach of
this Agreement. Notwithstanding the foregoing, no Party shall be
liable for consequential damages or for damages caused by the
failure to obtain a required Consent.
7.4 Extension; Waiver. At any time prior to the Closing
Date, any party hereto that is entitled to the benefits hereof
(with respect to any such corporate party by action taken by its
Board of Directors or a duly authorized officer), may (a) extend
the time for the performance of any of the obligations or other
acts of the other party or parties hereto, (b) in whole or in
part, waive any inaccuracy in the representations and warranties
of the other party or parties hereto contained herein or in any
Operative Document delivered pursuant hereto, and (c) in whole or
in part, waive compliance with any of the agreements of the other
party or parties hereto or conditions contained herein. Any
agreement on the part of any party hereto to any such extension
or waiver shall not be valid unless it is set forth in an
instrument in writing signed and delivered on behalf of such
party.
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8. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
8.1 Survival.
(a) The covenants, representations and warranties of
the Seller and the Shareholders set forth herein and in the
Operative Documents shall survive the Closing and the
consummation of the Transactions and shall continue in full
force and effect for eighteen (18) months after Closing or
the expiration or termination of this Agreement, whichever
first occurs (the "Seller Survival Period").
(b) The covenants, representations and warranties of
the Purchaser set forth herein and in the Operative
Documents shall survive the Closing and the consummation of
the Transactions and shall continue in full force and effect
until the Purchaser has made payment in full to the Seller
at the Purchase Price or the earlier expiration or
termination of this Agreement, whichever first occurs
("Survival Period").
(c) Anything to the contrary notwithstanding, the
Survival Period shall be extended automatically to include
any time period necessary to resolve a claim for
indemnification which was made before the expiration of the
Survival Period, but not resolved prior to its expiration,
and any such extension shall apply only as to the claims
asserted and not so resolved within the Survival Period.
Liability for any such item shall continue until such claim
shall have been finally settled, decided or adjudicated.
8.2 Indemnity by the Seller. The Seller and the
Shareholders shall jointly and severally indemnify and hold the
Purchaser and its Affiliates (the "Purchaser Indemnitees"),
harmless from and against:
(a) any Damages suffered or incurred arising out or as
a result of any Liability of the Seller or any Shareholder,
or any Affiliate of the Seller or the Shareholders, arising
on or prior to the Closing Date (except for the Scheduled
Liabilities);
(b) any Damages suffered or incurred because of the
breach or inaccuracy of any representation or warranty made
by the Seller or the Shareholders in this Agreement or the
Operative Documents;
(c) any Damages based on, arising out of, or resulting
from the breach or failure or alleged breach or failure by
the Seller or the Shareholders to perform any agreement,
covenant or other obligation contained in this Agreement or
in any Operative Document;
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(d) any Damages based on, arising out of, or resulting
from any employment relationship, or for any salary or other
compensation or benefits attributable to service or
employment with the Seller or any of its Affiliates
(including any Employee Benefit Plan, all Liabilities to any
Person under the Occupational Safety and Health Act
("OSHA"), all Liabilities under ERISA or the Code, and all
Liabilities to any Governmental Body), in each case arising
or resulting from facts or circumstances existing on or
prior to the Closing Date and in each case excluding the
Scheduled Liabilities;
(e) any Damages based on, arising out of, or resulting
from the failure or alleged failure of the Seller or the
Shareholders, or any Affiliate of the Seller or the
Shareholders, to comply with Applicable Law, including any
failure or alleged failure to comply with, or failure or
alleged failure to take any remedial action arising under,
any Environmental Law, in each case relating to the
ownership, use and/or operation of the Assets and the
operation of the Business on or prior to the date of
Closing;
(f) any Damages based on, arising out of, or resulting
from the failure or alleged failure of the Seller or any
Shareholder or any Affiliate of the Seller or the
Shareholders, to pay or withhold any Tax imposed on the
Seller and/or the Shareholders, the Business and/or the
Assets or for failing or allegedly failing to accurately
complete any return due with regard thereto, in each case
relating to the ownership, use and/or operation of the
Assets and the conduct of the Business on or prior to the
Closing and in each case excluding the Scheduled
Liabilities;
(g) any Damages based on, arising out of, or resulting
from the failure of the Seller or any Shareholder to pay
when due any Tax (including sales or other transfer Taxes)
triggered by, based on, arising out of, or attributable to
the Transactions contemplated or effected hereunder;
(h) any Damages based on, arising out of, or resulting
from the Excluded Assets; and
(i) the Transaction Expenses incurred by the Seller
and the Shareholders.
8.3 Indemnity by the Purchaser. The Purchaser and Edge
shall indemnify and hold the Seller, the Shareholders and their
respective Affiliates and the officers, directors, agents,
attorneys and accountants of each of them (the "Seller
Indemnitees"), harmless from and against:
(a) any Damages suffered or incurred arising out or as
a result of any Liability of the Purchaser, or any Affiliate
of the Purchaser, arising after the Closing Date;
(b) any Damages suffered or incurred because of the
breach or inaccuracy of any representation or warranty made
by the Purchaser in this Agreement or the Operative
Documents;
(c) any Damages based on, arising out of, or resulting
from the breach or failure or alleged breach of failure by
the Purchaser to perform any agreement, covenant or other
obligation contained in Agreement or in any Operative
Document, including the Purchaser's obligations to pay or
perform the Scheduled Liabilities;
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(d) any Damages based on, arising out of, or resulting
from the failure or alleged failure of the Purchaser or Edge
to pay or withhold any Tax imposed on Edge or the Purchaser
for periods from and after the Closing Date; and
(e) the Transaction Expenses incurred by the Purchaser
and Edge.
8.4 Defense of Claims.
(a) Notice of Claims. Any person entitled to
indemnification pursuant to this Article (an "Indemnitee")
shall promptly give written notice to the indemnifying party
("Indemnitor") after obtaining knowledge of any claim that
it may have pursuant to this Article. Such notice shall set
forth in reasonable detail the claim and the basis for
indemnification. A failure to give timely notice as provided
in this Section will not affect the rights or obligations of
the Indemnitor or an Indemnitee hereunder, except to the
extent that, as a result of such failure to provide timely
notice, the Indemnitor is deprived of its right to recover
any payment under its applicable insurance coverage or was
materially prejudiced as a result of such failure.
(b) Third-Party Claims.
(i) Right to Assume Defense. An Indemnitee shall
permit the Indemnitor to assume and control (at the
Indemnitor's sole cost) the defense of a claim or
Action arising from or involving a third party (a
"Third-Party Claim") unless (a) the Indemnitor fails to
promptly provide to an Indemnitee written notice of its
election to assume defense of the Third-Party Claim,
(b) an Indemnitee shall have been advised by counsel
that a conflict of interest exists between the
Indemnitee and the Indemnitor with respect to the Third-
Party Claim or with respect to any legal defense which
may be available, (c) the Indemnitor fails to provide
to the Indemnitee reasonable assurance of its financial
capability to defend the Third-Party Claim and to
provide indemnification with respect thereto, (d) the
Indemnitee, in the exercise of its reasonable
discretion, objects to the Indemnitor's choice of
counsel, (e) the Indemnitee reasonably believes that
the Indemnitor is not diligently conducting the defense
of the Third-Party Claim, or (f) the Indemnitor fails
to provide a written acknowledgment of its obligation
to indemnify the Indemnitee with respect to the Third-
Party Claim. An Indemnitee may participate in the
defense or settlement of a Third-Party Claim of which
the Indemnitor has assumed the defense, provided,
however, that such participation must be conducted
through counsel retained at the Indemnitee's sole
expense.
(ii) Settlement of Third-Party Claims. The
Indemnitor shall not consent to entry of any judgment
or enter into any settlement without the prior written
consent of the Indemnitee, which consent shall not be
unreasonably withheld (due consideration being given to
the ongoing relationships between the third party
making the Third-Party Claim and the Indemnitee),
provided, however, the Indemnitor may consent to entry
of any judgment or enter into any settlement without
the written consent of the Indemnitee so long as the
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judgment or settlement (a) includes an unconditional
and complete release of the Indemnitee (without any
Liability whatsoever to any Indemnitee) by the claimant
or plaintiff making the Third-Party Claim, which
release shall be in a form reasonably satisfactory to
the Indemnitee, and (b) involves no admission or
acknowledgment of civil or criminal liability or fault
of any kind. Alternatively, an Indemnitee shall not
consent to entry of any judgment or enter into any
settlement without the prior written consent of the
Indemnitor, which consent shall not be unreasonably
withheld (due consideration being given to the ongoing
relationships between the third party making the Third-
Party Claim and the Indemnitor), provided, however, the
Indemnitee may consent to entry of any judgment or
enter into any settlement without the written consent
of the Indemnitor so long as the judgment or settlement
(a) includes an unconditional and complete release of
the Indemnitor (without any Liability whatsoever to any
Indemnitor) by the claimant or plaintiff making the
Third-Party Claim, which release shall be in a form
reasonably satisfactory to the Indemnitor and (b)
involves no admission or acknowledgment of civil or
criminal liability or fault of any kind.
(iii) Cooperation. Each Party shall cooperate
with the other Parties in the defense of a Third-Party
Claim irrespective of which Party is assuming such
defense. Cooperation includes all reasonable requests
for access to witnesses, records, materials and all
other pertinent information in its possession or under
its control.
8.5 Offset. At any time and from time to time, the
Purchaser shall be entitled, in addition to, and not in lieu of,
any right or remedy which the Purchaser may have against the
Seller and the Shareholders, under or pursuant to this Agreement,
or otherwise, to notify the Seller and the Shareholders in
writing (an "Offset Notice") that the Purchaser reasonably
believes that it is entitled to indemnity for Damages under
Section 8.2. Any Offset Notice provided hereunder shall identify
the provision of this Agreement which the Purchaser believes
entitles it to such indemnity for Damages and shall identify the
facts which constitute the basis for such claim of indemnity and
the dollar amount of such claim. If on or before thirty (30)
days after delivery of the Offset Notice, the Seller or the
Shareholders shall not have objected thereto, the Purchaser may,
but shall not be required to, offset against the Purchase Price,
the amount of the Damages claimed in the Offset Notice. If on or
before thirty (30) days following delivery of the Offset Notice,
the Seller or the Shareholders shall notify the Purchaser in
writing (the "Offset Objection Notice") that the Seller or the
Shareholders question the amount of any Damages for which
indemnity was claimed thereon (or the entitlement to indemnity),
the Purchaser shall nonetheless be entitled to exercise its
rights of offset provided for in this Section 8.5, but only after
such claims for Damages have been Resolved. A "Resolution" of a
claim for Damages hereunder shall mean: (i) the mutual agreement
by the Purchaser and the Seller; or (ii) with respect to any
claim for Damages the delivery of a final award of the
arbitrators under Section 8.7 hereof. A Resolution of a claim for
Damages shall also mean that such a Claim is "Resolved." Any
Offset Objection Notice provided hereunder shall specify the
provisions of this Agreement and any facts which support the
objection to the claim for Damages. The Purchaser shall not be
obligated to exercise the rights of offset provided in this
Section 8.5, and no failure to exercise any such right of offset
shall relieve the Seller or the Shareholders of any indemnity
obligations under Section 8.2 or otherwise.
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8.6 No Third-Party Beneficiaries. The foregoing
indemnification is given solely for the purpose of protecting the
Purchaser Indemnitees and the Seller Indemnitees and lenders of
the Purchaser to whom the Purchaser assigns its rights hereunder,
and shall not be deemed extended to, or interpreted in a manner
to confer any benefit, right or cause of action upon, any other
Person.
8.7 Additional Agreement. Notwithstanding any other
provision of this Agreement to the contrary, the Purchaser and
Edge specifically agree that no Claim may be made (by virtue of
offset or otherwise) against the Minimum Purchase Price unless
such Claim is a Third-Party Claim; provided, however, nothing
contained herein shall prevent the Purchaser or Edge from
exercising all of its remedies under this Agreement (i) against
the Minimum Purchase Price for Third-Party Claims, or (ii)
against the Purchase Price in excess of the Minimum Purchase
Price for any Claims, whether or not such Claims are Third-Party
Claims (including, without limitation, exercise of any offset
rights). The Parties agree that this Section 8.7 modifies all of
the relevant provisions of this Article 8.
8.8 Arbitration.
(a) If the parties are unable to resolve any
controversy, dispute or claim arising out of, or relating
to, this Agreement (any such controversy, claim or dispute,
a "Dispute") on or before the 30th day following the receipt
by the parties of written notice of such Dispute from the
other party or parties, which notice describes in reasonable
detail the nature of the dispute and the facts and
circumstances relating thereto, any one or more of the
parties may, by delivery of written notice to the other
parties, require that representatives of the parties meet at
a mutually agreeable time and place in an attempt to resolve
such Dispute. Such meeting shall take place on or before
the 15th day following the date of the notice requiring such
meeting, and if the Dispute has not been resolved within
fifteen (15) days following such meeting, any one or more of
the parties may cause such Dispute to be settled by final
and binding arbitration in Dallas, Texas by filing a written
demand for arbitration with the American Arbitration
Association, with a copy to the other party or parties, by
submitting such dispute for arbitration within thirty (30)
days following the expiration of the 15-day period following
such meeting. Except as herein stated, the arbitration will
be conducted in accordance with the provisions of the
Commercial Arbitration Rules of American Arbitration
Association in effect at the time of filing of the demand
for arbitration; provided that the parties agree that each
party to the Dispute shall have discovery to the same extent
as provided under the Federal Rules of Civil Procedure.
(b) The Purchaser, on the one hand, and the Seller, on
the other hand, will appoint one person to hear and
determine the Dispute within thirty (30) days after receipt
of notice of arbitration from the noticing party. The two
persons so chosen will select a third impartial arbitrator,
and their majority decision will be final and conclusive
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upon both parties hereto. If either the Purchaser and Edge,
on the one hand, or the Seller and the Shareholders, on the
other hand, fails to designate its arbitrator within thirty
(30) days after the notice provided for herein, then the
arbitrator designed by the one will act as the sole
arbitrator and will be deemed to be the single, mutually
approved arbitrator to resolve the controversy. In the
event the parties are unable to agree upon a rate of
compensation for the arbitrators, they will be compensated
for their services at a rate to be determined by the
American Arbitration Association.
(c) This agreement to arbitrate shall be specifically
enforceable against the parties by any court of competent
jurisdiction, and may be challenged only upon the grounds
provided in Section 10 to the United States Arbitration Act,
9 U.S.C. Sec. 10. Application may also be made to such
court to confirm, modify or vacate any decision or award of
the arbitrators, for an order of enforcement and for any
other remedies, including equitable remedies, which may be
necessary to effectuate such decision or award. All the
parties hereto hereby consent to the jurisdiction of the
arbitrators and of such court and waive any objection to the
jurisdiction of such arbitrator and such court.
(d) One or more of the parties to any arbitration
proceeding commenced hereunder shall be entitled, as a part
of the arbitration award, to petition the arbitrators to
award the costs and expenses (including reasonable
attorneys' fees and interest of 12% from the date due until
paid on any award) of investigating, preparing and pursuing
an arbitration claim as such costs and expenses are
determined by the arbitrators; provided that in the absence
of such an award each party (considering, for this purpose,
the Purchaser as one party and the Seller and the
Shareholders as the other party), will pay its own costs and
expenses and one-half of the fees and expenses of the
arbitrator(s).
(e) The Purchaser and Edge, on the one hand, and the
Seller and the Shareholders, on the other hand, shall each
deposit one half of all estimated fees and expenses of the
arbitration proceeding with the American Arbitration
Association within fourteen (14) days after a Dispute has
been submitted to arbitration.
(f) THE ARBITRATOR OR ARBITRATORS SHALL NOT BE
EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES
(WHICH COMPENSATORY DAMAGES INCLUDE REASONABLE ATTORNEYS
FEES AND EXPERT WITNESS FEES) AND EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT TO RECOVER DAMAGES IN EXCESS OF
COMPENSATORY DAMAGES (INCLUDING PUNITIVE DAMAGES) IN ANY
FORUM.
(g) The arbitrators will, upon the request of any
party, issue a written opinion of their findings of fact and
conclusions of law.
(h) Upon receipt by the requesting party of said
written opinion, said party will have the right within
twenty (20) days thereof to file with the arbitrators a
motion to reconsider, and the arbitrators thereupon will
reconsider the issues raised by said motion and either
confirm or change their majority decision which will then be
final and conclusive upon both parties hereto. The costs of
such a motion of reconsideration and the resulting written
opinion of the arbitrators will be borne by the moving
party.
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8.9 Non-Disclosure of the Seller's Proprietary Information.
(a) The Seller and, by virtue of his involvement with
and ownership of the Seller, each of the Shareholders, had
and may continue to have access, to confidential,
proprietary, and highly sensitive information relating to
the Business (the "Seller's Proprietary Information"). The
Seller's Proprietary Information sought to be protected
includes, without limitation, information pertaining to:
(i) the identities of customers and clients with which or
whom the Seller does or seeks to do business, as well as the
point of contact persons and decision-makers at these
customers and clients, including their names, addresses, e-
mail addresses and positions; (ii) the past or present
purchasing history and the past and/or current job
requirements of each past and/or existing customer and
client; (iii) the volume of business and the nature of the
business relationship between the Seller and its customers
and clients; (iv) the business plans and strategy of the
Seller, including customer or client assignments and
rearrangements, sales and administrative staff expansions,
marketing and sales plans and strategy, proposed adjustments
in compensation of sales personnel, revenue, expense and
profit projections, industry analyses, and any proposed or
actual implemented technology changes; (v) information
regarding the employees of the Seller, including their
identities, skills, talents, knowledge, experience, and
compensation; (vi) the financial results and business
condition of the Seller; and (vii) computer programs and
software developed by the Seller and tailored to its needs
by its employees, independent contractors, consultants or
vendors; (viii) information relating to the Seller's
engineers, designers, contractors, or persons likely to
become engineers, designers, or contractors; (ix) any past,
present or future merchandise or supply sources; and (x)
system designs, procedure manuals, automated data programs,
reports and personnel procedures.
(b) In light of the foregoing, and in connection with
and in consideration for the Purchase Price to be received
pursuant to the terms of this Agreement, the Seller and each
Shareholder hereby agrees that for a period of two (2) years
and one (1) day after the Closing Date (such time period to
be referred to hereafter as the "Post-Closing Period"), the
Seller and each Shareholder will not use, publish, disclose
or divulge, directly or indirectly, at any time, any of the
Seller Proprietary Information for his or its own benefit or
for the benefit of any person, entity, or corporation other
than the Purchaser, to any person who is not a current
employee of the Purchaser, without the express, written
consent of Edge.
(c) To the extent that any the Shareholder has
obligations similar to those outlined in this Section 8.9 in
any other agreement with Edge and/or with the Purchaser,
including, without limitation, any employment agreement,
then the terms of this Section 8.9 shall control the scope
and duration of such obligations.
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8.10 Non-Competition.
(a) In connection with and in consideration for the
Purchase Price to be received pursuant to the terms of this
Agreement, the Seller and each Shareholder hereby agrees
that for the duration of the Post-Closing Period the Seller
and each Shareholder will not, without the prior written
consent of Edge, directly or indirectly, alone or for his or
its own account, or as owner, partner, investor, member,
trustee, officer, director, shareholder, employee,
consultant, distributor, advisor, representative or agent of
any partnership, joint venture, corporation, trust, or other
business organization or entity engage in any business or
activity within any state in which either the Seller
conducted business before the Closing or the Purchaser
conducts business after the Closing if such business or
activity relates to the Business or directly or indirectly
competes with the Business, as now conducted or as may be
conducted in the future (which, for proposed conduct, shall
be based upon a reasonable determination by the Board of
Directors of Edge considering factors such as material plans
developed to pursue such proposed activities).
(b) Notwithstanding anything in this Section 8.10 to
the contrary, the Post-Closing Period shall be deemed to be
terminated immediately in the event either (i) Edge
commences a voluntary bankruptcy proceeding (or an
involuntary bankruptcy proceeding that is not terminated
within ninety (90) days of the date of filing); (ii) Edge
defaults in the payment of the Purchase Price, when
calculated following the end of the Measurement Period,
which failure is not cured within seventy-five (75) days
following the end of the Measurement Period; or (iii) Edge
or the Purchaser fails to pay to any Shareholder (with
respect to such Shareholder) any salary payments due under
such Shareholder's Employment Letter following the Closing,
which failure is not cured within thirty (30) days of the
date of receipt of written notice of such failure.
8.11 Non-Solicitation of Employees and Consultants; Non-
Solicitation of Clients.
(a) In connection with and in consideration for the
Purchase Price to be received pursuant to the terms of this
Agreement, the Seller and each Shareholder hereby agrees
that for the duration of the Post-Closing Period such the
Seller and each Shareholder will not, without the prior
written consent of Edge, recruit, hire, solicit, or attempt
to recruit, hire or solicit, directly or by assisting
others, any employees or consultants either (i) employed by
or associated with the Seller prior to the Closing Date or
(ii) employed by or associated with the Purchaser after the
Closing Date and who were employed by, doing business with,
or associated with the Purchaser within six (6) months of
the time of the attempted recruiting, hiring or solicitation
(the "Restricted Employees"), nor shall he or it contact or
communicate with any Restricted Employees for the purpose of
inducing such Restricted Employees to terminate their
employment or association with the Seller.
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(b) In connection with and in consideration for the
Purchase Price to be received pursuant to the terms of this
Agreement, the Seller and each Shareholder hereby agrees
that for the duration of the Post-Closing Period the Seller
and each Shareholder will not, without the prior written
consent of Edge, directly or indirectly, alone or for his or
its own account, or as owner, partner, investor, member,
trustee, officer, director, shareholder, employee,
consultant, distributor, advisor, representative or agent of
any partnership, joint venture, corporation, trust, or other
business organization or entity, contact, solicit, or seek
to divert the business or patronage of any person,
association, corporation, or other business organization or
entity with whom or which either Edge, the Seller, and/or
the Purchaser had a business relationship, including,
without limitation a customer, client, supplier, or vendor
relationship, within the period six (6) months before the
Closing Date or will have during the Post-Closing Period.
(c) To the extent that any Shareholder has obligations
similar to those outlined in this Section 8.11 in any other
agreement with Edge and/or the Purchaser (including, without
limitation, any employment agreement) then the terms of this
8.10 shall control the scope and duration of such
obligations.
8.12 Business Combinations of Purchaser. The Purchaser
covenants that for a period of twelve months after the Closing
Date it will not effect a transaction whereby the result would be
a sale of all or substantially all of the stock or assets of the
Purchaser without obtaining the prior written approval of the
Seller.
9. GENERAL PROVISIONS AND OTHER AGREEMENTS
9.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if and
when delivered personally or transmitted by telex, facsimile
(receipt confirmed) or telegram, mailed by registered or
certified mail (return receipt requested) or sent by a recognized
next business day courier to the following persons at the
following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Purchaser:
UDT Consulting, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy (which shall not constitute notice to the
Purchaser) to:
▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller or the Shareholders:
C/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy (which shall not constitute notice to the
Seller or the Shareholders) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 Fees and Expenses. The Seller and the Shareholders
shall pay all of their respective fees, costs and expenses
(including those of accountants, appraisers and attorneys)
incurred in connection with or related to the preparation,
negotiation, execution, delivery, satisfaction, compliance and
consummation of this Agreement and the Transactions contemplated
hereby and the closing conditions hereunder, as well as the fees
of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ associated with the audit of the Seller. The
Purchaser and Edge shall pay all of their respective similar
fees, costs and expenses.
9.3 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement. Terms such as
"herein," "hereof," "hereinafter" refer to this Agreement as a
whole and not to the particular sentence or paragraph where they
appear, unless the context otherwise requires. Terms used in the
plural include the singular, and vice versa, unless the context
otherwise requires. This Agreement and the Operative Documents
have been drafted by all of the parties to this Agreement and
should not be construed against any of the parties hereto.
9.4 Parties in Interest. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any Persons
other than the Purchaser, the Seller and the Shareholders and
their respective permitted successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the
obligation or liability of any third Person to any party to this
Agreement, nor shall any provisions give any third Person any
right or subrogation against any party to this Agreement.
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9.5 Governing Law; Venue. This Agreement shall be
construed and enforced in accordance with the substantive laws of
the State of Texas without reference to the conflict of law
provisions of the State of Texas. Venue for any action shall lie
solely in Dallas County, Texas.
9.6 Incorporation by Reference. The Disclosure Schedule
and any other Schedules and exhibits hereto shall be deemed
incorporated by reference in this Agreement.
9.7 Entire Agreement; Amendment; Waiver. This Agreement,
the Disclosure Schedules and the Operative Documents constitute
the entire Agreement between the Seller, the Shareholders, the
Purchaser and Edge pertaining to the subject matter contained
herein and therein and supersedes all prior agreements,
representations, and all understandings of the parties. No
supplement, modification or amendment of this Agreement or any
such other instruments shall be binding unless expressed as such
and executed in writing by the Purchaser, Edge, the Seller and
the Shareholders. No waiver of any of the provisions of this
Agreement or any such other instruments shall be deemed to be or
shall constitute a waiver of any other provisions hereof or
thereof, whether or not similar, nor shall any such waiver
constitute a continuing waiver. No waiver shall be binding
unless expressed as such in a document executed by the party
making the waiver.
9.8 Assignment; Binding Effect. This Agreement may not be
assigned by operation of law or otherwise without consent. This
Agreement shall be binding on and shall inure to the benefit of
the successors, assigns, heirs and representatives of the parties
hereto, but nothing contained in this paragraph shall be
construed as a consent to any assignment of this Agreement by
either the Purchaser, Edge, the Seller or the Shareholders unless
otherwise set out herein. Notwithstanding the foregoing
provisions of this Section 9.8, the Seller may assign, transfer
and/or dispose all or any part of its rights under this Agreement
to the Shareholders and/or his designee or assignee and/or pay
any dividend and/or make any distribution to the Shareholders
and/or his designee or assignee; provided, however, that in the
event of and after any such assignment, transfer, disposition,
dividend or distribution, the Seller, the Shareholders and any
such designee or assignee shall remain jointly and severally
liable for any and all Damages and for any and all obligations of
the Seller set forth in this Agreement.
9.9 Severability. If any provision of this Agreement,
including any phrase, sentence, clause, section or subsection, is
legally inoperative or unenforceable for any reason, such
circumstances shall not have the effect of rendering any other
provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatsoever.
9.10 Counterparts. This Agreement may be executed by
facsimile in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
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9.11 Other Terms; Cooperation. In the event that this
Agreement either contemplates the negotiation of other terms or
is silent on material terms, the Parties shall exercise good
faith and diligence in reaching an agreement on these other
terms; provided, however, that the foregoing shall not require
the expansion of any liability or duty for the limitation or
restriction of any right established by this Agreement. It is
the intent of the Seller and the Shareholders to transfer to the
Purchaser all of the Assets of the Seller, other than the items
specifically excluded herein. In the event an Asset is
inadvertently not placed on the appropriate Schedule, upon
discovery, the Seller and/or the Shareholders shall effectuate
the transfer of such Asset as soon as practicable and such
inadvertent mistake shall not constitute a breach hereunder.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers.
SELLER:
UNIVERSAL DATA TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President/CEO
SHAREHOLDERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
PURCHASER:
UDT CONSULTING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Vice President and Secretary
EDGE:
EDGE TECHNOLOGY GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
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