EXECUTION COPY
EXHIBIT 10.29
SUBSCRIPTION AND EXCHANGE AGREEMENT
AMONG
RAZORFISH, INC.
SPRAY VENTURES AB
AND
COMMUNICADE INC.
DATED AS OF OCTOBER 1, 1998
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND RULES OF CONSTRUCTION........................................................ 1
SECTION 1.01. Definitions..................................................................... 1
SECTION 1.02. Certain Rules of Construction................................................... 7
ARTICLE II. AGREEMENT To EXCHANGE THE COMPANY SHARES.................................................... 8
SECTION 2.01. Exchange of the Company Shares and the Warrants................................. 8
SECTION 2.02. Purchase Price.................................................................. 8
ARTICLE III. CLOSING.................................................................................... 8
SECTION 3.01. The Closing..................................................................... 8
SECTION 3.02. Closing Conditions.............................................................. 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SPRAY VENTURES............................................ 10
SECTION 4.01. Organization, Good Standing and Qualification of the Company
And the Company Subsidiaries.................................................... 10
SECTION 4.02. Corporate Documents............................................................. 11
SECTION 4.03. Capitalization.................................................................. 11
SECTION 4.04. [Intentionally Omitted]......................................................... 12
SECTION 4.05. Non-Contravention; Consents..................................................... 12
SECTION 4.06. Proprietary Assets.............................................................. 13
SECTION 4.07. Financial Statements............................................................ 15
SECTION 4.08. Liabilities..................................................................... 15
SECTION 4.09. Books and Records............................................................... 15
SECTION 4.10. Title to Assets................................................................. 16
SECTION 4.11. Real Property................................................................... 16
SECTION 4.12. Material Company Contracts...................................................... 18
SECTION 4.13. Employees; Employee Benefits.................................................... 19
SECTION 4.14. Employment Relations............................................................ 20
SECTION 4.15. Compensation of Employees....................................................... 21
SECTION 4.16. Receivables; Major Customers.................................................... 21
SECTION 4.17. Accounts Payable; Customers and Suppliers....................................... 21
SECTION 4.18. Proceedings..................................................................... 22
SECTION 4.19. Compliance with Requirement of Laws............................................. 22
SECTION 4.20. Governmental Authorizations..................................................... 22
SECTION 4.21. Tax Matters..................................................................... 23
SECTION 4.22. Finders and Bbrokers............................................................ 24
SECTION 4.23. Absence of Changes.............................................................. 24
SECTION 4.24. Environmental Compliance........................................................ 25
SECTION 4.25. Insurance....................................................................... 26
SECTION 4.26. Full Disclosure................................................................. 26
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS........................................... 26
SECTION 5.01. Authority....................................................................... 26
SECTION 5.02. Shareholders.................................................................... 27
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................. 28
SECTION 6.01. Organization, Good Standing and Qualification of the Purchaser
and the Purchaser Subsidiaries.................................................. 28
SECTION 6.02. Corporate Documents............................................................. 29
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SECTION 6.03. Capitalization....................................................................... 29
SECTION 6.04. Authority; Binding Nature of Agreements.............................................. 30
SECTION 6.05. Non-Contravention; Consents.......................................................... 30
SECTION 6.06. Proprietary Assets................................................................... 31
SECTION 6.07. Financial Statements................................................................. 33
SECTION 6.08. Liabilities.......................................................................... 34
SECTION 6.09. Books and Records.................................................................... 34
SECTION 6.10. Title to Assets...................................................................... 34
SECTION 6.11. Real Property........................................................................ 35
SECTION 6.12. Material Purchaser Contracts......................................................... 37
SeCTION 6.13. Employees; Employee Benefits......................................................... 37
SECTION 6.14. Employment Relations................................................................. 40
SECTION 6.15. Compensation of Employees............................................................ 40
SECTION 6.16. Receivables; Major Customers......................................................... 40
SECTION 6.17. Accounts Payable; Customers and Suppliers............................................ 41
SECTION 6.18. Proceedings.......................................................................... 41
SECTION 6.19. Compliance With Requirement of Laws.................................................. 41
SECTION 6.20. Governmental Authorizations.......................................................... 42
SECTION 6.21. Tax Matters.......................................................................... 42
SECTION 6.22. Finders and Brokers.................................................................. 43
SECTION 6.23. Absence of Changes................................................................... 43
SECTION 6.24. Environmental Compliance............................................................. 44
SECTION 6.25. Insurance............................................................................ 45
SECTION 6.26. Full Disclosure...................................................................... 45
ARTICLE VII. CERTAIN COVENANTS............................................................................... 45
SECTION 7.01. Best Efforts......................................................................... 45
SECTION 7.02. Conduct of Business Pending the Closing.............................................. 46
SECTION 7.03. Access to Information................................................................ 48
SECTION 7.04. Notices of Certain Events............................................................ 49
SECTION 7.05. No Solicitation...................................................................... 49
SECTION 7.06. Confidentiality...................................................................... 49
SECTION 7.07. Fulfillment of Conditions............................................................ 50
SECTION 7.08. Waiver of Encumbrance on Company Shares.............................................. 51
ARTICLE VIII. CLOSING DELIVERIES............................................................................. 51
SECTION 8.01. Closing Deliveries................................................................... 51
SECTION 8.02. Deliveries by Shareholders........................................................... 51
SECTION 8.03. Deliveries by Purchaser.............................................................. 52
SECTION 8.04. Joint Deliveries..................................................................... 53
ARTICLE IX. TERMINATION...................................................................................... 53
SECTION 9.01. Grounds for Termination.............................................................. 53
SECTION 9.02. Effect of Termination................................................................ 54
ARTICLE X. POST-CLOSING AGREEMENTS........................................................................... 54
SECTION 10.01. Tax Matters.......................................................................... 54
ARTICLE XI. INDEMNIFICATION, ETC............................................................................. 56
SECTION 11.01. Survival of Representations and Warranties........................................... 56
SECTION 11.02. Indemnification by Spray Ventures.................................................... 56
SECTION 11.03. Indemnification by Communicade....................................................... 57
SECTION 11.04. Indemnification by the Purchaser..................................................... 58
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SECTION 11.05. Interest............................................................................. 60
SECTION 11.06. Defense of Third Party Claims........................................................ 60
ARTICLE XII. MISCELLANEOUS................................................................................... 61
SECTION 12.01. Tax and Accounting Treatment Elections............................................... 61
SECTION 12.02. Governing Law........................................................................ 61
SECTION 12.03. Arbitration.......................................................................... 61
SECTION 12.04. Successors and Assigns............................................................... 62
SECTION 12.05. Entire Agreement..................................................................... 62
SECTION 12.06. Severability......................................................................... 62
SECTION 12.07. Amendment and Waiver................................................................. 62
SECTION 12.08. Notices.............................................................................. 62
SECTION 12.09. Delays or Omissions.................................................................. 63
SECTION 12.10. Remedies Cumulative.................................................................. 64
SECTION 12.11. No Contribution...................................................................... 64
SECTION 12.12. Fees and Costs....................................................................... 64
SECTION 12.13. Further Assurances................................................................... 64
SECTION 12.14. Counterparts......................................................................... 64
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SCHEDULES
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Schedule 2.02 Purchase Price Allocations
Schedule 4.01(b) Company Group Directors and Officers
Schedule 4.01(d) Other Subsidiaries of the Company
Schedule 4.03(a) Company Group Capitalization
Schedule 4.03(b) Company Group Derivative Securities
Schedule 4.06(a) Certain Company Group Proprietary Assets
Schedule 4.07(c) Company Group Financials
Schedule 4.10(a) Company Group Liens
Schedule 4.10(c) Company Group Leased Assets
Schedule 4.11(b) Company Group Leased Premises; Company Group Third
Party Leased Premises
Schedule 4.12(a) Material Company Contracts
Schedule 4.13(a) Company Group Employees
Schedule 4.13(b) Company Group Consultants
Schedule 4.13(m) Company Employee Benefit Plans
Schedule 4.17(b) Company Group Largest Customers and Suppliers
Schedule 4.21(h) Company Business and Assets in the United States
Schedule 4.23(e) Sale or Transfer of Assets
Schedule 4.23(h) Loans to Shareholders
Schedule 4.23(j) Certain Company Liabilities
Schedule 6.01(b) Purchaser Group Directors and Officers
Schedule 6.01(d) Other Subsidiaries of the Purchaser
Schedule 6.03(a) Purchaser Group Capitalization
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Schedule 6.03(b) Purchaser Group Derivative Securities
Schedule 6.05(b) Purchaser Group Consents
Schedule 6.06(a) Certain Purchaser Group Proprietary Assets
Schedule 6.06(b)(ii) Restrictions on Purchaser Proprietary Assets
Schedule 6.06(b)(v) Purchaser Group Proprietary Assets Licensed to Third
Parties
Schedule 6.06(b)(vi) Purchaser Group Proprietary Assets Licensed from
Third Parties
Schedule 6.07(c) Purchaser Group Financials
Schedule 6.09 Company Group Records Not in Company Control
Schedule 6.10(b) Certain Purchaser Group Tangible Assets
Schedule 6.10(d) Purchaser Group Licensed Assets
Schedule 6.11(b) Purchaser Group Leased Premises; Purchaser Group
Third Party Leased Premises
Schedule 6.11(e) Options to Purchase Purchaser Leases
Schedule 6.12(a) Material Purchaser Contracts
Schedule 6.13(a) Purchaser Group Employees
Schedule 6.13(b) Purchaser Group Consultants
Schedule 6.13(c) Purchaser Group Employment Contracts
Schedule 6.13(f) Purchaser Employee Benefit Plans
Schedule 6.15 Purchaser Group Employee Compensation
Schedule 6.17(b) Purchaser Group Largest Customers and Suppliers
Schedule 6.18(a) Purchaser Group Proceedings
Schedule 6.20(a) Purchaser Group Government Authorizations
Schedule 6.21(d) Purchaser Group Audits
Schedule 8.02 Employees Party to Employment Agreements
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EXHIBITS
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Exhibit A Standard Company Group Employment Agreement
Exhibit B Form of Employment Agreement
Exhibit C Form of Opinion of Xxxxxxxxxx Xxxxxxxxx
Exhibit D Form of Opinion of Xxxxxxxx & Xxxxxxxx LLP
Exhibit E Form of Stockholders Agreement
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SUBSCRIPTION AND EXCHANGE AGREEMENT
This Subscription and Exchange Agreement (this "Agreement") is entered
into as of October 1, 1998, by and among Razorfish, Inc., a New York corporation
(the "Purchaser"), Spray Ventures AB, a corporation organized and existing under
the laws of the Kingdom of Sweden, registration number 556506-7997 ("Spray
Ventures"), and Communicade Inc., a Delaware corporation ("Communicade" and,
together with Spray Ventures, the "Shareholders" and each individually, a
"Shareholder").
W I T N E S S E T H:
Whereas, the Shareholders own, in the aggregate, 2,815 shares of
stock, par value SEK 100 per share, of Spray Network AB, a corporation organized
and existing under the laws of the Kingdom of Sweden, registration number
556503-3247 (the "Company"), which constitute all of the issued and outstanding
shares of stock of the Company (the "Company Stock"), and also own warrants
exercisable for 138 shares of stock of the Company, issued on September 1, 1997
(the "Warrants"); and
Whereas, the Purchaser desires to acquire all of the Company Stock
(the "Company Shares") and the Warrants, and the Shareholders desire to transfer
the Company Shares and the Warrants to the Purchaser upon the terms and subject
to the conditions set forth herein.
Now, Therefore, in consideration of the foregoing, and the mutual
promises, covenants, representations and warranties herein, the Purchaser, the
Company and the Shareholders, intending to be legally bound, hereby agree as
follows:
ARTICLE I.
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. Definitions.
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For purposes of this Agreement, the following terms shall have the
meanings set forth in this Section 1.01:
"Affiliate" means, with respect to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under common control
with, such Person. For the purposes of this definition, "control" (including
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Audited Financials" shall have the meaning set forth in Section
------------------
4.07(a).
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"Closing" shall have the meaning specified in Article III.
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"Closing Date" shall have the meaning specified in Article III.
------------
"Closing Receivables/Payables" shall have the meaning set forth in
----------------------------
Section 4.07(a).
"Common Stock" shall mean the common stock, par value $0.01 per share,
------------
of the Purchaser.
"Communicade" shall have the meaning specified in the first paragraph
-----------
of this Agreement.
"Company" shall have the meaning specified in the first paragraph of
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this Agreement.
"Company Contract" shall mean any Contract to which the Company or any
----------------
Company Subsidiary is a party or by which its properties or assets are bound or
under which it or its respective business, properties or assets receive
benefits.
"Company Employee Benefit Plan" shall mean any Employee Benefit Plan
-----------------------------
which is maintained or contributed to or is required to be maintained,
contributed to or provided by any Company Subsidiary currently or formerly
operating, under which any employee, former employee or independent contractor
(or any dependent of any such Persons) has any present or future right to
benefits or compensation or under which any such Company Subsidiary has or may
have any present or future liability or obligation.
"Company Group" shall mean the Company and the Company Subsidiaries.
-------------
"Company Shares" shall have the meaning set forth in the second
--------------
recital to this Agreement.
"Company Subsidiary" shall mean Tetre IT Management AB, a corporation
------------------
organized and existing under the laws of the Kingdom of Sweden (registration
number 556479-5549), Tetre New Media AB, a corporation organized and existing
under the laws of the Kingdom of Sweden (registration number 55614-6106), Tetre
Workgroup Solutions AB, a corporation organized and existing under the laws of
the Kingdom of Sweden (registration number 556511-7933), Spray Services AB, a
corporation organized and existing under the laws of the Kingdom of Sweden
(registration number 556541-5808), Spray Geelmuyden Kiese AS, a corporation
organized and existing under the laws of Norway, Spray Interactive Media OY, a
corporation organized and existing under the laws of Finland, and Spray
Interactive Media AG, a corporation organized and existing under the laws of
Germany, Spray Network USA, Inc., a Delaware corporation, and any Subsidiary of
such Entities. "Company Subsidiaries" shall mean, collectively, each Company
--------------------
Subsidiary.
2
"Company Stock" shall have the meaning set forth in the first recital
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to this Agreement.
"Consent" shall mean any approval, consent, ratification, permission,
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waiver or authorization (including any Governmental Authorization).
"Contract" shall mean any written or oral agreement, deed, contract,
--------
license, guaranty or other understanding of any nature.
"Current Balance Sheet" shall have the meaning set forth in Section
---------------------
4.07(a).
"Current Financials" shall have the meaning set forth in Section
------------------
4.07(a).
"Damages" shall mean all actual assessments, levies, losses, fines,
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penalties, obligations, payments, judgments, liabilities, damages, costs and
expenses, including, without limitation, attorneys', accountants',
investigators', and experts' fees and expenses, excluding special and
consequential damages suffered by the Indemnified Party. For the purposes of
clarification, any assessment, levy, loss, fine, penalty, obligation, payment,
liability, damage, cost or expense suffered by a member of the Company Group by
virtue of a state of facts which constitutes an inaccuracy in or breach of a
representation and warranty by Spray Ventures shall (without duplication) be
deemed to have been suffered by the Purchaser.
"Employee Benefit Plan" shall mean any and all bonus, deferred
---------------------
compensation, incentive compensation, stock purchase, stock option, stock
appreciation, phantom stock, savings, profit sharing, severance or termination
pay, health or other medical, dental, life, disability or other insurance
(whether insured or self-insured), supplementary unemployment or employment
benefit, pension (including, without limitation, employee benefit plans, as
defined in Section 3(2) of the U.S. Employee Retirement Income Security Act of
1974, as amended ("ERISA"), multiemployer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA, and
all plans of the nature described in Section 3(3) of ERISA), retirement,
registered retirement savings, supplementary retirement, change-in-control and
any other employment benefit or compensation plan, program, agreement,
arrangement, policy or practice (including any funding mechanism therefore which
is now in effect which will be required in the future as a result of the
Transactions), whether formal or informal, funded or unfunded, registered or
unregistered, oral or written.
"Encumbrance" shall mean options, proxies, voting trusts, voting
-----------
agreements, judgments, pledges, charges, escrows, rights of first refusal or
first offer, mortgages, indentures, claims, transfer restrictions, Liens,
equities, security interests and other encumbrances of every kind and nature
whatsoever, whether arising by agreement, operation of law or otherwise.
"Entity" shall mean any corporation (including any non profit
------
corporation), general partnership, limited partnership, limited liability
partnership, limited liability company, trust company, joint venture, firm or
other enterprise or association.
3
"Environmental Law" shall mean any Requirement of Law relating to
-----------------
pollution, the treatment, transportation, removal, storage, discharge or
generation of hazardous or toxic materials or waste, or the protection of human
health or the environment.
"Financials" shall have the meaning specified in Section 4.07(a).
----------
"Fully Diluted Basis" shall mean, with respect to the Purchaser's
-------------------
outstanding share capital, all shares together with (a) all shares that are
issuable upon the exercise of all outstanding options to acquire shares, whether
or not such options are currently exercisable, and (b) all other shares issuable
upon the exercise of any warrants or other rights held by any Person or Entity.
"Governmental Authorization" shall mean any (a) permit, license,
--------------------------
certificate, franchise, concession, approval, consent, ratification, permission,
clearance, confirmation, endorsement, waiver, certification, designation,
rating, registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Authority
or pursuant to any Requirement of Law; or (b) right under any Contract with any
Governmental Authority.
"Governmental Authority" shall mean any governmental or quasi-
----------------------
governmental agency, body or authority (including, without limitation, any
executive, legislative, judicial, administrative or regulatory agency, body or
authority), of whatever nature, whether local, municipal, domestic, foreign,
multinational or international.
"Indemnified Party" shall have the meaning specified in Section 11.05.
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"Indemnifying Party" shall have the meaning specified in Section
------------------
11.05.
"Key Company Employee" shall mean Per Xxxxxxx, Xxxxx Xxxxxxxx, Xxxxx
--------------------
Ihrfelt, Xxxxxx Randerz, Xxxxxx Xxxxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxx-Xxxxxx and
Hokan Lejdstrand.
"Key Purchaser Employee" shall mean Xxxxxxx X. Xxxxxx, Xxxxx X.
----------------------
Kanarick, Xxxxx Xxxxxxx, Xxx Xxxxx, Xxxx-Xxxxxxxx Meheu, Xxxx Xxxxxxxx, Xxxxxxx
Xxxxx, Xxxxxxx Xxxxxxx, Xxx Xxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxxx, and Xxxx
Xxxxxx.
"Knowledge" of any Person shall mean the actual knowledge of the
---------
directors of such Person, after due inquiry and, in the case of Spray Ventures,
shall be deemed to include the actual knowledge of the directors of the Company,
after due inquiry.
"Liability" shall mean any debt, obligation, duty or liability
---------
(matured, accrued, contingent or otherwise) of any nature, regardless of whether
such debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with Swedish GAAP or U.S. GAAP, as
applicable.
"Lien" shall mean, with respect to any asset, (a) any lien, claim,
----
pledge, hypothecation, charge, mortgage, deed of trust, security interest,
restriction, encumbrance,
4
option, easement, right-of-way, or encumbrance of any kind, or (b) the interest
of a vendor or lessor under any conditional sale agreement, capital lease or
title retention agreement (or any financing lease having substantially the same
economic effect as any of the foregoing) relating to such asset.
"Material Adverse Effect" shall mean events, facts or circumstances,
-----------------------
which, alone or in the aggregate, have or can reasonably be expected to have a
material adverse effect on the business, operations, prospects or financial
condition of any of the Parties or the Company Group.
"Material Company Contract" shall mean a Company Contract which has
-------------------------
annual revenues or expenses equal to or greater than SEK 784,314.
"Material Purchaser Contract" shall mean a Purchaser Contract which
---------------------------
has annual revenues or expenses equal to or greater than $100,000.
"Parties" shall mean Communicade, Purchaser and Spray Ventures.
-------
"Person" shall mean any individual, Entity or Governmental Authority.
------
"Proceeding" shall mean any action, suit, litigation, arbitration,
----------
mediation, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), inquiry,
audit, examination or investigation before, or involving any Governmental
Authority or any arbitrator, mediator or arbitration or mediation panel.
"Proprietary Asset" shall mean any patent, trademark (registered or
-----------------
unregistered), copyright, or other intellectual property.
"Purchase Price" shall have the meaning specified in Section 2.02.
--------------
"Purchaser" shall have the meaning specified in the first paragraph of
---------
this Agreement.
"Purchaser Year-End Financials" shall have the meaning set forth in
-----------------------------
Section 6.07(a).
"Purchaser Closing Receivables/Payables" shall have the meaning set
--------------------------------------
forth in Section 6.07(a).
"Purchaser Contract" shall mean any Contract to which the Purchaser or
------------------
any Purchaser Subsidiary is a party or by which its properties or assets are
bound or under which it or its respective business, properties or assets receive
benefits.
"Purchaser Current Balance Sheet" shall have the meaning set forth in
-------------------------------
Section 6.07(a).
5
"Purchaser Current Financials" shall have the meaning set forth in
----------------------------
Section 6.07(a).
"Purchaser Employee Benefit Plan" shall mean any Employee Benefit Plan
-------------------------------
which is maintained or contributed to or are required to be maintained,
contributed to or provided by the Purchaser or any Purchaser Subsidiary, under
which any employee, former employee or independent contractor (or any dependent
of any such Persons) has any present or future right to benefits or compensation
or under which the Purchaser or any Purchaser Subsidiary has or may have any
present or future liability or obligation.
"Purchaser Financials" shall have the meaning set forth in Section
--------------------
6.07(a).
"Purchaser Group" shall mean the Purchaser and the Purchaser
---------------
Subsidiaries.
"Purchaser Shareholders" shall mean all of the Persons holding the
----------------------
Purchaser Common Stock immediately prior to the Closing.
"Purchaser Shares" shall have the meaning specified in Section 2.02.
----------------
"Purchaser Subsidiary" shall mean Razorfish San Francisco, Inc.,
--------------------
Razorfish Los Angeles, Inc., Avalanche Solutions, Inc. and CHBi Razorfish Ltd.
"Purchaser Subsidiaries" shall mean, collectively, each Purchaser Subsidiary.
----------------------
"Related Party" shall mean, (i) with respect to the Company, (a) Spray
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Ventures, (b) each individual who is, or who has at any time been, an officer or
director of the Company or any of the Company Subsidiaries, and (c) any Entity
(other than the Company) in which any one of the Persons referred to in clauses
(i) (a) or (b) above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest, and (ii) with respect to the Purchaser, (a) the Purchaser
Shareholders, (b) each individual who is, or who has at any time been, an
officer or director of the Purchaser or any of the Purchaser Subsidiaries, and
(c) any Entity (other than the Purchaser) in which any one of the Persons
referred to in clauses (ii) (a) or (b) above holds (or in which more than one of
such individuals collectively hold), beneficially or otherwise, a material
voting, proprietary or equity interest.
"Requirement of Law" shall mean any law, statute, legislation,
------------------
constitution, principle of common law, resolution, ordinance, code, edict,
decree, order, proclamation, treaty, convention, rule, regulation, ruling,
directive, pronouncement, requirement, specification, determination, decision,
opinion or interpretation issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Authority.
"SEK" shall mean the lawful currency of the Kingdom of Sweden.
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"Shareholder" shall have the meaning specified in the first paragraph
-----------
of this Agreement.
6
"Spray Ventures" shall have the meaning specified in the first
--------------
paragraph of this Agreement.
"Subsidiary" shall mean with respect to any Person, any other Person
----------
that, directly or indirectly, is controlled by such Person. For the purposes of
this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Swedish GAAP" shall mean generally accepted accounting principles in
------------
effect in the Kingdom of Sweden, applied on a basis consistent with the
Company's past practices.
"Tax" shall have the meaning specified in Section 4.21.
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"Tax Return" shall mean any return (including any information return),
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report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information that is, has been or may
in the future be filed with or submitted to, or required to be filed with or
submitted to, any Governmental Authority in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any
Requirement of Law relating to any Tax.
"Tenant" shall have the meaning specified in Section 4.10.
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"Transaction Documents" shall mean this Agreement, the Shareholders
---------------------
Agreement and all other agreements, certificates and instruments executed or
contemplated to be executed by any of the Parties in connection with the
Transactions.
"Transactions" shall mean the sale and purchase of the Company Shares
------------
and all of the other transactions contemplated by this Agreement.
"US$" shall mean the lawful currency of the United States of America.
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"U.S. GAAP" shall mean generally accepted accounting principles in
---------
effect in the United States, applied on a basis consistent with the Purchaser's
past practices.
"Warrant" shall have the meaning set forth in the first recital to
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this Agreement.
SECTION 1.02. Certain Rules of Construction.
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When a reference is made in this Agreement to Sections, Articles,
Exhibits or Schedules, such reference shall be to a Section, Article, Exhibit or
Schedule (as the case may be) of this Agreement, unless otherwise indicated.
The headings of the subdivisions of this Agreement are included for ease of
reference only and shall not be deemed a part of this Agreement or taken into
account in the interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
7
followed by the words "without limitation." The use of any gender herein shall
be deemed to be or include the other genders and the use of the singular herein
shall be deemed to be or include the plural (and vice versa), whenever
appropriate.
ARTICLE II.
AGREEMENT TO EXCHANGE THE COMPANY SHARES
SECTION 2.01. Exchange of the Company Shares and the Warrants.
------------- ------------------------------------------------
Subject to the terms and conditions of this Agreement, at the Closing,
the Shareholders shall assign, transfer and deliver to the Purchaser all of the
Company Shares and the Warrants and the Purchaser shall acquire the same, free
of any Encumbrance.
SECTION 2.02. Purchase Price.
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At the Closing, in exchange for the Company Shares and the Warrants
(the "Purchase Price"), (i) the Purchaser shall issue such number of newly
issued shares of Common Stock as shall, immediately following the Closing,
constitute fifty percent (50%) of the then issued and outstanding shares of
Common Stock on a Fully Diluted Basis (the "Purchaser Shares"), free of any
Encumbrance, and (ii) at the Purchaser's option, the Purchaser shall either pay
to the Shareholders $100 in immediately available funds or the Purchaser shall
issue $100 worth of non-voting stock of the Purchaser, free of any Encumbrance.
The Purchase Price shall be allocated among the Shareholders in accordance with
the provisions of Schedule 2.02.
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ARTICLE III.
CLOSING
SECTION 3.01. The Closing. The consummation of the Transactions will
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take place at a closing (the "Closing") at the offices of Purchaser's legal
counsel, Xxxxxxxx & Xxxxxxxx LLP, 1290 Avenue of the Americas, New York, New
York, at 10:00 A.M., New York City time, when the conditions contained in this
Article III have been fulfilled or waived by the Parties. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
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SECTION 3.02. Closing Conditions.
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(a) The obligations of each of Spray Ventures and Communicade hereunder
are subject to the fulfillment, at or before the Closing, of each of the
following conditions, all or any of which may be waived in whole or in part by
Spray Ventures or Communicade, in its sole discretion:
(i) no termination event set forth in Article IX having occurred;
(ii) the delivery of the documents and the performance of the acts
set forth in Sections 8.01, 8.03 and 8.04;
8
(iii) the representations and warranties made by the Purchaser in
this Agreement, or in any Schedule delivered pursuant hereto, shall be true and
correct in all material respects (except for such changes contemplated by
Section 7.02(a)(i), (ii) and (ix)) on and as of the Closing with the same force
and effect as though made on and as of the Closing or, in the case of
representations and warranties made as of a specific date earlier than the
Closing, on and as of such earlier date;
(iv) the Purchaser shall have performed and complied in all
material respects with the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by the Purchaser at or before
the Closing;
(v) there shall not be pending any litigation, proceeding,
investigation, arbitration or claim by any Person or Governmental Authority or
regulatory body or the existence of any injunction or order (whether temporary,
preliminary or permanent) then in effect, and which in any case, has or could
reasonably have the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement; and
(vi) all proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident thereto
were reasonably satisfactory in form and substance to Spray Ventures and
Communicade and their counsel and Spray Ventures and Communicade received copies
of all such documents and other evidences as it or its counsel may reasonably
request in order to establish the consummation of such transaction and the
taking of all proceedings in connection therewith.
(b) The obligations of the Purchaser hereunder are subject to the
fulfillment, at or before the Closing, of each of the following conditions, all
or any of which may be waived in whole or in part by the Purchaser, in its sole
discretion:
(i) no termination event set forth in Article IX having
occurred;
(ii) the delivery of the documents and the performance of the
acts set forth in Sections 8.01, 8.02 and 8.04;
(iii) the representations and warranties made by each of Spray
Ventures and Communicade in this Agreement, or in any Schedule delivered
pursuant hereto, shall be true and correct in all material respects on and as of
the Closing with the same force and effect as though made on and as of the
Closing or, in the case of representations and warranties made as of a specific
date earlier than the Closing, on and as of such earlier date;
(iv) each of Spray Ventures and Communicade shall have
performed and complied in all material respects with the agreements, covenants
and obligations required by this Agreement to be so performed or complied with
by Spray Ventures or Communicade, as the case may be, at or before the Closing;
9
(v) there shall not be pending any litigation, proceeding,
investigation, arbitration or claim by any Person or Governmental Authority or
regulatory body or the existence of any injunction or order (whether temporary,
preliminary or permanent) then in effect, and which in any case, has or could
reasonably have the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the transactions contemplated by this
Agreement; and
(vi) all proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto were
reasonably satisfactory in form and substance to the Purchaser and its counsel
and the Purchaser received copies of all such documents and other evidences as
it or its counsel may reasonably request in order to establish the consummation
of such transaction and the taking of all proceedings in connection therewith.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SPRAY VENTURES
Spray Ventures hereby represents and warrants to the Purchaser with
respect to the Company and the Company Subsidiaries, as applicable, as follows:
SECTION 4.01. Organization, Good Standing and Qualification of the
------------- ----------------------------------------------------
Company and the Company Subsidiaries.
-------------------------------------
(a) The Company and the Company Subsidiaries are corporations duly
organized, validly existing and, to the extent applicable, in good standing
under the laws of the jurisdictions of their formation and are duly qualified to
conduct business and, to the extent applicable, in good standing under the laws
of each jurisdiction in which the nature of their business or the ownership or
leasing of their properties require such qualification. The Company and the
Company Subsidiaries have all requisite corporate power and authority to own and
operate their properties and assets, and to carry on their business as presently
conducted and as presently proposed to be conducted. The Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) Schedule 4.01(b) sets forth (i) the names of the members of the
----------------
Company's and the Company Subsidiaries' boards of directors, and (ii) the names
and titles of the Company's and the Company Subsidiaries' officers, if any.
(c) None of the Company or any of the Company Subsidiaries has filed
(or has had filed against it) a petition in bankruptcy, or is insolvent within
the meaning of applicable laws, rules, regulations or similar requirements, and
has not made any assignment in favor of its creditors or any class thereof, nor
has any petition for a receivership or administration order been presented in
respect of the Company or any of the Company Subsidiaries. Neither the Company
nor any of the Company Subsidiaries has initiated any proceedings with respect
to a compromise or arrangement with their creditors or for the dissolution,
liquidation or reorganization of such
10
Persons, or the winding up or cessation of the business or affairs of such
Persons. No receiver or administration receiver or liquidator has been appointed
in respect of the Company or any of the Company Subsidiaries, or any of their
assets and no execution has been levied upon any of their assets.
(d) Except as set forth in Schedule 4.01(d), the Company Subsidiaries
----------------
are the only Subsidiaries of the Company and, except for the outstanding shares
of the Company Subsidiaries held by the Company and such other shares as set
forth on Schedule 4.01(d), the Company has never owned, beneficially or
----------------
otherwise, any shares or other securities of, or any direct or indirect interest
in, any Person. The Company Subsidiaries have no Subsidiaries and have never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest in, any Person.
SECTION 4.02. Corporate Documents.
------------- --------------------
(a) The Company has delivered to the Purchaser accurate and complete
copies of:
(i) the memorandum of association, articles of association,
articles of incorporation and bylaws, or similar organizational documents,
including all amendments thereto, of the Company and each of the Company
Subsidiaries;
(ii) the share transfer registers of the Company and each of
the Company Subsidiaries; and
(iii) the minutes and other records of the official meetings and
other official proceedings (including any actions taken by written consent
or otherwise without a meeting) of the shareholders and boards of directors
of the Company and each of the Company Subsidiaries.
(b) There have been no official meetings or other official
proceedings of the shareholders or the board of directors of the Company or any
of the Company Subsidiaries that are not properly reflected in such minutes or
other records.
(c) None of the Company or the Company Subsidiaries is in violation
of its memorandum of association, articles of association, or articles of
incorporation and bylaws, as applicable.
SECTION 4.03. Capitalization.
------------- ---------------
(a) The authorized share capital of the Company consists of 2,815
Company Shares, all of which are issued and are outstanding. There are no
shares of capital stock of the Company of any other class authorized, issued or
outstanding. All of such shares are owned and held beneficially and of record
by the Shareholders as set forth on Schedule 4.03(a), free and clear of all
----------------
options, proxies, voting trusts, voting agreements, judgments, pledges, charges,
escrows, rights of first refusal or first offer, mortgages, indentures, claims,
transfer restrictions,
11
Liens, equities, security interests and other encumbrances of every kind and
nature whatsoever, whether arising by agreement, operation of law or otherwise.
The authorized and issued capital stock of each of the Company Subsidiaries is
as set forth on Schedule 4.03(a). All outstanding shares of such capital stock
----------------
are held directly by the Company except as set forth on Schedule 4.03(a). All
----------------
issued and outstanding shares described in this Section 4.03(a) have been duly
authorized and validly issued in full compliance with all applicable
Requirements of Law, are fully paid and non-assessable, and have not been issued
in violation of any preemptive or similar rights.
(b) Except as set forth on Schedule 4.03(b), there are no: (i)
----------------
outstanding subscriptions, options, calls, warrants or rights (whether or not
currently exercisable) to acquire any shares in the capital or other securities
of the Company or any of the Company Subsidiaries, (ii) outstanding securities,
instruments or obligations that are or may become convertible into or
exchangeable for any shares in the capital or other securities of the Company or
any of the Company Subsidiaries, (iii) Contracts under which the Company or any
of the Company Subsidiaries is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities, or (iv)
conditions or circumstances that may directly or indirectly give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares in the capital, or
other securities of, the Company or any of the Company Subsidiaries.
(c) The Company has never repurchased, redeemed or otherwise
reacquired or reduced in value (and has not agreed, committed or offered (in
writing or otherwise) to reacquire or reduce in value) any shares of its
capital.
(d) Any and all dividends (including stock dividends) or other
distributions (together with all interest or other amounts owed in connection
therewith) accrued but unpaid with respect to any of the Company Shares have
been cancelled and terminated, and all Persons to whom such dividends or other
distributions were payable have forever and irrevocably waived their rights to
receive such dividends and other distributions, and from and after the Closing
Date, neither the Company, the Purchaser nor any of their Affiliates shall have
any liability therefor or any Taxes relating thereto.
SECTION 4.04. [Intentionally Omitted]
------------- -----------------------
SECTION 4.05. Non-Contravention; Consents.
------------- ----------------------------
(a) Neither the execution and delivery of this Agreement or any
Transaction Document, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a violation of (A) any
of the provisions of the memorandum of association, articles of
association, articles of incorporation or bylaws, or similar organizational
documents, of the Company or any Company Subsidiary, or (B) any resolution
adopted by the stockholders or board of directors of the Company or any
Company Subsidiary;
12
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Authority or other Person the right to challenge any
of the Transactions or to exercise any remedy or obtain any relief under,
any Requirement of Law to which the Company or any Company Subsidiary or
any of the assets owned or used by the Company or any Company Subsidiary
are subject;
(iii) cause the Company or any Company Subsidiary to become
subject to, or to become liable for the payment of, any Tax;
(iv) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the Company or any Company
Subsidiary or any of their respective employees or that otherwise relates
to the business of the Company or any Company Subsidiary, or to any of the
assets owned or used by the Company or any Company Subsidiary;
(v) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any of the
Material Company Contracts or any other Company Contract (if such
contravention, conflict, violation, breach or default has or could
reasonably be expected to have a Material Adverse Effect on the Company or
any Company Subsidiary);
(vi) give any Person the right to (i) declare a default or
exercise any remedy under any Company Contract, (ii) accelerate the
maturity or performance of any Company Contract, or (iii) cancel, terminate
or modify any Company Contract;
(vii) give any Person the right to any payment by the Company or
any Company Subsidiary or give rise to any acceleration or change in the
award, grant, vesting or determination of options, warrants, rights,
severance payments or other contingent obligations of any nature whatsoever
of the Company or any Company Subsidiary in favor of any Person, in any
such case as a result of the change in control of the Company or such
Company Subsidiary, or otherwise resulting from the Transactions; or
(viii) result in the imposition or creation of any Lien upon or
with respect to any asset owned or used by the Company or any Company
Subsidiary.
(b) Neither the Company nor any of the Company Subsidiaries is
required to make any filing with or give any notice to, or to obtain any Consent
from, any Person in connection with the execution and delivery of this Agreement
or any of the other Transaction Documents or the consummation or performance of
any of the Transactions.
SECTION 4.06. Proprietary Assets.
------------- -------------------
(a) Schedule 4.06(a) sets forth a complete and accurate list
----------------
(including relevant registration information) of all registered Proprietary
Assets which are owned or used by,
13
required for, or material to the Company or the Company Subsidiaries in
connection with the Company's and the Company Subsidiaries' businesses.
(b) To the Knowledge of Spray Ventures, all Proprietary Assets which
are owned or used by, required for, or material to the Company or the Company
Subsidiaries in connection with the Company's and the Company Subsidiaries'
businesses, including those listed in Schedule 4.06(a) are:
----------------
(i) except for licenses for "off-the-shelf" software, owned
solely and exclusively by the Company or one of the Company Subsidiaries;
(ii) except pursuant to applicable law, not subject to any
limit as to time or any other limitation, right of termination,
reassignment or restriction;
(iii) valid and enforceable (and, to the extent registered, in
compliance with all Requirements of Law, including payment of filing,
examination and maintenance fees and proofs of working or use), with no
past or present default on the part of the Company or the Company
Subsidiaries or past or present acquiescence in the activities of third
parties that would adversely affect validity or enforceability of such
Proprietary Assets;
(iv) not being infringed or attacked or opposed or the subject
of any claim to ownership or compensation, by any Person, and no Person has
indicated any intention to infringe, attack or oppose such Proprietary
Assets; and
(v) not subject to any license, waiver, charge, contingent
assignment, agreement, obligation, or any other encumbrance of any sort in
favor of a third party.
(c) To the Knowledge of Spray Ventures, no claims or applications
have been made against, no notifications in writing or otherwise have been
received by, and there are no circumstances in respect of the Company's and the
Company Subsidiaries' businesses which (notwithstanding any view taken by the
Company as to the merits of such claim, application, notification or
circumstances) if pursued would affect the accuracy of the representations and
warranties in Section 4.06(b) above.
(d) To the Knowledge of Spray Ventures, the Company and the Company
Subsidiaries have conducted their business without infringement or claim of
infringement of any Proprietary Asset of any other Person. Without limiting the
foregoing, the Company and the Company Subsidiaries have the right (pursuant to
a written Contract) to use and incorporate into their products the Proprietary
Assets of other Persons, as and to the extent the same are currently so used and
incorporated. Neither the Company nor the Company Subsidiaries has received any
notice or other communication (in writing or otherwise) of any infringement of
any Proprietary Asset owned or used by any other Person. To the Knowledge of
Spray Ventures, no other Person is infringing, and no Proprietary Asset owned or
used by any other Person infringes or conflicts with, any Proprietary Asset
owned or used by the Company or any of the Company Subsidiaries.
14
(e) The Company and the Company Subsidiaries have taken reasonable
measures and precautions to protect the confidentiality and value of all
Proprietary Assets owned or used by the Company or the Company Subsidiaries.
SECTION 4.07. Financial Statements.
------------- ---------------------
(a) The Company has delivered to the Purchaser (i) the consolidated
balance sheet of the Company and the Company Subsidiaries as of December 31,
1997 and the related consolidated statements of operations for the Company and
the Company Subsidiaries for the year then ended (collectively, the "Year-End
Financials"), which Year-End Financials have been audited by Deloitte & Touche,
the Company's auditors, (ii) the audited consolidated balance sheet of the
Company and the Company Subsidiaries as of June 30, 1998 (the "Current Balance
Sheet") and the related audited consolidated statements of operations for the
Company and the Company Subsidiaries for the six-month period then ended
(collectively, the "Current Financials"), and (iii) a consolidated list of
accounts payable and accounts receivable for the Company and the Company
Subsidiaries as of June 30, 1998 and for the Company as of the date hereof, in
each case aged consistent with the Company's past practices (the "Closing
Receivables/Payables;" the Year-End Financials, the Current Financials and the
Closing Receivables/Payables, collectively, the "Financials").
(b) All of the Financials (and the line items contained therein) are
accurate and complete in all material respects. The Financials are in
accordance with the books and records of the Company and the Company
Subsidiaries and present fairly the assets, liabilities and financial condition
of the Company and the Company Subsidiaries as of the respective dates thereof
and the results of operations of the Company and the Company Subsidiaries for
the periods covered thereby. The Financials have been prepared in accordance
with Swedish GAAP, applied on a consistent basis throughout the periods covered.
(c) All of the Financials are attached hereto as Schedule 4.07(c).
----------------
SECTION 4.08. Liabilities.
------------- ------------
Except (a) as shown on the balance sheet included in the Current
Financials or in the list of accounts payable included in the Closing
Receivables/Payables, or (b) pursuant to the Company Contracts included on
Schedule 4.12(a), none of the Company or any of the Company Subsidiaries has any
----------------
material Liabilities of any nature. All reserves established by the Company and
the Company Subsidiaries and set forth in the balance sheet included in the
Current Financials are adequate for the purposes for which they were
established.
SECTION 4.09. Books and Records.
------------- ------------------
Neither the Company nor the Company Subsidiaries has any of its
records, systems, controls, data or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and possession of the Company Group.
15
SECTION 4.10. Title to Assets.
------------- ---------------
(a) The Company Group owns, and has good, valid and marketable title
to, all the tangible personal property and assets used in their businesses or
purported to be owned by them, including:
(i) all assets reflected on the Current Balance Sheet;
(ii) all assets acquired by the Company Group since the date of
the Current Balance Sheet;
(iii) all assets referred to in Schedule 4.06(a) and the Closing
----------------
Receivables/Payables and all of the Company Group's rights under the
Company's Contracts; and
(iv) all other assets reflected in the Company Group's books
and records as being owned by the Company Group.
All of said assets are owned by the Company Group free and clear of
any Liens, except liens for current taxes and assessments not delinquent and
statutory liens of landlords, carriers, warehousemen, mechanics or materialmen
incurred in the ordinary course of business for sums not yet due and except as
set forth on Schedule 4.10(a). The representation and warranty set forth in
----------------
this Section 4.10(a) shall not apply to the Real Estate or the Leased Premises.
(b) The Company Group does not own any equipment, furniture,
fixtures, improvements or other tangible assets with an individual value of SEK
156,800 or more.
(c) Schedule 4.10(c) identifies all material assets other than the
----------------
Leased Premises that are being leased or licensed to the Company or the Company
Subsidiaries. All leases pursuant to which the Company Group leases personal
property are in good standing and are valid and effective in accordance with
their respective terms and, to Spray Venture's Knowledge, there exists no
material default thereunder or occurrence or condition which could result in a
default thereunder or termination thereof. The buildings, equipment and other
tangible assets used by the Company Group are in good operating condition and
are useable in the ordinary course of the Company Group's business.
SECTION 4.11. Real Property.
------------- -------------
(a) The Company and the Company Subsidiaries do not own any real
estate, buildings, improvements or structures.
(b) (i) All real estate leased, subleased or licensed by the Company
Group as lessee, sublessee or licensee is described in Schedule 4.11(b) (the
----------------
"Company Leased Premises"). The Company Leased Premises are leased to the
Company Group pursuant to written agreements (together with all amendments,
assignments, guarantees, and other
16
documents relating thereto or other agreements listed therein, the "Company
Leases"), and true and correct copies of all the Company Leases have been
furnished to the Purchaser and are described on Schedule 4.11(b). The Company
----------------
Group owns all leasehold estates and other rights purported to be granted by the
Company Leases. Each of the Company Leases is in full force and effect, valid
and binding in accordance with its terms.
(ii) All real estate leased, subleased or licensed by the
Company Group as lessor, sublessor or licensor is described in Schedule
--------
4.11(b) (the "Third Party Leased Premises"). Except as set forth on
-------
Schedule 4.11(b), the Third Party Leased Premises are leased by the Company
----------------
Group to third parties (each, a "Tenant" and collectively, "Tenants")
pursuant to written agreements (together with all amendments, assignments,
guarantees, and other documents relating thereto or other agreements listed
therein, the "Third Party Leases") and true and correct copies of all the
Third Party Leases have been furnished to the Purchaser and are described
on Schedule 4.11(b). There are no security deposits held by the Company
---------------
Group or any other party under any of the Third Party Leases. The Company
Group has not received any notices from any Tenant desiring to cancel any
Third Party Lease. The Company Group has not received notification from any
Tenant that it disputes the computation of the Tenant's percentage rent,
additional rent or other amounts payable to the Company Group pursuant to
its Third Party Lease. The occupancy of each Tenant is valid and legal and,
to the Knowledge of Spray Ventures, does not violate any material
Requirement of Law.
(iii) There are no arrearages in rent, additional rent or other
amounts payable under any of the Company Leases or the Third Party Leases
(collectively, the "Leases"). There are no defaults by the Company Group
of any of its obligations under the Leases. The Company Group has not
received any notices of default under any of the Leases, and to Spray
Ventures' Knowledge, there are no defaults by any party other than the
Company Group under any of the Leases. There are no brokerage or other
leasing commissions payable pursuant to any agreements in connection with
any of the Leases or amendments thereto or renewals or expansions thereof.
(c) Neither Spray Ventures nor any member of the Company Group has
received written notice (i) of condemnation, zoning or other land-use regulation
proceedings or suspension of the right of any member of the Company Group to use
any of the Leases, (ii) of any special assessment proceedings affecting all or
any portion of the Leases, (iii) from any Governmental Authority having
jurisdiction over all or any portion of the Leases regarding or in respect of
any change in any applicable laws, regulations, statutes, rules or restrictions
relating to a change in the permitted use of all or any portion of the Leases or
the business conducted thereof or (iv) any notice from adjacent landowners or
land occupants regarding unrecorded easements and/or agreements or encroachments
in respect of all or any portion of the Leases. There is no pending or, to
Spray Venture's Knowledge, threatened or contemplated action by any Governmental
Authority or pending or contemplated action by a private party adverse to the
uses contemplated for the Leases. Upon consummation of the transactions
contemplated by this Agreement, and without obtaining the consent of any Person,
the Company will be entitled to
17
continue to use or possess all of the Leases in the same manner such Leases were
used or possessed immediately prior to the Closing.
(d) All of the demised premises, buildings and structures that
comprise the Leases are in good operating condition and repair (normal wear and
tear excepted), suitable for the purposes for which they are being used and each
has adequate rights of ingress and egress for the operation of the business of
the Company Group. Since January 1, 1997, no member of the Company Group has
received any notice of any uncured unsafe or other condition which presents risk
of injury to persons or loss of or damage to property affecting or concerning
all or any portion of the Leases.
(e) There are no written or oral options to purchase, rights of first
refusal, rights of first offer in connection with any of the Leases or any other
contractual right to offer, purchase, acquire, sell, assign or dispose of any of
the Leases. Except as set forth on Schedule 4.11(b), no Person has any right,
----------------
as member, tenant, occupant or otherwise, to use, lease and/or occupy any
portion of the Leases, and there are no oral or written agreements between any
member of the Company Group and any other Person providing for the occupancy or
use of any portion of the Leases.
SECTION 4.12. Material Company Contracts.
------------- ---------------------------
(a) Schedule 4.12(a) lists all Material Company Contracts.
--- ----------------
(b) Each Material Company Contract is valid and in full force and
effect, and is enforceable by the Company or the applicable Company Subsidiary
in accordance with its terms. There are no Material Company Contracts that the
Company Group intends to terminate, and the Company Group has not received
notice from any party to any Material Company Contract that it wishes to
terminate such Contract.
(c) To Spray Venture's Knowledge, neither the Company nor any Company
Subsidiary is in breach of or default under (and no event has occurred which
with notice or the passage of time or both would constitute a breach of or
default under) any Material Company Contract and, to the Company's Knowledge, no
other Person is in breach of or default under (and no event has occurred which
with notice or the passage of time or both would constitute a breach of or
default under) any Material Company Contract.
(d) None of the Material Company Contracts contains a "change in
control," "potential change in control" or similar provision which could result
in a potential "parachute payment." The consummation of the Transactions will
not (either alone or upon the passage of time and/or occurrence of any
additional acts or events) result in any payment (severance pay or otherwise)
becoming due from the Company or any Company Subsidiary to any Person or
accelerate the time of payment or vesting, or increase the amount of
compensation due, any Person; excluding, however, any such payments,
accelerations or increases which could have occurred upon the passage of time
and/or occurrence of any additional acts or event even if the "change of
control" or "potential change of control" occurring upon the execution and
delivery of this Agreement and the consummation of the Transactions did not
occur.
18
SECTION 4.13. Employees; Employee Benefits.
------------- -----------------------------
(a) Schedule 4.13(a) contains a list of all employees of the Company
----------------
and the Company Subsidiaries as of the date hereof and their salary or wages. A
standard employment contract is attached hereto as Exhibit A. No employee of the
---------
Company Group is on long-term disability leave or extended absence or in receipt
of workers' compensation benefits.
(b) Schedule 4.13(b) contains a list of individuals who are currently
----------------
performing services for the Company Group related to its business and are
classified as "consultants" or "independent contractors."
(c) To the Knowledge of Spray Ventures, no trade union or collective
bargaining agent is currently representing any of its employees with respect to
any labor actions against the Company. No employee of the Company Group, other
than the Key Company Employees, has any agreement or contract, written or oral,
regarding his employment that provides for a longer notice of termination by the
Company Group, other than pursuant to applicable law.
(d) No employee of the Company Group, nor, to Spray Venture's
Knowledge, any consultant with whom the Company or any of the Company
Subsidiaries has contracted, is in material violation of any term of any
employment contract, proprietary information agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, such Person because of the nature of the business to be conducted by the
Company Group, and to Spray Venture's Knowledge the continued employment by the
Company Group of its present employees, and the performance of the Company's and
the Company Subsidiaries' contracts with its independent contractors, will not
result in any such violation. The Company has not received any notice alleging
that any such violation has occurred.
(e) To the Knowledge of Spray Ventures, no officer or Key Company
Employee, or any group of Key Company Employees, intends to terminate his, her
or their employment with the Company, nor does the Company Group have a present
intention to terminate the employment of any officer, Key Company Employee or
group of Key Company Employees.
(f) The Company and the Company Subsidiaries have complied with all
obligations under applicable law to pay social security charges in respect of
the periods accrued prior to the date hereof.
(g) Each Company Employee Benefit Plan is fully funded for all
periods prior to the Closing Date. Without limiting the foregoing, all
contributions to each of the Company Employee Benefit Plans in respect of
periods of service or benefits accrued prior to the Closing Date have been made
on an accrual basis up to the Closing Date, notwithstanding that such
contributions may not be due and owing until after the Closing Date.
(h) No promises or commitments have been made by Spray Ventures, the
Company or any of the Company Subsidiaries, or any of their employees,
consultants or former
19
employees or consultants to amend any Company Employee Benefit Plan or to
provide increased benefits thereunder (other than plan amendments that are
required as a matter of law).
(i) Each Company Employee Benefit Plan is, and has been, administered
in all material respects in accordance with the terms thereof and applicable
laws. All obligations under the Company Employee Benefit Plans have been
satisfied, to the extent required by the terms thereof or applicable laws.
(j) Each Company Employee Benefit Plan is in compliance with all
applicable laws and there are no outstanding material defaults or violations by
the Company in connection with any Company Employee Benefit Plan, and no order
has been made or notice given requiring (or proposing to require) the Company,
the Company Subsidiaries or any others to take or refrain from taking any action
in respect of any Company Employee Benefit Plan. All material returns, filings,
reports and disclosures relating to the Company Employee Benefit Plans required
pursuant to the terms thereof or applicable laws have been made, filed or
distributed in accordance with all such requirements and all filing fees and
levies imposed on the Company Employee Benefit Plans by any regulatory
authorities or applicable laws have been made or remitted on a timely basis.
Each Company U.S. Employee Benefit Plan that is intended to be a qualified plan
under Internal Revenue Code Section 401 is so qualified.
(k) No actions, suits, claims (other than routine claims for payment
of benefits in the ordinary course), investigations, arbitrations or other
proceedings have been commenced or threatened in respect of any of the Company
Employee Benefit Plans or its assets.
(l) None of the Company Employee Benefit Plans provides benefits to
employees following retirement. No Company Employee Benefit Plan exists that
could result in the payment to any employee of any money, benefits or other
property or accelerate or increase the funding requirements for any Company
Employee Benefit Plan, in each case as a result of the Transactions.
(m) Except as set forth in Schedule 4.13(m), there are no employment
----------------
policies or plans, including policies or plans regarding incentive compensation,
stock options, severance pay or other terms or conditions of employment or terms
or conditions upon which Employees may be terminated, which are binding, under
contract or by operation of law, upon the Company or the Company's Subsidiaries.
SECTION 4.14. Employment Relations.
------------- ---------------------
(a) The Company and the Company Subsidiaries are not engaged in any
unfair labor practice. There have been no such complaints under applicable laws
against the Company or the Company Subsidiaries.
(b) There are no complaints nor are there any threatened complaints,
against the Company or any Company Subsidiary, before any employment standards
branch or tribunal or human rights tribunal.
20
SECTION 4.15. Compensation of Employees.
------------- --------------------------
No member of the Company Group has any retired employees who are
receiving or entitled to receive any healthcare or life insurance benefits or
any payments from the Company or the Company Subsidiaries not covered by any
pension plan to which the Company or the Company Subsidiaries is a party. The
Company Group has not, because of past practices or previous commitments with
respect to its employees, established any rights on the part of any of its
employees to additional compensation with respect to any period after the
Closing Date (other than wage increases in the ordinary course of business).
The present severance and vacation policy of the Company and the Company
Subsidiaries is equal to or greater than that required by applicable law.
SECTION 4.16. Receivables; Major Customers.
------------- -----------------------------
(a) The list of accounts receivable included in the Closing
Receivables/Payables provides an accurate and complete breakdown and aging of
all accounts receivable of the Company and the Company Subsidiaries as of June
30, 1998 and for the Company as of the date hereof.
(b) All such accounts receivable:
(i) represent valid obligations of customers of the Company and
the Company Subsidiaries' arising from bona fide transactions entered into
in the ordinary course of business; and
(ii) are current and will be collected in full (without any
counterclaim or setoff) in the ordinary course of business, subject to a
reserve for doubtful accounts as set forth in the Current Balance Sheet.
(c) Neither the Company nor any of the Company Subsidiaries' has
received any notice or other communication (in writing or otherwise) indicating
that any customer of the Company or the Company Subsidiaries may cease dealing
with the Company or any of the Company Subsidiaries or may otherwise reduce the
volume of business transacted by such Person with the Company or any of the
Company Subsidiaries below historical levels.
SECTION 4.17. Accounts Payable; Customers and Suppliers.
------------- ------------------------------------------
(a) The list of accounts payable included in the Closing
Receivables/Payables:
(i) provides an accurate and complete breakdown and aging of the
Company's and the Company Subsidiaries' accounts payable as of June 30,
1998 and for the Company as of the date hereof;
(ii) provides an accurate and complete breakdown of all customer
deposits and other deposits held by the Company and the Company
Subsidiaries as of June 30, 1998 and for the Company as of the date hereof;
and
21
(iii) provides an accurate and complete breakdown of amounts
owed to suppliers and the Company's and the Company Subsidiaries' debt as
of June 30, 1998 and for the Company as of the date hereof.
(b) Schedule 4.17(b) accurately identifies, and provides an accurate
----------------
and complete breakdown of the amounts paid to or received from, the three
largest suppliers and 10 largest customers of the Company Group (in terms of
amounts billed and paid, respectively) for the thirteen-month period ended
September 30, 1998. Spray Ventures is not aware of any loss or threatened loss
of any such suppliers, customers or accounts.
SECTION 4.18. Proceedings.
------------- ------------
(a) There is no pending Proceeding and no Person has threatened to
commence any Proceeding:
(i) that involves the Company or any Company Subsidiary or their
assets; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
Transactions.
(b) To the Knowledge of Spray Ventures, no acts, facts,
circumstances, events or conditions have occurred or exist which are a basis for
any Proceeding described in Section 4.18(a).
(c) No member of the Company Group is a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any Proceeding
with any governmental authority) which could have a Material Adverse Effect.
SECTION 4.19. Compliance With Requirement of Laws.
------------- ------------------------------------
The Company and the Company Subsidiaries are in compliance with each
Requirement of Law (including, without limitations, all Environmental Laws)
applicable to them or the conduct of their businesses or use of their assets
except for any failure to comply which, individually or in the aggregate, does
not or reasonably cannot be expected to have a Material Adverse Effect on the
Company or any of the Company Subsidiaries.
SECTION 4.20. Governmental Authorizations.
------------- ----------------------------
(a) The Company Group has no Governmental Authorizations.
(b) No Governmental Authorizations are necessary (i) to enable the
Company and the Company Subsidiaries to conduct their business in the manner in
which such business is currently being conducted, or (ii) to permit the Company
and the Company Subsidiaries to own and use their assets in the manner in which
they are currently owned and used.
22
SECTION 4.21. Tax Matters.
------------- ------------
(a) The Company and its Subsidiaries have filed, or caused to be
filed within the times and within the manner prescribed by law, all tax or
information returns and tax reports required under all applicable statutes,
rules or regulations to be filed by the Company and its Subsidiaries with
respect to income, franchise, capital stock, employees' income withholding,
withholding on payments to foreign persons, social security, unemployment,
disability, property, custom duties, sales, use, goods and services, excise,
transfer, value added, gross receipts, postponement and other taxes (including
but not limited to interest, penalties, or additions to tax in respect of the
foregoing) whether disputed or not (all of the foregoing collectively referred
to as "Taxes").
(b) All Taxes shown on said returns to be due and additional
assessments received prior to the date hereof have been paid.
(c) The amounts set up as accruals for Taxes on the Current
Financials are sufficient for the payment of all unpaid Taxes of the Company and
its Subsidiaries, whether or not such Taxes are disputed or have been asserted
by any Governmental Authority, for all periods or portions of periods ended on
or prior to Closing, including any Taxes due on any restructuring of the Company
or distribution of Subsidiaries of the Company to the Shareholders prior to
Closing.
(d) Neither the Company nor any of its Subsidiaries has received
notice of any proposed audit or reassessment from any taxing authorities and no
examination by the appropriate taxing authority of any return of the Company or
any of its Subsidiaries is currently in progress.
(e) No deficiency in the payment of Taxes by the Company or any of
its Subsidiaries for any period has been asserted in writing by any taxing
authority and remains unsettled at the date of this Agreement. No taxing
authority has undertaken, raised or threatened to raise any claim, proceeding or
investigation against the Company or any of its Subsidiaries, whether or not
such matter was agreed to or settled.
(f) There are no outstanding agreements or waivers extending the
statutory period of limitations for assessment applicable to any tax return of
the Company or any of its Subsidiaries.
(g) None of the Company or any of its Subsidiaries has any liability
for the Taxes of any Person other than the Company or a Company Subsidiary,
other than social charges, withholding taxes or garnishment of wages payable on
behalf of Company Group employees.
(h) Except as set forth on Schedule 4.21(h), neither the Company nor
----------------
any of its Subsidiaries is engaged in business in the United States or has
assets located in the United States. Neither the Company nor any of its
Subsidiaries is or has been a controlled foreign corporation within the meaning
of the United States tax laws.
23
SECTION 4.22. Finders and Brokers.
------------- --------------------
Neither the Company, the Company Subsidiaries, Spray Ventures nor any
Person acting on behalf of the Company, the Company Subsidiaries or Spray
Ventures has negotiated with any finder, broker, intermediary or any similar
Person in connection with the transactions contemplated herein. Spray Ventures
will indemnify the Purchaser and hold it harmless from any liability or expense
arising from any claim for brokerage commissions, finder's fees or other similar
compensation based upon any agreement, arrangement or understanding made by or
on behalf of the Company or Spray Ventures.
SECTION 4.23. Absence of Changes.
------------- -------------------
Since the date of the Current Financials:
(a) the Company and the Company Subsidiaries have operated their
businesses only in the ordinary course of business and consistent with past
practice, and there have not been any facts, circumstances, events or changes in
the Company's or the Company Subsidiaries' business operations or financial
condition, which has had or can reasonably be expected to have a Material
Adverse Effect on the Company or any of the Company Subsidiaries;
(b) none of the Company or any of the Company Subsidiaries has (i)
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of capital stock, or (ii) repurchased, redeemed or
otherwise reacquired or reduced in value any shares of capital stock or other
securities;
(c) none of the Company or any of the Company Subsidiaries has
purchased or otherwise acquired any asset from any other Person, except in the
ordinary course of business;
(d) none of the Company or any of the Company Subsidiaries has made
any material capital expenditure;
(e) except as set forth in Schedule 4.23(e), none of the Company or
----------------
any of the Company Subsidiaries has sold or otherwise transferred, and has not
leased or licensed, any asset to any other Person except for products sold by
the Company or any of the Company Subsidiaries from its inventory in the
ordinary course of business;
(f) none of the Company or the Company Subsidiaries has incurred any
damage, destruction, loss or interruption of use which adversely affects its
business or assets (whether or not covered by insurance);
(g) none of the Company or the Company Subsidiaries has forgiven any
debt or otherwise released or waived any right or claim;
24
(h) except as set forth in Schedule 4.23(h), none of the Company or
----------------
the Company Subsidiaries has made any loans or advances to, or guaranteed any
indebtedness of, the Shareholders or any of their Affiliates;
(i) none of the Company or the Company Subsidiaries has entered into
any transaction or taken any other action outside the ordinary course of
business;
(j) except as set forth in Schedule 4.23(j), none of the Company or
----------------
the Company Subsidiaries has incurred any Liability, except (i) Liabilities
incurred in the ordinary course of business and (ii) Liabilities incurred in
connection with or as a result of the Transactions;
(k) none of the Company or the Company Subsidiaries has made any
change in its accounting methods or practices, including, without limitation,
any change with respect to establishment of reserves for unearned premiums,
losses (including incurred but not reported losses) and loss adjustment
expenses, or made any change in depreciation or amortization policies or rates
adopted by it, except as required by law or Swedish GAAP;
(l) none of the Company or the Company Subsidiaries has (A) increased
the compensation of any of its employees or directors, other than in the
ordinary course of business or (B) changed, altered or entered into any
employment, severance, retention or similar agreement with any salaried
employee, in each case other than in the ordinary course of business;
(m) the Company has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(a)" through "(l)" above; and
(n) without limitation by the enumeration of any of the foregoing,
entered into any transaction with a consideration in excess of SEK 196,000 other
than in the usual and ordinary course of business and except as contemplated in
this Agreement.
SECTION 4.24. Environmental Compliance.
------------- -------------------------
The Company and the Company Subsidiaries are in compliance in all
material respect with all applicable Environmental Laws. The Company and the
Company Subsidiaries have not received any notice or other communication (in
writing or otherwise) that alleges that the Company or the Company Subsidiaries
are not in compliance with any Environmental Law, and, to the Knowledge of Spray
Ventures, there are no circumstances that may prevent or interfere with the
Company's or the Company Subsidiaries' compliance with any Environmental Law in
the future.
SECTION 4.25. Insurance.
------------- ----------
(a) Each insurable asset of the Company and the Company Subsidiaries
has at all times been and is at the date of this Agreement insured to its full
replacement value (with no
25
provision for deduction or excess) against each risk normally insured against by
a Person operating the types of business operated by the Company and the Company
Subsidiaries.
(b) The Company and the Company Subsidiaries have at all times been
and are at the date of this Agreement adequately insured against accident,
damage, injury, third party loss, loss of profits and any other risk normally
insured against by a Person operating the types of business operated by the
Company and the Company Subsidiaries.
(c) Each of the policies is valid and enforceable and is not void or
voidable. The Company or the Company Subsidiaries have paid all premiums due,
and have not done anything or omitted to do anything which might make any of the
policies void or voidable.
SECTION 4.26. Full Disclosure.
------------- ----------------
The Company has provided the Purchaser and the Purchaser's
representatives with full and complete access to all of the Company's and the
Company Subsidiaries' records and other documents and data requested. No
representation or warranty by Spray Ventures in this Agreement and no statement
contained in any schedule, certificate or other written statement required to be
furnished by Spray Ventures or the Company or any of its representatives
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby is inaccurate, incorrect, or incomplete in any material
respect or contains any untrue statement of a material fact or omits to state
any material fact required to be stated herein or therein or necessary in order
to make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants, severally and not
jointly, to the Purchaser as follows:
SECTION 5.01. Authority.
------------- ----------
(a) Such Shareholder is duly organized, validly existing and, if
applicable, in good standing under the laws of the jurisdictions of its
formation. Such Shareholder has all requisite right, power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party, and the execution,
delivery and performance by such Shareholder of this Agreement and such other
Transaction Documents have been duly authorized by all necessary action on the
part of such Shareholder (or the shareholders of such Shareholder).
(b) Each of this Agreement and such other Transaction Documents
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation
26
of such Shareholder party thereto, enforceable against such Shareholder in
accordance with its terms.
SECTION 5.02. Shareholders.
------------- -------------
(a) Such Shareholder has the capacity and financial capability to
comply with and perform all of its covenants and obligations under each of the
Transaction Documents to which it is or may become a party.
(b) Such Shareholder is the registered and beneficial owner and
holder of the Company Shares set forth beside its name on Schedule 4.03(a), free
----------------
and clear of any Encumbrances.
(c) Such Shareholder:
(i) has not, at any time, (A) made a general assignment for the
benefit of creditors or initiated any proceedings with respect to a
compromise or arrangement with its creditors, (B) filed, or had filed
against it, any bankruptcy petition or similar filing, (C) initiated any
proceedings for the dissolution, liquidation or reorganization of such
Shareholder, or the winding up or cessation of the business or affairs of
such Shareholder, (D) suffered the attachment or other judicial seizure of
all or a substantial portion of its assets, (E) suffered, or presented a
petition for, the appointment of a receiver or liquidator with respect to
such Shareholder or any of its assets, (F) admitted in writing its
inability to pay its debts as they become due, or (G) taken or been the
subject of any action that may have an adverse effect on its ability to
comply with or perform its respective covenants or obligations under any of
the Transaction Documents.
(ii) is not subject to any Order that may have an adverse effect
on such Shareholder's ability to comply with or perform such Shareholder's
covenants or obligations under any of the Transaction Documents.
(d) There is no Proceeding pending that may have an adverse effect on
the ability of such Shareholder to comply with or perform its covenants or
obligations under any of the Transaction Documents.
(e) No Consent of or by any Person is required in connection with the
execution, delivery and performance by such Shareholder of this Agreement or the
consummation of the Transactions contemplated hereby, except for any such
Consents that have been obtained prior to the date hereof.
27
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company and the
Shareholders, with respect to itself and the Purchaser Subsidiaries, as follows:
SECTION 6.01. Organization, Good Standing and Qualification of the
------------- ----------------------------------------------------
Purchaser and the Purchaser Subsidiaries.
-----------------------------------------
(a) The Purchaser and the Purchaser Subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdictions of their formation and are duly qualified to conduct business and
in good standing under the laws of each jurisdiction in which the nature of
their business or the ownership or leasing of their properties require such
qualification. The Purchaser and the Purchaser Subsidiaries have all requisite
corporate power and authority to own and operate their properties and assets,
and to carry on their business as presently conducted and as presently proposed
to be conducted. The Purchaser has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement.
(b) Schedule 6.01(b) sets forth (i) the names of the members of the
----------------
Purchaser's and the Purchaser Subsidiaries' boards of directors, and (ii) the
names and titles of the Purchaser's and the Purchaser Subsidiaries' officers.
(c) None of the Purchaser or any of the Purchaser Subsidiaries has
filed (or has had filed against it) a petition in bankruptcy, or is insolvent
within the meaning of applicable laws, rules, regulations or similar
requirements, and has not made any assignment in favor of its creditors or any
class thereof, nor has any petition for a receivership or administration order
been presented in respect of the Purchaser or any of the Purchaser Subsidiaries.
Neither the Purchaser nor any of the Purchaser Subsidiaries has initiated any
proceedings with respect to a compromise or arrangement with their creditors or
for the dissolution, liquidation or reorganization of such Persons, or the
winding up or cessation of the business or affairs of such Persons. No receiver
or administration receiver or liquidator has been appointed in respect of the
Purchaser or any of the Purchaser Subsidiaries, or any of their assets and no
execution has been levied upon any of their assets.
(d) Except as set forth in Schedule 6.01(d), the Purchaser
----------------
Subsidiaries are the only Subsidiaries of the Purchaser and, except for the
outstanding shares of the Purchaser Subsidiaries held by the Purchaser and as
set forth on Schedule 6.01(d), the Purchaser has never owned, beneficially or
----------------
otherwise, any shares or other securities of, or any direct or indirect interest
in, any Person. The Purchaser Subsidiaries have no Subsidiaries and have never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest in, any Person.
28
SECTION 6.02. Corporate Documents.
------------- --------------------
(a) The Purchaser has delivered to the Shareholders accurate and
complete copies of:
(i) the certificate of incorporation and bylaws, including all
amendments thereto, of the Purchaser and each of the Purchaser
Subsidiaries;
(ii) the share transfer registers of the Purchaser and each of
the Purchaser Subsidiaries; and
(iii) the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise
without a meeting) of the shareholders and boards of directors of the
Purchaser and each of the Purchaser Subsidiaries.
(b) There have been no meetings or other proceedings of the
shareholders or the board of directors of the Purchaser or any of the Purchaser
Subsidiaries that are not properly reflected in such minutes or other records.
(c) None of the Purchaser or the Purchaser Subsidiaries is in
violation of its articles of incorporation and bylaws.
SECTION 6.03. Capitalization.
------------- ---------------
(a) The authorized share capital of the Purchaser consists of
10,000,000 shares of Common Stock, of which 9,156,819 shares are issued and are
outstanding. There are no shares of capital stock of the Purchaser of any other
class authorized, issued or outstanding. All of such shares are owned and held
beneficially and of record by the Purchaser Shareholders, free and clear of all
options, proxies, voting trusts, voting agreements, judgments, pledges, charges,
escrows, rights of first refusal or first offer, mortgages, indentures, claims,
transfer restrictions, Liens, equities, security interests and other
encumbrances of every kind and nature whatsoever, whether arising by agreement,
operation of law or otherwise. The authorized and issued capital stock of each
of the Purchaser Subsidiaries is as set forth on Schedule 6.03(a). All
----------------
outstanding shares of such capital stock are held directly by the Purchaser
except as set forth on Schedule 6.03(a). All issued and outstanding shares
----------------
described in this Section 6.03(a) have been duly authorized and validly issued
in full compliance with all applicable Requirements of Law, are fully paid and
non-assessable, and have not been issued in violation of any preemptive or
similar rights.
(b) Except as set forth on Schedule 6.03(b), there are no: (i)
----------------
outstanding subscriptions, options, calls, warrants or rights (whether or not
currently exercisable) to acquire any shares in the capital or other securities
of the Purchaser or any of the Purchaser Subsidiaries, (ii) outstanding
securities, instruments or obligations that are or may become convertible into
or exchangeable for any shares in the capital or other securities of the
Purchaser or any of the Purchaser Subsidiaries, (iii) Contracts under which the
Purchaser or any of the Purchaser
29
Subsidiaries is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities, or (iv) conditions or circumstances
that may directly or indirectly give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares in the capital, or other securities of, the
Purchaser or any of the Purchaser Subsidiaries.
(c) The Purchaser has never repurchased, redeemed or otherwise
reacquired (and has not agreed, committed or offered (in writing or otherwise)
to reacquire) any shares of its capital.
SECTION 6.04. Authority; Binding Nature of Agreements.
------------- ----------------------------------------
The Purchaser has the right, power and authority to enter into and to
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party, and the execution, delivery and performance by
the Purchaser of this Agreement and each of such other Transaction Documents has
been duly authorized by all necessary action on the part of the Purchaser and
the Purchaser Shareholders. Each of this Agreement and such other Transaction
Documents constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject only to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
SECTION 6.05. Non-Contravention; Consents.
------------- ----------------------------
(a) Neither the execution and delivery of this Agreement or any other
Transaction Document to which the Purchaser is a party, nor the consummation or
performance of any of the Transactions, will directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with or result in a violation of (A)
any of the provisions of certificate of incorporation or bylaws of the
Purchaser or any of the Purchaser Subsidiaries, or (B) any resolution
adopted by the stockholders or board of directors of the Purchaser or any
of the Purchaser Subsidiaries;
(ii) contravene, conflict with or result in a violation of, or
give any Governmental Authority or other Person the right to challenge any
of the Transactions or to exercise any remedy or obtain any relief under,
any Requirement of Law to which the Purchaser or any Purchaser Subsidiary
or any of the assets owned or used by the Purchaser or any Purchaser
Subsidiary are subject;
(iii) cause the Purchaser or any Purchaser Subsidiary to become
subject to, or to become liable for the payment of, any Tax;
(iv) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Authority the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the
30
Purchaser or any Purchaser Subsidiary or any of their respective employees
or that otherwise relates to the business of the Purchaser or any Purchaser
Subsidiary, or to any of the assets owned or used by the Purchaser or any
Purchaser Subsidiary;
(v) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any of the
Material Purchaser Contracts or any other Purchaser Contract (if such
contravention, conflict, violation, breach or default has or could
reasonably be expected to have a Material Adverse Effect on the Purchaser
or any Purchaser Subsidiary);
(vi) give any Person the right to (i) declare a default or
exercise any remedy under any Purchaser Contract, (ii) accelerate the
maturity or performance of any Purchaser Contract, or (iii) cancel,
terminate or modify any Purchaser Contract;
(vii) give any Person the right to any payment by the Purchaser
or any Purchaser Subsidiary or give rise to any acceleration or change in
the award, grant, vesting or determination of options, warrants, rights,
severance payments or other contingent obligations of any nature whatsoever
of the Purchaser or any Purchaser Subsidiary in favor of any Person, in any
such case as a result of the change in control of the Purchaser or such
Purchaser Subsidiary, or otherwise resulting from the Transactions; or
(viii) result in the imposition or creation of any Lien upon or
with respect to any asset owned or used by the Purchaser or any Purchaser
Subsidiary.
(b) Except as set forth on Schedule 6.05(b), neither the Purchaser
----------------
nor any of the Purchaser Subsidiaries is required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution and delivery of this Agreement or any of the other Transaction
Documents or the consummation or performance of any of the Transactions. All
filings, notices and Consents required to be filed, given or obtained by the
Purchaser and the Purchaser Subsidiaries, as set forth on Schedule 6.05(b), will
----------------
have been filed, given or obtained prior to the Closing.
SECTION 6.06. Proprietary Assets.
------------- -------------------
(a) Schedule 6.06(a) sets forth a complete and accurate list
----------------
(including relevant registration information) of all registered Proprietary
Assets which are owned or used by, required for, or material to the Purchaser or
the Purchaser Subsidiaries in connection with the Purchaser's and the
Purchaser's Subsidiaries' businesses.
(b) To the Knowledge of the Purchaser, all Proprietary Assets
which are owned or used by, required for, or material to the Purchaser or the
Purchaser Subsidiaries in connection with the Purchaser's and the Purchaser's
Subsidiaries' businesses, including those listed in Schedule 6.06(a) are:
----------------
(i) other than those referred to in Section 6.06(b)(vi)
below, owned solely and exclusively by the Purchaser or one of the
Purchaser Subsidiaries;
31
(ii) except as set forth on Schedule 6.06(b)(ii) or pursuant to
--------------------
applicable law, not subject to any limit as to time or any other
limitation, right of termination, reassignment or restriction ;
(iii) valid and enforceable (and, to the extent registered, in
compliance with all Requirements of Law, including payment of filing,
examination and maintenance fees and proofs of working or use), with no
past or present default on the part of the Purchaser or the Purchaser
Subsidiaries or past or present acquiescence in the activities of third
parties that would adversely affect validity or enforceability of such
Proprietary Assets;
(iv) not being infringed or attacked or opposed or the subject
of any claim to ownership or compensation, by any Person, and no Person has
indicated any intention to infringe, attack or oppose such Proprietary
Assets;
(v) not subject to any license, waiver, charge, contingent
assignment, agreement, obligation, or any other encumbrance of any sort in
favor of a third party other than those from the Purchaser or from the
Purchaser Subsidiaries to their licensees or distributors, which licenses
are currently in force and are listed in Schedule 6.06(b)(v); and
-------------------
(vi) if not owned by the Purchaser or the Purchaser
Subsidiaries, subject to licenses granted to the Purchaser or the Purchaser
Subsidiaries which licenses are currently in force and, except for licenses
for "off-the-shelf" software, are listed in Schedule 6.06(b)(vi).
--------------------
(c) In the case of the licenses of Proprietary Assets referred to in
Section 6.06(b)(vi) above:
(i) the Purchaser or the Purchaser Subsidiaries have the
exclusive, unrestricted right to use the Proprietary Assets subject to the
license, except as set forth in Schedule 6.06(b)(vi);
--------------------
(ii) each such license is valid and enforceable and neither the
Purchaser, the Purchaser Subsidiaries, nor any other party to such license
is or has been in breach of the license, and to Knowledge of Spray Ventures
no such Person has indicated any intention to breach such license;
(iii) no event has occurred which, with notice or lapse of time
or both, would constitute a material default under any such license; and
(iv) none (except as is specifically marked with an asterisk
"*") will terminate or be rendered liable to termination by virtue of the
acquisition by the Shareholders of the Purchaser Shares.
(d) To the Knowledge of the Purchaser, no claims or applications have
been made against, no notifications in writing or otherwise have been received
by, and there are no
32
circumstances in respect of the Purchaser's and the Purchaser Subsidiaries'
businesses which (notwithstanding any view taken by the Purchaser as to the
merits of such claim, application, notification or circumstances) if pursued
would affect the accuracy of the warranties in Sections 4.06(b) and (c) above.
(e) To the Knowledge of the Purchaser, the Purchaser and the
Purchaser Subsidiaries have conducted their business without infringement or
claim of infringement of any Proprietary Asset of any other Person. Without
limiting the foregoing, the Purchaser and the Purchaser Subsidiaries have the
right (pursuant to a written Contract) to use and incorporate into their
products the Proprietary Assets of other Persons, as and to the extent the same
are currently so used and incorporated. Neither the Purchaser nor the Purchaser
Subsidiaries has received any notice or other communication (in writing or
otherwise) of any infringement of any Proprietary Asset owned or used by any
other Person. To the Knowledge of the Purchaser, no other Person is infringing,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Proprietary Asset owned or used by the Purchaser or any of
the Purchaser Subsidiaries.
(f) The Purchaser and the Purchaser Subsidiaries have taken
reasonable measures and precautions to protect the confidentiality and value of
all Proprietary Assets owned or used by the Purchaser or the Purchaser
Subsidiaries.
SECTION 6.07. Financial Statements.
------------- ---------------------
(a) The Purchaser has delivered to the Shareholders (i) the
consolidated balance sheet of the Purchaser and the Purchaser Subsidiaries as of
December 31, 1997 and the related consolidated statements of operations for the
Purchaser and the Purchaser Subsidiaries for the year then ended (collectively,
the "Purchaser Year-End Financials"), (ii) the unaudited consolidated balance
sheet of the Purchaser and the Purchaser Subsidiaries as of June 30, 1998 (the
"Purchaser Current Balance Sheet") and the related unaudited consolidated
statements of operations for the Purchaser and the Purchaser Subsidiaries for
the six-month period then ended (collectively, the "Purchaser Current
Financials"), and (iii) a consolidated list of accounts payable and accounts
receivable for the Purchaser and the Purchaser Subsidiaries as of the date
hereof, in each case aged consistent with the Purchaser's past practices (the
"Purchaser Closing Receivables/Payables;" the Purchaser Year-End Financials, the
Purchaser Current Financials and the Purchaser Closing Receivables/Payables,
collectively, the "Purchaser Financials").
(b) All of the Purchaser Financials (and the line items contained
therein) are accurate and complete in all material respects. The Purchaser
Financials are in accordance with the books and records of the Purchaser and the
Purchaser Subsidiaries and present fairly the assets, liabilities and financial
condition of the Purchaser and the Purchaser Subsidiaries as of the respective
dates thereof and the results of operations of the Purchaser and the Purchaser
Subsidiaries for the periods covered thereby. The Purchaser Financials have
been prepared in accordance with U.S. GAAP, applied on a consistent basis
throughout the periods covered.
(c) All of the Purchaser Financials are attached hereto as Schedule
--------
6.07(c).
-------
33
SECTION 6.08. Liabilities.
------------- ------------
Except (a) as shown on the balance sheet included in the Purchaser
Current Financials or in the list of accounts payable included in the Purchaser
Closing Receivables/ Payables, or (b) pursuant to the Purchaser Contracts
included on Schedule 6.12(a), none of the Purchaser or any of the Purchaser
----------------
Subsidiaries has any material Liabilities of any nature. All reserves
established by the Purchaser and the Purchaser Subsidiaries and set forth in the
balance sheet included in the Purchaser Current Financials are adequate for the
purposes for which they were established.
SECTION 6.09. Books and Records.
------------- ------------------
Except as set forth on Schedule 6.09, neither the Purchaser nor the
-------------
Purchaser Subsidiaries has any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent on or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and
possession of the Purchaser Group.
SECTION 6.10. Title to Assets.
------------- ------------------
(a) The Purchaser Group owns, and has good, valid and marketable
title to, all the tangible personal property and assets used in their businesses
or purported to be owned by them (other than those listed in Schedule 6.06(vi)),
------------------
including:
(i) all assets reflected on the Purchaser Current Balance
Sheet;
(ii) all assets acquired by the Purchaser Group since the date
of the Current Balance Sheet;
(iii) all assets referred to in Schedule 6.06(a)(i), Schedule
------------------- ---------
6.10(b) and the Purchaser Closing Receivables/Payables and all of the
-------
Purchaser Group's rights under the Purchaser's Contracts; and
(iv) all other assets reflected in the Purchaser Group's books
and records as being owned by the Purchaser Group.
All of said assets are owned by the Purchaser Group free and clear of
any Liens, except liens for current taxes and assessments not delinquent and
statutory liens of landlords, carriers, warehousemen, mechanics or materialmen
incurred in the ordinary course of business for sums not yet due. The
representation and warranty set forth in this Section 6.10(a) shall not apply to
the Purchaser Real Estate or the Purchaser Leased Premises.
(b) Schedule 6.10(b) identifies all equipment, furniture, fixtures,
----------------
improvements and other tangible assets owned by the Purchaser Group with an
individual value of $20,000 or more, and sets forth either the original cost and
book value or the estimated fair
34
market value of each of said assets. Schedule 6.10(b) also accurately identifies
----------------
all tangible assets leased to the Purchaser Group.
(c) Each asset identified in Schedule 6.10(b):
----------------
(i) is free of material defects and deficiencies and is in
good condition and repair, consistent with its age and intended use
(ordinary wear and tear excepted);
(ii) complies in all material respects and, to the Purchaser's
Knowledge, is being operated and otherwise used in full compliance with all
applicable Requirements of Law; and
(iii) is adequate for the uses to which it is being put.
The assets identified in Schedule 6.10(b) are adequate for the conduct
----------------
of the Purchaser Group's business in the manner in which such business is
currently being conducted
(d) Schedule 6.10(d) identifies all material assets other than the
----------------
Purchaser Leased Premises that are being leased or licensed to the Purchaser or
the Purchaser Subsidiaries. All leases pursuant to which the Purchaser Group
leases personal property are in good standing and are valid and effective in
accordance with their respective terms and, to the Purchaser's Knowledge, there
exists no material default thereunder or occurrence or condition which could
result in a default thereunder or termination thereof. The buildings, equipment
and other tangible assets used by the Purchaser Group are in good operating
condition and are useable in the ordinary course of the Purchaser Group's
business.
SECTION 6.11. Real Property.
------------- --------------
(a) The Purchaser and the Purchaser Subsidiaries do not own any real
estate, buildings, improvements or structures.
(b) (i) All real estate leased, subleased or licensed by the
Purchaser Group as lessee, sublessee or licensee is described in Schedule
--------
6.11(b) (the "Purchaser Leased Premises"). Except as set forth on Schedule
------- --------
6.11(b), the Purchaser Leased Premises are leased to the Purchaser Group
-------
pursuant to written agreements (together with all amendments, assignments,
guarantees, and other documents relating thereto or other agreements listed
therein, the "Purchaser Leases"), and true and correct copies of all the
Purchaser Leases have been furnished to the Purchaser and are described on
Schedule 6.11(b). The Purchaser Group owns all leasehold estates and other
----------------
rights purported to be granted by the Purchaser Leases. Each of the Purchaser
Leases is in full force and effect, valid and binding in accordance with its
terms.
(ii) All real estate leased, subleased or licensed by the
Purchaser Group as lessor, sublessor or licensor is described in Schedule
--------
6.11(b) (the "Purchaser Third Party Leased Premises"). Except as set forth
-------
on Schedule 6.11(b), the Purchaser Third Party Leased Premises are leased
----------------
by the Purchaser Group to third parties (each, a "Purchaser Tenant" and
collectively, "Purchaser Tenants") pursuant to written agreements
35
(together with all amendments, assignments, guarantees, and other documents
relating thereto or other agreements listed therein, the "Purchaser Third
Party Leases") and true and correct copies of all the Purchaser Third Party
Leases have been furnished to the Purchaser and are described on Schedule
6.11(b). Except as set forth on Schedule 6.11(b), there are no security
------- ----------------
deposits held by the Purchaser Group or any other party under any of the
Purchaser Third Party Leases. The Purchaser Group has not received any
notices from any Purchaser Tenant desiring to cancel any Purchaser Third
Party Lease. The Purchaser Group has not received notification from any
Purchaser Tenant that it disputes the computation of the Purchaser Tenant's
percentage rent, additional rent or other amounts payable to the Purchaser
Group pursuant to its Purchaser Third Party Lease. The occupancy of each
Purchaser Tenant is valid and legal and, to the Knowledge of the Purchaser,
does not violate any Requirement of Law.
(iii) There are no arrearages in rent, additional rent or other
amounts payable under any of the Purchaser Leases or the Purchaser Third
Party Leases (collectively, the "Purchaser Leases"). There are no defaults
by the Purchaser Group of any of its obligations under the Purchaser
Leases. The Purchaser Group has not received any notices of default under
any of the Purchaser Leases, and to the Purchaser's Knowledge, there are no
defaults by any party other than the Purchaser Group under any of the
Purchaser Leases. There are no brokerage or other leasing commissions
payable pursuant to any agreements in connection with any of the Purchaser
Leases or amendments thereto or renewals or expansions thereof.
(c) Neither the Purchaser nor any other member of the Purchaser Group
has received written notice (i) of condemnation, zoning or other land-use
regulation proceedings or suspension of the right of any member of the Purchaser
Group to use any of the Purchaser Leases, (ii) of any special assessment
proceedings affecting all or any portion of any Purchaser Leases, (iii) from any
Governmental Authority having jurisdiction over all or any portion of the
Purchaser Leases regarding or in respect of any change in any applicable laws,
regulations, statutes, rules or restrictions relating to a change in the
permitted use of all or any portion of the Purchaser Leases or the business
conducted thereof or (iv) any notice from adjacent landowners or land occupants
regarding unrecorded easements and/or agreements or encroachments in respect of
all or any portion of the Purchaser Leases. There is no pending or, to the
Purchaser's Knowledge, threatened or contemplated action by any Governmental
Authority or pending or contemplated action by a private party adverse to the
uses contemplated for the Purchaser Leases. Upon consummation of the
transactions contemplated by this Agreement, and without obtaining the consent
of any Person, the Purchaser will be entitled to continue to use or possess all
of the Purchaser Leases in the same manner such Purchaser Leases were used or
possessed immediately prior to the Closing.
(d) All of the demised premises, buildings and structures that
comprise the Purchaser Leases are in good operating condition and repair (normal
wear and tear excepted), suitable for the purposes for which they are being used
and each has adequate rights of ingress and egress for the operation of the
business of the Purchaser Group. Since January 1, 1997, no member of the
Purchaser Group has received any notice of any uncured unsafe or other condition
36
which presents risk of injury to persons or loss of or damage to property
affecting or concerning all or any portion of the Purchaser Leases.
(e) Except as set forth on Schedule 6.11(e), there are no written or
----------------
oral options to purchase, rights of first refusal, rights of first offer in
connection with any of the Purchaser Leases or any other contractual right to
offer, purchase, acquire, sell, assign or dispose of any of the Purchaser
Leases. Except as set forth on Schedule 6.11(e), no Person has any right, as
----------------
member, Purchaser Tenant, occupant or otherwise, to use, lease and/or occupy any
portion of the Purchaser Leases, and there are no oral or written agreements
between any member of the Purchaser Group and any other Person providing for the
occupancy or use of any portion of the Purchaser Leases.
SECTION 6.12. Material Purchaser Contracts.
------------- -----------------------------
(a) Schedule 6.12(a) lists all Material Purchaser Contracts.
----------------
(b) Each Material Purchaser Contract is valid and in full force and
effect, and is enforceable by the Purchaser or the applicable Purchaser
Subsidiary in accordance with its terms. There are no Material Purchaser
Contracts that the Purchaser Group intends to terminate, and the Purchaser Group
has not received notice from any party to any Material Purchaser Contract that
it wishes to terminate such Contract.
(c) To the Purchaser's Knowledge, neither the Purchaser nor any
Purchaser Subsidiary is in breach of or default under (and no event has occurred
which with notice or the passage of time or both would constitute a breach of or
default under) any Material Purchaser Contract and, to the Purchaser's
Knowledge, no other Person is in breach of or default under (and no event has
occurred which with notice or the passage of time or both would constitute a
breach of or default under) any Material Purchaser Contract.
(d) None of the Material Purchaser Contracts contains a "change in
control," "potential change in control" or similar provision which could result
in a potential "parachute payment." The consummation of the Transactions will
not (either alone or upon the passage of time and/or occurrence of any
additional acts or events) result in any payment (severance pay or otherwise)
becoming due from the Purchaser or any Purchaser Subsidiary to any Person or
accelerate the time of payment or vesting, or increase the amount of
compensation due, any Person; excluding, however, any such payments,
accelerations or increases which could have occurred upon the passage of time
and/or occurrence of any additional acts or event even if the "change of
control" or "potential change of control" occurring upon the execution and
delivery of this Agreement and the consummation of the Transactions did not
occur.
SECTION 6.13. Employees; Employee Benefits.
------------- -----------------------------
(a) Schedule 6.13(a) contains a list of all employees of the
----------------
Purchaser and the Purchaser Subsidiaries as of the date hereof and their
material terms and conditions of employment including salary or wages, bonus,
position and title. Except as disclosed on
37
Schedule 6.13(a), no employee of the Purchaser Group is on long-term disability
----------------
leave or extended absence or in receipt of workers' compensation benefits.
(b) Schedule 6.13(b) contains a list of individuals who are currently
----------------
performing services for the Purchaser Group related to its business and are
classified as "consultants" or "independent contractors."
(c) Neither the Purchaser nor any of the Purchaser Subsidiaries is a
party to or subject to any collective bargaining agreements with any trade union
or collective bargaining agent representing any of its employees. There is no
labor union organizing activity pending or threatened with respect to any
employees of the Purchaser Group. Except as identified on Schedule 6.13(c), no
----------------
employee of the Purchaser Group has any agreement or contract, written or oral,
regarding his employment, other than those deemed to exist at common law.
(d) No employee of the Purchaser Group, nor, to the Purchaser's
Knowledge, any consultant with whom the Purchaser or any of the Purchaser
Subsidiaries has contracted, is in material violation of any term of any
employment contract, proprietary information agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, such Person because of the nature of the business to be conducted by the
Purchaser Group, and to the Purchaser's Knowledge the continued employment by
the Purchaser Group of its present employees, and the performance of the
Purchaser's and the Purchaser Subsidiaries' contracts with its independent
contractors, will not result in any such violation. The Purchaser has not
received any notice alleging that any such violation has occurred.
(e) To the Knowledge of the Purchaser, no officer or Key Purchaser
Employee, or any group of Key Purchaser Employees, intends to terminate his, her
or their employment with the Purchaser, nor does the Purchaser Group have a
present intention to terminate the employment of any officer, Key Purchaser
Employee or group of Key Purchaser Employees.
(f) Each Purchaser Employee Benefit Plan is fully funded for all
periods prior to the Closing Date. Without limiting the foregoing, all
contributions to each of the Purchaser Employee Benefit Plans in respect of
periods of service or benefits accrued prior to the Closing Date have been made
on an accrual basis up to the Closing Date, notwithstanding that such
contributions may not be due and owing until after the Closing Date.
(g) Schedule 6.13(f) contains a true and complete list of all
----------------
Purchaser Employee Benefit Plans. The Purchaser has provided to the
Shareholders current, accurate and complete copies of each written Purchaser
Employee Benefit Plan or, where oral, a written description of the terms
thereof, as amended to date, together with the most current funding agreements
and summary plan descriptions relating to each such Purchaser Employee Benefit
Plan and the following documents (where applicable):
(i) all actuarial reports and financial statements;
38
(ii) the most current copies of any insurance contracts,
investment management agreements, investment reports or funding agreements;
(iii) the most current copies of booklets or manuals prepared
for or circulated to employees with respect to any of the Purchaser
Employee Benefit Plans;
(iv) the most recently filed annual report on Form 5500; and
(v) the determination letter as to the plan's qualified status
under Internal Revenue Code Section 401.
(h) No promises or commitments have been made by the Purchaser or any
of the Purchaser Subsidiaries, or any of their employees, consultants or former
employees or consultants to amend any Purchaser Employee Benefit Plan or to
provide increased benefits thereunder (other than plan amendments that are
required as a matter of law).
(i) Each Purchaser Employee Benefit Plan is, and has been,
administered in all material respects in accordance with the terms thereof and
applicable laws. All obligations under the Purchaser Employee Benefit Plans
have been satisfied, to the extent required by the terms thereof or applicable
laws.
(j) Each Purchaser Employee Benefit Plan is in compliance with all
applicable laws and there are no outstanding material defaults or violations by
the Purchaser in connection with any Purchaser Employee Benefit Plan, and no
order has been made or notice given requiring (or proposing to require) the
Purchaser, the Purchaser Subsidiaries or any others to take or refrain from
taking any action in respect of any Purchaser Employee Benefit Plan. All
material returns, filings, reports and disclosures relating to the Purchaser
Employee Benefit Plans required pursuant to the terms thereof or applicable laws
have been made, filed or distributed in accordance with all such requirements
and all filing fees and levies imposed on the Purchaser Employee Benefit Plans
by any regulatory authorities or applicable laws have been made or remitted on a
timely basis. Each Purchaser Employee Benefit Plan that is intended to be a
qualified plan under Internal Revenue Code Section 401 is so qualified.
(k) No actions, suits, claims (other than routine claims for payment
of benefits in the ordinary course), investigations, arbitrations or other
proceedings have been commenced or threatened in respect of any of the Purchaser
Employee Benefit Plans or its assets.
(l) None of the Purchaser Employee Benefit Plans provides benefits to
employees following retirement. No Purchaser Employee Benefit Plan exists that
could result in the payment to any employee of any money, benefits or other
property or accelerate or increase the funding requirements for any Purchaser
Employee Benefit Plan, in each case as a result of the Transactions.
39
SECTION 6.14. Employment Relations.
------------- ---------------------
(a) The Purchaser and the Purchaser Subsidiaries are not engaged in
any unfair labor practice. There have been no such complaints under applicable
laws against the Purchaser or the Purchaser Subsidiaries.
(b) There are no complaints nor are there any threatened complaints,
against the Purchaser or any Purchaser Subsidiaries, before any employment
standards branch or tribunal or human rights tribunal.
SECTION 6.15. Compensation of Employees.
------------- --------------------------
Schedule 6.15 is an accurate and complete list showing the names of
-------------
all retired employees, if any, of the Purchaser or the Purchaser Subsidiaries
who are receiving or entitled to receive any healthcare or life insurance
benefits or any payments from the Purchaser or the Purchaser Subsidiaries not
covered by any pension plan to which the Purchaser or the Purchaser Subsidiaries
is a party, their ages and current unfunded pension rate, if any. The Purchaser
Group has not, because of past practices or previous commitments with respect to
its employees, established any rights on the part of any of its employees to
additional compensation with respect to any period after the Closing Date (other
than wage increases in the ordinary course of business). The present severance
and vacation policy of the Purchaser and the Purchaser Subsidiaries is set forth
on Schedule 6.15.
-------------
SECTION 6.16. Receivables; Major Customers.
------------- -----------------------------
(a) The list of accounts receivable included in the Purchaser Closing
Receivables/Payables provides an accurate and complete breakdown and aging of
all accounts receivable of the Purchaser and the Purchaser Subsidiaries as of
the date hereof.
(b) All such accounts receivable:
(i) represent valid obligations of customers of the Purchaser
and the Purchaser Subsidiaries arising from bona fide transactions entered
into in the ordinary course of business; and
(ii) are current and will be collected in full (without any
counterclaim or setoff) in the ordinary course of business, subject to a
reserve for doubtful accounts as set forth in the Purchaser Current Balance
Sheet.
(c) Neither the Purchaser nor any of the Purchaser Subsidiaries has
received any notice or other communication (in writing or otherwise) indicating
that any customer of the Purchaser or the Purchaser Subsidiaries may cease
dealing with the Purchaser or any of the Purchaser Subsidiaries or may otherwise
reduce the volume of business transacted by such Person with the Purchaser or
any of the Purchaser Subsidiaries below historical levels.
40
SECTION 6.17. Accounts Payable; Customers and Suppliers.
------------- ------------------------------------------
(a) The list of accounts payable included in the Purchaser Closing
Receivables/Payables:
(i) provides an accurate and complete breakdown and aging of
the Purchaser's and the Purchaser Subsidiaries' accounts payable as of the
date hereof;
(ii) provides an accurate and complete breakdown of all
customer deposits and other deposits held by the Purchaser and the
Purchaser Subsidiaries as of the date of this Agreement; and
(iii) provides an accurate and complete breakdown of amounts
owed to suppliers and the Purchaser's and the Purchaser Subsidiaries' debt
as of the date of this Agreement.
(b) Schedule 6.17(b) accurately identifies, and provides an accurate
----------------
and complete breakdown of the amounts paid to or received from, the three
largest suppliers and 10 largest customers of the Purchaser Group (in terms of
amounts billed and paid, respectively) for the six-month period ended June 30,
1998. The Purchaser is not aware of any loss or threatened loss of any such
suppliers, customers or accounts.
SECTION 6.18. Proceedings.
------------- ------------
(a) Except as set forth in Schedule 6.18(a), there is no pending
----------------
Proceeding and no Person has threatened to commence any Proceeding:
(i) that involves the Purchaser or any Purchaser Subsidiary or
their assets; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
Transactions.
(b) To the Knowledge of the Purchaser, no acts, facts, circumstances,
events or conditions have occurred or exist which are a basis for any Proceeding
described in Section 6.18(a).
(c) No member of the Purchaser Group is a party to, or bound by, any
decree, order or arbitration award (or agreement entered into in any Proceeding
with any governmental authority) which could have a Material Adverse Effect.
SECTION 6.19. Compliance With Requirement of Laws.
------------- ------------------------------------
The Purchaser and the Purchaser Subsidiaries are in compliance with
each Requirement of Law (including, without limitations, all Environmental Laws)
applicable to them or the conduct of their businesses or use of their assets
except for any failure to comply which,
41
individually or in the aggregate, does not or reasonably cannot be expected to
have a Material Adverse Effect on the Purchaser or any of the Purchaser
Subsidiaries.
SECTION 6.20. Governmental Authorizations.
------------- ----------------------------
(a) Schedule 6.20(a) identifies each Governmental Authorization that
----------------
is held by the Purchaser and the Purchaser Subsidiaries, copies of which have
been previously provided to the Shareholders. All such Governmental
Authorizations are in full force and effect and no action or claim is pending,
nor to the Knowledge of the Purchaser, is threatened, to revoke or terminate any
of such Governmental Authorizations or declare any such Governmental
Authorizations invalid in any material respect.
(b) The Governmental Authorizations identified in Schedule 6.20(a)
----------------
constitute all of the Governmental Authorizations necessary (i) to enable the
Purchaser and the Purchaser Subsidiaries to conduct their business in the manner
in which such business is currently being conducted, and (ii) to permit the
Purchaser and the Purchaser Subsidiaries to own and use their assets in the
manner in which they are currently owned and used.
SECTION 6.21. Tax Matters.
------------- ------------
(a) The Purchaser and its Subsidiaries have filed, or caused to be
filed within the times and within the manner prescribed by law, all tax or
information returns and tax reports required under all applicable statutes,
rules or regulations to be filed by the Purchaser and its Subsidiaries with
respect to Taxes.
(b) All Taxes shown on said returns to be due and additional
assessments received prior to the date hereof have been paid.
(c) The amounts set up as accruals for Taxes on the Purchaser Current
Financials are sufficient for the payment of all unpaid Taxes of the Purchaser
and its Subsidiaries, whether or not such Taxes are disputed or have been
asserted by any Governmental Authority, for all periods or portions of periods
ended on or prior to Closing, including any Taxes due on any restructuring of
the Purchaser or distribution of Subsidiaries of the Purchaser to the Purchaser
Shareholders prior to Closing.
(d) Neither the Purchaser nor any of its Subsidiaries has received
notice of any proposed audit or reassessment from any taxing authorities and no
examination by the appropriate taxing authority of any return of the Purchaser
or any of its Subsidiaries is currently in progress.
(e) No deficiency in the payment of Taxes by the Purchaser or any of
its Subsidiaries for any period has been asserted in writing by any taxing
authority and remains unsettled at the date of this Agreement. No taxing
authority has undertaken, raised or threatened to raise any claim, proceeding or
investigation against the Purchaser or any of its Subsidiaries, whether or not
such matter was agreed to or settled.
42
(f) There are no outstanding agreements or waivers extending the
statutory period of limitations for assessment applicable to any tax return of
the Purchaser or any of its Subsidiaries.
(g) None of the Purchaser or any of its Subsidiaries has any
liability for the Taxes of any Person other than the Purchaser or any of its
Subsidiaries.
SECTION 6.22. Finders and Brokers.
------------- --------------------
Neither the Purchaser, the Purchaser Subsidiaries nor any Person
acting on behalf of the Purchaser or the Purchaser Subsidiaries has negotiated
with any finder, broker, intermediary or any similar Person in connection with
the transactions contemplated herein. The Purchaser will indemnify the
Shareholders and hold it harmless from any liability or expense arising from any
claim for brokerage commissions, finder's fees or other similar compensation
based upon any agreement, arrangement or understanding made by or on behalf of
the Purchaser.
SECTION 6.23. Absence of Changes.
------------- -------------------
Since the date of the Purchaser Current Financials:
(a) the Purchaser and the Purchaser Subsidiaries have operated their
businesses only in the ordinary course of business and consistent with past
practice, and there have not been any facts, circumstances, events or changes in
the Purchaser's or the Purchaser Subsidiaries' business operations or financial
condition, which has had or can reasonably be expected to have a Material
Adverse Effect on the Purchaser or any of the Purchaser Subsidiaries;
(b) none of the Purchaser or any of the Purchaser Subsidiaries has (i)
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of capital stock, or (ii) repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities;
(c) none of the Purchaser or any of the Purchaser Subsidiaries has
purchased or otherwise acquired any asset from any other Person, except in the
ordinary course of business;
(d) none of the Purchaser or any of the Purchaser Subsidiaries has
made any material capital expenditure;
(e) none of the Purchaser or any of the Purchaser Subsidiaries has
sold or otherwise transferred, and has not leased or licensed, any asset to any
other Person except for products sold by the Purchaser or any of the Purchaser
Subsidiaries from its inventory in the ordinary course of business;
(f) none of the Purchaser or the Purchaser Subsidiaries has incurred
any damage, destruction, loss or interruption of use which adversely affects its
business or assets (whether or not covered by insurance);
43
(g) none of the Purchaser or the Purchaser Subsidiaries has forgiven
any debt or otherwise released or waived any right or claim;
(h) none of the Purchaser or the Purchaser Subsidiaries has made any
loans or advances to, or guaranteed any indebtedness of, any of the Purchaser
Shareholders or any of their Affiliates;
(i) none of the Purchaser or the Purchaser Subsidiaries has entered
into any transaction or taken any other action outside the ordinary course of
business;
(j) none of the Purchaser or the Purchaser Subsidiaries has incurred
any Liability, except (i) Liabilities incurred in the ordinary course of
business and (ii) Liabilities incurred in connection with or as a result of the
Transactions;
(k) none of the Purchaser or the Purchaser Subsidiaries has made any
change in its accounting methods or practices, including, without limitation,
any change with respect to establishment of reserves for unearned premiums,
losses (including incurred but not reported losses) and loss adjustment
expenses, or made any change in depreciation or amortization policies or rates
adopted by it, except as required by law or U.S. GAAP;
(l) none of the Purchaser or the Purchaser Subsidiaries has (A)
increased the compensation of any of its employees or directors, other than in
the ordinary course of business, (B) changed, altered or entered into any
employment, severance, retention or similar agreement with any salaried
employee, in each case other than in the ordinary course of business, or (C)
adopted any new employee benefit plan, program or arrangement or amended any
Employee Benefit Plan (except amendments required by law);
(m) the Purchaser has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses "(a)" through "(l)" above; and
(n) without limitation by the enumeration of any of the foregoing,
entered into any transaction with a consideration in excess of $25,000 other
than in the usual and ordinary course of business and except as contemplated in
this Agreement.
SECTION 6.24. Environmental Compliance.
------------- -------------------------
The Purchaser and the Purchaser Subsidiaries are in compliance in all
material respect with all applicable Environmental Laws. The Purchaser and the
Purchaser Subsidiaries have not received any notice or other communication (in
writing or otherwise) that alleges that the Purchaser or the Purchaser
Subsidiaries are not in compliance with any Environmental Law, and, to the
Knowledge of the Purchaser, there are no circumstances that may prevent or
interfere with the Purchaser's or the Purchaser Subsidiaries' compliance with
any Environmental Law in the future.
44
SECTION 6.25. Insurance.
------------- ----------
(a) Each insurable asset of the Purchaser and the Purchaser
Subsidiaries has at all times been and is at the date of this Agreement insured
to its full replacement value (with no provision for deduction or excess)
against each risk normally insured against by a Person operating the types of
business operated by the Purchaser and the Purchaser Subsidiaries.
(b) The Purchaser and the Purchaser Subsidiaries have at all times
been and are at the date of this Agreement adequately insured against accident,
damage, injury, third party loss (including, without limitation, product
liability), loss of profits and any other risk normally insured against by a
Person operating the types of business operated by the Purchaser and the
Purchaser Subsidiaries.
(c) Each of the policies is valid and enforceable and is not void or
voidable. The Purchaser or the Purchaser Subsidiaries have paid all premiums
due, and have not done anything or omitted to do anything which might make any
of the policies void or voidable.
SECTION 6.26. Full Disclosure.
------------- ----------------
The Purchaser has provided the Shareholders and the Shareholders'
representatives with full and complete access to all of the Purchaser's and the
Purchaser Subsidiaries' records and other documents and data requested. No
representation or warranty by the Purchaser in this Agreement and no statement
contained in any schedule, certificate or other written statement required to be
furnished by the Purchaser or any of its representatives pursuant to the
provisions hereof or in connection with the transactions contemplated hereby is
inaccurate, incorrect, or incomplete in any material respect or contains any
untrue statement of a material fact or omits to state any material fact required
to be stated herein or therein or necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VII.
CERTAIN COVENANTS
SECTION 7.01. Best Efforts.
------------- -------------
(a) The Parties shall cooperate in good faith and use their respective
best efforts to close and make effective the transactions contemplated hereby as
expeditiously as possible, including using their respective best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated hereby, executing and delivering such
other documents, certificates, agreements and other writings and taking such
other actions as may be necessary or desirable in order to consummate and make
effective the transactions contemplated hereby as soon as possible.
45
(b) Each Party shall use its best efforts prior to the Closing not to
take any action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement (except for such
changes contemplated by Section 7.02(a)(i), (ii) and (ix)).
SECTION 7.02. Conduct of Business Pending the Closing.
------------- ----------------------------------------
(a) Prior to the Closing, unless the Parties shall otherwise agree in
writing (which agreement shall be deemed made if given by the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of the Parties), or
as otherwise expressly contemplated by this Agreement, the Purchaser shall
conduct its business and Spray Ventures shall cause the Company Group to conduct
their businesses, only in the ordinary and usual course consistent with past
practice, and the Purchaser shall and Spray Ventures shall cause the Company
Group to use their best efforts to maintain their respective assets in
substantially their current state of repair, preserve intact their present
business organization, keep available the services of their present officers and
the Key Purchaser Employees and the Key Company Employees, respectively, and
preserve their existing business relationships and goodwill with customers,
suppliers, independent contractors, employees and other Persons material to the
operation of their businesses. Without limiting the generality of the
foregoing, prior to the Closing the Purchaser shall not, and shall not permit
any Purchaser Subsidiary, and Spray Ventures shall not permit the Company or any
Company Subsidiary to:
(i) except to the extent the Purchaser takes such actions to
facilitate and effect the Closing hereunder and the public offering, (1)
amend its memorandum of association, articles of association, articles of
incorporation, by-laws or other organizational documents, (2) split,
combine or reclassify any shares of its outstanding capital stock, (3)
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property, or (4) directly or indirectly redeem or otherwise
acquire any shares of its capital stock;
(ii) except to the extent the Purchaser takes such actions to
facilitate and effect the Closing hereunder and the public offering,
authorize for issuance, issue or sell, deliver or agree to issue or sell
any shares of, or rights to acquire or convertible into any shares of, its
capital stock (whether through the issuance or granting of options,
warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise), or amend any of the terms
of any such capital stock;
(iii) (1) merge, combine or consolidate with another entity, (2)
acquire or purchase an equity interest in or a substantial portion of the
assets of another corporation, partnership or other business organization
or otherwise acquire any assets outside the ordinary course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary course of business
and consistent with past practice or (3) sell, lease, license, waive,
release, transfer, encumber or otherwise dispose of any of its material
assets outside the ordinary course of business and consistent with past
practice;
46
(iv) (1) incur, assume or prepay any indebtedness or any other
liabilities in excess of $100,000 individually, or in excess of $500,000 in
the aggregate, in the case of the Purchaser Group, or SEK 784,000
individually, or in excess of SEK 3,920,000 in the aggregate, in the case
of the Company Group, (other than trade payables), (2) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person or (3)
make any loans, gifts, advances or capital contributions to, or investments
in, any other Person;
(v) pay, satisfy, discharge or settle any claim, liabilities
or obligations (absolute, accrued, contingent or otherwise) against the
Company Group or the Purchaser Group, as the case may be, or any of its
directors, officers, employees or agents in excess of $100,000
individually, or in excess of $500,000 in the aggregate, in the case of the
Purchaser Group, or SEK 784,000 individually, or in excess of SEK 3,920,000
in the aggregate, in the case of the Company Group;
(vi) modify or amend, or waive any benefit of, any non-
competition agreement to which the Company Group or the Purchaser Group, as
the case may be, is a party;
(vii) authorize or make capital expenditures in excess of
$100,000 individually, or in excess of $500,000 in the aggregate, in the
case of the Purchaser Group, or SEK 784,000 individually, or in excess of
SEK 3,920,000 in the aggregate, in the case of the Company Group;
(viii) permit any insurance policy naming the Company Group or
the Purchaser Group, as the case may be, as a beneficiary or a loss payee
to be cancelled or terminated other than in the ordinary course of
business;
(ix) except to the extent the Purchaser takes such actions to
facilitate and effect the closing hereunder and the public offering, (1)
adopt, enter into, terminate or amend in any material respect any plan,
trust, fund, agreement or other arrangement for the current or future
benefit or welfare of any director, officer or employee, (2) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee or (3) take any action to fund or in any
other way secure, or to accelerate or otherwise remove restrictions with
respect to, the payment of compensation or benefits under any employee
plan, agreement, contract, arrangement other than in the ordinary course of
business;
(x) take any action that would fail to preserve and protect
the Proprietary Assets;
(xi) make any material change in its accounting or tax policies
or procedures;
47
(xii) make any Tax elections or settle or compromise any tax
liability or waive or extend the statute of limitations in respect of any
such taxes;
(xiii) make any payments to or authorize any transaction with
any Affiliate, except in the ordinary course of business;
(xiv) take any action, or enter into or authorize any contract
or transaction, other than in the ordinary course of business;
(xv) waive, release or cancel any claims against third parties
or debts owing to it, or any rights which have any value;
(xvi) terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any Material Contract in any material
respect; or
(xvii) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
(b) Until the Closing or the termination of this Agreement, the
Purchaser shall not, and shall not permit any Purchaser Subsidiary, and Spray
Ventures shall not permit the Company or any Company Subsidiary to make any new
commitment that will be binding on the Purchaser Company at the Closing or
following the Closing to pay any salary or bonus to any employee, except for
regular compensation and bonuses (and regular increases thereof) payable in
accordance with past practices.
(c) Prior to the Closing, the Purchaser and Spray Ventures shall
prepare and file on a timely basis all Tax returns of the Purchaser Group and
the Company Group, respectively, which are required to be filed after the date
hereof and prior to the Closing and shall pay or shall cause the Company to pay
(or establish appropriate reserves in accordance with prior practice), as the
case may be, all Taxes due with respect to the income and operations of the
Purchaser Group and the Company Group, respectively, with respect to such
period. All such Tax returns shall be accurately and completely prepared in
full compliance with all applicable legal requirements.
SECTION 7.03. Access to Information.
------------- ----------------------
The Purchaser and Spray Ventures shall cause the Company to afford and
to cause its officers, directors, employees, auditors and agents to afford, to
the other Parties and to their officers, employees, financial advisors, legal
counsel, accountants, consultants and other representatives unrestricted access
during normal business hours throughout the period prior to the Closing to all
of its books and records and its properties, plants, technology rights and
personnel and information with respect to current customers, prospects and any
third parties which may claim a proprietary right to their property (including
telephone interviews and site visits). The Purchaser shall and Spray Ventures
shall cause the Company to make the officers and employees of the Purchaser and
the Company, respectively, available to the other Parties and
48
their representatives as the other Parties and their representatives shall from
time to time reasonably request.
SECTION 7.04. Notices of Certain Events.
------------- --------------------------
Until the Closing or the termination of this Agreement, each Party
shall promptly notify the other Parties of: any notice or other communication
from any Governmental Agency or authority in connection with the transactions
contemplated hereby; and any actions, suits, claims, investigations or
proceedings commenced or, to its Knowledge, threatened against such Party
relating to the consummation of the transactions contemplated hereby. Until the
Closing, each Party will promptly disclose in writing to the other Parties any
matter hereafter arising which, if existing, occurring or known at the date of
this Agreement would have been required to be disclosed to such other Parties or
which would render inaccurate any of the representations, warranties or
statements set forth herein. No information provided to a Party pursuant to
this Section shall be deemed to cure any breach of any representation, warranty
or covenant made in this Agreement.
SECTION 7.05. No Solicitation.
------------- ----------------
(a) If this Agreement is terminated for any reason, then, unless
otherwise agreed to in writing by the Purchaser and Spray Ventures, until the
third anniversary of the termination of this Agreement, the Purchaser and Spray
Ventures shall not, and shall not permit any of its Affiliates (including the
Company), directors, officers, employees, agents or representatives to, directly
or indirectly, knowingly use any information acquired by them or any of their
Affiliates, directors, officers, employees, agents or representatives pursuant
to this Agreement or otherwise in connection with the transactions contemplated
hereby to compete with or act in any other way detrimental to any other Party or
its business.
(b) From the date hereof until the Closing, none of the Parties or
their respective Subsidiaries or Affiliates, nor any of the respective
directors, officers, employees, agents or representatives of the foregoing,
will, directly or indirectly, (a) solicit, initiate (including by way of
furnishing or disclosing non-public information), encourage or respond favorably
to any inquiries or the making of any proposal with respect to any merger,
change of control, consolidation or other business combination involving any
Party or the acquisition of all or any significant part of the assets or capital
stock of any Party (an "Acquisition Transaction") or (b) negotiate, explore or
otherwise engage in discussions with any Person (other than a Party and its
representatives) with respect to any Acquisition Transaction, or which may
reasonably be expected to lead to a proposal for an Acquisition Transaction or
enter into any agreement, arrangement or understanding with respect to any such
Acquisition Transaction or which would require such Person to abandon, terminate
or fail to consummate the transactions contemplated by this Agreement.
SECTION 7.06. Confidentiality.
------------- ----------------
(a) If the transactions contemplated hereby are not consummated for
any reason, each of the Parties shall not, and shall not permit any of its
directors, officers, employees,
49
agents or representatives or any third party on its behalf to challenge or
contest the proprietary and confidential nature of any information provided to
it by any other Party pursuant hereto. If the transactions contemplated hereby
are not consummated for any reason, the Parties will not use any due diligence
or other information obtained in connection with this Agreement to compete with
or act in any manner detrimental to the other Parties.
(b) If this Agreement shall be terminated, each Party will (i)
redeliver all documents, work papers and other materials of any other Party
relating to the transactions contemplated hereby, or of a proprietary or
confidential nature whether so obtained before or after the execution of this
Agreement, to the Party furnishing the same, and (ii) destroy all documents,
work papers and other materials developed by its accountants, agents and
employees in connection with the transactions contemplated hereby which embody
proprietary information or trade secrets furnished by any Party or deliver such
documents, work papers and other materials to the Party furnishing the same or
excise such information or secrets therefrom and all information received by any
Party with respect to the business of any other Party or any of its Subsidiaries
(other than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority)
shall not at any time be used for personal advantage or disclosed by such Party
to any third person to the detriment of the Party furnishing such information or
any of its Subsidiaries. If requested by any of the other Parties each Party
will certify that it has complied with this Section.
SECTION 7.07. Fulfillment of Conditions.
------------- --------------------------
Each of the Purchaser, Communicade and Spray Ventures will (a) execute and
deliver at the Closing each agreement that any of them is required hereby to
execute and deliver as a condition to the Closing, (b) proceed diligently and in
good faith and use best efforts to satisfy each other condition to the
obligations of the Purchaser, Communicade or Spray Ventures, as the case may be,
contained in this Agreement and (c) not take or fail to take any action that
reasonably could be expected to result in the nonfulfillment of any such
condition.
50
SECTION 7.08. Waiver of Encumbrance on Company Shares.
------------- ----------------------------------------
The Purchaser acknowledges and agrees to waive any inability of Spray
Ventures to state that Spray Ventures' representations and warranties are true
and correct as of the Closing Date solely with respect to the Encumbrance on the
Company Shares resulting from a Pledge Agreement by and between Spray Ventures
and Omnicom Finance Inc. (the "Pledge Agreement") provided that (a) there are no
other Encumbrances with respect to the Company Shares and (b) Omnicom Finance
Inc. shall have delivered the Company Shares free and clear of all Encumbrances
held by it to Razorfish at the Closing for the purpose of permitting Spray
Ventures to satisfy its delivery requirement under this Agreement.
ARTICLE VIII.
CLOSING DELIVERIES
SECTION 8.01. Closing Deliveries.
------------- -------------------
At the Closing, the Parties and the Company shall deliver the
documents, and shall perform the acts, which are set forth in this Article VIII.
All documents which the Company and the Shareholders shall deliver shall be in
form and substance reasonably satisfactory to the Purchaser and the Purchaser's
counsel. All documents which the Purchaser shall deliver shall be in form and
substance reasonably satisfactory to the Shareholders and their counsel.
SECTION 8.02. Deliveries by Shareholders.
------------- ---------------------------
Spray Ventures shall execute and deliver (or cause to be executed and
delivered) to the Purchaser all of the following; and, Communicade shall execute
and deliver (or cause to be executed and delivered) to the Purchaser the
deliveries specified in clause (a) below, but only in respect of its Company
Shares, and the deliveries specified in clauses (e), (f), (g) and (i) below:
(a) a certificate representing the Warrants and certificates
representing all outstanding Company Shares, duly endorsed in blank or with duly
executed stock powers attached, each together with such documents and
instruments, if any, as may be necessary to permit the Purchaser to acquire the
Warrants and the Company Shares, free and clear of all Encumbrances, except for
Spray Ventures' Company Shares which are held by Omnicom Finance Inc. ("OFI")
pursuant to the Pledge Agreement, which shares shall be delivered by OFI to the
Purchaser free and clear of all Encumbrances, in exchange for and upon receipt
of Purchaser Shares delivered to OFI, to permit Spray Ventures to satisfy its
delivery requirement hereunder;
(b) a written statement from OFI confirming the release as of the
Closing of its Encumbrance solely with respect to the Company Shares in exchange
for and upon receipt of the Purchaser Shares in accordance with the replacement
procedures set forth in Section 2.7.2 of the Pledge Agreement;
51
(c) employment agreements in the form of Exhibit B executed by Per
---------
Xxxxxxx, Xxxxx Svensson, and Johan Ihrfelt;
(d) a certified copy of the Company's and each Company Subsidiary's
memorandum of association, articles of association or articles of incorporation
and bylaws, or similar organizational documents;
(e) certified copies of resolutions of the Company's board of
directors and stockholders, and of the Shareholders' boards of directors,
authorizing the execution, delivery and performance of this Agreement and any
Transaction Documents to which the Company or the applicable Shareholder is a
Party;
(f) incumbency certificates with respect to the officers of the
Company and the Shareholders executing this Agreement, and any other Transaction
Document delivered by the Company or the Shareholders;
(g) a certificate of the Chief Executive Officer of each Shareholder
or in the case of Communicade its Chief Financial Officer, confirming that the
representations and warranties given herein by such Shareholder are true and
correct in all material respects at Closing;
(h) an opinion of Xxxxxxxxxx Swartling substantially in the form of
Exhibit C;
---------
(i) a certificate of the Chief Executive Officer or in the case of
Communicade its Chief Financial Officer, of each Shareholder confirming that the
covenants set forth herein to be performed or complied with by such Shareholder
prior to Closing have been performed or complied with in all material respects;
and
(j) the stock records of the Company and the Company Subsidiaries.
SECTION 8.03. Deliveries by Purchaser.
------------- ------------------------
The Purchaser shall execute and deliver (or cause to be executed and
delivered) to the Shareholders all of the following:
(a) certificates representing the Purchaser Shares;
(b) the cash payment provided in Section 2.02 or certificates
representing the non-voting shares of capital stock of the Purchaser referred to
in Section 2.02;
(c) an incumbency certificate with respect to the officers of the
Purchaser executing this Agreement, and any other Transaction Document to which
the Purchaser is a party;
52
(d) a certified copy of resolutions of the Purchaser's board of
directors, authorizing the issuance of the Purchaser Shares and the execution,
delivery and performance of this Agreement, and any other Transaction Document
delivered by the Purchaser;
(e) an opinion of Xxxxxxxx & Forester LLP substantially in the form of
Exhibit D;
----------
(f) a certificate of the Chief Executive Officer of the Purchaser
confirming that the representations and warranties given herein are true and
correct in all material respects (except for such changes contemplated by
Section 7.02(a)(i), (ii) and (ix)) at Closing;
(g) a certificate of the Chief Executive Officer of the Purchaser
confirming that the covenants set forth herein to be performed or complied with
by the Purchaser prior to Closing have been performed or complied with in all
material respects.
SECTION 8.04. Joint Deliveries.
------------- -----------------
At the Closing, the Shareholders, the Purchaser and the Purchaser
Shareholders (as the case may be) shall execute and deliver a Stockholders
Agreement in the form attached hereto as Exhibit E.
---------
ARTICLE IX.
TERMINATION
SECTION 9.01. Grounds for Termination.
------------- ------------------------
This Agreement (except for Sections 7.05 and Section 7.06 and Article
XII which shall survive termination) may be terminated at any time prior to the
Closing Date:
(i) by mutual written agreement of the Parties;
(ii) by Spray Ventures if the tax deferral notice requested by
Spray Ventures in October 1998 from the Swedish Ministry of Finance has not
been obtained on or before 60 days after the date hereof; or
(iii) by any of the Parties if any permanent injunction, order,
decree or ruling by any Governmental Authority of competent jurisdiction
preventing the consummation of the transaction contemplated hereby shall
have become final and nonappealable; provided, however, that the Party
-------- -------
seeking to terminate this Agreement pursuant to this Section 9.01(iii)
shall have used reasonable best efforts to remove such injunction or
overturn such action.
Termination pursuant to clause (ii) will be effective upon delivery of
a written notice of termination by Spray Ventures to the other Parties. If such
notice of termination has not been delivered on or before the 60th day after the
date hereof, Spray Ventures shall be
53
deemed to have waived its right to terminate this Agreement pursuant to clause
(ii) and, if none of the other termination conditions set forth above have been
met and the other closing conditions set forth in Article III have been met, the
Closing will then occur on the 61st day after the date hereof, in accordance
with Article III.
SECTION 9.02. Effect of Termination.
------------- ----------------------
If this Agreement is terminated as permitted by Section 9.01, such
termination shall be without liability of any Party (or any stockholder,
director, officer, employee, agent, consultant or representative of such Party)
to any other Party to this Agreement.
ARTICLE X.
POST-CLOSING AGREEMENTS
SECTION 10.01. Tax Matters.
-------------- ------------
The following provisions shall govern the allocation of responsibility
as between the Purchaser and Spray Ventures for certain tax matters following
the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. The Purchaser
-------------------------------------------------
shall cause the Company and the Company Subsidiaries to prepare and file all Tax
Returns for the Company and the Company Subsidiaries for all periods ending on
or prior to the Closing Date which are filed after the Closing Date other than
income Tax Returns, if any, with respect to periods for which a consolidated,
unitary or combined income Tax Return of Spray Ventures will include the
operations of the Company and the Company Subsidiaries. The Purchaser shall
permit Spray Ventures to review and comment on each such Tax Return described in
the preceding sentence prior to filing. Spray Ventures shall reimburse the
Purchaser for Taxes of the Company and its Subsidiaries with respect to such
periods within fifteen (15) days after payment by the Company and the Company
Subsidiaries of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Current Balance Sheet. Spray Ventures will also, within fifteen
(15) days after the filing of such Tax Returns, reimburse the Purchaser, the
Company and the Company Subsidiaries for any expenses incurred in the
preparation and filing of such Tax Returns.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
---------------------------------------------------------------
The Purchaser shall cause to be prepared and filed any Tax Returns of the
Company and the Company Subsidiaries for Tax periods which begin before the
Closing Date and end after the Closing Date. Spray Ventures shall pay to the
Purchaser within fifteen (15) days after the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to the
extent such Taxes are not reflected in the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Current Balance Sheet.
For purposes of this Section, in the case of any Taxes that
54
are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date shall
(x) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the number of days in the
Taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant Taxable period ended on the Closing Date. Any
credits relating to a Taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Company and the Company Subsidiaries. Spray Ventures will also, within
fifteen (15) days after the filing of any such Tax Return, reimburse the
Purchaser, the Company and the Company Subsidiaries for Spray Ventures'
allocable share of any expenses incurred in the preparation and filing of such
Tax Returns. Such allocable share of expenses shall be based on the portion of
Taxes due on such Tax Return payable by Spray Ventures.
(c) Cooperation on Tax Matters.
---------------------------
(i) The Purchaser, the Company and the Company Subsidiaries, and
Spray Ventures shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon
the other Party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
The Company and the Company Subsidiaries and Spray Ventures agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Company and the Company Subsidiaries relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Purchaser or Spray
Ventures, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing
authority, and (B) to give the other Party reasonable written notice prior
to transferring, destroying or discarding any such books and records and,
if the other Party so requests, the Company and the Company Subsidiaries or
Spray Ventures, as the case may be, shall allow the other Party to take
possession of such books and records.
(ii) The Purchaser and Spray Ventures further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
55
(iii) The Purchaser and Spray Ventures further agree, upon
request, to provide the other Party with all information that either Party
may be required to report pursuant to the Internal Revenue Code and all
Treasury Department Regulations promulgated thereunder.
(d) Tax Sharing Agreements. All tax sharing agreements or similar
-----------------------
agreements with respect to or involving the Company and the Company Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and the Company Subsidiaries shall not be bound thereby or have any
liability thereunder.
(e) Certain Taxes. All transfers, documentary, sales, use, stamp,
--------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Spray
Ventures when due, and Spray Ventures will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, the Purchaser will, and will cause its affiliates
to, join in the execution of any such Tax Returns and other documentation.
ARTICLE XI.
INDEMNIFICATION, ETC.
SECTION 11.01. Survival of Representations and Warranties.
-----------------------------------------------------------
The representations and warranties of each Party contained in this
Agreement shall survive the Closing for a period of eighteen (18) months;
provided that each of the representations and warranties contained in Sections
4.13, 4.21, 6.13 and 6.21, shall survive and continue for the applicable statute
of limitation period or periods legally applicable to them. Each Party shall
maintain net assets of at least $2,500,000.00 for the period ending 18 months
following the Closing.
SECTION 11.02. Indemnification by Spray Ventures.
--------------------------------------------------
(a) Spray Ventures shall indemnify, defend and hold harmless the
Purchaser, the Company, each of the Company Subsidiaries and each of their
respective officers, directors, shareholders, employees, agents and
representatives (collectively, the "Purchaser Related Indemnitees" and
individually each a "Purchaser Related Indemnitee") from and against, and shall
compensate and reimburse each of the Purchaser Related Indemnitees for, any
Damages (net of Taxes) which are suffered or incurred by any of the Purchaser
Related Indemnitees or to which any of the Purchaser Related Indemnitees may
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise from or are due to:
(i) any inaccuracy in or breach of any representation or warranty
made by Spray Ventures in this Agreement or in any of the other Transaction
Documents; or
56
(ii) any breach of, or failure to comply with, any covenant or
obligation of Spray Ventures contained in this Agreement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, Spray Ventures shall not be liable to indemnify any Purchaser Related
Indemnitee with respect to any indemnification claim made pursuant to this
Section 11.02 unless and until all Damages claimed by the Purchaser Related
Indemnitees pursuant to this Section 11.02 exceed (i) One Hundred Thousand
Dollars ($100,000) in the aggregate for any one section in Article IV or (ii)
Five Hundred Thousand Dollars ($500,000) in the aggregate and then Spray
Ventures' responsibility will be limited, in the aggregate, to the extent such
claims for Damages exceed the applicable threshold. Furthermore, the liability
of Spray Ventures under this Section 11.02 is limited to an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding anything to
the contrary contained herein, the limitations set forth in the previous
sentence shall not apply (i) in the event of fraudulent acts committed by Spray
Ventures or any of the directors of Spray Ventures or (ii) to Spray Ventures'
liability for Damages relating to any inaccuracy in or breach of the
representations and warranties set forth in Section 4.22.
(c) The Purchaser Related Indemnitees shall not be entitled to
recover under this Section 11.02 to the extent of any recovery of any Purchaser
Related Indemnitee under insurance policies held for the benefit of any
Purchaser Related Indemnitee (net of any retrospective premium cost resulting
from such recovery), it being understood that the Purchaser Related Indemnitees
shall in good faith pursue recovery against the insurers with the same degree of
diligence as they use to pursue claims against their insurers generally in the
conduct of their business.
(d) Prior to bringing any claim against Spray Ventures with respect
to any Damages resulting from a breach of any provision of Article IV, the
Purchaser Related Indemnitees shall give written notice of such claim to Spray
Ventures and, to the extent such Damages can be eliminated through a correction
of the breached provision or other action of Spray Ventures, shall give Spray
Ventures ninety (90) days to conclude such correction or take such action.
(e) The Purchaser agrees to use reasonable commercial efforts to
minimize any Damages for which the Purchaser Related Indemnitees are entitled to
indemnification under this Section 11.02.
SECTION 11.03. Indemnification by Communicade.
-----------------------------------------------
Communicade shall indemnify, defend and hold harmless the Purchaser
Related Indemnitees from and against, and shall compensate and reimburse each of
the Purchaser Related Indemnitees for, any Damages (net of Taxes) which are
suffered or incurred by any of the Purchaser Related Indemnitees or to which any
of the Purchaser Related Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third party claim) and
which arise from or are due to:
57
(i) any inaccuracy in or breach of any representation or
warranty made by Communicade in Article V of this Agreement; or
(ii) any breach of, or failure to comply with, any covenant or
obligation of Communicade contained in Article VIII.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, Communicade shall not be liable to indemnify any Purchaser Related
Indemnitee with respect to any indemnification claim made pursuant to this
Section 11.03 unless and until all Damages claimed by the Purchaser Related
Indemnitees pursuant to this Section 11.03 exceed (i) One Hundred Thousand
Dollars ($100,000) in the aggregate for any one section in Article V or (ii)
Five Hundred Thousand Dollars ($500,000) in the aggregate and then Communicade's
responsibility will be limited, in the aggregate, to the extent such claims for
Damages exceed the applicable threshold. Furthermore, the liability of
Communicade under this Section 11.03 is limited to an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding anything to
the contrary contained herein, the limitations set forth in the previous
sentence shall not apply in the event of fraudulent acts committed by
Communicade or any of the directors of Communicade.
(c) The Purchaser Related Indemnitees shall not be entitled to
recover under this Section 11.03 to the extent of any recovery of any Purchaser
Related Indemnitee under insurance policies held for the benefit of any
Purchaser Related Indemnitee (net of any retrospective premium cost resulting
from such recovery), it being understood that the Purchaser Related Indemnitees
shall in good faith pursue recovery against the insurers with the same degree of
diligence as they use to pursue claims against their insurers generally in the
conduct of their business.
(d) Prior to bringing any claim against Communicade with respect to
any Damages resulting from a breach of any provision of Article V, the Purchaser
Related Indemnitees shall give written notice of such claim to Communicade and,
to the extent such Damages can be eliminated through a correction of the
breached provision or other action of Communicade, shall give Communicade ninety
(90) days to conclude such correction or take such action.
(e) The Purchaser agrees to use reasonable commercial efforts to
minimize any Damages for which the Purchaser Related Indemnitees are entitled to
indemnification under this Section 11.03.
SECTION 11.04. Indemnification by the Purchaser.
-------------------------------------------------
(a) The Purchaser shall indemnify, defend and hold harmless the
Shareholders from and against, and shall compensate and reimburse each of the
Shareholders and each of their respective officers, directors, shareholders,
employees, agent and representatives (collectively, the "Shareholder Related
Indemnitees" and individually each a "Shareholder Related Indemnitee") for, any
Damages (net of Taxes) which are suffered or incurred by any of the Shareholder
Related Indemnitees or to which any of the Shareholder Related Indemnitees may
58
otherwise become subject at any time (regardless of whether or not such Damages
relate to any third party claim) and which arise from or as a direct or indirect
result of, or are directly or indirectly connected with:
(i) any inaccuracy in or breach of any representation or
warranty made by the Purchaser in this Agreement or in any of the other
Transaction Documents; or
(ii) any breach of, or failure to comply with, any covenant or
obligation of the Purchaser set forth in the Agreement.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Purchaser shall not be liable to indemnify any Shareholder
Related Indemnitee with respect to any indemnification claim made pursuant to
this Section 11.04 unless and until all Damages claimed by the Shareholder
Related Indemnitees pursuant to this Section 11.04 exceed (i) One Hundred
Thousand Dollars ($100,000) in the aggregate for any one section in Article VI
or (ii) Five Hundred Thousand Dollars ($500,000) in the aggregate and then the
Purchaser's responsibility will be limited, in the aggregate, to the extent such
claims for Damages exceed the applicable threshold. Furthermore, the liability
of the Purchaser under this Section 11.04 is limited to an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000). Notwithstanding anything to
the contrary contained herein, the limitations set forth in the previous
sentence shall not apply (i) in the event of fraudulent acts committed by the
Purchaser or any of the directors of the Purchaser or (ii) to the Purchaser's
liability for Damages relating to any inaccuracy in or breach of the
representations and warranties set forth in Section 6.22.
(c) The Shareholder Related Indemnitees shall not be entitled to
recover under this Section 11.04 to the extent of any recovery of any
Shareholder Related Indemnitee under insurance policies held for the benefit of
any Shareholder Related Indemnitee (net of any retrospective premium cost
resulting from such recovery), it being understood that the Shareholder Related
Indemnitees shall in good faith pursue recovery against the insurers with the
same degree of diligence as they use to pursue claims against their insurers
generally in the conduct of their business.
(d) Prior to bringing any claim against the Purchaser with respect to
any Damages resulting from a breach of any provision of Article VI, the
Shareholder Related Indemnitees shall give written notice of such claim to the
Purchaser and, to the extent such Damages can be eliminated through a correction
of the breached provision or other action of the Purchaser without any out-of-
pocket cost to the Purchaser or any costs incurred by the Purchaser for remedial
measures exceeding $100,000 for every breach (such costs to be calculated based
on the actual cost (e.g., actual salary cost for employees)), shall give the
Purchaser ninety (90) days to conclude such correction or take such action.
(e) Spray Ventures agrees to use reasonable commercial efforts to
minimize any Damages for which the Shareholder Related Indemnitees are entitled
to indemnification under this Section 11.04.
59
SECTION 11.05. Interest.
-------------------------
Any Party (the "Indemnifying Party") that is required to indemnify any
other Person (the "Indemnified Party") pursuant to this Article XI with respect
to any Damages shall also be required to pay such Indemnified Party interest on
the amount of such Damages (for the period commencing as of the date on which
such Indemnified Party first incurred or otherwise became subject to such
Damages and ending on the date on which the applicable indemnification payment
is made by such Party) at a rate per annum equal to 6%.
SECTION 11.06. Defense of Third Party Claims.
----------------------------------------------
(a) In the event of the assertion or commencement by any Person of
any claim or Proceeding (whether against the Purchaser, any Shareholder, any
other Indemnified Party or any other Person) with respect to which any
Shareholder or the Purchaser, as an Indemnifying Party, may become obligated to
indemnify, hold harmless, compensate or reimburse any Indemnitee pursuant to
this Article XI, the Indemnified Party shall reasonably promptly, following the
Indemnified Party's actual Knowledge thereof, notify such Indemnifying Party of
such claim or Proceeding. The Indemnifying Party shall have the right to assume
the defense of such claim or Proceeding at the sole expense of such Indemnifying
Party. If the Indemnifying Party so elects to assume the defense of any such
claim or Proceeding:
(i) such Indemnifying Party shall proceed to defend such claim
or Proceeding in a diligent manner with counsel reasonably satisfactory to
the Indemnified Party ;
(ii) the Indemnifying Party shall keep the Indemnified Party
informed of all material developments and events relating to such claim or
Proceeding;
(iii) the Indemnified Party shall have the right to participate
in the defense of such claim or Proceeding at its sole expense; and
(iv) the Indemnifying Party shall not settle, adjust or
compromise such claim or Proceeding without the prior written consent of
the Indemnified Party.
(b) If the Indemnified Party so proceeds with the defense of any such
claim or Proceeding on its own:
(i) all expenses incurred and relating to the defense of such
claim or Proceeding (whether or not incurred by the Indemnified Party)
shall be borne and paid exclusively by the Indemnifying Party;
(ii) the Indemnifying Party shall make available to the
Indemnified Party any documents and materials in the possession or control
of the Indemnifying Party that may be necessary to the defense of such
claim or Proceeding;
60
(iii) the Indemnified Party shall keep the Indemnifying Party
informed of all material developments and events relating to such claim or
Proceeding; and
(iv) the Indemnified Party shall have the right to settle,
adjust or compromise such claim or Proceeding with the consent of the
Indemnifying Party, provided, that the Indemnifying Party shall not
--------
unreasonably withhold such consent.
ARTICLE XII.
MISCELLANEOUS.
SECTION 12.01. Tax and Accounting Treatment Elections.
-------------------------------------------------------
The parties hereto acknowledge and agree that the Transactions shall
be treated as a taxable purchase transaction for the purposes of applicable law,
and that the Purchaser shall account for the Transactions under the purchase
method of accounting. The parties acknowledge and agree that Purchaser may, in
its sole discretion, file an election pursuant to Section 338 of the Code, and
the Shareholders agree that they will cooperate in all respects in the making of
such election. Spray Ventures agrees that it will not take any position with
any governmental authority inconsistent with the Company's valuation of its
shares as of the date hereof.
In the event that Spray Ventures does not obtain a tax deferral ruling
from the Swedish government substantially in the form it will request in
connection with the Transactions, the Parties will endeavor to restructure the
Transactions to obtain tax treatment which is beneficial to both the Purchaser
and Spray Ventures and to close the amended agreement reflecting such structure
as soon as possible.
SECTION 12.02. Governing Law.
------------------------------
This Agreement shall be construed in accordance with, and governed in
all respects by, the internal laws of the State of New York (without giving
effect to principles of conflict of laws).
SECTION 12.03. Arbitration.
----------------------------
Any dispute or controversy which cannot be amicably settled, shall be
solely and finally settled by arbitration pursuant to the Uncitral Arbitration
Rules, as at present in force which rules are deemed to be incorporated by
reference into this Section 12.03. The place of the arbitration shall be
Geneva, Switzerland. The appointing authority shall be the International
Chamber of Commerce in Geneva. The number of arbitrators shall be three. The
language to be used in the arbitration shall be English.
The award of the arbitrator(s) shall be the sole and exclusive remedy
among the Parties regarding any and all claims and counterclaims with respect to
the subject matter of such a dispute or controversy and shall be binding and
conclusive upon the Parties, their successors and assigns, and each shall comply
in good faith with any and all rulings of the arbitrators.
61
Judgment upon the award of the arbitrators may be entered in any court
of competent jurisdiction.
SECTION 12.04. Successors and Assigns.
---------------------------------------
This Agreement shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of each of the parties
hereto. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other parties; provided, however, that the Purchaser may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or both of which cases the Purchaser nonetheless shall remain responsible
for the performance of all of its obligations hereunder).
SECTION 12.05. Entire Agreement.
---------------------------------
This Agreement and the other Transaction Documents constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and replaces and supercedes all prior oral or written
communications or understandings.
SECTION 12.06. Severability.
-----------------------------
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 12.07. Amendment and Waiver.
-------------------------------------
This Agreement may be amended or modified only upon the mutual written
consent of the Company, the Purchaser and each of the Shareholders.
SECTION 12.08. Notices.
------------------------
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given (a) upon personal delivery to the Party to be
notified, (b) when sent by confirmed telex or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) three (3) days after deposit with a
nationally recognized overnight courier, specifying such delivery, with written
verification of receipt. All such notices shall be sent to the following
addresses:
62
if to Spray Ventures: Spray Ventures AB
Xxxxxxxxxx 00
000 00 XXXXXXXXX
Xxxxxxxxx: Per Xxxxxxx
Fax: +46-8-660 15 95
with a copy to: Xxxxxxxxxx Swartling Advokatbyra
-------------- Xxxxxxxxxxxxx 0
X.X. Xxx 0000
000 00 XXXXXXXXX
Attention: Xxxx Xxxxxxxxxxxxx, Esq.
Fax: +46-8-613 55 01
if to Communicade: Communicade Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Fax: (000) 000-0000
with a copy to: Xxxxx & Xxxxxxx LLP
-------------- 0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
if to the Purchaser: Razorfish, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy to: Xxxxxxxx & Xxxxxxxx llp
-------------- 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
SECTION 12.09. Delays or Omissions.
------------------------------------
No delay or omission to exercise any right, power or remedy accruing
to any of the Parties hereto, upon any breach or default of any other Party,
shall impair any such right, power or remedy of such Party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind
63
or character on the part of any Party of any breach or default under this
Agreement, or any waiver on the part of any Party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing.
SECTION 12.10. Remedies Cumulative.
------------------------------------
All remedies, either under this Agreement or by law or otherwise
afforded to any Party, shall be cumulative and not alternative.
SECTION 12.11. No Contribution.
--------------------------------
Each Shareholder hereby waives, and acknowledges and agrees that it
shall not have and shall not exercise or assert or attempt to exercise or
assert, any right of contribution or right of indemnity or any other right or
remedy against the Company or any of the Company Subsidiaries in connection with
any indemnification obligation or any other Liability to which such Shareholder
may become subject under this Agreement or any of the other Transactional
Documents or otherwise in connection with any of the Transactions. Each
Shareholder further acknowledges that the waivers, acknowledgments and
agreements of the Shareholders contained in this Section 12.11 are an essential
inducement to the Purchaser in entering into this Agreement and agreeing to
consummate the Transactions.
SECTION 12.12. Fees and Costs.
-------------------------------
The Purchaser shall pay all of its costs and expenses (including,
without limitation, attorneys' and consultants' fees and costs) incurred by
Purchaser in connection with the transactions contemplated hereby. Communicade
shall pay all of its costs and expenses (including, without limitation,
attorneys' and consultants' fees and costs) incurred by Communicade in
connection with the transactions contemplated hereby. The Company shall pay all
of its reasonable costs and expenses (including, without limitation, attorneys
and consultants fees and costs and any taxes payable arising out of such costs
and expenses) incurred in connection with the transactions contemplated hereby.
The Company shall pay all of Spray Ventures' reasonable advisory costs and
expenses (including, without limitation, attorneys' and consultants' fees and
costs and any taxes payable arising out of such advisory costs and expenses but
no other taxes) incurred in connection with the transactions contemplated
hereby.
SECTION 12.13. Further Assurances.
-----------------------------------
Each of the Parties shall execute and deliver such documents and take
such other actions as reasonably requested by any other Party in furtherance of
the transactions contemplated hereby.
SECTION 12.14. Counterparts.
-----------------------------
This Agreement and the other Transaction Documents may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which, taken together, shall constitute one and the same instrument.
64
In Witness Whereof, the Parties have executed this Agreement as of the
date set forth in the first paragraph hereof.
SHAREHOLDERS:
Spray Ventures AB
By: /s/ Per Xxxxxxx
-----------------------------
Name: Per Xxxxxxx
Title:
Communicade Inc.
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxx
Title: CEO
PURCHASER:
Razorfish, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
65