STOCK PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
AGREEMENT entered into as of the 17th day of September, 1998 among
Ergovision, Inc., a Delaware corporation (the "Buyer"), Gilead Enterprises, Inc.
a New York corporation (the "Company"), and Xxxx Xxxxxxxxxxx, Xxxx Xxxxxxxxxxx
and Xxxxxx X. Xxxxxxxxx being the holders of all of the issued and outstanding
capital stock of the Company (the "Sellers").
RECITALS
WHEREAS, the Sellers collectively own all of the outstanding shares of
Common Stock, without par value per share, of the Company (the "Company
Shares"), and are willing to sell the Company Shares to Buyer; and
WHEREAS, the parties hereto wish to adopt an agreement pursuant to which
Buyer will acquire all of the Company Shares in exchange for shares of Buyer's
$0.001 par value Common Stock ("Buyer's Common Stock") and for other
consideration as more fully set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the Plan of
Reorganization shall qualify as a tax-free reorganization under Section 368
(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and the Treasury
regulations promulgated thereunder; and
NOW, THEREFORE, in consideration for the mutual agreements contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1. Plan of Reorganization and Purchase and Sale of Shares
A. Plan of Reorganization
The parties to this Agreement hereby adopt a Plan of Reorganization
pursuant to the provisions of Section 368 (a)(1)(B) of the Internal Revenue Code
of 1986, as amended, and the Treasury regulations promulgated thereunder to be
effectuated in the manner hereinafter set forth. Neither the Buyer, Company nor
any of the Sellers shall intentionally take or cause to be taken any action,
whether or not at, prior to or after the Closing, which would disqualify the
Plan of Reorganization as a "pooling of interests" for financial accounting
purposes or as a tax-free "reorganization" within the meaning of Section 368 (a)
of the Code.
B. Exchange of Shares.
(a) Subject to the provisions of this Agreement, each of the Sellers
agrees to sell, and Buyer agrees to purchase, at the Closing (as defined in
Article 1.C hereof), the number of Company Shares set forth on Exhibit A hereto
next to such Seller's name. In consideration of such sale, Buyer agrees that it
will deliver to the Sellers an aggregate of Fifteen Thousand (15,000) Shares of
duly authorized, validly issued, fully-paid and non-assessable shares of Buyer's
Common Stock ("Purchase Shares"). The Sellers shall be entitled to all stock
splits and stock dividends declared by the Buyer and the Buyer shall only issue
future shares for due consideration.
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(b) Each Seller shall receive Thirty Three and One Third (33 1/3 %)
Percent of the Purchase Shares, and the Stock Options granted in accordance with
the terms of this Agreement, which is equal to the percentage of the Company
Shares owned by such Seller as set forth in Exhibit A hereto.
C. Time of Closing.
The closing of the purchase and sale provided for in this Agreement
(herein called the "Closing") shall take place simultaneously with the execution
of this Agreement; provided, however, that in no event shall the Closing date be
extended beyond September 30, 1998.
D. Delivery of Company Shares.
At the Closing, the Sellers and Company shall deliver or cause to be
delivered to Buyer, among other things:
(a) certificates for all the Company Shares owned by each of the Sellers,
duly endorsed in blank for transfer, or with stock powers attached duly executed
in blank, with all signatures notarized or, at the election of Buyer, guaranteed
in the form of Exhibit B hereto;
(b) such other documents as may be required to effect a valid transfer of
the Company Shares by the Sellers, free and clear of any and all liens and
encumbrances;
(c) general releases by all officers, directors and stockholders of the
Company of any liability of the Company to them, or any claim that they may have
against the Company in the form of Exhibit C hereto; and
(d) such other documents as may be required elsewhere in this Agreement or
may be reasonably requested by Buyer.
E. Delivery of Purchase Shares.
Buyer shall deliver or cause to be delivered to Sellers, among other
things, certificates for that number of Purchase Shares as determined in Article
1.B (b) hereof at Closing.
F. Further Assurances.
Sellers and Buyer from time to time after the Closing, at the request of
the other party and without further consideration, shall execute and deliver
further instruments of transfer and assignment and take such other action as
such other party may reasonably require to more effectively transfer the Company
Shares to the Buyer and to otherwise consummate the transactions contemplated
herein.
ARTICLE 2. Covenants, Representation and Warranties of the Company and Sellers
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Each Seller, jointly and severally, and the Company, to induce Buyer to
enter into and consummate this Agreement, represents and warrants to Buyer that:
A. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York, with the power to own
its properties and carry on its business as now being conducted.
B. The authorized capital stock of the Company consists of 200
shares, per share, of which there are issued and outstanding 30 shares, all of
which are validly issued, fully paid and non-assessable and owned of record and
beneficially by Sellers, free and clear of all liens and encumbrances.
C. The execution, delivery and performance of this Agreement has
been duly authorized and approved by the Company's Board of Directors and
Sellers. The Company and Sellers have the full right, power and authority,
without further corporate action, to enter into this agreement and perform the
same, and this Agreement constitutes a valid and binding obligation of the
Company and Sellers in accordance with its terms. Neither the execution nor
delivery of this Agreement nor the performance of this Agreement will result
(with or without lapse of time or the giving of notice or both) in any breach of
any term or provision of any contract, agreement, indenture or other instrument
(including without limitation the Company's certificate of incorporation and
by-laws), or any judgment, decree or order of any court to which the Company is
a party, or by which the Company may be bound, and no consent or authorization
is required of any person, firm or corporation pursuant to any of the
aforementioned instruments to the Company and Sellers consummation of this
Agreement and the transactions contemplated hereby.
D. The Company has no subsidiaries or interest in any other
corporation, partnership, joint venture or proprietorship.
E. The Company owns outright and has good and marketable title to
all of its properties and assets free and clear of all liens and encumbrances.
F. There are no liabilities of the Company of any kind whatsoever,
whether or not accrued and whether or not determined or determinable, in respect
of which the Company may become liable on or after consummation of the
transactions contemplated by this Agreement
G. All Federal, state and local income and other taxes accrued or
asserted against the Company have been paid, or adequate reserves have been
established therefore by the Company. All tax returns required to be filed by
the Company have been filed. Sellers have no knowledge of any unassessed tax
deficiency posed or threatened against the Company. No waiver of any statute of
limitations has been given with respect to presently unexamined tax return
examinations.
H. There is no litigation or proceeding pending or threatened
against the Company relating to its business or the transaction contemplated by
this Agreement.
I. The Company to the knowledge of the Sellers has good title to all
of its Intellectual Property Rights.
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(a) For purposes of Section I, "Intellectual Property" means all patents,
patent applications, trade marks (whether registered or unregistered) or service
marks, trade secrets, trade-dress, know-how, trade xxxx or service xxxx
applications, trade names, copyrights, licenses and computer software, owned or
used by the Company.
(b) All rights of ownership of, or material licenses to use, Intellectual
Property held by the Company are listed on Schedule I. To the best knowledge of
the Sellers and the Company, there are no Intellectual Property rights, other
than those set forth on this schedule.
(c) Except as set forth on Schedule I, all rights to Intellectual Property
required to be listed in Schedule:
(i) are owned exclusively by the Company, free and clear of any
attachments, licenses, sub-licenses or encumbrances, such that no other
person has any right or interest in or license to use or right to license
others to use any of the Intellectual Property;
(ii) are freely transferable (except as otherwise required by law);
and
(iii) are not subject to any outstanding order, decree, judgment or
stipulation or
(d) All licenses and other agreements pursuant to which any item of
Intellectual Property is licensed or used by the Company are valid, binding and
enforceable and there does not exist thereunder a default or event or condition
which, after notice or lapse of time or both, would constitute a default by any
party thereto.
(e) No proceedings to which the Company is a party have been commenced
which (i) challenge the rights of the Company in respect of the Intellectual
Property listed on Schedule I, or (ii) charge the Company with infringement of
any other person's rights in Intellectual Property and, to the knowledge of the
Company and Sellers, no such proceeding to which the Company is not a party has
been filed, nor are any such proceedings threatened to be filed.
(f) Except as set forth on Schedule I, no director, officer or employee of
the Company owns, directly or indirectly, in whole or in part, any Intellectual
Property right which the Company has used, is presently using, or the use of
which is reasonably necessary to its business as now conducted or presently
contemplated to be conducted.
J. Each Seller is purchasing or acquiring the Shares of Buyer's Common
Stock for his or her own account for investment and not with a present view to,
or for sale in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended (the "Act"). Each Seller hereby consents to
the placing of a legend substantially similar to the following on each
certificate for the shares of Buyer's Common Stock, and each Seller agrees to
abide by the restrictions contained therein:
The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "Act") and may not be sold, transferred
or assigned unless registered under the Act, pursuant to Rule 144, or an opinion
of counsel, satisfactory to the corporation, is obtained to the effect that such
sale, transfer or assignment is exempt from the registration requirements of the
Act.
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K. Each Seller understands that the Shares of Buyer's Common Stock have
not been registered under the Act by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things, the
bona fide nature of such Seller's investment intent as expressed herein. Each
Seller acknowledges that the shares of Buyer's Common Stock can be sold only if
registered under the Act or an exemption from such registration is available.
Each Seller has been advised of or is aware of the provisions of Rule 144
promulgated under the Act, which rule permits resale of securities purchased in
a private placement subject to the satisfaction of certain conditions contained
therein.
L. No representation or warranty made herein by any Seller or any
statement, certificate, Schedule or document furnished or to be furnished to the
Buyer herewith contains any untrue fact or statement or omits or will omit to
state any fact reasonably necessary to make the statements herein not
misleading, and shall be true and correct as though made on and as of the
Closing Date, and all copies of documents delivered hereunder are true and
complete copies.
ARTICLE 3. Representation and Warranties of Buyer
Buyer represents and warrants to the Sellers that:
A. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own and operate its properties, to carry on its
business as presently conducted, to enter into this Agreement and to carry out
the terms hereof.
B. There is no action, suit, proceeding or investigation pending, or to
Buyer's knowledge and belief any basis therefore or any threat thereof, which
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto.
C. The execution, delivery and performance of this Agreement by Buyer has
been duly authorized by all requisite corporate action, and this Agreement
constitutes the valid and binding obligation of Buyer, enforceable in accordance
with its terms.
D. Buyer is not in violation of any term of its certificate of
incorporation or by-laws, or of any material term of any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation, applicable to
Buyer, and the execution, delivery and performance of this Agreement will not
result in any such violation.
E. Buyer is not required to obtain any consent, approval or authorization
of, or registration, qualification, designation, declaration or filing with, any
governmental authority in connection with the execution and delivery of this
Agreement or the consummation of any transaction contemplated hereby.
F. The representations, warranties and covenants of Buyer contained in
this Agreement are true and correct, as though made on as of the Closing Date,
and Buyer has no reason to believe that the representations, warranties and
covenants of Buyer contained in this Agreement contain an untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein contained not misleading.
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ARTICLE 4. Sellers and Company's Closing Documents
The Sellers and Company are herewith delivering to Buyer the following
documents and instruments pursuant to the terms of this Agreement:
A. All of the Shares duly endorsed for transfer before a Notary Public by
each of the respective Sellers, with the proper notarized acknowledgment and
stock transfer tax stamps affixed thereto (if so required by law), guaranteed in
the form of Exhibit B hereto.
B. A general release executed by each officer, director and Seller of the
Company releasing any claim they may have against the Company or any officer or
director of the Company (inclusive of any subsidiary of the Company), except as
may otherwise be reserved under this Agreement, as set forth in Exhibit C
hereto.
C. A Secretary's Certificate, as set forth in Exhibit D, dated the date
hereof duly executed by the Company to the effect that annexed to said
certificate is a true and complete copy of:
(i) the Certificate of Incorporation and all amendments thereto of
the Company;
(ii) the Company's By-Laws and all amendments thereto; and
(iii) correct and complete copy of the resolutions adopted by the
Board of Directors of the Company approving this Agreement.
D. Buyer shall have received the written resignations of all officers and
directors of the Company, which resignations will be effective no later than the
Closing as set forth in Exhibit E.
ARTICLE 5. Buyer's Closing Documents
Buyer is herewith delivering to Sellers the following documents and
instruments pursuant to the terms of this Agreement:
A. Secretary's Certificate executed by Buyer's Secretary to the effect
that the execution and delivery of this Agreement and the consummation thereof
has been duly approved by the Buyer's Board of Directors as set forth in Exhibit
F hereto.
ARTICLE 6. Indemnification by Buyer
(a) Buyer hereby agrees to indemnify and hold harmless Sellers from and
against any claim, demand or liability, whether or not meritorious (and against
any costs and expenses, including, without limitation, attorney's fees incurred
in resisting any such claim, demand or liability), arising out of any action or
omission on or after the Closing by Buyer in, or resulting from, the operation
of the business purchased hereunder.
(b) Buyer shall give Sellers prompt written notice of any such claim,
demand or asserted liability and shall permit Seller to defend against any such
claim, demand or liability by counsel of its choice. Buyer shall cooperate with
Seller in such defense and shall make its books and records and personnel
available to Seller in connection therewith.
ARTICLE 7. Indemnification by Sellers
(a) Except for liabilities disclosed on the Balance Sheet (Schedule -) or
as otherwise provided herein, Sellers hereby agree to indemnify and hold
harmless Buyer from and against any claim, demand or liability, whether or not
meritorious (and against any costs and expenses,
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including, without limitation, attorney's fees incurred in resisting any such
claim, demand or liability), arising out of any action or omission before the
Closing by Sellers in, or resulting from, the operation of the business
purchased hereunder.
(b) Sellers shall give Buyer prompt written notice of any such claim
demand or asserted liability and shall permit Buyer to defend against any such
claim, demand or liability by counsel of its or their choice. Sellers shall
cooperate with Buyer in such defense and shall make its books and records and
personnel available to Buyer in connection therewith.
ARTICLE 8. Survival of Warranties
All representations and warranties made herein by any of the parties or
signatories to this Agreement shall survive the date hereof and last until the
expiration of the applicable statute of limitations in such cases made and
provided for.
ARTICLE 9. Restrictive Covenant
(a) Each Seller agrees for himself that for a period of two (2) years
after the date of Closing, he or she will not, directly or indirectly, own,
manage, operate, join, control, or participate in, or become affiliated as an
officer, employee, partner or otherwise in any corporation, partnership or
business entity engaged in the same or similar business as the Company anywhere
in the World other than the Company.
(b) Sellers acknowledge that the remedy at law for any breach of the
foregoing will be inadequate and that the Company and/or Buyer shall be entitled
to injunctive relief.
ARTICLE 10. Brokerage Indemnification
The parties mutually represent and warrant to each other that no broker or
finder was in any way involved with the transactions contemplated by this
Agreement.
ARTICLE 11. Stock Option Agreement With Sellers.
The Buyer will issue to the Xxxx Xxxxxxxxxxx a total of 2,500 Stock
Options to purchase the Buyer's Common Stock at a price of $3.00 per share over
a ten (10) year exercise period at the Closing. The Buyer will make such
adjustments in the Exercise Price and in the number or kind of shares of Common
Stock or other securities covered by the Stock Options as required and exercised
in good faith, to prevent any dilution of the rights of the Seller that
otherwise would result from (a) any stock dividend, stock split combination of
shares, recapitalization or other change in the capital structure of the Buyer,
or (b) any merger, consolidation, spin-off, spin-out, split-up, reorganization,
partial or complete liquidation, or other distribution of assets.
ARTICLE 12. Miscellaneous
A. This Agreement contains the entire understanding between the parties hereto
and there have been no oral or other agreements, representations or warranties
of any kind or nature (i) concerning or relating to the contents of this
Agreement, or (ii) made or given as a condition
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precedent or inducement to the signing of this Agreement, or (iii) otherwise
concerning this Agreement or the subject matter hereof.
B. This Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors, assigns, heirs and or beneficiaries.
C. This Agreement may be executed in one or more counterparts and all such
counterparts shall constitute one and the same instrument.
D. All Schedules and Exhibits referred to in this Agreement shall be deemed to
be annexed hereto and made a part hereof.
E. The construction and performance of this Agreement shall be governed by the
laws of the State of New York.
F. No change, termination or attempted waiver of any of the provisions of this
Agreement shall be binding unless in writing and signed by all parties to this
Agreement. G. The Article headings set forth herein are for reference purposes
only and do not form a material part of this Agreement.
ARTICLE 13. Notice
All notices, requests, demands and other communications required or
permitted to be given (i) hereunder by any party hereto shall be in writing and
shall be deemed to have been duly given when received if delivered personally,
or (ii) on the business day following the business day sent if sent by prepaid
domestically recognized overnight receipted courier if sent domestically, or
(iii) on the third business day following the day sent if sent by prepaid
internationally recognized overnight receipted courier if sent internationally,
or (iv) when receipt telephonically acknowledged if sent by telecopier
transmission on a business day or, if not a business day, on the next following
business day, or (v) when answered back if sent by telex, if on a business day,
or if not a business day, or the next following business day, to the parties at
the following addresses (or at such other addresses as shall be specified by the
parties by like notice) or, (vi) by U.S. registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following addresses
(or at such other addresses as shall be specified by the parties by the like
notice):
If to the Sellers or to the Company, to:
Xx. Xxxx Xxxxxxxxxxx Xxxxxx X. Xxxxxxxxx
000 Xxxx 00xx Xxxxxx #00X 000 Xxxxxxxx Xxxx Xx.
Xxx Xxxx, XX 00000-0000 Xxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Xxxx Xxxxxxxxxxx
000 Xxxx 00xx Xxxxxx #00X
Xxx Xxxx, XX 00000-0000
Tel: 000-000-0000
Fax: 000-000-0000
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If to the Buyer, to:
Ergovision, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx, CEO
Tel: 000-000-0000
Fax: 000-000-0000
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
ARTICLE 14. Arbitration
A. In the event of any dispute between the parties arising out of the
construction, application, or implementation of this Agreement or any documents
related thereto, the parties shall submit their dispute to binding arbitration
before the American Arbitration Association pursuant to the commercial
arbitration rules then prevailing. Any demand for arbitration shall be in
writing, addressed to the parties affected thereby, in accordance with the
notice provisions of this Agreement.
B. Any arbitration hereunder shall be held at the offices of the American
Arbitration Association in New York County, New York.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as an instrument under seal in multiple counterparts as of the date set
forth above by their duly authorized representatives.
ERGOVISION, INC.
BY: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxxx, Chairman and CEO
GILEAD ENTERPRISES, INC.
BY: /s/ Xxxx Xxxxxxxxxxx
---------------------------------------
Xxxx Xxxxxxxxxxx, President
SELLERS:
/s/ Xxxx Xxxxxxxxxxx
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Xxxx Xxxxxxxxxxx
/s/ Xxxx Xxxxxxxxxxx
-------------------------------------------
Xxxx Xxxxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxxxx
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