Stock Purchase Agreement - eMerge Vision Systems Inc. and Cyberstocckyard Inc.
STOCK PURCHASE AGREEMENT
BETWEEN
eEMERGE VISION SYSTEMS, INC.
("Purchaser")
AND
CYBERSTOCKYARD, INC.
(the "Company")
J. SCOTT SANDERS,
DAVID SANDERS,
SCOTT CALHOUN
AND
DR. DUANE PANKRATZ
(collectively, the "Seller")
<PAGE> 2
SCHEDULES
<TABLE>
<S> <C>
1.1 Company Stockholders
2.1 Jurisdiction
2.6 Third Party and Government Consents
2.8(b) Cash Accounts
2.8(c) Equipment
2.8(e) Intellectual Property and Information
2.8(e)(i) Software Products
2.8(f) Copyright Notices
2.8(g) Trade Secret Policy
2.8(i) Technical Documentation
2.8(j) Software Contracts
(a) Licenses from Third Parties
(b) Distribution or VAR Agreements
2.8(l) Prepaid Items
2.11 Financial Statements
2.12 Permits and Approvals
2.13 Employee Benefit Plans
2.15 Hazardous Substances
2.16 Litigation; Compliance with Laws
2.17 Contracts, Leases, Etc.
2.18 Forms of Warranties and Guaranties
2.20 Insurance
2.21 Contracts with Insiders and Affiliates
2.29 No Changes
4.1(c) "Accredited Investor" Status
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT made this 22nd day of March 1999 (the "Agreement")
between eMERGE Vision Systems, Inc., a Delaware corporation ("Purchaser"),
Cyberstockyard, Inc. a Mississippi corporation (the "Company") and J. Scott
Sanders, David Sanders, Scott Calhoun and Dr. Duane Pankratz (collectively, the
"Seller" and each as a "Seller").
BACKGROUND
WHEREAS, the Company is engaged in engaged in the business of selling
cattle and other products through its proprietary auction and other software
(the "Software Programs") over the internet ("Business").
WHEREAS, Sellers collectively own 400 shares of common stock, no par
value (the "Stock") of the Company, representing all of the issued and
outstanding shares of capital stock of the Company.
WHEREAS, Sellers desires to sell to Purchaser and Purchaser desires to
purchase from Sellers the Stock at the Purchase Price (as hereinafter defined)
and upon the other terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, representations and warranties made in this Agreement and
other consideration, the sufficiency of which is hereby acknowledged, Purchaser,
Company and Seller, intending to be legally bound, hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS; TRANSACTION CONSIDERATION
Section 1.1 Sale and Purchase. Subject to the terms and conditions set
forth in this Agreement, and in reliance upon the joint and several
representations and warranties made by the Company and each of the Sellers to
the Purchaser in this Agreement, each of the Sellers shall sell to the Purchaser
and the Purchaser shall purchase and receive from each of the Sellers, the
number of shares of Stock set forth opposite each Seller's name in the
Capitalization Table set forth on Schedule 1.1 hereto (the "Capitalization
Table") in exchange for a total of 200,000 shares (the "eVS Shares") of the
Purchaser's common stock, par value $0.01 (the "Purchase Price") allocated among
the Sellers as set forth on Schedule 1.1.
Section 1.2 Books and Records. At a closing, as defined in Section 12.1
(the "Closing"), Sellers shall cause the Company to deliver to Purchaser, or
turn over to Purchaser's representatives, all minute books, stock record books
and corporate seals of the Company, and the original copies of all books of
account, leases, other agreements, securities, customer lists, files and other
documents, instruments and papers of all kind and nature belonging to or
relating
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to the business of the Company and necessary or desirable in Purchaser's
judgment for the on-going conduct of the Company and its business, whether in
the possession of Seller or the Company.
Section 1.3 Resignations. At the Closing, Sellers shall make available
to Purchaser the immediately effective written resignations of all the directors
and officers of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES RESPECTING SELLER
The Company and the Sellers, jointly and severally, represent and
warrant to Purchaser as follows:
Section 2.1 Organization and Qualification. Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Mississippi and is duly qualified and in good standing as a foreign
corporation authorized to transact business and to own and lease property in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it requires such
qualification in order to avoid liability or disadvantage. All of such
jurisdictions are listed on Schedule 2.1.
Section 2.2 Capitalization of the Company. The authorized capital stock
of Company consists of 1,000 shares of a single class of common stock having no
par value per share, of which 400 shares are issued and outstanding. The Company
does not have any other authorized class or classes of securities of any kind,
whether debt or equity. The Company's total outstanding capital stock consists
of the Stock. All of the Stock is collectively owned by the Sellers as set forth
in the Capitalization Table. All of the shares of Stock are validly issued,
fully paid and non-assessable and have not been issued in violation of any
applicable securities laws or of any preemptive rights or other rights to
subscribe for, purchase or otherwise acquire securities. The Company does not
hold any shares of its capital stock in its treasury or otherwise, and no shares
of the Company's capital stock are reserved by the Company for issuance. There
are no outstanding options, warrants, conversion privileges, subscription,
calls, commitments or rights of any character relating to the capital stock of
the Company.
Section 2.3 Stock Ownership. Each Seller is the lawful owner of record
and beneficially of the shares of the Stock set forth on Schedule 1.1,
representing all of the issued and outstanding shares of capital stock of the
Company, and has good, marketable and valid title to the Stock, free and clear
of all pledges, liens, claims and encumbrances of every kind, including, without
limitation, any agreements, subscriptions, options, warrants, calls, commitments
or rights of any character granting to any person, firm or corporation any
interest in or right to acquire from Seller at any time, or upon the happening
of any event, any shares of the Stock. Sellers have full legal power and all
authorization required by law to transfer and deliver the Stock in accordance
with this Agreement. Upon delivery of the certificates representing the Stock to
the Purchaser, together with duly executed stock powers pursuant to this
Agreement, the Purchaser
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shall acquire good, marketable and valid title to the Stock, free and clear of
all liens, security interests, pledges, negative pledges, encumbrances, or
restrictions.
Section 2.4 Due Authorization.
(a) The Company. The Company's execution, delivery and
performance of this Agreement and all other related agreements (the "Transaction
Documents") and the consummation of the transactions contemplated hereby by the
Company: (i) are within the Company's corporate powers and have been duly
authorized by all necessary corporate and shareholder action on the part of the
Company and (ii) do not (A) require any action by or in respect of, or filing
with, any governmental or regulatory authority, (B) contravene, violate or
constitute, with or without the passage of time or the giving of notice or both,
a breach or default under, any requirement of law applicable to the Company or
any of its properties or any contract to which the Company or any of its
properties is bound or subject or (C) result in the creation of any adverse
claim against or on the Stock.
(b) Individual Sellers. Each Seller's execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by each of the Sellers (i) are within the powers and
authority of each of the Sellers and (ii) do not (A) require any action by or in
respect of, or filing with, any governmental or regulatory authority, (B)
contravene, violate or constitute, with or without the passage of time or the
giving of notice or both, a breach or default under, any requirement of law
applicable any of them or any of their respective properties or any contract to
which any of them or any of their respective properties is bound or subject or
(C) result in the creation of any adverse claim against or on the Stock.
Section 2.5 Validity of Contemplated Transactions. Except with respect
to those consents required to be obtained in connection with the following and
set forth in Schedule 2.6 hereto, (all of which have been obtained) the
execution, delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby do not and will not contravene any provision of the Articles/Certificate
of Incorporation or Bylaws or other governing documents of the Company; nor
violate, be in conflict with, or constitute a default under, cause the
acceleration of any payments pursuant to, or otherwise impair the validity or
effectiveness of any agreement, contract, indenture, lease, or mortgage, or
subject any property or asset of the Company, or Seller to any indenture,
mortgage, contract, commitment, or agreement, other than this Agreement, to
which the Company or Seller is a party or by which the Company or any of its
assets is bound; or violate any provision of law, rule, regulation, order,
permit, or license to which the Company or Seller is subject. This Agreement and
the Transaction Documents will, upon their execution, constitute, the valid and
binding obligations of the Company and Sellers, enforceable against Company and
Sellers in accordance with their terms.
Section 2.6 Government and Third-Party Approvals. Except as listed on
Schedule 2.6, no consent by, approval or authorization of or filing,
registration or qualification with any federal, state or local authority, or any
foreign governmental authority, or any corporation, person
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or other entity (including any party to any contract or agreement with Seller or
Company) is required (a) for the execution, delivery or performance of the
Transaction Documents by the Sellers or Company, or (b) in connection with
Seller's and Company's consummation of the transactions contemplated thereby.
Section 2.7. Title to Property and Related Matters. Company has good,
valid and marketable title to all of its assets, whether tangible or intangible,
and whether consisting of real or personal property, and all such assets are
held free and clear of mortgages, liens, pledges, claims, charges, security
interests or other encumbrances or limitations of any nature whatsoever.
Section 2.8. Other Representations Regarding Company's Assets
(a) Accounts Receivable. All of the Accounts Receivable as of
January 31, 1999 (the "Preliminary Balance Sheet Date") will be reflected on the
Preliminary Balance Sheet and all of the Accounts Receivable as of the Closing
Date will be reflected on the Closing Date Balance Sheet. The Accounts
Receivable listed on the Preliminary Balance Sheet and/or on the Closing Date
Balance Sheet (i) have arisen or will arise solely in the ordinary course of
business of Seller; (ii) represent or will represent, upon their creation, valid
obligations due to Company and are enforceable or will, upon their creation, be
enforceable in accordance with their terms; and (iii) are or upon their creation
will be collectible on or before the 90th day following the Closing Date in the
ordinary course of business in the aggregate recorded amounts thereof in
accordance with their terms.
(b) Cash Accounts. Schedule 2.8(b) lists each bank and mutual
fund account and safe deposit box of Company and each person authorized to sign
checks or withdraw funds from such accounts and to have access to such safe
deposit boxes.
(c) Equipment. The items of Equipment listed on Schedule
2.8(c) are, and on the Closing Date will be, in good working order and fit for
their intended use. The Equipment includes all of the motor vehicles and other
machinery and equipment currently used in the operation of the Business.
(d) Real Property. Company does not own any real property.
(e) Intellectual Property. Schedule 2.8(e) contains a true and
complete list of all patents, trademarks, service marks, trade names, copyrights
and similar intangible rights and all applications and registrations thereof
owned by the Company or used by the Company including, without limitation, the
Software Programs ("Intellectual Property"). In addition, Schedule 2.8(e),
identifies whether each item of the Intellectual Property is owned by the
Company or is possessed and used by the Company under any license, contract,
agreement or other commitment, and if under any such commitment, the identity of
the parties thereto, the term thereof and all amounts payable thereunder
together with the payment terms therefor. The Company owns or possesses adequate
and enforceable licenses or other rights to use all of the Intellectual
Property. The Company is not in default under any such licensing or similar
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agreements, and has not received any notice or other knowledge of conflict with
or infringement (or alleged infringement) of any rights of others and no
officer, director, consultant, employee, or former director of Company, or any
Person (as defined in this Section 2.8(e)), controlling, controlled, by or under
common control with Company, has any rights in or to any of the Intellectual
Property. The Intellectual Property does not infringe any proprietary right of
any third party. No trade secret information has been wrongfully appropriated by
any third party. To the best of Company's knowledge, the Intellectual Property
is not being infringed. The use by the Company of any of the Intellectual
Property and other technical or proprietary data has not required and does not
require the payment of any royalty or similar payment to any Person, and, on the
Closing Date, Company shall be able to transfer to Purchaser good and marketable
title thereto, free and clear of any claims of any kind, without the payment of
any royalty or other special consideration. In addition to, and without limiting
the generality of the foregoing, Company has and shall be able to convey to
Purchaser at the Closing the all of Company's rights to use the names
"Cyberstockyard," and any names similar thereto, and the sole and exclusive
rights to use the Internet domain name "cyberstockyard.com" and all iterations
and permutations thereof, together with all logos, slogans, trademarks, and
service marks relating thereto or heretofore used by Company in connection
therewith. To the best of Company's knowledge and except as set forth in
Schedule 2.8(e), there are no names similar to the names specified in the prior
sentence, used in the cattle industry. Company and Mr. Sanders have at all times
maintained in strictest confidence all Intellectual Property (excepting only
patents, copyrights, trademarks, trade names, and service marks). Company owns
the right to obtain, use and transfer the data compiled through the use of the
Software Programs (the Software Programs are more fully described in Schedule
2.8(e) attached hereto) and included in the Intellectual Property (the "Data"),
and has not conveyed to any third party any interest in, the rights (including
copyright rights) to the Data. The Data has been selected, coordinated, and
arranged in a manner completely original with Company. Company has full right
and authority to use and manipulate the Data and to convey to Purchaser all
rights (including copyright rights) to the Data. The Company has no contracts
with its client for software maintenance except as identified in Schedule
2.8(e), there are no Federal or state laws or regulations, or restrictions of
any third party, restricting such rights to use, manipulate, or convey the Data.
As used in this Agreement, the term "Person" means any individual, sole
proprietorship, corporation, partnership, limited liability company,
incorporated or unincorporated association, joint venture, joint stock company,
or other entity of any kind, as the context requires.
2.8(f) Procedures for Copyright Protection. Schedule 2.8(f) sets forth
the form and placement of the proprietary legends and copyright notices
displayed in or on the Software Program. In no instance has the eligibility of
the Software Program for protection under applicable copyright law been
forfeited to the public domain by omission of any required notice or any other
action.
2.8(g) Procedures for Trade Secret Protection. Company has promulgated
and used its best efforts to enforce its trade secret protection program set
forth in Schedule 2.8(g). Neither Company nor any Seller has knowledge of any
material violation of such program by any Person. The source code and system
documentation relating to the Software Program: (i) have at all
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times been maintained in confidence by Company and, to the best of Company's
knowledge, by any other Person who has at any time had access to such materials;
and (ii) have been disclosed by Company only to employees and consultants having
a "need to know" the contents thereof in connection with the performance of
their duties to Company and who are obligated by common law or by written
agreement (which agreements are being transferred to Purchaser pursuant to the
transactions contemplated by this Agreement) to keep such information
confidential.
2.8(h) Personnel Agreements. Anyone, including, but not limited to, all
employees, agents, consultants, and contractors, who have contributed to or
participated in the conception and development of the Software Program,
Technical Documentation, or Intellectual Property on behalf of Company either:
(i) have been party to a "work-for-hire" arrangement or agreement with Company,
in accordance with applicable Federal and state law, that has afforded Company
full, effective, exclusive, and original ownership of all tangible and
intangible property thereby arising; or (ii) have executed appropriate
instruments of assignment in favor of Company as assignee that have conveyed, in
accordance with applicable Federal and state law, to Company full, effective,
and exclusive ownership of all tangible and intangible property thereby arising.
2.8(i) Adequacy of Technical Documentation. The Technical Documentation
described on Schedule 2.8(i) includes the source code, system documentation and
schematics for the Software Programs, as well as any pertinent commentary or
explanation that may be necessary to render such materials understandable and
usable by a trained computer programmer. The Technical Documentation also
includes any programs (including compilers), "workbenches," tools, and higher
level (or "proprietary") languages used for the development, maintenance, and
implementation of the Software Program.
2.8(j) Third-Party Components in the Software Program. Company has
validly and effectively obtained the right and license to use, copy, modify, and
distribute the third-party programming and materials contained in the Software
Program and the Technical Documentation, pursuant to the Software Contracts
identified in Section 2.8(j). The Software Program and the Technical
Documentation contain no other programming or materials in which any third party
may claim superior, joint, or common ownership, including any right or license.
The Software Program and the Technical Documentation do not contain derivative
works of any programming or materials not owned in their entirety by Company.
2.8(k) Third-Party Interests or Marketing Rights in the Software
Program. Company has not granted, transferred, or assigned any right or interest
in the Software Program, the Technical Documentation, or the Intellectual
Property to any Person. There are no contracts, agreements, licenses, and other
commitments and arrangements in effect with respect to the marketing,
distribution, licensing, or promotion of the Software Program or any other
independent salesperson, distributor, sublicensor, or other remarketer or sales
organization, except for the Software Contracts identified as Distribution or
VAR Agreements in Schedule 2.8(j)).
2.8(l) Prepaid Expenses. All of Company's prepaid expenses are set
forth in Schedule 2.8(l).
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Section 2.9 Conduct of Business. Between February 1, 1999 and the date
hereof, Company has conducted the Business only in the ordinary course and in a
manner consistent with its past practices.
Section 2.10 Solvency. The Company is Solvent.
Section 2.11 Financial Statements
(a) Financial Statements. Schedule 2.11 consists of the
unaudited financial statements of the Company (the "Financial Statements") for
its fiscal year ended December 31, 1998 (the "Financial Statement Date")
(consisting of a balance sheet, a statement of operations, a statement of
shareholder's equity and retained earnings and a statement of cash flows. The
Financial Statements were prepared in accordance with generally accepted
accounting principles and practices consistently applied throughout the periods
reported upon and fairly and accurately present the financial condition and the
results of the operations of Company as at the respective dates thereof and for
the periods reported therein.
(b) Absence of Liabilities. On the Financial Statement Date,
Company had no Liabilities except as and to the extent reflected in the
Financial Statements or in this Agreement or in any Schedule hereto. Seller has
no Liabilities and no basis for any such Liability exists other than (i) any
reflected in the Financial Statements or in this Agreement or in any Schedule
hereto or (ii) any arising since the Financial Statement Date in the ordinary
course of business of Company and in compliance with the covenants and
agreements of Company herein contained.
Section 2.12. Permits and Approvals. Schedule 2.12 contains a true and
correct description of all licenses, permits, approvals, authorizations,
consents and registrations issued in favor of Company, all of which are in full
force and effect, and the Company and the Business are currently being operated
in compliance with the terms of each of the foregoing. Purchaser will not be
required, prior to or following the Closing, to file, apply for or obtain any
license, permit, approval, authorization, consent or registration in order to
own and operate the Business as currently owned and operated by Company.
Section 2.13 Employee Benefits. Except as set forth on Schedule 2.13,
Company has not established or maintained or is not obligated to make
contributions to or under or otherwise participate in, with respect to any
current or former employee, director, or independent contractor of the Company:
(i) any equity option, restricted equity, equity appreciation rights, bonus, or
other type of incentive compensation plan, program, agreement, or arrangement;
(ii) any severance, pension, profit-sharing, thrift or savings, retirement,
deferred compensation, employee equity ownership, employee equity purchase, or
supplemental executive retirement plan, agreement, or arrangement; or (iii) any
life insurance, death benefit, health and hospitalization, disability, employee
assistance, education or tuition assistance, vacations benefit or fringe benefit
plan, or other employee benefit plan, program, agreement, or arrangement. All
such plans listed on Schedule 2.13 in which any of the Company's employees
participate (collectively, the
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"Employee Benefit Plans") have been operated and administered in all material
respects in accordance with all applicable laws, rules, and regulations and are
fully funded. Company has no obligation or commitment (formal or informal) to
create any new benefit plan or program, or to amend any existing Employee
Benefit Plan to increase the benefits thereunder.
Section 2.14 Employee Matters; Labor Relations.
(a) Employment Agreements. None of the employees of the
Business are covered by employment contracts, written or oral. None of the
employees of the Business are members of any union or covered by any union
contracts. Company is not aware of any plan or solicitation of employees of the
Business to form or join a union in the past two (2) years. Company is not a
party to or bound by any employment agreement (written or oral) or any
collective bargaining or other labor agreement that could in any way affect
Purchaser, or any employees of the Business that Purchaser may hire after the
Closing Date.
(b) Labor Laws. With respect to Company's employees, Company
has complied in all material respects with the Immigration Reform and Control
Act of 1986, as amended, and all other applicable Federal, state, or local laws
relating to the employment of labor, including, but not limited to, the
provisions thereof relating to wages, non-discriminatory hiring, promotional and
employment practices and procedures, collective bargaining and payment of Social
Security, unemployment compensation, workers' compensation, and similar taxes,
and Company is not presently liable to any Person or governmental agency for any
wage in arrears or subject to any liabilities or penalties for failure to comply
with any of the foregoing laws. With respect to Company's employees, there are
no outstanding charges or claims of a material nature against Company or any of
its officers, directors, agents, or employees involving any alleged or actual
violation of Company, or, to the best of Company's knowledge, any such Person,
of any provision of the National Labor Relations Act, the Age Discrimination in
Employment Act, the Equal Employment Opportunity Act of 1964, or any other
Federal, state, or local law concerning equal employment opportunities, equal
pay legislation, or wage and hour obligations contained in the Fair Labor
Standards Act; nor, to Company's knowledge, has there been any threat of any
such claim or charge.
Section 2.15 Hazardous Substances. Except as listed on Schedule 2.15,
to Company's knowledge: (i) none of the assets of the Company has been used for
the manufacture, storage, transportation, deposit, disposal, treatment,
handling, production, processing or recycling of toxic, dangerous or hazardous
substances; (ii) the Company has engaged in no activity which would subject the
Company or the Purchaser to liens, damages, penalties, injunctive relief or
cleanup costs under any federal, state or local law, or under any civil action
respecting hazardous substances; (iii) the Company has complied with each, and
is not in violation of any, United States or state, provincial or local law,
statute, regulation, permit provision or ordinance, relating to the generation,
handling, storage, transportation, treatment or disposal of chemicals,
substances (the "Environmental Laws"); and (iv) the Company has obtained and
complied with all necessary permits and other approvals, including interim
status under the Reserve
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Conservation and Recovery Act, as amended ("RCRA"), necessary to store, treat,
dispose of and otherwise handle hazardous wastes and hazardous substances. A
"hazardous substance" shall mean that term as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601,
et seq., as amended, and dangerous, regulated toxic or hazardous substances,
petroleum products, or similar terms under any other applicable United States or
state, provincial or local law and any regulations thereunder
Section 2.16 Litigation; Compliance with Laws. Except as set forth in
Schedule 2.16 attached hereto, there is no suit, action, claim, arbitration,
administrative or legal or other proceeding, or governmental or other
investigation pending or, to Company or any Seller's knowledge, threatened
against or affecting the Company, whether or not covered by insurance; nor does
there exist any failure to comply with, nor any default under, any law,
ordinance, requirement, regulation, or order applicable to the Company, nor any
violation of or default with respect to any order, writ, injunction, judgment,
or decree of any court or federal, state or local department, official,
commission, authority, board, bureau, agency, or other instrumentality issued or
pending against the Company which might have a material adverse effect on the
financial condition, business, results of operations, properties, or assets of
the Company, or Purchaser's purchase or ownership of the Stock. The Company has
obtained all permits, licenses, zoning variances approvals, and other
authorization necessary for the complete operation of its business as presently
operated, and there are none. There have been no illegal kickbacks, bribes or
political contributions made by the Company.
Section 2.17 Contracts. Except as listed and described on Schedule 2.17
or any other Schedule attached hereto, the Company is not a party to any written
or oral agreement, contract or commitment (the "Contracts.").
Except as disclosed on Schedule 2.17, (i) each of the
Contracts is valid and enforceable in accordance with its terms, (ii) the
parties thereto are in compliance with the provisions thereof, (iii) no party is
in default in the performance, observance or fulfillment of any obligation,
covenant or condition contained therein, (iv) no event has occurred which with
or without the giving of notice or lapse of time, or both, would constitute a
default thereunder and (v) the Company's rights under the Contracts are
transferable by the Company to Purchaser without restriction except for the
Consents. To Company's knowledge, none of the terms or provisions of any of the
Contracts materially adversely affects the prospects, conditions, affairs, or
operations of the Company or the Business, including restrictions on the
Company's ability to compete.
Section 2.18. Product and Service Warranties. Set forth on Schedule
2.18 are the standard forms of product and service warranties and guarantees
utilized by Company in connection with the operation of the Business together
with all other material product and service warranties and guarantees used by
Company in connection with the operation of the Business.
Section 2.19. Taxes. For any period ending on or before the Closing,
the Company and Sellers have duly and timely filed or will file all federal,
state, and local tax returns, declarations,
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and reports, estimates, information returns and statements (collectively,
"Returns") required to be filed or sent by it, him or on its/his behalf and all
such Returns are or will be true, correct and complete, true, correct and
complete copies of which Returns have been delivered to Purchaser prior to the
date hereof. The Company has paid in full all Taxes (as defined hereafter) and
any penalties with respect to the Returns and any penalties entered with respect
thereto, due and payable for any period ending on or before the Financial
Statement Date. For all tax periods which commence after the Closing, to the
extent any Taxes are due and payable the Company shall use its best efforts to
determine a good faith estimate of the Taxes, shall properly reserve the full
amount of such estimate. The Company's federal income tax liabilities, if any,
have never been audited by the Internal Revenue Service and have been satisfied
for all taxable years up to and including the taxable year ended December 31,
1997. Neither the Internal Revenue Service nor any state or local taxing
authority has asserted that additional taxes are owed by the Company.
As used herein, the term "Taxes" shall include all federal, state, and
local taxes, including income, excise, withholding, property, franchise, gross
receipt and other taxes.
Section 2.20. Insurance. Schedule 2.20 sets forth a list of all
policies or binders of fire, liability, product liability, worker's
compensation, vehicular or other insurance held by or on behalf of Company
(specifying for each such insurance policy, except the policies for worker's
compensation and vehicular insurance, the insurer, the policy number or covering
note number with respect to binders, and each pending claim thereunder of more
than $5,000 and setting forth the aggregate amounts paid out under each such
policy through the date hereof). Such policies and binders are valid, in full
force and effect and sufficient to protect the Business against all insured
hazards. Company is not in default with respect to any provision contained in
any such policy or binder. Company has no knowledge of any material inaccuracy
in any application for such policies or binders, any failure to pay premiums
when due or any similar state of facts which might form the basis for
termination of any such insurance. Company has no knowledge of any state of
facts or the occurrence of any event that is reasonably likely to form the basis
for any claim against Seller not fully covered by the policies referred to on
Schedule 2.20. Company has not received written notice from any of its insurance
carriers that any insurance premiums will be materially increased in the future
or that any insurance coverage listed on Schedule 2.20 will not be available in
the future on substantially the same terms as now in effect.
Section 2.21. Contracts with Affiliates. There are no contracts,
obligations or arrangements between Company and any Seller or any director,
officer, shareholder or employee of Seller or any Affiliate of any such person
applicable to the Business except for those identified and described on Schedule
2.21.
Section 2.22. Copies of Articles and Bylaws. The copies of Company's
Certificate or Articles of Incorporation (certified by the Secretaries of State
of the respective jurisdictions of incorporation) and Bylaws (certified by
Company's Secretary) which have been delivered to Purchaser are correct and are
in effect as of the date of this Agreement.
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Section 2.23. Directors and Officers. The Company has delivered to
Purchaser a true and complete list as of the date of this Agreement showing the
names of each of the Company's officers and directors, each of whom has been
duly elected.
Section 2.24 Commission. Neither Company nor any of the Sellers nor
anyone on its/their behalf has made any agreement or taken any action which may
cause anyone claiming through Seller to become entitled to a commission as a
result of the sale of the Stock pursuant to this Agreement.
Section 2.25 Statements and Other Documents Not Misleading. Neither
this Agreement, including all Schedules, nor any other financial statement,
document or other instrument heretofore or hereafter furnished by Company or any
Seller to Purchaser in connection with the transactions contemplated hereby
contains or will contain any untrue statement of any material fact or omits or
will omit to state any material fact required to be stated in order to make such
statement, document or other instrument not misleading. There is no fact known
to the Company or any Seller which may materially adversely affect the Company's
assets or business prospects which has not been set forth in this Agreement, the
Schedules or the other documents furnished to Purchaser on or prior to the date
hereof in connection with the transactions contemplated hereby.
Section 2.26 Conditions Affecting. There is no fact, development or
threatened development with respect to the markets, products, services, clients,
customers, facilities, computer software, databases, personnel, vendors,
suppliers, operations, assets or prospects of the Business which are known to
Seller which is reasonably likely to materially adversely affect the business,
operations or prospects of Seller considered as a whole, other than such
conditions as may affect as a whole the economy generally. Seller has used its
best efforts to keep available for Purchaser the services of the employees,
agents, customers and suppliers of the Company active in the conduct of the
Business. Seller does not have any reason to believe that any loss of any
employee, agent, customer or supplier or other advantageous arrangement will
result because of the consummation of the transactions contemplated hereby.
Section 2.27 Business. The sole business of the Company is the
Business. All assets owned by the Company are used solely in connection with the
operation of the Business.
Section 2.28 Subsidiaries. The Company has no subsidiaries or interests
in other entities.
Section 2.29 No Changes. Since the date of the most recent Financial
Statements or December 31, 1998, and except as disclosed to Buyer on Schedule
2.29, there has not been:
(a) Any materially adverse change in the financial or other
condition, assets, liabilities or business of the Company, except changes
described in Schedule 2.29 hereto, none of which individually or in the
aggregate has been materially adverse to the Company;
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(b) Any damage, destruction or loss (whether or not covered by
insurance) or any condemnation by governmental authorities which has or may
adversely affect the Business, prospects or any property of the Company;
(c) Any strike, lockout, labor trouble or any event or
condition of similar character adversely affecting the business or prospects of
the Company;
(d) Any declaration, setting aside or payment of any dividend
or other distribution in respect of any of the Company's shares of stock, or any
direct or indirect redemption, purchase or other acquisition of any such shares;
or
(e) Any increase in the compensation payable or to become
payable by the Company to any of its officers, employees or agents, or any known
payment or arrangement made to or with any thereof, other than salary reviews
and increases taking effect after the Financial Statement Date, all of which
were consistent with the Company's past practices, except as disclosed to Buyer
in writing as soon as any such events have occurred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RESPECTING PURCHASER
Purchaser represents and warrants to Seller as follows:
Section 3.1 Organization. Purchaser is a corporation duly formed,
validly existing and in good standing under the laws of the State of Delaware.
Section 3.2. Due Authorization. The execution and delivery of this
Agreement by Purchaser and performance of the obligations of Purchaser
contemplated hereby and by the Transaction Documents has been duly and validly
authorized by all necessary corporate action. Purchaser has the right, power and
authority to enter into and perform this Agreement and the Transaction Documents
constitutes, upon their execution constitute, the valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with their terms.
Section 3.3. Conflict With Other Instruments. The execution, delivery
and performance of this Agreement and the Transaction Documents by Purchaser
will not contravene any provision of Purchaser's certificate of incorporation or
by-laws and will not result in a breach of, or constitute a default under, any
agreement or other document to which Purchaser is a party or by which Purchaser
is bound, or any decree, order or rule of any court or governmental agency or
any provision of applicable law which is binding on Purchaser.
Section 3.4. Government and Third-Party Approvals No consent by,
approval or authorization of or filing, registration or qualification with any
federal, state or local authority, or any corporation, person or other entity
(including any party to any contract or agreement with Purchaser) is required
for the execution, delivery or performance of this Agreement by Purchaser or in
connection with Purchaser's consummation of the transactions contemplated
hereby.
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Section 3.5. Litigation No litigation, arbitration investigation or
other proceeding of or before any court arbitrator or governmental or regulatory
official, body or authority is pending or, to the knowledge of Purchaser,
threatened against Purchaser or the transactions contemplated by this Agreement
and Purchaser does not know of any basis for such litigation, arbitration,
investigation or proceeding.
Section 3.6 Capitalization. The authorized capital stock of Purchaser
immediately prior to the Closing, consists of 20,000,000 shares of Common Stock,
par value one cent ($.01) per share, of Purchaser (the "Common Stock"),
5,297,750 shares of which are outstanding as of the Closing, and 10,000,000
shares of Preferred Stock, par value one cent ($.01) (the "Preferred Stock"). As
of the date of the Closing, 6,500,000 shares of Preferred Stock have been
designated as Series A, of which 6,443,606 shares are outstanding. The Shares
have been duly authorized for issuance. Assuming the accuracy of the
representations and covenants of Seller set forth in Article 4, the Shares will
have been offered, issued, sold and delivered in compliance with all applicable
state and federal laws concerning the issuance of securities, and when issued,
will be validly issued, fully paid and non-assessable shares of Common Stock,
and will not have been issued in violation of the preemptive rights of any
person. Other than as described in this Section 3.6 or set forth in Schedule
3.6, there are no outstanding shares of Common Stock, Preferred Stock, or any
other securities of Purchaser, and except as described on Schedule 3.6 hereto,
there are no options, warrants, call conversion rights, commitments, or
agreements of any character to which Purchaser is a party or by which Purchaser
may be bound that do or may obligate Purchaser to issue, deliver, or sell, or
cause to be issued, delivered, or sold, additional shares of Common Stock,
Preferred Stock, or other securities of Purchaser, or that do or may obligate
Purchaser to grant, extend, or enter into any such option, warrant, call
conversion right, commitment, or agreement. Except as set forth in Schedule 3.6,
there are no outstanding arrangements, agreements, commitments, or
understandings of any kind affecting or relating to the voting, issuance,
purchase, redemption, repurchase, or transfer of any capital stock or any other
securities of Purchaser.
Section 3.7 Brokers. Purchaser has not expressly or impliedly retained
any broker, finder, investment banker, or financial advisor in connection with
this Agreement or the transactions contemplated hereby. Purchaser has not taken
any actions that will cause Seller to incur or be required to pay, any broker,
finder, investment banker, financial advisor, or similar fee in connection with
this Agreement or any transaction contemplated hereby, to any Person acting as
broker, finder, investment banker, financial advisor, or in any similar capacity
on behalf of Purchaser.
Section 3.8 Acquisition of Shares for Investment. Purchaser is
acquiring ownership of the Company for investment for its own account and not
with a view to the resale or distribution thereof in violation of any federal or
state securities laws. Purchaser or such assignees will not offer, sell,
transfer, assign, pledge or hypothecate any portion of the Shares in the absence
of registration under, or pursuant to an applicable exemption from all
applicable federal and state securities laws.
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ARTICLE IV
SECURITIES LAW MATTERS
Section 4.1 Investment. Each Seller represents, covenants and agrees as
follows:
(a) Access to Information. Seller has had access to such
information relating to the business and affairs of Purchaser which Seller has
reasonably requested, and all additional information which Seller has considered
necessary to verify the accuracy of the information so received. Seller has had
the opportunity to ask questions of and receive answers from the Purchaser
concerning the terms and conditions of the transactions contemplated by this
Agreement. On the basis of the foregoing, Seller is familiar with the
operations, business plans and financial condition of Purchaser.
(b) General Access. Seller or his representative has received
and read or reviewed, and is familiar with, this Agreement and the other
agreements executed or delivered herewith, including the terms of the Stock, and
confirms that all documents, records and books pertaining to such Seller's
investment in the eVS Shares and requested by such Seller or his representative
have been made available or delivered to him.
(c) Reliance on Sellers' Representations. Seller understands
that Purchaser may issue and deliver to such Seller the number of eVS Shares
indicated on Schedule 1.1, pursuant to this Agreement, without compliance with
the registration requirements of the United States Securities Act of 1933 (the
"Securities Act") or any state securities laws; that for such purpose Purchaser
will rely upon the representations, warranties, covenants and agreements
contained herein; and that such non-compliance with registration is not
permissible unless such representations and warranties are correct and such
covenants and agreements performed. Except for Mr. J. Scott Sanders and Mr.
Scott Calhoun, each Seller represents that he is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act for the reasons set
forth on Schedule 4.1(c) hereto.
(d) Transfer Restrictions Imposed by Securities Laws. Seller
understands that, under existing rules of the United States Securities and
Exchange commission (the "SEC") he/she may be unable to sell the Shares except
to the extent that the Shares may be sold (i) pursuant to an effective
registration statement covering such shares pursuant to the Securities Act or
(ii) in a bona fide private placement to a purchaser who shall be subject to the
same restrictions on any resale or (iii) subject to the restrictions contained
in Rule 144 under the Securities Act ("Rule 144") and state securities laws.
Seller understands that Purchaser is under no obligation to effect a
registration of the eVS Shares under the Securities Act.
(e) Rule 144. Seller is familiar with the provisions of Rule
144 and the limitations upon the availability and applicability of such rule,
including without limitation its holding period requirements and volume
limitations.
(f) Sophisticated Investor. Seller is a sophisticated investor
familiar with the
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type of risks inherent in the acquisition of restricted securities such as the
eVS Shares and its financial position is such that it can afford to retain the
eVS Shares for an indefinite period of time without realizing any direct or
indirect cash return on its investment and can afford a complete loss of his
investment.
(g) Lack of Liquidity Seller has no present need for liquidity
in connection with his purchase of the Stock.
(h) Suitability and Investment Objectives. The purchase of the
Stock by Seller is consistent with the general investment objectives of Seller.
Seller understands that the purchase of the Stock involves a high degree of risk
and there may be no established market for the Purchaser's capital stock.
(i) Investment Intent. Seller is acquiring the eVS Shares for
his own account and not with a view to, or for sale in connection with, the
distribution thereof within the meaning of the Securities Act.
(j) Legends on Certificates. During the term of this
Agreement, each certificate representing eVS Shares shall, if applicable,
contain upon its face or upon the reverse side thereof legends to the following
effect:
"This Certificate represents securities which are restricted
and which are subject to the terms and conditions of a
Stockholders' and Registration Rights Agreement dated February
24, 1999 by and among eMerge Vision Systems, Inc. ("eVS") and
the stockholders identified therein (a copy of which is on
file at the principal office of eVS) and the rights,
privileges and options therein contained. No sale, transfer,
assignment, pledge, hypothecation or other disposition of this
Certificate or any of the securities represented thereby shall
be made except in compliance with the terms and conditions of
said agreement.
The Shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), but have been issued pursuant to an exemption from
such registration. Neither such Shares nor any interest
therein may be sold, transferred, pledged, hypothecated or
otherwise disposed of until either (i) the holder thereof
shall have received an opinion of counsel for the Company that
registration thereof under the Act is not required or (ii) a
registration statement under the Act covering such Shares or
such interest and the disposition thereof shall have become
effective under the Act.
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ARTICLE V
ACTIVITIES PRIOR TO CLOSING BY COMPANY
Section 5.1 Operation of Business. Prior to the Closing, Sellers shall
cause the Company to conduct its business only in the ordinary course and in
connection therewith and, to the extent consistent therewith, the Company shall
use its best efforts to preserve its business organization intact and maintain
its existing relations with customers, suppliers, employees and business
associates. The Company shall:
(a) Organizational Documents. Not amend its
Certificate/Articles of Incorporation or Bylaws, except as may be necessary to
carry out this Agreement or as required by law;
(b) Corporate Name. Not change its corporate name or permit
the use thereof by any other person or entity;
(c) Compensation, Bonuses. Not pay or agree to pay to any
employee, officer, or director of the Company, without the consent of the
Purchaser;
(d) Management. Not make any changes in the its management
without the consent of Purchaser;
(e) Mergers, Etc Not merge or consolidate the Company with any
other corporation or allow it to acquire or agree to acquire or be acquired by
any corporation, association, partnership, joint venture, or other entity;
(f) Disposition of Assets. Not sell, transfer, or otherwise
dispose of any assets of the Company without the prior written consent of
Purchaser;
(g) Indebtedness. Not create, incur, assume, or guarantee any
indebtedness for money borrowed arising out of or in connection with the
Company's business except in the ordinary course of business; create or suffer
to exist any lien on any of the Company's assets, except those in existence on
the date hereof; or increase the amount of any indebtedness outstanding under
any loan agreement, mortgage, or other borrowing arrangement in existence on the
date hereof arising out of or in connection with the Company's business;
(h) Payables. Pay when due, in accordance with past practices,
all of its accounts payable and trade obligations;
(i) Maintenance of Assets. Maintain its assets and properties
in good operating repair, order, and condition, reasonable wear and tear
excepted, and notify Purchaser immediately upon any loss of, damage to, or
destruction of any of the Company's assets;
(j) Insurance. Maintain in full force and effect insurance
coverage of the
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types and in the amounts currently held and apply the proceeds received under
any insurance policy or as a result of any loss or destruction of or damage to
any of the Company's assets to the repair or replacement of such assets;
(k) Contracts and Permits. Maintain in full force and effect
all Contracts and permits necessary for or related to the operation of the
Company's business in all material respects and in all places as such business
is now conducted and renew or revalidate any permits which may become void,
expired, terminated, canceled or withdrawn between the date hereof and the
Closing;
(l) Litigation, Etc Promptly advise Purchaser in writing of
the commencement of, and of any known threat to commence any, suit, claim,
action, arbitration, legal or administrative proceeding, governmental
investigation, or tax audit against it;
(m) Dividends or Other Distributions. Not declare, set aside
or pay any dividend or other distribution in respect of its shares of capital
stock, or redeem, purchase or otherwise acquire any such shares of capital
stock; and
(n) Capital Stock. Not issue, sell, pledge, dispose of or
encumber any additional shares of, or securities convertible or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of its capital stock or split, combine or reclassify the outstanding
Stock.
Section 5.2 Access to Information. Prior to Closing, Seller and Company
will cooperate fully with Purchaser and shall provide Purchaser and its
accountants, counsel, and other representatives, during normal business hours,
full access to the books, records, equipment, Contracts, other assets owned or
leased by the Company, and customer lists, and full opportunity to discuss the
Company's business, affairs, Software Programs, Intellectual Property, assets,
processes, and trade secrets with its officers, employees, customers, suppliers
and independent accountants, and furnish to Purchaser and its representatives
copies of such documents, records, and information with respect to the affairs
of the Company as Purchaser or its representatives may reasonably request.
Purchaser, Company and Sellers, and their respective principals agree that they
will hold in confidence, trade secret or proprietary information or data
supplied by the other in conjunction with this Agreement. In the event that the
transaction contemplated by this Agreement is not consummated for any reason,
each party will return to the other all documents and other materials provided
to it relating to the other party, without retaining copies thereof.
Section 5.3 Due Diligence Investigation. As an inducement to Purchaser
to expend substantial sums in the performance of its due diligence
investigation, Sellers agree that Purchaser may terminate this Agreement at any
time prior to the Closing Date, upon written notice to Sellers, if Purchaser in
good faith but in its sole discretion, determines that the financial, technical
or legal condition or the condition of the assets, properties and business of
the Company or its prospects, are unsatisfactory.
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Section 5.4 Best Efforts. Subject to the other provisions of this
Agreement, Sellers will use their best efforts to cause the conditions listed in
Section 7.1 hereof to be satisfied on the Closing Date (as defined in Section
12.1) and further will use their best efforts to satisfy the requirements of any
applicable federal or state securities laws relating to an exemption from
registration.
Section 5.5 Benefit Plans. The Company shall not adopt, terminate,
amend, extend, or otherwise change any benefit plan without the prior written
consent of Purchaser, and the Company shall give Purchaser prior written notice
of the Company's intention to take any such action required by law or necessary
to continue the qualified status of any benefit plans as they pertain to the
Company's employees or its former employees.
Section 5.6 Notice of Change. The Company will promptly notify
Purchaser of the existence or happening of any fact, event or occurrence prior
to the Closing Date and of which the Company or any of the Company's employees,
officers, directors, stockholders, or other representatives has knowledge which
may alter the accuracy of completeness of any representation or warranty
contained in Article 2 of this Agreement.
Section 5.7 No Discussions Unless and until this Agreement is
terminated pursuant to Article 10 hereof, Sellers will not, and will not
authorize or permit the Company or any of its employees, officers, directors, or
other representatives to, enter into, participate in, request, solicit or engage
in any discussions, negotiations, understandings, agreements or other
communications with any person or entity other than Purchaser relating to
offers, inquiries, negotiations or proposals with respect to the sale of the
assets or any capital stock of the Company, or any type of business combination
transaction. Seller and the Company will promptly notify Purchaser of any such
offer, inquiry, negotiation or proposal which either Seller or the Company may
receive.
Section 5.8 Publicity. No party shall issue any press releases or
otherwise make public statements with respect to the terms of this Agreement or
the transactions contemplated hereby, without the consent of the other parties,
except as may be required by any national, state, provincial or local
governmental or regulatory agency. The parties hereto shall not issue any such
press release or make any such public statement or filing prior to such
consultation, except as may be required by law.
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ARTICLE VI
ACTIVITIES PRIOR TO CLOSING BY PURCHASER
Section 6.1 Best Efforts. Subject to the other conditions of this
Agreement, Purchaser will use its best efforts to cause the conditions listed in
Section 7.2 hereof to be satisfied on the Closing Date (as defined in Section
12.1) and will further use it best efforts to satisfy the conditions of any
applicable federal or state securities laws relating to an exemption from
registration.
Section 6.2 Access to Information. Purchaser shall provide Sellers with
information concerning Purchaser's as reasonably requested by Seller regarding
Purchaser's ability to consummate the transactions contemplated herein, as may
be reasonably requested. Seller shall not disclose any such information to any
other person or entity without the prior written consent of Purchaser.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
Section 7.1 Conditions to Obligation of Purchaser to Close. The
obligation of Purchaser to consummate the transaction contemplated under this
Agreement on the Closing Date (as defined in Section 12.1) shall be subject to
the satisfaction or the waiver by Purchaser of the following conditions on or
prior to the Closing Date:
(a) Satisfactory Completion of Due Diligence. The results of
Purchaser's due diligence investigation shall be satisfactory to Purchaser, in
Purchaser's sole discretion.
(b) Representations and Warranties; Compliance with Agreement.
The representations and warranties of the Company and Sellers set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, and the Company
and each Seller shall have performed all covenants and agreements to be
performed by it or him under this Agreement on or prior to the Closing Date and
shall have delivered to the Purchaser a certificate to such effect, dated the
Closing Date, which certificate shall be in form and substance satisfactory to
Purchaser and its counsel.
(c) Opinion of Counsel for the Company. Gholson, Hicks &
Nickels, counsel for the Company, shall have delivered to Purchaser their
favorable opinion, dated the Closing Date and in the form set forth in Exhibit
7.1(c).
(d) Litigation Affecting Closing. On the Closing Date, no
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigation that might result in
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any such suit, action or proceeding shall be pending or threatened.
(e) Required Consents. The parties (other than the Company) to
any other contract, commitment or agreement to which the Company is a party, any
governmental agency or body or any other person, firm or corporation which owns
or has authority to grant any franchise, license, permit, easement, right or
other authorization necessary for the business or operations of the Company, and
any governmental body or regulatory agency having jurisdiction over Purchaser or
the Company, to the extent that their consent or approval is required under the
pertinent debt, lease, contract, commitment or agreement or other document or
instrument or under applicable laws, rules or regulations for the consummation
of the transaction contemplated hereby in the manner herein provided, shall have
granted such consent or approval, which shall include all Consents.
(f) Approval of Purchaser; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved by Purchaser, in the exercise of its reasonable judgment, and
Purchaser or its counsel shall have been furnished with certified copies,
satisfactory in form and substance to Purchaser in the exercise of its
reasonable judgment, of all such corporate records of the Company, and of the
proceedings of such persons authorizing the execution, delivery and performance
of this Agreement as Purchaser shall reasonably require.
(g) Availability of Exemption from Registration. The
transaction contemplated by this Agreement shall be exempt from registration
under the securities laws of the United States and any applicable state or local
jurisdiction.
(h) Delivery of Schedules. Delivery by Company and Seller of
the Schedules to this Agreement, which Schedules shall be in form and substance
reasonably satisfactory to the Purchaser.
Section 7.2 Conditions to Obligation of Seller to Close. The obligation
of each Seller to consummate the transfer of the Stock on the Closing Date (as
defined in Section 12.1) shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date:
(a) Satisfactory Completion of Due Diligence. The results of
each Seller's due diligence investigation of the Purchaser shall be satisfactory
to such Seller, in such Seller's sole discretion.
(b) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, Purchaser shall have performed all covenants and
agreements to be performed by it under this Agreement on or prior to the Closing
Date, and Purchaser shall have delivered to Company a certificate to such
effect, dated the Closing Date, which certificate shall be in form and substance
satisfactory to Company and its counsel;
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(c) Litigation Affecting Closing. On the Closing Date, no
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transaction contemplated hereby, and no investigation that might eventuate in
any such suit, action or proceeding shall be pending or threatened;
(d) Approval of Seller; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Sellers, in the exercise of their
reasonable judgment, and Sellers shall have been furnished with certified
copies, satisfactory in form and substance to Sellers in the exercise of their
reasonable judgment, of all such records of Purchaser and the Company and of the
proceedings of Purchaser and the Company authorizing their execution, delivery
and performance of this Agreement and the eVS Shares as Sellers shall reasonably
require.
(e) Availability of Exemption from Registration. The
transactions contemplated by this Agreement shall be exempt from registration
under the securities laws of the United States and any applicable state or local
jurisdiction and Sellers' shall have been satisfied with the information of
Purchaser furnished to them in connection therewith.
(f) Opinion of Counsel for the Company. Counsel for the
Company, shall have delivered to Purchaser their favorable opinion, dated the
Closing Date and in the form set forth in Exhibit 7.2(f).
ARTICLE VIII
CERTAIN POST-CLOSING COVENANTS
Section 8.1 Covenant Not to Compete (a) Sellers shall not, for a period
of three (3) years following the Closing Date (the "Restricted Period"),
compete, directly or indirectly, with Purchaser by engaging in the development
or sale of software related to an electronic, on-line, internet, and/or
web-enabled auction system, or the sale through an electronic, on-line,
internet, and/or web-enabled auction system of any products or services related
to (i) the animal science industry, including without limitation cattle, swine,
poultry or other animals produced for consumption by humans and other animals
("Livestock"), horses, third party Livestock feed or supplements, or third party
veterinary certifications relating thereto, (ii) the veterinary medicine
industry and/or the (iii) the agriculture industry. Nor shall any Seller compete
directly or indirectly with Purchaser by developing or offering for sale an
information system and/or data services of any kind for use in the animal
sciences, veterinary medicine or agriculture industries during the Restricted
Period.
(b) The foregoing prohibition against competition shall apply
to any area within North America provided however that nothing contained herein
shall prevent: (i) Dr. Duane Pankratz from operating and selling on line,
electronically or on the internet (but not
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through an auction system) products developed by (A) Grand Laboratories, Inc.,
which is in the business of developing and selling vaccines for Livestock and
animals, (B) Roth Angus, Inc., which is in the business of raising and selling
its pure bred cattle, or (C) Black Hills Gold, which is in the business of
selling jewelry or otherwise operating the aforementioned businesses in the
manner each is being conducted as of the date hereof, or (ii) Mr. David Sanders
from conducting his cattle brokerage business in the manner such business is
being conducted as of the date hereof and selling his/his clients' cattle on
line, electronically or on the internet (but not through an auction system).
(c) A Seller shall be deemed to be competing as described in
paragraph (a) hereof if Seller shall engage, directly or indirectly, in any of
the business covered thereby, whether for its own account or that of any other
person, firm, corporation, partnership or other business entity, and whether its
participation shall be as a stockholder, general or limited partner, or investor
possessing an ownership interest exceeding one percent (1%) in any such entity,
or as a principal, agent, lender or in any other capacity.
(d) During the Restricted Period, no Seller shall, directly or
indirectly: (1) solicit, divert, take away or induce customers (wherever
located) of Purchaser, to avail themselves of the services or products of others
which are competitive with any of Purchaser's services or products or (2)
solicit, employ or in any other fashion hire any employee of Purchaser unless
such person shall have been discharged by Purchaser, or otherwise induce any
employee of Purchaser to leave the employ of Purchaser. The prohibition set
forth in paragraph 8.1(c)(1) shall not apply to customers who were customers of
a Seller as of the Closing date, or products or services which were being
offered by a Seller as of the Closing Date.
Each Seller expressly acknowledges that damages alone will be
an inadequate remedy for any breach or violation of any of the provisions of
this Section 8.1, and that Purchaser, in addition to all other remedies
available at law or hereunder, shall be entitled, as a matter of right, to
injunctive relief, including specific performance, with respect to any such
breach or violation, in any court of competent jurisdiction. If any of the
provisions of this Section 8.1 are held to be in any respect an unreasonable
restriction upon Seller, then they shall be deemed to extend only over the
maximum period of time, geographic area or range of activities as to which they
may be enforceable. In the event that Seller shall be in violation of the
restrictive covenants in this Section 8.1, then the Restricted Period shall be
extended for a period of time equal to the period of time during which such
breach shall occur; and, in the event that Purchaser should be required to seek
relief from such breach in any court, board of arbitration or other tribunal,
then the Restricted Period shall be extended for the period of time required for
the pendency of such proceedings, including all appeals.
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Section 8.2 Post-Closing Conduct Generally; Further Assurances.
Purchaser and each Seller will cooperate upon and after the Closing Date in
effecting the orderly transfer of the operations of the Company to Purchaser. In
addition, after the Closing Date, at the request of any party and at the
requesting party's expense, but without additional consideration, the other
party shall execute and deliver from time to time such further instruments of
assignment, conveyance and transfer, shall cooperate in the conduct of
litigation and the processing and collection of insurance claims, and shall take
such other actions as may reasonably be required to convey and deliver more
effectively to Purchaser the Stock or to confirm and perfect the Purchaser's
title to the Stock, and otherwise to accomplish the orderly transfer of
ownership of the Company to Purchaser and the business assets and operations of
the Company as contemplated by this Agreement.
ARTICLE IX
SURVIVAL; INDEMNIFICATION; EXPENSES
Section 9.1 By Sellers. To the extent and in the manner herein
provided, each Seller shall, jointly and severally, indemnify, defend, and hold
harmless Purchaser or, after the Closing, the Company, from and against any and
all damages, losses, obligations, deficiencies, liabilities, claims,
encumbrances, penalties, costs, and expenses, including expenses related to
investigation and defense including reasonable attorneys' fees (collectively,
"Losses"), which Purchaser may suffer or incur, resulting from, related to, or
arising out of (i) any misrepresentation, breach of warranty or nonfulfillment
of any of the covenants of the Company or any Seller in this Agreement or from
any misrepresentation in or omission from any Schedule to this Agreement,
certificate, financial statement, or from any other document furnished or to be
furnished to Purchaser hereunder; (ii) any misrepresentation relating to the
Returns or Taxes; (iii) any and all distribution or transfer of assets of the
Company prior to Closing in violation of the spirit of this Agreement; and (iv)
any known but undisclosed suits, investigations, proceedings, demands,
assessments, audits, judgments, and claims (including employment-related claims)
arising out of the foregoing even though such proceeding or claim may not be
filed until after the Closing.
Section 9.2 By Purchaser. From and after the Closing Date (as defined
in Section 12.1), Purchaser agrees to indemnify, defend, and hold harmless each
Seller from and against (i) any and all Losses, which each Seller may suffer or
incur, resulting from, related to, or arising out of any misrepresentation,
breach of warranty, or nonfulfillment of any of the covenants or agreements of
Purchaser in this Agreement, (ii) any misrepresentation in or omission from any
certificate or document furnished or to be furnished to such Seller hereunder
and any and all suits, actions, investigations, proceedings, demands,
assessments, audits, judgments, and claims arising out of any of the foregoing,
and (iii) any and all Losses resulting from, related to, or arising out of the
operation of the Company's business after Closing.
Section 9.3 DeMinimus Exclusion and Limitation of Liability.
Notwithstanding either of the immediately preceding two subsections, it is
understood and agreed that with respect to inaccuracies or breaches of the
representations and warranties set forth in this Agreement, each
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Sellers or Purchaser, as the case may be, shall be obligated to indemnify and
hold harmless, only to the extent that the aggregate sum of the liabilities,
damages, costs and expenses incurred or sustained by such other with respect to
all such inaccuracies or breaches shall exceed the sum of Twenty-Five Thousand
Dollars ($25,000.00). Notwithstanding this Section, in no event shall the
liability of Sellers under this Agreement for any and all causes of action
exceed Four Hundred Thousand Dollars ($400,000.00), in the aggregate and in no
event shall the liability of Purchaser under this Agreement for any and all
causes of action exceed Four Hundred Thousand Dollars ($400,000.00) in the
aggregate and including the value of the Purchase Price paid hereunder.
Section 9.4 Procedures. Promptly after acquiring knowledge of any such
Losses or Claims against which Indemnitors have indemnified Purchaser or against
which Purchaser has indemnified Seller, or as to which either Purchaser or
Seller (herein, a "Party") may be liable, Indemnitors or Purchaser, as the case
may be, shall give to the other Party written notice thereof; provided, however,
that failure to give notice shall not relieve the indemnifying Party of any
liability it may have to the indemnified Party if such failure does not
materially prejudice the indemnifying Party. In the event of any such Loss or
Claim, (i) the indemnifying Party shall have the right to assume the defense
thereof and shall not be liable to such indemnified Party for any legal expenses
of other counsel or any other expenses subsequently incurred by such indemnified
Party in connection with the defense thereof, provided however that the
indemnifying Party shall have waived its right to contest its obligation to
indemnify the indemnified Party for all Losses or damages with respect to such
Claim; (ii) if the indemnifying Party fails to assume such defense or counsel
for the indemnifying Party advises that there are issues which raise conflicts
of interest between the indemnifying Party, on the one hand, and the indemnified
Party, on the other hand, the indemnified Party may retain one counsel
satisfactory to it, and the indemnifying Party shall pay all reasonable fees and
expenses of such counsel promptly as statements therefor are received; (iii) the
indemnifying Party shall receive from the indemnified Party all necessary and
reasonable cooperation in said defense including, but not limited to, the
services of employees who are familiar with the transactions out of which any
such Loss or Claim may have arisen; and (iv) the indemnifying Party shall not be
liable for any settlement effectuated without its prior written consent.
ARTICLE X
TERMINATION
Section 10.1 Events of Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(a) Mutual Consent. By mutual consent of the Company, the
Sellers and the Purchaser;
(b) Breach. By the Sellers holding a majority of the Stock, on
the one hand, or by Purchaser, on the other hand, if the other party shall have
(a) misstated any representation or been in breach of any warranty contained
herein or (b) been in breach of any covenant,
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undertaking or restriction contained herein and such misstatement of breach has
not been cured by the earlier of (i) five (5) days after the non-breaching party
gives notice to the breaching party of such misstatement or breach of (ii) the
Closing;
(c) By Purchaser. (i) if all of the conditions precedent set
forth in Section 7.1 hereof have not been met prior to March 29, 1999; and (ii)
if the results of its due diligence review of the Company and the Sellers is not
satisfactory in its sole discretion.
(d) By Sellers. if all of the conditions precedent set forth
in Section 7.2 hereof have not been met prior to March 29, 1999; and (ii) if the
results of its due diligence review of the Purchaser is not satisfactory in
their sole discretion
(e) By Either Party. Provided that such party is not in
material default hereunder, by either party if the Closing does not occur on or
before April 6, 1999;
Section 10.2 Consequences of Termination. If this Agreement is validly
terminated pursuant to Article 10 and the transactions contemplated hereby are
not consummated as described above, this Agreement shall become void and of no
further force and effect; provided, however, that if Purchaser terminates this
Agreement because any of the conditions contained in Section 7.1 (except for
Section 7.1(a))have not been satisfied, or if Seller terminates this Agreement
because any of the conditions contained in Section 7.2 have not been satisfied
then the terminating party shall have the right to pursue all of its legal
remedies for breach of contract and damages; provided further that if this
Agreement is validly terminated pursuant to Section 10.1 and the transactions
contemplated hereby are not consummated as described above, the provisions of
Sections 5.2 and 6.2 relating to the obligation of the parties to keep
confidential and not to use certain information obtained by it from the other
party and the provisions of Section 10.3 relating to responsibility for expenses
shall survive. No party hereto shall have any liability to any other party in
respect of a valid termination of this Agreement pursuant to Section 10.1,
except to the extent set forth above.
Section 10.3 Expenses if No Closing. If the Closing does not
occur and the transactions contemplated hereby are not consummated, then,
subject to the right of a non-defaulting party to recover damages, costs and
expenses from a defaulting party pursuant to Section 10.2, all costs and
expenses incurred in connection with this Agreement shall be paid by the person
incurring such expenses; i.e., by Purchaser if incurred by Purchaser and by
Seller if incurred by Seller.
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ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made by Seller and Purchaser in this
Agreement or pursuant hereto shall survive the Closing (as defined in Section
12.1) hereunder, notwithstanding any investigation made by or on behalf of
Seller or Purchaser prior to or after the Closing Date (as defined in Section
12.1).
ARTICLE XII
THE CLOSING
Section 12.1 Time and Place. The closing (the "Closing") of the
transactions contemplated hereby (the "Closing Date") shall be held on March 18,
1999, at 10:00 a.m., at the offices of the Purchaser, or at such other time and
at such other place as shall be mutually agreeable to the Purchaser and the
Sellers.
Section 12.2 Conduct at Closing
(a) As to Seller. Subject to the fulfillment of all of the
conditions set forth in Section 7.1 and the delivery of all certificates and
opinions required thereby, except such conditions as may be waived by the Seller
in writing, on the Closing Date Purchaser shall deliver to Sellers:
(i) Certificates evidencing eVS Stock, as provided for in
Section 1.1;
(ii) The certificate required by Section 7.2(b) hereof;
(iii) The opinion of counsel required by Section 7.2(c)
hereof; and
(iv) A certificate dated the Closing Date and signed on behalf
of Purchaser by its Secretary attaching (A) a true and correct copy of Purchaser
Certificate of Incorporation, (B) a true and correct copy of the by-laws of
Purchaser, (C) the resolutions by the Board of Directors of Purchaser
authorizing the actions taken and authorizing the officers of Purchase to
execute all documents and instruments to be executed and delivered by Purchaser
in connection with the purchase of the eVS Shares, and (D) certificates of good
standing certified by the Secretary of State of Delaware; and (E) specimen
signatures of the incumbent officers of Purchaser executing this Agreement and
the documents executed and delivered pursuant to or in connection with this
Agreement.
Section 12.3 As to Purchaser. Subject to the fulfillment of all of the
conditions set forth in Section 7.2 and the delivery of all certificates
required thereby, except such conditions, certificates and as may be waived by
Purchaser in writing, Seller shall deliver to Purchaser:
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(a) The stock certificates evidencing Seller's ownership of
the Stock, together with stock powers duly executed in blank, and all other good
and sufficient instruments of transfer and conveyance as may be necessary in
Purchaser's opinion to vest in Purchaser good, absolute, and marketable title to
the Stock;
(b) The books and records required by Section 1.2 hereof;
(c) The written resignations of those directors and officers
of the Company required by Section 1.3 hereof;
(d) The certificate required by Section 7.2(a) hereof;
(e) The opinion of counsel required by Section 7.2(b) hereof;
and
(f) A certificate dated the Closing Date and signed on behalf
of the Company by its Secretary attaching (a) (i) a true and correct copy of the
Company's Articles of Incorporation, (ii) a true and correct copy of the by-laws
of the Company, (iii) the resolutions by the Board of Directors and the
stockholders of the Company authorizing the actions taken and authorizing the
officers of the Company to execute all documents and instruments to be executed
and delivered by the Company in connection with the purchase of the Stock, and
(iv) certificates of good standing certified by the Secretaries of State or
other appropriate officials of those states in which the Company does business;
and (b) specimen signatures of the incumbent officers of the Company executing
this Agreement and the documents executed and delivered pursuant to or in
connection with this Agreement.
ARTICLE XIII
GENERAL
Section 13.1. No Tax Representations. Seller and Purchaser agree that
no representation or warranty has been made by them as to the tax consequences
of the transactions contemplated by this Agreement or the results of the
allocation of the amount of, or the consideration comprising, the Transaction
Consideration, that each is engaging separate counsel with respect to such tax
consequences, and that each is assuming its own respective tax liability, if
any, arising out of this Agreement or the consummation of the transactions
contemplated hereunder.
Section 13.2. Regarding the Representations and Warranties. Each of the
representations and warranties made by each Seller and the Company in Article II
is independent of the other representations and warranties made therein, and
each of the representations and warranties made by Purchaser in Article III is
independent of the other representations and warranties made therein.
Section 13.3. Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by each of the
parties and their respective successors and assigns. This Agreement may not be
assigned by either party without the prior
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written consent of the other party.
Section 13.4. Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
Section 13.5. Dispute Resolution
(a) Good-Faith Negotiations. If any dispute arises under this
Agreement that is not settled promptly in the ordinary course of business, the
parties shall seek to resolve any such dispute between them, first, by
negotiating promptly with each other in good faith in face-to-face negotiations.
These face-to-face negotiations shall be conducted by the respective designated
senior management representative of each party. If the parties are unable to
resolve the dispute between them through these face-to-face negotiations within
20 days (or such period as the parties shall otherwise agree) following the date
of notification (the "Notice Date") by one party to the other of the existence
of such dispute, then any such disputes shall be resolved in the following
manner. For purposes of this Section 13.5(a), Seller and Subsidiary shall be
deemed to be a single "party."
(b) Mediation. The parties shall endeavor to resolve any
dispute arising out of or relating to this Agreement by mediation under the CPR
Mediation Procedures for Business Disputes. Unless otherwise agreed, the parties
will select a mediator from the CPR Panels of Neutrals and shall notify CPR to
initiate the selection process.
(c) Resolution of Disputes
(i) The controversy or claim shall be settled by
arbitration conducted on a confidential basis, under the U.S. Arbitration Act,
if applicable, and the then current Commercial Arbitration Rules of the American
Arbitration Association (the "Association") strictly in accordance with the
terms of this Agreement and the substantive law of the State of Florida,
including such law in respect of the statute of limitations. The arbitration
shall be conducted at the Association's regional office located in Orlando,
Florida by three arbitrators, at least one of whom shall be knowledgeable in
e-commerce and web software design, programming and implementation, one of whom
shall be an attorney and one of whom shall be a member of a "Big Six" accounting
firm familiar with businesses engaged in software design, programming and
implementation. The arbitrators are not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any right to
recover such damages with respect to any such disputes. Judgment upon the
arbitrators' aware may be entered and enforced in any court of competent
jurisdiction.
(d) Neither party shall be precluded hereby from securing
equitable remedies in courts of any jurisdiction, including, but not limited to,
temporary restraining orders and preliminary injunctions to protect its rights
and interests but shall not be sought as a means to avoid or stay arbitration.
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(e) Each party is required to continue to perform its
obligations under this contract pending final resolution of any dispute arising
out of or relating to this contract, unless to do so would be impossible or
impracticable under the circumstances.
Section 13.6. Notices. All notices, requests, demands, waivers,
consents, approvals, or other communications which are required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally,
sent by reputable overnight courier service (such as Federal Express), sent by
telecopier, or sent by registered or certified mail, return receipt requested,
postage prepaid, to the addresses set forth below:
If to Purchaser:
eMERGE Vision Systems, Inc.
10315 102nd Terrace
Sebastian, FL 32958
Phone: 561/589-5310
Fax: 561/589-3779
Attention: Charles L. Abraham
With a copy to:
Karen M. Keating, Esquire
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Telephone: 610/254-4106
Fax: 610/293-1658
If to Seller:
<TABLE>
<S> <C>
Scott Sanders David Sanders
104 Southwood Street 1680 Valley Hills Circle
Starkville, MS 39759 Starkville, MS 39759
Phone: 601-323-2954 Phone: 601-323-7083
Fax: 601-320-3999 Fax: 601-323-1325
Scott Calhoun Dr. Duane Pankratz
1 Research Boulevard 44130 279th Street
Suite 201-B Freeman, SD 57029
Starkville, MS 39759 Fax: 605-925-4354
Phone: 601-323-1877 Phone: 605-925-4354
Fax: 601-320-3999
</TABLE>
With a copy to:
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William F, Gillis, Esquire
Gholson, Hicks & Nickels
710 Main Street, 3rd Floor
Columbus, MS 39701
Phone: 601-243-7300
Fax: 601-327-6217
or to such other address or telecopier number as the party entitled to receive
such notice may, from time to time, specify in writing to the other party.
Section 13.7 Governing Law and Jurisdiction. This Agreement shall be
construed and enforced in accordance with the law of the State of Florida
without giving effect to the principles of conflicts of law of any jurisdiction.
In the event that a party to this Agreement perceives the existence of a dispute
with the other party concerning any right or duty provided for herein, the
parties will, as soon as practicable, confer in an attempt to resolve the
dispute in accordance with Section 13.5 herein. If the parties are unable to
resolve such dispute amicably, then the parties hereby submit to the exclusive
jurisdiction of and venue in the state and federal courts located in the
District of the State of Florida with respect to any and all disputes concerning
the subject of, or arising out of, this Agreement.
Section 13.8. No Third Party Beneficiaries. Notwithstanding anything to
the contrary contained herein, no provision of this Agreement is intended to
benefit any person other than the signatories hereto nor shall any such
provision be enforceable by any other person.
Section 13.9. Severability. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 13.10. Schedules All Schedules referred to in this Agreement
are intended to be and are specifically incorporated by reference herein.
Section 13.11. Section Headings All section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 13.12. Contents of Agreement. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transaction
contemplated hereby and shall not be amended or terminated except by a written
instrument duly executed by each of the parties hereto. Any and all prior or
contemporaneous agreements or understandings between the parties regarding the
subject matter hereof are superseded in their entirety by this Agreement.
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Section 13.13 Counterparts. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been execute by all the parties hereto.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
eMERGE VISION SYSTEMS, INC.
/s/: Charles L. Abraham
By: Charles L. Abraham
Title: Chief Executive Officer
CYBERSTOCKYARD, INC.
/s/: Scott Sanders
By: Scott Sanders
Title:President
/s/: J. Scott Sanders
J. Scott Sanders
/s/: David Sanders
David Sanders
/s/: Dr. Duane Pankratz
Dr. Duane Pankratz
/s/: Scott Calhoun
Scott Calhoun
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