Exhibit 2.1
eMerge Interactive, Inc.
Securities Purchase Agreement
October 27, 1999
Table of Contents
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Page
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SECTION 1. Purchase and Sale of Securities.............................. 1
1.1 Sale and Issuance of Securities.............................. 1
1.2 Closing...................................................... 2
SECTION 2. Representations and Warranties of the Company to Investor.... 2
2.1 Organization and Standing; Certificate and Bylaws............ 3
2.2 Power and Authority.......................................... 3
2.3 Subsidiaries................................................. 3
2.4 Capitalization............................................... 3
2.5 Authorization; Enforceability................................ 4
2.6 Valid Issuance of Securities................................. 4
2.7 Offering..................................................... 5
2.8 Title to Properties; Liens and Encumbrances.................. 5
2.9 Intellectual Property........................................ 5
2.10 Material Contracts and Other Commitments..................... 6
2.11 Litigation................................................... 6
2.12 Taxes........................................................ 7
2.13 Insurance.................................................... 7
2.14 Employee Benefit Plans....................................... 7
2.15 Proprietary Information Agreements........................... 7
2.16 Registration Rights and Voting............................... 8
2.17 Consents..................................................... 8
2.18 Environmental and Safety Laws................................ 8
2.19 Related Party Transactions................................... 8
2.20 Broker's and Finders' Fees................................... 9
2.21 Compliance with Other Instruments............................ 9
2.22 Financial Statements......................................... 9
2.23 Permits...................................................... 9
2.24 Year 2000 Compliance......................................... 9
2.25 Employees.................................................... 10
2.26 Changes...................................................... 10
2.27 Undisclosed Liabilities...................................... 11
2.28 Certain Indebtedness......................................... 11
2.29 Corporate Documents.......................................... 12
2.30 Disclosure................................................... 12
SECTION 3. Representations and Warranties of JTL to Investor............ 12
3.1 Power and Authority.......................................... 12
3.2 Capitalization............................................... 12
3.3 Authorization; Enforceability................................ 12
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3.4 Accuracy of Representations and Warranties................. 12
3.5 Broker's and Finders' Fees................................. 13
3.6 Organization and Standing.................................. 13
SECTION 4. Representations and Warranties of Investor................. 13
4.1 Investment Experience...................................... 13
4.2 Investment................................................. 13
4.3 Rule 144................................................... 13
4.4 Access to Information...................................... 13
4.5 Authorization; Enforceability.............................. 13
4.6 Broker's and Finders' Fees................................. 14
4.7 Non-Limitation............................................. 14
4.8 Legends.................................................... 14
4.9 Residence.................................................. 14
SECTION 5. Conditions of Investor's Obligations at Closing............ 14
5.1 Opinion of the Company's Counsel........................... 14
5.2 Registration Rights Agreement.............................. 14
5.3 Stockholder Agreement...................................... 15
5.4 HSR Approvals.............................................. 15
5.5 Opinion of JTL's Counsel................................... 15
SECTION 6. Conditions of Sellers' Obligations at Closing.............. 15
6.1 Note....................................................... 15
6.2 Pledge Agreement........................................... 15
6.3 HSR Approvals.............................................. 15
6.4 Registration Rights Agreement.............................. 15
6.5 Stockholder Agreement...................................... 15
6.6 Opinion of Investor's Counsel ............................. 15
SECTION 7. Certain Covenants.......................................... 16
7.1 Conduct Pending Closing.................................... 16
7.2 Approvals.................................................. 16
7.3 Registration of Securities................................. 16
7.4 Indemnification By Sellers................................. 17
7.5 Indemnification by Investor................................ 17
7.6 Securities Laws Compliance................................. 17
7.7 Proprietary Information Agreements......................... 17
7.8 Reservation of Shares...................................... 17
7.9 Books and Records.......................................... 18
7.10 Use of Proceeds............................................ 18
7.11 Investor Rights............................................ 18
7.12 Reports.................................................... 18
7.13 Certificate of the Company................................. 19
7.14 Certificate of JTL......................................... 19
7.15 Certificate of Investor.................................... 19
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SECTION 8. Miscellaneous.............................................. 19
8.1 Termination................................................ 19
8.2 Entire Agreement; Successors and Assigns................... 20
8.3 Governing Law.............................................. 20
8.4 Counterparts............................................... 20
8.5 Headings................................................... 20
8.6 Notices.................................................... 20
8.7 Survival of Representations and Warranties................. 20
8.8 Amendment of Agreement..................................... 20
8.9 Expenses................................................... 20
8.10 Further Assurances......................................... 21
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EXHIBITS
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Exhibit A - Certificate of Incorporation
Exhibit B - Warrant
Exhibit C - Note
Exhibit D - Registration Statement
Exhibit E - Schedule of Exceptions
Exhibit F - Bylaws
Exhibit G - Registration Rights Agreement
Exhibit H - Stockholder Agreement
Exhibit I - Pledge Agreement
Exhibit J - Post-Closing Capitalization Table
Exhibit K - Opinion Letter of Counsel to the Company
Exhibit L - Opinion Letter of Counsel to JTL
Exhibit M - Opinion Letter of Counsel to Investor
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of October
27, 1999, by and among eMerge Interactive, Inc., a Delaware corporation (the
"Company"), J Technologies, LLC, a South Dakota limited liability company
("JTL"), and Internet Capital Group, Inc., a Delaware corporation (the
"Investor"). Each of JTL and the Company is referred to herein as a "Seller"
and, collectively, as "Sellers."
Background
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A. The Board of Directors and stockholders of the Company have adopted and
filed with the Secretary of State of the State of Delaware the Second Amended
and Restated Certificate of Incorporation in the form attached hereto as Exhibit
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A, which, among other matters, establishes the rights, preferences and
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privileges of the Company's Series D Preferred Stock, par value $0.01 (the
"Series D Preferred"), the Company's Class A Common Stock, par value $0.01 (the
"Class A Common Stock") and the Company's Class B Common Stock, par value $0.01
(the "Class B Common Stock").
B. The Company desires to sell a common stock purchase warrant and shares
of Series D Preferred to Investor, and Investor desires to purchase a common
stock purchase warrant and shares of Series D Preferred from the Company, on the
terms and subject to the conditions set forth in this Agreement.
C. JTL desires to sell shares of Class A Common Stock to Investor and
Investor desires to purchase shares of Class A Common Stock from JTL, on the
terms and subject to the conditions set forth in this Agreement.
Terms
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In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties hereto agree as follows:
SECTION 1.
Purchase and Sale of Securities.
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1.1 Sale and Issuance of Securities. At the Closing the Company shall
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issue to Investor and Investor shall purchase from the Company an aggregate of
4,555,556 shares of Series D Preferred (the "Company Shares") and a warrant in
the form attached hereto as Exhibit B (the "Warrant") to purchase 911,111 shares
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of such class of the Company's Common Stock, par value $0.01 (the "Common
Stock") as is specified in the Warrant. The aggregate purchase price for the
Company Shares and the Warrant shall be forty-one million dollars ($41,000,000)
(the "Company Purchase Price"). At the Closing JTL shall sell to Investor and
Investor shall purchase from JTL an aggregate of 1,000,000 shares of Class A
Common Stock (the "JTL Shares" and together with the Company Shares, the
"Shares") free and clear of all liens and encumbrances for an aggregate purchase
price of nine million dollars ($9,000,000) (the "JTL Purchase Price" and,
together with the Company Purchase Price, the "Purchase Price").
1.2 Closing.
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(a) The closing under this Agreement (the "Closing") will take place
at 10:00 a.m., local time, on the second business day after all of the
conditions to closing identified in Sections 5 and 6 have been satisfied or
waived, at the offices of Dechert Price & ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(b) At the Closing, each Seller shall deliver to Investor a
certificate evidencing the Shares that Investor is purchasing from such Seller,
accompanied by stock powers duly executed in blank or duly executed instruments
of transfer, if appropriate, and any other documents that are necessary to
transfer to Investor good title to the Shares, free and clear of all liens and
encumbrances. At the Closing the Company shall issue and deliver the Warrant to
Investor.
(c) At the Closing, Investor shall deliver the Purchase Price as
follows:
(i) delivery of nine million dollars ($9,000,000) to JTL by
wire transfer of immediately available funds to an account designated not less
than two business days before the Closing in writing by JTL;
(ii) delivery of eighteen million dollars ($18,000,000) to the
Company by wire transfer of immediately available funds to an account designated
not less than two days before the Closing in writing by the Company (the "Cash
Payment"), the Cash Payment and the Note delivered in accordance with clause
(iii) below shall be allocated equally among all the Company Shares and the
Warrant as payment of the Company Purchase Price; and
(iii) delivery of a non-negotiable promissory note of Investor
in favor of the Company in the aggregate principal amount of twenty-three
million dollars ($23,000,000) in the form attached hereto as Exhibit C (the
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"Note").
(d) At the Closing, the closing certificates and other documents
required to be delivered pursuant to this Agreement shall be exchanged.
SECTION 2.
Representations and Warranties of the Company to Investor.
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Except (i) as described in the draft Company registration statement on Form
S-1 dated October 27, 1999 attached hereto as Exhibit D (the "Registration
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Statement"), or (ii) as set forth on
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the Schedule of Exceptions attached hereto as Exhibit E specifically identifying
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the subparagraph of this Section 2 to which each such exception relates, the
Company hereby represents and warrants to Investor as of the date hereof as
follows:
2.1 Organization and Standing; Certificate and Bylaws. The Company is a
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corporation duly organized, validly existing under, and by virtue of, the laws
of the State of Delaware, and is in good standing under such laws. The Company
has all requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as currently conducted and
as proposed to be conducted. The Company is duly qualified and authorized to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on the Company. The Company has furnished Investor with copies of its
Certificate and Bylaws, as amended (attached hereto as Exhibit A and Exhibit F,
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respectively). Such copies are true, correct and complete and contain all
amendments as of the date hereof.
2.2 Power and Authority. The Company has all requisite legal and
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corporate power and authority to execute and deliver this Agreement, the
Registration Rights Agreement attached hereto as Exhibit G (the "Registration
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Rights Agreement"), the Stockholder Agreement attached hereto as Exhibit H (the
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"Stockholder Agreement"), the Warrant, the Note and the Pledge Agreement
attached hereto as Exhibit I (the "Pledge Agreement and, collectively with the
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Stockholder Agreement, the Registration Rights Agreement, the Warrant and the
Note, the "Related Agreements"), to sell and issue the Company Shares hereunder,
to issue the Class A Common Stock and Class B Common Stock issuable upon
exercise of the Warrant (the "Underlying Warrant Stock"), to issue the Class B
Common Stock issuable upon conversion of the Company Shares (the "Underlying
Common Stock"), to issue the Class A Common Stock issuable upon conversion of
the Class B Common Stock underlying the Warrant and the Company Shares (the
"Conversion Stock") and to carry out and perform its obligations under the terms
of this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby.
2.3 Subsidiaries. The Company has no Subsidiaries or affiliated companies
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and does not otherwise own or control, directly or indirectly, any equity
interest in any corporation, association or other business entity. The Company
is not a participant in any joint venture, partnership or similar arrangement.
As used herein, the term "Subsidiary" shall mean any corporation or other entity
more than 50% of the stock or other ownership interest of which (measured by
virtue of voting rights) in the aggregate is owned by the Company.
2.4 Capitalization. The authorized capital stock of the Company consists
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of 100,000,000 shares of Common Stock, 92,711,110 of which have been designated
as shares of Class A Common Stock, of which 5,616,155 shares are issued and
outstanding, and 7,288,890 of which have been designated as shares of Class B
Common Stock, none of which are issued and outstanding, and 15,000,000 shares of
Preferred Stock, $0.01 par value, 6,500,000, of which have been designated
Series A Preferred, and 6,443,606 of which are issued and outstanding, 2,400,000
of which have been designated Series B Preferred, and 2,400,000 of which are
issued and outstanding, 1,300,000 of which have been designated Series C
Preferred, and 1,100,000 of which are issued and outstanding and 4,555,556 of
which have been designated Series D Preferred, and none of which are issued and
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outstanding. All such issued and outstanding shares, including the JTL Shares,
have been duly authorized and validly issued, are fully paid and nonassessable
and have been issued in compliance with federal and state securities law. The
Company has reserved 6,500,000 shares of Class A Common Stock for issuance upon
conversion of the Series A Preferred, 2,400,000 shares of Class A Common Stock
for issuance upon conversion of the Series B Preferred, 1,300,000 shares of
Class A Common Stock for issuance upon conversion of the Series C Preferred,
4,555,556 shares of Class B Common Stock for issuance upon conversion of the
Series D Preferred and 911,111 shares of Class A Common Stock and Class B Common
Stock for issuance upon exercise of the Warrant. The Company has reserved
1,588,595 shares of its Common Stock for issuance pursuant to exercise of
options granted under its 1996 Stock Option Plan (the "1996 Plan"), and
2,000,000 shares of its Class A Common Stock, 1,000,000 of which is subject to
Stockholder approval, for issuance pursuant to exercise of options granted under
its 1999 Stock Option Plan (the "1999 Plan" and, together with the 1996 Plan,
the "Plans"), which are the only stock option, stock purchase or similar
incentive or benefit plans currently in effect with respect to the Company. To
date, the Company has granted options for an aggregate of 2,478,200 shares of
its Class A Common Stock under the Plans, 466,030 of which have expired or been
terminated and 113,780 of which have been exercised by the holders thereof to
date. The Shares shall have the rights, preferences, privileges and
restrictions set forth in the Certificate. Except as contemplated herein, there
are no outstanding options, warrants, conversion rights, preemptive rights,
rights of first refusal, or similar rights currently outstanding to purchase or
otherwise acquire from the Company any securities of the Company, nor are there
any agreements or understandings with respect thereto. Schedule 2.4(a) sets
forth the holders of the Company's outstanding shares of capital stock and
options or other rights to purchase stock of the Company and the number of
outstanding shares of each class or series of capital stock, options or other
rights to purchase stock of the Company held by each such holder. With the
exception of the Stockholder Agreement, the Company is not a party or otherwise
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons or entities, which
affects or relates to the voting or giving of written consents either by a
director of the Company or with respect to any capital stock of the Company.
Immediately after the Closing, the fully-diluted capitalization of the Company
will be as set forth in Exhibit J.
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2.5 Authorization; Enforceability. All corporate action on the part of
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the Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Related Agreements by the Company, the authorization, sale, issuance (or
reservation for issuance) and delivery of the Shares, the Warrant, the
Underlying Warrant Stock, the Underlying Common Stock, and the Conversion Stock
and the performance of all of the Company's obligations hereunder and under the
Related Agreements has been taken or will be taken prior to Closing. This
Agreement constitutes and as of the Closing the Related Agreements will
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms.
2.6 Valid Issuance of Securities. The Company Shares, when issued, sold
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and delivered in compliance with the provisions of this Agreement, will be duly
and validly issued, fully paid and nonassessable and issued in compliance with
applicable federal and state securities laws. The
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Warrant, when issued, sold and delivered in compliance with the provisions of
this Agreement, will constitute a valid and legally binding obligation of the
Company, enforceable in accordance with its terms. The Underlying Common Stock,
the Underlying Warrant Stock and the Conversion Stock have been duly and validly
reserved and, when issued in compliance with the provisions of the Certificate,
will be duly and validly issued and will be fully paid and nonassessable and
issued in compliance with applicable federal and state securities laws. The
Shares, the Warrant, the Underlying Warrant Stock, the Underlying Common Stock
and the Conversion Stock will be free and clear of any liens or encumbrances;
provided, however, that the Shares, the Warrant, the Underlying Warrant Stock,
the Underlying Common Stock and the Conversion Stock may be subject to
restrictions on transfer under state and/or federal securities laws. Except as
set forth in the Related Agreements, the Shares, the Warrant, the Underlying
Warrant Stock, the Underlying Common Stock and the Conversion Stock are
convertible are not subject to any preemptive rights, rights of first refusal or
restrictions on transfer.
2.7 Offering. Subject in part to the accuracy of Investor's
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representations in Section 4, the offer, sale and issuance of the Shares in
conformity with the terms of this Agreement (and the issuance of the Warrant,
the Underlying Warrant Stock, the Underlying Common Stock and the Conversion
Stock) constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities Act"), and
from all applicable state securities or Blue Sky laws.
2.8 Title to Properties; Liens and Encumbrances. The Company has good and
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valid title to all of its properties and assets, and is in compliance with the
lease of all properties leased by it, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than the lien of current taxes
not yet due and payable. The Company is not in default under or in breach of
any provision of its leases, and the Company holds valid leasehold interests in
the properties which it leases. The Company's properties and assets are in good
condition and repair.
2.9 Intellectual Property. The Company owns or possesses sufficient legal
---------------------
rights to all patents, patent applications, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, know-how, concepts, computer
programs, technical data, proprietary rights, proprietary processes and other
information necessary for or used in its business as now conducted and as
proposed to be conducted (each such item "Company Intellectual Property")
without any conflict with or, to the Company's knowledge, infringement of the
rights of others. The Company has not received any communications alleging, nor
does the Company have reason to believe, that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets, or other
proprietary rights or processes of any other person or entity, and to the
Company's knowledge, there is no reasonable basis therefor. To the Company's
knowledge, none of its employees, agents, consultants or contractors is
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or subject to any judgment, decree, or order of
any court or administrative agency, that would interfere with the use of such
person's or entity's best efforts to promote the interests of the Company, or
that would conflict with the Company's business as proposed to be conducted. To
the Company's knowledge, there has been no violation or
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infringement by a third party of any of the Company Intellectual Property.
Neither the execution nor the delivery of this Agreement or the Related
Agreements, nor the carrying on of the Company's business by the employees,
agents, consultants or contractors of the Company, nor the conduct of the
Company's business as currently proposed, will conflict with or result in a
material breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant, or instrument under which the Company or
any of such employees, agents, consultants or contractors is now obligated. The
Company has no plan to utilize, and does not believe it is or will be necessary
to utilize, any inventions of any of its employees (or people it currently
intends to hire) made prior to their employment or engagement by the Company.
2.10 Material Contracts and Other Commitments.
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(a) Except for the Related Agreements, there are no material
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, affiliates, or any affiliate thereof.
(b) Except for agreements explicitly contemplated by this Agreement or
the Related Agreements, there are no agreements, understandings, instruments,
contracts or proposed transactions to which the Company or any of its
Subsidiaries is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of or payments to the Company or any of its
Subsidiaries in excess of $100,000, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or any of its
Subsidiaries, or (iii) the grant of rights to manufacture, produce, assemble,
license, market, or sell its products or services to any other person or affect
the Company's exclusive right to develop, manufacture, assemble, distribute,
market or sell its products or services.
(c) The Company has not since December 31, 1998 (i) declared or paid
any dividends or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities in excess of $100,000, (iii) made any
loans or advances to any person, other than ordinary advances to employees for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the nonexclusive license of software to end-users
in the ordinary course of business.
(d) All the material contracts, agreements and instruments to which
the Company is a party are listed on the exhibit index to the Registration
Statement and such contracts, agreements and instruments are valid, binding and
in full force and effect in all material respects, and are valid, binding and
enforceable by the Company in accordance with their respective terms. The
Company is not in material default under any contract, and, to the Company's
knowledge, no other party to any such contract is in material default.
2.11 Litigation. There are (i) no actions, suits, proceedings, or
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investigations pending or, to the Company's knowledge, threatened against the
Company or its properties before any court or governmental agency (nor is there
any basis therefor) which are reasonably likely to have a material adverse
effect on the Company, and (ii) no actions, suits, proceedings or investigations
are pending
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or, to the Company's knowledge, threatened against it or its employees that may
relate to their employment with or conduct on behalf of the Company, or that
question the validity of this Agreement, the Related Agreements or any action
taken or to be taken in connection herewith or therewith. The foregoing
includes, without limitation, any action, suit, proceeding, or investigation
pending or currently threatened involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, their obligations under any agreements with prior employers, or
negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party or subject to any
writ, order, decree, injunction or judgment of any court, governmental agency,
or instrumentality (nor, to the Company's knowledge, is there any reasonable
basis therefor). There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company currently intends to initiate.
2.12 Taxes. The Company has timely filed all tax returns and reports
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(federal, state and local) as required by law, and such returns and reports are
true and correct in all material respects. The Company has paid all taxes and
other assessments due. There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any tax or
deficiency against the Company, and there are no actions, suits, proceedings,
investigations or claims now pending against the Company with respect to any tax
or assessment or any matters under discussion with any federal, state, local or
foreign authority relating to any taxes or assessments, or any claims for
additional taxes or assessments asserted by any such authority, and there is no
basis for the assertion of any additional taxes as assessments against the
Company. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended ("Code"), to be treated as an S corporation or a collapsible
corporation pursuant to Section 1362(a) or Section 341(f) of the Code, nor has
it made any other elections pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation, or amortization) that
would have a material effect on the business, properties, prospects, or
financial condition of the Company. The Company has never had any tax
deficiency proposed or assessed against it. The Company has never been audited
by governmental authorities. The Company has withheld or collected from each
payment made by it to each of its employees the amount of all taxes, including,
but not limited to, income taxes, Federal Insurance Contribution Act taxes and
Federal Unemployment Tax Act taxes required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositaries.
2.13 Insurance. The Company has in full force and effect fire, casualty
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and liability insurance policies with recognized insurers. The Company believes
that this insurance is sufficient in amount as of the Closing Date, subject to
reasonable deductibles, relative to other companies of similar size in similar
industries.
2.14 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.15 Proprietary Information Agreements. Each current and former employee,
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officer and director of the Company has executed an agreement with the Company
regarding confidentiality and
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proprietary information. To the Company's knowledge, none of its current or
former employees, officers or directors is in violation of such agreement. Each
current or former consultant to or material vendor of the Company that has had
access to the Company's confidential information has executed a written
agreement under which, among other things, each such consultant or material
vendor is obligated to maintain the confidentiality of the Company's
confidential information. To the Company's knowledge, none of its consultants or
material vendors are in violation of such agreement.
2.16 Registration Rights and Voting. Except as provided in the Registration
------------------------------
Rights Agreement, the Company is not under any obligation and has not granted
any rights to register under the Securities Act any of its currently outstanding
securities or any of its securities that may subsequently be issued. To the
Company's knowledge, except as contemplated in the Stockholder Agreement, no
stockholder of the Company has entered into any agreement with respect to the
voting of the Company's securities.
2.17 Consents. No consent, approval, qualification or authorization of, or
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registration, designation, declaration or filing with any person, including, any
local, state or federal governmental authority, on the part of the Company is
required in connection with the valid execution, delivery or performance of this
Agreement or the Related Agreements, or the offer, sale or issuance of the
Shares, the Warrant, the Underlying Warrant Stock, the Underlying Common Stock
and the Conversion Stock, or the consummation of any transaction contemplated
hereby, except (i) such filings as have been made prior to the date hereof, (ii)
filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (iii) such additional post-closing filings as may
be required to comply with applicable state and federal securities laws, and
with applicable general corporation laws of the various states, each of which
will be filed with the proper authority by the Company in a timely manner.
2.18 Environmental and Safety Laws. The Company is not in material
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violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and no material expenditures are
or will be required in order to comply with any such existing statute, law, or
regulation.
2.19 Related Party Transactions. No employee, officer, stockholder or
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director of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them, other than (i) for payment of salary for
services previously rendered, (ii) as reimbursement for reasonable expenses
incurred on behalf of the Company, or (iii) for other standard employee benefits
made generally available to all employees (not including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company). To the Company's knowledge, none of such persons has any direct
or indirect ownership interest in any firm or corporation with which the Company
is affiliated or with which the Company has a business relationship, or any firm
or corporation that competes with the Company, except that employees, officers
or directors of the Company and members of their immediate families may own
stock representing less than 1% equity ownership in publicly traded companies
that may compete with the
8
Company. To the Company's knowledge, no officer, director, or stockholder or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts as relate to any
such person's ownership of capital stock or other securities of the Company).
2.20 Broker's and Finders' Fees. The Company has not incurred, and will
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not incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.21 Compliance with Other Instruments. The Company is not in violation or
---------------------------------
default of any provisions of its Certificate or Bylaws, or of any mortgage,
indenture, agreement, instrument, judgment, order, writ, decree or contract to
which it is a party or by which it is bound, or any provision of any federal or
state statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with this Agreement and the Related
Agreements, and the consummation of the transactions contemplated hereby and
thereby, will not result in any such material violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any of the properties or assets of the Company or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any material
permit, license, authorization, or approval applicable to the Company, its
business, operations, properties or assets.
2.22 Financial Statements. The books of account and related records of the
--------------------
Company fairly reflect in reasonable detail its assets, liabilities and
transactions. The following financial statements (collectively, the "Financial
Statements") are included in the Registration Statement: (i) audited statements
of income, cash flows and stockholders' equity of the Company for the fiscal
years ended December 31, 1996 through 1998, inclusive, and balance sheets of the
Company as at each of such dates (it being understood that the balance sheet of
the Company as at December 31, 1998 is hereinafter referred to as the "Balance
Sheet") and (ii) unaudited statements of income, cash flows and stockholders'
equity of the Company for the six-month period ended June 30, 1999 and a balance
sheet of the Company as at such date. The Financial Statements: (a) fairly
present in all material respects the financial condition, assets and liabilities
of the Company as at their respective dates and the results of operations and
cash flows for the periods covered thereby and (b) have been prepared in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of the unaudited Financial Statements to normal year-end
audit adjustments and the absence of related notes.
2.23 Permits. The Company has all material franchises, permits, licenses,
-------
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects or financial condition of the Company, and
believes it can obtain, without undue burden or expense, any necessary authority
for the conduct of its business as currently planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
9
2.24 Year 2000 Compliance. The Company's computer systems and software are
--------------------
and will be, and the products developed, manufactured, sold or licensed by the
Company are and will be, able accurately to: (i) process any date rollover,
(ii) process calculations or computations regardless of the dates used in such
calculations whether before, on or after January 1, 2000, (iii) accept and
respond to two digit year date input in a manner that resolves any ambiguities
as to the century to which such two digit year date input relates in an
appropriate manner and (iv) store and display date data in a manner that is
unambiguous as to the century to which such two digit year date input relates.
Based upon a reasonable investigation made by the Company, none of the above-
referenced systems, software or products are reasonably expected to malfunction,
cease to function, generate incorrect data or provide incorrect results when
providing and/or receiving data in connection with any valid date, whether
occurring before, on or after January 1, 2000.
2.25 Employees. There is no strike, labor dispute or union organization
---------
activity pending or, to the Company's knowledge, threatened between the Company
and its employees. None of the Company's employees belongs to any union or
collective bargaining unit. The Company has complied in all material respects
with all applicable state and federal equal opportunity and other laws related
to employment. To the Company's knowledge, none of its employees is currently
in violation of any judgment, decree, order, or agreement relating to the
relationship of any such employee with the Company or any other party, due to
either (i) the nature of the Company's business as conducted currently or
proposed to be conducted, or (ii) the use by the employee of his or her best
efforts with respect to the conduct of such business. The Company is not a
party to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other employee compensation agreement that covers
executive officers and directors of the Company. To the Company's knowledge, no
officer or key employee intends to terminate his or her employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer or key employee. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company, with or
without cause.
2.26 Changes. Since June 30, 1999, other than immaterial and nonadverse
-------
changes in the ordinary course of business, there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company;
(b) any damage, destruction or loss, whether or not covered by
insurance, affecting the business, properties, prospects, or financial condition
of the Company (as such business is currently conducted and as it is currently
proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company affecting the business, properties,
prospects, or financial condition of
10
the Company (as such business is currently conducted and as it is currently
proposed to be conducted);
(e) any entering into or change in the terms of any material contract
or arrangement by which the Company or any of its assets or properties is bound
or to which the Company or any of such assets or properties is subject;
(f) any change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;
(g) any sale, assignment, or transfer of any Company Intellectual
Property;
(h) any resignation or termination of employment of any director,
officer or key employee of the Company, nor does the Company have any knowledge
of the impending resignation or termination of employment of any such person;
(i) any receipt of notice by the Company that there has been a loss
of, or material order cancellation by, any customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien
created by the Company with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the benefit
of its employees, stockholders, officers, or directors, or any members of their
immediate families, other than customary travel advances and other advances made
in the ordinary course of its business;
(l) any declaration, setting aside, or payment of any dividend or
other distribution of the Company's assets in respect of any of the Company's
capital stock, or any direct or indirect redemption, purchase, or other
acquisition of any of such stock by the Company;
(m) to the Company's knowledge after reasonable investigation, any
other event or condition of any character that might affect the business,
properties, prospects, or financial condition of the Company (as such business
is currently conducted and as it is currently proposed to be conducted); or
(n) any agreement or commitment by the Company to do any of the things
described in this Section 2.26.
2.27 Undisclosed Liabilities. The Company does not have any material
-----------------------
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due except as and
to the extent set forth on the most recent balance sheet included in the
Registration Statement and the notes thereto.
11
2.28 Certain Indebtedness. As of the date hereof, other than interest
--------------------
accrued after September 30, 1999, the aggregate amount of debt owed to Safeguard
by the Company is $10,147,979 and the aggregate amount of debt owed to XL Vision
by the Company is $5,757,978.
2.29 Corporate Documents. The Certificate and Bylaws of the Company are in
-------------------
the forms attached hereto as Exhibits A and F, respectively. The copy of the
---------- -
minute books of the Company provided to counsel to Investor contains minutes of
all meetings of the Board of Directors and stockholders and all actions by
written consent without a meeting by the Board of Directors and stockholders
since the date of the Company's incorporation, and accurately reflects all
actions by the Board of Directors (and any committee thereof) and stockholders
with respect to all transactions referred to in such minutes in all material
respects. Neither the stockholders nor the Board of Directors of the Company
have taken any action relating to the merger, consolidation, sale of assets or
business, liquidation, dissolution or any other reorganization of the Company.
2.30 Disclosure. The Company has provided Investor with all access to of
----------
the information which Investor has requested in connection with the execution of
this Agreement and the purchase of the Shares and the Warrant. No representation
or warranty of the Company contained in this Agreement, the Related Agreements
or any certificate or document furnished or to be furnished to Investor prior to
or at the Closing contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading. The Registration
Statement does not contain any untrue statement of a material fact and does not
omit to state a material fact necessary in order to make the statements
contained therein not misleading.
SECTION 3.
Representations and Warranties of JTL to Investor.
-------------------------------------------------
JTL hereby represents and warrants to Investor as of the date hereof as
follows:
3.1 Power and Authority. JTL has all requisite legal power and authority
-------------------
to execute and deliver this Agreement, to sell the JTL Shares and to carry out
and perform its obligations under the terms of this Agreement and the
transactions contemplated hereby.
3.2 Capitalization. JTL is the sole record and beneficial owner of the
--------------
shares of Class A Common Stock set forth opposite its name on Schedule 2.4, free
and clear of any lien, security interest, restriction, encumbrance or claim.
3.3 Authorization; Enforceability. All action on the part of JTL and its
-----------------------------
officers and members necessary for the authorization, execution, delivery and
performance of this Agreement by JTL, the sale and delivery of the JTL Shares by
JTL and the performance of all of JTL's obligations hereunder has been taken.
This Agreement constitutes the valid and legally binding obligation of JTL,
enforceable in accordance with its terms.
12
3.4 Accuracy of Representations and Warranties. To JTL's actual
------------------------------------------
knowledge, which need not be based on any inquiry, the representations and
warranties of the Company contained in this Agreement are true and accurate in
all respects.
3.5 Broker's and Finders' Fees. No broker, investment banker or other
--------------------------
person is entitled to any brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement or any transaction
contemplated hereby based on arrangements made by JTL.
3.6 Organization and Standing. JTL is a limited liability company duly
-------------------------
organized, validly existing under, and by virtue of, the laws of the State of
South Dakota, and is in good standing under such laws. The Company has all
requisite power and authority to own and operate its properties and assets, and
to carry on its business as currently conducted and as proposed to be conducted.
SECTION 4.
Representations and Warranties of Investor.
------------------------------------------
Investor represents and warrants to Sellers as follows:
4.1 Investment Experience. Investor has substantial experience in
---------------------
evaluating and investing in private placement transactions of securities in
companies similar to the Company such that Investor is capable of evaluating the
merits and risks of its investment in the Company and has the capacity to
protect its own interests. Investor is an "Accredited Investor" as defined in
Rule 501 of Regulation D promulgated under the Securities Act.
4.2 Investment. Investor is acquiring the Shares and the Warrant for
----------
investment for Investor's own account, not as a nominee or agent, and not with
the view to, or for resale in connection with, any distribution thereof.
4.3 Rule 144. Investor acknowledges that the Shares, the Warrant, the
--------
Underlying Warrant Stock, the Underlying Common Stock and the Conversion Stock
must be held indefinitely unless registered under the Securities Act or unless
an exemption from such registration is available. Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, which may include, among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.
4.4 Access to Information. Investor's officers and agents have had an
---------------------
opportunity to discuss the Company's management, prospects, business plan and
financial condition with the Company's management.
13
4.5 Authorization; Enforceability. Investor has all requisite legal and
-----------------------------
corporate power and authority to execute and deliver this Agreement and the
Related Agreements and to carry out and perform its obligations under the terms
of this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby. This Agreement constitutes and as of the Closing each of
the Related Agreements will constitute a valid and legally binding obligation of
such Investor, enforceable in accordance with its terms.
4.6 Broker's and Finders' Fees. No broker, investment banker or other
--------------------------
person is entitled to any brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement or any transaction
contemplated hereby based on arrangements made by Investor.
4.7 Non-Limitation. The foregoing representations and warranties,
--------------
however, do not limit or modify the representations and warranties in Section 2
or Section 3 of this Agreement or the right of Investor to rely thereon.
4.8 Legends. It is understood that each certificate representing the
-------
Shares, the Warrant, the Underlying Warrant Stock, the Underlying Common Stock
and the Conversion Stock shall bear the following legend or a substantially
similar legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS HAVING BECOME
EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A
STOCKHOLDER AGREEMENT ENTERED INTO BY THE HOLDER OF THESE SHARES AND THE
COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY.
4.9 Residence. The office of Investor in which its investment decision
---------
was made is located at the address set forth on the signature page to this
Agreement.
SECTION 5.
Conditions of Investor's Obligations at Closing.
-----------------------------------------------
The obligations of Investor under Section 1 of this Agreement are subject
to the fulfillment at or before the Closing of each of the following conditions,
any of which may be waived in writing by Investor:
14
5.1 Opinion of the Company's Counsel. There shall have been delivered to
--------------------------------
Investor an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇ & Bockius, counsel to the Company, in
substantially the form attached hereto as Exhibit K.
---------
5.2 Registration Rights Agreement. The Company shall have executed and
-----------------------------
delivered the Registration Rights Agreement.
5.3 Stockholder Agreement. The Company shall have executed and delivered
---------------------
the Stockholder Agreement.
5.4 HSR Approvals. Any applicable waiting period (and any extension
-------------
thereof) applicable to the consummation of the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
5.5 Opinion of JTL's Counsel. There shall have been delivered to Investor
------------------------
an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to JTL, in substantially the form attached
hereto as Exhibit L.
---------
SECTION 6.
Conditions of Sellers' Obligations at Closing.
---------------------------------------------
The obligations of the Company under Section 1 of this Agreement are
subject to the fulfillment at or before Closing of each of the following
conditions, any of which may be waived in writing by the Company. The
obligations of JTL under Section 1 of this Agreement are subject to the
fulfillment at or before Closing of the condition set forth in Section 6.3,
which may be waived in writing by JTL.
6.1 Note. Investor shall have executed and delivered the Note.
----
6.2 Pledge Agreement. Investor shall have executed and delivered the
----------------
Pledge Agreement.
6.3 HSR Approvals. Any applicable waiting period (and any extension
-------------
thereof) applicable to the consummation of the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
6.4 Registration Rights Agreement. Investor shall have executed and
-----------------------------
delivered the Registration Rights Agreement.
6.5 Stockholder Agreement. Investor shall have executed and delivered
---------------------
the Stockholder Agreement.
15
6.6 Opinion of Investor's Counsel. There shall have been delivered to
------------------------------
the Company an opinion of Dechert Price & ▇▇▇▇▇▇, in substantially the form
attached hereto as Exhibit M.
---------
SECTION 7.
Certain Covenants.
------------------
7.1 Conduct Pending Closing. Each of the parties shall use its respective
-----------------------
best efforts to cause all of the conditions to its obligation to close to be
satisfied on or prior to the Closing. The Company shall use its best efforts to
conduct the business of the Company in the ordinary course consistent with past
practice and in such a manner that at the Closing the representations and
warranties of the Company contained in this Agreement shall be true and correct
as though such representations and warranties were made on, as of, and with
reference to such date. Each Seller will promptly notify Investor in writing of
any event or fact which represents or is likely to cause a breach of any of its
representations, warranties, covenants or agreements. The Company shall
promptly advise Investor in writing of the occurrence of any condition or
development of a nature that is or may be materially adverse to the business,
properties, operations, prospects, condition (financial or otherwise), assets or
liabilities of its business.
7.2 Approvals.
---------
(a) Promptly after the execution of this Agreement, each of the
parties hereto shall prepare and make or cause to be made any required filings,
submissions and notifications under the laws of any domestic or foreign
jurisdiction, including under the HSR Act, to the extent that such filings are
necessary to consummate the transactions contemplated hereby and will use its
best efforts to take all other actions necessary to consummate the transactions
contemplated hereby in a manner consistent with applicable law. Each of the
parties hereto will furnish to the other parties such necessary information and
reasonable assistance as such other parties may reasonably request in connection
with the foregoing.
(b) Each party hereto shall promptly inform the other of any material
communication from the Federal Trade Commission, the Antitrust Division of the
United States Department of Justice or any other governmental body regarding any
of the transactions contemplated hereby. If any party hereto or any affiliate
thereof receives a request for additional information or documentary material
from any such governmental body with respect to the transactions contemplated
hereby, then such party shall endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party, an appropriate response in compliance with such request.
7.3 Registration of Securities. The Company intends to file the
--------------------------
Registration Statement with the Securities and Exchange Commission and to effect
an underwritten public offering of its Class A Common Stock as soon as
practicable after the date hereof; provided, however, that the Company will not
proceed with such public offering in the event that its Board of Directors (in
its sole discretion) determines that existing market conditions make such offer
inadvisable. The Company shall promptly provide Investor with a true and
complete copy of the registration
16
statement on Form S-1 filed with the Securities and Exchange Commission and all
supplements and amendments thereto.
7.4 Indemnification By Sellers. Each Seller hereby agrees to indemnify,
--------------------------
defend and hold harmless Investor from and against any loss, liability, claim,
obligation, damage, deficiency, costs and expenses, fines or penalties
(including without limitation reasonable attorney fees and other defense costs
or other response actions) of or to Investor (a) arising out of or resulting
from any misrepresentation or breach of representation or warranty of such
Seller contained in this Agreement or in any agreement or statement or
certificate furnished or to be furnished to Investor pursuant hereto or in
connection with the transactions contemplated hereby and (b) arising out of or
resulting from any breach or nonfulfillment of any covenant or agreement of such
Seller contained in this Agreement or in any agreement or statement or
certificate furnished or to be furnished to Investor pursuant hereto or in
connection with the transactions contemplated hereby.
7.5 Indemnification by Investor. Investor hereby agrees to indemnify and
---------------------------
hold harmless Sellers from and against any loss, liability, claim, obligation,
damage, deficiency, costs and expenses, fines or penalties (including without
limitation reasonable attorney fees and other defense costs or other response
actions) of or to Sellers (a) arising out of or resulting from any
misrepresentation or breach of representation or warranty of Investor contained
in this Agreement or in any agreement or statement or certificate furnished or
to be furnished to Sellers pursuant hereto or in connection with the
transactions contemplated hereby and (b) arising out of or resulting from any
breach or nonfulfillment of any covenant or agreement of Investor contained in
this Agreement or in any agreement or statement or certificate furnished or to
be furnished to Sellers pursuant hereto or in connection with the transactions
contemplated hereby.
7.6 Securities Laws Compliance. The Company shall make in a timely manner
--------------------------
any filings required by applicable federal or state securities or Blue Sky laws,
or those of any other applicable jurisdiction.
7.7 Proprietary Information Agreements. The Company shall require all
----------------------------------
future officers, directors, employees and consultants of the Company and its
Subsidiaries to execute and deliver an agreement which provides protection from
misappropriation or assignment of the Company Intellectual Property.
7.8 Reservation of Shares. For so long as Investor shall have any right
---------------------
to receive the Underlying Common Stock upon conversion of the Company Shares,
the Company shall reserve and keep available out of its authorized but unissued
Class B Common Stock the full number of shares of Underlying Common Stock
deliverable upon conversion of all the then outstanding Company Shares and
shall, at its own expense, take all such actions and obtain such permits and
orders as may be necessary to enable the Company lawfully to issue such
Underlying Common Stock upon conversion of the Company Shares. For so long as
the Warrant is outstanding, the Company shall reserve and keep available out of
its authorized but unissued Class A Common Stock and Series B Common Stock the
full number of shares of Underlying Warrant Stock deliverable upon execution of
the Warrant and shall, at its own expense, take all such actions and obtain such
permits and orders as may be necessary to enable the Company lawfully to issue
such Underlying Warrant Stock upon
17
exercise of the Warrant. For so long as any of the Underlying Common Stock, the
Warrant and the Underlying Warrant Stock is outstanding, the Company shall
reserve and keep available out of its authorized but unissued Class A Common
Stock the full number of shares of Class A Common Stock deliverable upon
conversion of all shares of Underlying Common Stock and Underlying Warrant Stock
and shall, at its own expense, take all such actions and obtain such permits and
orders as may be necessary to enable the Company lawfully to issue such Class A
Common Stock upon conversion of Underlying Common Stock and the Underlying
Warrant Stock.
7.9 Books and Records. The Company shall maintain complete and accurate
-----------------
records and books of account in which entries shall be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
transactions of the Company and its Subsidiaries, if any.
7.10 Use of Proceeds. The Company agrees that, prior to a Public Offering,
---------------
it will not reduce its outstanding indebtedness by more than $4,500,000 and it
will not make any payments in excess of $1,000,000 in the aggregate with respect
to indebtedness incurred after the date hereof.
7.11 Investor Rights. Until the consummation of a Public Offering, the
---------------
Company shall permit Investor at Investor's expense to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by Investor; provided, however, that the
Company shall not be obligated pursuant to this section to provide access to any
information that it reasonably considers to be a trade secret or similar
confidential information. For purposes of this Agreement, the term "Public
Offering" means the effectiveness of a registration statement filed by the
Company pursuant to the Securities Act (other than on Form S-4 or S-8 on any
successor forms thereto) covering the offer and sale of Class A Common Stock in
an underwritten public offering on a firm commitment basis in which the gross
proceeds of the offering will equal or exceed $10,000,000 (calculated before
deducting underwriters' discounts and commissions and other offering expenses),
and in which the public offering price per share of Class A Common Stock
(calculated before deducting underwriters' discounts and commissions) results in
a valuation of the total number of outstanding shares of capital stock of the
Company immediately prior to the closing of the public offering of at least
$30,000,000.
7.12 Reports. Until the consummation of a Public Offering, the Company
-------
will provide Investor the following reports:
(a) Annual Reports. As soon as practicable after the end of each
--------------
fiscal year, and in any event within seventy-five (75) days thereafter,
consolidated balance sheets of the Company and its subsidiaries, if any, as of
the end of such fiscal year, and consolidated statements of income,
stockholders' equity and cash flows of the Company and its subsidiaries, if any,
for such year, prepared in accordance with generally accepted accounting
principles and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and audited (without
qualification as to scope) by independent auditors of national standing selected
by the Company.
18
(b) Monthly and Quarterly Reports. As soon as practicable after the
-----------------------------
end of each month and fiscal quarter, and in any event within thirty (30) days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of each such period, consolidated statements of income,
consolidated statements of changes in financial condition, a consolidated
statement of cash flow of the Company and its subsidiaries and a statement of
stockholders' equity for such period and for the current fiscal year to date,
and setting forth in each case in comparative form the figures for corresponding
periods in the previous fiscal year, and setting forth in comparative form the
budgeted figures, prepared in accordance with generally accepted accounting
principles (other than for accompanying notes), subject to changes resulting
from year-end audit adjustments, all in reasonable detail and signed by the
principal financial or accounting officer of the Company.
(c) Annual Budget. As soon as practicable, but in any event thirty
-------------
(30) days prior to the end of each fiscal year, a projected operating budget and
business plan for the next fiscal year, prepared on a monthly basis, including
balance sheets and sources and applications of funds statements for such months
and, as soon as prepared, any other budgets or revised budgets prepared by the
Company.
7.13 Certificate of the Company. At the Closing, the Company shall deliver
--------------------------
to Investor a certificate dated as of the date of the Closing, stating that (a)
the representations and warranties of the Company contained in Section 2 are
true on and as of the Closing with the same effect as if made on and as of the
Closing and (b) the Company has performed or fulfilled all agreements,
obligations and conditions contained in this Agreement required to be performed
or fulfilled by the Company before Closing.
7.14 Certificate of JTL. At the Closing, JTL shall deliver to Investor,
------------------
which delivery may be by facsimile, a certificate dated as of the date of the
Closing, stating that (a) the representations and warranties of JTL contained in
Section 3 are true on and as of the Closing with the same effect as if made on
and as of the Closing and (b) JTL has performed or fulfilled all agreements,
obligations and conditions contained in this Agreement required to be performed
or fulfilled by JTL before Closing.
7.15 Certificate of Investor. At the Closing, Investor shall deliver to
-----------------------
Sellers a certificate dated as of the date of the Closing, stating that (a) the
representations and warranties of Investor contained in Section 4 are true on
and as of the Closing with the same effect as if made on and as of the Closing
and (b) Investor has performed or fulfilled all agreements, obligations and
conditions contained in this Agreement required to be performed or fulfilled by
Investor before Closing.
SECTION 8.
Miscellaneous.
-------------
8.1 Termination. This Agreement may be terminated at any time prior to
-----------
Closing: (a) by mutual consent of Sellers and Investor and (b) by Investor or
the Company if the Closing shall not have occurred prior to December 31, 1999;
provided, that Investor or the Company may terminate
--------
19
this Agreement pursuant to this clause (b) only if the Closing shall not have
occurred by such date for a reason other than a failure by such party to satisfy
the conditions to Closing of the other party set forth herein. In the event of
termination of this Agreement by either Investor or the Company, as provided
above, this Agreement shall forthwith terminate and there shall be no liability
on the part of either Sellers or Investor, other than the obligation to
indemnify the other party pursuant to the terms of this Agreement for
liabilities arising from a breach of this Agreement prior to such termination.
8.2 Entire Agreement; Successors and Assigns. This Agreement and the
----------------------------------------
exhibits hereto constitute the entire agreement between Sellers and Investor
relative to the subject matter hereof. Any previous agreement between Investor
and Sellers is superseded by this Agreement. Subject to the exceptions
specifically set forth in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.
8.3 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts entered into and wholly to be performed within the Commonwealth of
Pennsylvania by Pennsylvania residents.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
8.5 Headings. The headings of the Sections of this Agreement are for
--------
convenience and shall not by themselves determine the interpretation of this
Agreement.
8.6 Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be conclusively deemed effectively given upon personal
delivery, or delivery by overnight courier, or five days after deposit in the
United States mail, by registered or certified mail, postage prepaid, addressed
(i) if to the Company, as set forth below the Company's name on the signature
page of this Agreement, (ii) if to JTL, as set forth below JTL's name on the
signature page of this Agreement, and (iii) if to Investor, as set forth below
Investor's name on the signature page of this Agreement, or at such other
address as the Company, JTL or Investor may designate by ten (10) days' advance
written notice to the other parties.
8.7 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing. Sellers
acknowledge that their representations and warranties in this Agreement shall
not be affected or mitigated by any investigation conducted by Investor or its
representatives prior to Closing or any knowledge of Investor.
8.8 Amendment of Agreement. No provision of this Agreement may be amended
----------------------
except by a written instrument signed by the parties.
8.9 Expenses. Each party will pay its own costs and expenses incurred in
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connection with this Agreement and the transactions contemplated hereby;
provided, however, that all filing fees under the HSR Act shall be divided
equally between the Company and Investor.
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8.10 Further Assurances. Each party shall cooperate and take such action
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as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the day and year first above written.
EMERGE INTERACTIVE, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Title: CEO
-----------------------
Address: 10315 ▇▇▇/▇▇/ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
J TECHNOLOGIES, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
------------------------
Title: Authorized Member
-----------------------
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
INTERNET CAPITAL GROUP, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. Nassau
-------------------------
Name: ▇▇▇▇▇ ▇. Nassau
-----------------------
Title: Managing Director
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Address: 800 The Safeguard Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
22
