EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement"), made and entered into effective
as of the 28 day of February, 2005, by and among DIGITAL ANGEL
CORPORATION, a Delaware corporation ("Buyer"); and LASSE NORDFJELD, who
holds Shares under LANO Holding ApS ("L. Nordfjeld") and TORSTEN NORDFJELD,
who holds Shares as an individual and holds Bonds (as defined below) under
LATO Aps ("T. Nordfjeld") (L. Nordfjeld and T. Nordfjeld shall be
collectively referred to herein as the "Management Shareholders"), all the
SHAREHOLDERS OF DSD Holding A/S, a Danish corporation (the "Company") as
listed below ("Additional Shareholders") as well as those warrant holders
("Warrant Holders") and bond holders ("Bond Holders") listed below that
choose to exercise their rights to acquire shares of the Company after the
effective date of this Agreement, hereafter listed on Exhibit 1.1 to this
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Agreement. (The Management Shareholders, the Additional Shareholders, the
Warrant Holders and the Bond Holders shall be collectively referred to
herein as the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company and its Subsidiaries (as defined under paragraph 2.2 of
this Agreement) are involved in the business of electronic identification
devices;
WHEREAS, the Company has a share capital of DKK 5,548,500, the nominal value
of DKK 50 per share, currently issued and outstanding, all such issued and
outstanding shares being owned and held of record by the Shareholders as
follows:
SHAREHOLDER SHARE CAPITAL SHARES OWNED OWNERSHIP
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(DKK) PERCENTAGE
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LANO Holding ApS 3,430,000 68,600 shs. 61.82%
Torsten Nordfjeld 556,000 11,120 shs. 10.02%
Vaekstfonden 312,500 6,250 shs. 5.63%
Parfait ApS 1,250,000 25,000 shs. 22.53%
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Total 5,548,500 110,970 shs. 100%
WHEREAS, the Company has issued warrants to purchase an aggregate of 3,000
shares of the Company's stock ("Warrants") exercisable at the price per
share as indicated, all such issued and outstanding Warrants being owned and
held of record by the Warrant Holders as follows:
WARRANT HOLDER UNDERLYING SHARES EXERCISE PRICE PER SHARE
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Torsten Nordfjeld 3,000 shs DKK 200
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Total 3,000 shs. DKK 600,000
WHEREAS, the Company has issued certain bonds in the principal amounts
indicated convertible into shares of the Company's stock ("Bonds"), all such
issued and outstanding Bonds being owned and held of record by the Bond
Holders as follows:
BOND HOLDER PRINCIPAL AMOUNT
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LANO Holding ApS DKK 1,300,000
LATO ApS DKK 500,000
Gunnar Johan Sorensen DKK 50,000
Micheal Tezlaff DKK 100,000
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Total DKK 1,950,000
WHEREAS, the Shareholders desire to sell to Buyer, and Buyer desires to buy
from the Shareholders, all of the issued and outstanding shares of the stock
of the Company on the terms and subject to the conditions indicated below.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE 1.
PURCHASE OF STOCK
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1.1 PURCHASE AND SALE OF SHARES. On the terms and subject to the conditions
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herein set forth, on the "Closing Date" (as such term is hereinafter
defined), the Shareholders hereby agree to sell, transfer and deliver to
Buyer, and Buyer hereby agrees to purchase and acquire from the
Shareholders, the number of shares of the issued and outstanding stock of
the Company set forth opposite each of the Shareholders names on Exhibit 1.1
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attached hereto, as may be amended at the Closing Date to include those
Warrant Holders and Bond Holders that choose to exercise their rights to
acquire shares of the Company after the effective date of this Agreement
(collectively, the "Shares"), which constitutes, in the aggregate, all of
the issued and outstanding stock of the Company.
1.1.1 DIVISION. On November 10, 2004, the Shareholders of the
Company decided to divide the Company's assets and liabilities
between the Company and SFK Technology Holding A/S (the
"Division"), whereby DKK 5,567,500 of the Company's share capital
was redeemed and the Company's share capital of DKK 11,116,000 was
reduced to DKK 5,548,500. In connection with the Division,
according to Article 46 of the Danish Companies Act, the Company
is required to insert a notification in the Danish Official
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Gazette ("Statstidende") calling on the creditors who do not
accept the capital reduction under the Division to file their
claims within 3 months of the date of such notification (the
"Claims"). The Company inserted the notification on December 1,
2004, and, therefore, the capital reduction under the Division
cannot be formally registered before March 1, 2005 at the
earliest. Further, the Danish law provides that the capital
reduction under the Division cannot be formally registered as long
as filed Claims due for payment have not been satisfied and
adequate security has not been provided for Claims that have not
fallen due or are in dispute. The Management Shareholders each
hereby represent that no Claims have been filed as of the date of
this Agreement and do not expect that any Claims will be filed on
or before March 1, 2005. However, if any Claims are filed, the
Management Shareholders hereby agree to be responsible for the
full payment and settlement of any and all Claims.
1.2 CLOSING. Closing on the purchase and sale of the Shares shall take place
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at the offices of Lassen Ricard on February 28, 2005 at 10:00 a.m., or by
such other method, on such other time and date and at such other location as
may be mutually agreed upon by the parties to this Agreement (such date is
referred to in this Agreement as the "Closing Date"). The effective time of
the closing shall be as of 12:01 a.m. on the Closing Date (the "Closing").
1.3 PURCHASE PRICE.
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1.3.1 The aggregate consideration (the "Purchase Price") to be paid
by Buyer for the Shares to the Shareholders, pro rata based on the
number of Shares owned, shall be as follows:
(i) The Purchase Price shall be Seven (7) times the average annual
EBITDA of the Company for the calendar years of 2005, 2006 and 2007
("EBITDA Period") minus the outstanding Indebtedness of the Company
as of December 31, 2007 (net of any cash in excess of cash at
Closing) and minus thirty percent (30%) of the total compensation
paid to L. Nordfjeld pursuant to the Employment Agreement described
under paragraph 5.2.4, all as determined as provided in paragraph
1.3.2 below. The Purchase Price shall be calculated in Danish Krone
(DKK), at the conversion rate then current on the date the Purchase
Price Calculation is determined as provided in paragraph 1.3.2.
For purposes of this calculation, "EBITDA" shall mean an amount
equal to the net income or loss of the Company, the net income or
loss determined in accordance with generally accepted accounting
principles in the United States of America ("U.S. GAAP")
consistently applied, before interest, income taxes, depreciation
and amortization. "Indebtedness" shall mean (a) any indebtedness
for borrowed money or the deferred purchase price of property as
evidenced by a note, bond, or other instruments; (b) any
obligations as lessee under capital leases; (c) obligations secured
by any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind existing on any asset owned or held by the
Company or any of its Subsidiaries whether or not the Company or
any of its Subsidiaries has assumed or become liable for the
obligations secured thereby; (d) any obligation under any interest
rate swap agreement; (e) any obligations under direct or indirect
guarantees of (including obligations, contingent or otherwise, to
assure a creditor against loss in respect of) indebtedness or
obligations of the kinds referred to in
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clauses (a), (b), (c) and (d) above, excluding bank guarantees for
performance under tender orders given in the normal course of
business; (f) any advances or other obligations owed to Buyer or
any of its affiliates; and (g) any similar obligation of the
Company or any of its Subsidiaries. Indebtedness shall not include
accounts or trade payables due in the ordinary course of the
Company's business.
(ii) For purposes of this paragraph 1.3.1 and the calculations to
be made pursuant to this paragraph 1.3.1 and the Triggering Events
defined below, the term "Company" shall mean the Company on a
consolidated basis with its Subsidiaries in its present form (i.e.,
as of the Closing Date) and shall not include any
subsequently-added or acquired businesses or Subsidiary unless
consented to in writing by Buyer.
(iii) Payment of the Purchase Price will be made pursuant to
paragraph 1.4.1, Initial Stock Payment, with the balance, if any,
pursuant to paragraph 1.4.3, Payment of Balance of Purchase Price.
The parties hereto hereby acknowledge and agree that the Purchase
Price shall in no event be less than the amount of the Initial
Stock Payment due to the Shareholders under paragraph 1.4.1.
(iv) The Shareholders specifically acknowledge, understand and
agree that: (a) the Buyer will exercise its good faith in managing
the Company subsequent to Closing; (b) Buyer, as sole shareholder,
will have ultimate control over the business direction and
decisions of the Company subsequent to Closing, and there is always
business risk that some decisions may result in losses or are
otherwise sub-optimal; and (c) Buyer will be fair in not usurping
business opportunities, but as both Buyer and the Company are in
the same business, there is a possibility that some new business
may be attributed to or preserved by Buyer and not the Company.
(v) During the course of Buyer's management of the Company from the
date of Closing to December 31, 2007, if the Buyer takes an action
("Triggering Event") that the Shareholder Representative believes
materially negatively affects the Purchase Price Calculation, as
defined below, the Shareholder Representative shall notify Buyer in
writing if the Shareholder Representative objects to such
Triggering Event within the thirty (30) day period following such
Triggering Event, stating in such objection specific reasons for
the objection along with financial projections of the affect of not
permitting such Triggering Event. The Shareholder Representative
and the Buyer hereby agree to negotiate in good faith a mutually
agreeable resolution if there is an objection to the Triggering
Event. If the parties cannot agree to a resolution within fourteen
(14) days of the Buyer's receipt of the objection notice, the
parties shall submit the matter for resolution to an
internationally recognized arbitrator located in England
("Arbitrator"), not affiliated with either party. The costs of the
Arbitrator are to be paid by the party whose position is not upheld
by the Arbitrator. However, if neither party's position is upheld
by the Arbitrator, the costs of the Arbitrator shall be shared
equally by the parties. Examples of possible Triggering Events
include, but are not limited to, the following:
(a) a significant change in the Company's, or in one of
its Subsidiaries', current structure, business strategy or
activities, including, but not limited to, discontinuation
of the production and sale of ear tags or liquidation of
the
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Company or one of its Subsidiaries unless the activities
are transferred to the Company or one of the Company's
Subsidiaries;
(b) a significant change in the Company's accounting
principles, other than the changes to the Company's
accounting principles after the Closing Date so that they
are in accordance with U.S. GAAP;
(c) the Buyer, or any of its affiliates, performs any
business activities in Europe that the Company and its
Subsidiaries presently perform;
(d) a significant change in the Company's or one of the
Company's Subsidiaries' current financing which would
result in the Company or the Company's Subsidiary not
having sufficient financing for the Company's or the
Company's Subsidiary's current activities;
(e) an extraordinary and non-standard cost is incurred by
the Company or one of the Company's Subsidiaries as
compared with the current and normal costs and activities
of the Company or the Company's Subsidiary, including, but
not limited to, a significant increase in investments,
significant price reduction, significant management fees
to the Buyer, significant fees to members of the boards of
directors of the Company and the Company's Subsidiaries;
(f) the Company or one of the Company's Subsidiaries
provides business or financial assistance to the Buyer or
one of the Buyer's affiliated businesses and is not fairly
compensated in accordance with arm's length principles; or
(g) payment of a dividend or any equivalent to the Buyer.
(vi) For purposes of this Agreement, the term "Shareholder
Representative" shall mean a Shareholder whom the Shareholders
agree by a majority vote will represent their interests as
Shareholders and has the authority to act on the Shareholders'
behalf as specified in this Agreement. The Management Shareholders
will notify the Buyer of the identity of the Shareholder
Representative and any subsequent changes to the identity of the
Shareholder Representative. The initial Shareholder Representative
shall be Lasse Nordfjeld ("Initial Shareholder Representative").
(vii) The Shareholders specifically acknowledge, consent and
approve the appointment of the Initial Shareholder Representative,
and any subsequently appointed Shareholder Representative, as the
attorney-in-fact for the Shareholders and to take such actions and
to make any decisions required or permitted in this Agreement on
behalf of the Shareholders.
(viii) The Shareholders also specifically acknowledge, understand
and agree that any cash generated by the Company and its
Subsidiaries will be used first to pay capital expenditures and to
fund any increases determined by Buyer to be necessary in the
Company's working capital, then to pay down Indebtedness, all as
determined by Buyer in its sole discretion.
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1.3.2 FINAL PURCHASE PRICE CALCULATION.
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(a) On or prior to March 31, 2008, Buyer shall prepare and promptly
thereafter deliver to the Shareholders a statement setting forth
the Purchase Price required to be calculated pursuant to paragraph
1.3.1 above less the payment made prior to the date thereof
pursuant to paragraph 1.4 (the "Purchase Price Calculation"). The
Purchase Price Calculation shall be prepared by the Company's
in-house accountants and verified by the Company's independent
certified public accountants. In connection with the preparation of
such Purchase Price Calculation, Buyer and its authorized
representatives shall have full access to the relevant books and
records of the Company and each of its Subsidiaries and their
respective authorized representatives and employees to the extent
necessary to complete such Purchase Price Calculation.
(b) If Shareholders owning at least seventy percent (70%) of the
Shares object to the Purchase Price Calculation, the Shareholder
Representative shall notify Buyer in writing of such objection
within the thirty (30) day period following the delivery thereof,
stating in such written objection the reasons therefore and setting
forth the Shareholders' calculation of amounts set forth in the
Purchase Price Calculation. Upon receipt by Buyer of such written
objection, the parties shall attempt to resolve the disagreement
concerning the Purchase Price Calculation through negotiation. If
Buyer and the Shareholders cannot resolve such disagreement
concerning the Purchase Price Calculation within thirty (30) days
following the end of the foregoing 30-day period, the parties shall
submit the matter for resolution to an internationally recognized
firm of independent certified public accountants in England (the
"Accountants"), not affiliated with either party, with the costs
thereof to be shared equally by the parties. The Accountants shall
deliver a statement setting forth its own calculation of the
matters set forth in the Final Adjustment Statement to the parties
within thirty (30) days of the submission of the matter to such
Accountants.
(c) The "Purchase Price Calculation" for purposes of paragraph
1.3.2 shall be either: (1) if the Shareholders do not object, the
Purchase Price Calculation initially submitted by the Buyer to the
Shareholders; (2) if the Shareholders and Buyer agree, the Purchase
Price Calculation as so agreed; or (3) if the Shareholders object
and the parties fail to agree, the Purchase Price Calculation as
prepared by the Accountants.
1.3.3 BUYOUT PURCHASE PRICE. Notwithstanding anything to the contrary, at
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any time between the Closing Date and December 31, 2006, the Buyer may pay a
buyout purchase price equal to the higher of (a) $2,000,000 ("Set Amount")
or (b) the Purchase Price as determined pursuant to paragraph 1.3.1 for the
period from January 1, 2005 to the date of the Buyout less the payment made
prior pursuant to paragraph 1.4.1 ("EBITDA Amount") (collectively, the Set
Amount and the EBITDA Amount shall be referred to as the "Buyout Purchase
Price"). In addition, if L. Nordfjeld's employment is terminated pursuant to
Section 9(a)(iv) of L. Nordfjeld's Employment Agreement, attached as Exhibit
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5.2.6-1, the Shareholders shall have the right to demand that the Buyer pay
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the
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Buyout Purchase Price. The Shareholder Representative shall notify the Buyer
in writing within thirty (30) days of the termination date of L. Nordfjeld's
employment if the Shareholders desire to exercise such buyout option. The
Shareholder Representative and the Buyer hereby agree to each provide to the
other party their good faith determination of the EBITDA Amount
("Determinations") within seven (7) days of the date the Buyer notifies the
Shareholder Representative of its intent to exercise its rights under this
paragraph and pay the Buyout Purchase Price. If the parties do not agree on
the EBITDA Amount, the Shareholder Representative and the Buyer agree to
negotiate in good faith a mutually agreeable resolution. If the parties
cannot agree on a resolution within seven (7) days after receipt of the
Determinations, the parties shall submit the matter for resolution to an
internationally recognized arbitrator located in England ("Arbitrator") not
affiliated with either party, with resolution by the Arbitrator to be made
within fourteen (14) days after the matter is submitted to the Arbitrator.
The costs of the Arbitrator are to be paid by the party whose position is
not upheld by the Arbitrator. However, if neither party's position is upheld
by the Arbitrator, the costs of the Arbitrator shall be shared equally by
the parties. Such Buyout Purchase Price shall be payable in accordance with
the terms of paragraph 1.4.3. Any Buyout Purchase Price paid under this
paragraph shall be the final payment or amount due to the Shareholders, and
nothing in this paragraph shall be construed to require the Shareholders to
return or repay any of the Initial Stock Payment made under paragraph 1.4.1.
1.4 TERMS OF PAYMENT. The Purchase Price shall be paid as follows:
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1.4.1 INITIAL STOCK PAYMENT. An initial stock payment of US
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$3,500,000 worth of Applied Digital, Inc. ("ADSX") Class A common
stock, $0.01 par value, shall be delivered at Closing by the Buyer
to the Shareholders ("Initial Stock Payment"). The Shareholders
acknowledge, understand and agree that the Initial Stock Payment
shall be applied towards the repayment of any Bonds not converted
into shares of the Company's common stock ("1st Repayment") and
towards the repayment of that certain loan with Mezzanin Kapital
A/S dated August 15, 2000 (the "Mezzanin Loan"), including any
expenses and fees associated with the repayment of the Mezzanin
Loan, as negotiated by the Management Shareholders with Mezzanin
Kapital A/S, whereby no further obligations under the Mezzanin Loan
exist and the Mezzanin Loan is cancelled ("2nd Repayment") to the
extent any such amounts are not paid with the proceeds of the Loan
referred to in paragraph 7.6. To the extent any stock remains
available after payment of such items, the Initial Stock Payment
shall be distributed among the Shareholders, pro rata based on the
number of Shares owned. The Shareholders further acknowledge,
understand and agree that the 1st Repayment and 2nd Repayment shall
be handled by the Company and that the distribution of the
remaining Initial Stock Payment between the Shareholders shall be
handled by the Management Shareholders. The Management Shareholders
understand and agree that to the extent required pay the 1st
Repayment and 2nd Repayment, they shall distribute the necessary
amounts from the Initial Stock Payment to the Company so that the
Company may make such repayments. The Shareholders further
acknowledge, understand and agree that any disputes arising from
the distribution of the Initial Stock Payment shall be handled by
and between the Shareholders, and that Buyer shall have no
liability in any dispute or claim related to such repayments,
allocations and distributions.
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The Shareholders acknowledge and agree that the ADSX shares to be
delivered pursuant hereto (the "ADSX Shares") will be unregistered
shares and shall be valued based on the 10-day "VWAP" (Volume
Weighted Average Price) of ADSX Class A common stock for the ten
(10) trading days on the NASDAQ Stock Market prior to Closing. The
Shareholders further acknowledge and agree that the ADSX shares
will be valued at the fixed conversion rate of 5.75 Danish Krones
per US $1.00 for purposes of determining the Purchase Price under
paragraph 1.3.1.
1.4.2 ADDITIONAL COVENANTS REGARDING ADSX STOCK DELIVERED. ADSX,
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parent corporation of Buyer, agrees to take commercially reasonable
best efforts to file a registration statement ("Registration
Statement") with the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as
amended, to register the ADSX Shares delivered to the Shareholders
at Closing within thirty (30) days after the Closing Date and to
cause such registration to become effective as soon as practicable.
If the ADSX Shares are not registered with the SEC within seven (7)
months after the filing of the Registration Statement, unless the
Registration Statement is still in the review process with the SEC,
the Shareholders shall have the right to repurchase from the Buyer
all, but not less than all, of the issued and outstanding Shares of
the Company by returning 100% of the ADSX Shares paid as the
Initial Stock Payment pursuant to paragraph 1.4.1 to the Buyer (the
"Buy Back Option"). Notwithstanding the foregoing, before the
Shareholders may exercise the Buy Back Option, the Buyer shall have
the right to pay the Shareholders a cash payment of $3,500,000,
whereby the Shareholders shall return 100% of the ADSX Shares paid
as the Initial Stock Payment pursuant to paragraph 1.4.1 to the
Buyer and the Buy Back Option will become void.
1.4.3 PAYMENT OF BALANCE OF PURCHASE PRICE OR BUYOUT PURCHASE
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PRICE. The balance of the Purchase Price, if any, or the Buyout
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Purchase Price shall be payable within fifteen (15) days of the
date the Purchase Price Calculation is finally determined under
paragraph 1.3.2(c) or the date of Buyout under paragraph 1.3.3, as
applicable, to the Shareholders, pro rata based on the number of
Shares held. The balance of the Purchase Price or the Buyout
Purchase Price shall be paid from the Escrow Amount, as described
under paragraph 1.4.4., with the balance, if any, in cash or
unregistered shares of Buyer's Common Stock, $.005 par value, or a
combination thereof, as determined in the sole discretion of Buyer,
but in no event will the amount of Buyer's Common Stock exceed
fifty (50%) of said amount. The value of the Buyer's common stock
shall be based on the VWAP for the 10 trading days prior to payment
and the conversion rate of US dollars into Danish Krone then
current on the date of the Purchase Price Calculation. The
Shareholders acknowledge, understand and agree that the
distribution of the balance of the Purchase Price or the Buyout
Purchase Price shall be handled by the Management Shareholders, and
any disputes arising from the distribution of the balance of the
Purchase Price or the Buyout Purchase Price shall be handled by and
between the Shareholders, and Buyer shall have no liability in any
dispute or claim related to such allocations and distributions. The
Shareholders acknowledge and agree that under no circumstances will
the Buyer's Common Stock applied towards the payment of the balance
of the Purchase Price or the Buyout Purchase Price exceed nineteen
and ninety-nine one hundredths (19.99%) percent of the outstanding
Common Stock of the Buyer.
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1.4.4 ESCROW OF BALANCE OF PURCHASE PRICE. The Buyer agrees that
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the balance of the Purchase Price, as determined pursuant to
paragraph 1.3 but for the period from the Closing Date to December
31st of the applicable year (the "Escrow Amount"), shall be placed
in escrow to secure the Buyer's obligation to pay the balance of
the Purchase Price pursuant to paragraph 1.4.3. The calculation of
the Escrow Amount shall be made each year on or prior to March 31
of the following year (the "Escrow Calculation"), with the first
Escrow Calculation made on or prior to March 31, 2006 for the
period from January 1, 2005 to December 31, 2005 ("First Escrow
Year"). The Escrow Amount shall be adjusted up or down each year
based on the current Escrow Calculation. The Escrow Amount may
consist of cash or unregistered shares of Buyer's Common Stock,
$.005 par value, or a combination thereof, as determined in the
sole discretion of Buyer, but in no event will the amount of
Buyer's Common Stock exceed fifty (50%) of said amount.
1.4.5 NON-PAYMENT OF BALANCE OF PURCHASE PRICE. If Buyer does not
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pay the balance of the Purchase Price pursuant to paragraph 1.4.3
by June 30, 2008 for any reason other than due to a dispute in the
Purchase Price Calculation and which dispute is in the process of
being resolved pursuant to paragraph 1.3.2., the Shareholders shall
have the right to either (a) repurchase from the Buyer all, but not
less than all, of the issued and outstanding Shares of the Company
for 100% of the Purchase Price previously received by the
Shareholders (the "Buy Back Option") or (b) receive the Escrow
Amount. If the Board of Directors of the Buyer has knowledge that
the Buyer will not be able to pay the balance of the Purchase Price
pursuant to paragraph 1.4.3, the Buyer shall notify the Shareholder
Representative as soon as practical and the Shareholders shall have
the right to either (a) exercise the Buy Back Option or (b) receive
the Escrow Amount.
ARTICLE 2.
REPRESENTATIONS, WARRANTIES AND COVENANTS
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OF THE MANAGEMENT SHAREHOLDERS
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In connection with and as an inducement to Buyer to enter into and be bound
by the terms of this Agreement, the Management Shareholders each hereby,
jointly and severally, represent, warrant and covenant to Buyer (except for
paragraph 2.1 whereby all Shareholders listed on Exhibit 1.1, as amended,
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including those Warrant Holders and Bond Holders that choose to exercise
their rights to acquire shares of the Company after the effective date of
this Agreement, hereby, jointly and severally, represent, warrant and
covenant to Buyer) as follows. For purposes of this Agreement, all
representations and warranties made "to the best of the Management
Shareholders' knowledge" shall be made based on the knowledge which a
reasonably prudent person would have that occupied a similar position and
had a similar ownership interest in the Company as the Shareholders,
assuming such investigation as a reasonably prudent person would undertake
in order to make such representations and warranties.
2.1 OWNERSHIP OF SHARES. The Shareholders, as listed on Exhibit 1.1, are the
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lawful owners of all of the issued and outstanding stock of the Company free
and clear of all liens, encumbrances, restrictions and claims of every kind
and that the Subsidiary shares are free from any charge and encumbrance and
are owned by the Company. The delivery to Buyer of the Shares pursuant to
the provisions of this Agreement will transfer to Buyer ownership of all of
the
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issued and outstanding shares of stock of the Company, together with valid
legal title thereto, free and clear of all liens, encumbrances, restrictions
and claims of every kind.
2.2 ORGANIZATION, STANDING AND POWER. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the
country of Denmark and has all requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on its
business as is now being conducted. The Company owns capital stock of each
of the subsidiaries listed on Exhibit 2.2 (hereinafter referred to
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separately as a "Subsidiary" or collectively as the "Subsidiaries"), in the
amounts and percentages described therein. To the Best Knowledge of the
Managing Shareholders, each of the Subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of their
respective formation. To the Best Knowledge of the Managing Shareholders,
each of the Company and its Subsidiaries is duly qualified or licensed as a
foreign corporation and is in good standing to do business in each
jurisdiction in which property is owned, leased or purchased by it, or the
nature of the business conducted by it, make such qualification or licensing
and good standing necessary, each such jurisdiction being listed on attached
Exhibit 2.2. The Management Shareholders have delivered to Buyer complete
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and correct certified copies of the Articles of Incorporation and the Bylaws
of the Company and each Subsidiary as currently in effect. The Company has
no ownership interest in any other entity. Neither the Company nor the
Subsidiaries have issued any dividend-yielding debt instruments or otherwise
given any third party the right to a share of the profit from the operations
of the Company or any Subsidiary. The Company has no subsidiaries other than
the subsidiaries shown in Exhibit 2.2 (the "Group Overview"), and no
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Subsidiary has set up branch outside of its home country.
2.3 STRUCTURE. The Company's share capital is DKK 5,548,500, the nominal
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value of DKK 50 per share, and owned by all the Shareholders. The share
capital of each Subsidiary and the holders of all outstanding shares are set
forth on attached Exhibit 2.3. Other than the Warrants and Bonds described
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in this Agreement, the Company and each Subsidiary has no outstanding
subscriptions, warrants, options, calls or commitments relating to its
stock; no obligations or securities convertible into or exchangeable for its
stock; no plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of stock other than as contemplated
by this Agreement; and no legend or other reference to any purported
encumbrance appears upon any certificate representing stock of the Company
or any Subsidiary. No third party has any purchase options or pre-emptive
rights with respect to the Shares or the Subsidiary Shares. The Register of
Shareholders of the Company, and the Register of the Shareholders of each
Subsidiary are correct, updated and in accordance with the Group Overview.
All outstanding shares of the Company's stock are validly issued, fully paid
and nonassessable and are owned by the Shareholders. All outstanding shares
of each Subsidiary are validly issued, fully paid and nonassessable and are
owned by the person(s) or entity listed on attached Exhibit 2.3. To the Best
-----------
Knowledge of the Managing Shareholders, none of the outstanding stock or
other securities of the Company or any Subsidiary was issued in violation of
applicable securities laws or any applicable administrative order, law,
ordinance, regulation, statute or treaty; and neither the Company nor any
Subsidiary owns, or has any contract to acquire, any stock or other
securities of any person or entity or any direct or indirect equity or
ownership interest in any other business.
-10-
2.4 AUTHORITY. The execution and delivery of this Agreement by the
---------
Shareholders and the consummation by the Shareholders and the Company of the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action on the part of the Company.
This Agreement constitutes the legal, valid and binding obligation of the
Shareholders, enforceable against each of the Shareholders in accordance
with its terms and conditions.
2.5 NO VIOLATION. Other than as disclosed herein, neither the execution and
------------
delivery by the Shareholders of this Agreement, consummation of the
transactions contemplated hereby nor compliance by the Shareholders and the
Company with any of the provisions hereof will:
2.5.1 Violate or conflict with any provision of the Articles of
Incorporation or Bylaws of the Company or any Subsidiary;
2.5.2 Violate or constitute a default under or give rise to any
right of termination, cancellation or acceleration under the terms,
conditions or provisions of any agreement or instrument to which
the Shareholders or the Company or any Subsidiary is a party or by
which any of them or any of their properties or assets is bound
except as has been duly and validly waived, consented to or
approved of by the other parties to such agreement or instrument;
2.5.3 Result in the creation or imposition of any security
interest, lien or other encumbrance upon any of the assets of the
Company or any Subsidiary or the Shares under any agreement or
commitment to which the Shareholders or the Company or any
Subsidiary is a party or by which the Shareholders or the Company
or any Subsidiary is bound or to which the Shareholders or any
assets of the Company or any Subsidiary are subject; or
2.5.4 Violate any statute or law or any judgment, order, decree,
regulation or rule of any court or governmental authority
applicable to the Shares or the Shareholders, the Company or any
Subsidiary or any of their assets.
2.5.5 Except as set forth on Exhibit 2.5, all consents and
-----------
approvals of third parties and governmental authorities required in
connection with the execution and delivery by the Shareholders of
this Agreement and the consummation by the Shareholders of the
transactions contemplated by this Agreement have been obtained.
2.6 FINANCIAL DOCUMENTS. As of the date of this Agreement, the Management
-------------------
Shareholders have furnished to Buyer the financial statements and other
financial documents of the Company indicated on attached Exhibit 2.6 (the
-----------
"Initial Financial Documents"). Such financial statements have been prepared
in English and U.S. Dollars and include acceptable auditor's consents so
that such Initial Financial Documents can be filed by Buyer with (and
accepted by) the SEC on the date of Closing, if necessary. In addition, as a
condition precedent to Closing, the Management Shareholders shall furnish to
Buyer the additional financial statements of the Company required pursuant
to paragraph 5.2.15. ("Additional Financial Documents")(the Initial
Financial Documents and the Additional Financial Documents shall be
collectively referred to as the "Financial Documents"). To the Best
Knowledge of the Managing Shareholders, the Financial
-11-
Documents are true and correct and fairly and accurately represent the
financial matters stated therein. To the Best Knowledge of the Managing
Shareholders, all financial statements included as part of the Additional
Financial Documents have been prepared in accordance with U.S. GAAP applied
on a consistent basis throughout the period specified therein, and all
financial statements included as part of the Financial Documents present the
financial condition of the Company and the Subsidiaries as of the date
specified therein and the results of their operations and cash flows for the
periods specified therein. To the Best Knowledge of the Managing
Shareholders, the Financial Documents do not include any material assets or
omit to state any material liability, absolute or contingent, or other
facts, the inclusion or omission of which would render the Financial
Documents, in light of the circumstances in which they are made, misleading.
The Cash Forecast prepared by L. Nordfjeld and discussed in detail with
Buyer's representatives, attached as Exhibit 2.6(A), has been prepared in
--------------
good faith, is a fair representation of the information provided and
reflects the Management Shareholders' current views based on historical
facts and future events.
2.7 ASSETS. To the Best Knowledge of the Managing Shareholders, the Company
------
and each of its Subsidiaries has, and on the Closing Date will have, good
and marketable title to all of its assets, free and clear of all mortgages,
pledges, liens, conditional sales agreements or other encumbrances of any
kind or nature whatsoever, and the Company and each of its Subsidiaries own
all of the assets used in the operation of the Company's and the
Subsidiaries' businesses, except as disclosed on attached Exhibit 2.7. To
-----------
the Best Knowledge of the Managing Shareholders, all of the Company's and
its Subsidiaries' assets are, and on the Closing Date will be, in reasonably
good operating condition, normal wear and tear excepted, and each is fit and
suitable for the purpose and use for which they were intended.
2.8 BOOKS, RECORDS AND ACCOUNTS. To the Best Knowledge of the Managing
---------------------------
Shareholders, all accounts, books, ledgers and official and other records of
whatsoever kind material to the business of the Company and its Subsidiaries
have been fully, properly and accurately kept and completed in all material
respects, there are no material inaccuracies or material discrepancies of
any kind contained or reflected therein, and collectively they fairly
present the financial position of the Company and its Subsidiaries. To the
Best Knowledge of the Managing Shareholders, the minute books of the Company
and its Subsidiaries, as made available to Buyer and its representatives,
contain complete and accurate records of all meetings and corporate actions
or written consents by the stockholders and board of directors of the
Company and its Subsidiaries. The Company and the Subsidiaries have taken
all steps required by company law, including that records have been kept,
general meetings have been held and financial statements and other
notifications and information have been filed with the Danish Commerce and
Companies Agency ("Erhvervs- og Selskabsstyrelsen") and corresponding
foreign authorities, and that no resolutions subject to the notification
requirement have been passed other than those registered with the Danish
Commerce and Companies Agency or a corresponding foreign authority. No
Subsidiary has held or convened any general meeting or Directors' meeting
since April 27, 2004 [NEW DATE?] except as disclosed on attached Exhibit
-------
2.8. To the Best Knowledge of the Managing Shareholders, the Company and its
- ---
Subsidiaries keep their records and books of account in conformity with
accounting principles consistently applied.
-12-
2.9 JUDGMENTS. To the Best Knowledge of the Managing Shareholders, there are
---------
no unsatisfied judgments of record against the Company or any of its
Subsidiaries.
2.10 UNDISCLOSED LIABILITIES. Except with respect to liabilities disclosed
-----------------------
on attached Exhibit 2.10 and other than liabilities incurred by the Company
------------
or any Subsidiary in the ordinary course of business since December 31,
2004, to the Best Knowledge of the Managing Shareholders, there are no
liabilities of any kind or character outstanding for which the Company or
any Subsidiary is or may be liable (whether absolute, accrued, contingent or
otherwise, and including, without limitation, liabilities as a guarantor or
otherwise with respect to the obligations of others) which are not reflected
in the December 31, 2004, financial statements of the Company or its
Subsidiaries.
2.11 NO ADVERSE CHANGE. Except as indicated on attached Exhibit 2.11, to the
----------------- ------------
Best Knowledge of the Managing Shareholders, since December 31, 2004, there
has not been any material adverse change in the condition, assets,
liabilities, revenues, income or business of the Company or any Subsidiary
or in its relationships with suppliers, dealers, customers or employees,
including, but not limited to:
2.11.1 Any increase in the wages, salaries, compensation, pension
or other benefits payable or to become payable by the Company or
any of its Subsidiaries to any of its directors, employees, agents
or contractors;
2.11.2 The declaration, authorization, payment or distribution of
any stock, cash or other dividend or distribution to any
Shareholder;
2.11.3 Any incurrence by the Company or any of its Subsidiaries of
any obligations or liabilities, whether absolute, accrued,
contingent or otherwise (including, without limitation, liabilities
as guarantor or otherwise with respect to obligations of others),
other than obligations and liabilities incurred in the ordinary
course of business;
2.11.4 Any discharge or satisfaction of any lien or encumbrance or
payment of any obligation or liability by either the Company or any
of its Subsidiaries other than current liabilities shown or
reflected on the December 31, 2004 consolidated financial
statements of the Company or liabilities incurred since December
31, 2004 in the ordinary course of business or the Repayments
described under paragraph 1.4.1;
2.11.5 Any issuance or agreement to issue any stock, bonds,
options, warrants or other securities of the Company or any of its
Subsidiaries;
2.11.6 The mortgage, pledge or subjection to lien, security
interest or any other encumbrance of any of the Company's or any
Subsidiary's assets, real or personal, tangible or intangible,
other than in the ordinary course of business;
2.11.7 The sale or transfer of any of the Company's or any
Subsidiary's tangible assets, or the cancellation or release of any
debts or claims, except, in each case, in the ordinary course of
business;
-13-
2.11.8 The sale, assignment, transfer or encumbrance by the Company
or any Subsidiary of any trademarks, trade names or other
intangible assets;
2.11.9 Any extraordinary losses incurred by the Company or any
Subsidiary;
2.11.10 The failure by the Company or any Subsidiary to take or
make any charges, write-offs, increases in bad debt reserves or
other adjustments in the Company's or any Subsidiary's accounts
receivable by reason of failure or inability to collect or
diminished prospects for collection of the Company's or any
Subsidiary's accounts receivable;
2.11.11 Any change in any method of accounting or practice
previously adopted or reflected in any of the Financial Documents;
2.11.12 Except as otherwise disclosed in this Agreement, the
occurrence of any event or condition of any character materially
and adversely affecting the Company's or any Subsidiary's business
or tax liabilities or any change in the condition of the Company's
or any Subsidiary's assets, liabilities or business, except changes
in the ordinary course of business;
2.11.13 Any entry by the Company or any Subsidiary into or
termination of any other transaction other than in the ordinary
course of business;
2.11.14 Any change in the indebtedness of the Company or any of its
Subsidiaries not in the ordinary course of business other than as
shown on the December 31, 2004 consolidated financial statements of
the Company or the Repayments described under paragraph 1.4.1;
2.11.15 Any failure by the Company or any Subsidiary to pay any
creditors in the course of said companies business in accordance
with past practices; or
2.11.16 Any modification of the terms or conditions of any lease
applicable to the Company or any of its Subsidiaries.
2.12 LEASES. The schedule of leases attached hereto as Exhibit 2.12 sets
------ ------------
forth a complete and correct description of all leases of real and personal
property to which the Company or any Subsidiary is a party. The Management
Shareholders have delivered to Buyer copies of all lease agreements
described in said Exhibit 2.12. To the best of the Management Shareholders'
------------
knowledge, each such lease agreement is in full force and effect and neither
the Company, any Subsidiary nor any other party to any such lease is in
default thereof and neither the Company, any Subsidiary nor any other party
to any such lease have committed any act which, if not remedied, would
result under any such lease in a default thereunder after notice, lapse of
time or both. None of the leases with any Subsidiary as the lessee has been
terminated with or without notice or breached, and that no notice has been
given of rent increases or other changes. To the best of the Management
Shareholders' knowledge, the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby will not cause or give
rise to any event of default under any of the lease agreements.
-14-
2.13 INSURANCE. A complete list and summary description of all insurance
---------
policies maintained by the Company and each of its Subsidiaries with respect
to their properties and businesses against loss or damage of any kind is set
forth on Exhibit 2.13. The policies listed on Exhibit 2.13 are in full force
------------ ------------
and effect; such policies are with financially sound and reputable insurers;
all premiums due thereon have been paid; the Shareholders, the Company and
each of its Subsidiaries have complied in all material respects with all
provisions of such policies; the Company, its Subsidiaries and the
Management Shareholders have not received any notice of cancellation,
termination or non-renewal of such policies; and the dollar amount of
coverage has not been reduced for any such policy except as set forth in
Exhibit 2.13. If requested by Buyer, the Management Shareholders agree to
- ------------
take all action reasonably necessary to enable Buyer to continue all such
policies of insurance with respect to the Company's and its Subsidiaries'
operations.
2.14 LITIGATION. Except as described on Exhibit 2.14 hereto, to the best of
---------- ------------
the Management Shareholders' knowledge, the Shareholders, the Company and
each of its Subsidiaries, and their respective assets, properties and
businesses, are not subject to any pending or threatened litigation, action,
suit or proceeding by or before any court, arbitrator or federal, state or
other governmental commission, board or other agency, or by any private
party.
2.15 CONTRACTS. Except as disclosed on Exhibit 2.15, and to the best of the
--------- ------------
Management Shareholders' knowledge:
(a) The Company and each of its Subsidiaries have
fulfilled all of their obligations required under the
Materials Contracts (as defined below) to have been
performed by Company and/or its Subsidiaries on or prior
to the Closing Date;
(b) There has not occurred any default under any of the
Material Contracts on the part of Company, any of its
Subsidiaries or any other party thereto, nor has any event
occurred which, with the giving of notice or the lapse of
time, or both, would constitute a default under any of the
Material Contracts on the part of Company, any of its
Subsidiaries or any other party thereto; and
(c) No consent of any party to any of the Material
Contracts is required for (i) the execution, delivery or
performance of this Agreement or (ii) the consummation of
the transactions contemplated hereby.
(d) Exhibit 2.15 contains a complete and accurate list,
------------
and Management Shareholders have delivered to Buyer true
and complete copies, of (collectively, the "Material
Contracts"):
(i) each contract that involves performance of
services or delivery of goods or materials by the
Company or any of its Subsidiaries in excess of
$25,000;
(ii) each contract that was not entered into in
the ordinary course of business;
-15-
(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale
agreement, and other contract affecting the
ownership of, leasing of, title to, use of, or
any leasehold or other interest in, any real or
personal property (except personal property
leases and installment and conditional sales
agreements having a value per item or aggregate
payments of less than $25,000 and with terms of
less than one year);
(iv) each licensing agreement or other contract
with respect to patents, trademarks, copyrights
or other intellectual property, including
agreements with current or former employees,
consultants or contractors regarding the
appropriation or the non-disclosure of any of the
Intellectual Property;
(v) each joint venture, partnership and other
contract (however named) involving a sharing of
profits, losses, costs or liabilities by the
Company or any of its Subsidiaries with any other
person or entity;
(vi) each contract containing covenants that in
any material way purport to restrict the business
activity of the Company or any of its
Subsidiaries or limit the freedom of the Company
or any of its Subsidiaries to engage in any line
of business or to compete with any person or
entity;
(vii) each contract providing for payments to or
by any person or entity based on sales, purchases
or profits other than direct payments for goods;
(viii) each contract entered into other than in
the ordinary course of business that contains or
provides for an express undertaking by the
Company or any of its Subsidiaries to be
responsible for consequential damages;
(ix) each contract for capital expenditures in
excess of $25,000 individually, or in the
aggregate;
(x) each written warranty, guaranty or other
similar undertaking with respect to contractual
performance extended by the Company or any of its
Subsidiaries other than in the ordinary course of
business;
(xi) each amendment, supplement and modification
(whether oral or written) in respect of any of
the foregoing; and
(xii) each debt agreement (including any
amendment thereto) applicable to the Company or
any Subsidiary.
(e) Except as set forth in Exhibit 2.15, no Shareholder
------------
(and no person related to a Shareholder) has or may
acquire any rights under, and no Shareholder has or may
become subject to any obligation or liability under, any
Material Contract that relates to the business of, or any
of the assets owned or used by, the Company or any of its
Subsidiaries.
-16-
(f) Except as set forth on Exhibit 2.15, each Material
------------
Contract identified or required to be identified herein is
in full force and effect and is valid and enforceable in
accordance with its terms.
(g) Except as set forth on Exhibit 2.15:
------------
(i) The Company and each of its Subsidiaries is,
and at all times has been, in full compliance in
all material respects with all applicable terms
and requirements of each Material Contract under
which the Company and each of its Subsidiaries
have or had any obligation or liability or by
which the Company and each of its Subsidiaries or
any of the assets owned or used by the Company
and each of its Subsidiaries is or was bound;
(ii) Each other person or entity that has any
obligation or liability under any Material
Contract under which the Company or any of its
Subsidiaries have any rights is in material
compliance with all applicable terms and
requirements of each such Material Contract;
(iii) As to acts and omissions of the Company or
any of its Subsidiaries or of other persons or
entities, no event has occurred or circumstance
exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or
any of its Subsidiaries or other person the right
to declare a default or exercise any remedy
under, or to accelerate the maturity or
performance of, or to cancel, terminate or
modify, any Material Contract; and
(iv) The Company and its Subsidiaries have not
given to or received from any other person, at
any time in the two (2) previous calendar years,
any notice or other communication (whether oral
or written) regarding any actual or alleged
violation or breach of, or default under, any
Material Contract.
(h) There are no renegotiations of or attempts to
renegotiate any material amounts paid or payable to the
Company or any of its Subsidiaries under current or
completed Material Contracts with any person or entities
and no such person or entity has made written demand for
such renegotiation.
(i) The Material Contracts relating to the sale, design,
manufacture or provision of products or services by the
Company and its Subsidiaries have been entered into in the
ordinary course of business and have been entered into
without the commission of any act alone or in concert with
any other person or entity, or any consideration having
been paid or promised, that is or would be in violation of
any law.
(j) Except as set forth on Exhibit 2.15, the Company and
------------
its Subsidiaries have not been notified (orally or in
writing) that any customer desires to return any product
ordered or has failed to pay (or indicated an intent not
to pay) for any products or services ordered.
-17-
2.16 TAXES.
-----
2.16.1 DEFINITION. "Tax" shall mean any tax or liability imposed or
----------
collected by any governmental entity, including specifically, but
without limiting the generality of the foregoing, federal, state,
county, local and foreign income, profits, franchise, gross
receipts, payroll, sales, use, employment, excise, value-added,
withholding, real estate and other taxes, duties or assessments,
together with any related interest, penalties and similar additions
and any secondary or indirect tax liability.
2.16.2 RETURNS. The Company and each of its Subsidiaries have duly
-------
and accurately prepared and filed any and all Tax returns and
reports required by federal, state, local and foreign taxing
authorities and all Taxes reflected thereon have been paid. The
Company and each of its Subsidiaries have paid any and all Taxes,
license fees and other charges levied, assessed or imposed upon the
business or any of the property of the Company and each of its
Subsidiaries, except those which are not yet due and payable. The
Company and each of its Subsidiaries have maintained adequate
accruals and reserves for any and all projected or deferred Taxes
and such amounts have been appropriately accrued for in the
Financial Documents. The intercompany pricing within the Company
and its Subsidiaries cannot be disputed by the Danish or any
foreign tax authorities under the rules on transfer pricing. To the
best of the Management Shareholders' knowledge, there are no other
Taxes of any kind or character for which the Company or any of its
Subsidiaries is or may be liable which are now past due or
delinquent or which are unpaid and unaccrued for on the Financial
Documents (for the periods specified therein).
2.16.3 EXAMINATIONS. To the best of the Management Shareholders'
------------
knowledge, there is no current, pending or threatened audit,
examination, investigation, demand or assessment with respect to
the Company or any of its Subsidiaries or any Tax for which the
Company or any of its Subsidiaries is or may be liable or has filed
a return. To the best of the Management Shareholders' knowledge, no
assets of the Company or any of its Subsidiaries are subject to any
encumbrance arising from any Tax, other than any liens provided
under applicable law prior to the time that the related Tax is due
and payable. To the best of the Management Shareholders' knowledge,
the Company and its Subsidiaries have not entered any agreement,
settlement, extension of statute of limitations or compromise of
any Tax matter. To the best of the Management Shareholders'
knowledge, the Company and each of its Subsidiaries have not
granted any person a power of attorney with respect to any Tax
matter.
2.16.4 EMPLOYEES. To the best of the Management Shareholders'
---------
knowledge, the Company and each of its Subsidiaries have withheld
and paid all applicable income, payroll, employment, unemployment,
social security and other taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
agent, creditor, independent contractor, stockholder or third
party, and has properly reported such amounts.
2.17 GUARANTEES. Except as described in Exhibit 2.17, the Company has no
---------- ------------
liability to any person as a guarantor, surety, co-signer, endorser,
co-maker, indemnitor or obligor, and no
-18-
Shareholder or any other person or entity has guaranteed or provided
collateral for any obligation of the Company or any Subsidiary.
2.18 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
------------------------------------
2.18.1 EMPLOYEES. Attached hereto as Exhibit 2.18.1 is a list of
--------- --------------
all the Company's and its Subsidiaries' employees (the
"Employees"), each Employees' current rate of pay, original date of
hire and severance pay, whether absolute or contingent. To the best
of the Management Shareholders' knowledge, Exhibit 2.18.1 also
--------------
indicates which Employees are represented by any labor organization
and are a party to any collective bargaining agreement. To the best
of the Management Shareholders' knowledge, there are no existing or
threatened labor disputes relating to the Company or any of its
Subsidiaries or the business of the Company and its Subsidiaries.
2.18.2 EMPLOYEE AGREEMENTS. Except as disclosed on Exhibit 2.18.2,
------------------- --------------
to the best of the Management Shareholders' knowledge, no Employee
or director of the Company or any of its Subsidiaries is a party
to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition or proprietary rights
agreement, between such Employee or director and any other person
that in any way materially and adversely affects or will affect (i)
the performance of his duties as an Employee or director of the
Company or any of its Subsidiaries, or (ii) the ability of the
Company or any of its Subsidiaries to conduct the business,
including any proprietary rights agreement with the Shareholders by
any such Employee or director.
2.18.3 EMPLOYEE BENEFIT PLANS. To the best of the Management
----------------------
Shareholders' knowledge, Exhibit 2.18.3 contains a complete and
--------------
accurate list of all welfare benefit plans and employee benefit
plans including pension, profit sharing, retirement, bonus or
deferred compensation plans or similar obligations applicable to
the Company's and its Subsidiaries' Employees ("Plans"), and
indicates whether the Company or any of its Subsidiaries makes or
is required to make any contributions to the Plans. The Management
Shareholders have delivered to Buyer true and complete copies of
all the Plans listed on Exhibit 2.18.3. To the best of the
--------------
Management Shareholders' knowledge, the Company and its
Subsidiaries and the Plans have complied at all times since the
Plans' inceptions, both as to form and operation, with all
applicable laws, regulations, orders, judgments, decrees, rules and
guidance regarding such Plans. No present Employees or former
employees are entitled to a pension or the like from the Company or
its Subsidiaries other than as stated in Exhibit 2.18.3. No
--------------
resigned employee or employee under notice is or claims to be
entitled to any compensation or damages from the Company and its
Subsidiaries as a result of termination of employment.
2.18.4 COMPLIANCE. To the best of the Management Shareholders'
----------
knowledge, the Company and its Subsidiaries are and have been in
compliance in all material respects with all laws, rules and
regulations involving wages or hours of employees; and all accrued
obligations of the Company and its Subsidiaries relating to the
Employees and all former employees of the Company and its
Subsidiaries, whether arising by operation of law, by contract or
by past service, including, but not limited to all vacation
benefits, unemployment compensation benefits, profit sharing or
retirement benefits, health and
-19-
other welfare benefits, or social security benefits, have been
satisfied, or will be satisfied by Company and its Subsidiaries
prior to the Closing Date or are reflected as accruals on the
Company's financial statements as of December 31, 2004.
2.19 EMPLOYMENT, AGENCY AND INDEPENDENT CONTRACTOR AGREEMENTS. To the best
--------------------------------------------------------
of the Management Shareholders' knowledge, Exhibit 2.19 contains a complete
------------
and accurate list of all written employment, collective bargaining and other
labor contracts (or oral employment contracts other than those terminable at
will) of the Company and its Subsidiaries as well as all confidentiality or
non-disclosure agreements, non-solicitation commitments, covenants not to
compete, guaranties of compensation or other agreements which the Company or
any of its Subsidiaries has entered into or otherwise become bound or
subject to (including oral agreements) with respect to its employees, agents
and/or independent contractors. The Management Shareholders have delivered
to Buyer true and complete copies of all the agreements listed on Exhibit
-------
2.19.
- ----
2.20 REAL ESTATE. Except as disclosed on attached Exhibit 2.20, the Company
----------- ------------
and its Subsidiaries own no other real estate and have or own no other
interest in any real estate.
2.21 COMPLIANCE WITH LAWS. To the best of the Management Shareholders'
--------------------
knowledge, the Company and its Subsidiaries have complied and comply in all
material respects with all statutes, regulations and other legislation
relating to its operations - including legislation on labor market, equal
rights, environment, working environment, planning, building, fire,
marketing, personal data, competition, companies, taxation and book-keeping
and EU legislation in force - and all terms and conditions laid down by the
authorities pursuant to such legislation. No applicable statutes,
regulations and other legislation, and no terms and conditions laid down by
the authorities prescribe any duty for the Company and its Subsidiaries to
change existing conditions which will cause any material expenses or
inconvenience. There are no pending cases in which authorities have disputed
the Company and its Subsidiaries' compliance in any material respect with
statutes, regulations or other legislation, including EU legislation. The
Company and its Subsidiaries have duly filed all reports with public
authorities, including the customs and tax authorities, required by the
current rules, and that such reports have been free from errors and
omissions other than negligible errors and omissions. The Company and its
Subsidiaries have not failed to make any notification under competition
legislation or EU legislation, and no such notification have been filed.
Furthermore, the Company has not been notified of any third party claims
that the Company and its Subsidiaries have violated any rules of law,
regulations or other legislation, including EU legislation.
2.22 INVESTMENTS. Except as disclosed on attached Exhibit 2.22 or with
----------- ------------
respect to Company Plan investments, to the best of the Management
Shareholders' knowledge, the Company does not own any other stock or other
equity, ownership or proprietary interest in any corporation, partnership,
association, trust, joint venture or other entity; and the Company and its
Subsidiaries do not have an agreement or right to acquire, directly or
indirectly, any equity interest or investment in any third party and are not
subject to any obligation or requirement to provide funds to or make an
investment in any third party.
2.23 INTELLECTUAL PROPERTY. The term "Intellectual Property" includes all
---------------------
intellectual property and technology owned, utilized or licensed by the
Company or any of its Subsidiaries, including,
-20-
but not limited to, computer software and programs, software in progress,
computer operating systems and applications, know-how, patents, patent
applications, trade names, registered and unregistered trademarks and
service marks and any applications therefor, copyrights, whether registered
or unregistered, copyright registrations and applications for any of the
foregoing, trade secrets or other confidential proprietary information. To
the best of the Management Shareholders' knowledge, Exhibit 2.23 contains an
------------
accurate and complete list of (i) all Intellectual Property, and (ii) all
licenses or similar agreements or arrangements to which the Company or any
of its Subsidiaries is a party as licensee of the Intellectual Property,
including without limitation any licenses, sublicenses and other agreements
pursuant to which Company or any of its Subsidiaries is authorized to use
any third party software ("Third Party Intellectual Property"). The
Management Shareholders shall cause the Company to take all actions
reasonably necessary to ensure that Buyer is granted the rights to use any
Third Party Intellectual Property on the same terms and conditions available
to Company or any of its Subsidiaries on or before the Closing Date. To the
best of the Management Shareholders' knowledge, except as specifically
disclosed on Exhibit 2.23:
------------
(a) Company and the Subsidiaries own or are licensed or
otherwise possess legally enforceable rights to use the
Intellectual Property free and clear of any Encumbrances
(excluding license obligations and lease obligations). All
charges and fees concerning applications for or registered
Intellectual Property Rights of the Company and its
Subsidiaries, cf. Exhibit 2.23, have been duly paid.
------------
(b) No claim or action with respect to the Intellectual
Property or Third-Party Intellectual Property (to the
extent arising out of any use, reproduction or
distribution of such Third-Party Intellectual Property by
or through Company or any of its Subsidiaries) has been
asserted or is pending or threatened by any person or
entity, nor are there any valid grounds for any claims (i)
to the effect that the sale, licensing or use of any
product as now used, sold or licensed or proposed for use,
sale or license by Company or any of its Subsidiaries
infringes on any right of any third party; (ii) regarding
infringement, or misappropriation or misuse with regards
to any Intellectual Property; (iii) against the use by
Company or any of its Subsidiaries of any Intellectual
Property; (iv) challenging the ownership, validity or
effectiveness of Intellectual Property; or (v) challenging
Company's or any Subsidiary's license or legally
enforceable right to use in any manner whatsoever any
Third-Party Intellectual Property. The Company and each of
its Subsidiaries will not be, as a result of the execution
and delivery of this Agreement by the Shareholders or the
performance of Shareholders' obligations hereunder, in
material violation of any Intellectual Property license,
sublicense or agreement.
(c) There is no unauthorized use, disclosure, infringement
or misappropriation of any Intellectual Property by any
employee of or consultant to or former employee of or
consultant to Company or any of its Subsidiaries or by any
third party.
(d) The Intellectual Property, other than any Third-Party
Intellectual Property, was developed entirely by the
employees or consultants to Company or its
-21-
Subsidiaries during the time they were employed by Company
or its Subsidiaries and such Intellectual Property does
not include any invention or other intellectual property
of such employees or consultants made prior to the time
such employees or consultants were employed by Company or
its Subsidiaries, nor any intellectual property of any
previous employer of such employees or consultants nor the
intellectual property of any other person or entity.
(e) The Company and each of its Subsidiaries have taken
all reasonable precautions up through the Closing Date to
preserve and defend the Intellectual Property. Every
employee of and consultant to the Company and each of its
Subsidiaries involved in product development for the
Company and each of its Subsidiaries have executed an
invention and proprietary rights assignment agreement in
favor of the Company or its Subsidiaries.
2.24 RESTRICTIVE DOCUMENTS. To the best of the Management Shareholders'
---------------------
knowledge, neither the Company, any of its Subsidiaries, nor any Shareholder
is subject to, or a party to, any charter, bylaw, mortgage, lien, lease,
license, permit, agreement, contract, instrument, order, judgment or decree,
or any law, rule, ordinance or regulation, or any other restriction of any
other kind or character which (i) adversely affects the business or
practices, operations or conditions of the Company or any of its
Subsidiaries or any of their assets or property, (ii) prevents consummation
of the transactions contemplated by this Agreement, compliance by the
Shareholders with the terms, conditions and provisions hereof or the
continued operation of the Company's and its Subsidiaries' business after
the Closing Date on substantially the same basis as previously operated, or
(iii) restricts the ability of the Company or any of its Subsidiaries to
acquire any property or conduct any business in any area.
2.25 RESIGNATION. For purposes hereof, "Key Employee" shall mean any Company
-----------
or Subsidiary employee whose total compensation during the prior year
exceeds $75,000. No Key Employee of the Company or any Subsidiary has
resigned since January 1, 2005 and, to the best of the Management
Shareholders' knowledge, no Key Employee plans to retire or resign during
the twelve-month period following the Closing Date or otherwise be
unavailable as an employee of the Company or any Subsidiary at compensation
substantially similar to such employee's present rate of compensation.
2.26 BANK ACCOUNTS AND POWERS OF ATTORNEY. Exhibit 2.26 is an accurate and
------------------------------------ ------------
complete list showing (i) the name and address of each bank or similar
organization in which the Company or any of its Subsidiaries has an account
or safe deposit box, the number of such account or any such box, and the
name of persons authorized to draw thereon or to have access thereto; and
(ii) the names of all persons, if any, holding power of attorney from the
Company and a summary statement of the terms thereof.
2.27 ACCOUNTS RECEIVABLE. To the best of the Management Shareholders'
-------------------
knowledge, all accounts receivable of the Company that are reflected on the
Financial Documents (the "Accounts Receivable") represent valid obligations
arising from sales actually made or services actually performed in the
ordinary course of business.
-22-
2.28 LICENSES, PERMITS AND AUTHORIZATIONS. To the best of the Management
------------------------------------
Shareholders' knowledge, Exhibit 2.28 contains a complete and accurate list
------------
of all licenses, franchises, permits and other governmental authorizations
held by the Company and its Subsidiaries (the "Licenses"). To the best of
the Management Shareholders' knowledge, the Licenses are valid, and the
Company and its Subsidiaries have not received any written notice that any
License is to be cancelled, terminated or not renewed. To the best of the
Management Shareholders' knowledge, the Licenses are all of the licenses,
permits and authorizations that are required by law for the operation of the
business of the Company and its Subsidiaries. To the best of the Management
Shareholders' knowledge, except as disclosed on Exhibit 2.28, all Licenses
------------
will continue to be in full force and effect immediately after consummation
of the transactions contemplated by this Agreement.
2.29 RELATED PARTY TRANSACTIONS. To the best of the Management Shareholders'
--------------------------
knowledge, other than as specified on Exhibit 2.29, as of the Closing Date,
------------
there will be no contracts between or loans to or from the Company or any of
its Subsidiaries and (i) any Shareholder, (ii) any of the Company's or its
Subsidiaries' officers or directors, or (iii) any of their affiliates.
2.30 INVENTORY. To the best of the Management Shareholders' knowledge,
---------
except as disclosed on Exhibit 2.30, the inventory of the Company consists
------------
of items of a quality and quantity usable or salable in the normal course of
business and, if salable, are salable in the ordinary course at a price not
less than the book value amounts therefor. Any inventory which is obsolete
or which is below standard quality has been written down to reliable market
value or aggregate reserves have been provided therefor.
2.31 ENVIRONMENTAL COMPLIANCE AND HAZARDOUS WASTE.
--------------------------------------------
2.31.1 DEFINITIONS. The following terms shall have the following
-----------
meanings:
(a) ENVIRONMENTAL LAWS. "Environmental Laws" shall mean
------------------
and include any applicable EU, Danish, any other
nationality applicable to the Company's Subsidiaries or
local statute, regulation or ordinance related to human
health or the environment including, without limitation,
any law, regulation or ordinance concerning the protection
and preservation of natural resources, air, water, noise
or soil pollution or contamination, or "Hazardous
Materials" use, generation, storage or disposal.
(b) HAZARDOUS MATERIALS. "Hazardous Materials" shall mean
-------------------
and include asbestos, urea formaldehyde, polychlorinated
biphenyls, nuclear fuel or materials, chemical waste,
radioactive materials, explosives, known carcinogens,
petroleum products or other pollutants, contaminants,
chemicals, materials or substances defined as "hazardous
waste," "hazardous substance," "hazardous constituent,"
"solid waste," or "toxic substance" or otherwise as
hazardous or as a pollutant or contaminant in, or the
release or disposal of which is regulated by, any
Environmental Law.
-23-
(c) REAL PROPERTY. "Real Property" shall mean all real
-------------
property owned or leased by the Company or any of its
Subsidiaries, including the real property leased by the
Company or any of its Subsidiaries as listed on Exhibit
-------
2.12.
----
2.31.2 SPECIFIC REPRESENTATIONS. To the best of the Management
------------------------
Shareholders' knowledge, except as provided on attached Exhibit
-------
2.31 hereto:
----
(a) No Hazardous Materials are located on, in, about or
under any of the Real Property and none of the Real
Property has ever been utilized for the storage,
manufacture, disposal, handling, transportation or use of
any Hazardous Materials.
(b) All permits, licenses and similar authorizations and
approvals necessary or required under all Environmental
Laws, including those for any Hazardous Materials stored,
used or manufactured within or on any of the Real
Property, have been obtained, are being complied with and
are in full force and effect, and the Company, its
Subsidiaries and the Shareholders have complied with all
other reporting, filing and other requirements under the
Environmental Laws.
(c) There are no existing and no proposed, threatened or
pending investigations, administrative proceedings,
litigation, regulatory hearings or other actions
concerning any of the Real Property alleging noncompliance
with or violation of any Environmental Law or relating to
any required environmental permits or licenses.
(d) None of the Real Property is listed or registered as a
hazardous waste site or listed in any other list,
schedule, log, inventory or record of hazardous waste
sites maintained by any applicable EU, Danish, any other
nationality applicable to the Company's Subsidiaries or
local agency.
(e) All reports and investigations commissioned or
otherwise received by the Company, its Subsidiaries or any
Shareholder concerning any of the Real Property and
relating to Hazardous Materials have been disclosed to
Buyer.
(f) There are not now, nor have there ever been, any
aboveground or underground storage tanks located on, in or
under any of the Real Property.
(g) There are not now, nor have there ever been, any wells
located on any of the Real Property.
(h) There are no other existing or potential liabilities
or claims of any kind or character, whether known or
unknown, whether definite, contingent or otherwise, for
which the Company, its Subsidiaries, any Shareholder or
any owner or occupant of any of the Real Property is or
may be liable or responsible arising from the violation of
any Environmental Law.
2.32 PRODUCT LIABILITY. To the best of the Management Shareholders'
-----------------
knowledge, except as disclosed on Exhibit 2.32 attached hereto, no defect or
------------
deficiency exists in any of the products or
-24-
services which have been sold or licensed by Company or any of its
Subsidiaries which could give rise to any material liabilities or claims for
product liability.
2.33 CUSTOMERS AND SUPPLIERS. To the best of the Management Shareholders'
-----------------------
knowledge, no customers or suppliers of the Company or its Subsidiaries
intend to cease purchasing from, selling to or dealing with Company or any
of its Subsidiaries, nor has any information been brought to the attention
of the Management Shareholders which might reasonably lead the Management
Shareholders to believe that any of Company's or its Subsidiaries' customers
or suppliers intend to alter in any material respect their purchases from,
sales to or dealings with the Company or any of its Subsidiaries or would
alter in any material respect their purchases from, sales to or dealings
with the Buyer in the event of the consummation of the transactions
contemplated hereby.
2.34 INSOLVENCY. To the best of the Management Shareholders' knowledge, no
----------
insolvency proceeding of any character, including without limitation,
bankruptcy, receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, affecting Company or any of its
Subsidiaries or the Shares is pending or threatened. To the best of the
Management Shareholders' knowledge, the Company and its Subsidiaries have
adequate liquidity to fund their respective cash requirements for the
foreseeable future without incurring additional Indebtedness except in the
ordinary course of business consistent with past practices or require
support from Buyer.
2.35 WARRANTY. Except as set forth on attached Exhibit 2.35, to the best of
-------- ------------
the Management Shareholders' knowledge, the Company and its Subsidiaries
have not made or given any express warranty or guaranty with respect to any
products or services manufactured, sold or provided by the Company or any of
its Subsidiaries, and the Company and its Subsidiaries have made adequate
reserve to cover all warranty cost or expense on the Company's financial
statements as of December 31, 2004.
2.36 DISTRIBUTION OF THE LOAN AND PURCHASE PRICE, CANCELLATION OF THE
----------------------------------------------------------------
WARRANTS AND BONDS AND REPAYMENT OF MEZZANIN LOAN AS OF CLOSING DATE. As of
- --------------------------------------------------------------------
the Closing Date, the proceeds from the Loan referenced in paragraph 7.6 and
the Initial Stock Payment received by the Shareholders on the Closing Date
shall simultaneously be distributed as required under paragraphs 7.6 and
1.4.1, and all the Warrants and Bonds will be either exercised or converted
into shares of the Company's common stock, repaid in full and/or cancelled
and the Mezzanin Loan, including any expenses and fees associated with the
Mezzanin Loan, will be repaid in full and cancelled. No Warrants or Bonds
will be outstanding and no further obligations under the Mezzanin Loan will
exist as of the Closing Date as discussed above.
2.37 DSD HOLDING A/S. In connection with the Division as defined under
---------------
paragraph 1.1.1, the Management Shareholders represent that the Division is
a separate transaction from, and does not negatively affect, the
transactions contemplated by this Agreement other than as described under
Exhibit 2.11. Further, the Management Shareholders represent that either no
- ------------
Claims have been filed in connection with the Division or, if Claims have
been filed, all Claims that have been filed have been paid in full and
settled; and the Management Shareholders represent that they do not expect
any Claims, or if Claims have been filed, that any additional Claims, will
be filed.
-25-
2.38 EXHIBITS, ETC. The Exhibits attached hereto are integral parts of this
-------------
Agreement and constitute representations and warranties of the Management
Shareholders to Buyer. Such Exhibits have been prepared in English and in
U.S. Dollars. The Managing Shareholders shall have the obligation to amend
the Exhibits as necessary to reflect current and accurate information as of
the Closing Date as such Exhibits shall be deemed to have been repeated and
reaffirmed, as amended, at the Closing. The Exhibits, as amended, shall
survive consummation of the purchase and sale contemplated by this
Agreement. Each representation and warranty of the Management Shareholders
in this Agreement shall have independent force and effect, and shall not be
affected by any other representation or warranty in this Agreement except by
specific reference; provided, however, that a disclosure of a given item on
one Exhibit shall be deemed made for purposes of all Exhibits, and it shall
not be necessary to repeat the disclosure of a given item on multiple
Exhibits.
2.39 BROKER OR FINDER. No person or persons assisted in or brought about the
----------------
negotiation of this Agreement in the capacity of broker or agent or finder
on behalf of the Shareholders.
2.40 DISCLOSURE. No representation or warranty of the Management
----------
Shareholders in this Agreement and no statement contained in this Agreement
or in any document delivered or to be delivered pursuant hereto contains or
will contain an untrue statement of material fact or omits or will omit to
state any material fact necessary to make the statements herein or therein
contained, in light of the circumstances under which made, not misleading;
it being understood that as used in this subparagraph "material" means
material to any individual statement or omission and in the aggregate as to
all statements and omissions. It is understood and acknowledged that Buyer
has been afforded the opportunity to and has inspected the books and records
of the Company; provided, however, this does not restrict the scope or
effect of any representation, warranty or covenant of the Management
Shareholders hereunder.
2.41 RELIANCE. The foregoing representations, warranties and covenants are
--------
made jointly and severally by the Management Shareholders with the knowledge
and expectation that Buyer is relying thereon. The foregoing
representations, warranties and covenants, together with any and all other
representations, warranties and covenants contained in this Agreement, shall
be deemed to have been repeated and reaffirmed at and as of the Closing Date
and shall survive consummation of the purchase and sale contemplated by this
Agreement.
ARTICLE 3.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
--------------------------------------------------
In connection with and as an inducement to the Shareholders to enter into
and be bound by the terms of this Agreement, Buyer hereby represents,
warrants and covenants to the Shareholders as follows:
3.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of Delaware.
3.2 AUTHORITY. Buyer has full power and authority to enter into, execute and
---------
deliver this Agreement and to consummate the transactions contemplated
hereby and any instruments or
-26-
agreements required herein. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding
obligation of Buyer according to its terms, enforceable against Buyer in
accordance with its terms. The execution of this Agreement by Buyer has been
duly authorized by the Board of Directors of Buyer.
3.3 NO VIOLATION. Neither the execution and delivery by Buyer of this
------------
Agreement, the consummation of the transactions contemplated hereby, nor
compliance by Buyer with any of the provisions hereof will:
3.3.1 Violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer;
3.3.2 Violate or constitute a default under or give rise to any
right of termination, cancellation or acceleration under the terms,
conditions or provisions of any agreement or instrument to which
Buyer is a party or by which Buyer or any of its properties or
assets are bound except as has been duly and validly waived,
consented to or approved of by the other parties to such agreement
or instrument; or
3.3.3 Violate any statute or law or any judgment, order, decree,
regulation or rule of any court or governmental authority
applicable to Buyer.
3.4 ACQUISITION OF SHARES. Buyer is acquiring the Shares for its own account
---------------------
and not to offer or sell the Shares as part of a public distribution, and
Buyer is not participating, directly or indirectly, in an underwriting of
any such public distribution. Buyer is aware that state and federal
securities laws impose restrictions on transferability of the Shares and
Buyer agrees to comply with such restrictions.
3.5 ADSX SHARES. Upon issuance to the Shareholders pursuant to paragraph
-----------
1.4.1 of this Agreement, the ADSX Shares delivered to the Shareholders at
Closing shall have been duly authorized, duly and validly issued and fully
paid and nonassessable.
3.6 BROKER OR FINDER. No person or persons assisted in or brought about the
----------------
negotiation of this Agreement in the capacity of broker or agent or finder
on behalf of Buyer.
3.7 DISCLOSURE. No representation or warranty by Buyer in this Agreement and
----------
no statement contained in this Agreement or in any other document delivered
or to be delivered pursuant hereto contains or will contain an untrue
statement of material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein contained, in light of
the circumstances under which made, not misleading; it being understood that
as used in this subparagraph "material" means material to any individual
statement or omission and in the aggregate as to all statements and
omissions.
3.8 RELIANCE. The foregoing representations, warranties and covenants are
--------
made by Buyer with the knowledge and expectation that the Shareholders are
relying thereon. The foregoing representations, warranties and covenants,
together with any and all other representations, warranties and covenants
contained in this Agreement, shall be deemed to have been repeated and
reaffirmed at and as of the Closing Date and shall survive consummation of
the purchase and sale contemplated by this Agreement.
-27-
ARTICLE 4.
OPERATIONS PENDING CLOSING
--------------------------
The Management Shareholders hereby represent, warrant and covenant to and
agree with Buyer that, from the date hereof to the Closing Date or the
termination of this Agreement, the Management Shareholders shall not cause
or allow the Company or any of its Subsidiaries to:
4.1 Fail to carry on its business in substantially the same manner as now
being conducted;
4.2 Fail to pay all liabilities in the ordinary course of business as due;
4.3 Except in the ordinary course of business, sell, transfer, lease,
mortgage, pledge or otherwise dispose of or encumber any of the Company's or
its Subsidiaries' assets or cancel any of the Company's or its Subsidiaries'
claims, unless prior written approval is given by the Buyer;
4.4 Fail to maintain and preserve the Company's and its Subsidiaries'
business, organization and goodwill and its existing relationships with its
respective customers and others having business relationships with them;
4.5 Incur any obligation or liability or enter into any transaction except
in the ordinary course of the Company's and its Subsidiaries' business,
unless prior written approval is given by the Buyer;
4.6 Fail to maintain in full force and effect the Company's and its
Subsidiaries' corporate existence, rights, licenses and franchises;
4.7 Pay or commit to pay any salary, fee or other compensation at a rate in
excess of that prevailing on December 31, 2004;
4.8 Fail to maintain all existing policies of insurance with respect to the
Company or any of its Subsidiaries in their present form and with their
present coverage;
4.9 Enter into any employment, agency or other contract or agreement with
respect to the performance of personal services which is not terminable by
the Company or its Subsidiaries without liability, on thirty (30) days or
less notice, unless prior written approval is given by the Buyer;
4.10 Utilize any employment agency, placement service or similar service for
the purpose of employing any personnel where the Company or any of its
Subsidiaries will be obligated to pay any fee or commission for such
service, unless prior written approval is given by the Buyer;
4.11 Fail to comply with any law, rule, regulation or final order applicable
to the Company or any of its Subsidiaries;
4.12 Pay or commit to pay any bonus or other incentive compensation to any
of the Company's or any of the Subsidiary's officers, directors or
employees;
-28-
4.13 Settle, dismiss or otherwise compromise in any manner any action,
proceeding or suit listed on Exhibit 2.14; or
------------
4.14 Make any capital expenditure or commitment for capital expenditures in
excess of $25,000, unless prior written approval is given by the Buyer.
The Management Shareholders will promptly notify Buyer of any material
change in the business, operations or financial condition of the Company or
any of its Subsidiaries.
ARTICLE 5.
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS. All of the
-------------------------------------------------------
agreements and obligations of the Shareholders under this Agreement are
subject to the fulfillment, on or prior to the Closing Date, of the
following conditions precedent, any or all of which may be waived, in whole
or in part, in writing by the Shareholders:
5.1.1 PERFORMANCE AND COMPLIANCE. Buyer shall have performed and
--------------------------
complied with all of the agreements, covenants and conditions
required by this Agreement to be performed or complied with by
Buyer on or prior to the Closing Date, and all of the
representations and warranties of Buyer under this Agreement shall
be true and correct in all material respects as of the Closing
Date.
5.1.2 NO TERMINATION. No party to this Agreement shall have
--------------
terminated this Agreement as permitted herein.
Satisfaction or waiver of any or all of the above conditions precedent shall
not in any manner reduce the scope of the representations, warranties and
covenants made by Buyer elsewhere in this Agreement or the right and ability
of the Shareholders to be indemnified for any misrepresentation, inaccurate
warranty or unfulfilled covenant.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All of the agreements and
--------------------------------------------
obligations of Buyer under this Agreement are subject to the fulfillment, on
or prior to the Closing Date, of the following conditions precedent, any or
all of which may be waived, in whole or in part, in writing by Buyer:
5.2.1 PERFORMANCE AND COMPLIANCE. The Shareholders shall have
--------------------------
performed and complied with all of the agreements, covenants and
conditions required by this Agreement to be performed or complied
with by the Shareholders on or prior to the Closing Date, and all
of the representations and warranties of the Shareholders under
this Agreement shall be true and correct in all material respects
as of the Closing Date.
5.2.2 NO TERMINATION. No party to this Agreement shall have
--------------
terminated this Agreement as permitted herein.
-29-
5.2.3 OPINION OF THE SHAREHOLDERS' COUNSEL. Buyer and its counsel
------------------------------------
shall have been furnished with an opinion of legal counsel
substantially in the form provided on attached Exhibit 5.2.3
-------------
("Opinion of the Shareholders' Counsel").
5.2.4 EMPLOYMENT AGREEMENTS. The Company and the Key Employees
---------------------
shall each have executed and delivered to Buyer their respective
employment agreement substantially in the form attached hereto as
Exhibit 5.2.5-1 or Exhibit 5.2.5-2 (the "Employment Agreements").
--------------- ---------------
5.2.5 LEASE AGREEMENT. Buyer and L. Nordfjeld shall have entered
---------------
into a mutually acceptable lease agreement for the Company's leased
premises that shall replace the existing lease with respect to
these premises (the "Lease Agreement").
5.2.6 PERSONAL GUARANTEES. Buyer shall have been furnished evidence
-------------------
in form and content satisfactory to Buyer, in its sole and absolute
discretion, of the release of all personal guarantees executed by
the Shareholders in connection with the financing provided to the
Company or any of its Subsidiaries and that the Company and its
Subsidiaries have not guaranteed any obligation of any of the
Shareholders (the "Guarantee Releases").
5.2.7 CONSENTS AND APPROVALS. Buyer shall have been furnished all
----------------------
third party consents and approvals in form and content satisfactory
to Buyer, in its sole and absolute discretion, required by the
Company to consummate the transactions contemplated hereby (the
"Consents").
5.2.8 NO CLAIM REGARDING SHARE OWNERSHIP. There must not have been
----------------------------------
made or threatened by any Person any credible claim asserting that
such person (a) is the holder or beneficial owner of, or has the
right to acquire or obtain beneficial ownership of, any stock or
other equity or ownership interest in the Company; or (b) is
entitled to any portion of the Purchase Price payable for the
Shares.
5.2.9 RECEIPT OF ADSX SHARES. Buyer shall have received from ADSX
----------------------
the ADSX Shares to be delivered to Shareholders pursuant to this
Agreement.
5.2.10 NO ADVERSE CHANGES. There shall have been no material
------------------
adverse change since the date of the most recent Balance Sheet
included within the Financial Statements in the business or the
assets, except changes contemplated, permitted or required by this
Agreement.
5.2.11 NO LEGAL RESTRAINTS. No statute, rule, regulation or order
-------------------
of any court or administrative agency or claim of any third party
shall be in effect which restrains, prohibits or otherwise
interferes with any of the Shareholders consummating the
transactions contemplated hereby.
5.2.12 OUTSTANDING BANK LOANS. The lenders of certain bank loans to
----------------------
the Company identified on Exhibit 5.2.12 ("Bank Loans") have either
--------------
agreed to extend the terms of such Bank Loans for a period of three
years from the Closing date or agreed to permit the
-30-
Company to reborrow any amounts repaid under the Bank Loans during
the EBITDA Period on the same terms as the applicable Bank Loans.
5.2.13 LIMITATION ON NUMBER OF ADSX SHARES ISSUED. The number of
------------------------------------------
ADSX Shares to be issued shall not exceed nineteen and ninety-nine
one hundredths percent (19.99%) of the outstanding Class A common
stock of ADSX.
5.2.14 DISTRIBUTION OF THE LOAN AND PURCHASE PRICE, CANCELLATION OF
------------------------------------------------------------
THE WARRANTS AND BONDS AND REPAYMENT OF MEZZANIN LOAN AS OF THE
---------------------------------------------------------------
CLOSING DATE. As of the Closing Date, the proceeds from the Loan
------------
and the Initial Stock Payment received by the Shareholders on the
Closing Date shall simultaneously be distributed as required under
paragraphs 7.6 and 1.4.1 and all the Warrants and Bonds will be
either exercised or converted into shares of the Company's common
stock, repaid in full and/or cancelled and the Mezzanin Loan,
including any expenses and fees associated with the Mezzanin Loan,
will be repaid in full and cancelled. No Warrants or Bonds will be
outstanding and no further obligations under the Mezzanin Loan will
exist as of the Closing Date as discussed above.
5.2.15 RECEIPT OF ADDITIONAL FINANCIAL STATEMENTS. The Buyer shall
------------------------------------------
have received the Additional Financial Statements of the Company as
listed on Exhibit 5.2.15, prepared in English, in U.S. Dollars, in
a form reconciled to U.S. GAAP and in accordance with SEC rules and
regulations together with acceptable auditor's consents so that
such Additional Financial Statements can be filed by Buyer with
(and accepted by) the SEC on the date of Closing.
5.2.16 NO CLAIMS IN CONNECTION WITH THE DIVISION. No Claims have
-----------------------------------------
been filed in connection with the Division, or, if Claims have been
filed, that all the Claims have been paid in full and have been
settled.
Satisfaction or waiver of any or all of the above conditions precedent shall
not in any manner reduce the scope of the representations, warranties and
covenants made by the Shareholders elsewhere in this Agreement or the right
and ability of Buyer to be indemnified for any misrepresentation, inaccurate
warranty or unfulfilled covenant.
ARTICLE 6.
DELIVERY OF DOCUMENTS
---------------------
On the Closing Date, Buyer, as one party, and the Shareholders, as another
party, shall execute and deliver to each other the following documents,
instruments and agreements, together with such other documents, instruments
and agreements as the other party may reasonably request to consummate the
purchase and sale contemplated hereby:
6.1 BY BUYER TO THE SHAREHOLDERS. Buyer shall deliver the following to the
----------------------------
Shareholders:
6.1.1 INITIAL STOCK PAYMENT. Delivery of Initial Stock Payment to
---------------------
the Shareholders as required in paragraph 1.4.1.
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6.1.2 EMPLOYMENT AGREEMENTS. The Employment Agreements, duly
---------------------
executed by the Company.
6.1.3 THE LEASE AGREEMENT. The Lease Agreement, duly executed by
-------------------
Buyer.
6.1.4 AUTHORIZING RESOLUTIONS. A copy, certified by the Chief
-----------------------
Executive Officer or Chief Financial Officer of Buyer, of the duly
adopted resolutions of the Board of Directors of Buyer approving
this Agreement and authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby.
6.1.5 CLOSING CERTIFICATE. A certificate executed by the Chief
-------------------
Executive Officer or Chief Financial Officer of Buyer, dated as of
the Closing Date, to the effect that the representations and
warranties made by Buyer in this Agreement are accurate in all
material respects on and as of the Closing Date with the same force
and effect as though such representations and warranties had been
made on or given as of the Closing Date and that Buyer has
performed and complied with all of its covenants and obligations
under this Agreement.
6.2 BY THE SHAREHOLDERS TO BUYER. The Shareholders shall deliver the
----------------------------
following to Buyer:
6.2.1 SIGNATURE PAGES FOR ADDITIONAL SHAREHOLDERS. The Shareholders
-------------------------------------------
shall deliver to Buyer the Signature Pages of this Agreement
executed by those Shareholders who were Warrant Holders and Bond
Holders that choose to exercise their rights to acquire shares of
the Company after the effective date of this Agreement, so that all
Shareholders hereafter listed on Exhibit 1.1 to this Agreement have
-----------
become party to this Agreement.
6.2.2 EVIDENCE OF STOCK TRANSFER. The Shareholders shall deliver to
--------------------------
Buyer proof that the Shares have been registered in the name of the
Buyer on the stock register of the Company, so as to evidence the
transfer to Buyer all rights, title and interest in and to all the
shares of the issued and outstanding stock of the Company (the
Shares), free and clear of all liens, encumbrances, proxies or
other interests.
6.2.3 EMPLOYMENT AGREEMENTS. The Employment Agreements, duly
---------------------
executed by each of the Key Employees.
6.2.4 THE LEASE AGREEMENT. The Lease Agreement, duly executed by L.
-------------------
Nordfjeld and the Company.
6.2.5 OPINION OF THE SHAREHOLDERS' COUNSEL. Buyer and its counsel
------------------------------------
shall be furnished with the Opinion of the Shareholders' Counsel in
substantially the form provided on attached Exhibit 5.2.3.
-------------
6.2.6 RESIGNATIONS. Resignations from all officers and directors of
------------
the Company, and each of its Subsidiaries personally signed by such
individuals.
6.2.7 PERSONAL GUARANTEES. Buyer shall be furnished with the
-------------------
Guarantee Releases.
6.2.8 CONSENTS AND APPROVALS. Buyer shall be furnished with the
----------------------
Consents.
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6.2.9 AUTHORIZING RESOLUTIONS. A copy, certified by the Chief
-----------------------
Executive Officer or Chief Financial Officer of the Company, of the
duly adopted resolutions of the Board of Directors of the Company
approving this Agreement and authorizing the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby.
6.2.10 CLOSING CERTIFICATE. A certificate executed by the
-------------------
Shareholders, dated as of the Closing Date, to the effect that the
representations and warranties made by Shareholders in this
Agreement are substantially accurate in all material respects on
and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on or given as of
the Closing Date and that Shareholders have performed and complied
with all of their covenants and obligations under this Agreement.
ARTICLE 7.
ADDITIONAL COVENANTS OF THE PARTIES
-----------------------------------
7.1 EMPLOYEES. From and after the Closing Date, the Management Shareholders
---------
shall use their best efforts to ensure that the Company and all of its
Subsidiaries retain all of their employees as of the Closing Date and for
the six (6) month period thereafter.
7.2 ALLOCATION OF RESPONSIBILITY. The Management Shareholders shall jointly
----------------------------
and severally bear all responsibility for, and indemnify and hold harmless
Buyer from and against, any liabilities, obligations or claims resulting or
arising from facts and circumstances or other occurrences related to the
Company's and its Subsidiaries' business and operations on or prior to the
Closing Date.
7.3 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, Buyer and the
--------------------
Shareholders must mutually agree and will cooperate on any press release or
other public announcement (including any announcement to employees) relating
to the subject matter of this Agreement.
7.4 MUTUAL COOPERATION. Subsequent to the Closing Date, Buyer and the
------------------
Shareholders, at the request of the other, shall each execute, deliver and
acknowledge all such further instruments and documents and do and perform
all such other acts and deeds as may be reasonably required to consummate
the transactions contemplated by this Agreement and to carry out the purpose
and intent of this Agreement.
7.5 BOARD POSITION. From and after the Closing Date and until the date the
--------------
Buyer pays the balance of the Purchase Price or Buyout Purchase Price
pursuant to paragraph 1.4.3 or the Shareholders elect to exercise a Buy Back
Option pursuant to paragraph 1.4.2 or elect to receive the Escrow Amount
pursuant to paragraph 1.4.5, the Shareholders shall have the right to
nominate one (1) person reasonably acceptable to the Buyer to be elected as
a Director of the Company's Board of Directors ("Shareholder Director
Designee"). The Buyer will from time to time vote or cause to be voted, at
any special meeting or annual meeting of the shareholders or in connection
with a solicitation of proxies or execution of written consents, all Shares
of the Company's voting stock now or hereafter beneficially owned by the
Buyer or over which the
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Buyer now or hereafter exercises voting control, and will take or cause to
be taken all other necessary or desirable actions within the Buyer's direct
or indirect control, to elect the Shareholder Director Designee, remove any
such Shareholder Director Designee or fill any vacancies created by the
resignation or removal of any such Shareholder Director Designee, all as
directed by the Shareholder Representative. The Shareholders consent to and
approve the initial nomination of L. Nordfjeld as the Shareholder Director
Designee.
7.6 LOAN. At Closing, Buyer shall provide to the Company up to $1,000,000 in
----
the form of a loan (the "Loan"). The Loan shall be due and payable on the
date that is the three year and three month anniversary date of Closing and
shall bear interest at the rate of the Prime Rate or Reference Rate
published by Wells Fargo Bank, N.A. plus one (1%) percent or the equivalent
LIBOR based amount. Interest on such loan shall be paid quarterly. The Loan
shall be subordinate to the Bank Loans identified on Exhibit 5.2.12.
--------------
The Shareholders acknowledge, understand and agree and shall cause
the Company to use the proceeds of the Loan to repay all debt obligations of
the Company to SFK Technology Holding A/S resulting from the Division as
defined under paragraph 1.1.1; secondly for satisfying the 1st Repayment and
the 2nd Repayment, as described in paragraph 1.4.1 and lastly, if any
amounts remain, for additional working capital and general corporate
purposes. If the Loan is not repaid in full by the Company when the Purchase
Price Calculation is determined pursuant to paragraph 1.3.2, the Loan, to
the extent that the Loan has not been repaid, shall be classified as
Indebtedness for the purpose of the Purchase Price Calculation.
ARTICLE 8.
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION BY THE MANAGEMENT SHAREHOLDERS. The Management
----------------------------------------------
Shareholders, (including any entity which holds the Shares on behalf of the
Management Shareholders, specifically including LANO Holding ApS for L.
Nordfjeld and LATO ApS for T. Jordfjeld) jointly and severally, shall
indemnify and hold harmless Buyer, its affiliates and their respective
officers, directors, employees, agents, successors and assigns against any
and all liabilities, losses, damages, claims, costs, expenses, interest,
awards, judgments and penalties, including, without limitation, related
attorney and consultant fees and expenses (hereinafter collectively a
"Loss"), actually suffered or incurred by them, arising out of, relating to
or resulting from (a) the breach of any representation or warranty made by
the Management Shareholders in this Agreement, other than the representation
under paragraph 2.1, Ownership of Shares, (b) the breach by the Management
Shareholders of any of their covenants or agreements in this Agreement, (c)
the misrepresentation in or omission from any certificate, exhibit,
schedule, statement or other information furnished to Buyer, (d) any aspect
of the operation of the Company or any of its Subsidiaries prior to the
Closing Date or (e) the distributions of the Purchase Price pursuant to
paragraph 1.4.1 and the final payment under paragraph 1.4.3 (all such Losses
being referred to herein collectively as the "Buyer Losses").
8.2 INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders, including the
-----------------------------------
Management Shareholders, jointly and severally, shall indemnify and hold
harmless Buyer, its affiliates and their respective officers, directors,
employees, agents, successors and assigns against any and all Buyer Losses
actually suffered or incurred by them arising out of or resulting from the
breach of
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the representation under paragraph 2.1, Ownership of Shares, made by the
Shareholders in this Agreement.
8.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless the
------------------------
Shareholders, their affiliates and their respective officers, directors,
employees, agents, successors and assigns against any and all Losses
actually suffered or incurred by them arising out of or resulting from (a)
the breach of any representation or warranty made by Buyer in this
Agreement, (b) the breach by Buyer of any of its covenants or agreements in
this Agreement or (c) any liability arising out of the operation of the
Company by Buyer on or after the Closing Date.
8.4 NOTICE AND OPPORTUNITY TO DEFEND. For purposes of this Section 8.4, a
--------------------------------
party seeking indemnification shall be considered the "Indemnified Party"
and the party from whom indemnification is sought shall be considered the
"Indemnifying Party." Each party shall promptly, and in all events within
one hundred and twenty (120) days of the Management Shareholders, if the
Management Shareholders are the Indemnified Party, or the Chief Executive
Officer or Chief Financial Officer of the Buyer, if the Buyer is the
Indemnified Party, obtaining actual knowledge thereof, notify the
Indemnifying Party of the existence of any claim, demand or other matter
requiring a defense to which the Indemnifying Party's obligations under this
Article would apply. The Indemnified Party shall give the Indemnifying Party
a reasonable opportunity to defend the claim, demand or matter at the
Indemnifying Party's own expense and with counsel selected by the
Indemnifying Party and satisfactory to the Indemnified Party; provided that
the Indemnified Party shall at all times also have the right to fully
participate in the defense at its own expense. Any such claim, demand or
other matter shall not be settled or compromised without the consent of the
Indemnified Party; provided, however, if the Indemnified Party does not
consent to such settlement or compromise, such claim, demand or other matter
shall not be settled or compromised, but the Indemnifying Party's obligation
to indemnify with respect hereto shall be limited to the amount for which
such claim, demand or other matter could have been settled or compromised,
together with the cost of defense through the date such matter could have
been settled or compromised. If the Indemnifying Party shall, within a
reasonable time after receipt of notice, fail to defend, the Indemnified
Party shall have the right, but not the obligation, to undertake the
defense, and to compromise or settle, exercising reasonable business
judgment, the claim, demand or other matter on behalf, for the account and
at the risk of the Indemnifying Party. If the claim is one that cannot by
its nature be defended solely by the Indemnifying Party (including, without
limitation, any federal or state tax proceeding), the Indemnified Party
shall make available, or cause to be made available, all information and
assistance that the Indemnifying Party may reasonably request.
8.5 SET-OFF. Without limiting any of the other rights Buyer may have at law
-------
or in equity to recover from the Shareholders in respect of any Buyer Loss,
Buyer may set off an amount equal to the Buyer's reasonable estimate of such
Buyer Loss against any payment or payments coming due or deliveries required
by this Agreement including, without limitation, any delivery of additional
securities or any cash payments; provided, however, to the extent that the
Buyer exercises its right of set-off with respect to amounts that are
ultimately determined (through litigation, arbitration, settlement or
otherwise) to be due to the Shareholders, Buyer shall promptly pay to Seller
such amounts, together with interest thereon at the rate of six percent
(6.0%) per annum from their original due date.
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8.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------------------
warranties set forth in paragraph 1.1.1, Article 2 and Article 3 shall
survive the Closing for a period of three (3) years from the Closing Date
(the "1st Expiration Date"). In addition, the rights and obligations of the
Management Shareholders to appropriately distribute the Buyout Purchase
Price or the balance of the Purchase Price payment set forth in paragraphs
1.3.3 and 1.4.5 shall survive for a period of three (3) years from the date
of payment of the Buyout Purchase Price or the end of the EBITDA Period, as
the case may be (the "2nd Expiration Date") (The 1st Expiration Date and the
2nd Expiration Date shall be collectively referred to herein as the
"Expiration Date.") Notwithstanding anything in this Article 8 to the
contrary, an Indemnifying Party's indemnification obligations under Article
8 shall not terminate as of the Expiration Date with respect to any claims
for indemnification to which the Expiration Date would otherwise be
applicable which are asserted in writing prior to the Expiration Date and
have not been finally resolved prior to the Expiration Date.
8.7 LIMITATION OF LIABILITY. Any indemnification right resulting under this
-----------------------
Article 8, except those indemnification rights resulting from Claims
described under paragraph 1.1.1 and the second sentence under paragraph
2.37, shall be subject to reaching a minimum aggregate obligation (the
"Threshold") of One Hundred Thousand Dollars ($100,000) in claims, with each
claim subject to a minimum obligation of Twenty Thousand ($20,000) ("Claim
Threshold"), whereupon the entire aggregate amount of all obligations and
liabilities in excess of One Hundred Thousand Dollars ($100,000) shall be
immediately due and payable. If more than one claim exists regarding the
same event in which an indemnification obligation arises, all such claims
shall be aggregated to meet the Claim Threshold. By way of example, if the
following claims exist (i) one claim for $85,000 in connection with a breach
of the representation listed under paragraph 2.1, (ii) four claims for
$5,000 each in connection with a breach of the representation listed under
paragraph 2.3, (iii) one claim for $19,000 in connection with a breach of
the representation listed under paragraph 2.11.1 and (iv) one claim for
$5,000 in connection with a breach of the representation under paragraph
2.11.8, the claims under (i) and (ii) have each met the Claim Threshold
while the claims under (iii) and (iv) have not; however, the Threshold has
been met by aggregating the claims under (i) and (ii). Further, the maximum
aggregate amount required to be paid to the Buyer as the Indemnified Party
by the Management Shareholders as the Indemnifying Party under this Article
8, specifically pursuant to paragraph 8.1, shall not exceed 75% of that
portion of the Purchase Price received by the Management Shareholders (the
"Management Shareholders' Indemnification Ceiling"). Notwithstanding the
foregoing, the Threshold and the Management Shareholders' Indemnification
Ceiling shall not apply to any claim related to a breach of representation,
warranty or covenant where the Indemnifying Party had actual knowledge of
such breach at Closing and intentionally and willfully failed to disclose
such breach. The maximum amount required to be paid to the Buyer as the
Indemnified Party by a Shareholder, including a Management Shareholder, as
the Indemnifying Party under this Article 8, specifically pursuant paragraph
8.2, shall not exceed 100% of that portion of the Purchase Price received by
that Shareholder.
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ARTICLE 9.
TERMINATION
-----------
This Agreement may be terminated and the transactions contemplated hereby
abandoned at any time prior to the Closing Date:
9.1 By mutual written consent of the Shareholders and Buyer; or
9.2 By the Shareholders (as one party) or by Buyer (as another party) upon
written notice thereof to the other party if:
9.2.1 The purchase and sale contemplated hereby has not been
consummated by a date sixty (60) days after the date of this
Agreement, unless such purchase and sale has not been so
consummated because of, or as a result of, any actions or failure
to act on the part of the party seeking to terminate this Agreement
pursuant to this Section 9.2.1; or
9.2.2 There has been a failure by the other party to perform or
comply with any material agreement, covenant or condition herein
required to be performed or complied with by such other party
within the time required and such failure has continued for thirty
days following written notice thereof to such other party,
provided, however, such cure period shall not extend beyond the
expiration of the sixty (60) day period referenced in Section 9.2.1
above.
In the event of termination of this Agreement by either party pursuant to
this Article 9, this Agreement shall be of no further force or effect and
neither party shall have any liability to the other as a result of such
termination except where such termination results from a willful and
material breach of this Agreement.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
------------------------
10.1 NOTICES. All notices, offers, requests or other communications from
-------
either of the parties hereto to the other shall be in writing and shall be
considered to have been duly delivered or served on the date of meeting if
sent by first class certified mail, return receipt requested, postage
prepaid, to the party at its address as set forth below or to such other
address as such party may hereafter designate by written notice to the other
party:
If to Buyer, to:
Digital Angel Corporation
490 Villaume Avenue
South Saint Paul, Minnesota 55075
Attn: Kevin N. McGrath, CEO
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With a copy to:
Winthrop & Weinstine, P.A.
Suite 3500
225 South Sixth Street
Minneapolis, MN 55402
Attn: Philip T. Colton
If to the Shareholders, to:
Lasse Nordfjeld
28 Gronnegangen
DK-3070 Snekkersten
With a copy to:
Lassen Ricard
31Amaliegade
DK-1256 Copenhagen K
Attn: Peter Lambert
10.2 GOVERNING LAW. Provisions of this Agreement specifically dealing with
-------------
the Purchase Price and the issuance and registration of ADSX Shares,
specifically paragraphs 1.3 (except 1.3.1(v)) and 1.4 (collectively, the
"Buyer's Provisions"), shall be deemed to be a contract made under the laws
of the State of Minnesota, United States and for all purposes such Buyer's
Provisions shall be construed in accordance with and governed by the laws of
such state, excluding any choice of laws provisions or conflict of laws
principles which would required reference to the laws of any other
jurisdiction. As to all other provisions of this agreement, specifically
paragraph 1.3.1(v) and Articles 2, 3 and 4 (the Company's Provisions"), such
Company's Provisions shall be deemed to be a contract made under the laws of
Denmark and for all purposes the Company's Provisions shall be construed in
accordance with and governed by the laws of such country, excluding any
choice of laws provisions or conflict of laws principles which would
required reference to the laws of any other jurisdiction.
10.3 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
--------------------------------
enforce any of the Buyer's Provisions under, or based on any right arising
out of, this Agreement shall be brought against any of the parties in the
Courts of the State of Minnesota, United States, Ramsey County, or the
United States District Court for the District of Minnesota (collectively,
the "US Courts"), and each of the parties hereto consents to the
jurisdiction of such US Courts (and the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Any action or proceeding seeking to enforce any of the Company's Provisions
under, or based on any right arising out of, this Agreement shall be brought
against any of the parties in the Maritime and Commercial Court ("Denmark
Court"), and each of the parties hereto consents to the jurisdiction of such
Denmark Court (and the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. If a party seeks
to enforce any of the Buyer's Provisions in a US Court, then such party may
also seek, in good faith, enforcement of any additional Company's Provisions
in the same US Court at such time
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with Danish law applied to such Company's Provisions as provided under
paragraph 10.2. In the alternative, if a party seeks to enforce any of the
Company's Provisions in a Denmark Court, then such party may also seek, in
good faith, enforcement of any additional Buyer's Provisions in the same
Denmark Court at such time with Minnesota law applied to such Buyer's
Provisions as provided under paragraph 10.2. Process in any action or
proceeding referred to in the preceding sentences may be served on any party
hereto anywhere in the world.
10.4 ASSIGNMENT. No party to this Agreement may assign or transfer this
----------
Agreement, either directly or indirectly, without the prior written consent
of the other party to this Agreement, except that Buyer may assign all or
part or Buyer's interest in this Agreement to an entity controlling,
controlled by or under common control with Buyer so long as Buyer retains
responsibility and liability for performing its obligations under this
Agreement. Unless otherwise agreed by the other party to this Agreement, any
assignment of this Agreement shall not release the assignor from the duty to
perform the assignor's obligations under this Agreement. This Agreement
shall be binding upon, inure to the benefit of and may be enforced by and
against the respective successors and permitted assigns of each of the
parties to this Agreement.
10.5 SPECIFIC PERFORMANCE. The Shareholders agree that breach of this
--------------------
Agreement by the Shareholders will cause Buyer irreparable harm for which
there is no adequate remedy of law and, without limiting whatever other
rights and remedies Buyer may have under this Agreement, Buyer is entitled
to the remedy of specific performance to enforce this Agreement and the
Shareholders consent to the issuance of an order by a court of competent
jurisdiction requiring the specific performance of this Agreement by the
Shareholders.
10.6 ENTIRE AGREEMENT. This Agreement expresses the whole agreement between
----------------
the parties with respect to the purchase and sale contemplated hereby, there
being no representations, warranties or other agreements (oral or written)
not expressly set forth or provided for herein.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 CHANGES. Any and all agreements by the parties hereto to amend, change,
-------
extend, revise or discharge this Agreement, in whole or in part, shall be
binding upon the parties to such agreement, even though such agreements may
lack legal consideration, provided such agreements are in writing and
executed by the party against whom enforcement is sought.
10.9 CONSTRUCTION. Wherever possible, each provision of this Agreement and
------------
each related document shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or
any related document shall be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition
or invalidity without invalidating the remainder of such provision or the
remaining provisions of this Agreement or such related documents.
10.10 WAIVER. No failure on the part of either party to exercise, and no
------
delay in exercising any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial
-39-
exercise of any right or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right or remedy granted hereby
or by any related document or by law.
10.11 SEVERABILITY. In the event any part of this Agreement is found to be
------------
void, the remaining provisions of this Agreement shall nevertheless be
binding with the same effect as though the void parts were deleted.
10.12 TITLES AND SUB-TITLES. The titles of the paragraphs and subparagraphs
---------------------
are placed herein for convenient reference only and shall not to any extent
have the effect of modifying, amending or changing the expressed terms and
provisions of this Agreement.
10.13 NO THIRD PARTY BENEFICIARIES. This Agreement is a contract solely
----------------------------
among Buyer and the Shareholders. No third party beneficiaries (including,
without limitation, employees and customers of the Company) are intended and
none shall be inferred, and no party other than Buyer and the Shareholders
may assert any right, make any claim or otherwise attempt to enforce any
provision of or under this Agreement.
10.14 U.S. DOLLAR AMOUNTS. Unless otherwise specified, all dollar figures
-------------------
contained herein refer to U.S. dollar amounts and amounts payable hereunder
shall be paid in Danish Krones.
10.15 FEES AND EXPENSES. Each party shall be responsible to pay their own
-----------------
transactional expenses incurred in connection with this Agreement, except
that the Shareholder's legal fees in connection with this Agreement (and not
in connection with any transaction contemplated prior to the Division as
defined under paragraph 1.1.1 shall be paid by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SHAREHOLDERS: BUYER:
LANO Holdings ApS DIGITAL ANGEL CORPORATION
- ---------------------------------------
By: /s/ L. Nordfjeld By: /s/ James P. Santelli
------------------------------------ --------------------------------
Its: CEO Its: Vice President and CEO
-------------------------------- ----------------------------
As to Paragraph 1.4.2 and 3.5:
By: Bjarne Lehman Wey APPLIED DIGITAL, INC.
------------------------------------
Its: President and CEO
--------------------------------
By: /s/ Scott Silverman
--------------------------------
Its: CEO
---------------------------
Torsten Nordfjeld
- ---------------------------------------
By: /s/ Torsten Nordfjeld
------------------------------------
Its: CEO
--------------------------------
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By: _____________________
Its: Vaekstfonden
Reservation: The Representations and Warranties in paragraph 2.1 and the
indemnification in paragraph 8.2 shall be limited to Vaekstfonden's own
shares and thus Vaekstfonden shall not be jointly and severally liable
as set out in said clauses. Further, Vaekstfonden shall not be liable if
the Representation that "the Subsidiary shares are free from any charge and
encumbrance and are owned by the Company" is breached.
-41-
LIST OF EXHIBITS
Exhibit 1.1 Outstanding Shares
Exhibit 2.2 List of Subsidiaries
Exhibit 2.3 Capital Structure of Subsidiaries
Exhibit 2.5 Consents and Approvals
Exhibit 2.6 Financial Documents
Exhibit 2.6(A) Cash Forecast
Exhibit 2.7 Assets
Exhibit 2.8 Subsidiary Meetings
Exhibit 2.10 Undisclosed Liabilities
Exhibit 2.11 Adverse Changes
Exhibit 2.12 Leases
Exhibit 2.13 Insurance
Exhibit 2.14 Litigation
Exhibit 2.15 Material Contracts
Exhibit 2.17 Guarantees
Exhibit 2.18.1 Employees
Exhibit 2.18.2 Employee Agreements
Exhibit 2.18.3 Employee Benefit Plans
Exhibit 2.19 Employment, Agency and Independent Contractor Agreements
Exhibit 2.20 Real Estate
Exhibit 2.22 Investments
Exhibit 2.23 Intellectual Property
Exhibit 2.26 Bank Accounts and Powers of Attorney
Exhibit 2.28 Licenses, Permits and Authorizations
Exhibit 2.29 Related Party Transactions
Exhibit 2.30 Inventory
Exhibit 2.31 Environmental Compliance and Hazardous Waste
Exhibit 2.32 Defects or Deficiencies
Exhibit 2.35 Warranties
Exhibit 5.2.3 Opinion of Shareholders' Counsel
Exhibit 5.2.6-1 Form of Employment Agreement for Lasse Nordfjeld
Exhibit 5.2.6-2 Form of Employment Agreement for Torsten Nordfjeld
Exhibit 5.2.12 Bank Loans
Exhibit 5.2.15 Additional Financial Statements
-2-