AGREEMENT AND PLAN OF MERGER
AMONG
EDGE TECHNOLOGY GROUP, INC.,
VT ACQUISITION CORP.,
VIRTUALLY THERE, INC.
AND
VIRTUALLY THERE SHAREHOLDERS
as of May 30, 2002
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is
entered into as of May 30, 2002, among Edge Technology Group,
Inc., a Delaware corporation ("Edge"), VT Acquisition Corp., a
Texas corporation and a wholly owned subsidiary of Edge
("Acquisition Corp"), Virtually There, Inc., a Texas corporation
("VTI"), R. Jeffrey Ireland ("Ireland"), Alex D. Seleny
("Seleny"), Stephen Dooley ("Dooley") and Kathy Gutierrez
("Gutierrez") (collectively Ireland, Seleny, Dooley and Gutierrez
are referred to as the "VTI Shareholders").
RECITALS
A. The parties intend that, subject to the terms and
conditions hereinafter set forth, Acquisition Corp will merge
with and into VTI (the "Merger"). VTI will be the surviving
corporation (the "Surviving Corporation") and will become a
wholly owned subsidiary of Edge. The merger will occur pursuant
to a Plan of Merger substantially in the form of Exhibit A (the
"Plan of Merger") and the applicable provisions of the laws of
the State of Texas. Upon the Merger, all outstanding Common
Stock of VTI will be converted into Common Stock of Edge and all
outstanding Common Stock of Acquisition Corp will be converted
into Common Stock of VTI, in each case in the manner and on the
basis determined herein and as provided in the Plan of Merger.
B. Concurrently with the execution and delivery of this
Agreement, the VTI Shareholders are executing and delivering to
VTI's Secretary their unanimous written consents, as all of VTI's
shareholders, to the Merger, this Agreement, the Plan of Merger
and the transactions provided for herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements of Edge, VTI, the VTI Shareholders and
Acquisition Corp contained herein, the parties agree as follows:
ARTICLE I
PLAN OF MERGER
1.01 THE MERGER. The Plan of Merger will be filed with the
Office of the Secretary of State of the State of Texas as soon as
practicable after the "Closing" (as defined in Section 4.01,
below). The Merger shall be effective upon the filing of the
Plan of Merger with the State of Texas (the "Effective Time").
Subject to the terms and conditions of this Agreement and the
Plan of Merger, Acquisition Corp will be merged with and into VTI
pursuant to the Plan of Merger and in accordance with applicable
provisions of the laws of the State of Texas as follows:
(a) Merger Consideration. In exchange for all of the
issued and outstanding common stock of VTI (the "VTI Common
Stock"), Edge shall deliver the following (the "Merger
Consideration"):
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(i) the payment of up to $185,000 of indebtedness VTI
owes as set forth in Schedule 1.01(a)(i) attached
hereto (the "Debt Repayment Consideration"); and
(ii) the payment of $120,000, in the aggregate, in cash
(the "Cash Consideration") and one million, one
hundred and fifty three thousand and eight hundred
and forty six (1,153,846) shares of unregistered,
restricted, privately placed shares of common
stock of Edge (the "Stock Consideration") to the
VTI Shareholders in the proportions set forth on
Schedule 1.01(a)(ii) attached hereto.
(b) Conversion of Shares. The shares of VTI Common
Stock, no par value per share (the "VTI Common Stock"), that
are issued and outstanding immediately prior to the
Effective Time will by virtue of the Merger and at the
Effective Time, and without further action on the part of
any holder thereof, be converted into the right to receive
the Merger Consideration, subject to all terms and
conditions of this Agreement, including, without limitation,
the provisions for withholding a portion of the Merger
Consideration as provided in Section 1.03, below.
(c) VTI Treasury Stock. All shares of VTI Common
Stock that are held by VTI as treasury stock, if any, shall
be canceled and retired and no Merger Consideration shall be
delivered or paid in exchange therefor.
(d) VTI Options. All rights to acquire capital stock
of VTI (whether in the form of options, warrants, or rights
to convert securities) shall be exercised or terminated,
such that upon the payment of the Merger Consideration Edge
will hold 100% of the capital stock of VTI and no rights or
options to purchase or receive any shares of VTI's capital
stock shall be outstanding.
1.02 INTENTIONALLY DELETED
1.03 WITHHELD MERGER CONSIDERATION. At the Closing, Edge
shall retain the entire amount of the Cash Consideration which
shall be retained by Edge and to be payable in accordance with
the provisions of this Section 1.03 (the "Withheld Merger
Consideration").
(a) Edge may deduct from the Withheld Merger
Consideration any of the following amounts upon delivery of
a notice to VTI and the accompanying documentation to
evidence such deduction (each an "Adjustment Amount")
(i) Any VTI Pre-Closing Date Tax
Obligations, as defined in Section 2.08(b),
that remain unpaid as of the Closing Date;
and
(ii) Any amounts of Collectible A/R
Deficiency, as defined in Section 2.27;
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(iii)Any amount by which the Working Capital
deficit (as defined herein) is greater than
$103,374 on the Closing Date;
(iv) The amount of any Excess Professional
Service Fees not paid in full by the VTI
Shareholders on or before the Closing Date in
accordance with Section 6.08 hereof.
(v) The amount, if any, the total of the
following items existing on VTI's balance
sheet as of the Closing Date exceeds
$185,000:
(1) Indebtedness for borrowed
money, including for calculation of this
amount, amounts to be included as part
of the Debt Repayment Consideration; and
(2) The amount of any accounts
payable which are in excess of thirty
(30) days past due.
(b) In addition to any Adjustment Amounts set forth
above, Edge shall also have the right to deduct amounts from
the Withheld Merger Consideration for any Edge Damages,
pursuant to the indemnification procedures set forth in
Section 5.02, which are a result of third-party claims
against VTI and/or Edge.
(c) Edge shall release any remaining amounts of
Withheld Merger Consideration to the VTI Shareholders upon
the later to occur of either:
(i) twelve months and one day from the Effective
Date or
(ii) the date there are no current, pending or
threatened Claims for indemnification under
Section 5.02,
(d) The deductions against the Withheld Merger
Consideration set forth in this Section 1.03 shall not be
deemed to be Edge's exclusive remedy for any breach by VTI
or any VTI Shareholder of any term, condition, provision, or
obligation hereunder.
(g) As used herein, "Working Capital" shall equal
VTI's current assets less its current liabilities as of any
date specified, calculated in accordance with GAAP. For
purposes of this Agreement, the current portion of capital
lease obligations shall not be included in calculating
"Working Capital," "indebtedness" or as part of the "Debt
Repayment Consideration."
1.04 EFFECTS OF THE MERGER. At the Effective Time:
(a) The separate existence of Acquisition Corp will
cease and Acquisition Corp will be merged with and into VTI
and VTI will be the surviving corporation pursuant to the
terms of the Plan of Merger;
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(b) The Articles of Incorporation and Bylaws of
Acquisition Corp will become the Articles of Incorporation
and Bylaws of the Surviving Corporation;
(c) Each share of Acquisition Corp Common Stock
outstanding immediately prior to the Effective Time will
continue to be an identical outstanding share of the
Surviving Corporation;
(d) The composition of the Board of Directors of VTI
shall be as set forth in Annex 1 to Exhibit A;
(e) The officers of VTI shall be the persons set forth
in Annex 1 to Exhibit A; and
(f) The Merger will, at and after the Effective Time,
have all of the effects provided by applicable law.
1.05 FURTHER ASSURANCES. VTI agrees that if, at any time
after the Effective Time, Edge considers or is advised that any
further deeds, assignments or assurances are reasonably necessary
or desirable to vest, perfect or confirm in the Surviving
Corporation title to any property or rights of VTI, Edge and any
of its officers are hereby authorized by VTI to execute and
deliver all such proper deeds, assignments and assurances and do
all other things reasonably necessary or desirable to vest,
perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purposes of
this Agreement, in the name of VTI or otherwise.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE TARGET SHAREHOLDERS
Each of the VTI Shareholders hereby jointly and severally
represents and warrants that:
2.01 ORGANIZATION AND GOOD STANDING. VTI is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas and has the corporate power and
authority to own, operate and lease its properties and to carry
on its business as now conducted. VTI is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction listed in Schedule 2.01, which is each jurisdiction
in which the ownership of its properties, the employment of its
personnel or the conduct of its business requires it to be so
qualified, except where the failure to so qualify would not have
a material adverse effect on VTI, its assets, properties or
financial condition.
2.02 POWER, AUTHORIZATION AND VALIDITY.
(a) VTI has the corporate right, power, legal capacity
and authority to enter into and perform its obligations
under this Agreement and all agreements to which VTI is or
will be a party as contemplated by this Agreement (the "VTI
Ancillary Agreements"). The execution, delivery and
performance of this Agreement and the VTI Ancillary
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Agreements have been duly and validly approved by the VTI
Board of Directors and the VTI Shareholders, as required by
applicable law.
(b) No filing, authorization or approval, governmental
or otherwise, is necessary to enable VTI to enter into, and
to perform its obligations under, this Agreement and the VTI
Ancillary Agreements, except for:
(i) The filing of the Plan of Merger with the
Secretary of State of the State of Texas
(which filing has been authorized by all
necessary corporate approvals), and
(ii) The Required Consents, as defined in Section
2.05 below (which Required Consents have been
obtained).
(c) This Agreement and the VTI Ancillary Agreements
are, or when executed and delivered by VTI will be, valid
and binding obligations of VTI, enforceable against VTI in
accordance with their respective terms, except as to the
effect, if any, of:
(i) Applicable bankruptcy and other similar laws
affecting the rights of creditors generally;
(ii) Rules of law governing specific performance,
injunctive relief and other equitable
remedies; and
(iii)Any rights to indemnification being limited
under applicable securities laws;
provided, however, that the VTI Ancillary Agreements will
not be effective until the earlier of the date set forth
therein or the Effective Time.
2.03 CAPITALIZATION.
(a) Authorized/Outstanding Capital Stock. The
authorized capital stock of VTI consists of 1,000,000 shares
of VTI Common Stock, no par value per share, of which 93,000
shares are issued and outstanding as of the Closing Date,
and all of which issued and outstanding shares are held of
record and owned by the VTI Shareholders. VTI has no
authorized or issued shares of Preferred Stock. All issued
and outstanding shares of VTI Common Stock have been duly
authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission
and have been offered, issued, sold and delivered by VTI in
compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of
applicable federal and state securities laws.
(b) Options/Rights. There are no stock appreciation
rights, options, warrants, conversion privileges or other
rights or agreements outstanding to purchase or otherwise
acquire any of VTI's authorized but unissued capital stock,
there are no options, warrants,
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conversion privileges or other rights or agreements to which
VTI or any VTI Shareholder is a party involving the purchase
or other acquisition of any share of VTI capital stock, and
there is no liability for dividends accrued but unpaid; and
there are no voting agreements, rights of first refusal or
other restrictions (other than normal restrictions on
transfer under applicable federal and State of Texas
securities laws) applicable to any of VTI's outstanding
securities. By executing this Agreement, each of the VTI
Shareholders specifically waives and terminates any and all
previously existing or currently existing pre-emptive rights
granted to the by VTI's Articles of Incorporation.
2.04 SUBSIDIARIES. Except as disclosed on Schedule 2.04,
VTI does not have any subsidiaries or any equity interests,
direct or indirect, in any corporation, partnership, joint
venture or other business entity.
2.05 NO VIOLATION OF EXISTING AGREEMENTS.
(a) Neither the execution and delivery of this
Agreement or any VTI Ancillary Agreement, nor the
consummation of the transactions provided for herein or
therein, will conflict with, or (with or without notice or
lapse of time, or both) result in a termination, breach,
impairment or violation of:
(i) Any provision of the Articles of
Incorporation or Bylaws of VTI, as currently
in effect;
(ii) Any material instrument or contract to which
VTI is a party or by which VTI is bound; or
(iii)Any federal, state, local or foreign
judgment, writ, decree, order, statute, rule
or regulation applicable to and that would
have a material adverse effect on VTI or its
assets or properties.
(b) The consummation of the Merger by VTI will not
require the consent of any third party and will not have a
material adverse effect upon any such rights, licenses,
franchises, leases or agreements pursuant to the terms of
those agreements, other than as set forth in Schedule 2.05
(the "Required Consents"), and VTI has received all such
Required Consents, copies of which have been delivered to
Edge prior to the Closing Date.
2.06 LITIGATION; LEGAL IMPEDIMENTS. Except as set forth in
Schedule 2.06:
(a) There is no action, proceeding or investigation
pending or, to the knowledge of VTI or the VTI Shareholders,
threatened against VTI before any court or administrative
agency.
(b) No person, firm, corporation or entity has a claim
against VTI (or a successor in interest to VTI) based upon:
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(i) Ownership or rights to ownership of any
shares of VTI Common Stock;
(ii) Any rights as a VTI securities holder,
including, without limitation, any option or
other right to acquire any VTI securities,
any preemptive rights or any rights to notice
or to vote, or
(iii)Any rights under any agreement between VTI
and any VTI securities holder or former VTI
securities holder in such holder's capacity
as such; and
(c) There is no order, decree or ruling by any court
or governmental agency or threat thereof, or any other fact
or circumstance that would prohibit or render illegal the
transactions provided for in this Agreement.
(d) There is no litigation or proceeding pending or
threatened that would have the probable effect of enjoining
or preventing the consummation of any of the transactions
provided for in this Agreement.
2.07 VTI INTERIM FINANCIAL STATEMENTS. VTI has delivered to
Edge the financial statements as set forth in Schedule 2.07 (the
"VTI Interim Financial Statements"). The VTI Interim Financial
Statements have been prepared on an accrual basis and, in all
material respects, are in accordance with GAAP, and fairly and
accurately represent the financial condition of VTI and the
results of operations for the period beginning after the audited
balance sheet of VTI (the "Balance Sheet Date") and ending May
22, 2002. Except as set forth in Schedule 2.07, VTI has no
material debt, liability or obligation of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to
become due, that is not reflected or disclosed in VTI Interim
Financial Statements. The VTI Interim Financial Statements
reflect all material transactions of the business of VTI during
the periods covered thereby consistent with the basis of
accounting historically used by VTI, and all documentation that
is necessary to support such transactions has been made, and
after the Closing will be, available to Edge.
2.08 TAX MATTERS. Except as disclosed in Schedule 2.08:
(a) Returns and Reports.
(i) All Tax Returns required to be filed with any
Taxing Authority in any jurisdiction by or
for VTI on or before the Closing Date have
been duly and timely filed, or extensions of
time within which to file such Tax Returns
have been obtained; and
(ii) All such Tax Returns are true, correct and
complete in all material respects.
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(b) Payment.
(i) VTI has timely paid or has made adequate
provision for the payment of all Taxes for
which VTI is or may become liable for
payment, insofar as such Taxes are, were or
will be due and payable on or prior to the
Closing Date;
(ii) All Tax deficiencies assessed against VTI as
a result of any examination of Tax Returns of
VTI have been paid or are being contested in
good faith (collectively, all payment
obligations under Section 2.08(b)(i) and (ii)
shall be referred to as the "VTI Pre-Closing
Date Tax Obligations"); and
(iii)VTI is not the subject of, nor has it been
notified that it is the subject of, any
investigation, assessment, adjustment, audit
or other proceeding proposing any deficiency
in respect of any Tax, and to the knowledge
of VTI and the VTI Shareholders, no
investigation, assessment, adjustment, or
audit has been threatened.
(c) Taxes. VTI has made adequate provisions on the VTI
Interim Financial Statements for all Taxes payable by VTI
for any period for which no Tax Return has yet been filed or
for which Tax Returns have been filed but payment of the Tax
shown to be due thereon is not yet due. Furthermore,
adequate reserves have been maintained to pay such Taxes as
they are due.
(d) Extensions. No agreements, waivers, or other
arrangements exist providing for an extension of time or
statutory periods of limitation with respect to payment by,
or assessment against, VTI of any Tax and no request for any
such arrangements, waivers, or other agreements have been
made; furthermore, no unrevoked power of attorney with
respect to any Tax has been executed or filed with the
Internal Revenue Service or any other Taxing Authority.
(e) Proceedings. No suit, actions, claims, or
proceedings have been asserted as of the date hereof against
VTI in respect of any Tax.
(f) Section 341(f) Election. No election under
Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), has been or will be filed by or on
behalf of VTI.
(g) Tax Liens. There are no Tax liens as of the date
hereof upon any of the assets or properties of VTI except
for statutory liens for Taxes not yet due or delinquent.
(h) Withholding. The amounts of Taxes withheld by or
on behalf of VTI with respect to all amounts paid to
employees of VTI or creditors or other parties for all
periods ending on or before the Closing Date have been
proper and accurate in all material respects, and all
deposits required with respect to amounts paid to such
employees, creditors or other parties have been made in
compliance in all material respects with the provisions of
all applicable Tax laws.
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(i) Tax Sharing Agreements. VTI is not party to, nor
has any obligations under, any tax sharing or similar
agreement or arrangement other than agreements among VTI and
its subsidiaries, all of which have been disclosed to Edge
prior to the Closing Date.
(j) Records. VTI has made available for inspection by
Edge:
(i) Complete and correct copies of all Tax
Returns of VTI that have been required to be
filed for taxable periods ending with or
within the last five calendar years and for
such longer period as Edge has requested in
writing not to exceed the period of the
relevant statute of limitations;
(ii) Complete and correct copies of all ruling
requests, private letter rulings, revenue
agent reports, information document requests
and responses thereto, notices of proposed
deficiencies, deficiency notices,
applications for changes in method of
accounting, protests, petitions, closing
agreements, settlement agreements and any
similar documents submitted by, received by
or agreed to by, or on behalf of, VTI and
relating to taxable periods ending with or
within the last five calendar years and for
such longer period as Edge has requested in
writing, not to exceed the period of the
relevant statute of limitations; and
(iii)Copies of all record retention agreements
currently in effect between VTI and any
Taxing Authority.
(k) Accounting Methods.
(i) VTI has not agreed to make any adjustment by
reason of a change in its accounting method
that would affect the taxable income or
deductions of VTI for any period following
the Closing Date;
(ii) VTI will not be required to include in a
taxable period on or after the Closing Date
taxable income attributable to income that
economically accrued in a taxable period
ending on or before the Closing Date; and
(iii)VTI is not required to include income in any
amount under Section 481 of the Code (or any
comparable provisions of state, local or
foreign law), by reason of a change in
accounting methods or otherwise, as a result
of actions taken prior to the Closing Date.
(iv) VTI is and was entitled under the Code to
report its taxable income on the cash method
of reporting for all taxable years for which
the statute of limitations has not expired.
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(l) Transfer Pricing Agreements. There are no
transfer pricing agreements made by VTI with any Taxing
Authority.
(m) Excess Parachute Payments. VTI is not a party to
any agreement, contract, arrangement or plan that would
result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of
Section 280G of the Code.
(n) Controlled Foreign Corporation. VTI does not own
any interest in any "controlled foreign corporation" (within
the meaning of Section 957 of the Code), "passive foreign
investment company" (within the meaning of Section 1297 of
the Code) or other entity the income of which is required to
be included in the income of VTI whether or not distributed.
(o) For the purposes of this Agreement the following
terms shall have the meanings set forth below:
"Tax" or "Taxes" means all taxes, charges, fees, levies or
other assessments, including, without limitation, any net
income tax or franchise tax based on net income, any
alternative or add-on minimum taxes, any gross income, gross
receipts, premium, sales, use, ad valorem, value added,
transfer, profits, license, social security, Medicare,
payroll, employment, excise, severance, stamp, occupation,
property, environmental or windfall profit tax, custom duty
or other tax, governmental fee or other like assessment,
together with any interest, penalty, addition to tax or
additional amount imposed by any Taxing Authority.
"Tax Return" or "Tax Returns" shall mean all returns,
declarations of estimated tax payments, reports, forms,
estimates, information returns, statements and other
documentation, including any related or supporting
information filed with respect to any of the foregoing,
maintained, filed or to be filed with any Taxing Authority
in connection with the determination, assessment, collection
or administration of any Taxes.
"Taxing Authority" shall mean any domestic, foreign,
federal, national, state, provincial, county or municipal or
other local government, any subdivision, agency, commission
or authority thereof, or any quasi-governmental body
exercising any Taxing Authority or any other authority
exercising Tax regulatory authority.
2.09 TITLE TO PROPERTIES. VTI has good and valid title to
all of its assets as shown on the balance sheet as of the Balance
Sheet Date included in the VTI Interim Financial Statements, free
and clear of all liens, charges or encumbrances (other than for
Taxes not yet due and payable and Permitted Liens (as defined
below)), other than such material assets set forth on Schedule
2.09 as were sold by VTI in the ordinary course of business since
the Balance Sheet Date or which are subject to capitalized
leases. "Permitted Liens" means any lien, mortgage, encumbrance
or restriction that is reflected in the VTI Interim Financial
Statements and is not in excess of $10,000 and which does not
materially detract from the value or materially interfere with
the use, as currently used, of the properties subject thereto or
affected thereby or otherwise
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materially impair the business operations being conducted
thereon. Except as show on Schedule 2.09, there are no UCC
financing statements of record naming VTI as debtor. The
machinery and equipment included in such assets are in good
condition and repair, normal wear and tear excepted, and all
leases of real or personal property to which VTI is a party are
fully effective and afford VTI peaceful and undisturbed
possession of the subject matter of the lease. VTI is not in
violation of any material zoning, building, safety or
environmental ordinance, regulation or requirement or other law
or regulation applicable to the operation of owned or leased or
occupied properties, and VTI has not received any notice of such
violation with which it has not complied or had waived.
2.10 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet
Date, except as set forth in Schedule 2.10, there has not been
with respect to VTI:
(a) Any change in the financial condition, properties,
assets, liabilities business, results of operations or
prospects of VTI, which change by itself or in conjunction
with all other such changes, whether or not arising in the
ordinary course of business, has had or can reasonably be
expected to have a material adverse effect on VTI;
(b) Any contingent liability incurred by VTI as
guarantor or surety with respect to the obligations of
others;
(c) Any material mortgage, encumbrance or lien placed
on any of the properties of VTI;
(d) Any material obligation or liability incurred by
VTI other than in the ordinary course of business;
(e) Any purchase or sale or other disposition, or any
agreement or other arrangement for the purchase, sale or
other disposition, of any of the properties or assets of VTI
other than in the ordinary course of business;
(f) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
properties, assets or business of VTI;
(g) Any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in
respect of, the capital stock of VTI, any split, stock
dividend, combination or recapitalization of the capital
stock of VTI or any direct or indirect redemption, purchase
or other acquisition by VTI of the capital stock of VTI;
(h) Any material labor dispute or claim of material
unfair labor practices, any change in the compensation
payable or to become payable to any of VTI's officers,
employees or agents earning compensation at an anticipated
annual rate in excess of $1,000. or any bonus payment or
arrangement made to or with any of such officers, employees
or agents; or any change in the compensation payable or to
become payable to any of VTI's other officers, employees or
agents other than normal annual compensation increases in
accordance with past practices or any bonus payment or
arrangement made to
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or with any of such other officers, employees or agents
other than normal bonuses or other arrangements made in
accordance with past practices;
(i) Any material change with respect to the
management, supervisory, development or other key personnel
of VTI (the management, supervisory, development and other
key personnel of VTI being listed on Schedule 2.10(i));
(j) Any payment or discharge of a material lien or
liability thereof, which lien or liability was not either
(i) Shown on the balance sheet as of the Balance
Sheet Date included in the VTI Interim
Financial Statements or
(ii) Incurred in the ordinary course of business
after the Balance Sheet Date; or
(k) Any obligation, or material liability incurred by
VTI to any of its officers, directors or shareholders, or
any loans or advances made to any of its officers,
directors, shareholders or affiliate except normal
compensation and expense allowances payable to officers.
2.11 AGREEMENTS AND COMMITMENTS. Except as set forth in
Schedule 2.11, or as listed in Schedule 2.12(b) or Schedule
2.15(a), Schedule 2.15(b), Schedule 2.15(c), Schedule 2.15 (e),
Schedule 2.15(f), or Schedule 2.15 (g) as required by
Section 2.12, Section 2.15 (c) or Section 2.15 (f), respectively,
VTI is not a party or subject to any oral or written agreement,
obligation or commitment that is material to VTI, its financial
condition, business or prospects or which is described below:
(a) Any contract, commitment, letter agreement,
quotation or purchase order providing for payments by or to
VTI in an aggregate amount of
(i) $10,000 or more in the ordinary course of
business; or
(ii) $10,000 or more not in the ordinary course of
business;
(b) Any license agreement as licensor (except for any
nonexclusive software license granted by VTI to end-user
customers where the form of the license, excluding standard
immaterial deviations, has been provided to Edge);
(c) Any agreement by VTI to encumber, transfer or sell
rights in or with respect to any VTI Intellectual Property
(as defined in Section 2.12);
(d) Any agreement for the sale or lease of real or
personal property involving more than $10,000 per year;
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(e) Any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or
other agreement for the distribution of VTI's products;
(f) Any franchise agreement or financing statement;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture contract or arrangement or any
other agreement that involves a sharing of profits with
other persons;
(i) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt
securities, purchase money obligations, conditional sale,
guarantee or otherwise, except for trade indebtedness or any
advance to any employee of VTI incurred or made in the
ordinary course of business, and except as disclosed in the
VTI Interim Financial Statements; or
(j) Any contract containing covenants purporting to
limit the freedom of VTI to compete in any line of business
in any geographic area.
All agreements, obligations and commitments listed in
Schedule 2.11, Schedule 2.12, Schedule 2.15 (c), or
Schedule 2.15 (f) as required by Section 2.11, Section 2.12,
Section 2.15 (c) or Section 2.15 (f), as the case may be,
are valid and in full force and effect in all material
respects, and except as expressly noted in writing, a true
and complete copy of each has been delivered or been made
available to Edge or its counsel. Except as noted on
Schedule 2.11 neither VTI nor, to the knowledge of VTI or
the VTI Shareholders, any other party is in breach of or
default under any material terms of any such agreement,
obligation or commitment. VTI is not a party to any
contract or arrangement that it reasonably expects will have
a material adverse effect on its business or prospects.
2.12 INTELLECTUAL PROPERTY.
(a) VTI owns all right, title and interest in, or has
the right to use, all domestic and foreign patent
applications, patents, patent licenses, trademark
applications, trademarks, service marks, trade names,
copyrights applications, copyrights, trade secrets,
know-how, technology, material software licenses and other
intellectual property and proprietary rights used in or
reasonably necessary to the conduct of its business as
presently conducted and the business of the development,
production, marketing, licensing and sale of commercial
products using such intellectual property and proprietary
rights ("VTI Intellectual Property").
(b) VTI has taken reasonable measures to protect all
VTI Intellectual Property, and, except as set forth on
Schedule 2.12(b), neither VTI nor any VTI Shareholder has
any knowledge of any infringement of any VTI Intellectual
Property by any third party. As to the third party products
listed on Schedule 2.12(b) (the "VTI Third Party Products"),
VTI has obtained appropriate licensing rights to the same
and the use by VTI of VTI Third Party Products does not
infringe the rights of VTI's licensors.
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(c) Set forth on Schedule 2.12(c) delivered to Edge
herewith is a true and complete list of all copyright and
trademark registrations (and any applications therefor) and
all patents (and any applications therefor) for VTI
Intellectual Property owned by VTI. Neither VTI nor any VTI
Shareholder has any knowledge of any material loss,
cancellation, termination of expiration of any such
registration or patent except as set forth on Schedule
2.12(c).
(d) To the knowledge of VTI or the VTI Shareholders,
the business of VTI as conducted as of the date hereof,
including (without limitation) the business of development,
production, marketing, licensing and sale of commercial
products using VTI Intellectual Property and proprietary
rights, does not infringe or violate any of the patents,
trademarks, service marks, tradenames, copyrights, trade
secrets, proprietary rights or other intellectual property
of any other person, and VTI has not received any written or
oral claim or notice of infringement or potential
infringement of the intellectual property of any other
person or entity.
(e) With respect to VTI Third Party Products, VTI has
obtained appropriate licensing rights to such VTI Third
Party Products and the use by VTI of VTI Third Party
Products does not infringe the rights of VTI's licensors.
VTI has the right to manufacture all of its products and the
right to use all of its registered user lists, and to the
knowledge of VTI or the VTI Shareholders, is not using any
confidential information or trade secrets of any former
employer of any past or present employees.
2.13 COMPLIANCE WITH LAWS. Except as set forth in Schedule
2.13, to the knowledge of VTI and the VTI Shareholders, VTI has
complied and is and will be at the Closing Date in full
compliance with all material laws, ordinances, regulations and
rules, and all orders, writs, injunctions, awards, judgments and
decrees (collectively, "Laws"), applicable to VTI or to the
assets, properties and business of VTI, including, without
limitation:
(a) All applicable federal and state securities laws
and regulations,
(b) All applicable federal state and local Laws,
pertaining to:
(i) The sale, licensing, leasing, ownership or
management of VTI's owned, leased, occupied
or licensed real or personal property,
products or technical data;
(ii) Employment or employment practices, terms and
conditions of employment or wages and hours,
or
(iii)Safety, health, fire prevention,
environmental protection (including toxic
waste disposal and related matters described
in Section 2.21), building standards, zoning
or other similar matters;
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(iv) The Export Administration Act and regulations
promulgated thereunder or other laws,
regulations, rules, orders, writs,
injunctions, judgments or decrees applicable
to the export or re-export of controlled
commodities or technical data; or
(v) The Immigration Reform and Control Act;
provided, however, that this Section 2.13
shall not apply to any Law to the extent VTI
and the VTI Shareholders have provided a
representation and warranty elsewhere in this
Agreement as to full past and present
compliance by VTI with such Law; and
(c) VTI has received all material permits and
approvals from and has made all material filings with third
parties, including government agencies and authorities, that
are necessary to the conduct of its business as presently
conducted.
2.14 CERTAIN TRANSACTIONS AND AGREEMENTS. No person who is
an officer or director of VTI, or a member of any officer's or
director's immediate family, has any direct or indirect ownership
interest in any firm or corporation that competes with VTI or
Edge (except with respect to any interest in less than 1% of the
outstanding voting shares of any corporation the stock of which
is publicly traded). Except as set forth in Schedule 2.14, no
person who is an officer or director of VTI, or any member of any
officer's or director's immediate family, is directly or
indirectly interested in any material contract or informal
arrangement with VTI, except for compensation for services as an
officer, director or employee of VTI and except for the normal
rights of a shareholder. Except at set forth in Schedule 2.14,
none of such officers or directors or family members has any
interest in any property, real or personal, tangible or
intangible, including, without limitation, inventions, patents,
copyrights, trademarks, trade names or trade secrets, used in the
business of VTI, except for the normal rights of a shareholder.
2.15 EMPLOYEES.
(a) Except as set forth in Schedule 2.15 (a), VTI has
no employment contract or material consulting agreement
currently in effect that is not terminable at will without
penalty or payment of compensation by VTI.
(b) Except as set forth in Schedule 2.15 (b), VTI:
(i) Has never been and is not now subject to a
union organizing effort;
(ii) Is not subject to any collective bargaining
agreement with respect to any of its
employees;
(iii)Is not subject to any other contract, written
or oral, with any trade or labor union,
employees' association or similar
organization; and
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(iv) To the knowledge of either VTI or the VTI
Shareholders, has no material current labor
dispute, and neither VTI nor any VTI
Shareholder has any knowledge of any facts
indicating that the consummation of the
transactions provided for herein will have a
material adverse effect on its labor
relations.
(c) Schedule 2.15 (c) delivered by VTI to Edge
herewith contains a list of all pension, retirement,
disability, medical, dental or other health plans, life
insurance or other death benefit plans, profit sharing,
deferred compensation agreements, stock, option, bonus or
other incentive plans, vacation, sick, holiday or other paid
leave plans, severance plans or other similar employee
benefits plan maintained, contributed to, or required to be
contributed to, by VTI or any ERISA Affiliate (as defined
herein) for the benefit of any VTI employee, former employee
or retired employee (the "Employee Plans"), including
without limitation all "employee benefit plans" as defined
in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). "ERISA Affiliate" as
used in this Section 2.15 shall mean any other person or
entity under common control with VTI within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the
regulations thereunder. VTI does not now, nor has it ever,
maintained, participated in, or contributed to, any Employee
Plan which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA, Section 412 of the Code, or any
multiemployer plan as defined in Section 3(37) of ERISA.
VTI has delivered true and complete copies of all the
Employee Plans, together with the most recent summary plan
descriptions, if any, required under ERISA, and the three
most recent annual reports (Forms 5500 and all schedules
thereto), if any, required under ERISA, to Edge. Each of
the Employee Plans, and its operation and administration, is
in compliance with all applicable, federal, state, local and
other governmental laws and ordinances, orders, rules and
regulations, including the requirements of ERISA and the
Code. Except as set forth in Schedule 2.15 (c), any such
Employee Plans that are employee pension benefit plans (as
defined in Section 3(2) of ERISA) which are intended to
qualify under Section 401(a) of the Code have received
favorable determination letters that such plans satisfy the
qualification requirements of the Tax Reform Act of 1986.
In addition, to VTI's knowledge, no "prohibited
transaction," within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any
Employee Plan. The group health plans as defined in
Section 4980B(g) of the Code that benefit employees of VTI
are in material compliance with the continuation coverage
requirements of Section 4980B of the Code. There are no
outstanding violations of Section 4980B of the Code with
respect to any Employee Plan, covered employees or qualified
beneficiaries. No Employee Plan provides life insurance,
medical or other medical benefits to any employee upon his
or her retirement or termination of employment for any
reason, except as may be required by statute. Except as set
forth in Schedule 2.15 (c) (which does not identify any
individual by name, Social Security number or in any other
manner), no employee of VTI and no person subject to any VTI
health plan has made medical claims during the twelve months
preceding the date hereof for $25,000 or in the aggregate,
or, to the knowledge of VTI or the VTI Shareholders, has any
catastrophic illness.
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(d) To the knowledge of VTI or the VTI Shareholders,
no employee of VTI is in material violation of any term of
any employment contract, patent disclosure agreement or
noncompetition agreement or any other contract or agreement,
or any restrictive covenant, relating to the right of any
such employee to be employed by VTI or to use trade secrets
or proprietary information of others. To the knowledge of
VTI or the VTI Shareholders, the employment of any employee
of VTI does not of itself subject VTI to any liability to
any third party.
(e) Except as set forth in Schedule 2.15 (e), VTI is
not a party to any:
(i) Agreement with any executive officer or other
key employee of VTI
(A) The benefits of which are contingent, or
the terms of which are materially
altered, upon the occurrence of a
transaction involving VTI in the nature
of any of the transactions contemplated
by this Agreement and the Plan of Merger,
or any other business combination
transaction;
(B) Providing any term of employment or
compensation guarantee; or
(C) Providing severance benefits or other
benefits after the termination of
employment of such employee regardless of
the reason for such termination of
employment; or
(ii) Agreement or plan, including, without
limitation, any stock option plan, stock
appreciation rights plan or stock purchase
plan, any of the benefits of which will be
materially increased, or the vesting of
benefits of which will be materially
accelerated, by the occurrence of any of the
transactions contemplated by this Agreement
and the Plan of Merger or the value of any of
the benefits of which will be calculated on
the basis of any of the transactions
contemplated by this Agreement and the Plan
of Merger.
(f) A list of all employees, officers and development
consultants of VTI and their current compensation and
benefits or related agreements with employer as of the date
of this Agreement is set forth on Schedule 2.15 (f)-1, and
VTI and each of the VTI Shareholders represent and warrant
that each of the employees who is listed on Schedule 2.15(f)-
2 will continue their employment arrangements for at least
six months and one day after the Effective Date, unless any
such employee's employment is terminated by the Surviving
Corporation with the prior written consent of Edge, such
consent not to be unreasonably withheld.
(g) Except as set forth in Schedule 2.15 (g), all
contributions due from VTI with respect to any of the
Employee Plans have been made or accrued on VTI's Financial
Statements, and no further contributions will be due or will
have accrued thereunder as of the Closing Date.
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(h) Except as set forth on Schedule 2.15(h), as of the
Closing Date, there are no outstanding payment obligations
due to any employee of VTI, nor any claims outstanding by
any employee, for accrued and unpaid wages, salaries,
bonuses, pensions, severance pay or other benefits.
2.16 CORPORATE DOCUMENTS. VTI has made available to Edge
for examination all documents and information listed in Article
II or other exhibits called for by this Agreement that have been
requested by Edge's legal counsel or accountants, including,
without limitation, the following:
(a) Copies of VTI's Articles of Incorporation and
Bylaws as currently in effect;
(b) VTI's minute book containing all records of all
proceedings, consents, actions and meetings of VTI's
directors and shareholders;
(c) VTI's stock ledger, journal and other records
reflecting all stock issuances and transfers; and
(d) All permits, orders and consents issued by any
regulatory agency with respect to VTI, or any securities of
VTI, and all applications for such permits, orders and
consents.
2.17 NO BROKERS. VTI is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in
connection with the origin, negotiation or execution of this
Agreement or the Plan of Merger or in connection with any
transaction provided for herein or therein.
2.18 DISCLOSURE. The representations and warranties
contained in this Agreement and the schedules thereto delivered
to Edge by VTI or the VTI Shareholders or both under this
Agreement, taken together, do not contain any untrue statement of
a material fact or omit to state a material fact necessary in
order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made,
not misleading.
2.19 BOOKS AND RECORDS. The books, records and accounts of
VTI:
(a) Are in all material respects true and complete;
(b) Have been maintained in accordance with reasonable
business practices on a basis consistent with prior years;
(c) Are stated in reasonable detail and accurately and
fairly reflect the transactions and disposition of the
assets of VTI in all material respects; and
(d) Accurately and fairly reflect in all material
respects the basis for the VTI Interim Financial Statements.
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2.20 INSURANCE. VTI maintains fire and casualty, workers
compensation, general liability, "key man" and other insurance
policies as listed on Schedule 2.20. Neither VTI nor any VTI
Shareholder has any knowledge that any such insurance policy will
not be renewed in the normal course.
2.21 ENVIRONMENTAL MATTERS.
(a) During the period that VTI has leased or occupied
the premises currently occupied by it and those premises
occupied by it since the date of its incorporation, there
have been no disposals, releases or threatened releases of
Hazardous Materials (as defined below) from or any presence
thereof on any such premises that would have a material
adverse effect upon the business or financial statements of
VTI. There is no presence, disposals, releases or
threatened releases of Hazardous Materials on or from any of
such premises, which may have occurred prior to VTI having
taken possession of any of such premises that would have a
material adverse effect upon the business or financial
statements of VTI. For purposes of this Agreement, the
terms "disposal," "release," and "threatened release" have
the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. 9601 et seq., as amended ("CERCLA"). For
the purposes of this Section 2.21, "Hazardous Materials"
mean any hazardous or toxic substance, material or waste
which is or becomes prior to the Closing Date (as defined in
Section 5.01) regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical,"
"hazardous material," "toxic substance" or "hazardous
chemical" under any of the following:
(i) CERCLA;
(ii) The Emergency Planning and Community Right-to-
Know Act, 42 U.S.C. Sections 11001 et seq.;
(iii)The Hazardous Material Transportation Act, 49
U.S.C. Sections 1801, et seq.;
(iv) The Toxic Substances Control Act, 15 U.S.C.
Secions 2601 et seq.;
(v) The Occupational Safety and Health Act of
1970, 29 U.S.C. Sections 651 et seq.;
(vi) Regulations promulgated under any of the
above statutes; or
(vii)Any applicable state or local statute,
ordinance, rule or regulation that has a
scope or purpose similar to those identified
above.
(b) To the knowledge of VTI and the VTI Shareholders,
none of the premises currently leased or occupied by VTI or
any premises previously occupied by VTI is in material
violation of any federal, state or local law, ordinance,
regulation or order relating to industrial hygiene or to the
environmental conditions in such premises.
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(c) During the time that VTI has leased or occupied
the premises currently occupied by it or any premises
previously occupied by VTI, neither VTI nor, to the
knowledge of VTI or the VTI Shareholders, any third party,
has used, generated, manufactured or stored in such premises
or transported to or from such premises any Hazardous
Materials that would have a material adverse effect upon the
business or financial statements of VTI.
(d) During the time that VTI has leased or occupied
the premises currently occupied by it or any premises
previously occupied by VTI, there has been no litigation,
proceeding or administrative action brought or threatened in
writing against VTI by, or any settlement reached by VTI
with, any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on,
from or under any of such premises.
(e) During the period that VTI has leased or occupied
the premises currently occupied by it or any premises
previously occupied by VTI, no Hazardous Materials have been
transported from such premises to any site or facility now
listed or proposed for listing on the National Priorities
List, at 40 C.F.R. Part 300, or any list with a similar
scope or purpose published by any state authority.
2.22 GOVERNMENT CONTRACTS. Except as set forth on Schedule
2.22, VTI has no business contracts with any independent or
executive agency, division, subdivision, audit group or procuring
office of the federal government or of a state government,
including any prime contractor of the federal government and any
higher level subcontractor of a prime contractor of the federal
government, and including any employees or agents thereof, in
each case acting in such capacity.
2.23 PRODUCT LIABILITY AND WARRANTY PROCEEDINGS. No product
liability, warranty or similar actions, suits or proceedings have
been asserted against VTI since the Balance Sheet Date other than
as set forth in the VTI Interim Financial Statements.
2.24 WARN COMPLIANCE. Since the Balance Sheet Date, VTI has
not incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act (WARN) or similar
state laws. VTI has not (a) closed any facilities or
discontinued any operating unit with 50 or more workers; (b) laid
off or terminated 33% or more of the total workforce at any
singe site of employment, or (c) laid off or terminated 500 or
more workers at a singe site or employment during the ninety (90)
day period preceding the Closing Date. It shall be the obligation
of VTI and the VTI Shareholders to provide any notice required by
said Act by reason of the provisions, execution or operation of
this Agreement. Further, VTI is fully and solely responsible for
any WARN Act liability or notice requirements relating to any
events occurring prior to and through the Closing Date.
2.25 ADA COMPLIANCE. Except as set forth in Schedule 2.25,
VTI has complied and is in material compliance with the
provisions of the Americans with Disabilities Act (the "ADA").
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2.26 YEAR 2000 COMPLIANCE. Except as set forth in Schedule
2.26, no customer contract, license agreement or other document
by which VTI writes, creates or otherwise generates software code
or other intellectual property contains language by which VTI is
obligated to ensure that its product is Year 2000 Compliant.
2.27 ACCOUNTS RECEIVABLE. Except as set forth in Schedule
2.27, the accounts receivable set forth in the VTI Interim
Financial Statements and those accounts receivable accruing
through the Closing Date (the "Collectible A/R") represent valid
and bona fide sales to third parties incurred in the ordinary
course of business, subject to no defenses, set-offs or
counterclaims other than those resulting from applicable
insolvency laws. Each of the VTI Shareholders warrant the
Surviving Corporation's collection within ninety (90) days of the
Closing Date of the Collectible A/R; provided, however, that any
portion of the Collectible A/R that is not collected within such
90 day period (the "Collectible A/R Deficiency") shall be
assigned to the VTI Shareholders after the end of such 90 day
period and after the Collectible A/R Deficiency has either been
deducted from the Withheld Merger Consideration or been paid to
Edge pursuant to the indemnification provisions of Section 6.02.
2.28 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
disclosed on Schedule 2.28, no shareholder, officer, director or
affiliate of VTI possesses, directly or indirectly, any financial
interest in, or is a director, officer, employee or affiliate of,
any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of
VTI. Ownership of securities of a corporation whose securities
are registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), not in excess of one percent (1%)
of any class of such securities shall not be deemed to be a
financial interest for purposes of this Section 2.28.
2.29 BUSINESS RELATIONS. Schedule 2.29 contains an accurate
list of all significant customers of VTI (i.e., those customers
representing 5% or more of VTI's revenues for the 24 month period
ended December 31, 2001. Except as set forth in Schedule 2.29,
to the knowledge of VTI or the VTI Shareholders, no customer or
supplier of VTI will cease to do business with VTI after the
consummation of the transactions contemplated hereby, which
cessation would have a material adverse effect on the business,
operations or financial condition of VTI. Except as set forth in
Schedule 2.29, since December 31, 2000, VTI has not experienced
any difficulties in obtaining any inventory items necessary to
the operation of its business, and no such shortage of supply of
inventory items is pending or threatened. VTI is not required to
provide any bonding or other financial security arrangements in
any amount in connection with any transactions with any of its
customers or suppliers.
2.30 BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 2.30
sets forth each bank, savings institution and other financial
institution with which VTI has an account or safe deposit box and
the names of all persons authorized to draw thereon or to have
access thereto. Each person holding a power of attorney or
similar grant of authority on behalf of VTI is identified on
Schedule 2.30. Except as disclosed on such Schedule, VTI has not
given any revocable or irrevocable powers of attorney to any
person, firm, corporation or organization relating to its
business for any purpose whatsoever.
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2.31 Information Delivered. Such VTI Shareholder (a) has
received from Edge copies of Edge's Reports (the "Reports") on
Form 10-KSB for the fiscal year ended December 31, 2001 and Form
10-QSB for the fiscal quarter ended March 31, 2002, (the Reports
collectively referred to herein as the "SEC Documents") and (b)
has had the opportunity to ask questions of and receive answers
from Edge concerning the terms and conditions of this Agreement
and to obtain from Edge any additional information that Edge
possesses or can acquire without unreasonable effort or expense
necessary to verify the accuracy of the information described in
the SEC Documents.
2.32 INVESTMENT PURPOSES. Such VTI Shareholder further
represents, warrants, acknowledges and agrees that (a) he is
acquiring the shares of Edge's Common Stock under this Agreement
for his own account, as principal and not on behalf of other
persons, and for investment and not with a view to the resale or
distribution of all or any part of such shares in accordance with
applicable securities laws, (b) he will not sell or otherwise
transfer such shares unless, in the opinion of counsel who is
reasonably satisfactory to Edge, the transfer can be made without
violating the registration provisions of the 1933 Act and the
rules and regulations thereunder, unless such sale or transfer is
under an effective registration statement, and (c) the
certificate representing such shares will also bear the following
legend (the "Restrictive Legend"):
THE SHARES REPRESENTED BY THIS CERTIFICATE
WERE NOT ISSUED IN A TRANSACTION REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THE SHARES REPRESENTED HEREBY
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER
IS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR, IN THE OPINION OF COUNSEL TO
THE ISSUER, IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
2.33 STOCK OWNERSHIP. Such VTI Shareholder has the full
legal right, power and authority to enter into this Agreement.
Such VTI Shareholder owns beneficially (subject only to any
community property interest of such shareholder's spouse) and of
record the shares of VTI Common Stock set forth opposite such VTI
Shareholder's name on Schedule 1.01(a)(ii) and such shares of VTI
Common Stock, together with the other shares of VTI Common Stock
set forth on Schedule 1.01(a)(ii), constitute all of the
outstanding shares of capital stock of VTI, and such shares of
VTI Common Stock owned by such VTI Shareholder shall be, as of
the Closing Date, owned free and clear of all liens other than
standard state and federal securities laws private offering
restrictions.
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2.34 NO DISPOSAL OF SHARES. Such VTI Shareholder represents
that there is no current plan or intention by such VTI
Shareholder to sell, exchange or otherwise dispose of any of the
shares of Edge Common Stock received by such VTI Shareholder in
the Merger as of the Effective Time of the Merger. Shares of VTI
Common Stock and shares of Edge Common Stock held by the VTI
Shareholder and otherwise sold, redeemed, or disposed of prior to
or subsequent to the Closing Date will be considered in making
this representation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EDGE TECHNOLOGY GROUP, INC.
Edge hereby represents and warrants that, except as set
forth in the Schedules provided by Edge attached to this
Agreement:
3.01 ORGANIZATION AND GOOD STANDING. Edge is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and
authority to own, operate and lease its properties and to carry
on its business as now conducted and as proposed to be conducted.
Edge is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the
ownership of its properties, the employment of its personnel or
the conduct of its business requires it to be so qualified,
except where the failure to so qualify would not have a material
adverse effect on Edge, its assets, properties or financial
condition.
3.02 POWER, AUTHORIZATION AND VALIDITY.
(a) Edge has the corporate right, power, legal
capacity and authority to enter into and perform its
obligations under this Agreement and all agreements to which
Edge is or will be a party as contemplated by this Agreement
(the "Edge Ancillary Agreements"). The execution, delivery
and performance of this Agreement and the Edge Ancillary
Agreements have been duly and validly approved by the Edge
Board of Directors as required by applicable law.
(b) No filing, authorization or approval, governmental
or otherwise, is necessary to enable Edge to enter into, and
to perform its obligations under, this Agreement and the
Edge Ancillary Agreements, except for (i) the filing of the
Plan of Merger with the Secretary of State of the State of
Texas (which filing has been authorized by all necessary
corporate action) and (ii) consents disclosed in Schedule
4.02(b).
(c) This Agreement and the Edge Ancillary Agreements
are, or when executed and delivered by Edge will be, valid
and binding obligations of Edge, enforceable against Edge in
accordance with their respective terms, except as to the
effect, if any, of:
(i) Applicable bankruptcy and other similar laws
affecting the rights of creditors generally,
(ii) Rules of law governing specific performance,
injunctive relief and other equitable
remedies; and
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(iii)Any rights to indemnification being limited
under applicable securities laws;
provided, however, that the Edge Ancillary Agreements will
not be effective until the earlier of the date set forth
therein or the Effective Time.
ARTICLE IV
CLOSING MATTERS
4.01 THE CLOSING. The closing of this Agreement and the
transactions contemplated hereunder (the "Closing") shall take
place contemporaneously with the execution hereof and on the date
hereof (the "Closing Date") but for all purposes shall be deemed
to occur as of the close of business on the Closing Date. Prior
to or concurrently with the Closing, the Plan of Merger and such
other documents as may be required to effectuate the Merger will
be filed in the office of the Secretary of State of the State of
Texas, and the Merger will become effective at the Effective
Time.
4.02 EXCHANGE OF CERTIFICATES. As of the Effective Time,
all shares of VTI Common Stock that are outstanding immediately
prior thereto will, by virtue of the Merger and without further
action, cease to exist, and each share of VTI Common Stock will
be converted into the right to receive from Edge that portion of
the Cash Merger Consideration, subject to the withholding
provisions of Section 1.03, that each such share bears to the
total of all shares of VTI Common Stock issued and outstanding as
of the Effective Time (the "Pro Rata Portion").
4.03 ADDITIONAL EDGE DELIVERIES. In addition to the
foregoing, Edge shall deliver a portion of the Debt Repayment
Consideration in the form of tendering payment in the amounts
indicated and to the parties indicated on Schedule 4.3.
4.04 ADDITIONAL VTI DELIVERIES. In addition to the
foregoing, the VTI shall make the following deliveries to Edge on
or before the Closing Date:
(a) VTI and the VTI Shareholders shall deliver
evidence of the termination of any and all agreements among
the VTI Shareholders and/or VTI, including, but not limited
to that certain shareholders agreement dated November 20,
2001 by and among VTI and the VTI Shareholders.
(b) VTI shall obtain from each of the parties
identified on Schedule 4.4(b) written releases in connection
with the repayment of the amounts due and owing such party
and paid by Edge as part of the Debt Repayment
Consideration, including releases of all guarantees, and,
stock pledges and any and all other security interests
against the repayment of the debt identified on Schedule
4.4(b).
(c) VTI shall deliver employment agreements, in the
form provided by the Surviving Corporation, executed by each
of the individuals set forth on Schedule 2.15(f)-2 securing
their employment with the Surviving Corporation.
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ARTICLE V
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS
5.01 SURVIVAL OF REPRESENTATIONS.
(a) VTI's Representations. All representations and
warranties of VTI contained in Articles II and III of this
Agreement (other than the representations and warranties
contained in Section 2.03) (the "General Representations")
will remain operative and in full force and effect (but only
as of the Closing Date) for a period of two (2) years and
one day after the Closing Date, regardless of any
investigation made by or on behalf of the parties to this
Agreement. The representations and warranties contained in
Section 2.03 (the "Special Representations") will remain
operative and in full force and effect (but only as of the
Closing Date) for a period of five (5) years and one day
after the Closing Date (such time period to be referred to
hereafter as the "Post-Closing Period"), regardless of any
investigation made by or on behalf of the parties to this
Agreement. Notwithstanding the preceding provisions of this
Section 5.01(a), any act or omission constituting fraud
shall have no limit as to time.
(b) EDGE'S REPRESENTATIONS. All representations and
warranties of Edge contained in Article IV of this Agreement
will remain operative and in full force and effect (but only
as of the Closing Date) for a period of two (2) years and
one day after the Closing Date, regardless of any
investigation made by or on behalf of the parties to this
Agreement other than any act or omission constituting fraud,
which shall have no limitation as to time.
5.02 VTI AGREEMENT TO INDEMNIFY.
(a) The VTI Shareholders Indemnity. Subject to the
limitations set forth in Section 5.02(b), the VTI
Shareholders will indemnify and hold harmless Edge and its
respective officers, directors, agents and employees, and
each person, if any, who controls or may control Edge
(hereinafter in this Section 5.02 referred to individually
as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against any and all claims, demands,
actions, causes of action, losses, costs, damages,
liabilities and expenses including, without limitation,
reasonable legal fees, arising out of any misrepresentation
or breach of or default in connection with any of the
representations, warranties and covenants given or made by
VTI and/or the VTI Shareholders in this Agreement or any
certificate, document or instrument delivered by or on
behalf of VTI and/or by the VTI Shareholders pursuant hereto
(hereafter in this Section 5.02 referred to as the "Edge
Damages").
(b) Withheld Merger Consideration. Except for the
Adjustment Amounts set forth in Section 1.03 above,
Indemnified Persons shall make no deductions in the Withheld
Merger Consideration and shall have no claims against the
VTI Shareholders unless and until the Edge Damages exceed
$10,000, (the "Threshold Amount"), at which point the
Indemnified Persons shall be entitled to indemnification for
all claims,
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including those within the Threshold Amount. In seeking
indemnification for Edge Damages under this Section 5.02
following the Closing, the Indemnified Persons shall be
entitled to, including, without limitation, available
amounts of the Withheld Merger Consideration and all other
remedies available at law or in equity.
(c) R. Jeffrey Ireland shall act as the representative
of the VTI Shareholders for purposes of Sections 5.02 and
5.03 of this Agreement (the "Claims Representative"), and is
duly authorized to be such Claims Representative and may
bind the VTI Shareholders. Promptly after the receipt by
Edge of notice or discovery of any claim, damage or legal
action or proceeding giving rise to indemnification rights
under this Section 5.02, Edge will give the Claims
Representative written notice of such claim, damage, legal
action or proceeding (for purposes of this Section 5.02, a
"Claim") in accordance with Section 5.02 of this Agreement.
Within seven days of delivery of such written notice, the
Claims Representative may, with Edge's written consent,
which shall not be unreasonably withheld, at the expense of
the VTI Shareholders, elect to take all necessary steps
properly to contest any Claim involving third parties or to
prosecute or defend such Claim to conclusion or settlement.
If the Claims Representative makes the foregoing election,
then the Claims Representative will take all necessary steps
to contest any such Claim or to prosecute or defend such
Claim to conclusion or settlement, and will notify Edge of
the progress of any such Claim, will permit Edge, at its
expense, to participate in such prosecution or defense
(PROVIDED, HOWEVER, that if a conflict of interest exists
which would make it inappropriate, in the reasonable opinion
of Edge, for the same counsel to represent both Edge and the
VTI Shareholders in the resolution of such Claim, then Edge
may retain separate counsel, the fees and expenses of which
shall not be borne by Edge but shall instead be borne by the
VTI Shareholders) and will provide Edge with reasonable
access to all relevant information and documents relating to
the Claim and the Claims Representative's prosecution or
defense thereof. If the Claims Representative does not make
such election, then Edge shall be free to handle the
prosecution or defense of any such Claim, will take all
necessary steps to contest any such Claim involving third
parties or to prosecute or defend such Claim to conclusion
or settlement, will notify the Claims Representative of the
progress of any such Claim, and will permit the Claims
Representative, at the expense of the VTI Shareholders
(which expense shall be paid for from sources other than the
Withheld Merger Consideration), to participate in such
prosecution or defense and will provide the Claims
Representative with reasonable access to all relevant
information and documents relating to the Claim and Edge's
prosecution or defense thereof. In either case, the party
not in control of a Claim will fully cooperate, and will
cause its counsel, if any, to fully cooperate, with the
other party in the conduct of the prosecution or defense of
such Claim. Neither party will compromise or settle any such
Claim without the written consent of either Edge (if the
Claims Representative defends the Claim) or the Claims
Representative (if Edge defends the Claim), such consent not
to be unreasonably withheld.
(d) Any written notice of a Claim required under this
Section 5.02 (for purposes of this Section 5.02, a "Notice
of Claim") will be in writing and will contain the following
information to the extent reasonably available to Edge:
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(i) Edge's good faith estimate of the reasonably
foreseeable maximum amount of the alleged
Edge Damages (which amount may be the amount
of damages claimed by a third party plaintiff
in an action brought against Edge or VTI);
and
(ii) A brief description in reasonable detail of
the facts, circumstances or events giving
rise to the alleged Edge Damages based on
Edge's good faith belief thereof and the
basis under this Agreement for such Claim,
including, without limitation, the identity
and address of any third-party claimant (to
the extent reasonably available to Edge) and
copies of any formal demand or complaint.
(e) For purposes of Sections 5.02 and 5.03, the VTI
Shareholders hereby consent to the appointment of the Claims
Representative, as representative of the VTI Shareholders,
and as the attorney-in-fact for and on behalf of each VTI
Shareholder, and, subject to the express limitation set
forth below, the taking by the Claims Representative of any
and all actions and the making of any decisions required or
permitted to be taken by the Claims Representative under
Sections 5.02 and 5.03, including, without limitation, the
exercise of the power to:
(i) Agree to Edge's deductions against the
Withheld Merger Consideration, or any portion
thereof, in satisfaction of any Claims (for
purposes of this Section 5.02, the term
"Claims" is as defined in Sections 5.02 and
5.03);
(ii) Agree to, negotiate, enter into settlements
and compromises of, and demand arbitration
and comply with orders of courts and awards
of arbitrators with respect to any Claims;
(iii)Resolve any Claims; and
(iv) Take all actions necessary in the judgment of
the Claims Representative for the
accomplishment of the foregoing and all of
the other terms, conditions and limitations
of this Agreement.
(f) The Claims Representative will have unlimited
authority and power to act on behalf of each VTI Shareholder
with respect to Sections 5.02 and 5.03 and the disposition,
settlement or other handling of all Claims, rights or
obligations arising under this Agreement so long as all VTI
Shareholders are treated in the same manner. The VTI
Shareholders will be bound by all actions taken by the
Claims Representative in connection with Sections 5.02 and
5.03, and Edge will be entitled to rely on any action or
decision of the Claims Representative. In performing the
functions specified in Sections 5.02 and 5.03, the Claims
Representative will not be liable to the VTI Shareholders in
the absence of gross negligence or willful misconduct. R.
Jeffrey Ireland hereby accepts the position of
Representative subject to the right to resign as set forth
below. The Claims Representative may resign from such
position, effective upon a new
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representative being appointed in writing by VTI
Shareholders who beneficially own a majority of the withheld
portion of the VTI Common Stock. The Claims Representative
will not be entitled to receive any compensation from Edge
or the VTI Shareholders in connection with this Agreement.
Each VTI Shareholder will pay to the Claims Representative
his or her Pro Rata Portion of any out-of-pocket costs and
expenses reasonably incurred by the Claims Representative in
connection with actions taken pursuant to the terms of
Sections 5.02 and 5.03, and such amounts shall not be
deducted against the Withheld Merger Consideration.
5.03 EDGE AGREEMENT TO INDEMNIFY.
(a) Edge Indemnity. Subject to the limitations set
forth in Section 5.03(b), Edge will indemnify and hold
harmless the VTI Shareholders (hereinafter in this
Section 5.03 referred to individually as an "Edge
Indemnified Person" and collectively as "Edge Indemnified
Persons") from and against any and all claims, demands,
actions, causes of action, losses, costs, damages,
liabilities and expenses including, without limitation,
reasonable legal fees, net of any recoveries under insurance
policies or tax savings known to any VTI Shareholder at the
time of making of claim hereunder, arising out of any
misrepresentation or breach of or default in connection with
any of the representations, warranties and covenants given
or made by Edge in this Agreement or any certificate,
document or instrument delivered by or on behalf of Edge
pursuant hereto (hereafter in this Section 5.03 referred to
as "VTI Damages").
(b) Edge Indemnification Limitations. The
indemnification provided for in Section 5.02(b) will not
apply unless and until the aggregate VTI Damages for which
one or more Edge Indemnified Persons seeks indemnification
under Section 5.03(a) exceeds $10,000 (the "Threshold
Amount"), in which event the indemnification provided for in
Section 5.03(a) will include all VTI Damages, including
those within the Threshold Amount.. The provisions of this
Section 5.03 shall not preclude the exercise by any Edge
Indemnified Person of any and all other remedies available
at law or in equity.
(c) Process. Promptly after the receipt by any VTI
Shareholder of notice or discovery of any claim, damage or
legal action or proceeding giving rise to indemnification
rights under this Section 5.03, such VTI Shareholder will
give Edge written notice of such claim, damage, legal action
or proceeding (for purposes of this Section 5.03, a "Claim")
in accordance with this Section 5.03. Within seven days of
delivery of such written notice, Edge may, with such VTI
Shareholder's written consent, which shall not be
unreasonably withheld, at the expense of Edge, elect to take
all necessary steps properly to contest any Claim involving
third parties or to prosecute or defend such Claim to
conclusion or settlement. If Edge makes the foregoing
election, then Edge will take all necessary steps to contest
any such Claim or to prosecute or defend such Claim to
conclusion or settlement, and will notify such VTI
Shareholder of the progress of any such Claim, will permit
such VTI Shareholder, at its expense, to participate in such
prosecution or defense (PROVIDED, HOWEVER, that if a
conflict of interest exists which would make it
inappropriate, in the reasonable opinion of such VTI
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Shareholder, for the same counsel to represent both such VTI
Shareholder and Edge in the resolution of such Claim, then
such VTI Shareholder may retain separate counsel, and the
fees and expenses of one such counsel for all applicable VTI
Shareholders shall be borne by Edge rather than by any such
VTI Shareholder) and will provide such VTI Shareholder with
reasonable access to all relevant information and documents
relating to the Claim and Edge's prosecution or defense
thereof. If Edge does not make such election, then such VTI
Shareholder shall be free to handle the prosecution or
defense of any such Claim, will take all necessary steps to
contest any such Claim involving third parties or to
prosecute or defend such Claim to conclusion or settlement,
will notify Edge of the progress of any such Claim, and will
permit Edge, at the expense of Edge, to participate in such
prosecution or defense and will provide Edge with reasonable
access to all relevant information and documents relating to
the Claim and such VTI Shareholder's prosecution or defense
thereof. In either case, the party not in control of a
Claim will fully cooperate with, and will cause its counsel,
if any, to fully cooperate with, the other party in the
conduct of the prosecution or defense of such Claim. Neither
party will compromise or settle any such Claim without the
written consent of either such VTI Shareholder (if Edge
defends the Claim) or Edge (if such VTI Shareholder defends
the Claim), such consent not to be unreasonably withheld.
Notwithstanding the foregoing provisions of this Section
5.03(c), if two or more VTI Shareholders deliver, whether
separately or together, a Claim to Edge arising from or
relating to the same or a reasonably similar matter, then
the Claims Representative shall act on behalf of each such
VTI Shareholder bringing such a Claim for purposes of this
Section 5.03.
(d) Notice. Any written notice of a Claim required
under this Section 5.03 (for purposes of this Section 5.03,
a "Notice of Claim") will be in writing and will contain the
following information to the extent reasonably available to
such VTI Shareholder:
(i) Such VTI Shareholder's good faith estimate of
the reasonably foreseeable maximum amount of
the alleged VTI Damages (which amount may be
the amount of damages claimed by a third
party plaintiff in an action brought against
such VTI Shareholder); and
(ii) A brief description in reasonable detail of
the facts, circumstances or events giving
rise to the alleged VTI Damages based on such
VTI Shareholder's good faith belief thereof
and the basis under this Agreement for such
Claim, including, without limitation, the
identity and address of any third-party
claimant (to the extent reasonably available
to such VTI Shareholder) and copies of any
formal demand or complaint.
5.04 CERTAIN AGREEMENTS. The VTI Shareholders will use all
reasonable efforts to cause all present employees of VTI to
execute Edge's forms of assignments of copyright and other
intellectual property rights, noncompetition and trade secret
agreements and confidentiality agreements.
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5.05 Regulatory Approvals by VTI Shareholders. The VTI
Shareholders will execute and file, or join in the execution and
filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state, local or
foreign, which may be reasonably required, or which Edge may
reasonably request, in connection with the consummation of the
transactions provided for in this Agreement. The VTI
Shareholders will use all reasonable efforts to obtain or assist
Edge in obtaining all such authorizations, approvals and
consents.
5.06 REGULATORY APPROVALS BY EDGE. Edge will execute and
file, or join in the execution and filing, of any application or
other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body,
federal, state, local or foreign, which may be reasonably
required, or which VTI may reasonably request, in connection with
the consummation of the transactions provided for in this
Agreement. Edge will use all reasonable efforts to obtain or
assist VTI in obtaining all such authorizations, approvals and
consents.
5.07 NON-DISCLOSURE OF VTI PROPRIETARY INFORMATION.
(a) Each of the VTI Shareholders, by virtue of his
involvement with and ownership of VTI, had and may continue
to have access, to confidential, proprietary, and highly
sensitive information relating to the business of VTI and
which is a competitive asset of VTI (the "VTI Proprietary
Information"). The VTI Proprietary Information sought to be
protected includes, without limitation, information
pertaining to:
(i) The identities of customers and clients
with which or whom VTI 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 VTI and
its customers and clients;
(iv) The business plans and strategy of VTI,
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 VTI,
including their identities, skills,
talents, knowledge, experience, and
compensation;
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(vi) The financial results and business
condition of VTI;
(vii) Computer programs and software developed by
VTI and tailored to its needs by its
employees, independent contractors,
consultants or vendors;
(viii)Information relating to the VTI' 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 Merger Consideration to be
received pursuant to the terms of this Agreement, each VTI
Shareholder hereby agrees that for the duration of the Post-
Closing Period such VTI Shareholder will not use, publish,
disclose or divulge, directly or indirectly, at any time,
any VTI Proprietary Information for his own benefit or for
the benefit of any person, entity, or corporation other than
VTI, to any person who is not a current employee of VTI,
without the express, written consent of Edge. To the extent
that any VTI Shareholder has obligations similar to those
outlined in this Section 6.07 in any other agreement with
Edge and/or the Successor Corporation, including, without
limitation, any employment agreement, then the terms of this
Section 6.07 shall control the scope and duration of such
obligations.
5.08 NON-COMPETITION. In connection with and in
consideration for the Merger Consideration to be received
pursuant to the terms of this Agreement, each of Ireland and
Seleny hereby agrees that for the duration of the Post-Closing
Period such VTI Shareholder will not, without the prior written
consent of Edge, directly or indirectly, alone or for his 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 a 100 mile
radius of the municipal boundaries of Dallas, Texas if such
business or activity relates to the business of, or involves the
provision of services or products which directly or indirectly
competes with the business of, VTI, as now conducted or as may be
conducted during the Post-Closing Period, including any judicial
extensions of the restrictions set forth in this Section 5.08. To
the extent that any VTI Shareholder has obligations similar to
those outlined in this Section 5.08 in any other agreement with
Edge and/or the Successor Corporation (including, without
limitation, any employment agreement) then the terms of this
Section 5.08 shall control the scope and duration of such
obligations.
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5.09 NON-SOLICITATION OF EMPLOYEES AND CONSULTANTS; NON-
SOLICITATION OF CLIENTS.
(a) In connection with and in consideration for the
Merger Consideration to be received pursuant to the terms of
this Agreement, each VTI Shareholder hereby agrees that for
the duration of the Post-Closing Period such VTI 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 employed by or associated with VTI, nor shall he
contact or communicate with any employees or consultants of
VTI for the purpose of inducing employees or consultants to
terminate their employment or association with VTI. For
purposes of this covenant, "employees or consultants" shall
refer to permanent employees, temporary employees, or
consultants who were employed by, doing business with, or
associated with VTI within six (6) months of the time of the
attempted recruiting, hiring or solicitation.
(b) In connection with and in consideration for the
Merger Consideration to be received pursuant to the terms of
this Agreement, each VTI Shareholder hereby agrees that for
the duration of the Post-Closing Period such VTI Shareholder
will not, without the prior written consent of Edge,
directly or indirectly, alone or for his 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, directly or indirectly contact and/or solicit for
the purpose of diverting the business or patronage of any
person, association, corporation, or other business
organization or entity with whom or which either Edge, VTI,
and/or the Successor Corporation had a business
relationship, including, without limitation a customer,
client, supplier, or vendor relationship, within the period
six months before the Closing Date or will have during the
Post-Closing Period.
(c) To the extent that any VTI Shareholder has
obligations similar to those outlined in this Section 5.09
in any other agreement with Edge and/or the Successor
Corporation (including, without limitation, any employment
agreement) then the terms of this Section 5.09 shall control
the scope and duration of such obligations.
ARTICLE VI
MISCELLANEOUS
6.01 GOVERNING LAW; SPECIFIC PERFORMANCE; DISPUTE
RESOLUTION. The laws of the State of Texas (without regard to
its choice of law principles that might apply the law of another
jurisdiction) will govern the validity of this Agreement, the
construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties. Notwithstanding any
other provision of this Agreement, it is understood and agreed
that the remedy of indemnity payments and other remedies at law
would be inadequate in the case of any breach of the covenants
contained herein and each party agrees that any other party shall
be entitled to equitable relief, including the remedy of specific
performance, without posting of bond or other security, with
respect to any breach or attempted breach of such covenants. Any
dispute hereunder ("Dispute") shall be settled by arbitration in
Dallas, Texas and, except as herein specifically stated, in
accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA Rules") then in effect. However,
in all events, these arbitration provisions shall govern over any
conflicting rules that may now or hereafter be contained in the
AAA Rules. Any judgment upon the award
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rendered by the arbitrator may be entered in any court having
jurisdiction over the subject matter thereof. The arbitrator
shall have the authority to grant any equitable and legal
remedies that would be available in any judicial proceeding
instituted to resolve a Dispute.
(a) Compensation of Arbitrator. Any such arbitration
will be conducted before a single arbitrator who will be
compensated for his or her services at a rate to be
determined by the parties or by the American Arbitration
Association, but based upon a reasonable hourly or daily
consulting rate for the arbitrator if the parties are not
able to agree upon his or her rate of compensation.
(b) Selection of Arbitrator. The American Arbitration
Association will have the authority to select an arbitrator
from a list of arbitrators who are lawyers familiar with
Texas contract law and experienced in mergers and
acquisitions; provided, however, that such lawyers cannot
work for a firm then performing services for either party,
that each party will have the opportunity to make such
reasonable objection to any of the arbitrators listed as
such party may wish and that the American Arbitration
Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such
objection. If the foregoing procedure is not followed, each
party will choose one person from the list of arbitrators
provided by the American Arbitration Association (provided
that such person does not have a conflict of interest), and
the two persons so selected will select from the list
provided by the American Arbitration Association the person
who will act as the arbitrator.
(c) Payment of Costs. Edge and the VTI Shareholders
will each pay 50% of the initial compensation to be paid to
the arbitrator in any such arbitration and 50% of the costs
of transcripts and other normal and regular expenses of the
arbitration proceedings; provided, however, that the
prevailing party in any arbitration will be entitled to an
award of attorneys' fees and costs, and all costs of
arbitration, including those provided for above, will be
paid by the non-prevailing party, and the arbitrator will be
authorized to make such determinations.
(d) Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if
the claim were litigated in a Texas judicial proceeding.
(e) Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings
of fact and conclusions of law and a written opinion setting
forth the basis and reasons for any decision reached and
will deliver such documents to each party to this Agreement
along with a signed copy of the award.
(f) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to
alter, amend or otherwise affect the terms of these
arbitration provisions or the provisions of this Agreement.
(g) Exclusive Remedy. Except as specifically
otherwise provided in this Agreement, arbitration will be
the sole and exclusive remedy of the parties for any Dispute
arising out of this Agreement.
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6.02 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. No
party may assign any of its rights or obligations hereunder
without the prior written consent of the other party. This
Agreement will be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
6.03 SEVERABILITY. If any provision of this Agreement, or
the application thereof, is for any reason held to any extent to
be invalid or unenforceable, then the remainder of this Agreement
and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the
intent of the parties. The parties further agree to replace such
unenforceable provision of this Agreement with valid and
enforceable provisions that will achieve, to the extent possible,
the economic, business and other purposes of the invalid or
unenforceable provisions.
6.04 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be an original as regards any
party whose signature appears thereon and all of which together
will constitute one and the same instrument. This Agreement will
become binding when one or more counterparts hereof, individually
or taken together, bear the signatures of all parties reflected
hereon as signatories.
6.05 OTHER REMEDIES. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will
be deemed cumulative with and not exclusive of any other remedy
conferred hereby or by law on such party, and the exercise of any
one remedy will not preclude the exercise of any other.
6.06 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by a
writing signed by the party to be bound thereby. The waiver by a
party of any breach hereof or default in the performance hereof
will not be deemed to constitute a waiver of any other default of
any succeeding breach or default. This Agreement may be amended
by the parties at any time.
6.07 NO WAIVER. The failure of any party to enforce any of
the provisions hereof will not be construed to be a waiver of the
right of such party thereafter to enforce such provisions. The
waiver by any party of the right to enforce any of the provisions
hereof on any occasion will not be construed to be a waiver of
the right of such party to enforce such provisions on any other
occasion.
6.08 EXPENSES. Unless otherwise provided in the Agreement,
each party will bear its respective expenses and fees of its own
accountants, attorneys, investment bankers and other
professionals incurred with respect to this Agreement and the
transactions contemplated hereby; provided, however, that (a) the
audit of VTI conducted by Grant Thornton, LLP will be paid by VTI
prior to the Closing, of which Edge shall have contributed fifty
percent (50%) of the retainer, and (b) VTI will not incur, for
its own account, in connection with the Merger and the related
transactions contemplated hereby, expenses for fees and expenses
of lawyers, accountants and other professionals, including
payment of the Grant Thornton, LLP audit, in excess of $17,000,
unless any such excess amount of fees or expenses (the "Excess
Professional Service
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Fees" either (x) paid by the VTI Shareholders on or before the
Closing Date, in which case proof of such payment shall be
provided at Closing or (y) deducted from the Withheld Merger
Consideration.
6.09 NOTICES. Any notice or other communication required or
permitted to be given under this Agreement will be in writing,
will be delivered personally or by facsimile, mail or express
delivery, postage prepaid, and will be deemed given upon actual
delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as
follows:
(i) If to Edge :
Edge Technology Group, Inc.
6611 Hillcrest, No. 223
Dallas, Texas 75205
Attention: Graham C. Beachum II
with a copy, which shall not constitute
notice, to:
Arter & Hadden LLP
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attention: Victor B. Zanetti, Esq.
Phone: (214) 761-4475
Fax: (214) 741-7139
(ii) If to VTI or the VTI Shareholders:
Virtually There, Inc.
513 Main Street
Fort Worth, Texas 76102
Attention: R. Jeffrey Ireland
Phone: (817) 332-8282
Fax: (817)332-8244
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with a copy, which shall not constitute
notice, to:
Broude, Smith & Jennings, P.C.
309 West Seventh Street, Suite 110
Fort Worth, Texas 76102
Attention: John Broude
Phone: (817) 335-1615
Fax: (817) 335-1603
Email: jsb@bsjpc.com
or to such other address as the party in question may have
furnished to the other party by written notice given in
accordance with this Section 6.09.
6.10 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. The language
hereof will not be construed for or against either party. A
reference to a section, schedule or exhibit refers to a section
in, or a schedule or an exhibit to, this Agreement, unless
otherwise explicitly set forth. The titles and headings in this
Agreement are for reference purposes only and will not in any
manner limit the construction of this Agreement. For the
purposes of such construction, this Agreement will be considered
as a whole. References in this Agreement to the knowledge of VTI
(or similar phrases) refer to the actual knowledge of any one or
more of the officers and directors of VTI and any of the VTI
Shareholders, each after due inquiry of its internal records or
publicly available information; references in this Agreement to
the knowledge of Edge (or similar phrases) refer to the actual
knowledge of Graham C. Beachum, II, President and Chief Executive
Officer, or David N. Pilotte, Executive Vice President and Chief
Financial Officer, after due inquiry of its internal records or
publicly available information.
6.11 NO JOINT VENTURE. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or
partnership among the parties. No party is by virtue of this
Agreement authorized as an agent, employee or legal
representative of any other party. No party will have the power
to control the activities and operations of any other, and the
parties' status is, and at all times, will continue to be, that
of independent contractors with respect to each other. No party
will have any power or authority to bind or commit any other. No
party will hold itself out as having any authority or
relationship in contravention of this Section 6.11.
6.12 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other party and to execute such further
instruments, documents and agreements and to give such further
written assurances as may be reasonably requested by the other
party to evidence and reflect the transactions provided for
herein and to carry into effect the intent of this Agreement.
6.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No
provisions of this Agreement are intended, nor will be
interpreted, to provide or create any third party beneficiary
rights or any other rights of any kind in any client, customer,
affiliate, partner or employee of any party or any other person
or entity, unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal
solely among the parties to this Agreement.
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6.14 PUBLIC ANNOUNCEMENT. Edge and VTI will issue a press
release approved by both parties announcing the Merger as soon as
practicable following the execution of this Agreement; provided,
however, that Edge may make such press releases or other public
filings or announcements without the approval of the other
parties hereto upon the determination of Edge's counsel that such
action is necessary to comply with any relevant laws related
thereto.
6.15 CONFIDENTIALITY.
(a) Except as expressly authorized by Edge in writing,
VTI and each VTI Shareholder will not directly or indirectly
divulge to any person or entity or use any Edge Confidential
Information, except as required for the performance of its
duties under this Agreement. As used herein, "Edge
Confidential Information" consists of:
(i) Any information designated by Edge as
confidential whether developed by Edge or
disclosed to Edge by a third party;
(ii) The source code to any Edge software, and
any trade secrets relating to any of the
foregoing; and
(iii) Any information relating to Edge's product
plans, product designs, product costs,
product prices, product names, finances,
marketing plans, business opportunities,
personnel, research development or know-
how.
(b) Neither Edge nor VTI shall divulge the terms and
conditions of this Agreement, except as disclosed in
accordance with Section 6.14.
(c) The foregoing restriction will apply to
information about a party whether or not it was obtained
from such party's employees, acquired or developed by the
other party during such other party's performance under this
Agreement, or otherwise learned. The foregoing restrictions
will not apply to information that:
(i) Has become publicly known through no
wrongful act of the receiving party;
(ii) Has been rightfully received from a third
party authorized by the party which is the
owner, creator or compiler to make such
disclosure without restriction;
(iii) Has been approved or released by written
authorization of the party which is the
owner, creator or compiler; or
(iv) Is being or has therefore been disclosed
pursuant to a valid court order after a
reasonable attempt has been made to notify
the party which is the owner, creator or
compiler.
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6.16 ENTIRE AGREEMENT. This Agreement, the schedules and
exhibits hereto constitute the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied,
written or oral, among the parties with respect to the subject
matter hereof. The express terms hereof control and supersede
any course of performance or usage of trade inconsistent with any
of the terms hereof.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
EDGE TECHNOLOGY GROUP, INC.
By: /s/. David N. Pilotte
-------------------------------
Name: David N. Pilotte
Title: Chief Financial Officer and
Secretary
VIRTUALLY THERE, INC
By: /s/ R. JEFFREY IRELAND
------------------------------
Name: R. Jeffrey Ireland
Title: President
VT ACQUISITION CORP.
By: /s/ DAVID N. PILOTTE
------------------------------
David N. Pilotte
Vice President and Secretary
THE VIRTUALLY THERE SHAREHOLDERS:
/s/ R. JEFFREY IRELAND
---------------------------
R. Jeffrey Ireland
/s/ ALEX D. SELENY
---------------------------
Alex D. Seleny
/s/ STEPHEN DOOLEY
---------------------------
Stephen Dooley
_/s/ KATHY GUTIERREZ__________
Kathy Gutierrez
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