Purchase Agreement - eMerge Vision Systems Inc., Nutri-Charge, J Technologies LLC and The Biegert Family Revocable Trust
PURCHASE AGREEMENT
AMONG
eMERGE VISION SYSTEMS, INC.
NUTRI-CHARGE
J TECHNOLOGIES, LLC
AND
THE BIEGERT FAMILY IRREVOCABLE TRUST
DATED: JULY 29, 1998
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PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made this 29th day of
July, 1998, by and among eMERGE VISION SYSTEMS, INC., a Delaware corporation
("Buyer"), NUTRI-CHARGE, a South Dakota partnership (the "Partnership"), J
TECHNOLOGIES, LLC, a South Dakota limited liability company ("J Technologies")
and Judith Ackland and Larry Cox, Co-Trustees of The Biegert Family Irrevocable
Trust dated June 11, 1998 ("Biegert Trust") (J Technologies and The Biegert
Family Irrevocable Trust are collectively referred to as the "Sellers" and each
as "Seller").
BACKGROUND
STS Agriventures, Ltd. ("STS") is a licensee under a license in North
America from Her Majesty the Queen in Right of Canada (the "Canadian
Government") for the sale and distribution in North America (with the exception
of Canada) of electrolyte therapy products known as "Nutri-Charge" (the
"Nutri-Charge License") and a worldwide master license from the Canadian
Government for the manufacture of Nutri-Charge Premix for livestock (the
"Pre-Mix License"). STS is also licensee under a master license from the
Canadian Government for the promotion, development, manufacture, sublicense,
distribution, use, lease and sale of infra-red detection technology (the
"Detection Technology License"). STS is in the business of sub-licensing its
rights under the Nutri-Charge License and Detection Technology License to
others. STS has sublicensed certain rights under the Nutri-Charge License and
Detection Technology License to the Partnership.
Buyer has expertise with respect to the use of infrared technology in
the biological sciences ("Buyer's Technology").
As part of a single transaction, Buyer will purchase all of the capital
stock of STS pursuant to a Stock Purchase Agreement dated July 29, 1998 (the
"STS Stock Purchase Agreement") and all of the partnership interests of the
Partnership pursuant to this Agreement, surrender the Nutri-Charge License, the
Pre-Mix License and the Detection Technology License to the Canadian Government,
enter into a new expanded license with the Canadian Government covering the same
technologies (the "New Canadian License"), and combine these technologies with
Buyer's Technology to develop the business of non invasive scanning livestock
with infrared technology to determine health, meat quality and meat grading
together with manufacturing, distributing and selling electrolyte therapy
products alone or in conjunction with infra-red detection technology products to
identify and treat the effects of stress and other potentially value-reducing
infirmities in cattle, swine, poultry and other livestock and other applications
derived from the New Canadian License (such combination to be referred to as
"eVS Business").
Sellers own all of the partnership interests of the Partnership (the
"Interests"). Buyer desires to purchase the Interests from Sellers and Sellers
desire to sell the Interests to Buyer, all upon the terms and subject to the
conditions set forth herein.
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants herein contained, and intending to be legally bound, the
parties agree as follows:
ARTICLE 1
PURCHASE OF INTERESTS
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 Partnership and each of the Sellers to the Buyer in this
Agreement, each of the Sellers shall sell to the Buyer and the Buyer shall
purchase and receive from each of the Sellers, the percentage of Interests set
forth opposite each Seller's name in the Partnership Interest Table set forth on
Schedule 1.1 hereto (the "Partnership Interest Table").
1.2 Books and Records. At the Closing, as defined in Section 10.1,
Sellers shall cause the Partnership to deliver to Buyer, or turn over to Buyer's
representatives, all partnership agreements of the Partnership, 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 to the business of the Partnership and necessary or
desirable in Buyer's judgment for the on-going conduct of the Partnership and
its business, whether in the possession of Sellers or the Partnership.
ARTICLE 2
CONSIDERATION
2.1 Consideration; Payment. The consideration to be paid by Buyer to
Seller for the Interests shall be equal to 2,000,000 shares of common stock of
Buyer (the "eVS Shares") payable as follows:
(i) 1,000,000 eVS Shares to be issued at the Closing to
Biegert Trust;
(ii) 1,000,000 eVS Shares to be issued at the Closing to J
Technologies;
(iii) 400,000 of the eVS Shares to be issued to Biegert Trust
and all 1,000,000 eVS Shares to be issued to J Technologies shall
initially be "Restricted Shares" (as defined below) and shall remain
such until the earlier of (A) the seventh anniversary of the Closing or
(B) in seven (7) 200,000 share increments,
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(iv) the first time during the term of this Agreement that
Annual Gross Sales (as defined below) reach or exceed the following
milestones:
(v) $12,000,000 - 200,000 eVS Shares will no longer be
Restricted Shares;
(vi) $15,000,000 - an additional 200,000 eVS Shares will no
longer be Restricted Shares;
(vii) $18,000,000 - an additional 200,000 eVS Shares will no
longer be Restricted Shares;
(viii) $21,000,000 - an additional 200,000 eVS Shares will no
longer be Restricted Shares;
(ix) $24,000,000 - an additional 200,000 eVS Shares will no
longer be Restricted Shares;
(x) ($27,000,000 - an additional 200,000 eVS Shares will no
longer be Restricted Shares; and
(xi) $30,000,000 - the final 200,000 eVS Shares will no longer
be Restricted Shares.
"Annual Gross Sales" is defined as the gross revenues (net of
discounts, rebates and returns) of Buyer and Buyer's Affiliates (as defined
below) from sales of products that are a result of or derived from the
technology which is part of the eVS Business, earned in the 12 month period
commencing on January 1, 1999, and each 12 month period thereafter (each such
period, a "Calendar Year").
Within 30 days after the end of a Calendar Year, eVS will advise
Biegert Trust and J Technologies of the Annual Gross Sales and Biegert Trust and
J Technologies shall have the right to deliver eVS notice of the allocation of,
and the share certificate for, the number of shares that will no longer be
restricted shares pursuant to this section, and eVS will remove the appropriate
legend from the share certificate(s) with respect to such shares. For purposes
of the Agreement, "Buyer's Affiliates" shall mean any regularly-owned subsidiary
of Buyer and any other entity in which Buyer owns, directly or indirectly, at
least 50% of the voting control of or equity in and any other entity that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control by Buyer.
So long as the eVS Shares are Restricted Shares, neither Seller shall
have any right to, and shall not, sell, pledge, encumber, dispose of or
otherwise transfer such Restricted Shares or any interest therein, except J
Technologies may transfer its eVS Shares to (x) John Johanns or (y) to any
permitted assignee of John Johanns' rights under the Put Option (as defined
below) if with regard to (y) either, (i) such transfer is made
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concurrently with the exercise by the transferee of the Put Option or (ii) if
prior to such transfer Buyer is delivered an opinion of counsel reasonably
satisfactory to Buyer confirming the enforceability of the foregoing
restrictions on transfer on the proposed transferee; provided in each event, any
such transferee first executes the Stockholders Agreement. Each Seller and any
permitted transferee shall grant to Buyer an irrevocable proxy to vote such
Restricted Shares on all matters submitted to a vote of holders of eVS Shares,
except matters that will amend such Stockholders Agreement, abrogate or diminish
the rights of Sellers under this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARTNERSHIP AND SELLERS
Partnership and Sellers, jointly and severally, represent and warrant
to Buyer as follows:
3.1 Organization, Power, Standing and Qualification. The Partnership is
a general partnership consisting of two equal partners, namely, Sellers.
Partnership is duly organized, validly existing, and in good standing under the
laws of the state of South Dakota, and has full power and authority to carry on
its business as it is now being conducted and to own and operate the properties
and assets now owned and operated by it. Except as set forth in Schedule 3.1,
the Partnership is duly qualified to do business and is in good standing in all
jurisdictions where its operations or the ownership or use of its assets
requires such qualification.
3.2 Authorization for Agreement.
(i) The Partnership. The Partnership's execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Partnership: (i) are within the
Partnership's powers and (ii) do not (A) require any action by or in
respect of, or filing with, any governmental or regulatory authority,
(B) 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 Partnership or any of its properties or any
contract to which the Partnership or any of its properties is bound or
subject or (C) result in the creation of any adverse claim on any of
the Interests.
(ii) 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 corporate
powers and authority of and have been duly authorized by all necessary
corporate and shareholder action by 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
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or any of their respective properties is bound or subject or (C) result
in the creation of any adverse claim on any of the Interests.
3.3 Validity of Contemplated Transactions. Except with respect to those
consents required to be obtained in connection with the following and set forth
in Schedule 3.3 hereto, all of which have been obtained, the execution, delivery
and performance of this Agreement and the collateral documents and the
consummation of the transactions contemplated hereby and thereby do not and will
not contravene any provision of the Partnership Agreement or other governing
documents of the Partnership; 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 Partnership, or any
Seller to any indenture, mortgage, contract, commitment, or agreement, other
than this Agreement, to which the Partnership, or any Seller is a party or by
which the Partnership or any of its assets is bound; or violate any provision of
law, rule, regulation, order, permit, or license to which the Partnership or any
Seller is subject.
3.4 Partnership. All of the Interests of the Partnership are
collectively owned by the Sellers as set forth in the Partnership Interest
Table. All of the Interests are validly issued, fully paid and non-assessable
and have not been issued in violation of applicable securities laws or of any
preemptive rights or other rights to subscribe for, purchase or otherwise
acquire securities. There are no outstanding options, warrants, conversion
privileges, subscription, calls commitments or rights of any character relating
to the Interests of the Partnership.
3.5 Ownership of Interests. Each Seller is the record and beneficial
owner of the Interests as set forth in the Partnership Interest Table and has
good, marketable and valid title to such Interests, free and clear of all liens,
security interests, pledges, negative pledges, encumbrances, restrictions or
options. Upon delivery of the assignment of the Interests to the Buyer, the
Buyer shall acquire good, marketable and valid title to such Interests, free and
clear of all liens, security interests, pledges, negative pledges, encumbrances,
restrictions or options.
3.6 Title to Properties. The Partnership neither owns nor leases,
whether beneficially or of record, any tangible properties or assets, personal
or real.
3.7 Real Property. The Partnership neither owns nor leases, whether
beneficially or of record, any real property.
3.8 Financial Statements. The Partnership and the Sellers have
delivered or caused to be delivered to Buyer financial statements consisting of
a fiscal year end balance sheet for the Partnership and income statements of the
Partnership for the years then ended (collectively, the "Financial Statements").
The Financial Statements are true and correct in all material respects, are in
accordance with the applicable books and records of the Partnership and, have
been prepared in conformity with generally accepted accounting principles,
consistently applied during the related periods, and present fairly
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the financial condition of the Partnership and the results of its operations for
the respective periods ended on such dates.
3.9 Absence of Undisclosed Liabilities. The Partnership has no
liabilities or obligations of any nature, whether fixed or contingent, direct or
indirect, matured or unmatured, except for those which are specifically
disclosed in Schedule 3.9 hereto (the "Disclosed Liabilities").
3.10 Conduct of Business in the United States. Partnership has
conducted its business in the United States only, except for matters dealing
with the Canadian government in developing, promoting and facilitating the
testing of the subject intellectual properties.
3.11 Subsidiaries. The Partnership has no subsidiaries or interests in
other entities.
3.12 Compensation Arrangements. The Partnership has no (and has never
had any) employees and, except as disclosed in detail on Schedule 3.12, there
are no (and have never been any) officers, consultants, agents or other persons
performing services for the Partnership for compensation. All consultants,
agents and other persons performing services for the Partnership have been paid
in full. The Partnership has never adopted any benefit plans.
3.13 Certain Tax Matters. For any period ending on or before the
Closing, the Partnership has duly and timely filed or will file all federal,
state, and local tax returns, declarations, and reports, estimates, information
returns and statements (collectively, "Returns") required to be filed or sent by
it or on its 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 Buyer prior to the date hereof. The Partnership 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 Partnership shall
use its best efforts to determine a good faith estimate of the Taxes, shall
properly reserve the full amount of such estimate on any Financial Statement
delivered to Buyer covering periods after the date of the Financial Statement.
The Partnership'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 Partnership.
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.
3.14 Litigation; Compliance with Laws. Except as set forth in Schedule
3.14 attached hereto, there is no suit, action, claim, arbitration,
administrative or legal or other
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proceeding, or to Partnership's and Sellers' knowledge, governmental or other
investigation pending or, to Partnership's and Sellers' knowledge, threatened
against or affecting the Partnership, whether or not covered by insurance; nor
to Partnership's and Sellers' knowledge does there now exist any failure by the
Partnership to comply with, nor any default by the Partnership under any law,
ordinance, requirement, regulation, or order applicable to the Partnership, nor
any violation by the Partnership or default by the Partnership 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 Partnership which might have
a material adverse effect on the financial condition, business, results of
operations, properties, or assets of the Partnership, or Buyer's purchase or
ownership of the Interests. To Partnership's and Sellers' knowledge, the
Partnership has obtained all permits, licenses, zoning variances approvals, and
other authorization necessary for the complete operation of its business as
presently operated. Specifically, except as set forth in Schedule 3.14, the
Partnership has obtained all approvals, including without limitation, all US
Federal Drug Administration and Department of Agriculture regulatory approvals
necessary and proper for the manufacture and sale of electrolyte therapy
products manufactured pursuant to the Nutri-Charge License, Nutri-Charge Premix
manufactured pursuant to the Pre-Mix License and infra-red detection technology
manufactured pursuant to the Detection Technology License. There have been no
illegal kickbacks, bribes or political contributions made by the Partnership.
3.15 Intellectual Property.
(a) Schedule 3.15.1 sets forth a complete and accurate list
and full description of all patents, trademarks, service marks, trade names,
copyrights, and similar intangible rights and all applications or registrations
thereof owned by the Partnership or used in respect of the Partnership's
business (collectively, the "Listed Rights"). With respect to any registrations
of the Listed Rights owned or licensed by the Partnership, Schedule 3.15.1 also
sets forth, as to each such item of the Listed Rights, the (i) relevant
application or registration number, (ii) relevant filing, registration, issue or
application date, (iii) record owner, (iv) country, (v) title or description and
(vi) remaining life thereof. In addition, Schedule 3.15.1 identifies whether
each item of the Listed Rights is owned by the Partnership or is possessed and
used by the Partnership under the applicable license, contract, agreement or
other commitment. With respect to each such commitment, the identity of the
parties thereto, the term thereof and all amounts payable thereunder together
with the payment terms therefor are listed on Schedule 3.15.1. Except as set
forth on Schedule 3.15.1, the Listed Rights comprise all of the patent rights,
trademark and service mark rights, trade names, copyrights and all licenses that
are necessary for the conduct of the Partnership's business as now being
conducted and as proposed to be conducted. Except as set forth on Schedule
3.15.1, to the best of the Partnership's and Sellers' knowledge, the Partnership
owns and possesses (under license) all of the proprietary rights, know-how and
trade secrets not included in the Listed Rights (the "Other Proprietary Rights"
and, together with the Listed Rights, the "Intellectual Property") necessary for
the business as now being conducted and as proposed to be conducted.
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(b) Each item of the Intellectual Property constitutes a valid
and enforceable right of the Partnership and does not infringe or conflict with
the rights of any other person or entity, except as to the contractual rights of
the Canadian government and STS under the license and sublicense agreements.
Except as otherwise provided in Schedule 3.15.2, the Partnership has no
obligation to compensate, or to obtain the consent of, any third party for the
use of any item of the Intellectual Property. There is neither pending nor, to
the best of the Partnership's and Sellers' knowledge, threatened (except as
disclosed on Schedule 3.15.2) any suit, action, claim, arbitration, grievance,
litigation, administrative or legal or other proceeding, or investigation,
against the Partnership or its licensors contesting the validity of, or the
Partnership's rights to use, any of the Intellectual Property. Except as
otherwise provided in Schedule 3.15.2, the Partnership has not granted any
license or other right to use, in any manner, any item of the Intellectual
Property, whether or not requiring the payment of royalties, and no third party
has any right to use any of the Intellectual Property, to the best of the
Partnership's and Sellers' knowledge, no person or entity is infringing upon any
of the Partnership's rights to the Intellectual Property. The Partnership has
not received notice or infringement upon, misappropriation of or conflict with
any asserted right of any third party, and to the best of the Partnership's and
Sellers' knowledge, there is no basis for any such notice.
3.16 Specific Patent/USFDA Representations.
(xii) The Partnership and the Sellers have provided all
paperwork they possess concerning the U.S. Food and Drug Administration
("FDA").
(xiii) Aurora Co-op Elevator Company was the manufacturer of
the Nutri-Charge product used in the FDA trials undertaken on behalf of
the Partnership ("FDA Trials") and the Partnership has been advised
that its FDA Registration Number is 1916267.
(xiv) Jeffrey Biegert and his affiliates as sponsor of the FDA
Trial will assign all right, title and interest that he and they may
have in the FDA application process and FDA Trial results. He and they
will cooperate in the FDA application process as the sponsor to
expeditiously seek FDA approval. The assignment and cooperation of
Jeffrey Biegert is contingent upon agreement by Buyer that he and they
will be saved and held harmless from any and all costs and expense he
or they may incur by reason of being a sponsor to the FDA application
process.
(xv) John Johanns has had no direct contact with the FDA
regarding the Nutri-Charge product other than the initial meeting in
Washington, D.C. with Al Schaefer and Rick Stanley present, and except
for signing the FDA Trial report as an investigator. Jeffrey Biegert
has had no contact with the FDA
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regarding the Nutri-Charge product other than signing the FDA
application to manufacture the Nutri-Charge product for the FDA Trial.
3.17 Contracts
Except as listed and described on Schedule 3.17(a) or any other
Schedule attached hereto, the Partnership is not a party to any written or oral
agreement, contract or commitment (the "Contracts.")
Except as disclosed on Schedule 3.17(b), (i) each of the Contracts is
valid and enforceable in accordance with its terms, (ii) is in compliance with
the provisions thereof, (iii) Partnership and, to the best of the Partnership's
and Sellers' knowledge, each other party is not 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 by the Partnership, or to
the best of the Partnership's or Sellers' knowledge, by any other party
thereunder and (v) the Partnership's rights under the Contracts are transferable
by the Partnership to Buyer without restriction except for the Consents. To the
Partnership's and Sellers' knowledge, none of the terms or provisions of any of
the Contracts materially adversely affects the prospects, conditions, affairs,
or operations of the Partnership or its business, including restrictions on the
Partnership's ability to compete.
3.18 Other Transactions. Except as disclosed on Schedule 3.18 hereto,
the Partnership has not, since the date of the most recent Financial Statements,
(a) operated its business except in the ordinary course of business, (b)
incurred any debts, liabilities or obligations except in the ordinary course,
(c) discharged or satisfied any liens or encumbrances, or paid any debts,
liabilities or obligations, except in the ordinary course of business, (d)
mortgaged, pledged or subjected to lien or other encumbrance any of its assets,
tangible or intangible, except in the ordinary course of business, (e) sold or
transferred any of its tangible assets, or canceled any debts or claims, except,
in each case, in the ordinary course of business, or (f) suffered any
extraordinary losses or waived any rights of substantial value.
3.19 Product Liability Claims. To Partnership's and Sellers' knowledge,
there have been no incidents, events or claims relating to the Partnership in
the nature of products liability claims, breach of warranty claims or other
claims alleging failure of product performance. There is no product liability
insurance.
3.20 Bank Accounts. Schedule 3.20 hereto lists the names and addresses
of every bank and other financial institution in which the Partnership maintains
an account (whether checking, savings or otherwise), lock box or safe deposit
box, and the account numbers and names of persons having signing authority or
other access thereto.
3.21 No Changes. Since the date of the most recent Financial
Statements, and except as disclosed to Buyer in writing as soon as any such
events have occurred, there has not been:
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(a) Any materially adverse change in the financial or other
condition, assets, liabilities or business of the Partnership, except changes
described in Section 3.20 hereto, none of which individually or in the aggregate
has been materially adverse to the Partnership;
(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 Partnership;
(c) Any strike, lockout, labor trouble or any event or
condition of similar character adversely affecting the business or prospects of
the Partnership;
(d) Any declaration, setting aside or payment of any
distribution in respect of any of the Partnership's Interests or any direct or
indirect redemption, purchase or other acquisition of any such Interests; or
(e) Any increase in the compensation payable or to become
payable by the Partnership 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 Partnership's past practices, except as disclosed
to Buyer in writing as soon as any such events have occurred.
3.22 Copies of Partnership Agreement. The Partnership's Restated
Partnership Agreement (certified by the general partners of the Partnership) to
which Buyer has been provided a copy, is correct and remains in effect as at the
date of this Agreement. Except as set forth in Schedule 3.22, there are no other
material books and records of the Partnership to which Buyer has not been
provided access [in which the Partnership has access.]
3.23 Tangible Assets; Inventory. There are no tangible assets or
inventory owned, leased or licensed, whether beneficially or of record, by the
Partnership.
3.24 Accounts Receivable. There are no accounts receivable.
3.25 Hazardous Substances. Except as listed on Schedule 3.25, (i) none
of the assets of the Partnership has been used for the manufacture, storage,
transportation, deposit, disposal, treatment, handling, production, processing
or recycling of toxic, dangerous or hazardous substances; (ii) the Partnership
has engaged in no activity which would subject the Partnership or the Buyer 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 Partnership has complied with each, and is not in violation of any,
United States federal, state, 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 Partnership has obtained and complied with
all necessary permits and other approvals, including interim status under the
Reserve Conservation and Recovery Act, as amended ("RCRA"),
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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 federal, state, or local law and any regulations
thereunder.
3.26 Relationship With Licensees. Schedule 3.26 hereto contains an
accurate list of the Partnership's licensees. None of such licensees has given
the Partnership notice terminating or canceling any license, or materially
reducing any payment or royalty, or threatening to terminate or cancel, any
license or materially reduce any payment or royalty or relationship with the
Partnership, and Seller is not aware of any material deterioration of any such
relationship. None of the Partnership's licensees for the past two fiscal years
has given the Partnership notice terminating or canceling any license, or
materially reducing any payment or royalty, or threatening to terminate or
cancel any license, or materially reduce any payment or royalty or supply
relationship with the Partnership and the Partnership and Sellers are not aware
of any material deterioration of any such relationship.
3.27 Transactions With Affiliates. Except as set forth in Schedule
3.27, no General Partner or affiliate of the Partnership, nor any officer or
director of any General Partner or any affiliate of the Partnership, (i) owns or
has a material interest in any asset used by the Partnership in the operation of
its business, (ii) has any direct or indirect interest of any nature whatsoever
in any person which markets or provides the same type of services as those which
Buyer will provide by purchasing the business of the Partnership, (iii) provides
or causes to be provided any assets, services or facilities used or held for use
in connection with the business of the Partnership.
3.28 Veracity of Statements. No representation or warranty by the
Partnership or any Seller contained in this Agreement and no statement contained
in any certificate, schedule or other instrument furnished to Buyer pursuant
hereto or in connection with the transactions contemplated hereby, contains any
untrue statement of a material fact or omits to state a material fact.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers and the
Partnership as follows:
4.1 Organization. The Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation,
(ii) has the power and authority to own and operate its properties and assets
and to transact its business as currently conducted and (iii) is duly qualified
and authorized to do business and is in good standing in all jurisdictions,
which are identified on Schedule 4.1 hereto, where the failure to be duly
qualified, authorized and in good standing would have a
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material adverse effect upon the Buyer's businesses, prospects, operations,
results of operations, assets, liabilities or condition (financial or
otherwise).
4.2 Authorization for Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer (i) are within the Buyer's corporate powers and
duly authorized by all necessary corporate action on the part of the Buyer and
(ii) do not (A) require any action by or in respect of, or filing with, any
governmental body, agency or official, except as set forth in this Agreement or
(B) contravene, violate or constitute, whether with or without the passage of
time or the giving of notice or both, a breach or a default under, any
requirement of law applicable to the Buyer or any of its properties or any
Contract to which the Buyer or any of its properties is bound.
4.3 Enforceability. This Agreement has been duly executed and delivered
by the Buyer and constitutes the legal, valid and binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms.
4.4 Litigation. There is no legal proceeding or order pending against
or, to the knowledge of the Buyer, threatened against or affecting, the Buyer or
any of its properties or otherwise that could adversely affect or restrict the
ability of the Buyer to consummate fully the transactions contemplated by this
Agreement or that in any manner draws into question the validity of this
Agreement.
4.5 Hazardous Substances. (i) none of the assets of the Buyer has been
used for the manufacture, storage, transportation, deposit, disposal, treatment,
handling, production, processing or recycling of toxic, dangerous or hazardous
substances; (ii) the Buyer has engaged in no activity which would subject the
Buyer or the Partnership 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 Buyer has complied with each, and is
not in violation of any, United States federal, state, 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 Buyer has obtained and complied with all
necessary permits and other approvals, including interim status under the
Reserve 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.
Section9601, et seq., as amended, and dangerous, regulated toxic or hazardous
substances, petroleum products, or similar terms under any other applicable
United States federal, state, or local law and any regulations thereunder.
4.6 Product Liability Claims. There have been no incidents, events or
claims relating to the Buyer in the nature of products liability claims,
breaches of warranty claims or other claims alleging failure of product
performance.
4.7 Conflict With Authority, Bylaws, Etc. Neither the execution and
delivery of this Agreement and the Collateral Documents to which Buyer is a
party, nor the
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consummation of the transactions contemplated hereby and thereby in the manner
herein provided will violate, be in conflict with, constitute a default under,
cause the acceleration of any payments pursuant to, or otherwise impair the good
standing, validity, and effectiveness of any lease, license, permit,
authorization, or approval applicable to Buyer; or violate any provision of law,
rule, regulation, order, or permit to which Buyer is subject.
4.8 Acquisition of Interests for Investment. Buyer is acquiring
ownership of the Partnership 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. Buyer or such assignees will not offer, sell, transfer, assign,
pledge or hypothecate any portion of the Interests in the absence of
registration under, or pursuant to an applicable exemption from all applicable
federal and state securities laws.
4.9 Capitalization of Buyer. The authorized capital stock of Buyer
consists of 20,000,000 shares of a single class of common stock having $0.01 par
value per share and
4.10 10,000,000 shares of blank check preferred stock. Upon the Closing
and the closing of the transactions contemplated in the STS Stock Purchase
Agreement, Buyer's issued and outstanding capital will be as set forth in
Buyer's Capitalization Table attached as Schedule 4.9 hereto, and such shares
will be validly issued, fully paid and non-assessable and will not have been
issued in violation of applicable securities laws or of any preemptive rights or
other rights to subscribe for, purchase or otherwise.
4.11 Financial Statements. Buyer has delivered or caused to be
delivered to the Sellers financial statements consisting of a fiscal year end
balance sheet for the Buyer for __________ and income statements and statements
of cash flow of the Buyer, for the years then ended (collectively, the
"Financial Statements"). The Financial Statements are true and correct in all
material respects, are in accordance with the applicable books and records of
the Buyer and, have been prepared in conformity with generally accepted
accounting principles, consistently applied during the related periods ("GAAP"),
and present fairly the financial condition of the Buyer and the results of its
operations for the respective periods ended on such dates.
4.12 Absence of Undisclosed Liabilities. At the date of the Financial
Statements, Buyer had no liabilities or obligations of any nature, whether fixed
or contingent, direct or indirect, matured or unmatured, required by GAAP to be
reflected on the Financial Statements which was not so reflected.
4.13 Certain Tax Matters. For any period ending on or before the
Closing, the Buyer has duly and timely filed or will file all federal, state and
local tax returns, declarations, and reports, estimates, information returns and
statements (collectively, "Buyer Returns") required to be filed or sent by it or
on its behalf and all such Buyer Returns are or will be true, correct and
complete. Buyer has paid in full all Taxes and any penalties entered with
respect to the Buyer Returns and any penalties entered into with respect
thereto, due and payable for any period ending or before the date of the
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Financial Statements. Buyer's federal income tax liabilities, if any, have never
been audited by the Internal Revenue Service. Neither the Internal Revenue
Service nor any state or local taxing authority has asserted that additional
taxes are owed by Buyer.
4.14 Litigation: Compliance with Laws. Except as set forth in Schedule
4.13 attached hereto, there is no suit, action, claim, arbitration,
administrative or legal or other proceeding, or to Buyer's knowledge,
governmental or other investigation pending or, to Buyer's knowledge, threatened
against or affecting the Buyer, whether or not covered by insurance; nor to
Buyer's does there now exist any failure by Buyer to comply with, nor any
default by Buyer under any law, ordinance, requirement, regulation or order
applicable to Buyer, nor any violation by Buyer or default by Buyer 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 Buyer which might
have a material adverse effect on the financial condition, business, results of
operations, properties, or asset of Buyer or Buyer's purchase of ownership of
the Interests. To Buyer's knowledge, the Buyer has obtained all permits,
licenses, zoning variances approvals, and other authorization necessary for the
complete operation of its business as presently operated, except for the
approvals of FDA as to which no representations are made.
4.15 Property. Except as set forth on Schedule 4.14, to the best of the
Buyer's knowledge, the Buyer owns or possesses (under license) prior to or
contemporaneously with this agreement all of the proprietary rights, know-how
and trade secrets necessary for the business as presently conducted, excluding
the eVS Business. To the best of Buyer's knowledge, each item such intellectual
property constitutes a valid and enforceable right of the Buyer and does not
infringe or conflict with the rights of another person or entity. There is
neither pending nor, to the best of the Buyer's knowledge, threatened (except as
disclosed on Schedule 4.14) any suit, action, claim, arbitration, grievance,
litigation, administrative or legal or other proceeding, or investigation,
against the Buyer or its licensors contesting the validity of, or the Buyer's
rights to use, any of such intellectual property. To the best of Buyer's
knowledge, no person or entity is infringing upon any of the Buyer's rights to
the intellectual property. The Buyer has not received notice or infringement
upon, misappropriation of or conflict with any asserted right of any third
party, and to the best of Buyer's knowledge, there is no basis for any such
notice.
4.16 No Changes. Since the date of the Financial Statements, and except
as disclosed to Sellers in writing as soon as any such events have occurred,
there has not been:
(a) Any materially adverse change in the financial or other
condition, assets, liabilities or business of Buyer, none of which individually
or in the aggregate has been materially adverse to Buyer;
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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 Buyer; or
(c) Any strike, lockout, labor trouble or any event or
condition of similar character adversely affecting the business or prospects of
Buyer.
4.17 Veracity of Statements. No representation or warranty by Buyer
contained in this Agreement and no statement contained in any certificate,
schedule or other instrument furnished to Sellers pursuant hereto or in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact.
ARTICLE 5
ACTIVITIES PRIOR TO CLOSING BY SELLER
5.1 Operation of Business. Prior to the Closing, the Partnership shall
conduct its business only in the ordinary course and in connection therewith
and, to the extent consistent therewith, the Partnership shall use its best
efforts to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees and business associates. Except
as set forth in Schedule 5.1, the Partnership shall:
(a) Organizational Documents. Not amend its partnership
agreement, except as may be necessary to carry out this Agreement or as required
by law;
(b) Partnership Name. Not change its partnership name or
permit the use thereof by any other person or entity;
(c) Compensation, Bonuses. Not hire or pay or agree to hire or
pay any employee, independent contractor, officer, or director of the
Partnership, without the consent of Buyer.
(d) Management. Not make any changes in its management without
the consent of Buyer;
(e) Mergers, Etc. Not merge or consolidate the Partnership
with any entity or allow it to acquire or agree to acquire or be acquired by any
corporation, association, partnership, joint venture, or other entity; except
JLB, Inc. has sold its interest in the Partnership to the Biegert Trust and
Nutri-Search, Inc. has sold its interest in the Partnership to J Technologies.
(f) Disposition of Assets. Not sell, transfer, or otherwise
dispose of any assets of the Partnership without the prior written consent of
Buyer;
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(g) Indebtedness. Not create, incur, assume, or guarantee any
indebtedness for money borrowed arising out of or in connection with the
Partnership's business except in the ordinary course of business; create or
suffer to exist any lien on any of the Partnership'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
Partnership's business;
(h) Payables. Pay when due, in accordance with past practices,
all of its accounts payable and trade obligations;
(i) Contracts and Permits. Maintain in full force and effect
all Contracts and permits necessary for or related to the operation of the
Partnership'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;
(j) Litigation, Etc. Promptly advise Buyer 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;
(k) Interests. Not issue sell, pledge, dispose of or encumber
any additional Interests of, or rights convertible or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
Interests.
5.2 Access to Information. Prior to Closing, Seller will cooperate
fully with Buyer and shall provide Buyer and its accountants, counsel, and other
representatives, during normal business hours, full access to the books,
records, Contracts, other assets owned or leased by the Partnership, and full
opportunity to discuss the Partnership's business, affairs, assets, industrial
processes, and trade secrets with its officers, employees, customers, suppliers
and independent accountants, and furnish to Buyer and its representatives copies
of such documents, records, and information with respect to the affairs of the
Partnership as Buyer or its representatives may reasonably request. Buyer and
Seller, 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.
5.3 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 10.1).
5.4 Benefit Plans. The Partnership shall not adopt, terminate, amend,
extend, or otherwise change any benefit plan without the prior written consent
of Buyer, and the Partnership shall give Buyer prior written notice of the
Partnership's intention to take any
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such action required by law or necessary to continue the qualified status of any
benefit plans as they pertain to the Partnership's employees or its former
employees.
5.5 Notice of Change. The Partnership will promptly notify Buyer of the
existence or happening of any fact, event or occurrence prior to the Closing
Date and of which the Partnership or any of the Partnership's employees,
partners, or other representatives has knowledge which may alter the accuracy or
completeness of any representation or warranty contained in Article 3 of this
Agreement.
5.6 No Discussions. Unless and until this Agreement is terminated
pursuant to Article 14 hereof, Seller will not, and will not authorize or permit
the Partnership 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 Buyer relating to offers,
inquiries, negotiations or proposals with respect to the sale of the assets or
any capital stock of the Partnership, or any type of business combination
transaction. Seller and the Partnership will promptly notify Buyer of any such
offer, inquiry, negotiation or proposal which either Seller or the Partnership
may receive.
5.7 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.
ARTICLE 6
ACTIVITIES PRIOR TO CLOSING BY BUYER
6.1 Best Efforts. Subject to the other conditions of this Agreement,
Buyer 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 10.1).
6.2 Access to Information. Buyer shall provide Seller with information
reasonably requested by Seller regarding Buyer's ability to consummate the
transactions contemplated herein, as may be. Seller shall not disclose any such
information to any other person or entity without the prior written consent of
Buyer.
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ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
7.1 Conditions to Obligation of Buyer to Close. The obligation of Buyer
to consummate the transaction contemplated under this Agreement on the Closing
Date (as defined in Section 10.1) shall be subject to the satisfaction or the
waiver by Buyer of the following conditions on or prior to the Closing Date:
(a) Representations and Warranties; Compliance with Agreement.
The representations and warranties of the Partnership 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
Partnership and Sellers shall have performed all covenants and agreements to be
performed by it under this Agreement on or prior to the Closing Date and shall
have delivered to the Buyer a certificate to such effect, dated the Closing
Date, which certificate shall be in form and substance satisfactory to Buyer and
its counsel;
(b) Opinion of Counsel for the Partnership and Sellers. Frank
C. Heinisch, counsel for the Partnership and Sellers, shall have delivered to
Buyer their favorable opinion, dated the Closing Date and in the form set forth
in Exhibit 7.1.2;
(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
transactions contemplated hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or threatened;
(d) Required Consents. The parties (other than the
Partnership) to any other contract, commitment or agreement to which the
Partnership 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 Partnership, and any governmental body or regulatory agency
having jurisdiction over Buyer or the Partnership, 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; provided however the parties
acknowledge that Sellers and Partnership shall not be responsible to procure the
consent and approval of the Canadian Government and STS;
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(e) No Material Damage to Business. The assets, properties and
business of the Partnership shall not have been and shall not be threatened to
be materially adversely affected in any way as a result of fire, explosion,
earthquake, disaster, accident, labor dispute, any action by any governmental
authority, flood, drought, embargo, riot, civil disturbance, uprising, activity
of armed forces or act of God;
(f) Approval of Buyer; 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 Buyer, in the exercise of its reasonable judgment, and Buyer or
its counsel shall have been furnished with certified copies, satisfactory in
form and substance to Buyer in the exercise of its reasonable judgment, of all
such records of the Partnership, and of the proceedings of such persons
authorizing the execution, delivery and performance of this Agreement as Buyer
shall reasonably require;
(g) Other Transactions. The closing of the transactions
contemplated by the New Canadian License and the STS Stock Purchase Agreement
shall have been completed on the Closing Date.
(h) Stockholders Agreement. The Stockholders Agreement, by and
among Buyer, the Partnership and certain other stockholders of Buyer and the
Partnership (the "Stockholders Agreement"), shall have been executed and
delivered by the parties thereto.
(i) Put Option Agreement. A Put Option Agreement, by and among
John R. Johanns and XL Vision, Inc. (the "Put Option") in the form attached
hereto as Schedule 7.1.9 shall have been executed and delivered by the parties
thereto.
7.2 Conditions to Obligation of Sellers to Close. The obligation of
Sellers to consummate the transfer of the Interests on the Closing Date (as
defined in Section 10.1) shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date:
(a) Representations and Warranties. The representations and
warranties of Buyer 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, Buyer shall have performed all covenants and agreements to
be performed by it under this Agreement on or prior to the Closing Date, and
Buyer shall have delivered to Seller a certificate to such effect, dated the
Closing Date, which certificate shall be in form and substance satisfactory to
Seller and its counsel;
(b) Opinion of Counsel of Buyer. Pepper Hamilton LLP, counsel
for Buyer, shall have delivered to Sellers their opinion, dated the Closing Date
and in the form set forth in Exhibit 7.2.2;
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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 Sellers; 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 Buyer and the Partnership and of the
proceedings of Buyer and the Partnership authorizing their execution, delivery
and performance of this Agreement as Sellers shall reasonably require; and
(e) Stockholders Agreement. The Stockholders Agreement and Put
Option shall have been duly executed and delivered by the parties thereto.
ARTICLE 8
INDEMNIFICATION
8.1 By Sellers and Individual Indemnitors. To the extent and in the
manner herein provided, each of John Johanns and Jeffrey Biegert each being
called an "Indemnitor" and collectively, the "Indemnitors") shall, jointly and
severally, indemnify, defend, and hold harmless Buyer and, after the Closing,
the Partnership, 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 Buyer may suffer or incur,
resulting from, related to, or arising out of
(a) any misrepresentation, breach of warranty or
nonfulfillment of any of the covenants of the Partnership 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 Buyer by Sellers hereunder;
(b) any claims relating to the Returns or Taxes of the
Partnership;
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(c) any claims based upon alleged injuries to persons,
property or business by reason of alleged defectiveness, improper design, or
manufacture or malfunction or otherwise of any product manufactured by a third
party under license or sub-license from the Partnership, where such claim or
injury is actually known to the Partnership or Sellers, or is currently asserted
or threatened against the Partnership; (Indemnitors shall not be assumed or
imputed to have actual knowledge of design or manufacture in which they did not
directly participate nor supervise.)
(d) any and all Losses not disclosed on Schedule 3.9 resulting
from, related to or arising out of the operation of the Partnership's business
prior to the Closing; and
(e) any and all actions, 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.
Notwithstanding the foregoing, the obligations of either Indemnitor to indemnify
Buyer hereunder shall be limited to $250,000. Either Indemnitor shall have the
right to defer payment of any Losses indemnifiable hereunder until the fourth
anniversary of the Closing Date, provided if an Indemnitor elects so to defer
payment of any such Loss, the Indemnitor shall, pay Buyer the amount of the Loss
(subject to the aggregate limitation set forth in the preceding sentence) plus
interest at the rate of 12% per annum from the date of the Loss to the date paid
(interest will be without regard to the aggregate limitation set forth in the
preceding sentence.)
8.2 By Buyer. From and after the Closing Date (as defined in Section
10.1), Buyer 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 Buyer 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
Partnership's business after Closing.
8.3 Procedures. Promptly after acquiring knowledge of any such Losses
against which Sellers have indemnified Buyer or against which Buyer has
indemnified Seller, or as to which either Buyer or Seller (herein, a "Party")
may be liable, Sellers or Buyer, 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 Losses, (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
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the indemnifying Party shall have waived its right to contest its obligation to
indemnify the indemnified Party for all such Losses; (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 Losses may have arisen; and
(iv) the indemnifying Party shall not be liable for any settlement effectuated
without its prior written consent.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made by Seller and Buyer in this
Agreement or pursuant hereto shall survive the Closing (as defined in Section
10.1) hereunder, notwithstanding any investigation made by or on behalf of
Seller or Buyer prior to or after the Closing Date (as defined in Section 10.1).
ARTICLE 10
THE CLOSING
10.1 Time and Place. The closing (the "Closing") of the transactions
contemplated hereby (the "Closing Date") shall be held on July 29, 1998 at 1:00
p.m., at the offices of Pepper Hamilton LLP, 3000 Two Logan Square, Eighteenth
and Arch Streets, Philadelphia, Pennsylvania 19103-2799, or at such other time
and at such other place as shall be mutually agreeable to the Buyer and the
Sellers.
10.2 Conduct at Closing.
(a) As to Sellers. 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
Sellers in writing, on the Closing Date Buyer shall deliver to Sellers:
(xvi) certificates evidencing eVS Stock, as provided for in
Section 2.1;
(xvii) the certificate regarding representations and
warranties required by Section 7.2.1 hereof;
(xviii) a certificate dated the Closing Date and signed on
behalf of Buyer by its Secretary attaching (A)(i) a true and correct
copy of Buyer's Articles
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of Incorporation, (ii) a true and correct copy of the by-laws of Buyer,
(iii) the resolutions by the Board of Directors of Buyer authorizing
the actions taken and authorizing the officers of Buyer to execute all
documents and instruments to be executed and delivered by Buyer in
connection with the purchase of the Interests, and (iv) certificates of
good standing certified by the Secretary of State of Delaware; and (B)
specimen signatures of the incumbent officers of Buyer executing this
Agreement and the documents executed and delivered pursuant to or in
connection with this Agreement;
(xix) the opinion of counsel as required by 7.2.2 hereof; and
(xx) the executed Stockholders Agreement and Put Option as
required by 7.2.5.
(b) As to Buyer. Subject to the fulfillment of all of the conditions
set forth in Section 7.2 and the delivery of all certificates and opinions
required thereby, except such conditions, certificates, and opinions as may be
waived by Buyer in writing, Seller shall deliver to Buyer:
(xxi) assignments of Sellers' Interests and all other good and
sufficient instruments of transfer and conveyance as may be necessary
in Buyer's opinion to vest in Buyer good, absolute, and marketable
title to the Interests;
(xxii) the books and records required by Section 1.2 hereof;
(xxiii) the certificate required by Section 7.1.1 hereof;
(xxiv) the opinion of counsel required by Section 7.1.2
hereof;
(xxv) a certificate dated the Closing Date and signed on
behalf of the Partnership by its Sellers attaching (a) (i) a true and
correct copy of the Partnership's Partnership Agreement and (ii)
certificates of good standing and/or fictitious name certificates
certified by the Secretaries of State or other appropriate officials of
those states in which the Partnership does business; and (b) specimen
signatures of the incumbent officers of the Sellers executing this
Agreement and the documents executed and delivered pursuant to or in
connection with this Agreement;
(xxvi) the executed Stockholders Agreement and Put Option as
required by Section 7.1.8;
(xxvii) irrevocable proxies signed by Sellers; and
(xxviii) Consulting Agreement to be signed by John Johanns.
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ARTICLE 11
CONDUCT OF SELLER AND BUYER AFTER CLOSING
11.1 Post-Closing Conduct Generally. Buyer and each Seller will
cooperate upon and after the Closing Date in effecting the orderly transfer of
the operations of the Partnership to Buyer. 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 Buyer the Interests or to
confirm and perfect the Buyer's title to the Interests, and otherwise to
accomplish the orderly transfer of ownership of the Partnership to Buyer and the
business assets and operations of the Partnership as contemplated by this
Agreement.
11.2 Non-Competition. For a period of five (5) years from and after the
Closing Date (the "Restricted Period"), each Seller and each of John Johanns,
and Jeffery Biegert, and any Seller Affiliate covenants and agrees and shall
sign and deliver to Buyer at Closing an Acknowledgment and Agreement to that
effect that, without the prior written consent of Buyer, such person shall not
do any of the following directly or indirectly without the prior written consent
of the Partnership:
(a) engage or participate in any business activity in the
United States or Canada, competitive with the eVS Business, as same are
conducted by the Buyer and its affiliates during the Restricted Period (business
activity competitive with eVS Business shall not restrict or limit the Sellers,
John Johanns and Jeffrey Biegert, and the Seller Affiliates from continuing to
conduct in the ordinary course of their business their present activities of
manufacturing and marketing feed products and supplements owning and feeding
cattle, cow\calf operations, ranches, feed lots and similar aspects of the
cattle industry of a nature not similar to the eVS Business) provided that Buyer
acknowledges and consents to either John Johanns and/or Jeffrey Biegert
individually and/or entities of which either one or both own 20% or more may
continue to produce feed and feed supplement with electrolytes in the ordinary
course of business in substantially the same mode as is presently being
marketed); provided, however, that notwithstanding the foregoing exemptions and
proviso, none of either Seller, John Johanns, Jeffrey Biegert or any Seller
Affiliate shall be permitted to engage in the sale of any feed supplement or
other product which either (i) is advertised or marketed as, or in respect of
which claims are asserted that it constitutes, a product which is intended for
use, or can be used, either alone or in conjunction with infra-red technology
products, in an antemortem environment (i.e., either at the slaughterhouse
facilities or within 24 hours prior to shipping to slaughterhouse facilities) to
identify and/or treat the effects of stress and other value reducing infirmities
in cattle or (ii) a majority of which product is, in fact, fed or administered
to cattle in an antemortem environment (i.e., within 24 hours prior to either
arriving at the slaughtering facilities or shipping to the slaughtering
facilities.)
For purpose of this Agreement, the term "Seller's Affiliate"
means any entity in which either John Johanns and/or Jeffrey Biegert owns,
directly or indirectly, at
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<PAGE> 26
least 20% of the voting control of or equity in and any other entity that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control by John Johanns and/or Jeffrey Biegert.
(b) become interested in (as owner, stockholder, lender,
partner, co-venturer, director, officer, employee, agent, consultant or
otherwise) any person, firm, corporation, association or other entity engaged in
any business that is competitive with the eVS Business as conducted by the Buyer
and its affiliates during the Restricted Period or become interested in (as
owner, stockholder, lender, partner, co-venturer, director, officer, employee,
agent, consultant or otherwise) any portion of the business of any person, firm,
corporation, association or other entity where such portion of such business is
competitive with the eVS Business as conducted by the Buyer and its affiliates
during the Restricted Period with respect to any employment hereunder with
respect to any period thereafter, (business activity competitive with eVS
Business shall not restrict or limit the Sellers, John Johanns and Jeffrey
Biegert, and the Seller's Affiliates from continuing to conduct in the ordinary
course of their business their present activities of manufacturing and marketing
feed products and supplements owning and feeding cattle, cow\calf operation,
ranches, feed lots and similar aspects of the cattle industry of a nature not
similar to the eVS Business provided that Buyer acknowledges and consents to
either John Johanns and/or Jeffrey Biegert individually and/or entities of which
either one or both own 20% or more may continue to produce feed and feed
supplements with electrolytes in the ordinary course of business in
substantially the same mode as is presently being marketed), provided, however,
that notwithstanding the foregoing exemptions and proviso, none of either
Seller, John Johanns, Jeffrey Biegert or any Seller Affiliate shall be permitted
to engage in the sale of any feed supplement or other product which either (i)
is advertised or marketed as, or in respect of which claims are asserted that it
constitutes, a product which is intended for use, or can be used, either alone
or in conjunction with infra-red technology products, in an antemortem
environment (i.e., either at the slaughterhouse facilities or within 24 hours
prior to shipping to slaughterhouse facilities) to identify and/or treat the
effects of stress and other value reducing infirmities in cattle or (ii) a
majority of which product is, in fact, fed or administered to cattle in an
antemortem environment (i.e., within 24 hours prior to either arriving at the
slaughtering facilities or shipping to the slaughtering facilities).
Notwithstanding the foregoing, Seller may not hold more than five percent (5%)
of the outstanding securities of any class of any publicly-traded securities of
a Partnership that is engaged in activities referenced in Section 11.2 hereof.
(c) influence or attempt to influence any supplier, customer
or potential customer of the Buyer and its affiliates to terminate or modify any
written or oral agreement or course of dealing with the Buyer and its
affiliates; or
(d) influence or attempt to influence any person to either (i)
terminate or modify his employment, consulting, agency, distributorship or other
arrangement with the Buyer and its affiliates, or (ii) employ or retain, or
arrange to have any other person or entity employ or retain, any person who has
been employed or retained by the Partnership or Buyer as an employee,
consultant, agent or distributor of the Buyer and its affiliates at
26
<PAGE> 27
anytime during the twelve (12) month period immediately preceding the
termination of the Restricted Period.
It is further understood and agreed that the obligations under
this Section shall remain in effect for the entire five-year period indicated,
notwithstanding any termination of this Agreement during such period due to a
breach hereof by the Sellers.
It is also understood and agreed that, in the event of a
continuing material breach by a Seller of this Section, Buyer shall be entitled
to an injunction restraining such breach. The exercise by Buyer of any or all
such rights shall not be construed as prohibiting Buyer from pursuing any other
right or remedy it may have with respect to such breach, including the recovery
of damages.
If any of the provisions of this Section 11.2 are held to be
in any respect an unreasonable restriction upon either 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
either Seller shall be in violation of the restrictive covenants in this Section
11.2, then the Restricted Period shall be extended with respect to such Seller
for a period of time equal to the period of time during which such breach shall
occur; and, in the event that Buyer 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.
ARTICLE 12
SECURITIES LAW MATTERS
12.1 Investment. Each Seller represents, covenants and agrees as
follows:
(a) Seller has had access to such information relating to the
business and affairs of Buyer 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 Buyer 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 Buyer.
(b) Seller understands that Buyer will 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"); that for such purpose
Buyer 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. Seller represents that he/she is an
"accredited investor" as such term is defined in Rule 501 under the Securities
Act.
27
<PAGE> 28
(c) Seller understands that, under existing rules of the
United States Securities and Exchange commission (the "SEC") he/she may be
unable to sell the Interests except to the extent that the Interests may be sold
(i) pursuant to an effective registration statement covering such Interests
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"). Seller understands that Buyer is under no obligation to effect a
registration of the eVS Shares under the Securities Act.
(d) Seller is familiar with the provisions of Rule 144 and the
limitations upon the availability and applicability of such rule.
(e) Seller is a sophisticated investor familiar with the 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.
(f) Seller is acquiring the eVS Shares for his/her own account
and not with a view to, or for sale in connection with, the distribution thereof
within the meaning of the Securities Act.
12.2 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 Agreement dated July 29, 1998 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 eVS that
registration thereof under the act is not required or (ii) a
registration statement under the Act covering such
28
<PAGE> 29
Shares or such interest and the disposition thereof shall have
become effective under the Act."
ARTICLE 13
BROKERAGE; EXPENSES; TAXES
None of the parties, nor, where applicable, any of their respective
shareholders, officers, directors, or employees, has employed or will employ any
broker, agent, finder, or consultant or has incurred or will incur any liability
for any brokerage fees, commissions, finders' fees, or other fees, in connection
with the negotiation or consummation of the transactions contemplated by this
Agreement.
Except as otherwise expressly provided in this Agreement, each party
agrees to bear all the respective costs, fees and expenses of any character
incurred by such party including all attorneys' fees and expenses, in connection
with this Agreement or the transactions contemplated hereby, except that any
such costs, fees and expenses incurred by the Partnership in connection with the
transactions contemplated herein shall be paid by the Sellers.
Sellers shall pay any applicable sales, documentary, use, filing,
transfer, and other taxes payable as a result of the transfer of the Interests.
ARTICLE 14
TERMINATION
14.1 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 Partnership, the
Sellers and the Buyer;
(b) Breach. By the Sellers holding a majority of the
Interests, on the one hand, or by Buyer, 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, undertaking or
restriction contained herein and such misstatement of breach has not been cured
by the earlier of (i) ten (10) days after the non-breaching party gives notice
to the breaching party of such misstatement or breach of (ii) the Closing;
(c) By Buyer. Provided that the Buyer is not in material
default hereunder, if all of the conditions precedent set forth in Section 7.1
hereof have not been met prior to 60 days from the execution hereof;
29
<PAGE> 30
(d) By Sellers. Provided that the Sellers are not in material
default hereunder, if all of the conditions precedent set forth in Section 7.2
hereof have not been met prior to 60 days from the execution hereof;
(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 60 days from the execution hereof;
14.2 Consequences of Termination. If this Agreement is validly
terminated pursuant to Section 14.1 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 Buyer terminates this
Agreement because any of the conditions contained in Section 7.1 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 14.1 and the transactions contemplated hereby are not
consummated as described above, the provisions of Section 6.2 relating to the
obligation of Buyer to keep confidential and not to use certain information
obtained by it from Seller and the provisions of Section 14.3 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 14.1, except to the extent set forth above.
14.3 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 costs and expenses from a defaulting party
pursuant to Section 14.2, all costs and expenses incurred in connection with
this Agreement shall be paid by the person incurring such expenses, i.e., by
Buyer if incurred by Buyer and by Seller if incurred by Seller or the
Partnership.
ARTICLE 15
OPTION TO PURCHASE TECHNOLOGY
15.1 Option to Purchase Technology. Subject to compliance with the
provision of the New Canadian License, or any time after the seventh anniversary
of the Closing, if Buyer has not previously consummated a public offering of its
securities pursuant to a registration statement filed under the Securities Act,
and Buyer's Board of Directors determines in its good faith judgment that Buyer
should not commercialize the technologies licensed under the New Canadian
License, Sellers shall have the right to purchase from Buyer all of the
Technology then comprising the eVS Business by transferring to Buyer all of the
eVS Shares other than any eVS Shares previously sold to XL Vision, Inc. pursuant
to the Put Option.
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<PAGE> 31
ARTICLE 16
MISCELLANEOUS
16.1 Entire Agreement; Amendments. This Agreement, together with the
Stockholders Agreement by and among the Buyer and Sellers of even date herewith,
and the collateral documents, constitutes the entire understanding among the
parties with respect to the subject matter contained herein and supersedes any
prior understandings and agreements among them respecting such subject matter.
This Agreement may be amended, supplemented, and terminated only by a written
instrument duly executed by all of the parties.
16.2 Headings. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation.
16.3 Gender; Number. Words of gender may be read as masculine,
feminine, or neuter, as required by context. Words of number may be read as
singular or plural, as required by context.
16.4 Exhibits and Schedules. Each Exhibit and Schedule referred to
herein is incorporated into this Agreement by such reference.
16.5 Severability. If any provision of this Agreement is held illegal,
invalid, or unenforceable, such illegality, invalidity, or unenforceability will
not affect any other provision hereof. This Agreement shall, in such
circumstances, be deemed modified to the extent necessary to render enforceable
the provisions hereof.
16.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given to the person if delivered personally or
upon sending a copy thereof by first class or express mail, postage prepaid, or
by telegram (with messenger service specified), or reputable courier services,
charges prepaid, or by facsimile, to such party's address (or to such party's
facsimile number).
If to Buyer, to:
eMerge Vision Systems, Inc.
1305 102nd Terrace
Sebastian, FL 32958
Attention: Chuck Abraham, President
Fax Number: (561) 589-2049
With a copy to:
Pepper Hamilton LLP 3000 Two Logan Square
Philadelphia, PA 19103 U.S.A.
Attention: Elam M. Hitchner, III, Esquire
Fax Number: (215) 981-4750
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<PAGE> 32
If to Sellers or the Partnership, to:
Judith Ackland
P.O. Box 197
Shickley, NE 68436
With a copy to:
Frank C. Heinisch, Attorney at Law
P.O. Box 311
Geneva, NE 68361-0311
Larry Cox, CPA
P.O. Box 88
Henderson, NE 68371
Jim Titus, Attorney at Law
121 S. 13th Street, #601
P.O. Box 81849
Lincoln, NE 68501-1849
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
16.7 Waiver. The failure of any party to insist upon strict performance
of any of the terms or conditions of this Agreement will not constitute a waiver
of any of its rights hereunder.
16.8 Assignment. No party may assign any of its rights or delegate any
of its obligations hereunder without the prior written consent of the other
parties hereto.
16.9 Successors and Assigns. This Agreement binds, inures to the
benefit of, and is enforceable by the successors and assigns of the parties, and
does not confer any rights on any other persons or entities.
16.10 Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Delaware.
16.11 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their successors and assigns, and they shall not be construed
as conferring and are not intended to confer any rights on any other persons.
16.12 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when
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<PAGE> 33
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 executed 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
ATTEST eMERGE VISION SYSTEMS, INC.
By: By: /s/ Charles L. Abraham
---------------------------- ----------------------------
Name: Name: Charles L. Abraham
--------------------------- --------------------------
Title: Title: Chief Executive Officer
-------------------------- -------------------------
[EXECUTIONS CONTINUED]
33
<PAGE> 34
ATTEST NUTRI-CHARGE, by each of its general
partners:
ATTEST ATTEST
/s/: Judith Ackland /s/: Larry Cox
-------------------------------- --------------------------------
Judith Ackland, Co-Trustee of The Larry Cox, Co-Trustee of The
Biegert Family Irrevocable Trust Biegert Family Irrevocable Trust
dated June 11, 1998, as Seller dated June 11, 1998, as Seller
ATTEST J TECHNOLOGIES, LLC, as Seller
By: /s/: Heidi Johanns
----------------------------
Heidi Johanns, Member
WITNESS:
----------------------------
The following persons, intending to be legally bound hereby, execute this
Agreement and agree to its terms with respect only to Article 8, Indemnification
and, as applicable, Section 11.2, Non-Competition:
WITNESS:
/s/: John Johanns
---------------------------- ----------------------------
John Johanns
WITNESS:
/s/: Jeffrey L. Biegert
---------------------------- ----------------------------
Jeffrey L. Biegert
34
<PAGE> 35
SCHEDULE 1.1: PARTNERSHIP INTEREST TABLE:
<TABLE>
<S> <C> <C>
a. J TECHNOLOGIES, LLC, a South Dakota 50%; 1,000,000 shares eMERGE VISION
limited liability company SYSTEMS, INC. common stock
b. Judith Ackland and Larry Cox, /Co-Trustees 50% 1,000,000 shares eMERGE VISION
of The Biegert Family Irrevocable Trust SYSTEMS, INC. common stock
dated June 11, 1998;
</TABLE>
35
<PAGE> 36
SCHEDULE 3.1: ORGANIZATION, POWER, STANDING AND QUALIFICATION
Nutri-Charge is not actively doing business. Nutri-Charge is a South Dakota
partnership registered in Nebraska. Recently Amended Certificates of Partnership
of Nutri-Charge have been signed evidencing the change of partners. The
certificates have not yet been filed in Nebraska and South Dakota. The filing
will be done shortly. A Continuation of Certificate of Assumed Business Name was
recently filed in Idaho and a Trade Name Registration was recently filed in
Colorado. There are no other states in which Nutri-Charge has filed to do
business. Nutri-Charge knows of no requirement to qualify to do business in any
other states.
36
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SCHEDULE 3.3 CONTEMPLATED TRANSACTIONS
None, except for the consents required by the collaborative research agreement,
license and sublicense agreements with the Canadian Government and STS
Agriventures, Inc.
37
<PAGE> 38
SCHEDULE 3.9 ABSENCE OF UNDISCLOSED LIABILITIES
There are no liabilities except those future liabilities created with the
Sublicenses with the Canadian Government and STS Agriventures, Inc. Kelly F.
Lechtenberg, Midwest Veterinary Services Inc. recently presented a bill for
$35,000 for services rendered in a field trial. The bill was presented to John
Johanns and Nutri-Charge. The bill will be paid by John Johanns and/or Jeffrey
Biegert or an affiliate in the ordinary course of business.
Nutri-Charge will not be responsible for the bill. The bill is not in dispute.
38
<PAGE> 39
SCHEDULE 3.12 COMPENSATION ARRANGEMENTS
In conducting the field tests, affiliates of Nutri-Charge have retained agents
and consultants to manufacture the electrolyte product solely for testing
purposes and not for marketing. Agents and consultants have been retained by
Nutri-Charge affiliates to assist with field tests under the supervision of
Ag-Canada. All such agents and consultants have been paid in full and no further
obligation is owed to such agents and consultants except for ongoing field
trials of the infrared detection technology at Logan Valley Feed Lot under the
control of Dr. Kelly Lechtenberg and under the supervision of Ag-Canada. See
response in Schedule 3.9.
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SCHEDULE 3.14 LITIGATION, COMPLIANCE WITH LAWS (INCLUDING REGULATORY APPROVALS)
Litigation: None.
Compliance with Laws. Jeffrey Biegert (Biegert Feeds) obtained approvals from US
Federal Drug Administration for the field trials of the Nutri-Charge product. Dr
Allan L. Schaefer of Ag Canada has been in charge of all such applications. No
final approval has been received from FDA and Department of Agriculture for the
manufacture and sale of electrolyte therapy products manufactured pursuant to
the Nutri-Charge License, Nutri-Charge Premix manufactured pursuant to the
Pre-Mix License and infra-red detection technology manufactured pursuant to the
Detection Technology License. Nutri-Charge has relied on STS Atriventures, LTD
and the Canadian government to procure such approvals, Nutri-Charge has not
obtained any approvals except they assisted in procuring approval for the
Nutri-Charge product field trials that were conducted. Nutri-Charge has
cooperated and will assist in such application process, but Dr Schaefer has done
all the work in making the applications. There has been no application process
by Nutri-Charge and no approvals concerning the Infrared Detection Technology.
40
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SCHEDULE 3.15.1 LISTED RIGHTS
The Canadian government owns all patents and intellectual property in accordance
with the sublicenses by and between Nutri-Charge, STS and Ag-Canada. STS and
Ag-Canada records are a superior primary source of such information. US patent
number 5,505,968 for Antemortem Nutrient Supplement for Livestock was issued
April 9, 1996 and assigned to Canada. The Method for Detecting Poor Meat Quality
in Live Animals, (Infrared Detection Technology) was the subject of Patent
applications, US 08/084,993 and Canada 2,099,529. The Canadian trade mark
application for NUTRI-CHARGE, is application 727,395. See schedule 3.1 above.
The Nutri-Charge trade name is registered in the State of Nebraska.
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SCHEDULE 3.15.2 LICENSES
All intellectual property is owned by the Canadian government and Nutri-Charge's
rights are created by and subject to the License and Sub-license Agreements.
42
<PAGE> 43
SCHEDULE 3.17(A) CONTRACTS
"Contracts" include only Collaborative Research Agreements, License and
Sublicense Agreements with the Canadian government and STS Agriventures LTD..
43
<PAGE> 44
SCHEDULE 3.17(b)
None
44
<PAGE> 45
SCHEDULE 3.18 OTHER TRANSACTIONS
None
45
<PAGE> 46
SCHEDULE 3.20 BANK ACCOUNTS
US Bank, P.O. Box 64799, St. Paul, MN 55164; Office Used: US Bank 17th & Farnam,
Omaha, NE 68102; Account Name: Nutri-Charge Partnership; Account Number: 1 057
0068 5123
46
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SCHEDULE 3.22 MATERIAL ADVERSE CHANGE IN FINANCE
None
47
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SCHEDULE 3.25 HAZARDOUS SUBSTANCES
None to Partners and Seller's knowledge. No permits or other approvals have been
procured under the Reserve Conservation and Recovery Act.
48
<PAGE> 49
SCHEDULE 3.26 RELATIONSHIP WITH LICENSEES
None, Nutri-Charge has not licensed its sub-license.
49
<PAGE> 50
SCHEDULE 3.27 TRANSACTIONS WITH AFFILIATES.
Jeff Biegert and John Johanns own in their own right and work together through
various organizations in the cattle industry. Directly and indirectly they own
or control cow calf operations, ranch operations, feed lot operations, feed
cattle, buy, sell cattle, manufacture and market feed and feed supplements and
generally deal in and with all aspects of beef production to the point of
slaughter. The feed supplements that are produced in the ordinary course of
business contain electrolyte substances. Without specifically listing all the
entities involved this schedule is a reservation for Jeff Biegert and John
Johanns and their numerous and various business entities to continue in the
normal and customary course of business their cattle businesses in their current
relationships and to create new entities and relationships to continue the same
or similar business activities, subject only to any restrictions contained in
Section 11.2 hereof.
50
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SCHEDULE 4.13
[None]
51
<PAGE> 52
SCHEDULE 4.14
[None]
52
<PAGE> 53
SCHEDULE 5.1
None.
53
<PAGE> 54
SCHEDULE 7.1.9
Copy of the Put Option letter agreement is attached hereto.
54
<PAGE> 55
EXHIBIT 7.1.2
Opinion of Counsel for the Partnership. Frank C. Heinisch
55
<PAGE> 56
EXHIBIT 7.2.2
Opinion of Counsel of Buyer. Pepper Hamilton LLP
56
<PAGE> 57
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
BACKGROUND 2
ARTICLE 1 PURCHASE OF INTERESTS.............................................. 3
1.1 Sale and Purchase ................................................. 3
1.2 Books and Records ................................................. 3
ARTICLE 2 CONSIDERATION...................................................... 3
2.1 Consideration; Payment ............................................ 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARTNERSHIP AND SELLERS.......... 5
3.1 Organization, Power, Standing and Qualification ................... 5
3.2 Authorization for Agreement ....................................... 5
3.3 Validity of Contemplated Transactions ............................. 6
3.4 Partnership ....................................................... 6
3.5 Ownership of Interests ............................................ 6
3.6 Title to Properties ............................................... 6
3.7 Real Property ..................................................... 6
3.8 Financial Statements .............................................. 6
3.9 Absence of Undisclosed Liabilities ................................ 7
3.10 Conduct of Business in the United States .......................... 7
3.11 Subsidiaries ...................................................... 7
3.12 Compensation Arrangements ......................................... 7
3.13 Certain Tax Matters ............................................... 7
3.14 Litigation; Compliance with Laws .................................. 8
3.15 Intellectual Property. ............................................ 8
3.16 Specific Patent/USFDA Representations ............................. 9
3.17 Contracts ......................................................... 10
3.18 Other Transactions ................................................ 10
3.19 Product Liability Claims .......................................... 10
3.20 Bank Accounts ..................................................... 11
3.21 No Changes ........................................................ 11
3.22 Copies of Partnership Agreement ................................... 11
3.23 Tangible Assets; Inventory ........................................ 11
3.24 Accounts Receivable ............................................... 11
3.25 Hazardous Substances .............................................. 12
3.26 Relationship With Licensees ....................................... 12
3.27 Transactions With Affiliates ...................................... 12
3.28 Veracity of Statements ............................................ 12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER............................ 13
4.1 Organization ...................................................... 13
4.2 Authorization for Agreement ....................................... 13
4.3 Enforceability .................................................... 13
4.4 Litigation ........................................................ 13
4.5 Hazardous Substances .............................................. 13
4.6 Product Liability Claims .......................................... 14
</TABLE>
57
<PAGE> 58
<TABLE>
<S> <C>
4.7 Conflict With Authority, Bylaws, Etc .............................. 14
4.8 Acquisition of Interests for Investment ........................... 14
4.9 Capitalization of Buyer ........................................... 14
4.10 10,000,000 shares of blank check preferred stock .................. 14
4.11 Financial Statements .............................................. 15
4.12 Absence of Undisclosed Liabilities ................................ 15
4.13 Certain Tax Matters ............................................... 15
4.14 Litigation: Compliance with Laws .................................. 15
4.15 Property .......................................................... 16
4.16 No Changes ........................................................ 16
4.17 Veracity of Statements ............................................ 16
ARTICLE 5 ACTIVITIES PRIOR TO CLOSING BY SELLER.............................. 16
5.1 Operation of Business ............................................. 17
5.2 Access to Information ............................................. 18
5.3 Best Efforts ...................................................... 18
5.4 Benefit Plans ..................................................... 18
5.5 Notice of Change .................................................. 18
5.6 No Discussions .................................................... 18
5.7 Publicity ......................................................... 19
ARTICLE 6 ACTIVITIES PRIOR TO CLOSING BY BUYER............................... 19
6.1 Best Efforts ...................................................... 19
6.2 Access to Information ............................................. 19
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING.................................... 19
7.1 Conditions to Obligation of Buyer to Close ........................ 19
7.2 Conditions to Obligation of Sellers to Close ...................... 21
ARTICLE 8 INDEMNIFICATION.................................................... 22
8.1 By Sellers and Individual Indemnitors ............................. 22
8.2 By Buyer .......................................................... 23
8.3 Procedures ........................................................ 23
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................... 24
ARTICLE 10 THE CLOSING........................................................ 24
10.1 Time and Place .................................................... 24
10.2 Conduct at Closing ................................................ 24
ARTICLE 11 CONDUCT OF SELLER AND BUYER AFTER CLOSING.......................... 25
11.1 Post-Closing Conduct Generally .................................... 25
11.2 Non-Competition ................................................... 26
ARTICLE 12 SECURITIES LAW MATTERS............................................. 28
12.1 Investment ........................................................ 28
12.2 Legends on Certificates ........................................... 29
ARTICLE 13 BROKERAGE; EXPENSES; TAXES......................................... 30
ARTICLE 14 TERMINATION........................................................ 30
14.1 Events of Termination ............................................. 30
14.2 Consequences of Termination ....................................... 31
14.3 Expenses if No Closing ............................................ 31
ARTICLE 15 OPTION TO PURCHASE TECHNOLOGY...................................... 31
15.1 Option to Purchase Technology ..................................... 31
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ARTICLE 16 MISCELLANEOUS...................................................... 32
16.1 Entire Agreement; Amendments ...................................... 32
16.2 Headings .......................................................... 32
16.3 Gender; Number .................................................... 32
16.4 Exhibits and Schedules ............................................ 32
16.5 Severability ...................................................... 32
16.6 Notices ........................................................... 32
16.7 Waiver ............................................................ 33
16.8 Assignment ........................................................ 33
16.9 Successors and Assigns ............................................ 33
16.10 Governing Law ..................................................... 33
16.11 No Benefit to Others .............................................. 34
16.12 Counterparts ...................................................... 34
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