STOCK PURCHASE AGREEMENT
DATED SEPTEMBER __, 2000
AMONG
EPICEDGE, INC.,
(f/k/a Design Automation Services, Inc.)
EDGEWATER PRIVATE EQUITY FUND III, L.P.,
AND
XXXXX T.I.M.E. FUND, L.P.
TABLE OF CONTENTS
Page
Section 1. Definitions.....................................................................................1
1.1 Certain Definitions.............................................................................1
Section 2. Purchase of Investor Common Stock; Closing......................................................5
2.1 Purchase and Sale of the Investor Common Stock at the Closing...................................5
2.2 Use of Purchase Price...........................................................................6
2.3 The Closing.....................................................................................6
Section 3. Representations and Warranties..................................................................6
3.1 Organization and Qualification..................................................................6
3.2 Corporate Power.................................................................................6
3.3 Subsidiaries and Investments....................................................................7
3.4 Authorization, Governmental Approvals...........................................................7
3.5 Capital Stock...................................................................................7
3.6 Conflict with Other Instruments.................................................................7
3.7 Validity and Binding Effect.....................................................................7
3.8 Capitalization..................................................................................8
3.9 Compliance with Instruments.....................................................................8
3.10 Brokerage.......................................................................................8
3.11 Litigation......................................................................................8
3.12 Employee Benefit Plans..........................................................................9
3.13 Reserved.......................................................................................10
3.14 Compliance with Laws; Certain Operations.......................................................10
3.15 Financial Statements...........................................................................10
3.16 Absence of Undisclosed Liabilities.............................................................11
3.17 Assets.........................................................................................11
3.18 Tax Matters....................................................................................11
3.19 Absence of Material Adverse Change.............................................................11
3.20 Absence of Certain Developments................................................................12
3.21 Contracts......................................................................................13
3.22 Proprietary Rights.............................................................................13
3.23 Insurance......................................................................................15
3.24 Year 2000 Compliance...........................................................................15
3.25 Disclosure Schedule............................................................................15
3.26 Extent of Offering.............................................................................15
3.27 Reserved.......................................................................................15
3.28 Registration Rights............................................................................16
3.29 Illegal Payments...............................................................................16
3.30 Related Party Transactions.....................................................................16
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3.31 Disclosure.....................................................................................16
Section 4. Conditions Precedent...........................................................................17
4.1 Conditions Precedent...........................................................................17
Section 5. Covenants......................................................................................18
5.1 Affirmative Covenants..........................................................................18
5.2 Reporting Requirements.........................................................................19
5.3 Negative Covenants.............................................................................21
5.4 Reserved.......................................................................................22
5.5 Reserved.......................................................................................22
5.6 Investor Covenants.............................................................................22
Section 6. Events of Default..............................................................................23
6.1 Events of Default..............................................................................23
6.2 Remedies on Default............................................................................24
6.3 Reserved.......................................................................................25
Section 7. Miscellaneous..................................................................................27
7.1 Investor's Investment Representations..........................................................27
7.2 Benefit of Agreement, Assignment...............................................................27
7.3 Right to Conduct Activities....................................................................28
7.4 Notices........................................................................................28
7.5 Choice of Law..................................................................................29
7.6 Entire Agreement...............................................................................29
7.7 No Implied Waivers; Cumulative Remedies; Writing Required......................................29
7.8 Reimbursement of Expenses......................................................................30
7.9 Survival.......................................................................................30
7.10 Waivers of the Company/Personal Jurisdiction...................................................30
7.11 Herein, etc....................................................................................31
7.12 Severability...................................................................................31
7.13 Headings.......................................................................................31
7.14 Counterparts...................................................................................31
ii
EPICEDGE, INC.
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of September
__, 2000, among EpicEdge, Inc. (f/k/a Design Automation Systems, Inc.), a Texas
corporation (the "Company"), Edgewater Private Equity Fund III, L.P., a Delaware
limited partnership ("Edgewater"), and Xxxxx T.I.M.E. Fund, LP, a Connecticut
limited partnership ("TIME"). Edgewater and TIME are sometimes collectively
referred to herein as the "Investors" and individually as an "Investor".
The parties hereto agree as follows:
Section 1. Definitions.
1.1 Certain Definitions. In addition to other terms defined elsewhere in
this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means as to any Person (a) any Person which
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person; (b) any Person who
is a director or officer (i) of such Person, or (ii) of any Person described in
clause (a) above; or (c) any Person who is related to a Person described in
clauses (a) or (b) above by blood or marriage. For purposes of this definition,
"control" shall include the ownership of 20% or more of the voting securities of
such Person.
"AMEX" means the American Stock Exchange.
"Articles" means the Articles of Incorporation of the Company,
as may be amended or restated from time to time.
"Capitalized Lease" means a lease under which the obligations
of the lessee would, in accordance with GAAP consistently applied, be included
in determining total liabilities as shown on the liability side of a balance
sheet of the lessee.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations of any governmental agency or authority,
as from time to time in effect, promulgated thereunder.
"Common Stock" means the Company's common stock, $.01 par
value per share, which is the publicly-traded class of capital stock on AMEX.
1
"Contingent Obligations," as applied to any Person, shall
mean, without duplication, any direct or indirect liability, contingent or
otherwise, of that Person (a) with respect to any Indebtedness, lease, dividend
or other obligation of another if the primary purpose or intent thereof by the
Person incurring the Contingent Obligation is to provide assurance to the
obligee of such obligation of another that such obligation of another will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (b) with respect to the Indebtedness of
any partnership or joint venture of which such Person is a partner or joint
venturer or (c) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings. Contingent Obligations shall include (i) the direct or indirect
guaranty, endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse, or sale with recourse
by such Person of the obligation of another and (ii) any liability of such
Person for the obligations of another through any agreement (contingent or
otherwise) (x) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), (y) to maintain the solvency or any balance sheet
item, level of income or financial condition of another or (z) to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement. The amount of any Contingent Obligation
shall be equal to the amount of the obligation to the extent so guaranteed or
otherwise supported.
"Disclosure Schedule" shall mean the Disclosure Schedule
attached as Exhibit A hereto and made a part hereof.
"Employee Benefit Plan" shall mean any employee benefit plan
as defined in Section 3(3) of ERISA, whether or not terminated, to which the
Company or any of its Affiliates (other than individual Affiliates) contributes,
has an obligation to contribute or with respect to which any such Person has any
actual or potential liability.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time, and the rules and
regulations of any governmental agency or authority, as from time to time in
effect, promulgated thereunder.
"ERISA Affiliate" as applied to any Person, shall mean any
trade or business (whether or not incorporated) which is a member of a group of
which that Person is a member and which is under common control within the
meaning of Section 414 of the Code and the regulations promulgated and rulings
issued thereunder.
"Events of Default" shall have the meaning specified in
Section 6.1 of this Agreement.
"Financial Statements" shall have the meaning specified in
Section 3.15 of this Agreement.
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"Fiscal Year" shall mean the twelve (12) month period ending
on December 31 of each calendar year.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Including (or includes)" and words to the same or similar
effect shall be interpreted and construed to mean including without limitation
(or includes without limitation).
"Indebtedness" means at a particular time, without
duplication, (i) any indebtedness for borrowed money or issued in substitution
for or exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business that are not more than one hundred twenty (120)
days past due), (iv) any Contingent Obligations, (v) any obligations under
Capitalized Leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vi) any indebtedness
secured by a Lien on a Person's assets and (vii) any unsatisfied obligation for
"withdrawal liability" to a Multiemployer Plan as such terms are defined under
ERISA.
"IRS" means the United States Internal Revenue Service.
"Investor Common Stock" shall have the meaning as set forth in
Section 2.1 of this Agreement.
"Investor Representative" means (a) any individual designated
by the Majority Holders, the Lenders (as defined in the Shareholders' Agreement)
or Edgewater, as the case may be, as an Investor Representative prior to the
election of a representative designated by the Majority Holders to the Board of
Directors of the Company pursuant to clause (b) below or at any time no such
representative is a member of the Board of Directors of the Company, or (b) any
Board Member of the Company designated by the Majority Holders, the Lenders or
Edgewater, as the case may be, as an Investor Representative and elected to the
Board of Directors of the Company pursuant to Section 1.2(a) of the Shareholders
Agreement.
"Latest Balance Sheet" shall have the meaning specified in
Section 3.15 of this Agreement.
"Lien" shall mean any security interest, pledge, bailment (in
the nature of a pledge or for purposes of security), mortgage, deed of trust,
the grant of a power to confess judgment, conditional sales and title retention
agreement (including any lease in the nature thereof), charge, encumbrance or
other similar arrangement or interest in real or personal property, other than
licenses of Proprietary Rights.
3
"Majority Holders" shall mean the holders of a majority of the
shares of Investor Common Stock.
"Material Adverse Effect" shall mean a material adverse effect
on the financial condition, business, operating results, operations, business
prospects or property of the Company.
"Multiemployer Plan" has the meaning set forth in Section
3(37) of ERISA.
"Person" shall mean any individual, corporation, partnership,
company, limited liability company, joint venture, association, bank, business
trust or other entity, whether or not legal entities, or any governmental entity
or agency or political subdivision thereof.
"Principal Shareholders" means Xxxx Xxxx, Xxxxxxx Xxxxxx,
Xxxxxxx Xxxxxx and Xxxxx Xxxxx.
"Private Option Agreement" means the Stock Option Purchase
Agreement dated the date hereof among Xxxx Xxxx, Edgewater and TIME.
"Proprietary Rights" shall mean all patents, patent
applications, patent disclosures, inventions (whether or not patentable and
whether or not reduced to practice), and any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof;
trademarks, service marks, trade dress, logos, trade names, corporate names
(including the use of the current corporate name and trade names and all
translations, adaptations, derivations and combinations of the foregoing) and
the goodwill associated therewith; copyrights and copyright works; mask works;
all registrations, applications and renewals for any of the foregoing; all trade
secrets, confidential information, ideas, formulae, compositions, know-how,
manufacturing and production processes and techniques, research and development
information (including drawings, specifications, designs, plans, proposals,
technical data, financial, business and marketing plans, and customer and
supplier lists and related information); Software (including data, data bases
and documentation); all other proprietary rights; all copies and tangible
embodiments of the foregoing (in whatever form or medium); and all income,
royalties, damages and payments due or payable (including damages and payments
for past or future infringements or misappropriation thereof), the right to xxx
and recover for past or future infringements or misappropriation thereof and any
and all corresponding rights that, now or hereafter, may be secured throughout
the world.
"Registration Agreement" shall mean the Registration Agreement
of even date herewith among the Company and the Investors.
"Securities" shall mean any debt or equity securities of the
Company or Subsidiary, whether now or hereafter authorized, and any instrument
convertible into or exchangeable for Securities or a Security. The term
"Security" shall mean any one of the Securities.
4
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and any rules or regulations promulgated thereunder.
"Shareholders' Agreement" shall mean the Shareholders'
Agreement of even date herewith among the Company, the Investors and the
Principal Shareholders.
"Software" shall mean all software products developed or owned
by the Company as of the date of Closing as described in Schedule 3.22 of the
Disclosure Schedule, including all enhancements, versions, releases and updates
of such products as of Closing, and any other software products of the Company
in development or in which the Company has any interest as of the Closing,
regardless of the product's stage of development.
"Stock Purchase" shall mean any redemption, acquisition or
other retirement of capital stock of the Company (including preferred stock, if
any) or of warrants, rights or other options to purchase such stock, other than
upon conversion thereof into or exchange thereof for other shares of the
Company's capital stock which is not preferred stock that is or will be
redeemable at the option of the holder thereof.
"Subsidiary" of any Person shall mean any other Person of
which the outstanding capital stock, membership interest or other equity
interest possessing a majority of the voting power in the election of directors
(otherwise than as the result of a default) is owned or controlled by such
corporation directly or indirectly through one or more Subsidiaries.
"Tax" or "Taxes" shall mean all federal, foreign, state,
county, local or other taxes, charges, fees, levies or other assessments of any
nature whatsoever, including, without limitation, any federal income,
alternative minimum tax, gross receipts, excise, real or personal property,
sales, value-added, withholding, social security, payroll, employment,
severance, stamp, documentary, gains, environmental, retirement, unemployment,
occupation, use, ad valorem, service, net worth, franchise, transfer and
recording taxes, imposed by any federal, state, local or foreign taxing
authority, and shall include all interest, penalties and additions imposed with
respect to such amounts.
"Tax Returns" shall mean all returns, reports, information
statements or other documents (including, without limitation, elections,
declarations, disclosures, schedules, estimates, information, and amended
returns) provided to or filed or required to be provided to or filed with any
taxing authority relating to Taxes.
"Trade Secrets" shall mean all licenses, processes,
algorithms, formulae, designs, methods, trade secrets, inventories, proprietary
or technical information, and data covering or embodied in any Software or other
assets owned by the Company or used in the conduct of its business.
"Transaction Documents" shall mean this Agreement, the
Shareholders' Agreement, and the Registration Agreement.
5
Section 2. Purchase of Investor Common Stock; Closing.
2.1 Purchase and Sale of the Investor Common Stock at the Closing. At
the Closing (as defined below), the Company shall sell to Investors and, subject
to the terms and conditions set forth herein, and relying upon the
representations, warranties and covenants of the Company set forth herein, each
Investor shall purchase from the Company, severally and not jointly, the number
of shares set forth in Section 2.3 hereof with respect to such Investor,
representing in the aggregate 2,000,000 shares (as adjusted for stock splits,
recapitalizations and the like) of Common Stock at $1.00 per share (the
"Investor Common Stock"), for an aggregate purchase price of Two Million Dollars
($2,000,000) (the "Purchase Price").
2.2 Use of Purchase Price. The Purchase Price shall be used by the
Company solely for working capital requirements, and not to reduce the principal
portion of any Indebtedness or to make any payments to any shareholders or
Affiliates of the Company.
2.3 The Closing. The closing of the purchase and sale of the Investor
Common Stock shall take place on the date of execution of this Agreement (the
"Closing"). At the Closing, the Company shall deliver to each Investor stock
certificate(s) and other applicable instruments evidencing the Investor Common
Stock to be purchased by each Investor, issued in the name of each applicable
Investor, upon payment of the Purchase Price therefor by a cashier's or
certified check, or by wire transfer of immediately available funds to the
Company's account in the aggregate amount of Two Million Dollars ($2,000,000).
The stock certificates shall bear a legend as provided in the Shareholders'
Agreement. The Investor Common Stock to be purchased hereunder shall be
allocated among the Investors as follows: (a) One Million Two Hundred Fifty
Thousand (1,250,000) shares to Edgewater for One Million Two Hundred Fifty
Thousand Dollars ($1,250,000); and (b) Seven Hundred Fifty Thousand (750,000)
shares to TIME for Seven Hundred Fifty Thousand Dollars ($750,000).
Section 3. Representations and Warranties.
The Company hereby makes the following representations and warranties
which shall survive the execution and delivery of this Agreement and the
issuance of the Investor Common Stock hereunder and shall expire as provided in
Section 7.9 hereof.
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. The Company has all licenses, permits and authorizations necessary to own
its properties and to carry on its businesses as now being conducted and as
presently proposed to be conducted and is duly qualified to do business as a
foreign corporation in each state or country, if any, in which failure to
qualify would have a material adverse effect on the business, operations,
properties, financial condition, operating results or business prospects of the
Company. The Company has provided the Investors with true and correct copies of
the Articles and Bylaws.
6
3.2 Corporate Power. The Company has the requisite corporate power and
authority to execute, deliver and carry out the Transaction Documents and all
other instruments, documents and agreements contemplated or required by the
provisions of any of the Transaction Documents to be executed, delivered or
carried out by the Company hereunder. The Company has all requisite corporate
power and authority under the laws of its jurisdiction of incorporation to own
and operate its properties and to carry on its businesses as now conducted and
as presently proposed to be conducted.
3.3 Subsidiaries and Investments. Except as set forth on Schedule 3.3
of the Disclosure Schedule, the Company does not own or hold any rights to
acquire any shares of stock, membership interest or any security or interest in
any other Person, and the Company has never had a Subsidiary.
3.4 Authorization, Governmental Approvals. The execution and delivery
of this Agreement, the issuance of the Investor Common Stock, the execution and
delivery of the other Transaction Documents and all other instruments, documents
and agreements contemplated or required by the provisions hereof or thereof to
be executed and delivered by the Company and the consummation by the Company of
the transactions herein and therein contemplated to be consummated by the
Company have each been duly authorized by all necessary corporate action on the
part of the Company. Except for filings necessary for the sale of the Investor
Common Stock to qualify for certain exemptions from the registration
requirements under state blue sky laws and federal securities laws, no
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and no vote, authorization, consent or approval of
shareholders of the Company, is or was necessary for (a) the valid execution and
delivery of this Agreement by the Company, (b) the execution, issuance and
delivery of the Investor Common Stock, (c) the execution and delivery by the
Company of the other Transaction Documents and all other instruments, documents
and agreements contemplated or required by the provisions hereof or thereof and
to be executed and delivered by the Company, or (d) the consummation by the
Company of the transactions herein and therein contemplated to be consummated by
the Company.
3.5 Capital Stock. The Investor Common Stock that is being purchased by
Investors hereunder, when issued, sold, and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, is not subject to preemptive
rights, purchase rights or similar rights, and will be free of restrictions on
transfer other than restrictions on transfer under the applicable state and
federal securities laws and pursuant to the Shareholders' Agreement.
3.6 Conflict with Other Instruments. Except as set forth on Schedule
3.6 of the Disclosure Schedule, neither the execution and delivery by the
Company of the Transaction Documents or the other instruments, documents and
agreements contemplated or required hereby or thereby, nor the consummation of
the transactions herein or therein contemplated to be consummated by the
Company, nor compliance by the Company with the terms, conditions and provisions
hereof
7
or thereof, shall conflict with or result in a breach of any of the terms,
conditions or provisions of the Articles or the Bylaws of the Company, or any
law or any regulation, order, writ, injunction or decree of any court or
governmental instrumentality or any agreement or instrument to which the Company
is a party or by which it or any of its respective properties is bound or
constitute a default thereunder or result in the creation or imposition of any
Lien.
3.7 Validity and Binding Effect. The Transaction Documents which the
Company is required to execute and all other instruments and agreements
contemplated hereby or thereby to which the Company is a party have been duly
and validly executed and delivered by the Company and constitute legal, valid
and binding obligations of the Company, and all such obligations of the Company
are enforceable in accordance with their respective terms.
3.8 Capitalization.
(a) The authorized capital stock of the Company consists of
150,000,000 shares of Common Stock, of which at Closing, __________ shares were
issued and outstanding, and 5,000,000 shares of preferred stock, of which at
Closing no shares were issued and outstanding. The issued and outstanding
capital stock of the Company at the Closing Date owned by the Principal
Shareholders is set forth on Schedule 3.8 of the Disclosure Schedule. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable and are owned of record or beneficially by the Company's
shareholders. Except as set forth on Schedule 3.8, there are not outstanding any
shares of stock, securities, rights or options convertible or exchangeable into
or exercisable for any shares of the Company's capital stock, stock appreciation
rights or phantom stock, nor is the Company under any obligation (contingent or
otherwise) to redeem or otherwise acquire any shares of its capital stock or any
securities, rights or options to acquire such capital stock, stock appreciation
rights or phantom stock.
(b) There are no statutory or contractual shareholders
preemptive rights with respect to any shares of capital stock of the Company.
The Company has not violated and will not violate any applicable federal or
state securities laws in connection with the offer, sale or issuance of the
Investor Common Stock and such issuances, offers, or sales do not require
registration of the Investor Common Stock of the Company under the Securities
Act or any applicable state securities laws. Except for the Shareholders'
Agreement, the Registration Agreement and the Private Option Agreement, to the
Company's knowledge, there are no agreements between the Company's shareholders
(or any one or more of them) with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the Company's
affairs.
3.9 Compliance with Instruments. The Company is not in violation of any
term of (a) the Articles or the Bylaws or (b) any agreement, instrument,
contract or commitment to which it is a party or by which it may be bound,
except for such violations of agreements, instruments, contracts or commitments
which individually and in the aggregate do not result in a Material Adverse
Effect.
8
3.10 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding upon the Company.
The Company shall pay, and hold Investors harmless against, any liability, loss
or expense (including reasonable attorneys' fees and out-of-pocket expenses)
arising in connection with any claim by any Person.
3.11 Litigation. Except as set forth on Schedule 3.11 of the Disclosure
Schedules, there are no actions, suits or proceedings pending or, to the
Company's knowledge, threatened against or affecting the Company or its business
or assets, before any court or governmental department, agency or
instrumentality, domestic or foreign. The foregoing includes, without
limitation, any action, suit, proceeding, or investigation pending or currently
threatened involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, their
obligations under any agreements with prior employers, or negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business. The Company is not a party to or, to the best of its knowledge, named
in or subject to any order, writ, injunction, or decree of any court,
governmental agency, or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company currently
intends to initiate, except as set forth on Schedule 3.11 of the Disclosure
Schedules.
3.12 Employee Benefit Plans. Schedule 3.12 of the Disclosure Schedule
contains a list of all Employee Benefit Plans maintained by Company and/or any
ERISA Affiliate or to which the Company or any ERISA Affiliate contributes or is
or was obligated to contribute. Each Employee Benefit Plan that is intended to
be a qualified plan under Section 401(a) of the Code is a standardized prototype
plan that meets the requirements for qualification under Section 401(a) of the
Code, except to the extent that such requirements may be satisfied by adopting
any necessary amendments issued by the prototype plan sponsor prior to the
current expiration of the remedial amendment period under Section 401(b) of the
Code.
(a) As applicable with respect to each Employee Benefit Plan,
the Company has delivered to the Investors or made available, true and complete
copies of (A) each Employee Benefit Plan, including all amendments thereto, (B)
all trust documents, investment management contracts, custodial agreements and
insurance contracts relating thereto, (C) the current summary plan description
and each summary of material modifications thereto, (D) the most recent annual
report (Form 5500 and all schedules thereto) filed with the Internal Revenue
Service ("IRS"), the most recent IRS determination letter and each currently
pending application to the IRS for a determination letter, and (F) all records,
notices and filings concerning IRS or Department of Labor audits or
investigations.
(b) Except as set forth in Schedule 3.12 the Disclosure
Schedule:
(1) all accrued contributions and other payments to
be made by the Company or any ERISA Affiliate to any Employee Benefit Plan
through the date of the latest balance
9
sheet have been made or reserves adequate therefor have been set aside and
reflected on the latest balance sheet;
(2) neither the Company nor any ERISA Affiliate has
any liability on account of any failure to make contributions to any Employee
Benefit Plan. The Employee Benefit Plans have in all material respects been
maintained and administered in accordance with the documents governing them and
the laws and regulations applicable to them (including, without limitation,
rules and regulations of the Department of Labor and the IRS under ERISA and the
Code);
(3) there are no outstanding liabilities of any
Employee Benefit Plan other than liabilities for benefits to be paid to
participants and beneficiaries in the ordinary course of business;
(4) there is no pending litigation or, to the best
knowledge of the Company, any overtly threatened litigation or pending claim,
that involves any of the Employee Benefit Plans. No prohibited transaction has
occurred with respect to any Employee Benefit Plan;
(5) none of the Employee Benefit Plans is or ever has
been subject to Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate is or ever has been required to contribute to an
Employee Benefit Plan that is a Multiemployer Plan;
(6) except to the extent required by ERISA, none of
the Employee Benefit Plans provides for (or has ever provided for) medical or
health care or other welfare benefits for any former employee, officer, member,
manager or director of the Company or any ERISA Affiliate (or any of their
beneficiaries); and
(7) the transactions contemplated by this Agreement
will not entitle any employee to any severance benefit under the terms of any
Employee Benefit Plan or any personnel or employment policy of the Company or
any ERISA Affiliate. None of the Employee Benefit Plans contains any change in
control or other provisions which would cause an increase or acceleration of
benefits or benefit entitlements to participants or their beneficiaries, or an
increase in liability of the Company as a result of the transactions
contemplated by this Agreement or any related action thereafter.
3.13 Reserved.
3.14 Compliance with Laws; Certain Operations. The Company and its
officers, directors, agents and employees have substantially complied with all
applicable laws and regulations of foreign, federal, state and local governments
and all agencies thereof which affect the business, operations, properties,
financial condition, operating results or business prospects of the Company in
any material respect, and no claims have been filed against the Company alleging
a violation of, or liability or responsibility under, any such law or regulation
which have not been heretofore settled.
10
3.15 Financial Statements. The Company has delivered to Investors (a)
the audited balance sheets and related statements of income and cash flows at
and for the years ended December 31, 1998 and 1999, and (b) the unaudited
balance sheet (the "Latest Balance Sheet") and related statements of income and
cash flow at and for the six months ended June 30, 2000. Each of the foregoing
financial statements, including in all cases the notes thereto (collectively,
the "Financial Statements"), is accurate and complete in all material respects,
is consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects), fairly presents the financial
condition of the Company as at their respective dates and the results of
operations and cash flow for the periods covered thereby, and has been prepared
in accordance with GAAP, subject to the lack of footnote disclosure and year end
adjustments.
3.16 Absence of Undisclosed Liabilities. The Company does not have any
liability (whether accrued, known to the Company, whether due or to become due
and regardless of when asserted) arising out of transactions entered into on or
prior to the date hereof, or any action or inaction on or prior to the date
hereof, or any state of facts existing on or prior to the date hereof other than
(a) liabilities set forth on the Latest Balance Sheet (including any notes
thereto) or (b) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit).
3.17 Assets. The Company has good and indefeasible title to, or has a
valid leasehold interest in, or has a valid license to use, the tangible
properties and assets used by it, located on its premises or shown on the Latest
Balance Sheet or acquired thereafter (except for properties and assets disposed
of in the ordinary course of business since the date of the Latest Balance
Sheet), free and clear of all Liens, except for Liens disclosed on the Latest
Balance Sheet (including any notes thereto) and Liens for current property Taxes
not yet due and payable. The Company's tangible assets are in good operating
condition, ordinary wear and tear excepted, and are fit for use in the ordinary
course of business. The Company owns, or has a valid leasehold interest in, or
has a valid license to use, all tangible assets necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.
3.18 Tax Matters. The Company has filed all Tax Returns required to be
filed by it and all such Tax Returns are true and accurate in all material
respects. The Company has paid all sales, use, income, payroll, excise and other
Taxes owed by it and withheld and paid over all Taxes which it is obligated to
withhold from amounts owing to any employee, creditor, customer or third party;
to the best knowledge of the Company, the Company has not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency; and there are no pending federal or
state Tax audits being conducted with respect to the Company. To the best
knowledge of the Company, the Company has never had any Tax deficiency proposed
or assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any Tax or governmental charge.
Except as set forth on Schedule 3.18, to the best knowledge of the Company, none
of the Company's Tax Returns and none of its state income or franchise Tax
Returns or sales or use Tax Returns has ever been audited by governmental
authorities. Since the
11
date of the Financial Statements, the Company has made adequate provisions on
its books of account for all Taxes, assessments, and governmental charges with
respect to its business, properties, and operations for such period. The Company
has withheld or collected from each payment to each of its employees, the amount
of all Taxes, including, but not limited to, federal income Taxes, Federal
Insurance Contribution Act Taxes and Federal Unemployment Tax Act Taxes required
to be withheld or collected therefrom, and has paid the same to the proper Tax
receiving officers or authorized depositaries.
3.19 Absence of Material Adverse Change. Since the date of the Latest
Balance Sheet, there has been no material adverse change in the business,
operations, properties, financial condition, operating results or business
prospects of the Company.
3.20 Absence of Certain Developments. Except as set forth on Schedule
3.20 of the Disclosure Schedule, since the date of the Latest Balance Sheet, the
Company has not
(a) become subject to any Indebtedness, except current
liabilities incurred in the ordinary course of business and liabilities under
contracts entered into in the ordinary course of business;
(b) discharged or satisfied any Lien or paid any Indebtedness,
other than current liabilities paid in the ordinary course of business;
(c) declared or made any payment or distribution of cash or
other property to its shareholders with respect to its capital stock, or
purchased or redeemed any shares of its capital stock;
(d) mortgaged, pledged or subjected to any Lien any of its
material assets, except Liens for current property Taxes not yet due and
payable;
(e) sold, assigned or transferred any of its assets, except in
the ordinary course of business, or canceled without fair consideration any
debts or claims owing to or held by it;
(f) sold, assigned, transferred, abandoned or permitted to
lapse any licenses or permits or any portion thereof, or any Proprietary Rights
or other intangible assets, or (except as necessary to conduct its ongoing
operations) disclosed any proprietary confidential information to any Person;
(g) made or granted any bonus or any wage or salary increase
to any employee (except in the ordinary course of business consistent with past
practice), former employee or retiree or group of employees, former employees or
retirees or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement;
12
(h) made any capital expenditures or commitments therefor that
aggregate in excess of $1,000,000;
(i) made any loans or advances to any Persons (other than de
minimis employee loans or advances not exceeding $5,000 in the aggregate to any
employee);
(j) suffered any material extraordinary losses or waived any
rights of material value, whether or not in the ordinary course of business or
consistent with past practice;
(k) entered into any other material transaction including any
employment agreement;
(l) received notice that there has been a loss of, or material
order cancellation by, any customer of the Company;
(m) agreed to any change to a material contract arrangement by
which the Company or its assets is bound or subject;
(n) suffered any damage, destruction or loss, whether or not
covered by insurance materially affecting the business, properties, prospects or
financial condition of the Company;
(o) suffered any other event or condition of any character
that has materially and adversely affected or, to the best knowledge of the
Company, might materially and adversely affect the business, properties,
prospects or financial condition of the Company; or
(p) changed its accounting principles or practices or the
method of recording transactions involving accounts receivable and inventory.
3.21 Contracts. (a) The Company has in all material respects performed
all the obligations required to be performed by it to the date of this Agreement
and is not in receipt of any written claim of default under any material lease,
contract, commitment or other agreement to which it is a party; (b) no event has
occurred which with the passage of time or the giving of notice or both would
result in a breach or default under any material lease, contract, instrument or
other agreement to which the Company is a party; (c) to the best knowledge of
the Company, no contract or commitment material to the Company has been breached
in any material respect or canceled by the other party since the date of the
Latest Balance Sheet; (d) the Company is not a party to any contract which is
materially adverse to the operations, financial condition, operating results or
business prospects of the Company; (e) to the best knowledge of the Company,
since the date of the Latest Balance Sheet, no material customer or supplier has
notified the Company that it will stop or decrease in any material respect the
rate of business done with the Company; and (f) all material contracts of the
Company have been provided to the Investors.
13
3.22 Proprietary Rights.
(a) Schedule 3.22 of the Disclosure Schedule hereto contains a
complete and accurate list as of the date hereof of all patented and registered
Proprietary Rights owned by the Company (including, but not limited to,
Software, and all pending patent applications and applications for the
registration of other Proprietary Rights owned or filed by the Company).
Schedule 3.22 of the Disclosure Schedule also contains a complete and accurate
list of all licenses and other rights granted by the Company to any third party
with respect to the Proprietary Rights and material licenses and other rights
granted by any third party to the Company. Except as set forth on Schedule 3.22
of the Disclosure Schedule, (i) the Company owns and possesses all right, title
and interest in and to, or has a valid and enforceable license to use, all of
the Proprietary Rights necessary for the operation of the business of the
Company as currently conducted or as currently proposed to be conducted; (ii) no
claim by any third party contesting the validity, enforceability, use or
ownership of any Proprietary Rights has been made, is currently outstanding or,
to the best of the Company's knowledge, is threatened, and to the best of the
Company's knowledge, there are no grounds for any such claim; (iii) the loss or
expiration of any Proprietary Right or related group of Proprietary Rights is
not threatened, pending or reasonably foreseeable; (iv) the Company has not
received any notices of, nor is it aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict with, any
third party with respect to the Proprietary Rights, nor has the Company received
any claims of infringement or misappropriation of or other conflict with any
intellectual property rights of any third party; (v) to its knowledge after
diligent inquiry, the Company has not infringed, misappropriated or otherwise
conflicted with any intellectual property rights of any third parties, nor is it
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of the business of the Company as currently
conducted or as currently proposed to be conducted; and (vi) the Company has
made all necessary filings and recordations and has paid all required fees and
Taxes to record and maintain its ownership of the patented or registered
Proprietary Rights in the United States Patent and Trademark Office and the
United States Copyright Office.
(b) (i) The Company has good, sole and marketable title to all
copyrights in and to the Software free and clear of any Liens, and such
copyrights are not being challenged in any way; and (ii) no person or entity has
any right of renewal, reversion, or termination with respect to any copyrights
owned by the Company or any rights under any such copyrights.
(c) All of the Trade Secrets are embodied in the Software or
other assets owned by the Company (other than general business knowledge not
typically reduced to a written form), and there is no other tangible expression
of the Trade Secrets by the Company. The Company has taken all reasonable
security measures to protect the secrecy, confidentiality, and the value of the
Trade Secrets, and any other persons who have knowledge of or access to
information relating to the Trade Secrets have been put on notice and, if
appropriate, have entered into agreements that the Trade Secrets are proprietary
to the Company and are not to be divulged or misused. All of the Trade Secrets
are presently valid and protectable, are not part of the public domain, and, to
the knowledge of the Company, have not been used, divulged, or appropriated for
the benefit of any Persons other than the Company or to the detriment of the
Company.
14
(d) All authors of the Software or any other Person or entity
who participated in the development of the Software or any portion thereof or
performed any work related to the Software are collectively referred to as the
"Software Authors". Each Software Author (with the exception of independent
contractors) made his contribution to the Software within the scope of
employment with the Company, as a "work made for hire," and was directed or
engaged by the Company (as the case may be) to work on the Software. The
Software Authors who are independent contractors have assigned all of their
respective right, title and interest in and to the Software to the Company.
Except as set forth on Schedule 3.22 of the Disclosure Schedule, the Software
and every portion thereof are an original creation of the Software Authors and
do not contain any source code or portions of source code (including any "canned
program") created by any parties other than the Software Authors. To the
knowledge of the Company, the Company has not, by any of its acts or omissions,
or by acts or omissions of its affiliates, directors, officers, employees,
agents, or representatives caused any of its Proprietary Rights, including
Software, copyrights, trademarks, and Trade Secrets to be transferred,
materially distributed, or adversely affected to any material extent.
(e) The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or subject to any judgment, decree, or order of
any court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
3.23 Insurance. The Company believes that the insurance coverage of the
Company is customary for corporations of similar size engaged in similar lines
of business and is proper to cover the Company's properties, assets and
business. Each insurance policy maintained by the Company with respect to its
properties, assets and businesses is in full force and effect as of the date
hereof and shall remain in full force and effect following the date hereof. The
Company is not in default with respect to its obligations under any insurance
policy maintained by it.
3.24 Year 2000 Compliance. To the best knowledge of the Company, the
Software, computer firmware, computer hardware (whether general or specific
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are used or relied on by the Company in the conduct of
its business (collectively, "Information Technology") are designed to be used
prior to, during, and after the calendar year 2000 A.D., and the Information
Technology used during each such period will accurately receive, provide and
process time/date data (including, but not limited to, calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first centuries,
including the years 1999 and 2000, and leap year calculations and will not
malfunction, cease to function, or provide invalid or incorrect results as a
result of date/time data, to
15
the extent that other Information Technology, used in combination with the
Information Technology of the Company, properly exchanges date/time data with
it.
3.25 Disclosure Schedule. Any references to "Schedule" herein or a
Disclosure Schedule shall be deemed to refer to a part of the Disclosure
Schedule which (a) has been certified as true and correct by the Company, (b)
has been delivered to Investors in connection with the execution of this
Agreement and (c) describes in reasonable detail all exceptions to the
representations and warranties of the Company.
3.26 Extent of Offering. Neither the Company nor any agent acting on
its behalf has sold or offered to sell any or all of the Investor Common Stock
or any similar securities so as to bring the issuance or sale of the Investor
Common Stock pursuant to this Agreement and the Transaction Documents within the
provisions of Section 5 of the Securities Act, and neither the Company nor any
agent acting on its behalf will offer or sell the Investor Common Stock or any
similar securities so as to bring the issuance or sale of the Investor Common
Stock pursuant to this Agreement and the Transaction Documents within such
provisions.
3.27 Reserved.
3.28 Registration Rights. Except for rights existing pursuant to the
Registration Agreement contemplated hereby and except as set forth on Schedule
3.28 of the Disclosure Schedule, as of the Closing, no holder of any Security
will have any right to require the registration thereof (or of Securities
receivable upon the exercise or conversion thereof) under the Securities Act or
the right to include such Security (or any Security receivable upon the exercise
or conversion thereof) in a registration statement filed by the Company under
the Securities Act.
3.29 Illegal Payments. The Company has never made any illegal payment
of any kind, directly or indirectly, including, without limitation, payments,
gifts or gratuities, to the United States or any foreign national, state or
local government officials, employees or agents.
3.30 Related Party Transactions. Except as set for on Schedule 3.30 of
the Disclosure Schedule,
(a) No employee, officer or director of the Company, no
Affiliate of any employee, officer or director of the Company, and no member of
the immediate family of any employee, officer or director of the Company is
indebted to the Company.
(b) The Company is not indebted, and is not committed to make
loans or extend or guarantee credit, to any employee, officer or director of the
Company, or any Affiliate of any employee, officer or director of the Company,
or any member of the immediate family of any employee, officer or director of
the Company.
16
(c) No Affiliate of the Company, officer or director and no
member of the immediate family of any Affiliate of the Company, officer or
director is interested, directly or indirectly, in any agreement, contract,
commitment or transaction with the Company, except for any employment agreement
entered into in the ordinary course of business. To the best of the Company's
knowledge, no employee and no member of the immediate family of any employee is
interested, directly or indirectly, in any material contract with the Company,
except for any employment agreement entered into in the ordinary course of
business.
3.31 Disclosure. Neither this Agreement, nor the Disclosure Schedule,
nor any of the other Transaction Documents furnished to the Investors by the
Company at the time of the execution and delivery of this Agreement and the
Closing contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact known to the Company (other than
general conditions which are a matter of public knowledge) which materially
adversely affects the business, operations, properties, financial condition,
operating results or business prospects of the Company which has not been set
forth in this Agreement or in the other agreements, documents, certificates and
statements furnished in writing to the Investor prior to or on the date hereof
in connection with the transactions contemplated hereby.
Section 4. Conditions Precedent.
4.1 Conditions Precedent. The obligation of the Investors to purchase
the Investor Common Stock is subject to the conditions set forth below:
(a) The representations and warranties contained in this
Agreement shall be true and correct as of the Closing, and the Company shall
have performed all obligations to be performed hereunder and under the
Transaction Documents on or before the Closing.
(b) The Company shall have reserved no more than fifteen
percent (15%) of the issued and outstanding Common Stock on a fully diluted
basis for issuances of Common Stock pursuant to the Stock Option Plan referred
to in Section 1.3 of the Shareholders' Agreement.
(c) There shall be no breaches of or defaults under the Share-
holders' Agreement or the Registration Agreement.
(d) The shares of Investor Common Stock issuable to the
Investors pursuant to this Agreement shall be approved for listing on the AMEX.
(e) There shall be delivered to Investors at the Closing:
(i) A legal opinion of Fox, Rothschild, O'Brien &
Xxxxxxx, L.L.P., counsel to the Company, in form and substance
satisfactory to the Investors and their counsel;
17
(ii) Duly completed copies of the Transaction
Documents executed by the Company and the Principal Shareholders.
(iii) Certified copies of all documents and
resolutions evidencing corporate action taken by the Company with
respect to the Transaction Documents and the issuance of Investor
Common Stock, in form and substance satisfactory to the Investors and
their counsel;
(iv) Certified correct and complete copies of (A)
the Articles from the Secretary of State of Texas and (B) Bylaws, from
the Secretary of the Company in each case and to the extent applicable,
as validly amended to reflect the adoption of any amendments required
to effectuate the terms of this Agreement or the Shareholder's
Agreement;
(v) Good standing certificates for the jurisdiction
of incorporation of the Company and for each jurisdiction in which the
Company is qualified to do business;
(vi) Stock certificates in the name of each Investor
evidencing the shares of Investor Common Stock purchased hereunder (it
being understood that to the extent such stock certificates are not
delivered at the Closing, such stock certificates shall be delivered by
the Company to each Investor within three (3) business days of the
Closing); and
(vii) Such other instruments, documents and certifi-
xxxxx as the Investors may reasonably require.
Section 5. Covenants.
5.1 Affirmative Covenants. The Company covenants that as long as the
Investors or their Affiliates own of record or beneficially at least 500,000
shares of Common Stock in the aggregate, the Company shall:
(a) Preservation of Corporate Existence, etc. Preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as a foreign
corporation in each jurisdiction in which failure to qualify would have a
material adverse effect on the business, operations, properties, financial
condition, operating results and business prospects of the Company.
(b) Payment of Taxes. Pay and discharge all Taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, would become a
Lien upon any properties of the Company; provided that the Company shall not be
required to pay any such Tax, assessment, charge, levy or claim which it is
contesting in good faith and by proper proceedings and for which such reserves
or other provisions as may be required by GAAP shall have been made and
recorded.
18
(c) Maintenance of Insurance. Maintain insurance on its
properties and businesses with reputable insurance companies in such amounts, of
such types and covering such casualties, risks and contingencies as is
ordinarily carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Company operates.
(d) Maintenance of Properties and Assets. Maintain and
preserve all of its properties which are necessary for the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and all of its other assets (including Proprietary Rights) in accordance with
past custom and practice.
(e) Keeping of Records and Books of Account. Keep adequate
records and books of account, in which complete entries shall be made in
accordance with GAAP, reflecting all financial transactions of the Company.
(f) Visitation Rights. At any time and from time to time
during normal business hours (but so long as no Event of Default occurs, not
more frequently than quarterly) and with prior notice (except as set forth
below), permit one or more representatives designated by the Majority Holders to
examine and make copies of and abstracts from the records and books of account
of, and to visit the properties of the Company and to discuss the affairs,
finances and accounts of the Company with any of the Company's officers or
directors and the Company's independent accountants (and the delivery of an
executed copy of this Agreement to such accountants shall constitute the
Company's consent to such discussions); provided, however, that if an Event of
Default occurs, no designated representative is required to give notice and the
Investors may exercise their rights under this Section 5.1(f) at any time.
(g) Compliance with Laws. Substantially comply with the
applicable requirements of all laws, rules, regulations and orders of any
governmental authority (including, without limitation, ERISA and the Code and
the rules, regulations and orders promulgated thereunder), the violation of
which would have a Material Adverse Effect.
(h) Related Documents. Keep, observe and comply with all of
its covenants and obligations which are set forth in the Transaction Documents
or other agreement or instrument delivered in connection therewith so long as
such covenants and obligations are in force and effect.
(i) Board of Directors. Take all necessary and desirable
actions within its control in order to cause and to continue to cause compliance
with the provisions of Section 1.2(a) of the Shareholders' Agreement with
respect to the Board of Directors of the Company.
(j) Payment of Indebtedness, Etc. The Company shall and shall
cause each Subsidiary to faithfully observe, perform and discharge in all
material respects all the material covenants, conditions and obligations
including, without limitation, payment obligations which are imposed on it by
any and all material indentures, agreements, or other instruments securing or
evidencing Indebtedness or pursuant to which Indebtedness is issued or shall
cure any
19
non-performance or default prior to the date the creditor accelerates the
payment of the Indebtedness or commences proceedings to collect the
Indebtedness, and not permit the occurrence or continuance of any act or
omission which is or under the provisions thereof may be declared to be a
material default thereunder (after the expiration of all applicable cure
periods), unless such default (other than a default in payment of principal or
interest) or the right to declare a default on account of such act or omission
is waived pursuant to the provisions thereof; provided, however, that neither
the Company nor any Subsidiary shall be required to make any payment or to take
any other action by reason of this Section 5.1(j) at any time while it shall be
currently contesting in good faith by appropriate proceedings its obligations to
make such payment or to take such action, if the Company shall have set aside on
its books reserves (segregated or classified to the extent required by GAAP)
deemed by it adequate with respect thereto.
(k) Blue Sky. The Company shall make any and all filings
necessary (whether before or after the Closing) in connection with the offer,
issuance and sale and/or transfer of the Investor Common Stock to be purchased
pursuant to this Agreement under the securities or blue sky laws of any
jurisdiction in which such filing is required by law.
5.2 Reporting Requirements. The Company covenants that so long as the
Investors or their Affiliates own of record or beneficially 500,000 shares of
Common Stock in the aggregate, and if the Company is no longer subject to the
reporting requirements of the Federal securities laws, or if the applicable
report is not publicly disclosed, it shall furnish to Investors:
(a) Annual Budget. Prior to the end of each Fiscal Year, an
annual budget, prepared on a quarterly and annual basis for the Company for each
succeeding Fiscal Year (displaying anticipated statements of income and cash
flows and balance sheets); and within thirty (30) days after any quarterly
period in which there is a material adverse deviation from the annual budget, a
certificate from the Company's President explaining the deviation and what
actions the Company has taken and proposes to take with respect thereto.
(b) Financial Statements. Financial statements and information
to Investors on behalf of itself and any Subsidiaries as follows:
(i) Monthly Statements. Within thirty (30) days
after the end of each month during each fiscal year of the Company, a
copy of the unaudited financial statements of the Company, consisting
of a balance sheet as of the close of such month and related statements
of income and cash flows for such month and from the beginning of such
fiscal year to the end of such month, prepared in accordance with GAAP
on a consistent basis, subject to the lack of footnote disclosure and
year end adjustments.
(ii) Quarterly Statements. Within forty-five (45)
days after the end of each quarter during each fiscal year of the
Company, a copy of the unaudited financial statements of the Company,
consisting of a balance sheet as of the close of such quarter and
related statements of income and cash flows for such quarter and from
the beginning of such fiscal
20
year to the end of such quarter, prepared in accordance with GAAP on a
consistent basis, subject to the lack of footnote disclosure and year
end adjustments.
(iii) Annual Statement. As soon as available and in
any event within one hundred twenty (120) days after the end of each
fiscal year of the Company, a copy of its annual report, audited by
nationally recognized independent certified public accountants and
acceptable to the Investors, including balance sheet and related
statements of income, cash flows and shareholders equity of the Company
for such fiscal year, with comparative figures for the preceding fiscal
year, prepared in accordance with GAAP on a consistent basis.
(c) Notices of Litigation. Promptly after the commencement
thereof (but in no event later than ten (10) days), notice of all actions, suits
and proceedings with an amount in controversy of $250,000 or more before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(d) Notices of Adverse Judgments. Promptly after the
institution thereof (but in no event later than ten (10) days), notice of all
adverse judgments of $100,000 or more entered by any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, against the Company, such notice to include the exact dollar amount of
any such adverse judgment as well as any other estimated adverse economic impact
on the Company.
(e) Material Adverse Changes. Promptly after the occurrence
thereof (but in no event later than ten (10) days), notice of all events,
conditions, acts, facts and omissions (except general conditions which are a
matter of public knowledge) which may reasonably be expected to have any
Material Adverse Effect.
(f) Federal Securities Laws. Any such information (and
consents) regarding the Company in order to fulfill their respective obligations
under the federal securities laws.
(g) Other Information. Such other information respecting the
business, properties, condition or operations of the Company as the Investor may
from time to time reasonably request.
5.3 Negative Covenants. The Company covenants that so long as the
Investors or their Affiliates own of record or beneficially 500,000 shares of
Common Stock in the aggregate, neither it nor any Subsidiary shall, without the
prior written consent of the Investor Representative:
(a) Amendments or Changes in Bylaws or Articles of
Incorporation. Amend, modify, repeal or supplement any provision of the
Company's Bylaws (if adverse to the rights of the Investors under this
Agreement, the Shareholders' Agreement or the Registration Agreement) or the
Articles including, without limitation, any amendments that (i) authorize shares
of any class of stock of the Company having any preference or priority as to
dividends or assets superior to or in parity with the Investor Common Stock;
(ii) increase the number of authorized shares of any class of stock
21
of the Company; or (iii) authorize or reserve additional shares of Common Stock
with respect to the Stock Option Plan referred to in Section 1.3 of the
Shareholders' Agreement, or any other plan arrangements for issuing equity
securities to employees of the Company.
(b) Issuance of Capital Stock. (i) Issue shares of any class
of stock; and (ii) issue additional shares of Common Stock with respect to the
Stock Option Plan (other than as permitted under in Section 1.3 of the
Shareholders' Agreement), or any other plan or arrangement for issuing equity
securities to employees of the Company.
(c) Dividends. Directly or indirectly make, declare or pay any
dividends or other distributions on its capital stock in cash or in property to
any class of stock of the Company.
(d) Acquisitions; Sale of Assets; Merger; Consolidation;
Reorganization; Liquidation, Etc. Acquire any interest in any business (whether
by a purchase of assets, purchase of stock, merger, or otherwise); enter into an
agreement providing for a plan of exchange, merger or consolidation with or into
any other entity; enter into any joint venture, partnership or plan of
reorganization (except for strategic alliances entered into in the ordinary
course of business which do not involve (i) capital contributions, exchanges or
contributions of equity or assets, or (ii) transactions violating any other
provision of Section 5.3 hereof); sell, assign, lease, transfer or otherwise
dispose of any substantial portion of its capital assets; recapitalize; become a
member in a limited liability company or otherwise acquire an equity interest in
another Person; or liquidate.
(e) Change of Control. Authorize the sale of voting capital
stock (whether by the Company or any shareholder thereof) permitting the holder
thereof to control fifty-one percent (51%) of the voting rights of the Company
or any Subsidiary.
(f) Redemption of Stock. Make or incur any liability to make
any Stock Purchase (other than pursuant to equity incentive agreements with
employees and service providers giving the Company the right to repurchase
shares of the Company's capital stock upon termination of employment or services
and as provided in the Shareholders' Agreement), or other acquisition of shares
of the Company's capital stock or any payments with respect to stock
appreciation rights or similar rights.
(g) Change of Business. Enter into the ownership, active
management of operation of any business other than the ownership and operation
of the business of the Company conducted as of the date hereof, or make any
material change in the Company's current business.
(h) Directors. Increase the number of directors of the
Company, except as permitted by Section 1.2 of the Shareholders' Agreement.
(i) Liabilities. Become liable for, or make any payments with
respect to, any Indebtedness, except for Indebtedness not in excess of Six
Million Dollars ($6,000,000) outstanding at any time in the aggregate.
22
(j) Capital Expenditures. Make any capital expenditures that
in the aggregate exceed (i) Four Million Five Hundred Thousand Dollars
($4,500,000) in the 2000 Fiscal Year, or (ii) Two Million Dollars ($2,000,000)
in any other Fiscal Year.
(k) Transactions with Affiliates. Enter into any transaction
with any of its Affiliates, except on arms-length terms and approved by the
disinterested members of the Board of Directors of the Company or as otherwise
provided in this Agreement.
It is understood and agreed that if the Investor Representative does
not provide his consent to any of the actions prohibited by this Section 5.3,
the Company shall have an option to redeem all (but not less than all) of the
Investor Common Stock pursuant to the terms and conditions set forth in Section
6.4(b) below.
5.4 Reserved.
5.5 Reserved.
5.6 Investor Covenants. The Investors shall use commercially reasonable
efforts to (a) leverage the experience of the Investors in consulting on general
business matters to the Company, its officers and its Board of Directors, (b)
arrange for analysts to follow and cover the Company's public class of stock,
(c) assist the Company in obtaining an underwriter of nationally recognized
standing to underwrite a proposed offering of Common Stock, and (d) review and
advise the Company on all potential acquisitions. The Investors shall designate
a Person to serve on the Board of Directors of the Company as and to the extent
set forth in the Shareholders' Agreement.
Section 6. Events of Default.
6.1 Events of Default. If any of the following events (each is herein
referred to as an "Event of Default") occur:
(a) (i) default or breach shall occur in the performance of or
compliance with any covenant contained in Section 5.3, or (ii) default or breach
shall occur in the performance of or compliance with any covenant contained
herein (other than as set forth in clause (i) above) which shall continue
uncured for more than thirty (30) days after written notice of such default
shall have been provided by Investors, unless such cure cannot be effected
within thirty (30) days, in which case the cure period shall continue for up to
ninety (90) days if the default or breach is curable and the Company is
diligently attempting to effect such cure;
(b) the failure of the Company to elect a designee of the
Investors to the Company's Board of Directors pursuant to Section 5.1(i) of this
Agreement and Section 1.2(a) of the Shareholder's Agreement or the failure to
properly register the Investor Common Stock as provided in the Registration
Agreement;
23
(c) a breach of any of the Company's representations,
warranties, covenants and agreements under the Registration Agreement or the
Shareholders' Agreement (which continues beyond the expiration of any applicable
cure period), other than those referred to in clause (b) above;
(d) if any representation or warranty to the Investors made in
writing by the Company in this Agreement or in any agreement, certificate,
report, financial statement or instrument to be delivered to any Investor
pursuant to the Transaction Documents and which was prepared by a director,
officer, employee, agent or representative of the Company (which non-officer
employee, agent or representative was authorized by the Company) and delivered
to the Investors, shall prove to have been false or inaccurate in any material
respect on the date as of which it was made;
(e) a receiver, conservator, custodian, liquidator or trustee
of the Company or any of its Subsidiaries or of all or any of the property of
any of them, is appointed by court order and such order remains in effect for
more than sixty (60) days; or an order for relief is entered under the federal
bankruptcy laws with respect to the Company or any of its Subsidiaries; or any
of the material property of any of them is sequestered by court order and such
order remains in effect for more than sixty (60) days; or a petition is filed
against the Company or any of its Subsidiaries under the bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, and is
not dismissed within sixty (60) days after such filing;
(f) The Company or any of its Subsidiaries files a petition in
voluntary bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law;
(g) The Company or any of its Subsidiaries makes an assignment
for the benefit of its creditors, or admits in writing its inability to pay its
debts generally as they become due, or consents to the appointment of a
receiver, conservator, custodian, liquidator or trustee of the Company or any of
its subsidiaries, or of all or any part of the property of any of them;
(h) final judgment for the payment of money which,
individually or in the aggregate exceeds Two Hundred Fifty Thousand Dollars
($250,000) shall be rendered by a court of record against the Company or any of
its Subsidiaries, and the Company or such Subsidiary shall not (i) discharge the
same (by insurance or otherwise) or provide for its discharge in accordance with
its terms or (ii) procure a stay of execution thereof within sixty (60) days
from the date of entry thereof and within said period of sixty (60) days, or
such longer period during which execution of such judgment shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) The Company fails to maintain the listing of its Common
Stock on AMEX or any other nationally recognized securities exchange reasonably
acceptable to the Investors;
24
then, when any Event of Default has occurred and shall be continuing, and unless
consent of the Majority Holders, at the time has been obtained waiving such
Event of Default in writing, Investors shall have all available rights in law or
in equity or as may be available pursuant to this Agreement.
6.2 Remedies on Default.
(a) If an Event of Default shall have occurred pursuant to
Section 6.1, Investors shall be entitled to the rights specified in Section 6
(subject to the terms and conditions of Section 6.4 hereof) and, in addition,
may proceed to protect and enforce any or all other rights, powers and remedies
of such holders by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any covenant contained
herein or in the Shareholders' Agreement or Registration Agreement and, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any right, power or remedy granted hereby or thereby or
available at law, in equity, by statute or otherwise.
(b) No right, power or remedy conferred hereby or by ownership
of the Investor Common Stock or under any of the other Transaction Documents, or
now or hereafter available at law, in equity, by statute or otherwise shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise, but all
rights, powers and remedies of Investors shall be cumulative and not
alternative.
6.3 Reserved.
6.4 Put and Call Rights.
(a) Put. Upon the occurrence of an Event of Default arising
under Section 6.1(a)(i), Section 6.1(b), or Section 6.1(i), the Investors (by
vote of the Majority Holders) may exercise their option to sell to the Company
all of the Investor Common Stock (the "Put"), and the Company shall, upon
exercise of the Put by the Investors, purchase from the Investors all of the
Investor Common Stock.
(i) Upon the exercise of the Put, the Company shall
pay the Investors (pro-rata in accordance with the number of shares of
Investor Common Stock each Investor owns) for all of the Investor
Common Stock, in a lump sum for cash an amount equal to the greater of
(A) the Purchase Price, plus a premium equal to a fifty percent (50%)
compounded annual rate of return on the Purchase Price, and (B) the
fair market value of the Common Stock (i.e., the closing price of the
Common Stock on the AMEX (or if such shares are no longer listed on the
AMEX, any other applicable exchange or public listing)), if applicable,
averaged for the twenty (20) trading days ending on the day prior to
the day of the occurrence of the Event of Default triggering the Put)
(the "Put Purchase Price").
(ii) The Company shall pay the Put Purchase Price to
the Investors within sixty (60) days after such Event of Default,
except that the Company shall pay the Put
25
Purchase Price to the Investors within one hundred (100) days thereof
if the applicable Put was triggered by an Event of Default pursuant to
Section 6.1(i).
(b) Call. In the event that the Investor Representative does
not provide his consent to any of the actions set forth in Section 5.3 and the
Board of Directors of the Company authorizes, approves or ratifies any such
action, the Company may exercise its option to purchase from the Investors all
of the Investor Common Stock (the "Call"), and the Investors shall, upon
exercise of the Call by the Company, sell to the Company all of the Investor
Common Stock.
(i) Upon the exercise of the Call, the Company shall
pay the Investors (pro-rata in accordance with the number of shares of
Investor Common Stock each Investor owns) for all of the Investor
Common Stock, in a lump sum for cash an amount equal to the greater of
(a) the Purchase Price, plus a premium equal to a fifty percent (50%)
compounded annual rate of return on the Purchase Price, and (b) the
fair market value of the Common Stock (i.e., the closing price of the
Common Stock on the AMEX (or if such shares are no longer listed on the
AMEX, any other applicable exchange or public listing)), if applicable,
averaged for the twenty (20) trading days ending on the day prior to
the day of the meeting of the Board of Directors of the Company whereby
the Board of Directors of the Company authorized, approved or ratified
the action in question triggering the Call (the "Call Purchase Price").
(ii) The Company shall pay the Call Purchase Price
to the Investors within sixty (60) days after the meeting of the Board
of Directors of the Company whereby such Investor Representative did
not approve such action.
(c) Notice of Put/Call. Any Put or Call granted under this
Section 6.4 may be exercised from time to time by notice in writing, which
notice must be given within forty five (45) days with respect to a Call and five
(5) days with respect to a Put, of the occurrence of any event triggering such
Put or Call, to the Company in the case of a Put, or to the Investors in the
case of a Call (the "Notice"). The Notice shall state that such Put or Call, as
the case may be, is exercised. In each case, the Company shall provide to each
Investor a written statement of the dollar amount and the supporting
calculations of the Put Purchase Price or the Call Purchase Price, as the case
may be, at least ten (10) days prior to the date upon which the Put Purchase
Price or the Call Purchase Price, as the case may be, shall be payable and due,
which shall state the date and time of the closing thereof (which date shall be
in accordance with Section 6.4(a)(ii) or Section 6.4(b)(ii), as applicable) at
the principal office of the Company.
(d) Exercise Procedure. In the event that any Put or Call
under this Section 6.4 is exercised, delivery of the certificate or certificates
evidencing the shares involved, properly endorsed for transfer, shall be made by
the Investors against full payment therefor in the manner and at the time or
times specified in Section 6.4(a)(ii) or Section 6.4(b)(ii) hereof, as
applicable.
26
(e) Compounded Annual Rate of Return. It is understood and
agreed that in calculating the premium on the Purchase Price based on a 50%
"compounded annual rate of return" for purposes of this Section 6.4, such 50%
return shall be added to and calculated based on the Purchase Price for each
anniversary date hereof (or a pro rata portion for a partial year) plus the
amount of any previous 50% return calculated for each prior one (1) year period
after the date of this Agreement. For instance, the 50% "compounded annual rate
of return" (not including the Purchase Price amount) on the day after the second
anniversary of this Agreement would be equal to $2,500,000 and is calculated as
follows: (i) $2,000,000 (the Purchase Price) x 50% = $1,000,000 ("First Year
Return"); plus (ii) $3,000,000 (Purchase Price plus First Year Return) x 50% =
$4,500,000).
Section 7. Miscellaneous.
7.1 Investor's Investment Representations. Each Investor hereby
represents and warrants that:
(a) Investor is acquiring shares of Investor Common Stock
purchased hereunder or acquired pursuant hereto for his or its own account with
the present intention of holding such securities for purposes of investment, and
that he or it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein shall prevent Investors
and subsequent holders of such shares of Investor Common Stock from transferring
such securities in compliance with the provisions of the Shareholders'
Agreement. Each certificate or instrument representing Investor Common Stock
shall be imprinted with the legend prescribed in the Shareholders' Agreement;
(b) Such Investor has been furnished any and all material
relating to the Company and the shares of Investor Common Stock which he or it
has requested and has been afforded the opportunity to obtain any additional
information necessary to evaluate such Investor's participation in the
transactions contemplated by this Agreement;
(c) Such Investor, either alone or with his or its financial
advisor(s), has the necessary knowledge and experience in financial and business
matters as to be able to evaluate the merits and risks of such Investor's
participation in the transactions contemplated by this Agreement; and
(d) Such Investor qualifies as an "accredited investor" as
defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended.
7.2 Benefit of Agreement, Assignment. This Agreement shall be binding
upon and inure to the benefit of the Company and Investors and their respective
successors and assigns, heirs, executors and personal representative, as
applicable, except that the Company shall not have the right to assign any of
its rights under this Agreement without the prior written consent of Investors.
27
Notwithstanding the foregoing, the rights of the Investors set forth herein
shall inure only to the benefit of the Investors and their "Permitted
Transferees" (as such term is defined in the Registration Agreement).
7.3 Right to Conduct Activities. The Company and each Investor hereby
acknowledge that some or all of any of the Investors' investments in numerous
companies, may be competitive with the Company's business. No Investor shall be
liable for any claim arising out of, or based upon, (i) the investment by any
Investor in any Person competitive to the Company, or (ii) actions taken by any
partner, officer or other representative of any Investor to assist any such
competitive company, whether or not such action was taken as a board member of
such competitive company, or otherwise, and whether or not such action has a
detrimental effect on the Company.
7.4 Notices. Any and all notices or other communications required or
permitted to be delivered hereunder shall be deemed properly delivered if (a)
delivered personally, (b) mailed by first class, registered or certified mail,
return receipt requested, postage prepaid, (c) sent by next-day or overnight
mail or delivery or (d) sent by telecopy or telegram, to the parties as set
forth below:
If to Edgewater:
Edgewater Private Equity Fund III, L.P.
000 Xxxxx Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Partner
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
If to TIME:
Xxxxx T.I.M.E. Fund, LP
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telecopy: (000) 000-0000
28
If to the Company:
EpicEdge, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxxx Xxxxxx, President
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Fox, Rothschild, O'Brien & Xxxxxxx, L.L.P.
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Either party may change the name and address of the designee to whom notice
shall be sent by giving written notice of such change to the other party.
7.5 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of Illinois, applicable to agreements made and to be
performed entirely within such State.
7.6 Entire Agreement. This Agreement and the Transaction Documents
embody the entire agreement and understanding between the Company and Investors
and the final expression thereof and supersede any and all prior agreements and
understandings, written or oral, formal or informal, between the Company and
Investors relating to the subject matter hereof and thereof. No extensions,
changes, modifications or amendments whatsoever shall be made or claimed by
either party hereto, and no notices of any extension, change, modification or
amendment made or claimed by a party hereto shall have any force and effect
whatsoever unless the same shall be endorsed in writing and fully signed by both
parties hereto.
7.7 No Implied Waivers; Cumulative Remedies; Writing Required. No delay
or failure of the Investors in exercising any right, power or remedy hereunder
shall affect or operate as a waiver thereof, nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or remedy preclude any further exercise thereof or of any other
right, power or remedy. The rights and remedies hereunder of the Investors are
cumulative and not exclusive of any rights or remedies which it would otherwise
have. Any waiver, permit, consent or approval of any kind or character on the
part of the Investors of any breach or default under this Agreement or any such
waiver of any provision or condition of this Agreement must be in writing and
shall be effective only to the extent in such writing specifically set forth.
29
7.8 Reimbursement of Expenses. The Company shall, at Closing or upon
demand, pay all of the Investors' reasonable costs and expenses including,
without limitation, due diligence expenses, travel expenses, legal fees for the
Investors' counsel (provided reimbursement for such legal fees shall not exceed
$50,000 in the aggregate) and related costs and expenses incurred by Investors'
legal counsel in the preparation, negotiation and closing of this Agreement, the
Transaction Documents and the transactions and consequences contemplated hereby,
and any and all filings or notices required at any time under Federal or state
securities laws. Such payments shall be due immediately upon demand; provided,
however, the amounts thereof shall be limited to $25,000 if the transactions
contemplated by this Agreement are not consummated for any reason. Furthermore,
the Company shall also pay all brokers' or finders' fees and expenses (none of
which shall be the responsibility of the Investors).
7.9 Survival. All representations, warranties, covenants and agreements
of the Company contained herein or made in writing in connection herewith shall
survive the execution and delivery of this Agreement and the issuance of the
Investor Common Stock; provided, however, such representations and warranties of
the Company set forth in Section 3 of this Agreement shall survive only until
thirty (30) days after audited financial statements of the Company in the
Company's Form 10-K Annual Report are publicly released for the fiscal year
ending December 31, 2001.
7.10 Waivers of the Company/Personal Jurisdiction.
(a) EXCLUSIVE JURISDICTION. THE INVESTORS AND THE COMPANY
AGREE THAT ALL ACTIONS TO ENFORCE THIS AGREEMENT AND ALL DISPUTES AMONG OR
BETWEEN THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG OR BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT
AND THE TRANSACTION DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED ONLY BY A COURT LOCATED IN XXXX COUNTY, ILLINOIS,
AND THE COMPANY HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF SUCH COURT.
(b) WAIVERS OF THE COMPANY. THE COMPANY HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE COMPANY AT ITS ADDRESS SET
FORTH IN SECTION 7.4 OF THIS AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE COMPANY HEREBY WAIVES ITS RIGHTS
TO A JURY TRIAL, ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION
TO VENUE IN XXXX COUNTY, ILLINOIS IN CONNECTION WITH ANY CLAIM OR CAUSE OF
ACTION TO ENFORCE THIS AGREEMENT OR BASED UPON OR ARISING OUT OF ANY OF THIS
AGREEMENT OR THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN OR THEREIN, INCLUDING, WITHOUT LIMITATION,
30
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. THE COMPANY AGREES THAT XXXX COUNTY, ILLINOIS IS A REASONABLY
CONVENIENT FORUM TO RESOLVE ANY DISPUTE BETWEEN THE COMPANY AND INVESTORS. THE
COMPANY REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT. NOTHING IN THIS SECTION 7.10 SHALL
AFFECT THE RIGHT OF THE INVESTORS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
(c) OTHER JURISDICTIONS. THE COMPANY AGREES THAT THE INVESTORS
SHALL HAVE THE RIGHT TO PROCEED AGAINST THE COMPANY IN A COURT IN ANY LOCATION
TO ENABLE THE INVESTORS TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE INVESTORS. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE INVESTOR HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS SECTION 7.10.
7.11 Herein, etc. Words such as "herein," "hereunder,"
"hereof" and the like shall be deemed to refer to this Agreement as a whole and
not to any particular document or Article, Section or other portion of a
document.
7.12 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.
7.13 Headings. Section and subsection headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
7.14 Counterparts. This Agreement may be executed in any
number of counterparts and by either party hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument. One or more
counterparts of this Agreement may be delivered by facsimile, with the intention
that delivery by such means shall have the same effect as delivery of an
original counterpart thereof.
[Signature Page Follows]
31
Stock Purchase Agreement Signature Page
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
EPICEDGE, INC.,
a Texas corporation
By:___________________________________
Its: President
EDGEWATER PRIVATE EQUITY FUND III,
L.P.
By: Edgewater III Management, L.P.
Its: General Partner
By: Xxxxxx Management, Inc.
Its: General Partner
By:___________________________________
Its:__________________________________
XXXXX T.I.M.E. FUND, LP, a Connecticut
limited partnership
By:___________________________________
Its: Managing Partner
32
EXHIBIT A
DISCLOSURE SCHEDULE
See Attached
33
